GOLDEN ENTERTAINMENT, INC. (Form: 10-Q, Received: 11/09/2018 06:22:13)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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, 2018

☐	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	(I.R.S. Employer
of incorporation or organization)	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

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.

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 6, 2018, the registrant had 27,991,425 shares of common stock, $0.01 par value per share, outstanding.

GOLDEN ENTERTAINMENT, INC.

FORM 10-Q

INDEX

		Page
PART I.	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	1

	Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	1

	Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	2

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	3

	Condensed Notes to Consolidated Financial Statements	4

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25

ITEM 4.	CONTROLS AND PROCEDURES	26

PART II.	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	26

ITEM 1A.	RISK FACTORS	27

ITEM 5.	OTHER INFORMATION	27

ITEM 6.	EXHIBITS	28

SIGNATURES		29

Part I. Financi al Information

ITEM 1. FINANCIAL STATEMENTS

GOLDEN ENTERTAINMENT, INC.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

	September 30, 2018			December 31, 2017
ASSETS
Current assets
Cash and cash equivalents	$	132,367		$	90,579
Accounts receivable, net		15,146			14,692
Prepaid expenses		16,802			19,397
Inventories		5,852			5,594
Other		2,294			2,817
Total current assets		172,461			133,079
Property and equipment, net		886,534			895,241
Goodwill		158,134			158,134
Intangible assets, net		144,815			157,692
Deferred income taxes		7,893			7,787
Other assets		20,423			13,242
Total assets	$	1,390,260		$	1,365,175
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt and capital leases	$	8,859		$	9,759
Accounts payable		19,933			19,470
Accrued taxes, other than income taxes		6,374			6,664
Accrued payroll and related		15,775			22,570
Accrued liabilities		18,135			20,373
Total current liabilities		69,076			78,836
Long-term debt, net		960,470			963,200
Other long-term obligations		3,277			3,226
Total liabilities		1,032,823			1,045,262
Commitments and contingencies (Note 11)
Shareholders' equity
Common stock, $.01 par value; authorized 100,000 shares; 27,952 and 26,413 common shares issued and outstanding, respectively		280			264
Additional paid-in capital		432,618			399,510
Accumulated deficit		(75,461	)		(79,861	)
Total shareholders' equity		357,437			319,913
Total liabilities and shareholders' equity	$	1,390,260		$	1,365,175

The accompanying condensed notes are an integral part of these consolidated financial statements.

GOLDEN ENTERTAINMENT, INC.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues
Gaming	$	127,764		$	86,644		$	394,173		$	262,079
Food and beverage		41,999			15,169			128,024			45,061
Rooms		28,104			2,237			81,737			5,646
Other		12,470			3,610			37,735			10,642
Total revenues		210,337			107,660			641,669			323,428
Expenses
Gaming		76,465			61,434			232,663			185,575
Food and beverage		34,508			13,170			103,451			39,346
Rooms		13,109			601			36,965			1,574
Other operating		3,805			1,242			11,456			4,057
Selling, general and administrative		47,479			19,439			135,858			56,334
Depreciation and amortization		23,330			7,539			71,421			21,499
Acquisition expenses		1,123			2,975			2,429			5,041
Preopening expenses		21			282			858			1,128
Gain on contingent consideration		—			(1,719	)		—			(1,719	)
Loss on disposal of property and equipment		774			308			1,069			308
Total expenses		200,614			105,271			596,170			313,143
Operating income		9,723			2,389			45,499			10,285
Non-operating income (expense)
Interest expense, net		(16,291	)		(1,885	)		(47,100	)		(5,568	)
Change in fair value of derivative		1,222			—			5,895			—
Total non-operating expense, net		(15,069	)		(1,885	)		(41,205	)		(5,568	)
Income (loss) before income tax benefit		(5,346	)		504			4,294			4,717
Income tax benefit		2,222			8,051			106			10,893
Net income (loss)	$	(3,124	)	$	8,555		$	4,400		$	15,610

Weighted-average common shares outstanding
Basic		27,655			22,266			27,405			22,280
Dilutive impact of stock options and restricted stock units		—			1,825			1,787			1,167
Diluted		27,655			24,091			29,192			23,447
Net income (loss) per share
Basic	$	(0.11	)	$	0.38		$	0.16		$	0.70
Diluted	$	(0.11	)	$	0.36		$	0.15		$	0.67

The accompanying condensed notes are an integral part of these consolidated financial statements.

GOLDEN ENTERTAINMENT, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2018			2017
Cash flows from operating activities
Net income	$	4,400		$	15,610
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		71,421			21,499
Amortization of debt issuance costs and discounts on debt		3,799			561
Share-based compensation		7,063			5,352
Loss on disposal of property and equipment		1,069			308
Gain on revaluation of contingent consideration		—			(1,719	)
Change in fair value of derivative		(5,895	)		—
Deferred income taxes		(106	)		(10,798	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(454	)		(1,419	)
Income taxes		—			2,142
Prepaid expenses		2,494			(2,209	)
Inventories and other current assets		266			(455	)
Other assets		(486	)		(559	)
Accounts payable and other accrued expenses		(10,312	)		5,322
Accrued taxes, other than income taxes		(290	)		(2,065	)
Other liabilities		52			236
Net cash provided by operating activities		73,021			31,806
Cash flows from investing activities
Purchase of property and equipment		(48,939	)		(18,383	)
Deposit paid for asset purchase		(800	)		(2,467	)
Asset purchase		(300	)		(196	)
Net cash used in investing activities		(50,039	)		(21,046	)
Cash flows from financing activities
Repayments of term loans		(6,000	)		(9,000	)
Repayments of revolving credit facility		—			(4,000	)
Borrowings under revolving credit facility		—			1,000
Repayments of notes payable		(321	)		(3,049	)
Proceeds from leased equipment obligation		—			742
Principal payments under capital leases		(838	)		(608	)
Debt issuance costs		(95	)		—
Proceeds from issuance of common stock		27,242			168
Tax withholding on share-based payments		(820	)		—
Stock issuance costs		(362	)		—
Net cash provided by (used in) financing activities		18,806			(14,747	)
Cash and cash equivalents
Net increase (decrease) for the period		41,788			(3,987	)
Balance, beginning of period		90,579			46,898
Balance, end of period	$	132,367		$	42,911
Supplemental cash flow disclosures
Cash paid for interest	$	44,648		$	5,073
Non-cash investing and financing activities
Payables incurred for capital expenditures	$	3,680		$	4,317
Notes payable issued for property and equipment		—			717
Assets acquired under capital lease obligations		237			3,015

The accompanying condensed notes are an integral part of these consolidated financial statements.

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 (collectively, the “Company”) own and operate a diversified entertainment platform, consisting of a portfolio of gaming assets that focus on resort casino operations and distributed gaming (including tavern gaming in the Company’s wholly-owned taverns). The Company’s common stock is traded on the Nasdaq Global Market, and the Company’s ticker symbol is “GDEN.”

The Company conducts its business through two reportable operating segments: Casinos and Distributed Gaming.

The Company’s Casinos segment involves the operation of eight resort casino properties in Nevada and Maryland, comprising the Stratosphere Casino, Hotel & Tower (the “Stratosphere”), Arizona Charlie’s Decatur and Arizona Charlie’s Boulder in Las Vegas, Nevada, the Aquarius Casino Resort (the “Aquarius”) in Laughlin, Nevada, the Pahrump Nugget Hotel Casino (“Pahrump Nugget”), Gold Town Casino and Lakeside Casino & RV Park in Pahrump, Nevada, and the Rocky Gap Casino Resort in Flintstone, Maryland (“Rocky Gap”). The casino properties in Las Vegas and Laughlin, Nevada were added to the Company’s casino portfolio in October 2017 as a result of the Company’s acquisition of American Casino & Entertainment Properties LLC (“American”), as further described below.

The Company’s Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement devices in non-casino locations (such as grocery stores, convenience stores, restaurants, bars, taverns and liquor stores) in Nevada and Montana, and the operation of wholly-owned branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area.

On October 20, 2017, the Company completed the acquisition of all of the outstanding equity interests of American (the “American Acquisition”). The results of operations of American and its subsidiaries have been included in the Company’s results subsequent to that date. See Note 3, Acquisitions , for information regarding the American Acquisition.

In January 2018, the Company completed an underwritten public offering pursuant to its universal shelf registration statement, in which certain of the Company’s shareholders resold an aggregate of 6.5 million shares of the Company’s common stock, and the Company sold 975,000 newly issued shares of its common stock pursuant to the exercise in full of the underwriters’ over-allotment option to purchase additional shares. The Company’s net proceeds from the offering were approximately $25.6 million after deducting underwriting discounts and offering expenses.

In July 2018, the Company entered into an agreement to acquire all of the outstanding equity interests of Edgewater Gaming, LLC and Colorado Belle Gaming, LLC, which own the Edgewater Hotel & Casino Resort and Colorado Belle Hotel & Casino Resort in Laughlin, Nevada, as further described in Note 3, Acquisitions , below.

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, please refer to the audited consolidated financial statements of the Company for the year ended December 31, 2017 and the notes thereto included in the Company’s Annual Report on Form 10-K previously filed with the SEC. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, which include 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.

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. Certain minor reclassifications have been made to the prior year period amounts to conform to the current presentation.

Change in Depreciable Lives of Property and Equipment

During the quarter ended June 30, 2018, the Company completed an analysis associated with planned renovations of certain assets acquired in the American Acquisition (see Note 3, Acquisitions ). As a result, effective April 1, 2018, the Company changed its estimated useful lives on certain buildings and land improvements to better reflect the estimated periods during which these assets will remain in service. The estimated useful lives of buildings and building improvements that previously averaged ten years were increased to an average of 19 years. The effect of this change in estimated useful lives on the Company’s results of operations for the three months ended September 30, 2018 was to reduce depreciation expense by $2.1 million, reduce net loss by $2.5 million, and reduce both basic and diluted loss per share by $0.09. The effect of this change in estimated useful lives on the Company’s results of operations for the nine months ended September 30, 2018 was to reduce depreciation expense by $4.3 million, increase net income by $4.2 million, and increase basic and diluted earnings per share by $0.15 and $0.14, respectively.

Net Income Per Share

For all periods, basic net income per share is calculated by dividing net income by the weighted-average common shares outstanding. Diluted net income per share in profitable periods reflects the effect of all potentially dilutive common shares outstanding by dividing net income by the weighted-average of all common and potentially dilutive shares outstanding. Due to the net loss for the quarter ended September 30, 2018, 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 this period. The amount of potential common share equivalents were 1,870,290 for quarter ended September 30, 2018.

New Accounting Pronouncements

In May 2014 (amended January 2017), the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition model, Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers which created a new Topic 606 (“ASC 606”). The guidance is intended to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP applicable to revenue transactions. Existing industry guidance was eliminated, including revenue recognition guidance specific to the gaming industry. The Company adopted the standard as of January 1, 2018, following the full retrospective approach. The accompanying financial statements and related disclosures reflect the effects of the new revenue standard. The most significant impacts of the adoption are summarized in Note 2, Revenue Recognition .

In February 2016, the FASB issued ASU 2016-02, Leases , which replaces the existing guidance. ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. ASU 2016-02 is effective for annual periods beginning after December 15, 2018 and interim periods therein, with early adoption permitted. The Company has begun planning its assessment and implementation process, including determining the completeness of its lease population, and is currently evaluating the impact of this guidance on its consolidated financial statements and disclosures. While the income statement is not expected to be materially impacted, the Company expects adoption to have a material impact on the balance sheet due to recognition of right-of-use assets and lease liabilities . The Company also anticipates expanded footnote disclosures related to its leases under the new guidance. The Company’s evaluation of ASU 2016-02 and related guidance pertaining to improvements to ASU 2016-02, including ASU 2018-10 and ASU 2018-11, is ongoing and may identify additional impacts on its consolidated financial statements and related disclosures prior to adoption.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows, which reduced the diversity on how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard became effective for the Company as of January 1, 2018, and the adoption did not have a material impact on the Company’s financial statements and disclosures.

In January 2017, the FASB issued ASU 2017-01, Business Combinations , which clarified the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The standard became effective for the Company as of January 1, 2018, and the adoption did not have a material impact on the Company’s financial statements and disclosures.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation , which amends the scope of modification accounting for share-based payment arrangements. ASU 2017-09 provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. The standard became effective for the Company as of January 1, 2018, and the adoption did not have a material impact on the Company’s financial statements and disclosures.

In June 2 018, the FASB issued ASU 2018-07, Compensation – Stock Compensation , which expands previous guidance to include all share-based payment arrangements related to the acquisition of goods and services from both non-employees and employees. ASU 2018-07 is effective for annual periods beginning after December 15, 2018 and interim periods therein, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and disclosures.

In August 2 018, the FASB issued ASU 2018-13, Fair Value Measurement , which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. ASU 2018-13 is effective for annual periods beginning after December 15, 2019 and interim periods therein, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and disclosures.

In August 2 018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software , which provides guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. ASU 2018-15 is effective for annual periods beginning after December 15, 2019 and interim periods therein, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and disclosures.

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 – Revenue Recognition

Revenue Recognition

Revenue from contracts with customers primarily consists of casino wagers, room sales, food and beverage transactions, rental income from the Company’s retail tenants and entertainment sales. These contracts can be written, oral or implied by customary business practices.

Casino gaming revenues are the aggregate of gaming wins and losses. The commissions rebated to premium players for cash discounts and other cash incentives to patrons related to gaming play are recorded as a reduction to casino gaming revenues. Gaming contracts include a performance obligation to honor the patron’s wager and typically include a performance obligation to provide a product or service to the patron on a complimentary basis to incentivize gaming or in exchange for points earned under the Company’s loyalty programs.

The Company generally enters into three types of slot and amusement device placement contracts as part of its distributed gaming business: space agreements, revenue share agreements and participation agreements. Under space agreements, the Company pays a fixed monthly rental fee for the right to install, maintain and operate the Company’s slots at a business location. Under these agreements, the Company recognizes all gaming revenue and records fixed monthly rental fees as gaming expenses in the consolidated statement of operations. 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. With regard to both space and revenue share agreements, the Company holds the applicable gaming license to conduct gaming at the location (although revenue share locations are required to obtain separate regulatory approval to receive a percentage of the gaming revenue). 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. In Montana, the Company’s slot and amusement device placement contracts are all revenue share agreements. In its distributed gaming business, the Company considers its customer to be the gaming player since the Company controls all aspects of the slot machines. Due to the maintaining of control of the services directly before they are transferred to the customer, the Company is considered to be the principal in these transactions and therefore records revenue on a gross basis.

For wagering contracts that include complimentary products and services provided by the Company to incentivize gaming, the Company allocates the stand-alone selling price of each product and service to the respective revenue type. Complimentary products or services provided under the Company's control and discretion that are supplied by third parties are recorded as an operating expense.

For wagering contracts that include products and services provided to a patron in exchange for points earned under the Company’s loyalty programs, Golden Rewards®, ace|PLAY®, Gold Mine Rewards ^TM and Rocky Gap Rewards Club ^TM , the Company allocates the estimated stand-alone selling price of the points earned to the loyalty program liability. The loyalty program liability is a deferral of revenue until redemption occurs under ASC 606. Upon redemption of loyalty program points for Company-owned products and services, the stand-alone selling price of each product or service is allocated to the respective revenue type. For redemptions of points with third parties, the redemption amount is deducted from the loyalty program liability and paid directly to the third party. Any discounts received by the Company from the third party in connection with this transaction are recorded to other revenue.

After allocation to the other revenue types for products and services provided to patrons as part of a wagering contract, the residual amount is recorded to casino gaming revenue as soon as the wager is settled. As all wagers have similar characteristics, the Company accounts for its gaming contracts collectively on a portfolio basis versus an individual basis.

Revenue from leases is primarily recorded to other revenues and is generated from base rents through long-term leases with retail tenants. Base rent, adjusted for contractual escalations, is recognized on a straight-lined basis over the term of the related lease. Overage rent is paid by a tenant when its sales exceed an agreed upon minimum amount and is not recognized by the Company until the threshold is met.

Food, beverage and retail revenues are recorded at the time of sale. Room revenue is recorded at the time of occupancy. Sales taxes and surcharges collected from customers and remitted to governmental authorities are presented on a net basis.

Contract and Contract Related Liabilities

The Company provides numerous products and services to its customers. There is often a timing difference between the cash payment by the customers and recognition of revenue for each of the associated performance obligations. The Company has the following main types of gaming liabilities associated with contracts with gaming customers: (1) outstanding chip liability, and (2) loyalty program liabilities.

The outstanding chip liability represents the collective amounts owed to patrons in exchange for gaming chips in their possession. Outstanding chips are expected to be recognized as revenue or redeemed for cash within one year of being purchased. The loyalty program liabilities represent a deferral of revenue until patron redemption of points earned. The loyalty program points are expected to be redeemed and recognized as revenue within one year of being earned. As of September 30, 2018 and December 31, 2017, the amount of gaming liabilities was $11.4 million and $12.2 million, respectively.

Customer deposits and other deferred revenue represent cash deposits made by customers for future non-gaming services to be provided by the Company. With the exception of tenant deposits, which are tied to the terms of the lease and typically extend beyond a year, the majority of these customer deposits and other deferred revenue are expected to be rec ognized as revenue or refunded to the customer within one year of the date the deposit was recorded.

Significant Impacts of Adoption of ASC 606

The adoption of ASC 606 principally affected the presentation of promotional allowances and how the Company measured the liability associated with its loyalty programs. The promotional allowances line item was eliminated from the consolidated statement of operations with amounts being deducted from the respective revenue line items, and the cost of providing such complimentaries is no longer included in gaming expense. Additionally, the valuation of points associated with the Company’s loyalty programs was changed from cost to fair value, with the Company recording an increase to the loyalty point liability.

Furthermore, as a result of the adoption of the new standard, certain adjustments and other reclassifications to and between revenue categories and to and between expense categories were required; however, the amounts associated with such adjustments did not have a significant impact on the Company’s previously reported operating income or net income.

The Company elected to adopt the full retrospective method to apply the new guidance to each prior reporting period presented as if it had been in effect since January 1, 2015, with a pre-tax cumulative effect of the adoption recognized as a decrease in retained earnings of $1.1 million on January 1, 2017, related to its loyalty program point liability.

Adoption of the new standard did not have a significant impact on the Company’s previously reported net revenues, expenses, operating income, and net income. The impact of adoption of the new standard to previously reported selected financial statement information was as follows:

	Three Months Ended September 30, 2017
(In thousands)	As Reported			Adjustments			As Adjusted
Gross revenues	$	113,748		$	(6,088	)	$	107,660
Promotional allowances		(5,426	)		5,426			—
Net revenues		108,322			(662	)		107,660
Operating income		2,389			—			2,389
Net income		8,555			—			8,555

	Nine Months Ended September 30, 2017
(In thousands)	As Reported			Adjustments			As Adjusted
Gross revenues	$	342,045		$	(18,617	)	$	323,428
Promotional allowances		(16,584	)		16,584			—
Net revenues		325,461			(2,033	)		323,428
Operating income		10,285			—			10,285
Net income		15,610			—			15,610

Note 3 – Acquisitions

American Acquisition

Overview

On October 20, 2017, the Company completed the acquisition of all of the outstanding equity interests of American for aggregate consideration of $787.6 million in cash (after giving effect to post-closing adjustments) and the issuance by the Company of approximately 4.0 million shares of its common stock to W2007/ACEP Holdings, LLC (“ACEP Holdings”), a former American equity holder. The fair value of the Company’s common stock issued to ACEP Holdings was $101.5 million, based on the closing price of the Company’s common stock on October 20, 2017 of $25.08 per share.

Acquisition Method of Accounting

The American Acquisition has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”). Under ASC 805, the purchase price of the acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values as determined by management based on its judgment with assistance from third-party appraisals. The excess of the purchase price over the net book value of the assets acquired and the liabilities assumed has been recorded as goodwill. The Company has recognized the assets acquired and liabilities assumed in the American Acquisition based on fair value estimates as of the date of the acquisition. The determination of the fair value of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) was completed in the second quarter of 2018. There were no measurement period adjustments that were material to the Company’s consolidated financial statements.

Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information has been prepared by management for illustrative purposes only and does not purport to represent what the results of operations, financial condition or other financial information of the Company would have been if the American Acquisition had occurred on January 1, 2016, or what such results or financial condition will be for any future periods. The unaudited pro forma combined financial information is based on preliminary estimates and assumptions and on the information available at the time of the preparation thereof. These preliminary estimates and assumptions may change, be revised or prove to be materially different, and the estimates and assumptions may not be representative of facts existing at the time of the American Acquisition. The unaudited pro forma combined financial information does not reflect non-recurring charges that will be incurred in connection with the American Acquisition, nor any cost savings and synergies expected to result from the American Acquisition (and associated costs to achieve such savings or synergies), nor any costs associated with severance, restructuring or integration activities resulting from the American Acquisition.

The following table summarizes certain unaudited pro forma combined financial information derived from a combination of the historical consolidated financial statements of the Company and of American for the three and nine months ended September 30 2017, adjusted to give effect to the American Acquisition, related transactions (including the refinancing), and the adoption of ASC 606.

	Three Months Ended		Nine Months Ended
(In thousands, except per share data)	September 30, 2017		September 30, 2017
Pro forma combined revenues	$	214,625	$	638,658
Pro forma combined net income		13,883		31,751
Weighted-average common shares outstanding:
Basic		26,312		26,326
Diluted		28,137		27,493
Pro forma combined net income per share:
Basic	$	0.53	$	1.21
Diluted		0.49		1.15

Laughlin Acquisition

On July 14, 2018, the Company entered into a purchase agreement with Marnell Gaming, LLC (the “Seller”) to acquire Edgewater Gaming, LLC and Colorado Belle Gaming, LLC (collectively, the “Acquired Entities”). At the closing of the acquisition, the Company expects to pay the Seller $155 million in cash and issue to the Seller between 455,501 and 1,226,348 shares of the Company’s newly issued common stock (which was valued at signing at between $13 million and $35 million, based on the volume-weighted average trading price of the Company’s common stock for the twenty trading days ending on July 13, 2018), with the final amount based on the earnings before interest, taxes, depreciation, amortization, rent and management fees of the Acquired Entities from December 1, 2017 to November 30, 2018. Consummation of the acquisition is subject to the satisfaction or waiver of customary closing conditions, applicable gaming authority approvals, the absence of a material adverse effect regarding the Acquired Entities, and other customary closing conditions. The Company and the Seller have agreed that the closing of the transactions will not occur prior to January 1, 2019, unless otherwise agreed by the parties. The Company intends to finance the cash portion of the purchase price from a combination of borrowings under the Company’s revolving credit facility and cash on hand.

Note 4 – Property and Equipment, Net

Property and equipment, net, consisted of the following:


(In thousands)	September 30, 2018			December 31, 2017
Land	$	121,081		$	121,081
Building and site improvements		716,732			705,266
Furniture and equipment		140,966			125,339
Construction in process		29,095			6,972
Property and equipment		1,007,874			958,658
Less: Accumulated depreciation		(121,340	)		(63,417	)
Property and equipment, net	$	886,534		$	895,241

Depreciation expense for property and equipment, including capital leases, was $18.8 million and $5.6 million for the three months ended September 30, 2018 and 2017, respectively, and $58.2 million and $15.7 million for the nine months ended September 30, 2018 and 2017, respectively.

Note 5 – Accrued Liabilities

Accrued liabilities consisted of the following:


(In thousands)	September 30, 2018		December 31, 2017
Gaming liabilities	$	11,396	$	12,209
Interest		482		1,770
Deposits		2,846		—
Other accrued liabilities		3,411		6,394
Total accrued liabilities	$	18,135	$	20,373

Note 6 – Long-Term Debt

Long-term debt, net, consisted of the following:

(In thousands)	September 30, 2018			December 31, 2017
Term loans	$	994,000		$	1,000,000
Capital lease obligations		5,238			5,839
Notes payable		426			1,159
Total long-term debt		999,664			1,006,998
Less unamortized discount		(26,771	)		(30,122	)
Less unamortized debt issuance costs		(3,564	)		(3,917	)
		969,329			972,959
Less current maturities		(8,859	)		(9,759	)
Long-term debt, net	$	960,470		$	963,200

Senior Secured Credit Facilities

As of September 30, 2018, the Company’s senior secured credit facilities consisted of a $940 million senior secured first lien credit facility (consisting of $800 million in term loans and a $140 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 “First Lien Facility”), and a $200 million senior secured second lien term loan facility with Credit Suisse AG, Cayman Islands Branch (as administrative agent and collateral agent), the lenders party thereto and the other entities party thereto (the “Second Lien Term Loan” and, together with the First Lien Facility, the “Credit Facilities”).

On June 11, 2018, the Company entered into Incremental Joinder Agreement No. 1 with JPMorgan Chase Bank, N.A. and the lenders party thereto, pursuant to which the size of the revolving credit facility under the First Lien Facility was increased from $100 million to $140 million.

As of September 30, 2018, $794 million and $200 million of term loan borrowings were outstanding under the Company’s First Lien Facility and Second Lien Term Loan, respectively, there were no letters of credit outstanding under the First Lien Facility, and the Company’s revolving credit facility was undrawn, leaving borrowing availability under the revolving credit facility as of September 30, 2018 of $140 million.

As of September 30, 2018, the weighted-average effective interest rate on the Company’s outstanding borrowings under the Credit Facilities was approximately 5.7%.

The revolving credit facility under the First Lien Facility matures on October 20, 2022, and the term loans under the First Lien Facility mature on October 20, 2024. The term loans under the First Lien Facility are 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 term loans under the Second Lien Term Loan are repayable in full at maturity on October 20, 2025.

The Company was in compliance with its financial covenants under the Credit Facilities as of September 30, 2018.

Note 7 – Stock Incentive Plans and Share-Based Compensation

As of September 30, 2018, 1,007,154 shares of the Company’s common stock were available for grants of awards under the Company’s 2015 Incentive Award Plan (the “2015 Plan”), which includes the annual increase in the number of shares available for grant on January 1, 2018 of 1,056,505 shares.

Stock Options

The following table summarizes the Company’s stock option activity:

	Stock Options
				Weighted-
				Average
	Shares			Exercise Price
Outstanding at January 1, 2018		4,375,929		$	10.73
Granted		—
Exercised		(733,033	)	$	7.05
Cancelled		(117,635	)	$	12.15
Outstanding at September 30, 2018		3,525,261		$	11.44
Exercisable and Vested at September 30, 2018		2,056,168		$	10.25

Share-based compensation expense related to stock options was $1.1 million and $1.4 million for the three months ended September 30, 2018 and 2017, respectively, and $4.0 million and $3.6 million for the nine months ended September 30, 2018 and 2017, respectively. The Company’s unrecognized share-based compensation expense related to stock options was approximately $8.3 million as of September 30, 2018, which is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Stock Units and Performance Stock Units

On March 14, 2018, the Compensation Committee of the Board of Directors of the Company approved a new long-term incentive structure for equity awards to be granted to the executive officers of the Company under the 2015 Plan. Under this new structure, commencing in the first quarter of 2018, the executive officers of the Company receive long-term equity awards in a combination of time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”). The number of PSUs that will be eligible to vest will be determined based on the Company’s attainment of performance goals set by the Compensation Committee. Following the two-year performance period, the number of “vesting eligible” PSUs will then be subject to one additional year of time-based vesting. Share-based compensation costs related to RSU and PSU awards are calculated based on the market price on the date of the grant. The Company periodically reviews the estimates of performance against the defined criteria to assess the expected payout of each outstanding PSU grant and adjusts the stock compensation expense accordingly.

The following table summarizes the Company’s RSU and PSU activity:

	RSUs					PSUs
				Weighted-				Weighted-
				Average Grant				Average Grant
	Shares			Date Fair Value		Shares ⁽¹⁾		Date Fair Value
Outstanding at January 1, 2018		—					62,791	$	27.87
Granted		241,542		$	29.09		108,957	$	28.72
Vested		—					—
Cancelled		(8,081	)	$	28.72		—
Outstanding at September 30, 2018		233,461		$	29.10		171,748	$	28.41

__________________

(1)

The number of shares listed for PSUs as outstanding at January 1, 2018 and granted in 2018 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 will vary depending on whether or not the Company meets or exceeds the applicable threshold, target or maximum performance goals for the PSUs. With respect to 108,957 of the listed “target” number of PSUs, 200% of the “target” number of PSUs will be eligible to vest at “maximum” performance levels.

Outstanding PSUs as of December 31, 2017 were combined with the RSUs in the Company’s Annual Report on Form 10-K previously filed with the SEC.

Share-based compensation expense related to RSUs was $1.1 million and $0.2 million for the three months ended September 30, 2018 and 2017, respectively, and $2.3 million and $1.5 million for the nine months ended September 30, 2018 and 2017, respectively. Share-based compensation expense related to PSUs was $0.3 million and $0.8 million for the three and nine months ended September 30, 2018, respectively. There was no share-based compensation expense related to PSUs in 2017.

As of September 30, 2018, there was $4.5 million and $3.2 million of unamortized compensation expense related to unvested RSUs and PSUs, respectively, which is expected to be recognized over a weighted-average period of 1.5 years for RSUs and 2.8 years for PSUs.

Note 8 – Income Taxes

The Company’s effective tax rate was (2.5)% and (231.33)% for the nine months ended September 30, 2018 and 2017, respectively.

Income tax benefit was $0.1 million for the nine months ended September 30, 2018, which was attributed primarily to excess tax benefits from stock options exercised during the third quarter of 2018. Income tax benefit was $10.9 million for the nine months ended September 30, 2017, which was attributed primarily to a partial release of valuation allowance on deferred tax assets.

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. The Company concluded that, as of December 31, 2017, it is more likely than not that the Company will generate sufficient taxable income within the applicable net operating loss carry-forward periods to realize a portion of its deferred tax assets.

The Company’s income taxes receivable was $0.2 million as of September 30, 2018 and December 31, 2017.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate income tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. As of September 30, 2018, the Company had not completed its accounting for the tax effects of enactment of the Tax Act; however, in certain cases, as described below, the Company has made a reasonable estimate of the effects on its existing deferred tax balances. For any amounts the Company has not been able to make a reasonable estimate, it will continue to account for those items based on its existing accounting under ASC 740, Income Taxes, and the provisions of the tax laws that were in effect immediately prior to enactment. In all cases, the Company will continue to make and refine its calculations as additional analysis is completed. In addition, the Company’s estimates may also be affected as it gains a more thorough understanding of the Tax Act.

Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118 (SAB 118), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed. SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the Tax Act.

Several provisions of the Tax Act have significant impact on the Company’s U.S. tax attributes, generally consisting of credits and loss carry-forwards. Although the Company has made a reasonable estimate of the gross amounts of the attributes disclosed, the Company is continuing to analyze certain aspects of the Tax Act and is refining its calculations which could potentially affect the measurements of these balances or potentially give rise to new deferred tax amounts.

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 cash and cash equivalents, accounts receivable and payable, short-term borrowings and accrued and other current liabilities approximate fair value because of the short duration of these financial instruments. As of September 30, 2 018 and December 31, 2017, the fair value of the Company’s long-term debt approximated the carrying value because the terms were recently negotiated and based upon the Company’s expected borrowing rate for debt with similar remaining maturities and compara ble risk.

As of September 30, 2018, the Company had one derivative instrument outstanding from which the Company will receive cash payments at the end of each period in which the interest rate exceeds the agreed upon strike price (the “Interest Rate Cap”), with a notional amount of $650 million, which expires on December 31, 2020. Using Level 2 inputs, the Company adjusts the carrying value of its Interest Rate Cap derivative to estimate fair value quarterly. The fair value of the Company’s asset under its Interest Rate Cap is based upon observable market-based inputs that reflect the present values of the difference between estimated future fixed rate payments and future variable receipts. Fair value of the Company’s Interest Rate Cap at September 30, 2018 was $9.2 million. As the Company elected to not apply hedge accounting, the change in fair value of this Interest Rate Cap was recorded in the consolidated statement of operations.

Note 10 – Leases

Rental Income

The Company recorded rental revenue of $1.9 million for the three months ended September 30, 2018 and no rental revenue during the three months ended September 30, 2017. The Company recorded rental revenue of $5.5 million for the nine months ended September 30, 2018 and de minmus amount for the nine months ended September 30, 2017.

Rent Expense

The Company leases its branded tavern locations, office headquarters building, land, equipment and vehicles under noncancelable operating leases that are not subject to contingent rents. The Company leases one of its tavern locations and its office headquarters building from a related party. See Note 13, Related Party Transactions, for more detail.

Slot placement contracts in the form of space agreements are also accounted for as operating leases. Under space agreements, the Company pays fixed monthly rental fees for the right to install, maintain and operate its slots at business locations, which are recorded in gaming expenses. Other operating leases include an operating ground lease with the Maryland Department of Natural Resources for approximately 270 acres in the Rocky Gap State Park on which Rocky Gap is situated, and leases of four parcels of land in Pahrump, Nevada, on which the Company’s Gold Town Casino is located.

Operating lease rental expense associated with all operating leases, which is calculated on a straight-line basis, is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2018		2017		2018		2017
Space agreements	$	9,559	$	9,245	$	28,981	$	27,884
Related party leases		384		469		1,175		1,550
Other operating leases		3,805		3,430		11,215		9,958
Total rent expense	$	13,748	$	13,144	$	41,371	$	39,392

Note 11 – Commitments and Contingencies

Participation and Revenue Share Agreements

In addition to the space agreements described above in Note 10, Leases , the Company also enters into slot placement contracts in the form of revenue share and participation agreements. 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. 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. During the three and nine months ended September 30, 2018, the aggregate contingent payments recognized by the Company as gaming expenses under revenue share and participation agreements were $35.5 million and $110.1 million, respectively, including $0.2 million and $0.7 million, respectively, under revenue share and participation agreements with related parties, as described in Note 13, Related Party Transactions . During the three and nine months ended September 30, 2017, the aggregate contingent payments recognized by the Company as gaming expenses under revenue share and participation agreements were $35.4 million and $107.0 million, respectively, including $0.3 million and $0.8 million, respectively, under revenue share and participation agreements with related parties .

The Company also enters into amusement device and ATM placement contracts in the form of revenue share agreements. Under these revenue share agreements, the Company pays the business location a percentage of the non-gaming revenue generated from the Company’s amusement devices and ATMs placed at the location. During the three months ended September 30, 2018 and 2017, the total contingent payments recognized by the Company as other operating expenses for amusement devices and ATMs under such agreements were $0.3 million and $0.2 million, respectively. During the nine months ended September 30, 2018 and 2017, the total contingent payments recognized by the Company as other operating expenses for amusement devices and ATMs under such agreements were $1.1 million and $1.0 million, respectively.

Capital Lease Financing Agreement

In June 2018 the Company entered into a capital lease financing arrangement for external and internal lighting and renovations at the Stratosphere. Construction commenced in the third quarter of 2018 and is expected to be completed in the first quarter of 2019. The total amount to be paid is $9.6 million, of which $8.5 million will be financed over a 36-month period.

Miscellaneous 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 has recorded reserves of $1.7 million for claims as of September 30, 2018. 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.

In February and April 2017, several former employees filed two separate purported class action lawsuits against the Company in the District Court of Clark County, Nevada, and on behalf of similarly situated individuals employed by the Company in the State of Nevada. The lawsuits allege that the Company violated certain Nevada labor laws including payment of an hourly wage below the statutory minimum wage without providing a qualified health insurance plan and an associated failure to pay proper overtime compensation. The complaints seek, on behalf of the plaintiffs and members of the putative class, an unspecified amount of damages (including punitive damages), injunctive and equitable relief, and an award of attorneys’ fees, interest and costs. The Company agreed to settle the first of these cases in the fourth quarter of 2017 and the second of these cases in the third quarter of 2018. Both settlements are subject to court approval and are included in the Company’s recorded reserves of $1.7 million at September 30, 2018.

On August 31, 2018, prior guests of the Stratosphere 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 alleges that the Tax was charged in violation of the federal Internet Tax Freedom Act, which imposes a national moratorium on the taxation of Internet access by states and their political subdivisions, and seeks, 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. The Company has not yet been served on this complaint.

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 12 – 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 eight 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 certain strategic, high-traffic, non-casino locations (such as grocery stores, convenience stores, restaurants, bars, taverns and liquor stores) in Nevada and Montana, and the operation of wholly-owned 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.

Results of Operations - Segment Net Income (Loss), Revenues and Adjusted EBITDA

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, preopening expense, acquisition expenses, class action litigation expenses, share-based compensation expenses, executive severance, gain/loss on disposal of property and equipment and other gains and losses, calculated before corporate overhead (which is not allocated to each segment).

The following tables set forth, for the periods indicated, certain operating data for the Company’s segments, and reconciles Adjusted EBITDA to net income (loss):

	Three Months Ended September 30, 2018
(In thousands)	Casinos		Distributed Gaming		Corporate and Other			Consolidated
Revenues
Gaming	$	60,440	$	67,324	$	—		$	127,764
Food and beverage		29,666		12,333		—			41,999
Rooms		28,104		—		—			28,104
Other		10,627		1,531		312			12,470
Total revenues	$	128,837	$	81,188	$	312		$	210,337

Net income (loss)	$	19,113	$	5,014	$	(27,251	)	$	(3,124	)
Depreciation and amortization		17,667		5,292		371			23,330
Acquisition expenses		—		—		1,123			1,123
Loss on disposal of property and equipment		770		4		—			774
Share-based compensation		37		3		2,743			2,783
Preopening expenses		—		73		(52	)		21
Class action litigation expenses		—		—		219			219
Executive severance		54		1		65			120
Other, net		—		—		50			50
Interest expense, net		25		21		16,245			16,291
Change in fair value of derivative		—		—		(1,222	)		(1,222	)
Income tax benefit		—		—		(2,222	)		(2,222	)
Adjusted EBITDA	$	37,666	$	10,408	$	(9,931	)	$	38,143

	Three Months Ended September 30, 2017
(In thousands)	Casinos		Distributed Gaming			Corporate and Other			Consolidated
Revenues
Gaming	$	19,958	$	66,686		$	—		$	86,644
Food and beverage		3,674		11,495			—			15,169
Rooms		2,237		—			—			2,237
Other		1,552		1,966			92			3,610
Total revenues	$	27,421	$	80,147		$	92		$	107,660

Net income (loss)	$	6,686	$	7,517		$	(5,648	)	$	8,555
Depreciation and amortization		2,202		4,937			400			7,539
Acquisition expenses		—		—			2,975			2,975
Loss on disposal of property and equipment		35		272			1			308
Gain on contingent consideration		—		(1,719	)		—			(1,719	)
Share-based compensation		—		—			1,603			1,603
Preopening expenses		—		121			161			282
Class action litigation expenses		—		—			1,530			1,530
Sign-on bonuses		—		—			166			166
Interest expense, net		5		41			1,839			1,885
Income tax benefit		—		—			(8,051	)		(8,051	)
Adjusted EBITDA	$	8,928	$	11,169		$	(5,024	)	$	15,073

	Nine Months Ended September 30, 2018
(In thousands)	Casinos		Distributed Gaming		Corporate and Other			Consolidated
Revenues
Gaming	$	186,828	$	207,345	$	—		$	394,173
Food and beverage		90,405		37,619		—			128,024
Rooms		81,737		—		—			81,737
Other		31,280		5,782		673			37,735
Total revenues	$	390,250	$	250,746	$	673		$	641,669

Net income (loss)	$	67,190	$	20,014	$	(82,804	)	$	4,400
Depreciation and amortization		54,714		15,419		1,288			71,421
Acquisition expenses		—		—		2,429			2,429
Loss on disposal of property and equipment		1,050		19		—			1,069
Share-based compensation		37		3		7,345			7,385
Preopening expenses		—		309		549			858
Class action litigation expenses		16		195		343			554
Executive severance		273		38		367			678
Other, net		144		167		129			440
Interest expense, net		74		93		46,933			47,100
Change in fair value of derivative		—		—		(5,895	)		(5,895	)
Income tax benefit		—		—		(106	)		(106	)
Adjusted EBITDA	$	123,498	$	36,257	$	(29,422	)	$	130,333

	Nine Months Ended September 30, 2017
(In thousands)	Casinos			Distributed Gaming			Corporate and Other			Consolidated
Revenues
Gaming	$	57,385		$	204,694		$	—		$	262,079
Food and beverage		10,747			34,314			—			45,061
Rooms		5,646			—			—			5,646
Other		4,112			6,263			267			10,642
Total revenues	$	77,890		$	245,271		$	267		$	323,428

Net income (loss)	$	16,365		$	23,596		$	(24,351	)	$	15,610
Depreciation and amortization		5,798			14,513			1,188			21,499
Acquisition expenses		—			—			5,041			5,041
Loss on disposal of property and equipment		35			272			1			308
Gain on contingent consideration		—			(1,719	)		—			(1,719	)
Share-based compensation		—			—			5,352			5,352
Preopening expenses		—			730			398			1,128
Class action litigation expenses		—			—			1,585			1,585
Sign-on bonuses		—			—			166			166
Interest expense, net		(34	)		361			5,241			5,568
Income tax benefit		—			—			(10,893	)		(10,893	)
Adjusted EBITDA	$	22,164		$	37,753		$	(16,272	)	$	43,645

Total Segment 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, 2018	$	1,012,607	$	297,151	$	80,502	$	1,390,260

Balance at December 31, 2017	$	1,039,025	$	298,453	$	27,697	$	1,365,175

Note 13 – Related Party Transactions

As of September 30, 2018, 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 rent expense for the office headquarters building was $0.3 million for each of the three months ended September 30, 2018 and 2017, and $1.0 million and $0.9 million for the nine months ended September 30, 2018 and 2017, respectively. There were no amounts and $0.1 million owed by the Company with respect to such lease as of September 30, 2018 and December 31, 2017, respectively. Additionally, a portion of the office headquarters building was sublet to a company owned or controlled by Mr. Sartini. There was less than $0.1 million of rental income under such sublease for each of the three and nine months ended September 30, 2018. There was no rental income and less than $0.1 million of rental income under such sublease for the three and nine months ended September 30, 2017, respectively. No amounts were owed to the Company under such sublease at September 30, 2018 or December 31, 2017. Mr. Sartini serves as the Chairman of the Board, President and Chief Executive Officer of the Company and is co-trustee of the Sartini Trust, which is a significant shareholder of the Company. Mr. Arcana serves as the Executive Vice President and Chief Operating Officer of the Company.

As of September 30, 2018, the Company leased one tavern location from a trust controlled by Mr. Sartini through a trust for the benefit of Mr. Sartini’s immediate family members (including Blake L. Sartini, II) for which Mr. Sartini serves as trustee. In addition, a second tavern location that the Company had previously leased from related parties was sold in January 2018 to an unrelated third party. The rent expense for tavern locations leased from related parties (including sold tavern locations for the periods in which the leases were with related parties) was $0.1 million and $0.2 million for the three months ended September 30, 2018 and 2017, respectively, and $0.4 million and $0.7 million for the nine months ended September 30, 2018 and 2017, respectively. There were no amounts owed by the Company with respect to such leases as of September 30, 2018 and December 31, 2017.

During each of the three months ended September 30, 2018 and 2017, the Company paid less than $0.1 million under aircraft time-sharing, co-user and cost-sharing agreements between the Company and Sartini Enterprises, Inc. a company controlled by Mr. Sartini. During each of the nine months ended September 30, 2018 and 2017, the Company paid $0.2 million and $0.1 million, respectively, under aircraft time-sharing, co-user and cost-sharing agreements. The Company owed less than $0.1 million under the aircraft time-sharing, co-user and cost-sharing agreements as of September 30, 2018 and December 31, 2017 .

During the three months ended September 30, 2018 and 2017, the Company recorded revenues of $0.2 million and $0.3 million, respectively, and the Company recorded gaming expenses of $0.2 million and $0.3 million, respectively, related to the use of the Company’s slots at a distributed gaming location owned in part by Sean T. Higgins, who serves as the Company’s Executive Vice President of Compliance and Governmental Affairs and Chief Legal Officer. During each of the nine months ended September 30, 2018 and 2017, the Company recorded revenues of $0.7 million and $0.9 million, respectively, and the Company recorded gaming expenses of $0.7 million and $0.8 million, respectively, related to the use of the Company’s slots at a distributed gaming location owned in part by Mr. Higgins. De minimis amounts were owed to the Company and were due and payable by the Company related to this arrangement as of September 30, 2018 and no amount was due and payable by the Company as of December 31, 2017 .

During each of the three months ended September 30, 2018 and 2017, the Company recorded selling, general and administrative (“SG&A”) expenses of less than $0.1 million related to a three-year consulting agreement between the Company and Lyle A. Berman, who serves on the Board of Directors of the Company. During each of the nine months ended September 30, 2018 and 2017, the Company recorded $0.2 million of SG&A expenses related to the Lyle A. Berman consulting agreement. No amount was due and payable by the Company as of September 30, 2018 and December 31, 2017 related to this agreement . The consulting agreement expired on July 31, 2018.

Note 14 – Subsequent Events

On November 7, 2018, the Board of Directors authorized the Company to repurchase up to $25 million 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 the Company’s finance

agreements. There is no minimum number of sh ares that the Company is required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice.

On November 8, 2018, the Company entered into Incremental Joinder Agreement No. 2, pursuant to which the size of the revolving credit facility under the First Lien Facility was increased from $140 million to $200 million.

The Company’s management evaluates subsequent events through the date of issuance of the consolidated financial statements. There have been no other 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 September 30, 2018.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITI ON AND RESULTS OF OPERATIONS

As used in this Quarterly Report on Form 10-Q, unless the context suggests otherwise, the terms “Golden,” “we,” “our” and “us” refer to Golden Entertainment, Inc. and 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, 2017 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,” “plan,” “project,” “seek,” “should,” “think,” “will,” “would” and similar expressions. In addition, forward-looking statements include statements regarding cost savings, synergies, growth opportunities and other financial and operating benefits of our acquisition of American Casino & Entertainment Properties, LLC (“American”), our pending acquisition of certain entities that own two resort casino properties in Laughlin, Nevada (as further described below) and our 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 failure of our pending Laughlin, Nevada acquisition to close as anticipated; our ability to realize the anticipated cost savings, synergies and other benefits of our acquisition of American, our pending Laughlin, Nevada acquisition and our other acquisitions, 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, Chief Operating Officer, and Chief Strategy and Financial 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 on Form 10-K 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 tavern gaming in our wholly-owned taverns).

We conduct our business through two reportable operating segments: Casinos and Distributed Gaming. In our Casinos segment, we own and operate eight 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 grocery stores, convenience stores, liquor stores, restaurants, bars and taverns in Nevada and Montana, and the operation of wholly-owned branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area.

Casinos

On October 20, 2017, we completed the acquisition of all of the outstanding equity interests of American (the “American Acquisition”) for aggregate consideration of $787.6 million in cash (after giving effect to post-closing adjustments) and the issuance by us of approximately 4.0 million shares of our common stock to W2007/ACEP Holdings, LLC, a former American equity holder. The American Acquisition added four Nevada resort casino properties to our casino portfolio, including the Stratosphere Casino, Hotel & Tower (the “Stratosphere”) in Las Vegas. The results of operations of American and its subsidiaries have been included in our results subsequent to that date. See Note 3, Acquisitions , in the accompanying unaudited consolidated financial statements for additional information.

We own and operate eight resort casino properties in Nevada and Maryland, comprising the Stratosphere, Arizona Charlie’s Decatur and Arizona Charlie’s Boulder in Las Vegas, Nevada, the Aquarius Casino Resort (the “Aquarius”) in Laughlin, Nevada, Pahrump Nu gget Hotel Casino (“Pahrump Nugget”), Gold Town Casino and Lakeside Casino & RV Park in Pahrump, Nevada, and the Rocky Gap Casino Resort (“Rocky Gap”) in Flintstone, Maryland.

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The Stratosphere : The Stratosphere is our premier casino property, located on Las Vegas Blvd on the north end of the Las Vegas Strip. A gaming and entertainment complex, the Stratosphere comprises the iconic Stratosphere Tower, a casino, a hotel and a retail center. As of September 30, 2018, the Stratosphere featured an 80,000 sq. ft. casino and offered 2,429 hotel rooms, 728 slots, 47 table games, a race and sports book, 10 restaurants, two rooftop pools, a fitness center, retail shops and entertainment facilities.

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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. As of September 30, 2018, our Arizona Charlie’s Decatur casino offered 259 hotel rooms and a total of 1,033 slots, seven table games, race and sports books, five restaurants, and an approximately 400-seat bingo parlor, and our Arizona Charlie’s Boulder casino offered 303 hotel rooms and a total of 833 slots, seven table games, race and sports books, four restaurants, and an approximately 450-seat bingo parlor, as well as an RV park with approximately 220 RV hook-up sites.

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Aquarius : The Aquarius is located in Laughlin, Nevada, which is located approximately 90 miles from Las Vegas on the western riverbank of the Colorado River. The Aquarius caters primarily to patrons traveling from Arizona and Southern California, as well as customers from Nevada seeking an alternative to the Las Vegas experience. As of September 30, 2018, the Aquarius had 1,906 hotel rooms and offered 1,221 slots, 33 table games and eight restaurants.

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Pahrump casinos : We own and operate three casinos in Pahrump, Nevada, the gateway to Death Valley National Park, approximately 60 miles from Las Vegas. Pahrump Nugget is our largest property in Pahrump, Nevada. As of September 30, 2018, Pahrump Nugget offered 69 hotel rooms, 415 slots, 10 table games, a race and sports book, an approximately 200-seat bingo facility and a bowling center. As of September 30, 2018, our Gold Town Casino offered 229 slots and an approximately 100-seat bingo facility, and our Lakeside Casino & RV Park offered 184 slots and approximately 160 RV hook-up sites.

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Rocky Gap : Rocky Gap is situated on approximately 270 acres in the Rocky Gap State Park in Maryland, which we lease from the Maryland Department of Natural Resources under a 40-year operating ground lease expiring in 2052 (plus a 20-year option renewal). As of September 30, 2018, Rocky Gap offered 665 slots, 17 table games, two casino bars, three restaurants, a spa and the only Jack Nicklaus signature golf course in Maryland. Rocky Gap is a AAA Four Diamond Award® winning resort with 198 hotel rooms, as well as an event and conference center.

On July 14, 2018, we entered into a purchase agreement with Marnell Gaming, LLC (the “Seller”) to acquire Edgewater Gaming, LLC and Colorado Belle Gaming, LLC (collectively, the “Acquired Entities”). At the closing of the acquisition, we expect to pay the Seller $155 million in cash and issue to the Seller between 455,501 and 1,226,348 shares of our newly issued common stock (which was valued at signing at between $13 million and $35 million, based on the volume-weighted average trading price of our common stock for the twenty trading days ending on July 13, 2018), with the final amount based on the earnings before interest, taxes, depreciation, amortization, rent and management fees of the Acquired Entities from December 1, 2017 to November 30, 2018. Consummation of the acquisition is subject to the satisfaction or waiver of customary closing conditions, applicable gaming authority approvals, the absence of a material adverse effect regarding the Acquired Entities, and other customary closing conditions. We and the Seller have agreed that the closing of the transactions will not occur prior to January 1, 2019, unless otherwise agreed by the parties. We intend to finance the cash portion of the purchase price from a combination of borrowings under our revolving credit facility and cash on hand.

Distributed Gaming

Our Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement devices in non-casino locations such as grocery stores, convenience stores, liquor stores, restaurants, bars and taverns 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 operate wholly-owned branded taverns with slots, which target local patrons, primarily in the greater Las Vegas, Nevada metropolitan area. As of September 30, 2018, our distributed gaming operations comprised approximately 10,660 slots in over 1,000 locations.

Our wholly-owned branded taverns offer a casual, upscale environment catering to local patrons offering superior food, c raft beer and other alcoholic beverages, and typically include 15 onsite slots. As of September 30, 2018, we operated 60 wholly-owned branded taverns, which offered a total of over 950 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, PT’s Brewing C ompany, Sierra Junction and SG Bar. We also own a brewery in Las Vegas, PT’s Brewing Company, which produces craft beer for our taverns and casinos.

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, 2018 and 2017.

													Increase (Decrease)
	Three Months Ended September 30,						Nine Months Ended September 30,						From Prior Year
(In thousands)	2018			2017			2018			2017			Three Months Ended September 30,			Nine Months Ended September 30,
Revenues by segment
Casinos	$	128,837		$	27,421		$	390,250		$	77,890		$	101,416		$	312,360
Distributed Gaming		81,188			80,147			250,746			245,271			1,041			5,475
Corporate and other		312			92			673			267			220			406
Total revenues		210,337			107,660			641,669			323,428			102,677			318,241
Operating expenses by segment
Casinos		62,818			13,062			185,939			39,697			49,756			146,242
Distributed Gaming		64,243			63,386			196,205			190,860			857			5,345
Corporate and other		826			(1	)		2,391			(5	)		827			2,396
Total operating expenses		127,887			76,447			384,535			230,552			51,440			153,983
Selling, general and administrative		47,479			19,439			135,858			56,334			28,040			79,524
Depreciation and amortization		23,330			7,539			71,421			21,499			15,791			49,922
Acquisition expenses		1,123			2,975			2,429			5,041			(1,852	)		(2,612	)
Preopening expenses		21			282			858			1,128			(261	)		(270	)
Gain on contingent consideration		—			(1,719	)		—			(1,719	)		1,719			1,719
Loss on disposal of property and equipment		774			308			1,069			308			466			761
Total expenses		200,614			105,271			596,170			313,143			95,343			283,027

Operating income		9,723			2,389			45,499			10,285			7,334			35,214
Non-operating expense, net		(15,069	)		(1,885	)		(41,205	)		(5,568	)		(13,184	)		(35,637	)
Income tax benefit		2,222			8,051			106			10,893			(5,829	)		(10,787	)
Net income (loss)	$	(3,124	)	$	8,555		$	4,400		$	15,610		$	(11,679	)	$	(11,210	)

Three and Nine Months Ended September 30, 2018 Compared to Three and Nine Months Ended September 30, 2017

Revenues

The $102.7 million, or 95%, increase in revenues for the three months ended September 30, 2018 compared to the prior year period resulted primarily from increases of $41.1 million, $26.8 million, $25.9 million and $8.9 million in gaming, food and beverage, room and other revenues, respectively, due primarily to the impact of revenue in the current year period from the American Acquisition which was consummated in October 2017.

The $101.4 million, or 370%, increase in revenues related to our Casinos segment for the three months ended September 30, 2018 compared to the prior year period resulted primarily from increases of $40.5 million, $26.0 million, $25.9 million and $9.1 million in gaming, food and beverage, room and other revenues, respectively, due primarily to the impact of revenue in the current year period from the American Acquisition. Additionally, revenue from Rocky Gap increased slightly compared to the prior year period, primarily due to revised marketing efforts, partially offset by weather conditions in Maryland.

The $1.0 million, or 1%, increase in revenues related to our Distributed Gaming segment for the three months ended September 30, 2018 was primarily due to increases of $0.6 million in gaming revenues and $0.8 million in food and beverage revenues, reflecting a full period of revenues from the five taverns opened in 2017, and was offset by a decrease of $0.4 million in other operating revenues.

The $318.2 million, or 98%, increase in revenues for the nine months ended September 30, 2018 compared to the prior year period resulted primarily from increases of $132.1 million, $83.0 million, $76.1 million and $27.1 million in gaming, food and beverage, room and other revenues, respectively, due primarily to the inclusion in the current year period of revenue from the American Acquisition which was consummated in October 2017.

The $312.4 million, or 401%, increase in revenues related to our Casinos segment for the nine months ended September 30, 2018 compared to the prior year period resulted primarily from increases of $129.4 million, $79.7 million, $76.1 million and $27.2 million in gaming, food and beverage, room and other revenues, respectively, due primarily to the inclusion in the current year period of revenue from the American Acquisition. Additionally, revenue from Rocky Gap increased $0.3 million compared to the prior year period, primarily due to revised marketing efforts, partially offset by weather conditions in Maryland.

The $5.5 million, or 2%, increase in revenues related to our Distributed Gaming segment for the nine months ended September 30, 2018 was primarily due to increases of $2.7 million in gaming revenues and $3.3 million in food and beverage revenues, reflecting the opening of three new taverns in the Las Vegas Valley in 2018 as well as a full period of revenues from the five taverns opened in 2017, and was offset by a $0.5 million decrease in other operating revenues.

During the three and nine months ended September 30, 2018, Adjusted EBITDA in our Casinos segment as a percentage of segment revenues (or Adjusted EBITDA margin) was 29% and 32%, respectively, compared to Adjusted EBITDA margin in our Distributed Gaming segment of 13% and 14%, 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). See Note 12, Segment Information , in the accompanying unaudited consolidated financial statements for additional information regarding segment Adjusted EBITDA and a reconciliation of segment Adjusted EBITDA to segment net income (loss).

Operating Expenses

The $51.4 million, or 67%, increase in operating expenses for the three months ended September 30, 2018 compared to the prior year period resulted primarily from $15.0 million, $21.3 million, $12.5 million and $2.6 million increases in gaming, food and beverage, room and other expenses, respectively, due primarily to the inclusion in the current year period of operating expenses relating to the resort casino properties acquired in the American Acquisition.

The $154.0 million, or 67%, increase in operating expenses for the nine months ended September 30, 2018 compared to the prior year period resulted primarily from $47.1 million, $64.1 million, $35.4 million and $7.4 million increases in gaming, food and beverage, room and other expenses, respectively, due primarily to the inclusion in the current year period of operating expenses relating to the resort casino properties acquired in the American Acquisition.

Selling, General and Administrative Expenses

The $28.0 million, or 144%, increase in selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2018 compared to the prior year period resulted primarily from the inclusion in the current year period of SG&A expenses relating to the resort casino properties acquired in the American Acquisition.

The $79.5 million, or 141%, increase in SG&A expenses for the nine months ended September 30, 2018 compared to the prior year period resulted primarily from the inclusion in the current year period of SG&A expenses relating to the resort casino properties acquired in the American Acquisition.

Within our Casinos segment, SG&A expenses increased $23.0 million, or 424%, for the three months ended September 30, 2018, and increased $65.3 million, or 407%, for the nine months ended September 30, 2018, in each case compared to the prior year period, resulting primarily from the inclusion in the current year period of SG&A related to the American Acquisition. The majority of the SG&A expenses in this segment comprised marketing and advertising, building and rent expense, bonus and payroll taxes. SG&A expenses at Rocky Gap did not change significantly in the current year period compared to the prior year period.

Within our Distributed Gaming segment, SG&A expenses increased $0.9 million, or 17%, for the three months ended September 30, 2018, and increased $2.0 million, or 12%, for the nine months ended September 30, 2018, in each case compared to the prior year period, reflecting the opening of three new taverns in the Las Vegas Valley in 2018.

Acquisition Expenses

Acquisition expenses during the three and nine months ended September 30, 2018 related to the pending acquisition of the Acquired Entities and the American Acquisition.

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.

During the three and nine months ended September 30, 2018 and 2017, preopening expenses related primarily to costs incurred in the opening of new taverns in the Las Vegas Valley.

Depreciation and Amortization

The increase in depreciation and amortization expenses for each of the three and nine months ended September 30, 2018 compared to the prior year period, was primarily due to the depreciation of the assets and the amortization of the intangibles acquired in the American Acquisition.

Non-Operating Expense, Net

Non-operating expense, net increased $13.2 million for the three months ended September 30, 2018 compared to the prior year period, primarily due to a $14.4 million increase in interest expense from the substantially higher level of indebtedness under our senior secured credit facilities following the American Acquisition, partially offset by a gain on change in fair value of derivative of $1.2 million.

Non-operating expense, net increased $35.6 million for the nine months ended September 30, 2018 compared to the prior year period, primarily due to a $41.5 million increase in interest expense from the substantially higher level of indebtedness under our senior secured credit facilities following the American Acquisition, partially offset by a gain on change in fair value of derivative of $5.9 million.

Income Taxes

Our effective tax rate was (2.5)% and (231.33)% for the nine months ended September 30, 2018 and 2017, respectively. For the nine months ended September 30, 2018, the effective tax rate differed from the federal tax rate of 21% primarily due to excess tax benefit from stock options exercised during the third quarter of 2018. For the nine months ended September 30, 2017, the effective tax rate differed from the federal tax rate of 35% due primarily to changes in the valuation allowance for deferred taxes.

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 income 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, preopening expenses, acquisition expenses, class action litigation expense, share-based compensation expenses, executive severance, gain/loss on disposal of property and equipment, gain on change in fair value of derivative and other gains and losses.

The following table presents a reconciliation of Adjusted EBITDA to net income (loss):

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2018			2017			2018			2017
Net income (loss)	$	(3,124	)	$	8,555		$	4,400		$	15,610
Depreciation and amortization		23,330			7,539			71,421			21,499
Acquisition expenses		1,123			2,975			2,429			5,041
Loss on disposal of property and equipment		774			308			1,069			308
Gain on revaluation of contingent consideration		—			(1,719	)		—			(1,719	)
Share-based compensation		2,783			1,603			7,385			5,352
Preopening expenses		21			282			858			1,128
Class action litigation expenses		219			1,530			554			1,585
Executive severance and sign-on bonuses		120			166			678			166
Other, net		50			—			440			—
Interest expense, net		16,291			1,885			47,100			5,568
Change in fair value of derivative		(1,222	)		—			(5,895	)		—
Income tax benefit		(2,222	)		(8,051	)		(106	)		(10,893	)
Adjusted EBITDA	$	38,143		$	15,073		$	130,333		$	43,645

Liquidity and Capital Resources

As of September 30, 2018, we had $132.4 million in cash and cash equivalents. We 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.

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. In January 2018, the SEC declared our universal shelf registration statement effective for the future sale of up to $150.0 million in aggregate amount of common stock, preferred stock, debt securities, warrants and units and the resale of up to approximately 8.0 million shares of our common stock held by the selling security holders named therein. The securities may be offered from time to time, separately or together, directly by us or through underwriters, dealers or agents at amounts, prices, interest rates and other terms to be determined at the time of the offering.

In January 2018, we completed an underwritten public offering pursuant to our universal shelf registration statement, in which certain of our shareholders resold an aggregate of 6.5 million shares of our common stock, and we sold 975,000 newly issued shares of our common stock pursuant to the exercise in full of the underwriters’ over-allotment option to purchase additional shares. Our net proceeds from the offering were approximately $25.6 million after deducting underwriting discounts and offering expenses.

Cash Flows

Net cash provided by operating activities for the nine months ended September 30, 2018 increased $41.2 million compared to the prior year period due primarily to the flow-through effect of higher revenues.

Net cash used in investing activities was $50.0 million for the nine months ended September 30, 2018, compared to $21.0 million for the prior year period. The increase in net cash used in investing activities as compared to the prior year period was primarily due to capital expenditures undertaken at the Stratosphere in 2018.

Net cash provided by financing activities was $18.8 million for the nine months ended September 30, 2018, and primarily related to net proceeds to us in the underwritten public offering completed in January 2018, partially offset by repayments under our first lien senior secured credit facility. Net cash used in financing activities was $14.7 million for the nine months ended September 30, 2017, primarily related to proceeds from borrowings, net of repayments, under our former senior secured credit facility.

Senior Secured Credit Facilities

As of September 30, 2018, our senior secured credit facilities consisted of a $940 million senior secured first lien credit facility (consisting of $800 million in term loans and a $140 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 “First Lien Facility”), and a $200 million senior secured second lien term loan facility with Credit Suisse AG, Cayman Islands Branch (as administrative agent and collateral agent), the lenders party thereto and the other entities party thereto (the “Second Lien Term Loan” and, together with the First Lien Facility, the “Credit Facilities”).

On June 11, 2018, we entered into Incremental Joinder Agreement No. 1 with JPMorgan Chase Bank, N.A. and the lenders party thereto, pursuant to which the size of the revolving credit facility under the First Lien Facility was increased from $100 million to $140 million. On November 8, 2018, we entered into Incremental Joinder Agreement No. 2, pursuant to which the size of the revolving credit facility under the First Lien Facility was increased from $140 million to $200 million.

As of September 30, 2018, $794 million and $200 million of term loan borrowings were outstanding under our First Lien Facility and Second Lien Term Loan, respectively, there were no letters of credit outstanding under the First Lien Facility, and our revolving credit facility was undrawn, leaving borrowing availability under the revolving credit facility as of September 30, 2018 of $140 million.

Borrowings under each of the Credit Facilities bear interest, at our option, at either (1) a base rate equal to the greatest of the federal funds rate plus 0.50%, the applicable administrative agent’s prime rate as announced from time to time, or the LIBOR rate for a one-month interest period plus 1.00%, subject to a floor of 1.75% (with respect to the term loans) or 1.00% (with respect to borrowings under the revolving credit facility) or (2) the LIBOR rate for the applicable interest period, subject to a floor of 0.75% (with respect to the term loans only), plus in each case, an applicable margin. The applicable margin for the term loans under the First Lien Facility is 2.00% for base rate loans and 3.00% for LIBOR rate loans. The applicable margin for borrowings under the revolving credit facility under the First Lien Facility ranges from 1.50% to 2.00% for base rate loans and 2.50% to 3.00% for LIBOR rate loans, based on our net leverage ratio. The applicable margin for the Second Lien Term Loan is 6.00% for base rate loans and 7.00% for LIBOR rate loans. The commitment fee for the revolving credit facility is payable quarterly at a rate of between 0.375% and 0.50%, depending on our net leverage ratio, and is accrued based on the average daily unused amount of the available revolving commitment. As of September 30, 2018, the weighted-average effective interest rate on our outstanding borrowings under the Credit Facilities was approximately 5.7%.

The revolving credit facility under the First Lien Facility matures on October 20, 2022, and the term loans under the First Lien Facility mature o n October 20, 2024. The term loans under the First Lien Facility are 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 term loans under the Second Lien Term Loan are repayable in full at maturity on October 20, 2025.

Borrowings under each of the Credit Facilities are guaranteed by each of our existing and future wholly-owned domestic subsidiaries (other than certain insignificant or unrestricted subsidiaries), and are secured by substantially all of the present and future assets of Golden and our subsidiary guarantors (subject to certain exceptions).

Under the Credit Facilities, we and our restricted subsidiaries are subject to certain limitations, including limitations on our respective ability to: incur additional debt, grant liens, sell assets, make certain investments, pay dividends and make certain other restricted payments. In addition, we will be required to pay down the term loans under the Credit Facilities under certain circumstances if we or our restricted subsidiaries issue debt, sell assets, receive certain extraordinary receipts or generate excess cash flow (subject to exceptions). The revolving credit facility under the First Lien Facility contains a financial covenant regarding a maximum net leverage ratio that applies when borrowings under the revolving credit facility exceed 30% of the total revolving commitment. The Credit Facilities also prohibit the occurrence of a change of control, which includes the acquisition of beneficial ownership of 50% or more of our capital stock (other than by certain permitted holders, which include, among others, Blake L. Sartini, Lyle A. Berman, Neil I. Sell and certain affiliated entities). If we default under the Credit Facilities due to a covenant breach or otherwise, the lenders may be entitled to, among other things, require the immediate repayment of all outstanding amounts and sell our assets to satisfy the obligations thereunder. We were in compliance with our financial covenants under the Credit Facilities as of September 30, 2018.

Other Items Affecting Liquidity

The outcome of the following matters may also affect our liquidity.

Commitments, Capital Spending and Development

We 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 intend to fund such capital expenditures through our revolving credit facility and operating cash flows.

See Note 11, Commitments and Contingencies , in the accompanying unaudited consolidated financial statements for additional information regarding commitments and contingencies that may also affect our liquidity.

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.

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 and promotional allowances, 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 on Form 10-K for the year ended December 31, 2017, previously filed with the SEC. For a more extensive discussion of our accounting policies, see Note 2, Summary of Significant Accounting Policies , in the notes to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2017. With the exception of the adoption of AS C 606 on January 1, 2018, during the first quarter 2018, there were no newly identified or material changes to our critical accounting policies and estimates, as discussed in our Annual Report on Form 10-K for the year ended December 31, 2017. See Note 1, Nature of Business and Basis of Presentation and Note 2, Revenue Recognition , in the notes to the unaudited consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for further information regarding our updated revenue rec ognition and loyalty program accounting policies, including estimates inherent in the accounting of such items, and the impact of adoption of ASC 606 on our unaudited consolidated financial statements.

Commitments and Contractual Obligations

No significant changes occurred in the third quarter of 2018 to the contractual commitments discussed under Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Commitments and Contractual Obligations, in our Annual Report on Form 10-K for the year ended December 31, 2017.

Seasonality

We may experience seasonal fluctuations that could significantly impact our quarterly operating results. Our casinos and distributed gaming businesses in Nevada have historically experienced lower revenues during the summer as a result of fewer tourists due to higher temperatures, as well as increased vacation activity by local residents. Rocky Gap typically experiences higher revenues during summer months and may be significantly adversely impacted by inclement weather during winter months. Our Nevada distributed gaming operations typically experience higher revenues during the fall which corresponds with several professional sports seasons. Our Montana distributed gaming operations typically experience higher revenues during the fall due to the inclement weather in the state and less opportunity for outdoor activities, in addition to the impact from professional sports seasons. While other factors like 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 the accompanying unaudited consolidated 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.

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, 2018, our variable rate long-term debt primarily comprised our indebtedness under the Credit Facilities.

As of September 30, 2018, we had $794 million in principal amount of outstanding borrowings under the First Lien Facility, and $200 million in principal amount of outstanding borrowings under the Second Lien Term Loan. Our primary interest rate under the Credit Facilities is the Eurodollar rate plus an applicable margin. As of September 30, 2018, the weighted-average effective interest rate on our outstanding borrowings under the Credit Facilities was approximately 5.7%. Assuming the outstanding balance under our Credit Facilities 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 $5.0 million over a twelve-month period.

As of September 30, 2018, our investment portfolio included $132.4 million in cash and cash equivalents. As of September 30, 2018, we did not hold any short-term investments.

ITEM 4. CONTROL S 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, 2018, 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 a reasonable assurance level as of September 30, 2018.

On October 20, 2017, the American Acquisition was completed. Management has begun the evaluation of the internal control structures of American. However, SEC guidance permits management to omit an assessment of an acquired business’ internal control over financial reporting from management’s assessments of internal control over financial reporting and disclosure controls and procedures for a period not to exceed one year from the date of the acquisition. Accordingly, we excluded American from our evaluation of our disclosure controls and procedures as of September 30, 2018. We have reported the operating results of American in our consolidated statements of operations and cash flows from the acquisition date through September 30, 2018. As of September 30, 2018, total assets related to American represented approximately 65.5% of our total assets, recorded on a preliminary basis as the measurement period for the business combination remained open as of September 30, 2018. Revenues from American comprised approximately 48.5% and 48.7%, respectively, of our consolidated revenues for the three and nine months ended September 30, 2018. We will include American in our evaluation of internal control over financial reporting as of December 31, 2018.

During the quarter ended September 30, 2018, 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. As described above, on October 20, 2017, the American Acquisition was completed. Management excluded American from its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2017. Our integration of American may lead us to modify certain internal controls in future periods.

Part II. Other Information

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are 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 we have recorded reserves of $1.7 million for claims as of the date of this filing. Although lawsuits, claims, investigations and other legal proceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of our currently pending matters should not have a material adverse effect on our business, financial condition, results of operations or liquidity. Regardless of the outcome, legal proceedings can have an adverse impact on us 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 our business, financial condition, results of operations or liquidity in a particular period.

In February and April 2017, several former employees filed two separate purported class action lawsuits against us in the District Court of Clark County, Nevada, and on behalf of similarly situated individuals employed by us in the State of Nevada. The lawsuits allege that we violated certain Nevada labor laws including payment of an hourly wage below the statutory minimum wage without providing a qualified health insurance plan and an associated failure to pay proper overtime compensation. The complaints seek, on behalf of the plaintiffs and members of the putative class, an unspecified amount of damages (including punitive damages), injunctive and equitable relief, and an award of attorneys’ fees, interest and costs. We agreed to settle the first of these cases in the fourth quarter of 2017 and the second of these cases in the third quarter of 2018. Both settlements are subject to court approval and are included in our recorded reserves of $1.7 million at September 30, 2018.

On August 31, 2018, prior guests of the Stratosphere filed a purported class action complaint against us 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 alleges that the Tax was charged in violation of the federal Internet Tax Freedom Act, which imposes a national moratorium on the taxation of Internet access by states and their political subdivisions, and seeks, 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. We have not yet been served on this complaint.

While legal proceedings are inherently un predictable 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, we believe that these proceedings should not have a material adverse effe ct on our financial position, results of operations or cash flows.

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 for the year ended December 31, 2017, 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 on Form 10-K for the year ended December 31, 2017. The risks described in our Annual Report on Form 10-K 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 8, 2018, we entered into the Incremental Joinder Agreement No. 2 (the “Incremental Joinder No. 2”), by and among us, the subsidiary guarantors party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (the “Agent”). The Incremental Joinder No. 2 relates to that certain First Lien Credit Agreement, dated as of October 20, 2017, by and among us, the subsidiary guarantors party thereto, the lenders party thereto, the Agent, JPMorgan Chase Bank, N.A., as collateral agent, and the other parties thereto, with respect to a $900 million senior secured first lien credit facility (consisting of $800 million in term loans and a $100 million revolving credit facility) (the “First Lien Facility”), and the Incremental Joinder Agreement dated June 11, 2018. The Incremental Joinder No. 2 provides for an increase in the size of the revolving credit facility under the First Lien Facility from $140 million to $200 million.

The revolving credit facility under the First Lien Facility matures on October 20, 2022, and the term loans under the First Lien Facility mature on October 20, 2024. As of September 30, 2018, our weighted-average interest rate under the First Lien Credit Facility was 5.09%. The commitment fee for the revolving credit facility is payable quarterly at a rate of between 0.375% and 0.50%, depending on our net leverage ratio, and is accrued based on the average daily unused amount of the available revolving commitment. Borrowings under the First Lien Facility are guaranteed by each of our existing and future wholly owned domestic subsidiaries (other than certain insignificant or unrestricted subsidiaries), and are secured by substantially all of our present and future assets and the guarantors (subject to certain exceptions). Under the First Lien Facility, we and our restricted subsidiaries are subject to certain customary limitations, as described in this Quarterly Report on Form 10-Q.

Certain of the lenders under the First Lien Facility, and their respective affiliates, may in the future perform for us and our affiliates various commercial banking, investment banking, financial advisory or other services, for which they have received and/or may in the future receive customary compensation and expense reimbursement. In addition, Credit Suisse AG, Cayman Islands Branch, a lender under the First Lien Facility, also serves as administrative agent and collateral agent under our $200 million senior secured second lien term loan facility (the “Second Lien Facility”), and the Agent is a lender under the Second Lien Facility.

The foregoing description of the Incremental Joinder No. 2 does not purport to be complete and is qualified in its entirety by the full text of such agreement, which is filed as Exhibit 10.1 hereto and incorporated herein by reference.

ITEM 6. EXHIBITS

Exhibits		Description

2.1*		Purchase Agreement, dated as of July 14, 2018, by and between Golden Entertainment, Inc. and Marnell Gaming, LLC (incorporated by reference to Exhibit 2.1 to Golden Entertainment, Inc.’s Current Report on Form 8-K dated July 14, 2018, filed on July 16, 2018)

10.1		Incremental Joinder Agreement No. 2, dated as of November 8, 2018, by and among Golden Entertainment, Inc. (as borrower), the subsidiaries of Golden Entertainment, Inc. party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A. (as administrative agent).
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Calculation Definition Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but a copy will be furnished to the Securities and Exchange Commission upon request

SIGNAT URES

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 8, 2018	/s/ BLAKE L. SARTINI
	Blake L. Sartini
	Chairman of the Board, President and Chief Executive Officer
	(Principal Executive Officer)

	/s/ CHARLES H. PROTELL
	Charles H. Protell
	Executive Vice President, Chief Strategy Officer and Chief Financial Officer
	(Principal Financial Officer)

	/s/ THOMAS E. HAAS
	Thomas E. Haas
	Senior Vice President of Accounting
	(Principal Accounting Officer)

Exhibit 10.1

Execution Version

INCREMENTAL JOINDER AGREEMENT NO. 2

This INCREMENTAL JOINDER AGREEMENT NO. 2 (this “ Agreement ”), dated as of November 8, 2018, and effective as of the Effective Date (as hereinafter defined), is made and entered into by and among GOLDEN ENTERTAINMENT, INC., a Minnesota corporation (“ Borrower ”), the SUBSIDIARY GUARANTORS party hereto, each of the INCREMENTAL EXISTING TRANCHE REVOLVING LENDERS (as hereinafter defined) party hereto and JPMORGAN CHASE BANK, N.A., as administrative agent under the Credit Agreement referred to below (in such capacity, together with its successors and assigns, the “ Administrative Agent ”).

RECITALS:

WHEREAS, reference is hereby made to the First Lien Credit Agreement, dated as of October 20, 2017, as amended by that certain Incremental Joinder Agreement No. 1, dated as of June 11, 2018 (as further amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Borrower, the Guarantors, the banks, financial institutions and other entities from time to time party thereto as lenders (including the L/C Lenders and the Swingline Lender), Administrative Agent, JPMorgan Chase Bank, N.A., as collateral agent, and the other parties thereto;

WHEREAS, pursuant to Section 2.12 of the Credit Agreement, Borrower has requested to increase the aggregate amount of the Revolving Commitments under the Credit Agreement by utilizing the Shared Fixed Incremental Amount, and the Borrower has requested that each financial institution party hereto and listed on Schedule A hereto (each, an “ Incremental Existing Tranche Revolving Lender ”, and collectively, the “ Incremental Existing Tranche Revolving Lenders ”) provide, on a several and not a joint basis, an Incremental Existing Tranche Revolving Commitment (as defined in the Credit Agreement) in the amount set forth opposite such Incremental Existing Tranche Revolving Lender’s name on Schedule A hereto (the “ Incremental Existing Tranche Revolving Commitments ” and the loans made thereunder, the “ Incremental Existing Tranche Revolving Loans ”); and

WHEREAS, each Incremental Existing Tranche Revolving Lender party hereto and Administrative Agent is willing, on the terms and subject to the conditions set forth below, to enter into this Agreement.

NOW, THEREFORE, in consideration of the premises and agreements, provisions and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Definitions

. Except as otherwise expressly provided herein, capitalized terms used in this Agreement (including in the Recitals and the introductory paragraph above) shall have the meanings given in the Credit Agreement, and the rules of construction set forth in the Credit Agreement shall apply to this Agreement.

ARTICLE II

AGREEMENT TO PROVIDE INCREMENTAL EXISTING TRANCHE REVOLVING COMMITMENTS

SECTION 2.1 Agreement to Provide Incremental Existing Tranche Revolving Commitments

. Each Incremental Existing Tranche Revolving Lender hereby agrees, severally and not jointly, to provide its respective Incremental Existing Tranche Revolving Commitment in the amount set forth opposite such Incremental Existing Tranche Revolving Lender’s name on Schedule A hereto annexed hereto on the terms set forth in this Agreement and the Credit Agreement and subject to the conditions set forth herein, and its Incremental Existing Tranche Revolving Commitment shall be binding as of the Effective Date.

SECTION 2.2 New Loans and Commitments

. The Incremental Existing Tranche Revolving Commitment of each Incremental Existing Tranche Revolving Lender is in addition to such Incremental Existing Tranche Revolving Lender’s existing Loans and Commitments under the Credit Agreement immediately prior to the Effective Date, if any (which shall continue under and be subject in all respects to the Credit Agreement (and the other Credit Documents).

SECTION 2.3 Incremental Existing Tranche Revolving Commitments

(a) This Agreement represents Borrower’s request for Incremental Existing Tranche Revolving Commitments to be provided on the terms and subject to the conditions set forth herein on the Effective Date and for the Incremental Existing Tranche Revolving Loans to be made thereunder to be funded from time to time after the Effective Date in accordance with the Credit Agreement. It is the understanding, agreement and intention of the parties that (i) the Incremental Existing Tranche Revolving Commitments shall be part of the same Tranche of Commitments as the Closing Date Revolving Commitments and shall constitute Closing Date Revolving Commitments, Incremental Existing Tranche Revolving Commitments (as defined in the Credit Agreement), Revolving Commitments and Commitments under the Credit Agreement and the other Credit Documents and (ii) all Incremental Existing Tranche Revolving Loans incurred pursuant to the Incremental Existing Tranche Revolving Commitments shall be part of the same Tranche of Loans as the Revolving Loans incurred pursuant the Closing Date Revolving Commitments and shall constitute Loans and Revolving Loans under the Credit Agreement and the other Credit Documents. The Incremental Existing Tranche Revolving Commitments and Incremental Existing Tranche Revolving Loans shall be subject to the provisions of the Credit Agreement and the other Credit Documents and shall be on terms and conditions identical to the Closing Date Revolving Commitments and the Revolving Loans incurred pursuant to the Closing Date Revolving Commitments, respectively, in each case, under the Credit Agreement immediately prior to the Effective Date (after giving effect to any amendments under this Agreement). As of the Effective Date and giving effect to all of the transactions occurring on the Effective Date, each Incremental Existing Tranche Revolving Lender shall have total Revolving Commitments in the amount set opposite its name set forth on Annex A-1 (as amended pursuant to this Agreement) annexed hereto as Schedule B .

(b) The Incremental Existing Tranche Revolving Commitments shall be part of the same Tranche of Commitments as the Closing Date Revolving Commitments and may be drawn from time to time after the Effective Date in accordance with Section 2.01(a) of the Credit Agreement and shall terminate as set forth in Section 2.04(a)(iii) of the Credit Agreement. The Incremental Existing Tranche Revolving Loans borrowed under the Incremental Existing Tranche Revolving Commitments shall be part of the same Tranche of Loans as the Revolving Loans

incurred pursuant the Closing Date Revolving Commitments and shall be repaid in accordance with Section 3.01(a) of the Credit Agreement.

SECTION 2.4 Agreements of Revolving Lenders

. Each Incremental Existing Tranche Revolving Lender (a) confirms that it has received a copy of the Credit Agreement, this Agreement and the other Credit Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; (b) agrees that it will, independently and without reliance upon Administrative Agent or any other Lender or Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (c) appoints and authorizes each applicable Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to each such Agent, as applicable, by the terms thereof, together with such powers as are incidental thereto; (d) hereby affirms the acknowledgements and representations of such Incremental Existing Tranche Revolving Lender as a Lender contained in Section 12.07 of the Credit Agreement; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with the terms of the Credit Agreement all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender, including its obligations pursuant to Section 13.05 of the Credit Agreement. Each Incremental Existing Tranche Revolving Lender acknowledges and agrees that upon its execution of this Agreement that such Incremental Existing Tranche Revolving Lender shall on and as of the Effective Date become, or continue to be, a “Revolving Lender” and a “Lender” under, and for all purposes of, the Credit Agreement and the other Credit Documents, shall be subject to and bound by the terms thereof, shall perform all the obligations of and shall have all rights of a Lender thereunder, and shall make available such amount to fund its ratable share of outstanding Incremental Existing Tranche Revolving Loans from time to time after the Effective Date in accordance with the Credit Agreement. Each Incremental Existing Tranche Revolving Lender has delivered herewith to Borrower and Administrative Agent such forms, certificates or other evidence with respect to United States federal income tax withholding matters as such Incremental Existing Tranche Revolving Lender may be required to deliver to Borrower and Administrative Agent pursuant to Section 5.06 of the Credit Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce the Incremental Existing Tranche Revolving Lenders to enter into this Agreement and provide the Incremental Existing Tranche Revolving Commitments, Borrower represents to Administrative Agent and each of the Incremental Existing Tranche Revolving Lenders that, as of the Effective Date and giving effect to all of the transactions occurring on the Effective Date:

SECTION 3.1 Corporate Existence

. Borrower and each Restricted Subsidiary (a) is a corporation, partnership, limited liability company or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b)(i) has all requisite corporate or other power and authority, and (ii) has all governmental licenses, authorizations, consents and approvals necessary to own its Property and carry on its business as now being conducted; and (c) is qualified to do business and is in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary; except, in the case of clauses (b)(ii) and (c) where the failure thereof individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect.

SECTION 3.2 Action; Enforceability

. Borrower and each Restricted Subsidiary has all necessary corporate or other organizational power, authority and legal right to execute, deliver and perform its obligations under this Agreement and to consummate the transactions herein contemplated; the execution, delivery and performance by Borrower and each Restricted Subsidiary of this Agreement and the consummation of the transactions herein contemplated have been duly authorized by all necessary corporate, partnership or other organizational action on its part; and this Agreement has been duly and validly executed and delivered by each Credit Party and constitutes its legal, valid and binding obligation, enforceable against each Credit Party in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws of general applicability from time to time in effect affecting the enforcement of creditors’ rights and remedies and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

SECTION 3.3 No Breach; No Default

(a) None of the execution, delivery and performance by any Credit Party of this Agreement nor the consummation of the transactions herein contemplated do or will (i) conflict with or result in a breach of, or require any consent (which has not been obtained and is in full force and effect) under (x) any Organizational Document of any Credit Party or (y) any applicable Requirement of Law (including, without limitation, any Gaming Law) or (z) any order, writ, injunction or decree of any Governmental Authority binding on any Credit Party, or tortiously interfere with, result in a breach of, or require termination of, any term or provision of any Contractual Obligation of any Credit Party or (ii) constitute (with due notice or lapse of time or both) a default under any such Contractual Obligation or (iii) result in or require the creation or imposition of any Lien (except for the Liens created pursuant to the Security Documents) upon any Property of any Credit Party pursuant to the terms of any such Contractual Obligation, except with respect to (i)(y), (i)(z), (ii) or (iii) which would not reasonably be expected to result in a Material Adverse Effect; and

(b) No Default or Event of Default has occurred and is continuing.

SECTION 3.4 Credit Document Representations

. Each of the representations and warranties made by Borrower or any of the other Credit Parties in or pursuant to the Credit Agreement and the other Credit Documents to which such entity is a party are true and correct in all material respects as of such date (except to the extent such representations and warranties are qualified by “materiality” or “Material Adverse Effect,” in which case such representations and warranties shall be true and correct in all respects), as applicable, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects as of such earlier date (except to the extent such representations and warranties are qualified by “materiality” or “Material Adverse Effect,” in which case such representations and warranties shall be true and correct in all respects)).

ARTICLE IV

CONDITIONS TO THE EFFECTIVE DATE

This Agreement shall become effective on the date (the “ Effective Date ”) on which each of the following conditions is satisfied or waived:

SECTION 4.1 Execution of Counterparts

. Administrative Agent shall have received executed counterparts of this Agreement from each Credit Party and each of the Incremental Existing Tranche Revolving Lenders.

SECTION 4.2 Revolving Note . Administrative Agent shall have received copies of the Revolving Notes, substantially in the form of Exhibit A-1 of the Credit Agreement, and duly completed and executed, for each Incremental Existing Tranche Revolving Lender that requested a Revolving Note at least three (3) Business Days prior to the Effective Date.

SECTION 4.3 Corporate Documents

. Administrative Agent shall have received (i) copies of the Organizational Documents of Borrower and the Subsidiary Guarantors set forth on Schedule C hereto (the “Specified Subsidiary Guarantors”, and together with Borrower, the “ Specified Credit Parties ”), (ii) evidence of all corporate or other applicable authority for each Specified Credit Party (including a resolution or written consent and incumbency certificate) with respect to the execution, delivery and performance of this Agreement , certified as of the Effective Date as complete and correct copies thereof by a Responsible Officer of Borrower, and (iii) copies of the certificates of good standing or the equivalent (if any) for each Specified Credit Party from the office of the secretary of state or other appropriate governmental department or agency of the state of its formation, incorporation or organization, in each case dated a recent date prior to the Effective Date .

SECTION 4.4 Opinions of Counsel

. Administrative Agent shall have received a favorable written opinion of (i) Latham & Watkins LLP, special New York counsel for the Specified Credit Parties, (ii) Gray, Plant, Mooty, Mooty & Bennett, P.A., special Minnesota counsel for the Specified Credit Parties, (iii) Alonso Law Limited, special Nevada counsel for the Specified Credit Parties and (iv) Duane Morris, special Maryland counsel for the Specified Credit Parties, in each case (A) dated the Effective Date, (B) addressed to Administrative Agent and the Incremental Existing Tranche Revolving Lenders and (C) in a form reasonably satisfactory to Administrative Agent and addressing matters relating to the Specified Credit Parties as reasonably requested by Administrative Agent.

SECTION 4.5 No Default or Event of Default; Representations and Warranties True

. Both immediately prior to and immediately after giving effect to this Agreement and all of the transactions contemplated in connection therewith:

(a) no Default or Event of Default shall have occurred and be continuing; and

(b) each of the representations and warranties made by the Credit Parties in Article III hereof shall be true and correct in all material respects on and as of the Effective Date (it being understood and agreed that any such representation or warranty which by its terms is made as of an earlier date shall be required to be true and correct in all material respects only as such earlier date, and that any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct in all respects on the applicable date).

SECTION 4.6 Flood Insurance Requirements

. Administrative Agent shall have received from Borrower (i) a completed “Life-of-Loan” Federal Emergency Management Agency standard flood hazard determination with respect to each Mortgaged Real Property and if such Mortgaged Real Property is located in a special flood hazard area, a notice about special flood hazard area status and flood disaster assistance duly executed by Borrower and the applicable Credit Party relating thereto together with evidence of insurance as required pursuant to Section 9.02(c) of the Credit Agreement.

SECTION 4.7 Patriot Act

. On or prior to the Effective Date, Administrative Agent shall have received at least three (3) Business Days prior to the Effective Date all documentation and other information reasonably requested in writing at least ten (10) Business Days prior to the Effective Date by Administrative Agent that Administrative Agent reasonably determines is required by regulatory authorities from the Credit Parties under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the Act.

SECTION 4.8 Fees and Expenses

. All reasonable and documented out-of-pocket fees and expenses due to Administrative Agent required to be paid on the Effective Date (including pursuant to Section 6.10 hereof) shall have been paid (or the Borrower shall have made arrangements reasonably satisfactory to Administrative Agent for such payment).

SECTION 4.9 Beneficial Ownership Certificate

. If Borrower qualifies as a “legal entity customer” under 31 C.F.R. § 1010.230, Borrower shall deliver a certification regarding beneficial ownership as required by 31 C.F.R. § 1010.230.

SECTION 4.10 Lien Searches

. Administrative Agent shall have received results of lien searches conducted in the jurisdictions in which the Credit Parties are organized, in each case, dated a recent date prior to the Effective Date.

SECTION 4.11 Officer’s Certificate

. Administrative Agent shall have received a certificate signed by a Responsible Officer of the Borrower certifying as to the satisfaction of the conditions set forth in paragraphs (a) and (b) of Section 4.5 as of the Effective Date.

SECTION 4.12 Real Property

. Administrative Agent shall have received an e-mail confirmation from local counsel in each jurisdiction where a Mortgaged Real Property that is subject to a Mortgage as of the Effective Date is located, in form and substance reasonably satisfactory to Administrative Agent, to the effect that:

(a) the recording of the existing Mortgage is the only filing or recording necessary to give constructive notice to third parties of the lien created by such Mortgage as security for the Secured Obligations (as defined therein), including the Secured Obligations evidenced by the Credit Agreement as amended by this Agreement and the other documents executed in connection therewith, for the benefit of the Secured Parties; and

(b) no other payment of any mortgage recording taxes or similar taxes, are necessary or appropriate under applicable law in connection with the execution of this Agreement in order to maintain the continued enforceability, validity or priority of the lien created by such Mortgage as security for the Secured Obligations, including the Secured Obligations evidenced by the Credit Agreement as amended by this Agreement and the other documents executed in connection therewith, for the benefit of the Secured Parties.

ARTICLE V

VALIDITY OF OBLIGATIONS AND LIENS

SECTION 5.1 Validity of Obligations

. Borrower and each Guarantor acknowledges and agrees that, both before and after giving effect to this Agreement, Borrower and each Guarantor is, jointly and severally, indebted to the Lenders and the other Secured Parties for the Obligations (including the Obligations in respect of the Incremental Existing Tranche Revolving Commitments provided pursuant to this Agreement), without defense, counterclaim or offset of any kind. Borrower and each Guarantor hereby ratifies and reaffirms the validity, enforceability and binding nature of such Obligations both before and after giving effect to this Agreement (except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors’ rights generally and subject to general principles of equity).

SECTION 5.2 Validity of Liens and Credit Documents

. Borrower and each Guarantor hereby ratifies and reaffirms its obligations under the Credit Documents to which it is a party and its prior grant and the validity and enforceability (except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors’ rights generally and subject to general principles of equity) of the Liens and security interests granted to Collateral Agent for the benefit of the Secured Parties to secure all of the Obligations (including the Obligations in respect of the Incremental Existing Tranche Revolving Commitments provided pursuant to this Agreement) by Borrower and each Guarantor pursuant to the Credit Documents to which any of Borrower or such Guarantor is a party and hereby confirms and agrees that after giving effect to this Agreement, all such Liens and security interests and each such Credit Document is, and shall continue to be, in full force and effect and each is hereby ratified and confirmed in all respects.

ARTICLE VI

MISCELLANEOUS

SECTION 6.1 Notice

. For purposes of the Credit Agreement, the initial notice address of each Incremental Existing Tranche Revolving Lender (other than any Incremental Existing Tranche Revolving Lender that, immediately prior to the execution of this Agreement, is a “Lender” under the Credit Agreement) shall be as set forth below its signature to this Agreement.

SECTION 6.2 Amendment, Modification and Waiver

. This Agreement may not be amended, modified or waived except by an instrument or instruments in writing signed and delivered on behalf of Borrower and Administrative Agent (acting at the direction of such Lenders as may be required under Section 13.04 of the Credit Agreement).

SECTION 6.3 Entire Agreement

. This Agreement, the Credit Agreement and the other Credit Documents, constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties or any of them with respect to the subject matter hereof.

SECTION 6.4 GOVERNING LAW

. THIS AGREEMENT, AND ANY CLAIMS, CONTROVERSIES, DISPUTES, OR CAUSES OF ACTION (WHETHER ARISING UNDER CONTRACT LAW, TORT LAW OR OTHERWISE) BASED UPON OR RELATING TO THIS AGREEMENT, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW PRINCIPLES THAT WOULD APPLY THE LAWS OF ANOTHER JURISDICTION.

SECTION 6.5 SUBMISSION TO JURISDICTION

. EACH PARTY HERETO AGREES THAT SECTION 13.09(b) OF THE CREDIT AGREEMENT SHALL APPLY TO THIS AGREEMENT MUTATIS MUTANDIS.

SECTION 6.6 Severability

. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement.

SECTION 6.7 Counterparts

. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by facsimile or other electronic transmission (including portable document format (“.pdf”) or similar format) shall be effective as delivery of a manually executed counterpart hereof.

SECTION 6.8 Credit Document

. This Agreement shall constitute an “Incremental Joinder Agreement” and a “Credit Document”, each as defined in the Credit Agreement.

SECTION 6.9 No Novation

. This Agreement shall not extinguish the obligations for the payment of money outstanding under the Credit Agreement or discharge or release the priority of any Credit Document (or any other security therefor. Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Credit Agreement, any of the other Credit Documents or the instruments, documents and agreements securing the same, which shall remain in full force and effect. Nothing in this Agreement shall be construed as a release or other discharge of Borrower or any other Credit Party from any of its obligations and liabilities under the Credit Agreement or the other Credit Documents.

SECTION 6.10 Expenses

. The Borrower agrees to reimburse Administrative Agent for its reasonable and documented out-of-pocket expenses incurred by them in connection with this Agreement, including the reasonable and documented fees, charges and disbursements of Cahill Gordon & Reindel llp , counsel for Administrative Agent.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties have caused this Incremental Joinder Agreement No. 2 to be duly executed as of the day and year first above written, to be effective as of the Effective Date.

GOLDEN ENTERTAINMENT, INC. ,

as Borrower

By: _/s/ Charles H. Protell ________________

Name: Charles H. Protell
Title: Executive Vice President, Chief Strategy Officer and Chief Financial Officer

[Signature Page to Incremental Joinder Agreement No. 2]

GOLDEN HOLDINGS, INC.

77 GOLDEN GAMING, LLC

GOLDEN ROUTE OPERATIONS-MONTANA LLC

BIG SKY GAMING MANAGEMENT, LLC

GOLDEN ROUTE OPERATIONS-ILLINOIS LLC

GOLDEN ROUTE OPERATIONS-PENNSYLVANIA LLC

SARTINI SYNERGY ONLINE, LLC

GOLDEN GAMING, LLC ,

each as a Guarantor

By: _/s/ Charles H. Protell ________________

Name: Charles H. Protell
Title: Executive Vice President, Chief Strategy Officer and Chief Financial Officer of Golden Entertainment, Inc., in such capacity acting as agent for each of the foregoing entities

[Signature Page to Incremental Joinder Agreement No. 2]

GOLDEN AVIATION, LLC

GOLDEN PAHRUMP NUGGET, LLC

GOLDEN PAHRUMP TOWN, LLC

GOLDEN PAHRUMP LAKESIDE, LLC

GOLDEN ROUTE OPERATIONS LLC

GOLDEN TAVERN GROUP, LLC

SARTINI GAMING, LLC

MARKET GAMING, LLC

CARDIVAN, LLC

CORRAL COUNTRY COIN, LLC ,

each as a Guarantor

By: _/s/ Charles H. Protell ________________

[Signature Page to Incremental Joinder Agreement No. 2]

GOLDEN - PT’S PUB STEWART-NELLIS 2, LLC

GOLDEN - PT’S PUB EAST SAHARA 3, LLC

GOLDEN - PT’S PUB CHEYENNE-NELLIS 5, LLC

GOLDEN - PT’S PUB SUMMERLIN 6, LLC

GOLDEN - PT’S PUB VEGAS VALLEY 7, LLC

GOLDEN - PT’S PUB WEST SAHARA 8, LLC

GOLDEN - PT’S PUB SPRING MOUNTAIN 9, LLC

GOLDEN - PT’S PUB FLAMINGO 10, LLC

GOLDEN - PT’S PUB RAINBOW 11, LLC

GOLDEN - PT’S PUB DURANGO 12, LLC

GOLDEN - PT’S PUB WARM SPRINGS 13, LLC

GOLDEN - PT’S PUB TWAIN 14, LLC

GOLDEN - PT’S PUB TROPICANA 15, LLC

GOLDEN - PT’S PUB WINTERWOOD 16, LLC

GOLDEN - PT’S PUB SUNSET-PECOS 17, LLC

GOLDEN - PT’S PUB MLK 18, LLC

GOLDEN - PT’S PUB TUNES 19, LLC

GOLDEN - PT’S PUB DECATUR-HACIENDA 20, LLC

GOLDEN - PT’S PUB DECATUR-SOBB 21, LLC

GOLDEN - PT’S PUB SILVERADO-MARYLAND 22, LLC

GOLDEN - PT’S PUB SILVERADO-BERMUDA 23, LLC

GOLDEN - PT’S PUB SUNRISE 24, LLC

GOLDEN - PT’S PUB HUALAPAI 25, LLC

GOLDEN – PT’S PUB BIG GAME 26, LLC

GOLDEN – PT’S PUB CANTINA 27, LLC

GOLDEN – PT’S PUB FORT APACHE 29, LLC

GOLDEN-PT’S PUB ANN 30, LLC

GOLDEN - PT’S PUB RUSSELL 31, LLC

GOLDEN-PT’S PUB CENTENNIAL 32, LLC

GOLDEN - PT’S PUB HORIZON 33, LLC

GOLDEN - PT’S PUB ST. ROSE 35, LLC

GOLDEN - PT’S PUB EASTERN 36, LLC

GOLDEN - PT’S PUB RACETRACK 37, LLC

GOLDEN - PT’S PUB ANTHEM 38, LLC

GOLDEN - PT’S PUB SUNSET-BUFFALO 39, LLC

GOLDEN-PT’S PUB TRIPLE BAR 40, LLC

GOLDEN-PT’S PUB OCEANS 41, LLC

GOLDEN-PT’S PUB DESERT INN 42, LLC

GOLDEN - PT’S PUB SPRING VALLEY 44, LLC ,

each as a Guarantor

By: _/s/ Charles H. Protell ________________

[Signature Page to Incremental Joinder Agreement No. 2]

GOLDEN-O’ACES BAR RAINBOW 46, LLC

GOLDEN-O’ACES BAR POST 47, LLC

GOLDEN - PT’S PUB FOOTHILLS 48, LLC

GOLDEN-PT’S PUB FRED’S 49, LLC

GOLDEN-PT’S PUB CROSSROADS TC 50, LLC

GOLDEN-PT’S PUB WHITNEY RANCH 51, LLC

GOLDEN-PT’S PUB BLACK MOUNTAIN 52, LLC

GOLDEN-PT’S PUB MOLLY MALONE’S 53 LLC

GOLDEN-PT’S PUB KAVANAUGH’S 54 LLC

GOLDEN-PT’S PUB SEAN PATRICK’S 55 LLC

GOLDEN-PT’S PUB MORRISSEY’S 56 LLC

GOLDEN-PT’S PUB GB’S 57 LLC

GOLDEN-PT’S PUB OWL 58 LLC

GOLDEN-PT’S PUB FIRESIDE 59 LLC

GOLDEN-PT’S PUB MOUNTAINSIDE 60 LLC

GOLDEN-PT’S PUB OYSTER 61 LLC

GOLDEN-PT’S PUB BEANO’S 62 LLC

GOLDEN-PT’S PUB BREW 63 LLC

GOLDEN-PT’S PUB RANCH 64 LLC

GOLDEN-PT’S BWS 65 LLC

GOLDEN-PT’S SRD 66 LLC

GOLDEN-PT’S OSO BLANCA 67 LLC

GOLDEN-PT’S EL CAPITAN 68 LLC

GOLDEN-PT’S WEST MARTIN 69 LLC

GOLDEN-PT’S HUNTINGTON COVE 70 LLC

GOLDEN-PT’S GVHR 71 L.L.C.

GOLDEN-PT’S PECCOLE SAHARA 72 LLC

GOLDEN-PT’S DECATUR 73 LLC

GOLDEN-PT’S BUFFALO-BLUE DIAMOND 74 LLC

GOLDEN-PT’S LV CACTUS 75 LLC

GOLDEN-PT’S MAULE 76 LLC

GOLDEN-SIERRA GOLD DOUBLE R 1, LLC

GOLDEN-SIERRA JUNCTION DOUBLE R 2, LLC

SIERRA GOLD JONES 3, LLC

SIERRA GOLD BUFFALO 4, LLC

SIERRA GOLD STEPHANIE 5, LLC

SIERRA GOLD ALIANTE 6, LLC

SIERRA GOLD FLAMINGO 7 LLC

GOLDEN RR EASTERN 3, LLC

BONNIE’S 1 LLC ,

each as a Guarantor

By: _/s/ Charles H. Protell ________________

[Signature Page to Incremental Joinder Agreement No. 2]

LAKES GAME DEVELOPMENT , LLC

LAKES GAMING AND RESORTS, LLC

LAKES JAMUL, INC.

LAKES KAR SHINGLE SPRINGS, L.L.C.

LAKES KEAN ARGOVITZ RESORTS-CALIFORNIA, L.L.C.

LAKES NIPMUC, LLC

LAKES PAWNEE CONSULTING, LLC

LAKES SHINGLE SPRINGS, INC.

LAKES MARYLAND DEVELOPMENT, LLC

EVITTS RESORT, LLC ,

each as a Guarantor

By: _/s/ Charles H. Protell ________________

[Signature Page to Incremental Joinder Agreement No. 2]

GOLDEN CASINOS NEVADA LLC

ACEP ADVERTISING AGENCY, LLC

STRATOSPHERE LEASING, LLC

ACEP INTERACTIVE, LLC

STRATOSPHERE GAMING LLC

AQUARIUS GAMING LLC

ARIZONA CHARLIE’S, LLC

FRESCA, LLC

STRATOSPHERE ENTERTAINMENT L.L.C.

W2007 STRATOSPHERE LAND PROPCO, LLC ,

each as a Guarantor

By: _/s/ Charles H. Protell ________________

[Signature Page to Incremental Joinder Agreement No. 2]

Acknowledged and Agreed by:

jpmorgan chase bank, n.a. , as Administrative Agent

By: /s/ Chiara Carter

Name: Chiara Carter

Title: Executive Director

[Signature Page to Incremental Joinder Agreement No. 2]

CAPITAL ONE, n.a. ,
as Incremental Existing Tranche Revolving Lender

By: /s/ Wallace Lo

Name: Wallace Lo

Title: Duly Authorized Signatory

Notice Information :

Name: Wallace Lo

Address: 299 Park Ave Fl, 23, New York, NY

Telephone: (347) 213-0121

Email: Wallace.Lo@CapitalOne.com

Name: Kristopher Tracy

Address: 299 Park Ave Fl, 23, New York, NY

Telephone: (646) 836-5433

Email: Kristopher.Tracy@CapitalOne.com

[Signature Page to Incremental Joinder Agreement No. 2]

CITZENS BANKS, n.a. ,
as Incremental Existing Tranche Revolving Lender

By: /s/ Sean McWhinnie

Name: Sean McWhinnie

Title: Director

Notice Information :

Address: 600 Washington Blvd., Stamford, CT 06901

Telephone: (203) 900-6806

Email: sean.c.mcwhinnie@citizensbank.com

[Signature Page to Incremental Joinder Agreement No. 2]

FIFTH THIRD BANK,
as Incremental Existing Tranche Revolving Lender

By: /s/ Knight D. Kieffer

Name: Knight D. Kieffer

Title: Managing Director

Notice Information :

Address: 214 N. Tryon St., 17 ^th Floor, Charlotte, NC 28202

Telephone: (704) 808-5051

Email: knight.kieffer@53.com

[Signature Page to Incremental Joinder Agreement No. 2]

SCHEDULE A

INCREMENTAL EXISTING TRANCHE REVOLVING COMMITMENTS


Incremental Existing Tranche Revolving Lender	Commitment Amount
Fifth Third Bank	$20,000,000
Capital One, N.A.	$20,000,000
Citizens Bank, N.A.	$20,000,000
Total Incremental Existing Tranche Revolving Commitments:	$60,000,000

Schedule A-1

SCHEDULE B

ANNEX A-1

REVOLVING COMMITMENTS


Lender	Revolving Commitment	L/C Commitment
Fifth Third Bank	$20,000,000	n/a
Capital One, N.A.	$20,000,000	n/a
Citizens Bank, N.A.	$20,000,000	n/a
Total Revolving Commitments:	$60,000,000	n/a

Schedule B-1

SCHEDULE C

SPECIFIED SUBSIDIARY GUARANTORS

Arizona Charlie’s, LLC

Aquarius Gaming LLC

Evitts Resort, LLC

Fresca, LLC

Golden Gaming, LLC

Golden Casinos Nevada LLC

Golden Holdings, Inc.

Golden Pahrump Lakeside, LLC

Golden Pahrump Nugget, LLC

10.

Golden Pahrump Town, LLC

11.

Lakes Gaming and Resorts, LLC

12.

Sartini Gaming, LLC

13.

Stratosphere Gaming LLC

14.

W2007 Stratosphere Land Propco, LLC

Schedule C-1

Exhibit 31.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF

2002

I, Blake L. Sartini, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Golden Entertainment, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant, and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 8, 2018

/s/ BLAKE L. SARTINI

Blake L. Sartini

Chairman of the Board, President and

Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF

2002

I, Charles H. Protell, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Golden Entertainment, Inc.;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 8, 2018

/s/ CHARLES H. PROTELL

Charles H. Protell

Executive Vice President, Chief Strategy Officer and

Chief Financial Officer

Exhibit 32.1

CERTIFICATIONS OF

CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY

ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Golden Entertainment, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2018

/s/ BLAKE L. SARTINI

Blake L. Sartini

Chairman of the Board, President and

Chief Executive Officer

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2018		/s/ CHARLES H. PROTELL
		Charles H. Protell
		Executive Vice President, Chief Strategy Officer and
		Chief Financial Officer

The foregoing certifications are being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. The foregoing certifications are not to be incorporated by reference into any filing of Golden Entertainment, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.