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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________________________
FORM 10-Q
________________________________________
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 000-24993
________________________________________
GOLDEN ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
________________________________________
Minnesota 41-1913991
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
6595 S Jones Boulevard
Las Vegas, Nevada
89118
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (702) 893-7777
________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value GDEN The Nasdaq Stock Market LLC
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, 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 November 2, 2020, the registrant had 28,180,521 shares of common stock, $0.01 par value per share, outstanding.


GOLDEN ENTERTAINMENT, INC.
FORM 10-Q
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN ENTERTAINMENT, INC.
Consolidated Balance Sheets
(In thousands, except per share data)
September 30, 2020 December 31, 2019
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 100,432  $ 111,678 
Accounts receivable, net of allowance of $1,299 and $599 at September 30, 2020 and December 31, 2019, respectively
13,317  16,247 
Prepaid expenses 20,065  19,879 
Inventories 6,144  8,237 
Other 3,735  4,388 
Total current assets 143,693  160,429 
Property and equipment, net 996,856  1,046,536 
Operating lease right-of-use assets, net 184,155  203,531 
Goodwill 160,199  185,470 
Intangible assets, net 114,511  134,006 
Other assets 9,513  10,945 
Total assets $ 1,608,927  $ 1,740,917 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt and finance leases $ 10,249  $ 8,497 
Current portion of operating leases 33,338  33,883 
Accounts payable 26,740  30,146 
Accrued taxes, other than income taxes 7,076  7,495 
Accrued payroll and related 21,291  27,221 
Accrued liabilities 33,046  25,522 
Total current liabilities 131,740  132,764 
Long-term debt, net and finance leases 1,128,940  1,130,374 
Non-current operating leases 165,644  184,301 
Deferred income taxes 1,700  1,088 
Other long-term obligations 2,329  2,646 
Total liabilities 1,430,353  1,451,173 
Commitments and contingencies (Note 10) —  — 
Shareholders’ equity
Common stock, $.01 par value; authorized 100,000 shares; 28,181 and 27,879 common shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
282  279 
Additional paid-in capital 468,612  461,643 
Accumulated deficit (290,320) (172,178)
Total shareholders’ equity 178,574  289,744 
Total liabilities and shareholders’ equity $ 1,608,927  $ 1,740,917 
The accompanying condensed notes are an integral part of these consolidated financial statements.
1

GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Revenues
Gaming $ 145,521  $ 142,568  $ 329,413  $ 432,606 
Food and beverage 28,685  51,109  80,400  152,971 
Rooms 22,505  35,347  54,097  102,148 
Other 8,685  14,290  24,617  43,551 
Total revenues 205,396  243,314  488,527  731,276 
Expenses
Gaming 76,128  83,799  189,471  250,154 
Food and beverage 22,654  41,020  67,280  119,450 
Rooms 11,111  16,644  29,652  47,053 
Other operating 2,748  4,815  9,279  16,409 
Selling, general and administrative 52,132  57,106  132,290  170,288 
Depreciation and amortization 31,551  29,611  94,637  86,852 
Impairment of goodwill and intangible assets —  —  27,872  — 
Acquisition and severance expenses 24  428  3,367  3,095 
(Gain) loss on disposal of assets (474) (233) 817  599 
Preopening expenses 73  243  187  1,759 
Total expenses 195,947  233,433  554,852  695,659 
Operating income (loss) 9,449  9,881  (66,325) 35,617 
Non-operating expense
Interest expense, net (16,422) (18,776) (51,575) (56,046)
Loss on extinguishment and modification of debt —  —  —  (9,150)
Change in fair value of derivative —  (352) (1) (4,089)
Total non-operating expense, net (16,422) (19,128) (51,576) (69,285)
Loss before income tax benefit (provision) (6,973) (9,247) (117,901) (33,668)
Income tax benefit (provision) 17  (200) (241) 1,795 
Net loss $ (6,956) $ (9,447) $ (118,142) $ (31,873)
Weighted-average common shares outstanding
Basic 28,130  27,806  28,045  27,714 
Dilutive impact of stock options and restricted stock units —  —  —  — 
Diluted 28,130  27,806  28,045  27,714 
Net loss per share
Basic $ (0.25) $ (0.34) $ (4.21) $ (1.15)
Diluted $ (0.25) $ (0.34) $ (4.21) $ (1.15)
The accompanying condensed notes are an integral part of these consolidated financial statements.
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GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Shareholders’ Equity
(In thousands)
(Unaudited)
Common stock Additional Paid-In Capital Accumulated Deficit Total Shareholders’ Equity
Shares Amount
Balance, January 1, 2019 26,779  $ 268  $ 435,245  $ (120,361) $ 315,152 
Cumulative effect, change in accounting for leases, net of tax —  —  —  (12,272) (12,272)
Issuance of stock on options exercised and restricted stock units vested 53  —  —  —  — 
Share-based compensation —  —  4,140  —  4,140 
Share issuance related to business combination 911  9  16,599  —  16,608 
Tax benefit from share-based compensation —  —  (288) —  (288)
Net loss —  —  —  (8,018) (8,018)
Balance, March 31, 2019 27,743  $ 277  $ 455,696  $ (140,651) $ 315,322 
Issuance of stock on options exercised and restricted stock units vested 57  1  55  —  56 
Share-based compensation —  —  2,122  —  2,122 
Tax benefit from share-based compensation —  —  (3) —  (3)
Net loss —  —  —  (14,408) (14,408)
Balance, June 30, 2019 27,800  $ 278  $ 457,870  $ (155,059) $ 303,089 
Issuance of stock on options exercised and restricted stock units vested 13  —  —  —  — 
Share-based compensation —  —  2,578  —  2,578 
Tax benefit from share-based compensation —  —  (9) —  (9)
Net loss —  —  —  (9,447) (9,447)
Balance, September 30, 2019 27,813  $ 278  $ 460,439  $ (164,506) $ 296,211 

Common stock Additional Paid-In Capital Accumulated Deficit Total Shareholders’ Equity
Shares Amount
Balance, January 1, 2020 27,879  $ 279  $ 461,643  $ (172,178) $ 289,744 
Issuance of stock on options exercised and restricted stock units vested 172  2  —  —  2 
Share-based compensation —  —  2,153  —  2,153 
Tax benefit from share-based compensation —  —  (428) —  (428)
Net loss —  —  —  (32,620) (32,620)
Balance, March 31, 2020 28,051  $ 281  $ 463,368  $ (204,798) $ 258,851 
Issuance of stock on options exercised and restricted stock units vested 73  —  —  —  — 
Share-based compensation —  —  1,755  —  1,755 
Net loss —  —  —  (78,566) (78,566)
Balance, June 30, 2020 28,124  $ 281  $ 465,123  $ (283,364) $ 182,040 
Issuance of stock on options exercised and restricted stock units vested 57  1  —  —  1 
Share-based compensation —  —  3,510  —  3,510 
Tax benefit from share-based compensation —  —  (21) —  (21)
Net loss —  —  —  (6,956) (6,956)
Balance, September 30, 2020 28,181  $ 282  $ 468,612  $ (290,320) $ 178,574 
The accompanying notes are an integral part of these consolidated financial statements.
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GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2020 2019
Cash flows from operating activities
Net loss $ (118,142) $ (31,873)
Adjustments to reconcile net loss to net cash (used in)  provided by operating activities:
Depreciation and amortization 94,637  86,852 
Impairment of goodwill and intangible assets 27,872  — 
Share-based compensation 7,418  8,840 
Amortization of debt issuance costs and discounts on debt 3,372  3,427 
Loss on disposal of assets 817  599 
Provision for credit losses 806  1,034 
Loss on extinguishment of debt —  9,150 
Change in fair value of derivative 1  4,089 
Deferred income taxes 612  (1,796)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 2,494  (579)
Prepaid expenses (226) 1,358 
Inventories and other current assets 2,376  537 
Other assets 1,417  (464)
Accounts payable and other accrued expenses 1,723  17,860 
Accrued taxes, other than income taxes (419) (371)
Other liabilities (142) (619)
Net cash provided by operating activities 24,616  98,044 
Cash flows from investing activities
Purchase of property and equipment, net of change in construction payables (31,410) (81,202)
Acquisition of business, net of cash acquired —  (148,952)
Proceeds from disposal of property and equipment 637  107 
Asset purchase —  (45)
Other investing activities —  (33)
Net cash used in investing activities (30,773) (230,125)
Cash flows from financing activities
Repayments of revolving credit facility (200,000) (145,000)
Borrowings under revolving credit facility 200,000  145,000 
Repayments of term loan —  (220,000)
Proceeds from issuance of senior notes —  375,000 
Repayments of notes payable (2,937) (2,200)
Principal payments under finance leases (1,706) (1,267)
Payments for debt issuance costs —  (6,686)
Debt extinguishment and modification costs —  (4,763)
Tax withholding on share-based payments (449) (301)
Proceeds from exercise of common stock 3  56 
Net cash (used in) provided by financing activities (5,089) 139,839 
Cash and cash equivalents
Change in cash and cash equivalents (11,246) 7,758 
Balance, beginning of period 111,678  116,071 
Balance, end of period $ 100,432  $ 123,829 
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Consolidated Statements of Cash Flows – (Continued)
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2020 2019
Supplemental cash flow disclosures
Cash paid for interest $ 40,835  $ 38,676 
Cash received for income taxes, net (741) (193)
Non-cash investing and financing activities
Payables incurred for capital expenditures $ 994  $ 9,434 
Assets acquired under finance lease obligations 559  5,768 
Loss on extinguishment of debt —  4,388 
Impairment of right-of-use asset —  12,272 
Operating lease right-of-use assets obtained in exchange for lease obligations (1)
6,061  36,117 
Common stock issued in connection with acquisition —  16,608 
(1)For 2019, the amount includes operating lease right-of-use assets obtained in exchange for existing lease obligations due to the adoption of Accounting Standards Codification 842 — Leases.
The accompanying condensed notes are an integral part of these consolidated financial statements.
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GOLDEN ENTERTAINMENT, INC.
Condensed Notes to Consolidated Financial Statements (Unaudited)

Note 1 – Nature of Business and Basis of Presentation
Overview
Golden Entertainment, Inc. and its wholly-owned subsidiaries own and operate a diversified entertainment platform, consisting of a portfolio of gaming assets that focus on resort casino operations and distributed gaming (including gaming in the Company’s branded taverns). Unless otherwise indicated, the terms “Golden” and the “Company,” refer to Golden Entertainment, Inc. together with its subsidiaries.
The Company conducts its business through two reportable operating segments: Casinos and Distributed Gaming. The Company’s Casinos segment involves the operation of ten resort casino properties in Nevada and Maryland, comprising:
The STRAT Hotel, Casino & SkyPod (The “Strat”) Las Vegas, Nevada
Arizona Charlie’s Boulder Las Vegas, Nevada
Arizona Charlie’s Decatur Las Vegas, Nevada
Aquarius Casino Resort (“Aquarius”)
Laughlin, Nevada
Colorado Belle Hotel & Casino Resort (“Colorado Belle”) (1)
Laughlin, Nevada
Edgewater Hotel & Casino Resort (“Edgewater”) Laughlin, Nevada
Gold Town Casino Pahrump, Nevada
Lakeside Casino & RV Park Pahrump, Nevada
Pahrump Nugget Hotel Casino (“Pahrump Nugget”) Pahrump, Nevada
Rocky Gap Casino Resort (“Rocky Gap”) Flintstone, Maryland
(1)As a result of the impact of the 2019 novel coronavirus (“COVID-19”) pandemic, the operations of the Colorado Belle remain suspended.
The Company’s Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and Montana, and the operation of branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area.
Impact of COVID-19
In December 2019, an outbreak of COVID-19 began in Wuhan, Hubei Province, China. The disease has since spread rapidly across the world, causing the World Health Organization to declare COVID-19 a pandemic on March 11, 2020. Since that time, people across the globe have been advised to avoid non-essential travel, and steps have been taken by governmental authorities, including in the States in which the Company operates, to implement closures of non-essential operations to contain the spread of the virus. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. Following emergency executive orders issued by the Governors of Nevada, Maryland, and Montana, in the week of March 16, 2020, all of the Company’s properties were temporarily closed to the public and the Company’s Distributed Gaming operations at third-party locations were suspended. The Company’s Distributed Gaming operations in Montana and Nevada resumed on May 4, 2020 and June 4, 2020, respectively, and the Company’s Casino operations in Nevada and Maryland resumed on June 4, 2020 and June 19, 2020, respectively. However, as a result of the impact of the COVID-19 pandemic, the operations of the Colorado Belle remain suspended. While all of the Company’s properties except for Colorado Belle re-opened during the second quarter of 2020, the Company’s implementation of protocols intended to protect gaming patrons, guests and team members from potential COVID-19 exposure continues to limit the Company’s operations. These measures include enhanced sanitization, public gathering limitations of less than 50% of casino and tavern capacity, patron social distancing requirements, limitations on casino operations, which include disabling electronic gaming machines, and face mask and temperature check requirements for patrons. Certain amenities at the Company’s casinos may remain closed or operate in a limited capacity, including restaurants, bars, and other food and beverage outlets, as well as table games, spas and pools. These measures limit the number of patrons that are able to attend these venues. The Company cannot predict when these restrictions on its operations will be changed or eliminated.
On July 10, 2020, the Governor of the State of Nevada issued a new emergency executive order mandating the closure of all bars, pubs, taverns, breweries, distilleries and wineries in seven counties, including Clark County (the location of most of the Company’s branded taverns). As a result of the Governor’s executive order, the Company closed most of its tavern locations. Golden implemented modifications of the gaming areas in its taverns which allowed the Company to start reopening its tavern locations in late July 2020 and, as of September 30, 2020, all of the Company’s tavern locations had re-opened.
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Temporary closures of the Company’s operations due to the COVID-19 pandemic resulted in lease concessions for certain of the Company’s taverns and route locations. Such concessions provided for deferral and, in some instances, forgiveness of rent payments with no substantive amendments to the consideration due per the terms of the original contract and did not result in a substantial changes in the Company’s obligations under such leases. The Company elected to account for the deferred rent as variable lease payments, which resulted in a reduction of the rent expense in the amount of $1.7 million and $10.5 million for the three and nine months ended September 30, 2020, respectively. Rent expense that was not forgiven will be recorded in future periods as these deferred payments are paid to the Company’s lessors.
The disruptions arising from the COVID-19 pandemic had a significant adverse impact on the Company’s financial condition and results of operations for the three and nine months ended September 30, 2020. The duration and intensity of this global health emergency and related disruptions is uncertain. The impact of COVID-19 on the Company’s consolidated results of operations, cash flows and financial condition in 2020 will be material, but cannot be reasonably estimated at this time, as it is unknown when the COVID-19 pandemic will end, when or how quickly the current travel restrictions, occupancy and other limitations will be modified or cease to be necessary, and how these uncertainties will impact the Company’s business and the willingness of customers to spend on travel and entertainment.
The impact of the COVID-19 pandemic on the Company’s operations qualified as a triggering event necessitating an evaluation of long-lived assets, goodwill, and indefinite-lived intangible assets for indicators of impairment as discussed in “Note 3 — Property and Equipment” and “Note 4 — Goodwill and Intangible Assets.”
The Company’s $200 million revolving credit facility (the “Revolving Credit Facility”) was undrawn and available for borrowing as of September 30, 2020. In addition, the Company has implemented various mitigating actions to preserve liquidity, including delaying material capital expenditures, reducing operating expenses and implementing a cost reduction program with respect to discretionary expenditures. To further enhance its liquidity position or to finance any future acquisition or other business investment initiatives, the Company may obtain additional financing, which could consist of debt, convertible debt or equity financing from public or private credit and capital markets.
Basis of Presentation
The unaudited consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial information. Accordingly, certain information normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) has been condensed and/or omitted. For further information, refer to the audited consolidated financial statements of the Company for the year ended December 31, 2019 and the notes thereto included in the Company’s Annual Report on Form 10-K (the “Annual Report”) previously filed with the SEC. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, which included only normal recurring adjustments, necessary to present fairly the Company’s results for the periods presented. Results for interim periods should not be considered indicative of the results to be expected for the full year and should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report.
The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.
Significant Accounting Policies
There have been no changes to the significant accounting policies disclosed in the Company’s Annual Report.
Net Loss Per Share
For all periods, basic net loss per share is calculated by dividing net loss by the weighted-average common shares outstanding. Diluted net loss per share in profitable periods reflects the effect of all potentially dilutive common shares outstanding by dividing net loss by the weighted-average of all common and potentially dilutive shares outstanding. Due to the net losses for the three and nine months ended September 30, 2020 and 2019, the effect of all potential common share equivalents was anti-dilutive, and therefore, all such shares were excluded from the computation of diluted weighted average shares outstanding for both periods. The amount of potential common share equivalents excluded were 653,000 and 742,232 for three and nine months ended September 30, 2020, respectively, and 730,282 and 842,142 for the three and nine months ended September 30, 2019, respectively.
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Reclassification of Prior Year Balances
Reclassifications were made to the Company’s prior period consolidated financial statements to conform to the current period presentation, where applicable.
Accounting Standards Issued and Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“Topic 326”). The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans and other financial instruments, the Company is required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The Company adopted the standard as of January 1, 2020, and the adoption did not have a material impact on the Company’s financial statements and disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“Topic 820”). The new guidance amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying, and adding certain disclosures on fair value measurements in Topic 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted the standard as of January 1, 2020, and the adoption did not have a material impact on the Company’s financial statements and disclosures.
In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU is intended to eliminate potential diversity in practice in accounting for costs incurred to implement cloud computing arrangements that are service contracts by requiring customers in such arrangements to follow internal-use software guidance with respect to such costs, with any resulting deferred implementation costs recognized over the term of the contract in the same income statement line item as the fees associated with the hosting element of the arrangement. The Company adopted the standard as of January 1, 2020, and the adoption did not have a material impact on the Company’s financial statements and disclosures.
Accounting Standards Issued but Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU is intended to simplify the accounting for income taxes by removing certain exceptions for investments, intraperiod allocations, and interim calculations, and adds guidance to reduce the complexity of applying Topic 740. The standard is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its financial statements and disclosures; however, it does not expect the impact to be material.
No other recently issued accounting standards that are not yet effective have been identified that management believes are likely to have a material impact on the Company’s financial statements.
Note 2 – Acquisitions
The Company had no material acquisitions for the three and nine months ended September 30, 2020.
Laughlin Acquisition
On January 14, 2019, the Company completed the acquisition of Edgewater Gaming, LLC and Colorado Belle Gaming, LLC (the “Laughlin Entities”) from Marnell Gaming, LLC (“Marnell”) for $156.2 million in cash (after giving effect to the post-closing adjustment provisions in the purchase agreement) and the issuance of 911,002 shares of the Company’s common stock to certain assignees of Marnell (the “Laughlin Acquisition”). The results of operations of the Laughlin Entities are included in the Company’s results subsequent to the acquisition date. The determination of the fair value of the assets acquired and liabilities assumed (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) was completed in the fourth quarter of 2019.
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Note 3 – Property and Equipment
Property and equipment, net, consisted of the following:
(In thousands) September 30, 2020 December 31, 2019
Land $ 125,240  $ 125,240 
Building and site improvements 926,666  880,662 
Furniture and equipment 240,920  222,938 
Construction in process 9,943  49,869 
Property and equipment 1,302,769  1,278,709 
Accumulated depreciation (305,913) (232,173)
Property and equipment, net $ 996,856  $ 1,046,536 
Depreciation expense for property and equipment, including finance leases, was $25.9 million and $77.7 million for the three and nine months ended September 30, 2020, and $23.9 million and $69.8 million for the three and nine months ended September 30, 2019, respectively.
The Company concluded that the impact of the current COVID-19 pandemic on its operations and financial results is an indicator that impairment may exist related to its long-lived assets. As a result, the Company revised its cash flow projections to reflect the current economic environment, including the uncertainty around the nature, timing and extent of elimination or change of the restrictions on its operations, and utilized such projections in performing an interim qualitative assessment of its property and equipment for potential impairment. Based on the results of such assessment, the Company concluded that there was no impairment of the Company’s long-lived assets as of September 30, 2020.
To the extent the Company becomes aware of new facts and circumstances arising from the COVID-19 pandemic that impact its operations, the Company will revise its cash flow projections accordingly, as its estimates of future cash flows are highly dependent upon certain assumptions, including, but not limited to, the nature, timing, and extent of elimination or change of the restrictions on the Company’s operations and the extent and timing of the economic recovery globally, nationally, and specifically within the gaming industry. If such assumptions are not accurate, the Company may be required to record impairment charges in future periods, whether in connection with its regular review procedures, or earlier, if an indicator of an impairment is present prior to such evaluation.
Note 4 – Goodwill and Intangible Assets
The Company tests goodwill and indefinite-lived intangible assets for impairment annually in the last quarter of the year, unless events or changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its fair value. Finite-lived intangible assets are evaluated for potential impairment whenever there is an indicator that the carrying value of an asset group may not be recoverable.
During the first quarter of 2020, the Company concluded that the COVID-19 pandemic had an adverse impact on its operations and financial results, particularly within the Company’s Casinos segment due to the mandatory property closures, which management considered an indicator of impairment, and necessitated a performance of interim qualitative and quantitative impairment tests. The Company’s interim assessment resulted in recognition of a non-cash impairment of its Casinos segment goodwill of $6.5 million.
Mandatory shut-down of the Company’s properties for a majority of the second quarter of 2020 resulted in deterioration of performance of the Company’s casino properties in particular, which required the Company to revise its cash flow projections to reflect the current economic environment, including the uncertainty surrounding the nature, timing, and extent of elimination or change of the restrictions on the Company’s operations. The revised cash flow projections also reflected the Company’s decision to keep operations of its Colorado Belle property suspended. Interim qualitative and quantitative assessment of Golden’s goodwill and intangible assets for potential impairment conducted during the second quarter of 2020 utilizing the updated projections resulted in recognition of an additional non-cash impairment of the goodwill of the Company’s Casinos segment in the amount of $18.8 million as of June 30, 2020. The assessment also indicated that the carrying value of an indefinite-lived trade name for certain of the Company’s properties within the Casinos segment exceeded its fair value and resulted in recognition of a non-cash impairment charge of $2.6 million.
The estimated fair value of goodwill and indefinite-lived intangible assets for the first and second quarter was determined using discounted cash flow models which utilized Level 3 inputs as follows: discount rate of 12.0%; long-term revenue growth rate of 2.0% to 3.0%.
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The results of the qualitative and quantitative assessment of the Company’s goodwill and intangible assets for potential impairment conducted for the three months ended September 30, 2020 indicated no additional impairment of its goodwill and intangible assets as of September 30, 2020.
The following table summarizes goodwill activity by reportable segment:
(In thousands) Casinos Distributed Gaming Total Goodwill
Balance, December 31, 2019 $ 87,366  $ 98,104  $ 185,470 
Goodwill impairment (25,271) —  (25,271)
Balance, September 30, 2020 $ 62,095  $ 98,104  $ 160,199 
Intangible assets, net, consisted of the following:
September 30, 2020
(In thousands) Useful Life
(Years) 		Gross Carrying Value Cumulative Amortization Impairment Intangible Assets, Net
Indefinite-lived intangible assets
Trade names Indefinite $ 53,690  $ —  $ (2,600) $ 51,090 
53,690  —  (2,600) 51,090 
Amortizing intangible assets
Customer relationships
4-16
81,105  (28,544) —  52,561 
Player relationships
2-14
42,990  (37,118) —  5,872 
Non-compete agreements
2-5
9,840  (6,906) —  2,934 
Gaming license (1)
15 2,100  (1,034) —  1,066 
In-place lease value 4 1,170  (851) —  319 
Leasehold interest 4 570  (464) —  106 
Other
4-25
1,814  (1,251) —  563 
139,589  (76,168) —  63,421 
Balance, September 30, 2020 $ 193,279  $ (76,168) $ (2,600) $ 114,511 
(1)Relates to Rocky Gap.
December 31, 2019
(In thousands) Useful Life
(Years) 		Gross Carrying Value Cumulative Amortization Intangible Assets, Net
Indefinite-lived intangible assets
Trade names Indefinite $ 53,690  $ —  $ 53,690 
53,690  —  53,690 
Amortizing intangible assets
Customer relationships
4-16
81,105  (24,140) 56,965 
Player relationships
2-14
42,990  (26,649) 16,341 
Non-compete agreements
2-5
9,840  (5,467) 4,373 
Gaming license (1)
15 2,100  (929) 1,171 
In-place lease value 4 1,301  (724) 577 
Leasehold interest 4 570  (345) 225 
Other
4-25
1,814  (1,150) 664 
139,720  (59,404) 80,316 
Balance, December 31, 2019 $ 193,410  $ (59,404) $ 134,006 
(1)Relates to Rocky Gap.
Total amortization expense related to intangible assets was $5.7 million and $16.9 million for the three and nine months ended September 30, 2020, respectively, and $5.7 million and $17.1 million for the three and nine months ended September 30, 2019, respectively.
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To the extent the Company becomes aware of new facts and circumstances arising from the COVID-19 pandemic that impact its operations, the Company will revise its cash flow projections accordingly, as its estimates of future cash flows are highly dependent upon certain assumptions, including, but not limited to, the nature, timing, and extent of elimination or change of the restrictions on the Company’s operations and the extent and timing of the economic recovery globally, nationally, and specifically within the gaming industry. If such assumptions are not accurate, the Company may be required to record impairment charges in future periods, whether in connection with its regular review procedures, or earlier, if an indicator of an impairment is present prior to such evaluation.
Note 5 – Accrued Liabilities
Accrued liabilities consisted of the following:
(In thousands) September 30, 2020 December 31, 2019
Interest $ 13,594  $ 6,562 
Gaming liabilities 12,607  12,353 
Other accrued liabilities 4,758  3,873 
Deposits 2,087  2,734 
Total current accrued liabilities $ 33,046  $ 25,522 
Note 6 – Long-Term Debt
Long-term debt, net, consisted of the following:
(In thousands) September 30, 2020 December 31, 2019
Term Loan $ 772,000  $ 772,000 
2026 Unsecured Notes 375,000  375,000 
Finance lease liabilities 10,057  12,463 
Notes payable 5,721  6,369 
Total long-term debt and finance leases 1,162,778  1,165,832 
Unamortized discount (16,410) (18,885)
Unamortized debt issuance costs (7,179) (8,076)
Total long-term debt and finance leases after debt issuance costs and discount 1,139,189  1,138,871 
Current portion of long-term debt and finance leases (10,249) (8,497)
Long-term debt, net and finance leases $ 1,128,940  $ 1,130,374 
Senior Secured Credit Facility
In October 2017, the Company entered into a senior secured credit facility consisting of a $900 million senior secured first lien credit facility (consisting of an $800 million term loan (the “Term Loan”) and a $100 million Revolving Credit Facility) with JPMorgan Chase Bank, N.A. (as administrative agent and collateral agent), the lenders party thereto and the other entities party thereto (the “Credit Facility”). The Revolving Credit Facility was subsequently increased from $100 million to $200 million in 2018 increasing the total Credit Facility capacity to $1.0 billion.
As of September 30, 2020, the Company had $772 million in principal amount of outstanding Term Loan borrowings under its Credit Facility, no outstanding letters of credit and no borrowings under the Revolving Credit Facility, such that full borrowing availability of $200 million under the Revolving Credit Facility was available to the Company for re-borrowing.
The Revolving Credit Facility matures on October 20, 2022, and the Term Loan matures on October 20, 2024. The Term Loan is repayable in 27 quarterly installments of $2 million each, which commenced in March 2018, followed by a final installment of $746 million at maturity.
The Company was in compliance with its financial covenants under the Credit Facility as of September 30, 2020.
Senior Unsecured Notes
On April 15, 2019, the Company issued $375 million in principal amount of 7.625% Senior Notes due 2026 (“2026 Unsecured Notes”) in a private placement to institutional buyers at face value. The 2026 Unsecured Notes bear interest at 7.625%, payable semi-annually on April 15th and October 15th of each year.
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The weighted-average effective interest rate on the Company’s outstanding borrowings under the Credit Facility and the 2026 Unsecured Notes was approximately 5.00% and 5.71% for the three and nine months ended September 30, 2020, respectively.
Note 7 – Stockholders’ Equity and Stock Incentive Plans
Share Repurchase Program
On March 12, 2019, the Company’s Board of Directors authorized the repurchase of up to $25.0 million additional shares of common stock. Share repurchases may be made from time to time in open market transactions, block trades or in private transactions in accordance with applicable securities laws and regulations and other legal requirements, including compliance with the Company’s finance agreements. There is no minimum number of shares that the Company is required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice. As of September 30, 2020, the Company had not repurchased any shares under the March 12, 2019 authorization.
Stock Options
The following table summarizes the Company’s stock option activity:
Stock Options
Shares Weighted-Average Exercise Price
Outstanding at January 1, 2020 3,126,521  $ 11.61 
Granted —  $ — 
Exercised (45,000) $ 2.66 
Cancelled (2,292) $ 13.50 
Expired (148,013) $ 26.61 
Outstanding at September 30, 2020 2,931,216  $ 10.99 
Exercisable at September 30, 2020 2,847,738  $ 10.92 
Share-based compensation expense related to stock options was $0.5 million and $1.6 million for the three and nine months ended September 30, 2020, respectively, and $0.8 million and $4.2 million for the three and nine months ended September 30, 2019, respectively. The Company’s unrecognized share-based compensation expense related to stock options was $0.5 million as of September 30, 2020, which is expected to be recognized over a weighted-average period of 0.4 years. The unrecognized share-based compensation expense related to stock options was $2.8 million as of September 30, 2019, which was expected to be recognized over a weighted-average period of 1.2 years.
Restricted Stock Units
The following table summarizes the Company’s activity related to time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”):
RSUs PSUs
Shares Weighted-Average Grant Date Fair Value
Shares (1)
Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2020 661,258  $ 16.44  376,328  $ 20.65 
Granted 624,415  $ 9.65  404,880  $ 8.86 
Vested (308,222) $ 16.06  (5,254) $ 28.72 
Cancelled (29,669) $ 16.89  (32,235) $ 28.72 
Outstanding at September 30, 2020 947,782  $ 12.07  743,719  $ 13.82 
(1) The number of shares for 62,791 of the PSUs included in the outstanding balance at January 1, 2020 represents the actual number of PSUs granted to each recipient that are eligible to vest if the Company meets its performance goals for the applicable period. The number of shares for the remainder of the PSUs included in the outstanding balance at January 1, 2020 and for all of the PSUs granted in 2020 represents the “target” number of PSUs granted to each recipient eligible to vest if the Company meets its “target” performance goals for the applicable period. The actual number of PSUs eligible to vest for those PSUs will vary depending on whether or not the Company meets or exceeds the applicable threshold, target, or maximum performance goals for the PSUs, with 200% of the “target” number of PSUs eligible to vest at “maximum” performance levels.
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Additionally, 108,957 of the PSUs included in the outstanding balance at January 1, 2020 represent PSUs granted in March 2018 (the “2018 PSU Awards”). During the first quarter of 2020, the Company’s financial results for the applicable performance goals were certified, which resulted in the reduction of the 2018 PSU Awards that were eligible to vest to 76,722 shares, 5,254 of which have since vested.
Share-based compensation expense related to RSUs was $1.9 million and $4.0 million for the three and nine months ended September 30, 2020, respectively, and $1.1 million and $3.1 million for the three and nine months ended September 30, 2019, respectively. Share-based compensation expense related to PSUs was $1.1 million and $1.8 million for the three and nine months ended September 30, 2020, respectively, and $0.7 million and $1.4 million for the three and nine months ended September 30, 2019, respectively.
As of September 30, 2020, there was $7.9 million and $4.0 million of unamortized share-based compensation expense related to RSUs and PSUs, respectively, which is expected to be recognized over a weighted-average period of 2.1 years for both RSUs and PSUs. As of September 30, 2019, there was $7.6 million and $4.1 million of unamortized share-based compensation expense related to RSUs and PSUs, respectively, which was expected to be recognized over a weighted-average period of 2.6 years and 2.2 years for RSUs and PSUs, respectively.
As of September 30, 2020, a total of 1,497,182 shares of the Company’s common stock remained available for grants of awards under the Golden Entertainment, Inc. 2015 Incentive Award Plan, which includes the annual increase in the number of shares available for grant on January 1, 2020 of 1,066,403 shares.
Note 8 – Income Tax
The Company’s effective income tax rate was 0.2% and (0.2)% for the three and nine months ended September 30, 2020, respectively, and (2.2)% and 5.3% for the three and nine months ended September 30, 2019, respectively.
Income tax benefit of $0.02 million and income tax expense of $0.2 million for the three and nine months ended September 30, 2020, respectively, and income tax expense of $0.2 million and benefit of $1.8 million for the three and nine months ended September 30, 2019, respectively, in each case were primarily due to the change in valuation allowance against the Company’s deferred tax assets during the three and nine months ended September 30, 2020 and 2019. Deferred tax assets are evaluated by considering historical levels of income, estimates of future taxable income, and the impact of tax planning strategies. The Company continues to evaluate its deferred tax asset valuation allowance on a quarterly basis.
As of September 30, 2020, the Company’s 2017 and 2018 federal tax returns were under audit by the IRS.
Note 9 – Financial Instruments and Fair Value Measurements
Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures. The framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.
The carrying values of the Company’s cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short duration of these financial instruments.
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The following table summarizes the fair value measurement of the Company’s long-term debt: 
September 30, 2020
(In thousands) Carrying Amount Fair Value Fair Value Hierarchy
Term Loan $ 772,000  $ 746,910  Level 2
2026 Unsecured Notes 375,000  370,313  Level 2
Finance lease liabilities 10,057  10,057  Level 3
Notes payable 5,721  5,721  Level 3
Total debt $ 1,162,778  $ 1,133,001 
December 31, 2019
(In thousands) Carrying Amount Fair Value Fair Value Hierarchy
Term Loan $ 772,000  $ 776,806  Level 2
2026 Unsecured Notes 375,000  401,250  Level 2
Finance lease liabilities 12,463  12,463  Level 3
Notes payable 6,369  6,369  Level 3
Total debt $ 1,165,832  $ 1,196,888 
The estimated fair value of the Company’s Term Loan and 2026 Unsecured Notes is based on a relative value analysis performed as of September 30, 2020 and December 31, 2019. The finance lease liabilities and notes payable are fixed-rate debt, are not traded and do not have observable market inputs, therefore, the fair value is estimated to be equal to the carrying value.
As of September 30, 2020, the Company had an interest rate cap agreement that was outstanding with a notional amount of $650 million, which expires on December 31, 2020. Using Level 2 inputs, the Company adjusts the carrying value of the interest rate cap agreement to estimated fair value quarterly based upon observable market-based inputs that reflect the present values of the difference between estimated future fixed rate payments and future variable receipts. The fair value of the Company’s interest rate cap agreement was immaterial as of September 30, 2020 and December 31, 2019. As the Company elected to not apply hedge accounting, the change in fair value of its interest rate cap agreement was recorded in the consolidated statement of operations.
Note 10 – Commitments and Contingencies
Participation and Revenue Share Agreements
The Company enters into slot placement contracts in the form of participation and revenue share agreements. Under participation agreements, the business location holds the applicable gaming license and retains a percentage of the gaming revenue that it generates from the Company’s slots. Under revenue share agreements, the Company pays the business location a percentage of the gaming revenue generated from the Company’s slots placed at the location, rather than a fixed monthly rental fee. The aggregate contingent payments recognized by the Company as gaming expenses under revenue share and participation agreements were $37.4 million and $87.3 million for the three and nine months ended September 30, 2020, respectively. The aggregate contingent payments recognized by the Company as gaming expenses under revenue share and participation agreements were $39.3 million and $117.3 million for the three and nine months ended September 30, 2019, respectively.
Legal Matters
From time to time, the Company is involved in a variety of lawsuits, claims, investigations and other legal proceedings arising in the ordinary course of business, including proceedings concerning labor and employment matters, personal injury claims, breach of contract claims, commercial disputes, business practices, intellectual property, tax and other matters for which the Company records reserves. Although lawsuits, claims, investigations and other legal proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of its currently pending matters should not have a material adverse effect on its business, financial condition, results of operations or liquidity. Regardless of the outcome, legal proceedings can have an adverse impact on the Company because of defense costs, diversion of management resources and other factors. In addition, it is possible that an unfavorable resolution of one or more such proceedings could in the future materially and adversely affect the Company’s business, financial condition, results of operations or liquidity in a particular period.
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On August 31, 2018, prior guests of The Strat filed a purported class action complaint against the Company in the District Court, Clark County, Nevada, on behalf of similarly situated individuals and entities that paid the Clark County Combined Transient Lodging Tax (“Tax”) on the portion of a resort fee that constitutes charges for Internet access, during the period of February 6, 2014 through the date the alleged conduct ceases. The lawsuit alleged that the Tax was charged in violation of the federal Internet Tax Freedom Act, which imposed a national moratorium on the taxation of Internet access by states and their political subdivisions, and sought, on behalf of the plaintiff and the putative class, damages equal to the amount of the Tax collected on the Internet access component of the resort fee, injunctive relief, disgorgement, interest, fees and costs. All defendants to this matter, including Golden Entertainment, Inc., filed a joint motion to dismiss this matter for lack of merit. The District Court granted this joint motion to dismiss on February 21, 2019. The plaintiffs filed an appeal to the Supreme Court of Nevada on April 10, 2019. The Company, and other defendants, filed an appellate response brief on October 19, 2019. On July 29, 2020 the Supreme Court of the State of Nevada upheld the lower court’s 2019 dismissal of this case.
On August 5, 2015 a prior employee filed a Charge of Discrimination with the Equal Employment Opportunity Commission (“EEOC”) and subsequently filed an Amended Charge of Discrimination on January 2016 alleging that the Company engaged in disability discrimination under the Americans with Disabilities Act of 1990, as amended. The EEOC requested financial recovery as well as that the Company update certain policies and procedures. In late 2019 the EEOC issued a Letter of Determination and invited the Company to participate in a mediation on behalf of the plaintiff and similarly situated parties to work toward a resolution of this matter. This matter was settled with the complainant and the EEOC in October 2020.
While legal proceedings are inherently unpredictable and no assurance can be given as to the ultimate outcome of any of the above matters, based on management’s current understanding of the relevant facts and circumstances, the Company believes that these proceedings should not have a material adverse effect on its financial position, results of operations or cash flows.
Note 11 – Segment Information
The Company conducts its business through two reportable operating segments: Casinos and Distributed Gaming. The Company’s Casinos segment involves the ownership and operation of resort casino properties in Nevada and Maryland. The Company’s Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and Montana, and the operation of branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area. The Corporate and Other segment includes the Company’s cash and cash equivalents, miscellaneous receivables and corporate overhead. Costs recorded in the Corporate and Other segment have not been allocated to the Company’s reportable operating segments because these costs are not easily allocable and to do so would not be practical.
The Company evaluates each segment’s profitability based upon such segment’s Adjusted EBITDA, which represents each segment’s earnings before interest and other non-operating income (expense), income taxes, depreciation and amortization, impairment of goodwill and intangible assets, acquisition and severance expenses, preopening and related expenses, asset disposal and other writedowns, share-based compensation expenses, and change in fair value of derivative, calculated before corporate overhead (which is not allocated to each segment).
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The following tables set forth, for the periods indicated, certain operating data for the Company’s segments, and reconciles net income (loss) to Adjusted EBITDA:
Three Months Ended September 30, 2020
(In thousands) Casinos Distributed Gaming Corporate and Other Consolidated
Revenues
Gaming $ 83,549  $ 61,972  $ —  $ 145,521 
Food and beverage 22,067  6,618  —  28,685 
Rooms 22,505  —  —  22,505 
Other 7,193  1,313  179  8,685 
Total revenues $ 135,314  $ 69,903  $ 179  $ 205,396 
Net income (loss) $ 25,068  $ (1,161) $ (30,863) $ (6,956)
Depreciation and amortization 25,165  5,723  663  31,551 
Acquisition and severance expenses —  —  24  24 
Preopening and related expenses (1)
—  —  73  73 
Gain on disposal of assets (20) (346) (108) (474)
Share-based compensation —  —  3,520  3,520 
Other, net 92  467  727  1,286 
Interest expense, net 226  15  16,181  16,422 
Income tax benefit —  —  (17) (17)
Adjusted EBITDA $ 50,531  $ 4,698  $ (9,800) $ 45,429 

Three Months Ended September 30, 2019
(In thousands) Casinos Distributed Gaming Corporate and Other Consolidated
Revenues
Gaming $ 69,953  $ 72,615  $ —  $ 142,568 
Food and beverage 37,836  13,273  —  51,109 
Rooms 35,347  —  —  35,347 
Other 11,977  2,110  203  14,290 
Total revenues $ 155,113  $ 87,998  $ 203  $ 243,314 
Net income (loss) $ 17,858  $ 5,786  $ (33,091) $ (9,447)
Depreciation and amortization 23,500  5,616  495  29,611 
Acquisition and severance expenses 137  —  291  428 
Preopening and related expenses (1)
308  189  59  556 
Gain on disposal of assets (4) (223) (6) (233)
Share-based compensation —  —  2,583  2,583 
Other, net 218  —  25  243 
Interest expense, net 200  18  18,558  18,776 
Change in fair value of derivative —  —  352  352 
Income tax provision —  —  200  200 
Adjusted EBITDA $ 42,217  $ 11,386  $ (10,534) $ 43,069 
(1)Preopening and related expenses include rent, organizational costs, non-capital costs associated with the opening of tavern and casino locations, and expenses related to The Strat rebranding and the launch of the TrueRewards loyalty program.
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Nine Months Ended September 30, 2020
(In thousands) Casinos Distributed Gaming Corporate and Other Consolidated
Revenues
Gaming $ 170,664  $ 158,749  $ —  $ 329,413 
Food and beverage 57,888  22,512  —  80,400 
Rooms 54,097  —  —  54,097 
Other 20,067  3,965  585  24,617 
Total revenues $ 302,716  $ 185,226  $ 585  $ 488,527 
Net loss $ (23,849) $ (5,751) $ (88,542) $ (118,142)
Depreciation and amortization 75,222  17,490  1,925  94,637 
Impairment of goodwill and intangible assets 27,872  —  —  27,872 
Acquisition and severance expenses 2,606  612  149  3,367 
Preopening and related expenses (1)
225  (1) 188  412 
Loss (gain) on disposal of assets 1,290  (360) (113) 817 
Share-based compensation —  —  7,522  7,522 
Other, net 187  705  868  1,760 
Interest expense, net 562  40  50,973  51,575 
Change in fair value of derivative —  —  1  1 
Income tax provision —  —  241  241 
Adjusted EBITDA $ 84,115  $ 12,735  $ (26,788) $ 70,062 

Nine Months Ended September 30, 2019
(In thousands) Casinos Distributed Gaming Corporate and Other Consolidated
Revenues
Gaming $ 213,075  $ 219,531  $ —  $ 432,606 
Food and beverage 113,327  39,644  —  152,971 
Rooms 102,148  —  —  102,148 
Other 36,653  6,333  565  43,551 
Total revenues $ 465,203  $ 265,508  $ 565  $ 731,276 
Net income (loss) $ 63,018  $ 20,739  $ (115,630) $ (31,873)
Depreciation and amortization 69,195  16,514  1,143  86,852 
Acquisition and severance expenses 524  35  2,536  3,095 
Preopening and related expenses (1)
2,662  1,415  208  4,285 
Loss (gain) on disposal of assets 763  (158) 384  989 
Share-based compensation 11  5  8,885  8,901 
Other, net 310  —  1,284  1,594 
Interest expense, net 316  57  55,673  56,046 
Loss on extinguishment and modification of debt —  —  9,150  9,150 
Change in fair value of derivative —  —  4,089  4,089 
Income tax benefit —  —  (1,795) (1,795)
Adjusted EBITDA $ 136,799  $ 38,607  $ (34,073) $ 141,333 
(1)Preopening and related expenses include rent, organizational costs, non-capital costs associated with the opening of tavern and casino locations, and expenses related to The Strat rebranding and the launch of the TrueRewards loyalty program.
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Assets
The Company’s assets by segment consisted of the following amounts:
(In thousands) Casinos Distributed Gaming Corporate and Other Consolidated
Balance at September 30, 2020 $ 1,112,412  $ 433,198  $ 63,317  $ 1,608,927 
Balance at December 31, 2019 $ 1,204,574  $ 482,294  $ 54,049  $ 1,740,917 
Note 12 – Related Party Transactions
As of September 30, 2020, the Company leased its office headquarters building from a company 33% beneficially owned by Blake L. Sartini, 5% owned by a trust for the benefit of Mr. Sartini’s immediate family members (including Blake L. Sartini, II) for which Mr. Sartini serves as trustee, and 3% beneficially owned by Stephen A. Arcana. The lease for the Company’s office headquarters building expires on December 31, 2030. The rent expense for the office headquarters building was $0.5 million and $1.1 million for the three and nine months ended September 30, 2020 and $0.3 million and $1.0 million for the three and nine months ended September 30, 2019, respectively. No amount was due and payable by the Company as of September 30, 2020 and December 31, 2019 under this lease arrangement. Additionally, a portion of the office headquarters building was sublet to Sartini Enterprises, Inc., a company controlled by Mr. Sartini. Rental income during each of the three and nine months ended September 30, 2020 and 2019 for the sublet portion of the office headquarters building was insignificant. No amount was owed to the Company under such sublease as of September 30, 2020 and December 31, 2019. In addition, Golden and Sartini Enterprises, Inc. participate in certain cost-sharing arrangements. The amount due and payable by the Company under such arrangements was insignificant as of September 30, 2020 and no amount was due and payable by the Company as of December 31, 2019. Mr. Sartini serves as the Chairman of the Board and Chief Executive Officer of the Company and is co-trustee of The Blake L. Sartini and Delise F. Sartini Family Trust, which is a significant shareholder of the Company. Mr. Arcana serves as the Executive Vice President and Chief Operating Officer of the Company.
In November 2018, the Company entered into a lease agreement for office space in a building to be constructed and owned by a company 33% beneficially owned by Mr. Sartini, 5% owned by a trust for the benefit of Mr. Sartini’s immediate family members (including Blake L. Sartini, II) for which Mr. Sartini serves as trustee, and 3% beneficially owned by Mr. Arcana. The lease commenced in August 2020 and expires on December 31, 2030. The rent expense for the space was less than $0.1 million for the three and nine months ended September 30, 2020. Additionally, the lease agreement includes a right of first refusal for additional space on the second floor of the building.
One tavern location that the Company had previously leased from a related party was sold in the second quarter of 2019 to an unrelated third party. As a result, the Company did not incur any rent expense for the tavern location previously leased from a related party for the three months ended September 30, 2019 and the rent expense for the nine months ended September 30, 2019 was $0.2 million. No tavern locations were leased from related parties for the three and nine months ended September 30, 2020.
The Company paid $0.1 million and $0.4 million for the three and nine months ended September 30, 2020, respectively, and $0.1 million and $0.5 million for the three and nine months ended September 30, 2019, respectively, under the aircraft time-sharing, co-user and cost-sharing agreements with Sartini Enterprises, Inc. The Company owed no amount under the aircraft time-sharing, co-user and cost-sharing agreements as of September 30, 2020 and December 31, 2019. Less than $0.1 million was owed to the Company under such agreements as of September 30, 2020 and no amount was owed to the Company under such agreements as of December 31, 2019.
Note 13 – Subsequent Events
The Company’s management evaluates subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that occurred during such period that would require adjustment to or disclosure in the consolidated financial statements as of and for the nine months ended September 30, 2020.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used in this Quarterly Report on Form 10-Q, unless the context suggests otherwise, the terms “Golden,” “we,” “us” and “our” and refer to Golden Entertainment, Inc. together with its subsidiaries.
The following information should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”) previously filed with the Securities and Exchange Commission (“SEC”).
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can generally be identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “potential,” “seek,” “should,” “think,” “will,” “would” and similar expressions, or they may use future dates. In addition, forward-looking statements include statements regarding the impact of the 2019 novel coronavirus (“COVID-19”) pandemic on our business; cost savings, synergies, growth opportunities and other financial and operating benefits of our casino and other acquisitions; our strategies, objectives, business opportunities and plans for future expansion, developments or acquisitions; anticipated future growth and trends in our business or key markets; projections of future financial condition, operating results, income, capital expenditures, costs or other financial items; anticipated regulatory and legislative changes; and other characterizations of future events or circumstances as well as other statements that are not statements of historical fact. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. These forward-looking statements are subject to assumptions, risks and uncertainties that may change at any time, and readers are therefore cautioned that actual results could differ materially from those expressed in any forward-looking statements. Factors that could cause our actual results to differ materially include: the uncertainty of the extent, duration and effects of the COVID-19 pandemic and the response of governments, including government-mandated closures or travel restrictions; our ability to realize the anticipated cost savings, synergies and other benefits of our casino and other acquisitions, including the casinos we recently acquired in Las Vegas and Laughlin, Nevada, and integration risks relating to such transactions; changes in national, regional and local economic and market conditions; legislative and regulatory matters (including the cost of compliance or failure to comply with applicable laws and regulations); increases in gaming taxes and fees in the jurisdictions in which we operate; litigation; increased competition; our ability to renew our distributed gaming contracts; reliance on key personnel (including our Chief Executive Officer, President and Chief Financial Officer, and Chief Operating Officer); the level of our indebtedness and our ability to comply with covenants in our debt instruments; terrorist incidents; natural disasters; severe weather conditions (including weather or road conditions that limit access to our properties); the effects of environmental and structural building conditions; the effects of disruptions to our information technology and other systems and infrastructure; factors affecting the gaming, entertainment and hospitality industries generally; and other factors identified under the heading “Risk Factors” in our Annual Report and in Part II, Item 1A of this report, or appearing elsewhere in this report and in our other filings with the SEC. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the filing date of this report. We undertake no obligation to revise or update any forward-looking statements for any reason.
Overview
We own and operate a diversified entertainment platform, consisting of a portfolio of gaming assets that focus on resort casino operations and distributed gaming (including gaming in our branded taverns).
We conduct our business through two reportable operating segments: Casinos and Distributed Gaming. In our Casinos segment, we own and operate ten resort casino properties in Nevada and Maryland. Our Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and Montana, and the operation of branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area.
Impact of COVID-19
In December 2019, an outbreak of COVID-19 began in Wuhan, Hubei Province, China. The disease has since spread rapidly across the world, causing the World Health Organization to declare COVID-19 a pandemic on March 11, 2020. Since that time, people across the globe have been advised to avoid non-essential travel, and steps have been taken by governmental authorities,
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including in the States in which we operate, to implement closures of non-essential operations to contain the spread of the virus. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. Following emergency executive orders issued by the Governors of Nevada, Maryland, and Montana, in the week of March 16, 2020, all of our properties were temporarily closed to the public and our Distributed Gaming operations at third-party locations were suspended. Our Distributed Gaming operations in Montana and Nevada resumed on May 4, 2020 and June 4, 2020, respectively, and our Casino operations in Nevada and Maryland resumed on June 4, 2020 and June 19, 2020, respectively. However, as a result of the impact of the COVID-19 pandemic, the operations of the Colorado Belle Hotel & Casino Resort (“Colorado Belle”) remain suspended. While all of our properties except for the Colorado Belle re-opened during the second quarter of 2020, our implementation of protocols intended to protect gaming patrons, guests and team members from potential COVID-19 exposure continues to limit our operations. These measures include enhanced sanitization, public gathering limitations of less than 50% of casino and tavern capacity, patron social distancing requirements, limitations on casino operations, which include disabling electronic gaming machines, and face mask and temperature check requirements for patrons. Certain amenities at our casinos may remain closed or operate in a limited capacity, including restaurants, bars, and other food and beverage outlets, as well as table games, spas and pools. These measures limit the number of patrons that are able to attend these venues. We cannot predict when these restrictions on our operations will be changed or eliminated.
On July 10, 2020, the Governor of the State of Nevada issued a new emergency executive order mandating the closure of all bars, pubs, taverns, breweries, distilleries and wineries in seven counties, including Clark County (the location of most of our branded taverns). As a result of the Governor’s executive order, we closed most of our tavern locations. Golden implemented modifications of the gaming areas in its taverns which allowed us to start reopening our tavern locations in late July 2020 and, as of September 30, 2020, all of our tavern locations had re-opened.
The disruptions arising from the COVID-19 pandemic had a significant adverse impact on our financial condition and results of operations for the three and nine months ended September 30, 2020. The duration and intensity of this global health emergency and related disruptions is uncertain. The impact of COVID-19 on our consolidated results of operations, cash flows and financial condition in 2020 will be material, but cannot be reasonably estimated at this time, as it is unknown when the COVID-19 pandemic will end, when or how quickly the current travel restrictions, occupancy and other limitations will be modified or cease to be necessary, and how these uncertainties will impact our business and the willingness of customers to spend on travel and entertainment.
The impact of the COVID-19 pandemic on our operations qualified as a triggering event necessitating an evaluation of long-lived assets, goodwill, and indefinite-lived intangible assets for indicators of impairment as discussed in “Note 3 — Property and Equipment” and “Note 4 — Goodwill and Intangible Assets” in Part I, Item 1: Financial Statements.
Our $200 million revolving credit facility (the “Revolving Credit Facility”) was undrawn and available for borrowing as of September 30, 2020. In addition, we have implemented various mitigating actions to preserve liquidity, including delaying material capital expenditures, reducing operating expenses and implementing a cost reduction program with respect to discretionary expenditures. To further enhance our liquidity position or to finance any future acquisition or other business investment initiatives, we may obtain additional financing, which could consist of debt, convertible debt or equity financing from public or private credit and capital markets.
Casinos
We own and operate ten resort casino properties in Nevada and Maryland. In light of COVID-19, certain amenities at our resort casino properties may remain closed or operate in a limited capacity, including restaurants, bars, and other food and beverage outlets, as well as table games, spas and pools.
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The following table sets forth certain information regarding our properties as of September 30, 2020:
Location Slot Machines Table Games Hotel Rooms Race and Sport Book Bingo (seats)
Nevada Casinos
The STRAT Hotel, Casino & SkyPod (“The Strat”) Las Vegas, NV 716 43  2,429  1  —
Arizona Charlie’s Boulder Las Vegas, NV 741 —  303  1  approx. 400
Arizona Charlie’s Decatur Las Vegas, NV 762 10  259  1  approx. 400
Aquarius Casino Resort (“Aquarius”) Laughlin, NV 1,114 33  1,906  1  —
Colorado Belle Hotel & Casino Resort (“Colorado Belle”) (1)
Laughlin, NV —  —  —  —  —
Edgewater Hotel & Casino Resort (“Edgewater”) Laughlin, NV 651 20  1,052  1  —
Gold Town Casino Pahrump, NV 194 —  —  —  —
Lakeside Casino & RV Park Pahrump, NV 158 —  —  —  approx. 100
Pahrump Nugget Hotel Casino (“Pahrump Nugget”) Pahrump, NV 324 9  69  1  approx. 200
Maryland Casino
Rocky Gap Casino Resort (“Rocky Gap”) Flintstone, MD 655 16  198  —  —
Totals 5,315  131  6,216  6 
(1)We have implemented various mitigating actions to preserve liquidity in light of the COVID-19 pandemic. As a result, the operations of the Colorado Belle remain suspended. Refer to “Note 4 — Goodwill and Intangible Assets” included in Part I, Item 1: Financial Statements for financial statement impact associated with this matter.
The Strat: The Strat is our premier casino property, located on Las Vegas Blvd on the north end of the Las Vegas Strip. The Strat comprises the iconic SkyPod, a casino, a hotel and a retail center. In addition to hotel rooms and gaming in an 80,000 square foot casino, The Strat offers nine restaurants, two rooftop pools, a fitness center, retail shops and entertainment facilities.*
Arizona Charlie’s casinos: Our Arizona Charlie’s Decatur and Arizona Charlie’s Boulder casino properties primarily serve local Las Vegas patrons, and provide an alternative experience to the Las Vegas Strip. In addition to hotel rooms, gaming and bingo facilities, Arizona Charlie’s Boulder casino offers four restaurants and an RV park with approximately 220 RV hook-up sites and Arizona Charlie’s Decatur casino offers five restaurants.*
Laughlin casinos: We own and operate three casinos in Laughlin, Nevada, which is located approximately 90 miles from Las Vegas on the western riverbank of the Colorado River. In addition to hotel rooms and gaming, the Aquarius has eight restaurants, the Colorado Belle offered three restaurants, and the Edgewater offers six restaurants and dedicated entertainment venues, including the Laughlin Event Center. As noted above, as a result of the impact of the COVID-19 pandemic, the operations of the Colorado Belle remain suspended.*
Pahrump casinos: We own and operate three casinos in Pahrump, Nevada, which is located approximately 60 miles from Las Vegas and is a gateway to Death Valley National Park. In addition to hotel rooms, gaming and bingo facilities at our Pahrump casino properties, Pahrump Nugget offers a bowling center and our Lakeside Casino & RV Park offers 160 RV hook-up sites.*
Rocky Gap Casino Resort: Rocky Gap is situated on approximately 270 acres in the Rocky Gap State Park in Maryland, which we lease from the Maryland DNR under a 40-year ground lease expiring in 2052 (plus a 20-year option renewal). In addition to hotel rooms and gaming, Rocky Gap offers three restaurants, a spa and the only Jack Nicklaus signature golf course in Maryland. Rocky Gap is a AAA Four Diamond Award® winning resort and includes an event and conference center.*
* As a result of the COVID-19 pandemic, we have reduced capacity or temporarily closed certain of our amenities at our resort casino properties.
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Distributed Gaming
Our Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and Montana. We place our slots and amusement devices in locations where we believe they will receive maximum customer traffic, generally near a store’s entrance. In addition, we own and operate branded taverns with slots, which target local patrons, primarily in the greater Las Vegas, Nevada metropolitan area. As of September 30, 2020, our distributed gaming operations comprised over 10,000 slots in approximately 1,000 locations.
Our branded taverns offer a casual, upscale environment catering to local patrons offering superior food, craft beer and other alcoholic beverages, and typically include 15 onsite slots. As of September 30, 2020, we owned and operated 66 branded taverns, which offered a total of over 1,000 onsite slots. Most of our taverns are located in the greater Las Vegas, Nevada metropolitan area and cater to local patrons seeking more convenient entertainment establishments than traditional casino properties. Our tavern brands include PT’s Gold, PT’s Pub, Sierra Gold, Sean Patrick’s, PT’s Place, PT’s Ranch, Sierra Junction and SG Bar.
On July 10, 2020, the Governor of the State of Nevada issued a new emergency executive order mandating the closure of all bars, pubs, taverns, breweries, distilleries and wineries in seven counties, including Clark County (the location of most of our branded taverns). As a result of the Governor’s executive order, we closed most of our tavern locations. Golden implemented modifications of the gaming areas in our taverns which allowed us to start reopening our tavern locations in late July 2020 and, as of September 30, 2020, all of our tavern locations had re-opened.
Results of Operations
The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2020 and 2019.
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2020 2019 2020 2019
Revenues by segment
Casinos $ 135,314  $ 155,113  $ 302,716  $ 465,203 
Distributed Gaming 69,903  87,998  185,226  265,508 
Corporate and other 179  203  585  565 
Total revenues 205,396  243,314  488,527  731,276 
Operating expenses by segment
Casinos 54,943  77,334  141,567  228,113 
Distributed Gaming 57,369  68,621  153,248  204,214 
Corporate and other 329  323  867  739 
Total operating expenses 112,641  146,278  295,682  433,066 
Selling, general and administrative 52,132  57,106  132,290  170,288 
Depreciation and amortization 31,551  29,611  94,637  86,852 
Impairment of goodwill and intangible assets —  —  27,872  — 
Acquisition and severance expenses 24  428  3,367  3,095 
(Gain) loss on disposal of assets (474) (233) 817  599 
Preopening expenses 73  243  187  1,759 
Total expenses 195,947  233,433  554,852  695,659 
Operating (loss) income 9,449  9,881  (66,325) 35,617 
Non-operating expense, net (16,422) (19,128) (51,576) (69,285)
Income tax benefit (provision) 17  (200) (241) 1,795 
Net loss $ (6,956) $ (9,447) $ (118,142) $ (31,873)





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Three and Nine Months Ended September 30, 2020 Compared to Three and Nine Months Ended September 30, 2019 
Revenues
The $37.9 million, or 16%, decrease in revenues for the three months ended September 30, 2020 compared to the prior year period resulted from decreases of $22.4 million, $12.8 million and $5.6 million in food and beverage, room and other revenues, respectively, offset by an increase in gaming revenues in the amount of $3.0 million. The decrease in food and beverage, room and other revenues was primarily attributable to limitations on our operations arising from our implementation of protocols intended to protect gaming patrons, guests and team members from potential COVID-19 exposure. The increase in gaming revenues for the three months ended September 30, 2020 is related to a higher volume of play from our gaming patrons.
The $19.8 million, or 13%, decrease in revenues related to our Casinos segment for the three months ended September 30, 2020 compared to the prior year period resulted primarily from decreases of $15.8 million, $12.8 million and $4.8 million in our food and beverage, room and other revenues, respectively, offset by an increase in gaming revenues in the amount of $13.6 million. The decrease in food and beverage, room and other revenues was primarily attributable to limitations on our operations arising from our implementation of protocols intended to protect gaming patrons, guests and team members from potential COVID-19 exposure. The increase in gaming revenues within our Casinos segment for the three months ended September 30, 2020 is related to a higher volume of play from our gaming patrons.
The $18.1 million, or 21%, decrease in revenues related to our Distributed Gaming segment for the three months ended September 30, 2020 compared to the prior year period resulted primarily from decreases of $10.6 million, $6.7 million and $0.8 million in our gaming, food and beverage and other revenues, respectively, primarily due to the temporary suspension of certain aspects of our Distributed Gaming operations in response to the Nevada Governor’s executive order issued on July 10, 2020 (as discussed above) and as a result of limitations on our operations arising from our implementation of protocols intended to protect gaming patrons, guests and team members from potential COVID-19 exposure.
The $242.7 million, or 33%, decrease in revenues for the nine months ended September 30, 2020 compared to the prior year period resulted from decreases of $103.2 million, $72.6 million, $48.1 million and $18.9 million in gaming, food and beverage, room and other revenues, respectively, primarily due to the impact of the temporary closures of all of our properties and suspension of our Distributed Gaming operations as a result of the COVID-19 pandemic and the limitations on our operations arising from our implementation of protocols intended to protect gaming patrons, guests and team members from potential COVID-19 exposure.
The $162.5 million, or 35%, decrease in revenues related to our Casinos segment for the nine months ended September 30, 2020 compared to the prior year period resulted primarily from decreases of $42.4 million, $55.4 million, $48.1 million and $16.6 million in gaming, food and beverage, room and other revenues, respectively, primarily due to the temporary closures of our casino properties as a result of the COVID-19 pandemic and the limitations on our operations arising from our implementation of protocols intended to protect gaming patrons, guests and team members from potential COVID-19 exposure.
The $80.3 million, or 30%, decrease in revenues related to our Distributed Gaming segment for the nine months ended September 30, 2020 compared to the prior year period resulted primarily from decreases of $60.8 million, $17.1 million and $2.4 million in gaming, food and beverage and other revenues, respectively, primarily due to the temporary suspension of certain aspects of our Distributed Gaming operations in response to the Nevada Governor’s executive order issued on July 10, 2020 (as discussed above) and as a result of limitations on our operations arising from our implementation of protocols intended to protect gaming patrons, guests and team members from potential COVID-19 exposure.
During the three and nine months ended September 30, 2020, Adjusted EBITDA in our Casinos segment as a percentage of segment revenues (or Adjusted EBITDA margin) was 37% and 28%, respectively, compared to Adjusted EBITDA margin in our Distributed Gaming segment of 7% for both three and nine months ended September 30, 2020. During the three and nine months ended September 30, 2019, Adjusted EBITDA margin in our Casinos segment was 27% and 29%, respectively, compared to Adjusted EBITDA margin in our Distributed Gaming segment was 13% and 15%, respectively. The lower Adjusted EBITDA margin in our Distributed Gaming segment relative to our Casinos segment reflects the fixed and variable amounts paid to third parties under our space and revenue share agreements as expenses in the Distributed Gaming segment (which includes the percentage of gaming revenues paid to third parties under revenue share agreements). Refer to “Note 11 — Segment Information” in Part I, Item 1: Financial Statements for additional information regarding segment Adjusted EBITDA and a reconciliation of segment Adjusted EBITDA to segment net loss. In addition, current year margins were impacted by the COVID-19 pandemic as discussed in Part I, Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations — Impact of COVID-19.
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Operating Expenses
The $33.6 million, or 23%, decrease in operating expenses for the three months ended September 30, 2020 compared to the prior year resulted primarily from $7.7 million, $18.4 million, $5.5 million and $2.1 million decreases in gaming, food and beverage, room and other expenses, respectively. These operating expense decreases primarily result from the various mitigating actions taken by Golden to preserve liquidity, including delaying material capital expenditures, reducing operating expenses and implementing a cost reduction program with respect to discretionary expenditures.
The $137.4 million, or 32%, decrease in operating expenses for the nine months ended September 30, 2020 compared to the prior year resulted primarily from $60.7 million, $52.2 million, $17.4 million and $7.1 million decreases in gaming, food and beverage, room and other expenses, respectively. These operating expense decreases primarily reflect the temporary closures of our casino properties, branded taverns and distributed gaming routes as a result of the COVID-19 pandemic and the various mitigating actions taken by Golden to preserve liquidity, including delaying material capital expenditures, reducing operating expenses and implementing a cost reduction program with respect to discretionary expenditures.
Selling, General and Administrative Expenses
The $5.0 million, or 9%, decrease in selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2020 compared to the prior year period was primarily due to the impact of the COVID-19 pandemic, which resulted in a decrease in payroll, rent and other expenses. SG&A expenses are comprised of marketing and advertising, utilities, building rent, maintenance contracts, corporate office overhead, information technology, legal, accounting, third-party service providers, executive compensation, share-based compensation and payroll expenses and payroll taxes.
The $38.0 million, or 22%, decrease in SG&A expenses for the nine months ended September 30, 2020 compared to the prior year period was primarily due to the temporary closures of our casino properties, branded taverns and distributed gaming routes as a result of the COVID-19 pandemic, which resulted in a decrease in payroll, rent and other expenses.
Acquisition and Severance Expenses
Acquisition expenses were incurred primarily for the three and nine months ended September 30, 2019 and related to consulting services for our acquisition of Edgewater Gaming, LLC and Colorado Belle Gaming, LLC from Marnell Gaming, LLC, which closed on January 14, 2019 (the “Laughlin Acquisition”). Severance expenses were primarily incurred for the three and nine months ended September 30, 2020 and related to the mitigating actions we took to preserve liquidity in light of COVID-19.
Preopening Expenses
Preopening expenses consist of labor, food, utilities, training, initial licensing, rent and organizational costs incurred. Non-capital costs associated with the opening of tavern and casino locations are also expensed as preopening expenses as incurred.
Preopening expenses related primarily to corporate costs incurred for the three and nine months ended September 30, 2020 and 2019.
Depreciation and Amortization
Depreciation and amortization expenses for the three months ended September 30, 2020 increased by $1.9 million, or 7%, compared to the prior year period, primarily due to the depreciation of the assets related to the remodel of The Strat and the amortization of the intangibles related to the Laughlin Acquisition.
Depreciation and amortization expenses for the nine months ended September 30, 2020 increased $7.8 million, or 9%, compared to the prior year period, primarily due to the depreciation of the assets related to the remodel of The Strat and the amortization of the intangibles related to the Laughlin Acquisition.
Non-Operating Expense, Net
Non-operating expense, net decreased by $2.7 million, or 14%, for the three months ended September 30, 2020 compared to the prior year period, primarily due to a $2.4 million decrease in interest expense followed by a $0.4 million decrease in loss related to change in fair value of derivative.
Non-operating expense, net decreased by $17.7 million, or 26%, for the nine months ended September 30, 2020 compared to the prior year period, primarily due to a $9.2 million decrease in loss on extinguishment of debt, $4.5 million decrease in interest expense and a $4.1 million decrease in loss related to change in fair value of derivative.
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Income Taxes
Our effective income tax rate was 0.2% and (0.2)% for the three and nine months ended September 30, 2020, respectively, and (2.2)% and 5.3% for the three and nine months ended September 30, 2020, respectively. The effective income tax rate differed from the federal tax rate of 21% due primarily to the change in valuation allowance against our deferred tax assets both for three and nine months ended September 30, 2020 and 2019.
Non-GAAP Measures
To supplement our consolidated financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), we use Adjusted EBITDA, a measure we believe is appropriate to provide meaningful comparison with, and to enhance an overall understanding of, our past financial performance and prospects for the future. We believe Adjusted EBITDA provides useful information to both management and investors by excluding specific expenses and gains that we believe are not indicative of our core operating results. Further, Adjusted EBITDA is a measure of operating performance used by management, as well as industry analysts, to evaluate operations and operating performance and is widely used in the gaming industry. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. In addition, other companies in our industry may calculate Adjusted EBITDA differently than we do. A reconciliation of net loss to Adjusted EBITDA is provided in the table below.
We define “Adjusted EBITDA” as earnings before interest and other non-operating income (expense), income taxes, depreciation and amortization, impairment of goodwill, acquisition and severance expenses, preopening and related expenses, asset disposal and other writedowns, share-based compensation expenses, and change in fair value of derivative.
The following table presents a reconciliation of Adjusted EBITDA to net loss:
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2020 2019 2020 2019
Net loss $ (6,956) $ (9,447) $ (118,142) $ (31,873)
Depreciation and amortization 31,551  29,611  94,637  86,852 
Impairment of goodwill and intangible assets —  —  27,872  — 
Acquisition and severance expenses 24  428  3,367  3,095 
Preopening and related expenses (1)
73  556  412  4,285 
(Gain) loss on disposal of assets (474) (233) 817  989 
Share-based compensation 3,520  2,583  7,522  8,901 
Other, net 1,286  243  1,760  1,594 
Interest expense, net 16,422  18,776  51,575  56,046 
Loss on extinguishment and modification of debt —  —  —  9,150 
Change in fair value of derivative —  352  1  4,089 
Income tax (benefit) provision (17) 200  241  (1,795)
Adjusted EBITDA $ 45,429  $ 43,069  $ 70,062  $ 141,333 
(1)Preopening and related expenses include rent, organizational costs, non-capital costs associated with the opening of tavern and casino locations, and expenses related to The Strat rebranding and the launch of the True Rewards loyalty program.
Liquidity and Capital Resources
As of September 30, 2020, we had $100.4 million in cash and cash equivalents. We currently believe that our cash and cash equivalents, cash flows from operations and borrowing availability under our Revolving Credit Facility will be sufficient to meet our capital requirements during the next 12 months. As of September 30, 2020, we had borrowing availability of $200 million under our Revolving Credit Facility.
Our operating results and performance depend significantly on national, regional and local economic conditions and their effect on consumer spending. Declines in consumer spending would cause revenues generated in both our Casinos and Distributed Gaming segments to be adversely affected.
To further enhance our liquidity position or to finance any future acquisition or other business investment initiatives, we may obtain additional financing, which could consist of debt, convertible debt or equity financing from public and/or private credit and capital markets.
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Cash Flows
Net cash provided by operating activities was $24.6 million for the nine months ended September 30, 2020, compared to $98.0 million for the prior year period. The decrease was primarily due to the impact of the COVID-19 pandemic on our operations as discussed in Part I, Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations — Impact of COVID-19 and the timing of working capital spending.
Net cash used in investing activities was $30.8 million for the nine months ended September 30, 2020, compared to $230.1 million for the prior year period. The decrease in net cash used in investing activities reflects the closing of the Laughlin Acquisition and capital expenditures made in 2019, and the deferral of material capital expenditures in light of the COVID-19 pandemic in 2020.
Net cash used in financing activities was $5.1 million for the nine months ended September 30, 2020, primarily due to repayment of our obligations under the notes payable and finance leases. Net cash provided by financing activities was $139.8 million for the nine months ended September 30, 2019, primarily due to issuance of the 7.625% Senior Notes due 2026 in April 2019, partially offset by the repayment in full of our $200 million senior secured second lien term loan facility.
Long-Term Debt
Refer to “Note 6 — Long-Term Debt” in Part I, Item 1: Financial Statements and to “Liquidity and Capital Resources” in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report for discussion of our debt instruments.
Other Items Affecting Liquidity
The outcome of the following specific matters, including our commitments and contingencies, may also affect our liquidity.
Commitments, Capital Spending and Development
We normally perform on-going refurbishment and maintenance at our facilities, of which certain maintenance costs are capitalized if such improvement or refurbishment extends the life of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. We normally fund such capital expenditures through our Revolving Credit Facility and operating cash flows. However, due to the impact of COVID-19 pandemic on our operations, all material capital expenditures have been deferred.
Refer to “Note 10 — Commitments and Contingencies” in Part I, Item 1: Financial Statements for additional information regarding commitments and contingencies that may also affect our liquidity.
Share Repurchase Program
On March 12, 2019, our Board of Directors authorized the repurchase of up to $25.0 million additional shares of common stock, subject to available liquidity, general market and economic conditions, alternate uses for the capital and other factors. Share repurchases may be made from time to time in open market transactions, block trades or in private transactions in accordance with applicable securities laws and regulations and other legal requirements, including compliance with our finance agreements. There is no minimum number of shares that we are required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice. During the three and nine months ended September 30, 2020, no shares of our common stock were repurchased under our share repurchase programs.
Other Opportunities
We may investigate and pursue expansion opportunities in our existing or new markets from time to time. Such expansions will be influenced and determined by a number of factors, which may include licensing availability and approval, suitable investment opportunities and availability of acceptable financing. Investigation and pursuit of such opportunities may require us to make substantial investments or incur substantial costs, which we may fund through cash flows from operations or borrowing availability under our Revolving Credit Facility. To the extent such sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity or debt financings or from other sources. No assurance can be given that additional financing will be available or that, if available, such financing will be obtainable on terms favorable to us. Moreover, we can provide no assurances that the investigation or pursuit of an opportunity will result in a completed transaction.

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Critical Accounting Policies and Estimates
Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to the application of the acquisition method of accounting, long-lived assets, goodwill and indefinite-lived intangible assets, revenue recognition, income taxes and share-based compensation expenses. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.
A description of our critical accounting estimates can be found under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report. For a more extensive discussion of our accounting policies, refer to “Note 2 — Summary of Significant Accounting Policies” in Part II, Item 8: Financial Statements and Supplemental Data in our Annual Report. There were no material changes to our critical accounting policies and estimates during the three and nine months ended September 30, 2020.
Commitments and Contractual Obligations
For the three and nine months ended September 30, 2020, there were no material changes in our commitments under contractual obligations as compared to those disclosed in Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Items Affecting Liquidity – Contractual Obligations in our Annual Report.
Seasonality
We believe that our Casinos and Distributed Gaming segments are affected by seasonal factors, including holidays, weather and travel conditions. Our Las Vegas and Pahrump casinos as well as our Nevada distributed gaming businesses have historically experienced lower revenues during the summer as a result of fewer tourists due to higher temperatures in addition to increased vacation activity by local residents. Our casinos in Laughlin and Rocky Gap typically experience higher revenues during summer months with increased visitation and may be adversely impacted by inclement weather during winter months. Our Montana distributed gaming operations also typically experience higher revenues during the summer due to the inclement weather in other seasons. While other factors like the COVID-19 pandemic, unemployment levels, market competition and the diversification of our business may either offset or magnify seasonal effects, some seasonality is likely to continue, which could result in significant fluctuation in our quarterly operating results.
Recently Issued Accounting Pronouncements
See “Note 1 — Nature of Business and Basis of Presentation” in Part I, Item 1: Financial Statements for information regarding recently issued accounting pronouncements.
Regulation and Taxes
The casino and distributed gaming industries are subject to extensive regulation by state gaming authorities. Changes in applicable laws or regulations could have a material adverse effect on us.
The gaming industry represents a significant source of tax revenues to regulators. From time to time, various federal and state legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. It is not possible to determine the likelihood of possible changes in tax law or in the administration of such law. Such changes, if adopted, could have a material adverse effect on our future financial position, results of operations, cash flows and prospects.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt. As of September 30, 2020, our variable rate long-term debt primarily comprised our indebtedness under the Credit Facility (defined in “Note 6 — Long-Term Debt” in Part I, Item 1: Financial Statements).
As of September 30, 2020, we had $772 million in principal amount of outstanding borrowings under the Term Loan (defined in “Note 6 — Long-Term Debt” in Part I, Item 1: Financial Statements) and no outstanding borrowings under the Revolving Credit Facility. Our primary interest rate under the Credit Facility is the Eurodollar rate plus an applicable margin. The weighted-average effective interest rate on our outstanding borrowings under the Credit Facility was approximately 3.74% and 4.03% for the three and nine months ended September 30, 2020, respectively. Assuming the outstanding balance under our Credit Facility remained constant over a year, a 50 basis point increase in the applicable interest rate would increase interest incurred, prior to effects of capitalized interest, by $3.9 million over a twelve-month period.
As of September 30, 2020, our investment portfolio included $100.4 million in cash and cash equivalents and we did not hold any short-term investments.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to provide reasonable assurance of achieving the objective that information in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified and pursuant to the requirements of the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of September 30, 2020, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2020.
During the quarter ended September 30, 2020, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
ITEM 1. LEGAL PROCEEDINGS
A discussion of our legal proceedings is contained in “Note 10 — Commitments and Contingencies — Legal Matters” in Part I, Item 1: Financial Statements.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K, as updated by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which factors could materially affect our business, financial condition, liquidity or future results. There have been no material changes to the risk factors described in the “Risk Factors” section in our Annual Report. The risks described in our Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity, results of operations, prospects or stock price.
ITEM 5. OTHER INFORMATION
On November 3, 2020, our Board of Directors approved an amendment to our Sixth Amended and Restated Bylaws to revise Article 10, Forum for Adjudication of Disputes, to provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. The foregoing summary is qualified in its entirety by the full text of the Seventh Amended and Restated Bylaws, which are filed as Exhibit 3.1 hereto and are incorporated herein by reference.
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ITEM 6. EXHIBITS
Exhibits Description
3.1
31.1
31.2
32.1
101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Calculation Definition Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
GOLDEN ENTERTAINMENT, INC.
(Registrant)
Dated: November 6, 2020 /s/  BLAKE L. SARTINI
Blake L. Sartini
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/  CHARLES H. PROTELL
Charles H. Protell
President and Chief Financial Officer
(Principal Financial Officer)
/s/  THOMAS E. HAAS
Thomas E. Haas
Senior Vice President of Accounting
(Principal Accounting Officer)
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