Table of Contents     


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
þ      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
For the quarterly period ended March 31, 2019
OR
¨      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to     
Commission file number 001-37754
RED ROCK RESORTS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
47-5081182
(I.R.S. Employer
Identification No.)
1505 South Pavilion Center Drive, Las Vegas, Nevada
(Address of principal executive offices)
89135
(Zip Code)
(702) 495-3000
Registrant’s telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Class A Common Stock, $.01, par value
RRR
NASDAQ Stock Market
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  þ     No  o

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  þ     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
Emerging growth company o
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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o     No  þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding at April 30, 2019
Class A Common Stock, $0.01 par value
 
70,273,915
Class B Common Stock, $0.00001 par value
 
46,884,413

Table of Contents     


RED ROCK RESORTS, INC.
INDEX

 
 
 
 
 
 
 
 
 
 


Table of Contents     


Part I.    Financial Information
Item 1.    Financial Statements
RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
 
March 31, 2019
 
December 31, 2018
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
109,249

 
$
114,607

Restricted cash
3,750

 
3,651

Receivables, net
56,912

 
51,356

Inventories
15,348

 
14,910

Prepaid gaming tax
23,776

 
23,422

Prepaid expenses and other current assets
50,225

 
34,417

Assets held for sale
19,602

 
19,602

Total current assets
278,862

 
261,965

Property and equipment, net of accumulated depreciation of $888,828 and $847,718 at March 31, 2019 and December 31, 2018, respectively
3,093,844

 
3,012,405

Goodwill
195,676

 
195,676

Intangible assets, net of accumulated amortization of $48,296 and $46,117 at March 31, 2019 and December 31, 2018, respectively
115,041

 
117,220

Land held for development
193,686

 
193,686

Investments in joint ventures
8,953

 
8,903

Native American development costs
18,332

 
17,970

Deferred tax asset, net
109,914

 
111,833

Other assets, net
121,334

 
89,868

Total assets
$
4,135,642

 
$
4,009,526

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
36,063

 
$
25,896

Accrued interest payable
15,084

 
7,418

Other accrued liabilities
237,492

 
266,474

Current portion of long-term debt
33,906

 
33,894

Total current liabilities
322,545

 
333,682

Long-term debt, less current portion
2,931,901

 
2,821,465

Other long-term liabilities
23,780

 
12,436

Payable pursuant to tax receivable agreement
24,948

 
24,948

Total liabilities
3,303,174

 
3,192,531

Commitments and contingencies (Note 13)

 

Stockholders’ equity:
 
 
 
Preferred stock, par value $0.01 per share, 100,000,000 shares authorized; none issued and outstanding
—

 
—

Class A common stock, par value $0.01 per share, 500,000,000 shares authorized; 70,273,915 and 69,662,590 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
703

 
697

Class B common stock, par value $0.00001 per share, 100,000,000 shares authorized; 46,884,413 shares issued and outstanding at March 31, 2019 and December 31, 2018
1

 
1

Additional paid-in capital
367,039

 
361,970

Retained earnings
160,183

 
155,869

Accumulated other comprehensive income
641

 
1,083

Total Red Rock Resorts, Inc. stockholders’ equity
528,567

 
519,620

Noncontrolling interest
303,901

 
297,375

Total stockholders’ equity
832,468

 
816,995

Total liabilities and stockholders’ equity
$
4,135,642

 
$
4,009,526

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

3



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RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(amounts in thousands, except per share data)
(unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Operating revenues:
 
 
 
Casino
$
244,933

 
$
236,247

Food and beverage
104,933

 
90,928

Room
48,075

 
46,630

Other
25,922

 
22,556

Management fees
23,159

 
24,678

Net revenues
447,022

 
421,039

Operating costs and expenses:
 
 
 
Casino
82,940

 
78,958

Food and beverage
92,236

 
80,109

Room
20,196

 
20,100

Other
11,859

 
8,786

Selling, general and administrative
99,065

 
95,109

Depreciation and amortization
50,853

 
43,164

Write-downs and other charges, net
23,728

 
3,845

Tax receivable agreement liability adjustment
—

 
(16,873
)
 
380,877

 
313,198

Operating income
66,145

 
107,841

Earnings from joint ventures
505

 
608

Operating income and earnings from joint ventures
66,650

 
108,449

Other (expense) income:
 
 
 
Interest expense, net
(37,438
)
 
(31,111
)
Loss on modification of debt
(302
)
 
—

Change in fair value of derivative instruments
(6,638
)
 
15,803

Other
(69
)
 
(155
)
 
(44,447
)
 
(15,463
)
Income before income tax
22,203

 
92,986

Provision for income tax
(1,919
)
 
(10,856
)
Net income
20,284

 
82,130

Less: net income attributable to noncontrolling interests
8,961

 
30,950

Net income attributable to Red Rock Resorts, Inc.
$
11,323

 
$
51,180

 
 
 
 
Earnings per common share (Note 11):
 
 
 
Earnings per share of Class A common stock, basic
$
0.16

 
$
0.74

Earnings per share of Class A common stock, diluted
$
0.16

 
$
0.65

Weighted-average common shares outstanding:
 
 
 
Basic
69,397

 
68,798

Diluted
116,693

 
116,947

 
 
 
 
Comprehensive income
$
19,539

 
$
81,520

Less: comprehensive income attributable to noncontrolling interests
8,660

 
30,665

Comprehensive income attributable to Red Rock Resorts, Inc.
$
10,879

 
$
50,855

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

4



Table of Contents     


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands)
(unaudited)

 
Red Rock Resorts, Inc. Stockholders’ Equity
 
 
 
 
Common stock
 
Additional paid-in capital
 
Retained earnings
 
Accumulated other comprehensive income
Noncontrolling interest
Total stockholders’ equity
Class A
 
Class B
Shares
 
Amount
Shares
 
Amount
Balances,
December 31, 2018
69,663

 
$
697

 
46,884

 
$
1

 
$
361,970

 
$
155,869

 
$
1,083

 
$
297,375

 
$
816,995

Net income
—

 
—

 
—

 
—

 
—

 
11,323

 
—

 
8,961

 
20,284

Other comprehensive loss, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
(444
)
 
(301
)
 
(745
)
Share-based compensation
—

 
—

 
—

 
—

 
3,874

 
—

 
—

 
—

 
3,874

Distributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(4,688
)
 
(4,688
)
Dividends
—

 
—

 
—

 
—

 
—

 
(7,009
)
 
—

 
—

 
(7,009
)
Issuance of restricted stock awards, net of forfeitures
424

 
4

 
—

 
—

 
(4
)
 
—

 
—

 
—

 
—

Repurchases of Class A common stock
(8
)
 
—

 
—

 
—

 
(213
)
 
—

 
—

 
—

 
(213
)
Stock option exercises
195

 
2

 
—

 
—

 
3,968

 
—

 
—

 
—

 
3,970

Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco
—

 
—

 
—

 
—

 
(2,556
)
 
—

 
2

 
2,554

 
—

Balances,
March 31, 2019
70,274

 
$
703

 
46,884

 
$
1

 
$
367,039

 
$
160,183

 
$
641

 
$
303,901

 
$
832,468

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

5



Table of Contents     


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(amounts in thousands)
(unaudited)

 
Red Rock Resorts, Inc. Stockholders’ Equity
 
 
 
 
Common stock
 
Additional paid-in capital
 
Retained earnings
 
Accumulated other comprehensive income
Noncontrolling interest
Total stockholders’ equity
Class A
 
Class B
Shares
 
Amount
Shares
 
Amount
Balances,
December 31, 2017
68,898

 
$
689

 
47,264

 
$
1

 
$
349,430

 
$
26,138

 
$
2,473

 
$
252,981

 
$
631,712

Net income
—

 
—

 
—

 
—

 
—

 
51,180

 
—

 
30,950

 
82,130

Other comprehensive loss, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
(325
)
 
(285
)
 
(610
)
Share-based compensation
—

 
—

 
—

 
—

 
2,484

 
—

 
—

 
—

 
2,484

Distributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(5,496
)
 
(5,496
)
Dividends
—

 
—

 
—

 
—

 
—

 
(6,938
)
 
—

 
—

 
(6,938
)
Issuance of restricted stock awards, net of forfeitures
158

 
2

 
—

 
—

 
(2
)
 
—

 
—

 
—

 
—

Repurchases of Class A common stock
(3
)
 
—

 
—

 
—

 
(72
)
 
—

 
—

 
—

 
(72
)
Stock option exercises
31

 
—

 
—

 
—

 
613

 
—

 
—

 
—

 
613

Exchanges of noncontrolling interests for Class A common stock
330

 
3

 
(330
)
 
—

 
1,869

 
—

 
19

 
(1,891
)
 
—

Tax receivable agreement liability resulting from exchanges of noncontrolling interests for Class A common stock
—

 
—

 
—

 
—

 
(2,184
)
 
—

 
—

 
—

 
(2,184
)
Deferred tax assets resulting from exchanges of noncontrolling interests for Class A common stock
—

 
—

 
—

 
—

 
2,333

 
—

 
—

 
—

 
2,333

Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco
—

 
—

 
—

 
—

 
(1,095
)
 
—

 
—

 
1,095

 
—

Balances,
March 31, 2018
69,414

 
$
694

 
46,934

 
$
1

 
$
353,376

 
$
70,380

 
$
2,167

 
$
277,354

 
$
703,972

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


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Table of Contents     


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
20,284

 
$
82,130

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
50,853

 
43,164

Change in fair value of derivative instruments
6,638

 
(15,803
)
Reclassification of unrealized gain on derivative instruments into income
(745
)
 
(698
)
Write-downs and other charges, net
382

 
349

Tax receivable agreement liability adjustment
—

 
(16,873
)
Amortization of debt discount and debt issuance costs
4,004

 
3,974

Share-based compensation
3,853

 
2,454

Earnings from joint ventures
(505
)
 
(608
)
Distributions from joint ventures
433

 
551

Loss on modification of debt
302

 
—

Deferred income tax
1,919

 
10,856

Changes in assets and liabilities:
 
 
 
Receivables, net
(5,196
)
 
3,413

Inventories and prepaid expenses
(36,114
)
 
(1,709
)
Accounts payable
11,683

 
3,117

Accrued interest payable
7,666

 
4,925

Other accrued liabilities
(9,981
)
 
(4,784
)
Other, net
(871
)
 
(8,411
)
Net cash provided by operating activities
54,605

 
106,047

Cash flows from investing activities:
 
 
 
Capital expenditures, net of related payables
(160,030
)
 
(137,728
)
Proceeds from asset sales
70

 
83

Distributions in excess of earnings from joint ventures
30

 
428

Native American development costs
(204
)
 
(130
)
Net settlement of derivative instruments
3,819

 
1,310

Other, net
(853
)
 
(1,089
)
Net cash used in investing activities
(157,168
)
 
(137,126
)
 
 
 
 

7



Table of Contents     


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(amounts in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from financing activities:
 
 
 
Borrowings under credit agreements with original maturity dates greater than
three months
220,000

 
—

Payments under credit agreements with original maturity dates greater than three months
(111,835
)
 
(3,406
)
Proceeds from exercise of stock options
3,970

 
613

Distributions to noncontrolling interests
(4,688
)
 
(5,496
)
Dividends paid
(6,968
)
 
(6,905
)
Payment of debt issuance costs
(2,505
)
 
—

Payments on other debt
(232
)
 
(577
)
Payments on tax receivable agreement liability
—

 
(5,015
)
Other, net
(438
)
 
(297
)
Net cash provided by (used in) financing activities
97,304

 
(21,083
)
Decrease in cash, cash equivalents and restricted cash
(5,259
)
 
(52,162
)
Balance, beginning of period
118,258

 
234,744

Balance, end of period
$
112,999

 
$
182,582

Cash, cash equivalents and restricted cash:
 
 
 
Cash and cash equivalents
$
109,249

 
$
179,192

Restricted cash
3,750

 
3,390

Balance, end of period
$
112,999

 
$
182,582

Supplemental cash flow disclosures:
 
 
 
Cash paid for interest, net of $2,599 and $1,064 capitalized, respectively
$
26,374

 
$
23,317

Cash paid for income taxes, net of refunds received
$
(65
)
 
$
(176
)
Non-cash investing and financing activities:
 
 
 
Capital expenditures incurred but not yet paid
$
71,985

 
$
53,264

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

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Table of Contents     


RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1 .    Organization, Basis of Presentation and Significant Accounting Policies
Organization
Red Rock Resorts, Inc. (“Red Rock,” or the “Company”) was formed as a Delaware corporation in September 2015 to own an equity interest in and manage Station Casinos LLC (“Station LLC”). In May 2016, the Company completed an initial public offering (“IPO”) and used the proceeds to purchase newly issued limited liability company interests in Station Holdco LLC (“Station Holdco” and such units, the “LLC Units”), and outstanding LLC Units from existing members of Station Holdco. The Company owns all of the outstanding voting interests in Station LLC and has an indirect economic interest in Station LLC through its ownership interest in Station Holdco, which owns all of the economic interests in Station LLC. Station LLC, a Nevada limited liability company, is a gaming, development and management company that owns and operates ten major gaming and entertainment facilities and ten smaller casino properties ( three of which are 50% owned) in the Las Vegas regional market. Station LLC also manages Graton Resort in Sonoma County, California on behalf of a Native American tribe.
At March 31, 2019 , the Company held approximately 60.0% of the economic interests in Station Holdco as well as 100% of the voting interest in Station LLC and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and is the designated sole managing member of both Station Holdco and Station LLC. The Company controls and operates all of the business and affairs of Station Holdco and Station LLC, and conducts all of its operations through these entities. The Company is subject to federal income taxes and California state income taxes.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments necessary for a fair presentation of the results for the interim periods have been made, and such adjustments were of a normal recurring nature. The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year. These financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 . Certain amounts in the condensed consolidated financial statements for the prior year have been reclassified to be consistent with the current year presentation.
Principles of Consolidation
Station Holdco and Station LLC are variable interest entities (“VIEs”), of which the Company is the primary beneficiary. Accordingly, the Company consolidates the financial position and results of operations of Station LLC and its consolidated subsidiaries and Station Holdco, and presents the interest in Station Holdco not owned by Red Rock within noncontrolling interest in the condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated.
The Company has investments in three 50% owned smaller casino properties which are joint ventures accounted for using the equity method. The carrying amount of the Company’s investment in one of the smaller casino properties has been reduced below zero and is presented within Other long-term liabilities on the Condensed Consolidated Balance Sheets.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported and disclosed. Actual results could differ from those estimates.
Significant Accounting Policies
A description of the Company’s significant accounting policies is included in the audited financial statements within its Annual Report on Form 10-K for the year ended December 31, 2018 .
The Company updated its lease accounting policies as described in Note 12 in conjunction with the adoption of the new lease accounting standard.

9



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Recently Issued and Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued amended accounting guidance for measurement of credit losses on financial instruments. The amended accounting guidance replaces the incurred loss impairment model with a forward-looking expected loss model, and is applicable to most financial assets, including trade receivables other than those arising from operating leases. The amended guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim and annual periods beginning after December 15, 2018. A modified retrospective transition method with a cumulative-effect adjustment to retained earnings is required to be applied at the date of adoption. The Company will adopt this guidance in the first quarter of 2020 and does not expect the adoption to have a material impact on its financial position or results of operations.
In February 2016, the FASB issued a new accounting standard that changes the accounting for leases and requires expanded disclosures about leasing activities. Under the new standard, lessees are required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for leases with terms greater than twelve months. Lessor accounting will remain largely unchanged, other than certain targeted improvements intended to align lessor accounting with the lessee accounting model and with revenue recognition guidance.
The Company adopted the new lease accounting standard on January 1, 2019 using the modified retrospective transition method and elected not to retrospectively adjust its results of operations or balance sheets for comparative periods presented. The Company elected to use the package of practical expedients in its transition and accordingly, did not reassess its prior conclusions about lease identification, lease classification and initial direct costs. In addition, the Company elected not to apply the use-of-hindsight practical expedient. For leases under which the Company is the lessor, the Company elected not to separate non-lease components from lease components. Upon adoption, the Company recognized operating lease right-of-use assets and operating lease liabilities of $17.3 million . In addition, prepaid rent, deferred rent and off-market lease liability balances related to operating leases at December 31, 2018 were reclassified to right-of-use assets upon adoption. The Company recognized no cumulative-effect adjustment to retained earnings upon adoption of the new standard, and the adoption did not have a material impact on the Company’s statements of income or cash flows. See Note 12 for additional information.     
2 .    Noncontrolling Interest in Station Holdco
As discussed in Note 1 , Red Rock holds a controlling interest in and consolidates the financial position and results of operations of Station LLC and its subsidiaries and Station Holdco, and the interests in Station Holdco not owned by Red Rock are presented within noncontrolling interest in the condensed consolidated financial statements. During the three months ended March 31, 2018 , approximately 0.3 million LLC Units, together with an equal number of Class B common shares, held by noncontrolling interest holders were exchanged for Class A common shares, which increased Red Rock’s ownership interest in Station Holdco. No such units and shares were exchanged for Class A common shares during the three months ended March 31, 2019 .
The ownership of the LLC Units is summarized as follows:        
 
March 31, 2019
 
December 31, 2018
 
Units
 
Ownership %
 
Units
 
Ownership %
Red Rock
70,273,915

 
60.0
%
 
69,662,590

 
59.8
%
Noncontrolling interest holders
46,884,413

 
40.0
%
 
46,884,413

 
40.2
%
Total
117,158,328

 
100.0
%
 
116,547,003

 
100.0
%
 
 
 
 
 
 
 
 
The Company uses monthly weighted-average LLC Unit ownership to calculate the pretax income and other comprehensive loss of Station Holdco attributable to Red Rock and the noncontrolling interest holders. Station Holdco equity attributable to Red Rock and the noncontrolling interest holders is rebalanced, as needed, to reflect LLC Unit ownership at period end.
3 .    Native American Development
North Fork Rancheria of Mono Indians Tribe
The Company has development and management agreements with the North Fork Rancheria of Mono Indians (the “Mono”), a federally recognized Native American tribe located near Fresno, California, which were originally entered into in 2003. In August 2014, the Mono and the Company entered into the Second Amended and Restated Development Agreement (the “Development Agreement”) and the Second Amended and Restated Management Agreement. Pursuant to those agreements, the Company will assist the Mono in developing and operating a gaming and entertainment facility (the “North

10



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Fork Project”) to be located in Madera County, California. The Company purchased a 305 -acre parcel of land adjacent to Highway 99 north of the city of Madera (the “North Fork Site”), which was taken into trust for the benefit of the Mono by the Department of the Interior (“DOI”) in February 2013.
As currently contemplated, the North Fork Project is expected to include approximately 2,000 slot machines, approximately 40 table games and several restaurants, and the cost of the project is expected to be between $250 million and $300 million . Development of the North Fork Project is subject to certain governmental and regulatory approvals, including, but not limited to, approval of the Management Agreement by the Chairman of the National Indian Gaming Commission (“NIGC”).
Under the terms of the Development Agreement, the Company has agreed to arrange the financing for the ongoing development costs and construction of the facility. The Company will contribute significant financial support to the North Fork Project. Through March 31, 2019 , the Company has paid approximately $33.4 million of reimbursable advances to the Mono, primarily to complete the environmental impact study, purchase the North Fork Site and pay the costs of litigation. The advances are expected to be repaid from the proceeds of third-party financing or from the Mono’s gaming revenues; however, there can be no assurance that the advances will be repaid. The carrying amount of the advances was reduced to fair value upon the Company’s adoption of fresh-start reporting in 2011. At March 31, 2019 , the carrying amount of the advances was $18.3 million . In accordance with the Company’s accounting policy, accrued interest on the advances will not be recognized in income until the carrying amount of the advances has been recovered.
The Company will receive a development fee of 4% of the costs of construction (as defined in the Development Agreement) for its development services, which will be paid upon the commencement of gaming operations at the facility. In March 2018, the Mono submitted a proposed Third Amended and Restated Management Agreement (the “Management Agreement”) to the NIGC. The Management Agreement allows the Company to receive a management fee of 30% of the North Fork Project’s net income. The Management Agreement and the Development Agreement have a term of seven years from the opening of the North Fork Project. The Management Agreement includes termination provisions whereby either party may terminate the agreement for cause, and the Management Agreement may also be terminated at any time upon agreement of the parties. There is no provision in the Management Agreement allowing the tribe to buy-out the agreement prior to its expiration. The Management Agreement provides that the Company will train the Mono tribal members such that they may assume responsibility for managing the North Fork Project upon the expiration of the agreement.
Upon termination or expiration of the Management Agreement and Development Agreement, the Mono will continue to be obligated to repay any unpaid principal and interest on the advances from the Company, as well as certain other amounts that may be due, such as management fees. Amounts due to the Company under the Development Agreement and Management Agreement are secured by substantially all of the assets of the North Fork Project except the North Fork Site. In addition, the Development Agreement and Management Agreement contain waivers of the Mono’s sovereign immunity from suit for the purpose of enforcing the agreements or permitting or compelling arbitration and other remedies.
The timing of this type of project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurance as to when, or if, these approvals will be obtained. The Company currently estimates that construction of the North Fork Project may begin in the next 18 to 30 months and estimates that the North Fork Project would be completed and opened for business approximately 18  months after construction begins. There can be no assurance, however, that the North Fork Project will be completed and opened within this time frame or at all. The Company expects to assist the Mono in obtaining third-party financing for the North Fork Project once all necessary regulatory approvals have been received and prior to commencement of construction; however, there can be no assurance that the Company will be able to obtain such financing for the North Fork Project on acceptable terms or at all.
The Company has evaluated the likelihood that the North Fork Project will be successfully completed and opened, and has concluded that the likelihood of successful completion is in the range of 65% to 75% at March 31, 2019 . The Company’s evaluation is based on its consideration of all available positive and negative evidence about the status of the North Fork Project, including, but not limited to, the status of required regulatory approvals, as well as the progress being made toward the achievement of all milestones and the successful resolution of all litigation and contingencies. There can be no assurance that the North Fork Project will be successfully completed or that future events and circumstances will not change the Company’s estimates of the timing, scope, and potential for successful completion or that any such changes will not be material. In addition, there can be no assurance that the Company will recover all of its investment in the North Fork Project even if it is successfully completed and opened for business.


11



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The following table summarizes the Company’s evaluation at March 31, 2019 of each of the critical milestones necessary to complete the North Fork Project.
 
As of March 31, 2019
Federally recognized as an Indian tribe by the Bureau of Indian Affairs (“BIA”)
Yes
Date of recognition
Federal recognition was terminated in 1966 and restored in 1983.
Tribe has possession of or access to usable land upon which the project is to be built
The DOI accepted approximately 305 acres of land for the project into trust for the benefit of the Mono in February 2013.

Status of obtaining regulatory and governmental approvals:
 
Tribal-state compact
A compact was negotiated and signed by the Governor of California and the Mono in August 2012. The California State Assembly and Senate passed Assembly Bill 277 (“AB 277”) which ratified the Compact in May 2013 and June 2013, respectively. Opponents of the North Fork Project qualified a referendum, “Proposition 48,” for a state-wide ballot challenging the legislature’s ratification of the Compact. In November 2014, Proposition 48 failed. The State took the position that the failure of Proposition 48 nullified the ratification of the Compact and, therefore, the Compact did not take effect under California law. In March 2015, the Mono filed suit against the State (see North Fork Rancheria of Mono Indians v. State of California)  to obtain a compact with the State or procedures from the Secretary of the Interior under which Class III gaming may be conducted on the North Fork Site. In July 2016, the DOI issued Secretarial procedures (the “Secretarial Procedures”) pursuant to which the Mono may conduct Class III gaming on the North Fork Site.
Approval of gaming compact by DOI
The Compact was submitted to the DOI in July 2013. In October 2013, notice of the Compact taking effect was published in the Federal Register. The Secretarial Procedures supersede and replace the Compact.
Record of decision regarding environmental impact published by BIA
In November 2012, the record of decision for the Environmental Impact Statement for the North Fork Project was issued by the BIA. In December 2012, the Notice of Intent to take land into trust was published in the Federal Register.
BIA accepting usable land into trust on behalf of the tribe
The North Fork Site was accepted into trust in February 2013.
Approval of management agreement by NIGC
In December 2015, the Mono submitted a Second Amended and Restated Management Agreement, and certain related documents, to the NIGC. In July 2016, the Mono received a deficiency letter from the NIGC seeking additional information concerning the Second Amended and Restated Management Agreement. In March 2018, the Mono submitted the Management Agreement and certain related documents to the NIGC. In June 2018, the Mono received a deficiency letter from the NIGC seeking additional information concerning the Management Agreement. Approval of the Management Agreement by the NIGC is expected to occur following the Mono’s response to the deficiency letter. The Company believes the Management Agreement will be approved because the terms and conditions thereof are consistent with the provisions of the Indian Gaming Regulatory Act (“IGRA”).
Gaming licenses:
 
Type
The North Fork Project will include the operation of Class II and Class III gaming, which are allowed pursuant to the terms of the Secretarial Procedures and IGRA, following approval of the Management Agreement by the NIGC.
Number of gaming devices allowed
The Secretarial Procedures allow for the operation of a maximum of 2,000 Class III slot machines at the facility during the first two years of operation and thereafter up to 2,500 Class III slot machines. There is no limit on the number of Class II gaming devices that the Mono can offer.
Agreements with local authorities
The Mono has entered into memoranda of understanding with the City of Madera, the County of Madera and the Madera Irrigation District under which the Mono agreed to pay one-time and recurring mitigation contributions, subject to certain contingencies. The memoranda of understanding with the City and County were amended in December 2016 to restructure the timing of certain payments due to delays in the development of the North Fork Project.


12



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Following is a discussion of certain unresolved legal matters related to the North Fork Project.
Stand Up For California! v. Brown. In March 2013, Stand Up for California! and Barbara Leach, a local resident (collectively, the “Stand Up” plaintiffs), filed a complaint for declaratory relief and petition for writ of mandate in California Superior Court for the County of Madera against California Governor Edmund G. Brown, Jr., alleging that Governor Brown violated the California constitutional separation-of-powers doctrine when he concurred in the North Fork Determination. The complaint sought to vacate and set aside the Governor’s concurrence. Plaintiffs’ complaint was subsequently amended to include a challenge to the constitutionality of AB 277. The Mono intervened as a defendant in the lawsuit. In March 2014, the court dismissed plaintiffs’ amended complaint, which dismissal was appealed by plaintiffs. In December 2016, an appellate court ruled in favor of the Stand Up plaintiffs concluding that Governor Brown exceeded his authority in concurring in the Secretary’s determination that gaming on the North Fork Site would be in the best interest of the tribe and not detrimental to the surrounding community. The appellate court’s decision reversed the trial court’s previous ruling in favor of the Mono. The Mono and the State filed petitions in the Supreme Court of California seeking review of the appellate court’s decision. In March 2017, the Supreme Court of California granted the Mono and State’s petitions for review and deferred additional briefing or other action in this matter pending consideration and disposition of a similar issue in United Auburn Indian Community of Auburn Rancheria v. Brown. The United Auburn case was fully briefed in December 2017. Oral argument has not yet been scheduled.
Picayune Rancheria of Chukchansi Indians v. Brown . In March 2016, Picayune Rancheria of Chukchansi Indians (“Picayune”) filed a complaint for declaratory relief and petition for writ of mandate in California Superior Court for the County of Madera against Governor Edmund G. Brown, Jr., alleging that the referendum that invalidated the Compact also invalidated Governor Brown’s concurrence with the North Fork Determination. The complaint seeks to vacate and set aside the Governor’s concurrence. In July 2016, the court granted the Mono’s application to intervene and the Mono filed a demurrer seeking to dismiss the case. In November 2016, the district court dismissed Picayune’s complaint, but the court subsequently vacated its ruling based on the December 2016 decision by the Fifth District Court of Appeal in Stand Up for California! v. Brown . In May 2017, the court stayed the case for six months by agreement of the parties and scheduled a status conference on November 13, 2017 to address how the case should proceed in light of the California Supreme Court’s granting of the Mono and State’s petitions for review in Stand Up for California! v. Brown . The case remains stayed.
Stand Up for California! et. al. v. United States Department of the Interior. In November 2016, Stand Up for California! and other plaintiffs filed a complaint in the United States District Court for the Eastern District of California alleging that the DOI’s issuance of Secretarial Procedures for the Mono was subject to the National Environmental Policies Act and the Clean Air Act, and violate the Johnson Act. The complaint further alleges violations of the Freedom of Information Act and the Administrative Procedures Act. The DOI filed its answer to the complaint in February 2017 denying plaintiffs’ claims and asserting certain affirmative defenses. A motion to intervene filed by the Mono was granted in March 2017. Plaintiffs subsequently filed a motion to stay the proceedings in May 2017. Briefing on the contested stay request concluded in July 2017 and briefing on cross-motions for summary judgment was concluded in September 2017. On July 18, 2018, the court denied plaintiffs’ motion to stay the proceedings and granted the summary judgment motions of the Mono and the federal defendants. On September 11, 2018, plaintiffs filed a notice of appeal of the District Court decision and a briefing schedule has been established with the United States Court of Appeals for the Ninth Circuit.

13



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

4 .    Other Accrued Liabilities
Other accrued liabilities consisted of the following (amounts in thousands):
 
March 31,
2019
 
December 31, 2018
Contract and customer-related liabilities:
 
 
 
Rewards Program liability
$
20,903

 
$
20,654

Advance deposits and future wagers
19,025

 
18,624

Unpaid wagers, outstanding chips and other customer-related liabilities
15,753

 
19,640

Other accrued liabilities:
 
 
 
Accrued payroll and related
43,684

 
55,448

Accrued gaming and related
24,096

 
22,221

Construction payables and equipment purchase accruals
86,675

 
108,855

Operating lease liabilities, current portion
3,976

 
—

Other
23,380

 
21,032

 
$
237,492

 
$
266,474

5 .    Long-term Debt
Long-term debt consisted of the following indebtedness of Station LLC (amounts in thousands):
 
March 31,
2019
 
December 31, 2018
Term Loan B Facility due June 8, 2023, interest at a margin above LIBOR or base rate (5.00% and 5.03% at March 31, 2019 and December 31, 2018, respectively), net of unamortized discount and deferred issuance costs of $41.0 million and $43.3 million at March 31, 2019 and December 31, 2018, respectively
$
1,773,552

 
$
1,775,951

Term Loan A Facility due March 8, 2023, interest at a margin above LIBOR or base rate (4.25% at March 31, 2019), net of unamortized discount and deferred issuance costs of $3.2 million at March 31, 2019
193,745

 
—

Term Loan A Facility due June 8, 2022, interest at a margin above LIBOR or base rate (4.50% and 4.53% at March 31, 2019 and December 31, 2018, respectively), net of unamortized discount and deferred issuance costs of $0.8 million and $4.0 million at March 31, 2019 and December 31, 2018, respectively
54,326

 
251,448

Revolving Credit Facility due March 8, 2023, interest at a margin above LIBOR or base rate (4.25% at March 31, 2019)
361,277

 
—

Revolving Credit Facility due June 8, 2022, interest at a margin above LIBOR or base rate (4.54% weighted average at December 31, 2018)
—

 
245,000

5.00% Senior Notes due October 1, 2025, net of unamortized deferred issuance costs of $5.5 million and $5.7 million at March 31, 2019 and December 31, 2018, respectively
544,464

 
544,286

Other long-term debt, weighted-average interest of 6.62% and 6.69% at March 31, 2019 and December 31, 2018, respectively, maturity dates ranging from 2027 to 2037
38,443

 
38,674

Total long-term debt
2,965,807

 
2,855,359

Current portion of long-term debt
(33,906
)
 
(33,894
)
Total long-term debt, net
$
2,931,901

 
$
2,821,465

Credit Facility
On February 8, 2019, Station LLC amended its existing credit facility agreement (the “Credit Facility”) to, among other things, (i) increase the borrowing availability under the Revolving Credit Facility by $115.0 million to $896.0 million and (ii) for consenting lenders under the Term Loan A Facility and the Revolving Credit Facility, extend the maturity date for their portion of such facilities by approximately one year and reduce the interest rate thereunder by 25 basis points. As a result of the amendment, both the Revolving Credit Facility and the Term Loan A Facility each have two tranches with different maturity dates and interest rate spreads. Amounts outstanding under the Revolving Credit Facility and the Term Loan A Facility bear

14



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

interest at either LIBOR or base rate, at Station LLC’s option, plus a spread that is dependent on Station LLC’s consolidated total leverage ratio as shown below:
Consolidated Total Leverage Ratio
 
Revolving Credit Facility and Term Loan A Facility due
March 8, 2023
 
Revolving Credit Facility and Term Loan A Facility due
June 8, 2022
 
 
 
LIBOR
 
Base Rate
 
LIBOR
 
Base Rate
Greater than 3.50 to 1.00
 
1.75
%
 
0.75
%
 
2.00
%
 
1.00
%
Less than or equal to 3.50 to 1.00
 
1.50
%
 
0.50
%
 
1.75
%
 
0.75
%
The Company evaluated the Credit Facility amendment on a lender by lender basis and accounted for the amendment as a debt modification. The Company incurred approximately $3.3 million in costs associated with the transaction comprising primarily lender fees that were deferred. Of that amount, third-party fees of $0.3 million associated with the modified Term Loan A Facility were recognized as Loss on modification of debt in the Condensed Consolidated Statements of Income and Comprehensive Income .
The Credit Facility contains a number of customary covenants, including requirements that Station LLC maintain throughout the term of the Credit Facility and measured as of the end of each quarter, an interest coverage ratio of not less than 2.50 to 1.00 and a maximum consolidated total leverage ratio, with step-downs over the term of the Credit Facility, ranging from 6.50 to 1.00 at March 31, 2019 to 5.25 to 1.00 at December 31, 2021 and thereafter. A breach of the financial ratio covenants shall only become an event of default under the Term Loan B Facility if the lenders within tranches of the Term Loan A Facility and the Revolving Credit Facility take certain affirmative actions after the occurrence of a default of such financial ratio covenants. In the opinion of management, the Company was in compliance with all applicable covenants at March 31, 2019 .
Revolving Credit Facility Availability
At March 31, 2019 , Station LLC’s combined borrowing availability under both tranches of its Revolving Credit Facility, subject to continued compliance with the terms of the Credit Facility, was $497.6 million , which was net of $361.3 million in outstanding borrowings and $37.1 million in outstanding letters of credit and similar obligations.
6 .    Derivative Instruments
The Company’s objective in using derivative instruments is to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps as a primary part of its cash flow hedging strategy. The Company does not use derivative financial instruments for trading or speculative purposes.
The Company’s hedging strategy includes the use of forward-starting interest rate swaps that are not designated in cash flow hedging relationships. The interest rate swap agreements allow Station LLC to receive variable-rate payments in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Station LLC’s interest rate swaps each have one -year terms that run consecutively through July 2021, with predetermined fixed pay rates that increase with each new term to more closely align with the one -month LIBOR forward curve as of the trade date of the interest rate swap. At March 31, 2019 , the weighted-average fixed pay rate for Station LLC’s interest rate swaps was 1.46% , which will increase to 1.94% over the exposure period. At March 31, 2019 , Station LLC’s interest rate swaps had a combined notional amount of $1.5 billion .
The change in fair value of all of Station LLC’s derivative instruments is reflected in Change in fair value of derivative instruments in the Condensed Consolidated Statements of Income and Comprehensive Income in the period in which the change occurs. The Company classifies cash flows for derivative instruments not designated as cash flow hedges as investing activities in the Condensed Consolidated Statements of Cash Flows.
Station LLC has not posted any collateral related to its interest rate swap agreements; however, Station LLC’s obligations under the interest rate swap agreements are subject to the security and guarantee arrangements applicable to the Credit Facility. The interest rate swap agreements contain a cross-default provision under which Station LLC could be declared in default on its obligation under such agreements if certain conditions of default exist on the Credit Facility. At March 31, 2019 , the termination value of Station LLC’s interest rate swaps, including accrued interest, was a net asset of $14.3 million . At March 31, 2019 , Station LLC’s interest rate swaps effectively converted $1.5 billion of Station LLC’s variable interest rate debt to a fixed rate of 3.96% .

15



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The fair values of Station LLC’s interest rate swaps, exclusive of accrued interest, as well as their classification on the Condensed Consolidated Balance Sheets, are presented below (amounts in thousands):
 
March 31,
2019
 
December 31, 2018
Interest rate swaps not designated in hedge accounting relationships:
 
 
 
Prepaid expenses and other current assets
$
4,159

 
$
8,334

Other assets, net
9,167

 
15,611

Information about pretax gains and losses on derivative financial instruments is presented below (amounts in thousands):
Derivatives Not Designated in Hedge Accounting Relationships
 
Location of (Loss) Gain on Derivatives Recognized in Income
 
Amount of (Loss) Gain on Derivatives Recognized in Income
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Interest rate swaps
 
Change in fair value of derivative instruments
 
$
(6,638
)
 
$
15,803

Certain of Station LLC’s interest rate swaps were previously designated in cash flow hedging relationships until their dedesignation in June 2017. Accordingly, cumulative deferred net gains previously recognized in accumulated other comprehensive income associated with these interest rate swaps are being amortized as a reduction of interest expense through July 2020 as the hedged interest payments occur. During each of the three -month periods ended March 31, 2019 and 2018 , $0.7 million in deferred net gains were reclassified from accumulated other comprehensive income to Interest expense, net in the Condensed Consolidated Statements of Income and Comprehensive Income . At March 31, 2019 , there was $3.4 million in deferred net gains included in accumulated other comprehensive income , and of this amount, $2.8 million is expected to be reclassified into earnings during the next twelve months.
7 .    Fair Value Measurements
Assets Measured at Fair Value on a Recurring Basis
Information about the Company’s financial assets measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, is presented below (amounts in thousands):
 
 
 
Fair Value Measurement at Reporting Date Using
 
Balance at March 31, 2019
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Interest rate swaps
$
13,326

 
$
—

 
$
13,326

 
$
—

 
 
 
Fair Value Measurement at Reporting Date Using
 
Balance at December 31, 2018
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Interest rate swaps
$
23,945

 
$
—

 
$
23,945

 
$
—

The fair values of Station LLC’s interest rate swaps were determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the interest rate swaps. This analysis reflects the contractual terms of the interest rate swaps, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. Station LLC incorporated credit valuation adjustments to appropriately reflect both its

16



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

own nonperformance risk and the counterparty’s nonperformance risk in the fair value measurement. The Company had no financial liabilities measured at fair value on a recurring basis at March 31, 2019 or December 31, 2018 .
Fair Value of Long-term Debt
The estimated fair value of Station LLC’s long-term debt compared with its carrying amount is presented below (amounts in millions):
 
March 31,
2019
 
December 31, 2018
Aggregate fair value
$
2,984

 
$
2,766

Aggregate carrying amount
2,966

 
2,855

The estimated fair value of Station LLC’s long-term debt is based on quoted market prices from various banks for similar instruments, which is considered a Level 2 input under the fair value measurement hierarchy.
8 .    Stockholders’ Equity     
During each of the three -month periods ended March 31, 2019 and 2018 , the Company declared and paid cash dividends of $0.10 per share of Class A common stock. On April 30, 2019 , the Company announced that it would pay a dividend of $0.10 per share to holders of record as of June 14, 2019 to be paid on June 28, 2019 . Prior to the payment of the dividend, Station Holdco will declare a distribution to all LLC Unit holders, including the Company, of $0.10 per unit, a portion of which will be paid to its noncontrolling interest holders.
Changes in Accumulated Other Comprehensive Income
The following table presents changes in accumulated other comprehensive income , net of tax and noncontrolling interest, by component for the three months ended March 31, 2019 (amounts in thousands):
 
Accumulated Other Comprehensive Income
 
Unrealized gain on interest rate swaps
 
Unrecognized pension liability
 
Total
Balances, December 31, 2018
$
1,279

 
$
(196
)
 
$
1,083

Amounts reclassified from accumulated other comprehensive income (loss) into income
(444
)
 
—

 
(444
)
Net current-period other comprehensive loss
(444
)
 
—

 
(444
)
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco
2

 
—

 
2

Balances, March 31, 2019
$
837

 
$
(196
)
 
$
641

Net Income Attributable to Red Rock Resorts, Inc. and Transfers from (to) Noncontrolling Interests
The table below presents the effect on Red Rock Resorts, Inc. stockholders’ equity from net income and transfers from (to) noncontrolling interests (amounts in thousands):
 
Three Months Ended
March 31,
 
2019
 
2018
Net income attributable to Red Rock Resorts, Inc.
$
11,323

 
$
51,180

Transfers from (to) noncontrolling interests:
 
 
 
Exchanges of noncontrolling interests for Class A common stock
—

 
1,891

Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco
(2,554
)
 
(1,095
)
Net transfers (to) from noncontrolling interests
(2,554
)
 
796

Change from net income attributable to Red Rock Resorts, Inc. and net transfers (to) from noncontrolling interests
$
8,769

 
$
51,976

 
 
 
 

17



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

9 .    Share-based Compensation
The Company maintains an equity incentive plan which is designed to attract, retain and motivate employees and to align the interests of those individuals with the interests of the Company. A total of 11,585,479 shares of Class A common stock is reserved for issuance under the plan, of which approximately 0.5 million shares were available for issuance at March 31, 2019 .
The following table presents information about share-based compensation awards under the equity incentive plan:
 
Restricted Class A
 Common Stock
 
Stock Options
 
Shares
 
Weighted-average grant date fair value
 
Shares
 
Weighted-average exercise price
Outstanding at January 1, 2019
373,764

 
$
26.09

 
5,166,565

 
$
25.60

Activity during the period:
 
 
 
 
 
 
 
Granted
445,339

 
27.41

 
3,205,472

 
27.26

Vested/exercised
(46,027
)
 
26.49

 
(226,254
)
 
21.13

Forfeited
(21,291
)
 
30.92

 
(361,918
)
 
27.23

Outstanding at March 31, 2019
751,785

 
$
26.71

 
7,783,865

 
$
26.34

 
 
 
 
 
 
 
 
The Company recognized share-based compensation expense of $3.9 million and $2.5 million for the three months ended March 31, 2019 and 2018 , respectively. At March 31, 2019 , unrecognized share-based compensation cost was $60.3 million , which is expected to be recognized over a weighted-average period of 3.3 years.         
10 .    Income Taxes
Red Rock is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from Station Holdco based upon Red Rock’s economic interest held in Station Holdco. Station Holdco is treated as a pass-through partnership for income tax reporting purposes. Station Holdco’s members, including the Company, are liable for federal, state and local income taxes based on their share of Station Holdco’s pass-through taxable income.     
The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates the estimate of the annual effective tax rate and makes necessary cumulative adjustments to the total tax provision or benefit. The current taxes are estimated for the period and the balance sheet is adjusted to reflect such taxes currently payable or receivable. The remaining tax provision or benefit is recorded as deferred taxes.
The Company files income tax returns in federal and state jurisdictions. The Company is under federal audit for the 2016 tax year. The Company regularly assesses the likelihood of adverse outcomes resulting from any examinations to determine the adequacy of the Company’s provision for income taxes.
The Company’s effective tax rate for the three months ended March 31, 2019 was 8.64% , including discrete items, as compared to 11.67% for the three months ended March 31, 2018 . The Company’s effective tax rate is less than the statutory rate of 21% primarily because its effective tax rate includes a rate benefit attributable to the fact that Station Holdco operates as a limited liability company which is not subject to federal income tax. Accordingly, the Company is not liable for income taxes on the portion of Station Holdco’s earnings attributable to noncontrolling interests. Station Holdco operates in Nevada and California. Nevada does not impose a state income tax and the Company’s activities in California are minimal; as a result, state income taxes do not have a significant impact on the Company’s effective rate. During the three months ended March 31, 2018 , the Company recognized income from a transaction with a pre-IPO owner and reported a net discrete $3.6 million write-down to the deferred tax asset.
As a result of the IPO and certain reorganization transactions, the Company recorded a net deferred tax asset resulting from the outside basis difference of its interest in Station Holdco. The Company also recorded a deferred tax asset for its liability related to payments to be made pursuant to the tax receivable agreement (“TRA”) representing 85% of the tax savings the Company expects to realize from the amortization deductions associated with the step up in the basis of depreciable assets under Section 754 of the Internal Revenue Code. This deferred tax asset will be recovered as cash payments are made to the TRA participants.

18



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The Company determined that the deferred tax asset related to the LLC Units issued in the IPO and reorganization transactions is not expected to be realized unless the Company disposes of its investment in Station Holdco. As such, the Company established a valuation allowance against this portion of its deferred tax asset. The Company recognizes changes to the valuation allowance through the provision for income tax or other comprehensive income, as applicable, and at March 31, 2019 and December 31, 2018 , the valuation allowance was $38.4 million and $40.0 million , respectively.
Tax Receivable Agreement
In connection with the IPO, the Company entered into the TRA with certain pre-IPO owners of Station Holdco. In the event that such parties exchange any or all of their LLC Units for Class A common stock, the TRA requires the Company to make payments to such holders for 85% of the tax benefits realized by the Company as a result of such exchange. The Company expects to realize these tax benefits based on current projections of taxable income. The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits.
At March 31, 2019 and December 31, 2018 , the Company’s liability under the TRA was $24.9 million , of which $9.0 million was payable to entities related to Frank J. Fertitta III, the Company’s Chairman of the Board and Chief Executive Officer, and Lorenzo J. Fertitta, a vice president of the Company and a member of the Company’s board. For the three months ended March 31, 2018 , exchanges of LLC Units resulted in an increase in the amount payable under the TRA liability of $2.2 million and a net increase in deferred tax assets of $2.3 million , both of which were recorded through stockholders’ equity. No LLC Units were exchanged during the three months ended March 31, 2019 . During the three months ended March 31, 2018 , the Company’s liability under the TRA was reduced by $21.9 million , and nontaxable income of $16.9 million was recognized in a transaction with a pre-IPO owner.
The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Company generates each year and the tax rate then applicable. The payment obligations under the TRA are Red Rock’s obligations and are not obligations of Station Holdco or Station LLC. Payments are generally due within a specified period of time following the filing of the Company’s annual tax return and interest on such payments will accrue from the original due date (without extensions) of the income tax return until the date paid. Payments not made within the required period after the filing of the income tax return generally accrue interest at a rate of LIBOR plus 5.00% .
The TRA will remain in effect until all such tax benefits have been utilized or expired, unless the Company exercises its right to terminate the TRA. The TRA will also terminate if the Company breaches its obligations under the TRA or upon certain mergers, asset sales or other forms of business combinations, or other changes of control. If the Company exercises its right to terminate the TRA, or if the TRA is terminated early in accordance with its terms, Red Rock’s payment obligations would be accelerated based upon certain assumptions, including the assumption that the Company would have sufficient future taxable income to utilize such tax benefits, and may substantially exceed the actual benefits, if any, the Company realizes in respect of the tax attributes subject to the TRA.
11 .     Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to Red Rock by the weighted-average number of shares of Class A common stock outstanding during the period. The calculation of diluted earnings per share gives effect to all potentially dilutive shares, including shares issuable pursuant to outstanding stock options and nonvested restricted shares of Class A common stock, based on the application of the treasury stock method, and outstanding Class B common stock that is exchangeable, along with an equal number of LLC Units, for Class A common stock, based on the application of the if-converted method. Dilutive shares included in the calculation of diluted earnings per share for the three months ended March 31, 2019 and 2018 represent outstanding shares of Class B common stock, nonvested restricted shares of Class A common stock and outstanding stock options. All other potentially dilutive securities have been excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive.

19



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

A reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per share is presented below (amounts in thousands):
 
Three Months Ended
March 31,
 
2019
 
2018
Net income
$
20,284

 
$
82,130

Less: net income attributable to noncontrolling interests
(8,961
)
 
(30,950
)
Net income attributable to Red Rock, basic
11,323

 
51,180

Effect of dilutive securities
7,077

 
24,306

Net income attributable to Red Rock, diluted
$
18,400

 
$
75,486

 
 
 
 
 
Three Months Ended
March 31,
 
2019
 
2018
Weighted-average shares of Class A common stock outstanding, basic
69,397

 
68,798

Effect of dilutive securities
47,296

 
48,149

Weighted-average shares of Class A common stock outstanding, diluted
116,693

 
116,947

 
 
 
 
The calculation of diluted earnings per share of Class A common stock excluded the following potentially dilutive shares that were outstanding at the end of the period because their inclusion would have been antidilutive (amounts in thousands):
 
 
As of March 31,
 
 
2019
 
2018
Shares issuable upon exercise of stock options
 
5,849

 
2,145

Shares issuable upon vesting of restricted stock
 
506

 
—

Shares of Class B common stock are not entitled to share in the earnings of the Company and are not participating securities. Accordingly, earnings per share of Class B common stock under the two-class method has not been presented.
12 .    Leases
Lessee
The Company leases certain equipment, buildings, land and other assets used in its operations. The Company determines whether an arrangement is or contains a lease at inception, and determines the classification of the lease based on facts and circumstances as of the lease commencement date. For leases with an initial term greater than twelve months, the Company recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement date. For leases with an initial term of twelve months or less, the Company has elected not to recognize ROU assets or lease liabilities. The Company measures its ROU assets and lease liabilities at the lease commencement date based on the present value of lease payments over the lease term. To calculate the present value of lease payments for leases that do not contain an implicit interest rate, the Company uses its incremental borrowing rate based on information available at the lease commencement date. For leases under which the Company has options to extend or terminate the lease, such options are included in the lease term when it is reasonably certain that the Company will exercise the option. The Company includes operating lease ROU assets within Other assets, net on its Condensed Consolidated Balance Sheets. Operating lease liabilities are included in Other accrued liabilities and Other long-term liabilities. For arrangements that contain both lease and non-lease components under which the Company is the lessee, the components are not combined for accounting purposes. The Company’s leases do not include any significant residual value guarantees, restrictions or covenants.
For operating leases with fixed rental payments or variable rental payments based on an index or rate, the Company recognizes lease expense on a straight-line basis over the lease term. For operating leases with variable payments not based on an index or rate, the Company recognizes the variable lease expense in the period in which the obligation for the payment is incurred. The Company’s variable lease payments not based on an index or rate are primarily related to short-term leases for slot machines under which lease payments are based on a percentage of the revenue earned.

20



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The components of lease expense were as follows (amounts in thousands):
 
Three Months
Ended
March 31, 2019
Operating lease cost
$
1,282

Short-term lease cost
1,814

Variable lease cost
2,645

Total lease expense
$
5,741

Supplemental balance sheet information related to leases under which the Company is the lessee was as follows (amounts in thousands):
 
March 31, 2019
Operating lease right-of-use assets
$
16,048

 
 
Operating lease liabilities:
 
Current portion
$
3,976

Noncurrent portion
12,831

Total operating lease liabilities
$
16,807

Weighted-average remaining lease term - operating leases
28.6 years

Weighted-average discount rate - operating leases
5.40
%
Supplemental cash flow information related to leases under which the Company is the lessee was as follows (amounts in thousands):
 
Three Months
Ended
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
2,418

Future minimum lease payments required under all operating leases with initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2019 are as follows (amounts in thousands):
Year Ending December 31,
 
2019 (a)
$
3,696

2020
3,793

2021
2,196

2022
879

2023
473

Thereafter
43,603

Total future lease payments
54,640

Less imputed interest
(37,833
)
Total operating lease liabilities
$
16,807

____________________________________
(a)    Amount at March 31, 2019 represents lease payments for the remainder of the year.
Lessor
The Company leases space within its properties to third-party tenants, primarily food and beverage outlets and movie theaters. The Company also leases space to tenants within commercial and industrial buildings located on certain land held for development. All of the Company’s tenant leases are classified as operating leases and do not contain options for the lessee to purchase the underlying real property. At March 31, 2019 , the Company’s tenant leases had remaining lease terms ranging from less than one year to approximately 20 years.

21



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Lease payments from tenants at the Company’s properties typically include variable rent based on a percentage of the tenant’s net sales, and may also include a fixed base rent amount, which may increase by a rate or index over time. The Company recognizes variable rental income in the period in which the right to receive such rental income is established according to the lease agreements and base rental income on a straight-line basis over the lease term. Lease payments from the Company’s tenants at commercial and industrial buildings are typically based on a fixed rental amount, which may increase by a rate or index over time. Non-lease components within tenant lease agreements, which primarily comprise utilities, property taxes and common area maintenance charges, are included within operating lease income. For the three months ended March 31, 2019 and 2018 , revenue from tenant leases was $5.7 million and $6.0 million , respectively, which is included in Other revenues in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income .
The following table presents undiscounted future minimum rentals to be received under operating leases as of March 31, 2019 (amounts in thousands):
Year Ending December 31,
 
2019 (a)
$
7,496

2020
8,630

2021
7,395

2022
5,307

2023
4,160

Thereafter
13,118

 
$
46,106

____________________________________
(a)    Amount at March 31, 2019 represents minimum rentals to be received for the remainder of the year.
13 .    Commitments and Contingencies
The Company and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. No assurance can be provided as to the outcome of any legal matters and litigation inherently involves significant risks.
14 .    Segments
The Company views each of its Las Vegas casino properties and each of its Native American management arrangements as individual operating segments. The Company aggregates all of its Las Vegas operating segments into one reportable segment because all of its Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing techniques, are directed by a centralized management structure and have similar economic characteristics. The Company also aggregates its Native American management arrangements into one reportable segment.

22



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The Company utilizes Adjusted EBITDA as its primary performance measure. The Company’s segment information and a reconciliation of net income to Adjusted EBITDA are presented below (amounts in thousands):
 
Three Months Ended
March 31,
 
2019
 
2018
Net revenues
 
 
 
Las Vegas operations:
 
 
 
Casino
$
244,933

 
$
236,247

Food and beverage
104,933

 
90,928

Room
48,075

 
46,630

Other (a)
24,266

 
21,192

Management fees
163

 
173

Las Vegas operations net revenues
422,370

 
395,170

Native American management:
 
 
 
Management fees
22,996

 
24,505

Reportable segment net revenues
445,366

 
419,675

Corporate and other
1,656

 
1,364

Net revenues
$
447,022

 
$
421,039

 
 
 
 
Net income
$
20,284

 
$
82,130

Adjustments
 
 
 
Depreciation and amortization
50,853

 
43,164

Share-based compensation
3,853

 
2,454

Write-downs and other charges, net
23,728

 
3,845

Tax receivable agreement liability adjustment
—

 
(16,873
)
Interest expense, net
37,438

 
31,111

Loss on modification of debt
302

 
—

Change in fair value of derivative instruments
6,638

 
(15,803
)
Provision for income tax
1,919

 
10,856

Other
69

 
(807
)
Adjusted EBITDA (b)
$
145,084

 
$
140,077

 
 
 
 
Adjusted EBITDA
 
 
 
Las Vegas operations
$
130,478

 
$
125,877

Native American management
21,476

 
22,094

Reportable segment Adjusted EBITDA
151,954

 
147,971

Corporate and other
(6,870
)
 
(7,894
)
Adjusted EBITDA
$
145,084

 
$
140,077

 
 
 
 
____________________________________
(a)
Other revenue included revenue from tenant leases of $5.7 million and $6.0 million for the three months ended March 31, 2019 and 2018 , respectively. Revenue from tenant leases is accounted for under the lease accounting guidance and does not represent revenue recognized from contracts with customers.
(b)
Adjusted EBITDA includes net income plus depreciation and amortization, share-based compensation, write-downs and other charges, net, including Palms redevelopment and preopening expenses, tax receivable agreement liability adjustment, interest expense, net, loss on modification of debt, change in fair value of derivative instruments, provision for income tax and other.

23





Item 2.    
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results of operations of Red Rock Resorts, Inc. (“we,” “our,” “us,” “Red Rock” or the “Company”) should be read in conjunction with our condensed consolidated financial statements and related notes (the “Condensed Consolidated Financial Statements”) included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2018 .
Overview
Red Rock was formed as a Delaware corporation in September 2015 to manage Station Casinos LLC (“Station LLC”) and to own an indirect interest in Station LLC through our ownership in Station Holdco LLC (“Station Holdco”). In May 2016, we completed an initial public offering (“IPO”) and used the proceeds to purchase newly issued limited liability company interests in Station Holdco (“LLC Units”), and outstanding LLC Units from existing members of Station Holdco. We own all of the outstanding voting interests in Station LLC and have an indirect economic interest in Station LLC through our ownership interest in Station Holdco, which owns all of the economic interests in Station LLC. Station LLC is a gaming, development and management company that owns and operates ten major gaming and entertainment facilities and ten smaller casinos ( three of which are 50% owned) in the Las Vegas regional market. Station LLC also manages Graton Resort in Sonoma County, California on behalf of a Native American tribe.
At March 31, 2019 , we held approximately 60.0% of the economic interests in Station Holdco, as well as 100% of the voting interest in Station LLC and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and we are designated as the sole managing member of both Station Holdco and Station LLC. We control and operate all of the business and affairs of Station Holdco and Station LLC, and conduct all of our operations through these entities. Our Condensed Consolidated Financial Statements reflect the consolidation of Station LLC and its consolidated subsidiaries, and Station Holdco. The financial position and results of operations attributable to LLC Units we do not own are reported separately as noncontrolling interest.
Our principal source of revenue and operating income is gaming, and our non-gaming offerings include restaurants, hotels and other entertainment amenities. Approximately 80% to 85% of our casino revenue is generated from slot play. The majority of our revenue is cash-based and as a result, fluctuations in our revenues have a direct impact on our cash flows from operations. Because our business is capital intensive, we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing and fund capital expenditures.
A significant portion of our business is dependent upon customers who live and/or work in the Las Vegas metropolitan area. Based on population and employment growth, the Las Vegas economy was one of the fastest growing economies in the United States from 2015 to 2018. Based on a recent U.S. Census Bureau release, Nevada was first among all states in percentage growth of population from July 2017 to July 2018. In addition, based on preliminary data for March 2019 from the U.S. Bureau of Labor Statistics, Las Vegas experienced a 2.8% year-over-year increase in employment to 1,025,700, which is an all-time high. This resulted in an unemployment rate of 3.8% which has declined from 14.1% in July 2011. Businesses and consumers in Las Vegas continue to increase their spending as evidenced by 72 consecutive months of year-over-year increases in taxable retail sales from February 2013 to January 2019. Home values have also improved significantly over the past several years with the median price of an existing single family home in Las Vegas up approximately 165% at March 2019 compared to January 2012, as reported by the Greater Las Vegas Association of Realtors.
The Las Vegas economy continues to show growth in employment, taxable sales and home prices, and we believe these positive trends, along with new capital investment planned or underway in Las Vegas, provide a foundation for future growth in our business. Although we experienced improved operating results over the past few years due, in part, to more favorable local economic conditions, we cannot be sure if, or how long, these favorable market conditions will persist or that they will continue to positively impact our results of operations .
Our operating results for the three months ended March 31, 2019 continued to reflect the impact of construction disruption and costs associated with the ongoing $690 million redevelopment project at Palms Casino Resort (“Palms”). Phase one of the Palms redevelopment opened in May 2018, and with the exception of the new wellness spa and salon, which is expected to be complete by the end of the second quarter of 2019, phase two of the project is now complete. In addition, with the exception of one restaurant, which is expected to be complete by the end of the third quarter of 2019, phase three of the project is now also complete. The Palms redevelopment project remains on schedule and the $690 million project budget

24



Table of Contents     


remains unchanged. A $191 million redevelopment project at Palace Station was completed on schedule and on budget in December 2018.
Information about our results of operations is included herein and in the notes to our Condensed Consolidated Financial Statements.
Our Key Performance Indicators
We use certain key indicators to measure our performance.
Gaming revenue measures:
•
Slot handle, table game drop and race and sports write are measures of volume. Slot handle represents the dollar amount wagered in slot machines, and table game drop represents the total amount of cash and net markers issued that are deposited in table game drop boxes. Write represents the aggregate dollar amount wagered on race and sports events.
•
Win represents the amount of wagers retained by us and recorded as casino revenue.
•
Hold represents win as a percentage of slot handle or table game drop.
As our customers are primarily Las Vegas residents, our hold percentages are generally consistent from period to period. Fluctuations in our casino revenue are primarily due to the volume and spending levels of customers at our properties.
Food and beverage revenue measures:
•
Average guest check is a measure of sales volume and product offerings, and represents the average amount spent per customer visit.
•
Number of guests served is an indicator of volume.
Room revenue measures:
•
Occupancy is calculated by dividing occupied rooms, including complimentary rooms, by rooms available.
•
Average daily rate (“ADR”) is calculated by dividing room revenue, which includes the retail value of complimentary rooms, by rooms occupied, including complimentary rooms.
•
Revenue per available room is calculated by dividing room revenue by rooms available.

25



Table of Contents     


Results of Operations
Information about our results of operations is presented below (amounts in thousands):
 
Three Months Ended March 31,
 
Percent
change
 
2019
 
2018
 
Net revenues
$
447,022

 
$
421,039

 
6.2
 %
Operating income
66,145

 
107,841

 
(38.7
)%
 
 
 
 
 
 
Casino revenues
244,933

 
236,247

 
3.7
 %
Casino expenses
82,940

 
78,958

 
5.0
 %
Margin
66.1
%
 
66.6
%
 
 
 
 
 
 
 
 
Food and beverage revenues
104,933

 
90,928

 
15.4
 %
Food and beverage expenses
92,236

 
80,109

 
15.1
 %
Margin
12.1
%
 
11.9
%
 
 
 
 
 
 
 
 
Room revenues
48,075

 
46,630

 
3.1
 %
Room expenses
20,196

 
20,100

 
0.5
 %
Margin
58.0
%
 
56.9
%
 
 
 
 
 
 
 
 
Other revenues
25,922

 
22,556

 
14.9
 %
Other expenses
11,859

 
8,786

 
35.0
 %
 
 
 
 
 
 
Management fee revenue
23,159

 
24,678

 
(6.2
)%
 
 
 
 
 
 
Selling, general and administrative expenses
99,065

 
95,109

 
4.2
 %
Percent of net revenues
22.2
%
 
22.6
%
 
 
 
 
 
 
 
 
Depreciation and amortization
50,853

 
43,164

 
17.8
 %
Write-downs and other charges, net
23,728

 
3,845

 
n/m

Tax receivable agreement liability adjustment
—

 
(16,873
)
 
n/m

Interest expense, net
37,438

 
31,111

 
20.3
 %
Loss on modification of debt
(302
)
 
—

 
n/m

Change in fair value of derivative instruments
(6,638
)
 
15,803

 
n/m

Provision for income tax
(1,919
)
 
(10,856
)
 
(82.3
)%
Net income attributable to noncontrolling interests
8,961

 
30,950

 
(71.0
)%
Net income attributable to Red Rock
11,323

 
51,180

 
(77.9
)%
____________________________________
n/m = Not meaningful
We view each of our Las Vegas casino properties as an individual operating segment. We aggregate all of our Las Vegas operating segments into one reportable segment because all of our Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing programs, are directed by a centralized management structure and have similar economic characteristics. We also aggregate our Native American management arrangements into one reportable segment. The results of operations for our Native American management segment are discussed in the section entitled “Management Fee Revenue” below and the results of our Las Vegas operations are discussed in the remaining sections below.

26



Table of Contents     


Net Revenues . Net revenues for the three months ended March 31, 2019 increase d by 6.2% as compared to the prior year period. The increase in net revenues was primarily due to an increase in Las Vegas operations.
Operating Income . Operating income decrease d to $66.1 million for the three months ended March 31, 2019 from $107.8 million for the same period in 2018 . The decrease was primarily due to redevelopment costs at Palms and higher depreciation expense in the current year period, as well as income from a tax receivable agreement liability adjustment in the prior year period. The impact of these factors was partially offset by improved operating results at our properties. Components of operating income for the comparative periods are discussed below.
Casino.   Casino revenues increase d by 3.7% for the three months ended March 31, 2019 as compared to the prior year period due to increased volume across all major categories of gaming operations. Slot handle increase d by 2.4% , table games drop increase d by 11.3% and race and sports write increase d by 12.0% for the three months ended March 31, 2019 as compared to the same period in 2018 . Casino expenses increase d by 5.0% for the three months ended March 31, 2019 , primarily due to the increased casino volume.
Food and Beverage.   For the three months ended March 31, 2019 , food and beverage revenue increase d by 15.4% as compared to the prior year period, primarily due to the opening of several new restaurants and entertainment offerings at Palms and Palace Station. For the three months ended March 31, 2019 as compared to the same period in 2018 , the number of restaurant guests served increase d by 1.1% and the average guest check increase d by 13.0% . Food and beverage expenses increase d by 15.1% for the three months ended March 31, 2019 as compared to the prior year period, commensurate with the increase in food and beverage revenue.
Room.   Information about our hotel operations is presented below:
 
Three Months Ended March 31,
 
2019
 
2018
Occupancy
87.7
%
 
90.0
%
Average daily rate
$
131.38

 
$
125.60

Revenue per available room
$
115.17

 
$
112.98

For the three months ended March 31, 2019 , room revenues increase d by 3.1% as compared to the same period in 2018 , primarily due to a decrease in construction disruption at Palms and the completion of the Palace Station redevelopment project. For the three months ended March 31, 2019 , our ADR increase d by 4.6% and our occupancy rate decrease d by 2.3 percentage points, both as compared to the prior year period. Room expenses increase d slightly for the three months ended March 31, 2019 as compared to the prior year period.
Other.   Other primarily represents revenues from tenant leases, retail outlets, bowling, spas and entertainment and their corresponding expenses. Other revenues and other expenses increase d for the three months ended March 31, 2019 as compared to the prior year period, primarily due to additional entertainment offerings.
Management Fee Revenue.   Management fee revenue primarily represents fees earned from our agreement with a Native American tribe to manage Graton Resort. For the three months ended March 31, 2019 as compared to the prior year period, management fee revenue decrease d 6.2% to $23.2 million . The decrease was due to the expiration of the Gun Lake management agreement in February 2018, which produced $4.3 million of revenue in the prior year period, partially offset by increase d management fees from Graton Resort driven by stronger operating results.
Selling, General and Administrative (“SG&A”). For the three months ended March 31, 2019 , SG&A expenses increase d by $4.0 million as compared to the prior year period. As a percentage of net revenue, SG&A expenses decreased slightly for the three months ended March 31, 2019 as compared to the prior year period.
Depreciation and Amortization.   For the three months ended March 31, 2019 , depreciation and amortization expense increase d to $50.9 million as compared to $43.2 million for the prior year period. The increase in depreciation and amortization expense was primarily due to the completion of the Palace Station project and portions of the Palms redevelopment being placed into service.
Write-downs and Other Charges, net. Write-downs and other charges, net include asset disposals, preopening and redevelopment, innovation and development costs, severance and non-routine expenses. For the three months ended March 31, 2019 and 2018 , write-downs and other charges, net totaled $23.7 million and $3.8 million , respectively. These amounts included $20.6 million and $2.6 million , respectively, related to the redevelopment of Palms.

27



Table of Contents     


Tax Receivable Agreement Liability Adjustment.   From time to time, our liability under the tax receivable agreement (“TRA”) is adjusted based on a number of factors, including the amount and timing of our taxable income, the tax rate then applicable, our amortizable basis in Station Holdco, and the impact of transactions relating to TRA liabilities. Adjustments to our TRA liability are recognized within the Tax receivable agreement liability adjustment line in the Condensed Consolidated Statements of Income and Comprehensive Income . No LLC Units were exchanged during the three months ended March 31, 2019 and there was no change in our TRA liability. During the three months ended March 31, 2018 , our liability under the TRA was reduced by $21.9 million , and we recognized nontaxable income of $16.9 million in a transaction with a pre-IPO owner. In addition, during the three months ended March 31, 2018 , exchanges of LLC Units resulted in a $2.2 million increase in the TRA liability and a net increase in deferred tax assets of $2.3 million , both of which were recorded through stockholders’ equity.
Interest Expense, net.   Interest expense, net increase d to $37.4 million for the three months ended March 31, 2019 as compared to $31.1 million for the same period in 2018 . The increase in interest expense was primarily due to higher outstanding indebtedness and higher variable interest rates on our credit facility due to an increase in LIBOR. These increases were partially offset by higher capitalized interest and the repricing of a portion of the credit facility in February 2019. Additional information about long-term debt is included in Note 5 to the Condensed Consolidated Financial Statements.
Loss on Modification of Debt. For the three months ended March 31, 2019 , we recorded a $0.3 million loss on modification of debt resulting from the amendment to the credit facility in February 2019. See Note 5 for additional information.
Change in Fair Value of Derivative Instruments. During the three -month periods ended March 31, 2019 and 2018 , we recognized a net loss of $6.6 million and a net gain of $15.8 million , respectively, in the fair value of our interest rate swaps, primarily due to movements in interest rates and the forward yield curve.
Provision for Income Tax . For the three months ended March 31, 2019 , we recognized an income tax provision of $1.9 million . Station Holdco is treated as a partnership for income tax reporting and Station Holdco’s members are liable for federal, state and local income taxes based on their share of Station Holdco’s taxable income. We are not liable for income tax on the noncontrolling interests’ share of Station Holdco’s taxable income and therefore our effective tax rate of 8.64% for the three months ended March 31, 2019 was less than the statutory rate. The provision for income tax was $10.9 million for the three months ended March 31, 2018 .
Net Income Attributable to Noncontrolling Interests . Net income attributable to noncontrolling interests for the three months ended March 31, 2019 and 2018 represented the portion of net income attributable to the ownership interest in Station Holdco not held by us.

28



Table of Contents     


Adjusted EBITDA
Adjusted EBITDA for the three months ended March 31, 2019 and 2018 for our two reportable segments and a reconciliation of net income to Adjusted EBITDA are presented below (amounts in thousands). The Las Vegas operations segment includes all of our Las Vegas area casino properties and the Native American management segment includes our Native American management arrangements.
 
Three Months Ended March 31,
 
2019
 
2018
Net revenues
 
 
 
Las Vegas operations
$
422,370

 
$
395,170

Native American management
22,996

 
24,505

Reportable segment net revenues
445,366

 
419,675

Corporate and other
1,656

 
1,364

Net revenues
$
447,022

 
$
421,039

 
 
 
 
Net income
$
20,284

 
$
82,130

Adjustments
 
 
 
Depreciation and amortization
50,853

 
43,164

Share-based compensation
3,853

 
2,454

Write-downs and other charges, net
23,728

 
3,845

Tax receivable agreement liability adjustment
—

 
(16,873
)
Interest expense, net
37,438

 
31,111

Loss on modification of debt
302

 
—

Change in fair value of derivative instruments
6,638

 
(15,803
)
Provision for income tax
1,919

 
10,856

Other
69

 
(807
)
Adjusted EBITDA
$
145,084

 
$
140,077

 
 
 
 
Adjusted EBITDA
 
 
 
Las Vegas operations
$
130,478

 
$
125,877

Native American management
21,476

 
22,094

Reportable segment Adjusted EBITDA
151,954

 
147,971

Corporate and other
(6,870
)
 
(7,894
)
Adjusted EBITDA
$
145,084

 
$
140,077

 
 
 
 
The increase in Adjusted EBITDA for the three months ended March 31, 2019 as compared to the prior year period is due to the factors described above.
Adjusted EBITDA is a non-GAAP measure that is presented solely as a supplemental disclosure. We believe that Adjusted EBITDA is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies. We believe that in addition to net income, Adjusted EBITDA is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing core operations. Adjusted EBITDA includes net income plus depreciation and amortization, share-based compensation, write-downs and other charges, net, including Palms redevelopment and preopening expenses, tax receivable agreement liability adjustment, interest expense, net, loss on modification of debt, change in fair value of derivative instruments, provision for income tax and other.
To evaluate Adjusted EBITDA and the trends it depicts, the components should be considered. Each of these components can significantly affect our results of operations and should be considered in evaluating our operating performance, and the impact of these components cannot be determined from Adjusted EBITDA. Further, Adjusted EBITDA does not represent net income or cash flows from operating, investing or financing activities as defined by GAAP and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. In addition, it should be noted that not all gaming companies that report EBITDA or adjustments to this measure may calculate

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EBITDA or such adjustments in the same manner as we do, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies.
Holding Company Financial Information
The indenture governing the 5.00% Senior Notes contains certain covenants that require Station LLC to furnish to the holders of the notes certain annual and quarterly financial information relating to Station LLC and its subsidiaries. The obligation to furnish such information may be satisfied by providing consolidated financial information of the Company along with additional disclosure explaining the differences between such information and the financial information of Station LLC and its subsidiaries on a standalone basis. The following financial information about the Company and its consolidated subsidiaries, exclusive of Station LLC and its subsidiaries (the “Holding Company”), is furnished to explain the differences between the financial information of the Holding Company and the financial information of Station LLC and its subsidiaries for the periods presented in this report. The primary differences between the financial information of the Holding Company and that of Station LLC relate to income taxes payable or receivable by the Holding Company, the liability relating to the TRA and additional SG&A expenses incurred by the Holding Company for professional costs relating to the TRA and public company reporting.
At March 31, 2019 , the difference between the balance sheet for Station LLC and its consolidated subsidiaries and the balance sheet for the Holding Company is that the Holding Company had cash of $0.1 million and a net deferred tax asset of $109.9 million that are solely assets of the Holding Company, partially offset by liabilities that are solely the Holding Company’s, consisting of a $24.9 million liability under the TRA and $0.7 million of other net current liabilities. At December 31, 2018 , the Holding Company had cash of $0.2 million and a net deferred tax asset of $111.8 million , partially offset by liabilities that are solely the Holding Company’s, consisting of a $24.9 million liability under the TRA and $0.6 million of other net current liabilities.
For the three months ended March 31, 2019 , the Holding Company incurred a net loss of $1.9 million representing provision for income tax. For the three months ended March 31, 2018 , the Holding Company generated net income of $5.0 million , which primarily included $16.9 million of income from TRA liability adjustments, provision for income tax of $10.9 million and SG&A expense of $1.0 million .
Liquidity and Capital Resources
The following liquidity and capital resources discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions, investments and subsidiaries, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the risks described in Item 1A—Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018 .
On February 8, 2019, we amended Station LLC’s existing credit facility to, among other things, (i) increase the borrowing availability under the revolving credit facility by $115.0 million to $896.0 million and (ii) for consenting lenders under the term loan A facility and the revolving credit facility, extend the maturity date for their portion of such facilities by approximately one year and reduce the interest rate thereunder by 25 basis points. As a result of the amendment, both the revolving credit facility and the term loan A facility each have two tranches with different maturity dates and interest rate spreads as discussed in Note 5 to the Condensed Consolidated Financial Statements.
At March 31, 2019 , we had $109.2 million in cash and cash equivalents, and Station LLC’s combined borrowing availability under both tranches of its revolving credit facility, subject to continued compliance with the terms of the credit facility, was $497.6 million , which was net of $361.3 million in outstanding borrowings and $37.1 million in outstanding letters of credit and similar obligations.
Our anticipated uses of cash for the remainder of 2019 are expected to include (i) $175.0 million to $225.0 million for maintenance and investment capital expenditures, including amounts related to the redevelopment of Palms, (ii) required principal and interest payments on Station LLC’s indebtedness, totaling $25.6 million and $103.5 million , respectively, (iii) $57.3 million for the purchase of the leased land on which Wild Wild West is located, and (iv) dividends to our Class A common stockholders and distributions to noncontrolling interest holders of Station Holdco, including approximately $11.7 million to be paid in June 2019 .
We are obligated to make payments under the TRA, which is described in Note 10 to the Condensed Consolidated Financial Statements. At March 31, 2019 , such obligations with respect to previously consummated transactions totaled $24.9 million . Future payments in respect of any subsequent exchanges of LLC Units for Class A common stock would be in addition to these amounts and are expected to be substantial. Required TRA payments are generally limited to one payment per year, and

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the timing of these payments may vary. The amount of such payments is also limited to the extent we utilize the related deferred tax assets. The payments that we are required to make will generally reduce the amount of overall cash that might have otherwise been available to us, but we expect the cash tax savings we will realize from the utilization of the related deferred tax assets to fund the required payments.
We believe that cash flows from operations, available borrowings under the credit facility, other debt financings and existing cash balances will be adequate to satisfy our anticipated uses of capital for the next twelve months. We regularly assess our projected capital requirements for capital expenditures, repayment of debt obligations, and payment of other general corporate and operational needs. In the long term, we expect that we will fund our capital requirements with a combination of cash generated from operations, borrowings under the credit facility and the issuance of debt or equity as market conditions may permit. However, our cash flow and ability to obtain debt or equity financing on terms that are satisfactory to us, or at all, may be affected by a variety of factors, including competition, general economic and business conditions and financial markets. As a result, we cannot provide any assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements or other obligations.
In February 2019, our Board of Directors approved an equity repurchase program authorizing the repurchase of up to an aggregate of $150 million of our Class A common stock. We are not obligated to repurchase any shares under this program. Subject to applicable laws and the provisions of any agreements restricting our ability to do so, repurchases may be made at our discretion from time to time through open market purchases, negotiated transactions or tender offers, depending on market conditions and other factors. Through March 31, 2019 , no repurchases were made under the program. From time to time, we may also seek to repurchase our outstanding indebtedness. Any such purchases may be funded by existing cash balances or the incurrence of debt, including borrowings under our credit facility. The amount and timing of any repurchase will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations.
Following is a summary of our cash flow information (amounts in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
Cash flows provided by (used in):
 
 
 
Operating activities
$
54,605

 
$
106,047

Investing activities
(157,168
)
 
(137,126
)
Financing activities
97,304

 
(21,083
)
Cash Flows from Operations
Our operating cash flows primarily consist of operating income generated by our properties (excluding depreciation and other non-cash charges), interest paid and changes in working capital accounts such as inventories, prepaid expenses, receivables and payables. The majority of our revenue is generated from our slot machine and table game play, which is conducted primarily on a cash basis. Our food and beverage, room and other revenues are also primarily cash-based. As a result, fluctuations in our revenues have a direct impact on our cash flow from operations.
For the three months ended March 31, 2019 , net cash provided by operating activities was $54.6 million as compared to $106.0 million for the prior year period. Operating cash flows were impacted by expenses and prepayments related to the redevelopment and additional entertainment offerings of Palms.
Cash Flows from Investing Activities
For the three months ended March 31, 2019 , capital expenditures were $160.0 million , which primarily were related to the redevelopment at Palms. During the three months ended March 31, 2018 , capital expenditures were $137.7 million , which primarily were related to various renovation projects, including the redevelopment at Palms and the upgrade and expansion project at Palace Station, as well as the purchase of slot machines and related gaming equipment.
Cash Flows from Financing Activities
During the three months ended March 31, 2019 , we incurred net borrowings under the revolving credit facility of $116.3 million . We also completed an amendment to our credit facility and paid $2.5 million in related fees and costs. In addition, we paid $7.0 million in dividends to Class A common shareholders and $4.7 million in cash distributions to the noncontrolling interest holders of Station Holdco.
During the three months ended March 31, 2018 , we paid $6.9 million in dividends to Class A common shareholders and $5.5 million in cash distributions, of which $4.7 million was paid to the noncontrolling interest holders of Station Holdco.

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We also paid $5.0 million to a pre-IPO owner of Station Holdco in exchange for which the owner assigned to us all of its rights under the TRA as described in Note 10 .
Restrictive Covenants
As described in Financial Condition, Capital Resources and Liquidity in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018 , the amendment of the credit facility in February 2019 included changes to certain financial ratio covenants that Station LLC is required to maintain throughout the term of the facility. During the three months ended March 31, 2019 , there were no other changes to the covenants included in the credit facility or the indenture governing the 5.00% Senior Notes. At March 31, 2019 , Station LLC’s interest coverage ratio was 4.30 to 1.00 and its consolidated total leverage ratio was 5.10 to 1.00, both as defined in the credit facility. We believe that as of March 31, 2019 , Station LLC was in compliance with the covenants contained in the credit facility and the indenture governing the 5.00% Senior Notes.
Off-Balance Sheet Arrangements
We have not entered into any transactions with special purpose entities and our derivative arrangements are described in Note 6 to the Condensed Consolidated Financial Statements. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity. At March 31, 2019 , we had outstanding letters of credit and similar obligations totaling $37.1 million .
Contractual Obligations
During the three months ended March 31, 2019 , there have been no material changes to the contractual obligations previously reported in our Annual Report on Form 10-K for the year ended December 31, 2018 .
Native American Development
We have development and management agreements with the North Fork Rancheria of Mono Indians, a federally recognized Native American tribe located near Fresno, California, pursuant to which we will assist the tribe in developing and operating a gaming and entertainment facility to be located on Highway 99 north of the city of Madera, California. See Note  3 to the Condensed Consolidated Financial Statements for information about this project.
Regulation and Taxes
We are subject to extensive regulation by Nevada gaming authorities as well as the National Indian Gaming Commission, the California Gambling Control Commission and the Federated Indians of Graton Rancheria Gaming Commission. In addition, we will be subject to regulation, which may or may not be similar to that in Nevada, by any other jurisdiction in which we may conduct gaming activities in the future.
The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state and federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada legislature meets every two years for 120 days and when special sessions are called by the Governor. The current legislative session began on February 4, 2019. There are currently no specific proposals to increase taxes on gaming revenue, but there are no assurances that an increase in taxes on gaming or other revenue will not be proposed and passed by the Nevada legislature in the future.
Description of Certain Indebtedness
Except for the February 2019 amendment to Station LLC’s credit facility, during the three months ended March 31, 2019 there were no material changes to the terms of our indebtedness as described in Note 11 to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 and Note 5 to the Condensed Consolidated Financial Statements.
Derivative and Hedging Activities
A description of our derivative and hedging activities is included in Note 6 to the Condensed Consolidated Financial Statements.
Critical Accounting Policies and Estimates
A description of our critical accounting policies and estimates is included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018 . As of January 1, 2019, we updated our lease accounting policies in conjunction with our adoption of the new lease accounting standard. A description of this change is included in Note 12 to the Condensed Consolidated Financial Statements. There were no other material changes to our critical accounting policies and estimates during the three months ended March 31, 2019 .

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Forward-looking Statements
When used in this report and elsewhere by management from time to time, the words “may,” “might,” “could,” “believes,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements with respect to our financial condition, results of operations and our business including our expansions, development and acquisition projects, legal proceedings and employee matters. Certain important factors, including but not limited to, financial market risks, could cause our actual results to differ materially from those expressed in our forward-looking statements. Further information on potential factors which could affect our financial condition, results of operations and business includes, without limitation, the impact of our substantial indebtedness; the effects of local and national economic, credit and capital market conditions on consumer spending and the economy in general, and on the gaming and hotel industries in particular; the effects of competition, including locations of competitors and operating and market competition; changes in laws, including increased tax rates, regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies; risks associated with construction projects, including disruption of our operations, shortages of materials or labor, unexpected costs, unforeseen permitting or regulatory issues and weather; litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation; acts of war or terrorist incidents or natural disasters; risks associated with the collection and retention of data about our customers, employees, suppliers and business partners; and other risks described in our filings with the Securities and Exchange Commission. All forward-looking statements are based on our current expectations and projections about future events. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof.
Item 3.    Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. There have been no material changes in our market risks from those disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2018 .
Item 4.    Controls and Procedures
The Company’s management conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of March 31, 2019 . In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide 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. Based on this evaluation, the principal executive officer and principal financial officer concluded that, as of March 31, 2019 , the Company’s disclosure controls and procedures were effective, at the reasonable assurance level, and are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II.    Other Information
Item 1.    Legal Proceedings
The Company and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. No assurance can be provided as to the outcome of such matters and litigation inherently involves significant risks.
Item 1A.    Risk Factors
There have been no material changes in the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018 .
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
In January and March 2019, we repurchased 823 and 7,512 shares, respectively, of Class A common stock in satisfaction of tax withholding obligations on vested restricted stock at an average price of approximately $20 and $26 per share, respectively, for a total purchase price of approximately $16,700 and $195,800 , respectively. The shares were retired upon repurchase. These repurchases were not part of the Company’s equity repurchase program.
Item 3.    Defaults Upon Senior Securities— None.
Item 4.    Mine Safety Disclosures— None.
Item 5.    Other Information— None.
Item 6.    Exhibits
(a)
Exhibits
No. 10.1—Amendment No. 1 to Tax Receivable Agreement.
No. 10.2—Employment Agreement, dated as of February 19, 2019, among Red Rock Resorts, Inc., Station Casinos LLC and Robert A. Finch. †
No. 31.1—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
No. 31.2—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
No. 32.1—Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
No. 32.2—Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
No. 101—The following information from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 formatted in eXtensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets at March 31, 2019 (unaudited) and December 31, 2018 , (ii) the Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2019 and 2018 , (iii) the Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2019 and 2018 , (iv) the Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 and (v) the Notes to Unaudited Condensed Consolidated Financial Statements.
______________________________
† Management contract or compensatory plan or arrangement.


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
RED ROCK RESORTS, INC.,
Registrant
 
 
 
Date:
May 8, 2019
/s/ STEPHEN L. COOTEY
 
 
Stephen L. Cootey
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)


35




Exhibit 10.1
AMENDMENT NO. 1 TO
TAX RECEIVABLE AGREEMENT



This Amendment No. 1 dated March 28, 2019 (the “ Amendment ”) to Tax Receivable Agreement (the “ Agreement ”) dated as of April 28, 2016, is adopted, executed and agreed to, for good and valuable consideration, among Red Rock Resorts, Inc. (the “ Corporation ”), Station Holdco LLC (the “ Company ”), Fertitta Business Management LLC (“ FBM ”), FI Station Investor LLC (“ FI Station ”) and FBM Sub 1 LLC (“ FBM Sub ”). Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Agreement.

RECITALS


WHEREAS, certain of the parties hereto previously entered into the Agreement on the terms and conditions therein set forth;

WHEREAS, FBM, FBM Sub and FI Station constitute, collectively, Members holding a majority of the outstanding Units (excluding Units held by the Corporation or any Exchanging Subsidiary); and

WHEREAS, the parties hereto desire to amend certain provisions of the Agreement.

AMENDMENT


NOW, THEREFORE, in consideration of the promises and covenants contained herein, the Agreement is hereby amended as follows:

Section 1. Amendment to Section 2.01 . Section 2.01 of the Agreement is amended by deleting the existing text thereof in its entirety and substituting therefor the following: “[Intentionally Omitted]”.

Section 2. Amendment to Section 2.02 . Section 2.02(a) of the Agreement is amended by adding the following sentence thereto immediately following the second sentence of the existing text thereof: “Notwithstanding the preceding sentence, to the extent that the Corporation shall have concluded that there is no Realized Tax Benefit or Realized Tax Detriment for such Taxable Year, the Corporation shall not be obligated to deliver to such Member a Tax Benefit Schedule for such Taxable Year.”.






Section 3. Governing Law . This Amendment shall be governed by and interpreted in accordance with the law of the State of Delaware, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.

Section 4. Severability . If any term or other provision of this Amendment or the Agreement as amended hereby is invalid, illegal or incapable of being enforced as a result of any rule of law or public policy, all other terms and other provisions of this Amendment and the Agreement as amended hereby shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Amendment or the Agreement is not affected in any manner materially adverse to any party.

Section 5. Effect . Except as herein otherwise specifically provided (i) this Amendment shall be effective upon the execution and delivery hereof by the parties hereto and (ii) this Amendment and the Agreement as amended hereby shall be binding upon and inure to the benefit of the Members and their legal representatives, successors and permitted assigns.


[Signature pages follow]






IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.


RED ROCK RESORTS, INC.
 
By:
/s/ STEPHEN L. COOTEY
 
Stephen L. Cootey
Title:
Executive Vice President, Chief Financial Officer and Treasurer
 
 
 
 
 








STATION HOLDCO LLC

By: Red Rock Resorts, Inc.
Its: Managing Member

 
By:
/s/ STEPHEN L. COOTEY
Name:
Stephen L. Cootey
Title:
Executive Vice President, Chief Financial Officer and Treasurer
 
 
 
 
 








FERTITTA BUSINESS MANAGEMENT LLC
 
By:
/s/ FRANK J. FERTITTA III
Name:
Frank J. Fertitta III
Title:
General Manager
 
 
 
By:
/s/ LORENZO J. FERTITTA
Name:
Lorenzo J. Fertitta
Title:
General Manager
 
 








FI STATION INVESTOR LLC
 
By:
/s/ RICHARD J. HASKINS
 
Richard J. Haskins
Title:
President
 
 
 
 
 








FBM SUB 1 LLC
 
By:
/s/ FRANK J. FERTITTA III
Name:
Frank J. Fertitta III
Title:
General Manager
 
 
 
 
 






Exhibit 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of February 19, 2019 (the “Effective Date” ), by and among STATION CASINOS LLC , a Nevada limited liability company (the “ Company ”), RED ROCK RESORTS, INC. , a Delaware corporation (the “ Parent ”), and ROBERT A. FINCH (the “ Executive ”).
WHEREAS, the Company, the Parent and the Executive (each individually a “ Party ” and together the “ Parties ”) desire to enter into this Agreement, as set forth herein;
NOW, THEREFORE , in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the Parties agree as follows:
1.     DEFINITIONS . In addition to certain terms defined elsewhere in this Agreement, the following terms shall have the following respective meanings:
1.1    “ Affiliate ” shall mean any Person directly or indirectly controlling, controlled by or under common control with the Company (including the Parent and any Person directly or indirectly controlling, controlled by or under common control with the Parent).
1.2    “ Base Salary ” shall mean the salary provided for in Section 3.1 of this Agreement, as the same may be increased thereunder.
1.3    “ Board ” shall mean the Board of Directors of the Parent, including any successor of the Parent in the event of a Change in Control.
1.4    “ Cause ” shall mean that the Executive: (a) has been found unsuitable to hold a gaming license by final, non-appealable decision of the Nevada Gaming Commission; (b) has been convicted of any felony; (c) has engaged in acts or omissions constituting gross negligence or willful misconduct resulting, in either case, in material economic harm to the Company; or (d) has materially breached this Agreement.
1.5    “ Change in Control ” shall mean the occurrence of any of the following events:
(a)    The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), other than a Permitted Holder, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the election of members of the Board (the “ Voting Power ”) at such time; provided that the following acquisitions shall not constitute a Change in Control: (i) any such acquisition directly from the Parent; (ii) any such acquisition by the Parent; (iii) any such acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Parent or any of its subsidiaries; or (iv) any such acquisition pursuant to a transaction that complies with clauses (i), (ii) and (iii) of paragraph (c) below; or


(b)    individuals who, as of the Effective Date, constitute the Board (the “ Incumbent Board ”) cease for any reason (other than death or disability) to constitute at least a majority of the Board; provided , that any individual becoming a director subsequent to the Effective Date, whose election, or nomination for election by the Parent’s stockholders, was approved by a vote of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Parent in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual was a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than either the Board or any Permitted Holder; or
(c)    consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Parent (a “ Business Combination ”), in each case, unless following such Business Combination, (i) either (A) Permitted Holders or (B) all or substantially all of the individuals and entities who were the beneficial owners of the Voting Power immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such transaction (including an entity that, as a result of such transaction, owns the Parent or substantially all of the Parent’s assets either directly or through one or more subsidiaries) and, in the case of the foregoing clause (B), in substantially the same proportions relative to each other as their ownership immediately prior to such transaction of the securities representing the Voting Power, (ii) no Person (excluding any Permitted Holder, any entity resulting from such transaction or any employee benefit plan (or related trust) sponsored or maintained by the Parent or such entity resulting from such transaction) beneficially owns, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock of the entity resulting from such transaction, or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to such transaction, and (iii) at least a majority of the members of the board of directors of the entity resulting from such transaction were members of the Incumbent Board at the time of the execution of the initial agreement with respect to, or the action of the Board providing for, such transaction; or
(d)    approval by the stockholders of the Parent of a complete liquidation or dissolution of the Parent.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any deferred compensation that is subject to Section 409A of the Code, then, to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event described in paragraph (a), (b), (c) or (d) above, with respect to such deferred compensation, shall only constitute a Change in Control for purposes of the payment


timing of such deferred compensation if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5).
1.6    “ Code ” shall mean the Internal Revenue Code of 1986, as amended.
1.7    “ Company Group ” shall mean the Parent together with its subsidiaries.
1.8    “ Company Property ” shall mean all property, items and materials provided by the Company or any Affiliate to the Executive, or to which the Executive has access, in the course of his employment, including all files, records, documents, drawings, specifications, memoranda, notes, reports, manuals, equipment, computer disks, videotapes, blueprints and other documents and similar items relating to the Company or any Affiliate, or their respective customers, whether prepared by the Executive or others, and any and all copies, abstracts and summaries thereof.
1.9    “ Confidential Information ” shall mean all nonpublic and/or proprietary information respecting the business of the Company or any Affiliate, including products, programs, projects, promotions, marketing plans and strategies, business plans or practices, business operations, employees, research and development, intellectual property, software, databases, trademarks, pricing information and accounting and financing data. Confidential Information also includes information concerning the Company’s or any Affiliate’s customers, such as their identity, address, preferences, playing patterns and ratings or any other information kept by the Company or any Affiliate concerning customers, whether or not such information has been reduced to documentary form. Confidential Information does not include information that is, or becomes, available to the public unless such availability occurs through an unauthorized act on the part of the Executive or another person with an obligation to maintain the confidentiality of such information.
1.10    “ Disability ” shall mean a physical or mental incapacity that prevents the Executive from performing the essential functions of his position with the Company for a minimum period of 90 days as determined (a) in accordance with any long-term disability plan provided by the Company of which the Executive is a participant, or (b) by the following procedure: The Executive agrees to submit to medical examinations by a licensed healthcare professional selected by the Company, in its sole discretion, to determine whether a Disability exists. In addition, the Executive may submit to the Company documentation of a Disability, or lack thereof, from a licensed healthcare professional of his choice. Following a determination of a Disability or lack of Disability by the Company’s or the Executive’s licensed healthcare professional, any other Party may submit subsequent documentation relating to the existence of a Disability from a licensed healthcare professional selected by such other Party. In the event that the medical opinions of such licensed healthcare professionals conflict, such licensed healthcare professionals shall appoint a third licensed healthcare professional to examine the Executive, and the opinion of such third licensed healthcare professional shall be dispositive.
1.11    “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.


1.12    “ Good Reason ” shall mean and exist if there has been a Change in Control and, thereafter, without the Executive’s prior written consent, one or more of the following events occurs:
(a)    the Executive suffers a material reduction in the authorities, duties or responsibilities associated with his position as described in Section 2.3 , or the Executive is assigned any duties or responsibilities that are inconsistent with the scope of duties and responsibilities associated with the Executive’s position as described in Section 2.3 ;
(b)    the Executive is required to relocate from, or maintain his principal office outside of, Las Vegas, Nevada;
(c)    the Executive’s Base Salary is decreased by the Company;
(d)    the Company discontinues its bonus plan and equity incentive plan in which the Executive participates without immediately replacing such bonus plan and equity plan with plans that are the substantial economic equivalent of such bonus plan and equity plan, or amends such bonus plan and equity plan so as to materially reduce the Executive’s potential bonus and equity incentives at any given level of economic performance of the Company;
(e)    the Company materially reduces the employee benefit programs provided to the Executive as described in Section 4 , and such reduction does not also apply to similarly situated executives (other than Frank J. Fertitta III) of the Company;
(f)    the Company or the Parent materially breaches this Agreement; or
(g)    the Company fails to obtain a written agreement satisfactory to the Executive from any successor or assign of the Company to assume and perform this Agreement.
1.13    “ Permitted Holder ” shall mean (a) (i) Frank J. Fertitta III and Lorenzo J. Fertitta and (ii) any lineal descendants of such persons; (b) executors, administrators or legal representatives of the estate of any person listed in clause (a) of this sentence; (c) heirs, distributees and beneficiaries of any person listed in clause (a) of this sentence; (d) any trust as to which any of the foregoing is a settlor or co-settlor; and (e) any corporation, partnership or other entity which is, directly or indirectly, controlling, controlled by or under common control with, any of the foregoing.
1.14    “ Person ” shall mean any individual, firm, partnership, association, trust, company, corporation, limited liability company, joint-stock company, unincorporated organization, government, political subdivision or other entity.
1.15    “ Pro Rata Annual Bonus ” shall mean the amount of Annual Bonus, multiplied by a fraction, the numerator of which is the number of days in such year during which the Executive was actually employed by the Company (or its predecessor) and the denominator of which is 365.


1.16    “ Restricted Area ” shall mean (a) the City of Las Vegas, Nevada, and the area within a 30-mile radius of that city, and (b) any area in or within a 30-mile radius of any other jurisdiction in which the Company or any of its Affiliates is directly or indirectly engaged in the development, ownership, operation or management of any gaming activities or is actively pursuing any such activities.
1.17    “ Restricted Period ” shall mean the first anniversary of the date of the Executive’s termination of employment with the Company Group.
1.18    “ Target Annual Bonus ” shall mean an amount that is no less than 100% of the Executive’s then current Base Salary.
1.19     “Target Annual Equity Incentive” shall mean an amount that is no less than 200% of the Executive’s then current Base Salary.
1.20    “ Term of Employment ” shall mean the period specified in Section 2.2 .
2.     TERM OF EMPLOYMENT, POSITIONS AND RESPONSIBILITIES .
2.1     Employment Accepted . The Company hereby employs the Executive, and the Executive hereby accepts employment with the Company, for the Term of Employment, in the positions and with the duties and responsibilities set forth in Section 2.3 , and upon such other terms and conditions as are stated in this Agreement. This Agreement supersedes and replaces any existing employment agreement between the Company and the Executive.
2.2     Term of Employment . The Term of Employment shall commence on the Effective Date and, unless earlier terminated pursuant to the provisions of this Agreement, shall terminate upon the close of business on the day immediately preceding the fifth anniversary of the Effective Date.
2.3     Title and Responsibilities . During the Term of Employment, the Executive shall be employed as the Executive Vice President and Chief Operating Officer. In carrying out his duties under this Agreement, the Executive shall report directly to the President and/or Chief Executive Officer of the Company. During the Term of Employment, the Executive shall devote full time and attention to the business and affairs of the Company and shall use his best efforts, skills and abilities to promote the interests of the Company Group. Anything herein to the contrary notwithstanding, the Executive shall not be precluded from engaging in charitable and community affairs and managing his personal investments, to the extent such activities do not materially interfere with the Executive’s duties and obligations under this Agreement, it being expressly understood and agreed that, to the extent any such activities have been conducted by the Executive prior to the date of this Agreement and disclosed to the Board in writing prior to the Effective Date, the continued conduct of such activities (or, in lieu thereof, activities similar in nature and scope thereto) after the date of this Agreement shall be deemed not to interfere with the Executive’s duties and obligations to the Company under this Agreement. The Executive may serve as a member of the board of directors of other corporations, subject to the approval of a majority of the Board, which approval shall not be unreasonably withheld or delayed.



3.     COMPENSATION .
3.1     Base Salary . During the Term of Employment, the Executive shall be entitled to receive a base salary payable no less frequently than in equal bi-weekly installments at an annualized rate of no less than $600,000 (the “ Base Salary ”). The Base Salary shall be reviewed annually for increase (but not decrease) in the discretion of the Board. In conducting any such annual review, the Board shall take into account any change in the Executive’s responsibilities, increases in the compensation of other executives of the Company or any Affiliate (or any comparable competitor(s) of the Company Group), the performance of the Executive, the results and projections of the Company Group and other pertinent factors. Such increased Base Salary shall then constitute the Executive’s “Base Salary” for purposes of this Agreement.
3.2     Annual Bonus . The Company may pay the Executive an annual bonus (the “ Annual Bonus ”) for each calendar year ending during the Term of Employment in an amount that will be determined by the Board based on the performance of the Executive and of the business of the Company Group, but with a targeted annual payment amount (based upon achievement of applicable target-level performance) equal to the Target Annual Bonus. The Annual Bonus awarded to the Executive shall be paid at the same time as annual bonuses are paid to other senior officers of the Company, and in any event no later than March 1 of the year following the calendar year in which such bonus is earned.
3.3     Equity Incentives . The Executive shall be eligible to participate in the Company’s and the Parent’s long-term incentive plans on terms and amounts to be determined by the Board in its sole discretion, but with a targeted annual payment amount equal to the Target Annual Equity Incentive.
3.4     Initial Equity Award . The Parent shall grant to the Executive an initial equity grant (the “ Initial Equity Award ”) as follows: (a) a stock option to acquire shares of the Parent’s common stock, at an exercise price per share equal to the per share price of the Parent’s common stock as of such grant date, with the number of shares subject to such stock option being that necessary to cause the Black-Scholes-Merton value of such stock option on the grant date to be equal to the excess of (i) 150% of the Base Salary (determined using inputs consistent with those the Parent uses for its financial reporting purposes) over (ii) the grant date value of any options previously awarded to the Executive by Parent in 2019, which award will vest 33 1/3% on each of the second, third and fourth anniversaries of the effective date of the grant (subject to the Executive’s continued employment on the applicable vesting date); and (b) a number of restricted shares of the Parent equal to 150% of the Base Salary divided by the per share price of the Parent’s common stock as of such grant date, which restricted shares will vest 50% on each of the third and fourth anniversaries of the effective date of the grant (subject to the Executive’s continued employment on the applicable vesting date). The Initial Equity Award shall be subject to the terms of the Red Rock Resorts, Inc. 2016 Equity Incentive Plan and the terms of the applicable award agreements.
4.     EMPLOYEE BENEFIT PROGRAMS .


4.1     Pension and Welfare Benefit Plans . During the Term of Employment, the Executive and his dependents where applicable shall be entitled to participate in all employee benefit programs made available to the Company’s executives or salaried employees generally, as such programs may be in effect from time to time, including pension and other retirement plans, group life insurance, group health insurance, accidental death and dismemberment insurance, long-term disability, sick leave (including salary continuation arrangements), vacations (of at least four weeks per year), holidays and other employee benefit programs sponsored by the Company; provided , however , that such benefits shall not duplicate the benefits provided pursuant to Section 4.2 .
4.2     Additional Pension, Welfare and Other Benefits . During the Term of Employment, the Company shall also provide the Executive and his dependents where applicable with substantially the same group health, executive medical, disability and life insurance-related coverage and/or benefits and tax preparation services as provided to similarly situated executives (other than Frank J. Fertitta III) of the Company as of the Effective Date.
5.     BUSINESS EXPENSE REIMBURSEMENT; RELOCATION EXPENSES . During the Term of Employment, the Executive shall be entitled to receive reimbursement by the Company for all reasonable out-of-pocket expenses incurred by him in performing services under this Agreement, subject to providing the proper documentation of said expenses.
6.     TERMINATION OF EMPLOYMENT .
6.1     Termination Due to Death or Disability . The Executive’s employment shall be terminated immediately in the event of his death or Disability. In the event of a termination due to the Executive’s death or Disability, the Executive or his estate, as the case may be, shall be entitled, in lieu of any other compensation whatsoever, to:
(a)    Base Salary at the rate in effect at the time of his termination through the date of termination of employment;
(b)    any accrued but unpaid vacation or holiday pay through the date of termination of employment;
(c)    any Annual Bonus awarded but not yet paid, payable as specified in Section 3.2 ;
(d)    a Pro Rata Annual Bonus for the fiscal year in which death or Disability occurs, payable as specified in Section 3.2 ;
(e)    subject to Section 5 , reimbursement for expenses incurred but not paid prior to such termination of employment; and
(f)    such rights to other compensation and benefits as may be provided in applicable plans and programs of the Company, including applicable employee benefit plans and programs, according to the terms and provisions of such plans and programs.


6.2     Termination by the Company for Cause . The Company may terminate the Executive for Cause at any time during the Term of Employment by giving written notice to the Executive within 90 days of the Company first becoming aware of the existence of Cause, and, unless the Executive takes remedial action resulting in the cessation of Cause within 30 days of receipt of such notification, the Company may terminate his employment for Cause at any time during the 40-day period following the expiration of such 30-day period (or, if such act or failure to act is not susceptible to remedy, during the 40-day period following the Company’s provision of notice regarding the existence of Cause). In the event of a termination for Cause, the Executive shall be entitled, in lieu of any other compensation whatsoever, to:
(a)    Base Salary at the rate in effect at the time of his termination through the date of termination of employment;
(b)    any accrued but unpaid vacation or holiday pay through the date of termination of employment;
(c)    any Annual Bonus awarded but not yet paid, payable as specified in Section 3.2 ;
(d)    subject to Section 5 , reimbursement for expenses incurred but not paid prior to such termination of employment; and
(e)    such rights to other benefits as may be provided in applicable plans and programs of the Company, including applicable employee benefit plans and programs, according to the terms and conditions of such plans and programs.
6.3     Termination by the Executive Without Good Reason . The Executive may terminate his employment on his own initiative for any reason upon 30 days’ prior written notice to the Company; provided , however , that during such notice period, the Executive shall reasonably cooperate with the Company (at no cost to the Executive) in minimizing the effects of such termination on the Company Group. Such termination shall have the same consequences as a termination for Cause under Section 6.2 .
6.4     Termination by the Company Without Cause . Notwithstanding any other provision of this Agreement, the Company may terminate the Executive’s employment without Cause, other than due to death or Disability, at any time during the Term of Employment by giving written notice to the Executive. In the event of such termination, the Executive shall be entitled, in lieu of any other compensation whatsoever, to:
(a)    Any unpaid Base Salary at the rate in effect at the time of his termination through the date of termination of employment;
(b)    any accrued but unpaid vacation or holiday pay through the date of termination of employment;


(c)    subject to Section 7.3 , an amount equal to the Executive’s annual Base Salary at the rate in effect at the time of his termination, paid in 12 equal monthly installments;
(d)    any Annual Bonus awarded but not yet paid, payable as specified in Section 3.2 ;
(e)    subject to Section 7.3 , a Pro Rata Annual Bonus for the fiscal year in which such termination of employment occurs, payable as specified in Section 3.2 ;
(f)    subject to Section 5 , reimbursement of expenses incurred but not paid prior to such termination of employment;
(g)    (i) continuation of the Executive’s group health insurance and long‑term disability insurance, at the level in effect at the time of his termination of employment, through the end of the 12th month following such termination, or (ii) in the event the Company determines that continuation of such coverage is not permitted, a lump-sum payment to the Executive of the economic equivalent thereof (as if the Executive were employed during such period); and
(h)    such rights to other benefits as may be provided in applicable plans and programs of the Company, including applicable employee benefit plans and programs, according to the terms and conditions of such plans and programs.
6.5     Termination by the Executive With Good Reason . The Company covenants and agrees that it will not take any action, or fail to take any action, that will provide Good Reason for the Executive to terminate this Agreement. In the event that the Company takes any action, or fails to take any action, in violation of the proceeding sentence, then the Executive shall give, within 90 days of the Executive first becoming aware of the occurrence of such action or failure to act, written notice to the Company of the existence of Good Reason, and, unless the Company takes remedial action resulting in the cessation of Good Reason within 30 days of receipt of such notification, the Executive may terminate his employment for Good Reason at any time during the 40-day period following the expiration of such 30-day period (or, if such act or failure to act is not susceptible to remedy, during the 40-day period following the Executive’s provision of notice regarding the existence of Good Reason). Such termination shall have the same consequences as a termination without Cause under Section 6.4 . For the avoidance of doubt, in addition to the provisions set forth in Section 6.4 , any unvested Initial Equity Award granted under Section 3.4, as well as any unvested equity awards granted under Section 3.4 during the Term of Employment shall immediately vest upon the termination date to the extent required under the terms of the Red Rock Resorts, Inc. 2016 Equity Incentive Plan.
7.     CONDITIONS TO PAYMENTS .
7.1     Timing of Payments . Unless otherwise provided herein or required by law, any payments to which the Executive shall be entitled under Section 6 following the termination of his employment shall be made as promptly as practicable and in no event later than five business days following such termination of employment; provided , however , that any amounts payable


pursuant to Section 6.4(a) (or the same amounts payable pursuant to Section 6.5 ) shall be payable beginning upon the Company’s first ordinary payroll date after the 30 th day following the termination of his employment, subject to the satisfaction of the conditions set forth in Section 7.3 prior to such date.
7.2     No Mitigation; No Offset . In the event of any termination of employment under Section 6 , the Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due to the Executive on account of any remuneration attributable to any subsequent employment that the Executive may obtain. Any amounts payable to the Executive are in the nature of severance payments, or liquidated damages, or both, and are not in the nature of a penalty.
7.3     General Release . No amounts payable to the Executive upon the termination of his employment pursuant to Section 6.4(a) or (c) (or the same amounts payable pursuant to Section 6.5 ) shall be made to the Executive unless and until he executes a general release substantially in the form annexed to this Agreement as Exhibit A and such general release becomes effective within 30 days after the date of termination pursuant to its terms. If such release does not become effective within the time period prescribed above, the Company’s obligations under Section 6.4(a) or (c) (or the same amounts payable pursuant to Section 6.5 ) shall cease immediately.
8.     EXCISE TAX .
8.1    Notwithstanding any other provisions in this Agreement, in the event that any payment or benefit received or to be received by the Executive (including any payment or benefit received in connection with a change in control of the Company or the termination of the Executive’s employment, whether pursuant to the terms of this Agreement or any other plan, program, arrangement or agreement) (all such payments and benefits, together, the “ Total Payments ”) would be subject (in whole or part), to any excise tax imposed under Section 4999 of the Code, or any successor provision thereto (the “ Excise Tax ”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, program, arrangement or agreement, the Company will reduce the Total Payments to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax (but in no event to less than zero); provided , however , that the Total Payments will only be reduced if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state, municipal and local income and employment taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state, municipal and local income and employment taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).
8.2    In the case of a reduction in the Total Payments, the Total Payments will be reduced in the following order (unless reduction in another order is required to avoid adverse consequences under Section 409A of the Code, in which case, reduction will be in such other


order): (i) payments that are payable in cash that are valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced (if necessary, to zero), with amounts that are payable last reduced first; (ii) payments and benefits due in respect of any equity valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24) will next be reduced; (iii) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with amounts that are payable last reduced first, will next be reduced; (iv) payments and benefits due in respect of any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24) will next be reduced; and (v) all other non-cash benefits not otherwise described in clauses (ii) or (iv) will be next reduced pro-rata. Any reductions made pursuant to each of clauses (i)-(v) above will be made in the following manner: first, a pro-rata reduction of cash payment and payments and benefits due in respect of any equity not subject to Section 409A of the Code, and second, a pro-rata reduction of cash payments and payments and benefits due in respect of any equity subject to Section 409A of the Code as deferred compensation.
8.3    For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax: (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code will be taken into account; (ii) no portion of the Total Payments will be taken into account which, in the opinion of tax counsel (“ Tax Counsel ”) reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the change in control, the Company’s independent auditor (the “ Auditor ”), does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments will be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as set forth in Section 280G(b)(3) of the Code) that is allocable to such reasonable compensation; and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments will be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
8.4    At the time that payments are made under this Agreement, the Company will provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including any opinions or other advice the Company received from Tax Counsel or the Auditor. If the Executive objects to the Company’s calculations, the Company will pay to the Executive such portion of the Total Payments (up to 100% thereof) as the Executive determines is necessary to result in the proper application of this Section 8 . All determinations required by this Section 8 (or requested by either the Executive or the Company in connection with this Section 8 ) will be at the expense of the Company. The fact that the Executive’s right to payments or benefits may be reduced by reason of the limitations contained in this Section 8 will not of itself limit or otherwise affect any other rights of the Executive under this Agreement.


9.     INDEMNIFICATION .
9.1     General . The Company agrees that if the Executive is made a party or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (an “ Indemnifiable Action ”), by reason of the fact that he is or was a director or officer of the Company or the Parent or is or was serving at the request of the Company or the Parent as a director, officer, member, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Indemnifiable Action is alleged action in an official capacity as a director, officer, member, employee or agent he shall be indemnified and held harmless by the Company and the Parent to the fullest extent authorized by Nevada law and the Company’s and the Parent’s by-laws, as the same exist or may hereafter be amended (but, in the case of any such amendment to the Company’s or the Parent’s by-laws, only to the extent such amendment permits the Company or the Parent to provide broader indemnification rights than the Company’s or the Parent’s by-laws permitted the Company or the Parent to provide before such amendment, as applicable), against all expense, liability and loss (including attorneys’ fees, judgments, fines, or penalties and amounts paid or to be paid in settlement) incurred or suffered by the Executive in connection therewith. The indemnification provided to the Executive pursuant to this Section 9 shall be in addition to, and not in lieu of, any indemnification provided to the Executive pursuant to (a) any separate indemnification agreement between the Executive and any member of the Company Group, (b) the Company’s and/or the Parent’s charter and/or bylaws, and/or (c) applicable law; provided that nothing herein or therein shall entitle the Executive to recover any expense, liability or loss more than once.
9.2     Procedure . The indemnification provided to the Executive pursuant to this Section 9 shall be subject to the following conditions:
(a)    The Executive must promptly give the Company written notice of any actual or threatened Indemnifiable Action and, upon providing such notice, the Executive shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proof to overcome that presumption in reaching any contrary determination; provided , however , that the Executive’s failure to give such notice shall not affect the Company’s obligations hereunder;
(b)    The Company will be permitted, at its option, to participate in, or to assume, the defense of any Indemnifiable Action, with counsel approved by the Executive; provided , however , that (i) the Executive shall have the right to employ his own counsel in such Indemnifiable Action at the Executive’s expense; and (ii) if (A) the retention of counsel by the Executive has been previously authorized by the Company, (B) the Executive shall have concluded, based on the advice of his legal counsel, that there may be a conflict of interest between the Company and the Executive in the conduct of any such defense, or (C) the Company shall not, in fact, have retained counsel to assume the defense of such Indemnifiable Action, the fees and expenses of the Executive’s counsel shall be at the expense of the Company; and provided , further , that the Company shall not settle any action or claim that would impose any limitation or


penalty on the Executive without obtaining the Executive’s prior written consent, which consent shall not be unreasonably withheld;
(c)    The Executive must provide reasonable cooperation to the Company in the defense of any Indemnifiable Action; and
(d)    The Executive must refrain from settling any Indemnifiable Action without obtaining the Company’s prior written consent, which consent shall not be unreasonably withheld.
9.3     Advancement of Costs and Expenses . The Company agrees to advance all costs and expenses referred to in Sections 9.1 and 9.6 ; provided , however , that the Executive agrees to repay to the Company any amounts so advanced only if, and to the extent that, it shall ultimately be determined by a court of competent jurisdiction that the Executive is not entitled to be indemnified by the Company or the Parent as authorized by this Agreement. The advances to be made hereunder shall be paid by the Company to or on behalf of the Executive within 20 days following delivery of a written request therefor by the Executive to the Company. The Executive’s entitlement to advancement of costs and expenses hereunder shall include those incurred in connection with any action, suit or proceeding by the Executive seeking a determination, adjudication or arbitration in award with respect to his rights and/or obligations under this Section 9 .
9.4     Non-Exclusivity of Rights . The right to indemnification and the payment of expenses incurred in defending an Indemnifiable Action in advance of its final disposition conferred in this Section 9 shall not be exclusive of any other right which the Executive may have or hereafter may acquire under any statute, provision of the certificate of incorporation or by-laws of the Company or the Parent, agreement, vote of stockholders or disinterested directors or otherwise.
9.5     D&O Insurance . The Company will maintain a directors’ and officers’ liability insurance policy covering the Executive that provides coverage that is reasonable in relation to the Executive’s position during the Term of Employment.
9.6     Witness Expenses . Notwithstanding any other provision of this Agreement, the Company and the Parent shall indemnify the Executive if and whenever he is a witness or threatened to be made a witness to any action, suit or proceeding to which the Executive is not a party, by reason of the fact that the Executive is or was a director or officer of the Company or its Affiliates or by reason of anything done or not done by him in such capacity, against all expense, liability and loss incurred or suffered by the Executive in connection therewith; provided , however , that if the Executive is no longer employed by the Company, the Company will compensate him, on an hourly basis, for all time spent (except for time spent actually testifying), at either his then current compensation rate or his Base Salary at the rate in effect as of the termination of his employment, whichever is higher.
9.7     Survival . The provisions of this Section 9 shall survive the expiration or earlier termination of this Agreement, regardless of the reason for such termination.


10.     DUTY OF LOYALTY .
10.1     General . The Parties hereto understand and agree that the purpose of the restrictions contained in this Section 10 is to protect the goodwill and other legitimate business interests of the Company and its Affiliates and that the Company would not have entered into this Agreement in the absence of such restrictions. The Executive acknowledges and agrees that the restrictions are reasonable and do not, and will not, unduly impair his ability to earn a living after the termination of his employment with the Company.
10.2     Confidential Information . The Executive understands and acknowledges that Confidential Information constitutes a valuable asset of the Company and its Affiliates and may not be converted to the Executive’s own or any third party’s use. Accordingly, the Executive hereby agrees that he shall not, directly or indirectly, during the Term of Employment or at any time after the termination of his employment, disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information. The Executive further agrees that he shall not, directly or indirectly, during the Term of Employment or at any time after the termination of his employment, use or make use of any Confidential Information in connection with any business activity other than that of the Company. The Parties acknowledge and agree that this Agreement is not intended to, and does not, alter the Company’s or the Parent’s rights, or the Executive’s obligations, under any state or federal statutory or common law regarding trade secrets and unfair trade practices.
10.3     Company Property . All Company Property is and shall remain exclusively the property of the Company. Unless authorized in writing to the contrary, the Executive shall promptly, and without charge, deliver to the Company on the termination of employment hereunder, or at any other time the Company may so request, all Company Property that the Executive may then possess or have under his control.
10.4     Required Disclosure . In the event the Executive is required by law or court order to disclose any Confidential Information or to produce any Company Property, the Executive shall promptly notify the Company of such requirement and provide the Company with a copy of any court order or of any law which requires such disclosure and, if the Company so elects, to the extent permitted by applicable law, give the Company an adequate opportunity, at its own expense, to contest such law or court order prior to any such required disclosure or production by the Executive.
10.5     Non-Solicitation of Employees . The Executive agrees that, during the Restricted Period, he will not, directly or indirectly, for himself, or as agent, or on behalf of or in conjunction with any other person, firm, partnership, corporation or other entity, induce or entice any employee of the Company or any Affiliate to leave such employment, or otherwise hire or retain any employee of the Company or any Affiliate, or cause or assist anyone else in doing so. For the purposes of this Section 10.5 , the term “employee” shall include consultants and independent contractors, and shall be deemed to include current employees and any employee who left the employ of the Company or any Affiliate within six months prior to any such inducement or enticement or hiring or retention of that person.


10.6     Non-Competition . The Executive agrees that, during the Restricted Period, the Executive shall not, without the express written consent of the Board, directly or indirectly enter the employ of, act as a consultant to or otherwise render any services on behalf of, act as a lender to, or be a director, officer, principal, agent, stockholder, member, owner or partner of, or permit the Executive’s name to be used in connection with the activities of any other business, organization or third party engaged in the gaming industry or otherwise in the same business as the Company or any Affiliate and that directly or indirectly conducts its business in the Restricted Area .
10.7     Remedies . The Executive and the Company acknowledge that the covenants contained in this Section 10 are reasonable under the circumstances. Accordingly, if, in the opinion of any court of competent jurisdiction, any such covenant is not reasonable in any respect, such court will have the right, power and authority to sever or modify any provision or provisions of such covenants as to the court will appear not reasonable and to enforce the remainder of the covenants as so amended. The Executive further acknowledges that the remedy at law available to the Company Group for breach of any of the Executive’s obligations under this Section 10 may be inadequate and that damages flowing from such a breach may not readily be susceptible to being measured in monetary terms. Accordingly, in addition to any other rights or remedies that the Company Group may have at law, in equity or under this Agreement, upon proof of the Executive’s violation of any such provision of this Agreement, the Company Group will be entitled to seek immediate injunctive relief and may seek a temporary order restraining any threatened or further breach, without the necessity of proof of actual damage or the posting of any bond.
10.8     Protected Disclosures .
(a)    Nothing in this Agreement will preclude, prohibit or restrict the Executive from (i) communicating with any federal, state or local administrative or regulatory agency or authority, including but not limited to the Securities and Exchange Commission (the “ SEC ”); (ii) participating or cooperating in any investigation conducted by any governmental agency or authority; or (iii) filing a charge of discrimination with the United States Equal Employment Opportunity Commission or any other federal state or local administrative agency or regulatory authority.
(b)    Nothing in this Agreement, or any other agreement between the parties, prohibits or is intended in any manner to prohibit, the Executive from (i) reporting a possible violation of federal or other applicable law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the SEC, the U.S. Congress, and any governmental agency Inspector General, or (ii) making other disclosures that are protected under whistleblower provisions of federal law or regulation. This Agreement does not limit the Executive’s right to receive an award (including, without limitation, a monetary reward) for information provided to the SEC. The Executive does not need the prior authorization of anyone at the Company to make any such reports or disclosures, and the Executive is not required to notify the Company that the Executive has made such reports or disclosures.


(c)    Nothing in this Agreement or any other agreement or policy of the Company is intended to interfere with or restrain the immunity provided under 18 U.S.C. §1833(b). The Executive cannot be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) (A) in confidence to federal, state or local government officials, directly or indirectly, or to an attorney, and (B) for the purpose of reporting or investigating a suspected violation of law; (ii) in a complaint or other document filed in a lawsuit or other proceeding, if filed under seal; or (iii) in connection with a lawsuit alleging retaliation for reporting a suspected violation of law, if filed under seal and does not disclose the trade secret, except pursuant to a court order.
(d)    The foregoing provisions regarding Protected Disclosures are intended to comply with all applicable laws. If any laws are adopted, amended or repealed after the execution of this Agreement, this Agreement shall be deemed to be amended to reflect the same.
10.9     Survival . The Executive agrees that the provisions of this Section 10 shall survive the termination of this Agreement and the termination of the Executive’s employment to the extent provided above.
11.     DISPUTE RESOLUTION; FEES . Except as otherwise provided in Section 9.3 , the Parties agree that in the event any Party finds it necessary to initiate any legal action to obtain any payments, benefits or rights provided by this Agreement to such Party, the other Party shall reimburse such Party for all reasonable attorney’s fees and other related expenses incurred by him or it to the extent such Party is successful in such action.
12.     NOTICES . All notices, demands and requests required or permitted to be given to a Party under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give notice of:
If to the Company:
Station Casinos LLC
1505 S. Pavilion Center Drive
Las Vegas, Nevada 89135
Attention: President
If to the Parent:
Red Rock Resorts, Inc.
1505 S. Pavilion Center Drive
Las Vegas, Nevada 89135
Attention: President
If to the Executive:
To the Executive’s most current home address, as set forth in the employment records of the Company
13.     BENEFICIARIES/REFERENCES . The Executive shall be entitled to select a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following


the Executive’s death, and may change such election, by giving the Company written notice thereof. In the event of the Executive’s death or a judicial determination of his incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.
14.     SURVIVORSHIP . The respective rights and obligations of the Parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations, whether or not survival is specifically set forth in the applicable provisions. The provisions of this Section 14 are in addition to the survivorship provisions of any other Section of this Agreement.
15.     REPRESENTATIONS AND WARRANTIES . Each Party represents and warrants that he or it is fully authorized and empowered to enter into this Agreement and that the performance of his or its obligations under this Agreement will not violate any agreement between that Party and any other Person.
16.     ENTIRE AGREEMENT . This Agreement contains the entire agreement among the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, among the Parties with respect thereto (including the prior employment agreement among the Parties). No representations, inducements, promises or agreements not embodied herein shall be of any force or effect.
17.     ASSIGNABILITY; BINDING NATURE . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs and assigns; provided , however , that no rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive, other than rights to compensation and benefits hereunder, which may be transferred only by will or operation of law and subject to the limitations of this Agreement; and provided , further , that no rights or obligations of the Company under this Agreement may be assigned or transferred by the Company, except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company under this Agreement, either contractually or as a matter of law.
18.     AMENDMENT OR WAIVER . No provision in this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing, signed by all Parties. No waiver by one Party of any breach by any other Party of any condition or provision of this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. No failure of the Company to exercise any power given it hereunder or to insist upon strict compliance by the Executive with any obligation hereunder, and no custom or practice at variance with the terms hereof, shall constitute a waiver of the right of the Company to demand strict compliance with the terms hereof.


19.     SEVERABILITY . In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. Without limiting the generality of the immediately preceding sentence, in the event that a court of competent jurisdiction or an arbitrator appointed in accordance with Section 21 determines that the provisions of this Agreement would be unenforceable as written because they cover too extensive a geographic area, too broad a range of activities or too long a period of time, or otherwise, then such provisions will automatically be modified to cover the maximum geographic area, range of activities and period of time as may be enforceable, and, in addition, such court or arbitrator (as applicable) is hereby expressly authorized to so modify this Agreement and to enforce it as so modified.
20.     SECTION 409A . Notwithstanding anything in this Agreement to the contrary, no payment under this Agreement shall be made to the Executive at a time or in a form that would subject Executive to the penalty tax of Section 409A of the Code (the “ 409A Tax ”). If any payment under any other provision of this Agreement would, if paid at the time or in the form called for under such provision, subject the Executive to the 409A Tax, such payment (the “ Deferred Amount ”) shall instead be paid at the earliest time that it could be paid without subjecting the Executive to the 409A Tax, and shall be paid in a form that would not subject the Executive to the 409A Tax. By way of specific example, if the Executive is a “specified employee” (within the meaning of Section 409A of the Code), at the time of the Executive’s “ Separation From Service ” (within the meaning of Section 409A of the Code) and if any portion of the payments or benefits to be received by the Executive upon Separation From Service would be considered deferred compensation under Section 409A of the Code and cannot be paid or provided to the Executive without the Executive incurring the 409A Tax, then such amounts that would otherwise be payable pursuant to this Agreement during the six-month period immediately following the Executive’s Separation From Service (which, for the avoidance of doubt, will be considered a part of the Deferred Amount) will instead be paid or made available on the earlier of (i) the first business day of the seventh month following the date of Executive’s Separation From Service or (ii) the Executive’s death. The Deferred Amount shall accrue simple interest at the prime rate of interest as published by Bank of America N.A. (or its successor) during the deferral period and shall be paid with the Deferred Amount. With respect to any amount of expenses eligible for reimbursement or the provision of any in-kind benefits under this Agreement, to the extent such payment or benefit would be considered deferred compensation under Section 409A of the Code or is required to be included in the Executive’s gross income for federal income tax purposes, such expenses (including expenses associated with in-kind benefits) will be reimbursed no later than December 31st of the year following the year in which the Executive incurs the related expenses. In no event will the reimbursements or in-kind benefits to be provided by the Company in one taxable year affect the amount of reimbursements or in-kind benefits to be provided in any other taxable year, nor will the Executive’s right to reimbursement or in-kind benefits be subject to liquidation or exchange for another benefit. Each payment under this Agreement is intended to be a “separate payment” and not one of a series of payments for purposes of Section 409A of the Code.
21.     MUTUAL ARBITRATION AGREEMENT .


21.1     Arbitrable Claims . All disputes between the Executive (and his attorneys, successors, and assigns) and the Company (and its trustees, beneficiaries, officers, directors, managers, affiliates, employees, agents, successors, attorneys, and assigns) relating in any manner whatsoever to the employment or termination of the Executive, including all disputes arising under this Agreement (“ Arbitrable Claims ”), shall be resolved by binding arbitration as set forth in this Section 21 (the “ Mutual Arbitration Agreement ”). Arbitrable Claims shall include claims for compensation, claims for breach of any contract or covenant (express or implied), and tort claims of all kinds, as well as all claims based on any federal, state, or local law, statute or regulation, but shall not include the Company’s right to seek injunctive relief as provided in Section 10.7 . Arbitration shall be final and binding upon the Parties and shall be the exclusive remedy for all Arbitrable Claims. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS, EXCEPT AS PROVIDED BY SECTION 21.4 .
21.2     Procedure . Arbitration of Arbitrable Claims shall be in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, as amended, and as augmented in this Agreement. Either Party may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Otherwise, neither Party shall initiate or prosecute any lawsuit, appeal or administrative action in any way related to an Arbitrable Claim. The initiating Party must file and serve an arbitration claim within 60 days of learning the facts giving rise to the alleged claim. All arbitration hearings under this Agreement shall be conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the interpretation and enforcement of this Agreement. Subject to Section 11 , the fees of the arbitrator shall be divided equally between both Parties.
21.3     Confidentiality . All proceedings and all documents prepared in connection with any Arbitrable Claim shall be confidential and, unless otherwise required by law, the subject matter and content thereof shall not be disclosed to any Person other than the Parties, their counsel, witnesses and experts, the arbitrator and, if involved, the court and court staff.
21.4     Applicability . This Section 21 shall apply to all disputes under this Agreement other than disputes relating to the enforcement of the Company’s rights under Section 10 of this Agreement.
21.5     Acknowledgements . The Executive acknowledges that he:
(a)    has carefully read this Section 21 ;
(b)    understands its terms and conditions; and
(c)    has entered into this Mutual Arbitration Agreement voluntarily and not in reliance on any promises or representations made by the Company other than those contained in this Mutual Arbitration Agreement.
22.     GOVERNING LAW . This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Nevada without reference to the principles of conflict of laws thereof. In the event of any dispute or controversy arising out of or relating to


this Agreement that is not an Arbitrable Claim, the Parties mutually and irrevocably consent to, and waive any objection to, the exclusive jurisdiction of any court of competent jurisdiction in Clark County, Nevada, to resolve such dispute or controversy.
23.     HEADINGS; INTERPRETATION . The headings of the Sections and Sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. The word “including” (in its various forms) means including without limitation. All references in this Agreement to “days” refer to “calendar days” unless otherwise specified.
24.     CLAWBACK . Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with any member of the Company Group or any Affiliate, which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by any member of the Company Group or an Affiliate pursuant to any such law, government regulation or stock exchange listing requirement).
25.     WITHHOLDING . The Company and any Affiliate will have the right to withhold from any amount payable hereunder any federal, state, city, local, foreign or other taxes in order for the Company or any Affiliate to satisfy any withholding tax obligation it may have under any applicable law, regulation or ruling.
26.     GUARANTEE . The Parent and Station Holdco LLC, to the fullest extent permitted by applicable law, hereby irrevocably and unconditionally guarantees to the Executive the prompt performance and payment in full when due of all obligations of the Company to the Executive under this Agreement.
27.     COUNTERPARTS . This Agreement may be executed in counterparts, including by email delivery of a scanned signature page in pdf or tiff format, each of which shall be deemed an original and all of which shall constitute one and the same Agreement with the same effect as if all Parties had signed the same signature page. Any signature page of this Agreement may be delivered detached from any counterpart of this Agreement and reattached to any other counterpart of this Agreement identical in form hereto but having attached to it one or more additional signature pages.
[Remainder of page intentionally left blank]



IN WITNESS WHEREOF , the undersigned have executed this Agreement on the respective dates set forth below.
STATION CASINOS LLC
By: /s/ JEFFREY T. WELCH    
Name:    Jeffrey T. Welch
Title:
Executive Vice President and
Chief Legal Officer

2/19/19
Date

RED ROCK RESORTS, INC.
(for itself and on behalf of Station Holdco LLC)
By: /s/ JEFFREY T. WELCH    
Name:    Jeffrey T. Welch
Title:
Executive Vice President and
Chief Legal Officer

2/19/19
Date


/s/ ROBERT A. FINCH    
ROBERT A. FINCH
2/18/19
Date




EXHIBIT A
GENERAL RELEASE AND COVENANT NOT TO SUE
This GENERAL RELEASE AND COVENANT NOT TO SUE (this “ Release ”) is executed and delivered by ROBERT A. FINCH (the “ Executive ”) to RED ROCK RESORTS, INC. , STATION CASINOS LLC , and STATION HOLDCO LLC (collectively, the “ Company ”).
In consideration of the agreement by the Company or its affiliates to provide certain separation payments pursuant to Section 6 of the Employment Agreement between the Executive and the Company, dated as of February __, 2019 (the “ Employment Agreement ”), and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Executive hereby agrees as follows:
1.     RELEASE AND COVENANT . THE EXECUTIVE, OF HIS OWN FREE WILL, VOLUNTARILY RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND AFFILIATES, AND EACH OF THEIR RESPECTIVE PAST AND PRESENT AGENTS, EMPLOYEES, MANAGERS, REPRESENTATIVES, OFFICERS, DIRECTORS, ATTORNEYS, ACCOUNTANTS, TRUSTEES, SHAREHOLDERS, PARTNERS, INSURERS, HEIRS, PREDECESSORS-IN-INTEREST, ADVISORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “ RELEASED PARTIES ”) FROM, AND COVENANTS NOT TO SUE OR PROCEED AGAINST ANY OF THE FOREGOING ON THE BASIS OF, ANY AND ALL PAST OR PRESENT CAUSES OF ACTION, SUITS, AGREEMENTS OR OTHER RIGHTS OR CLAIMS WHICH THE EXECUTIVE, HIS DEPENDENTS, RELATIVES, HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS HAS OR HAVE AGAINST ANY OF THE RELEASED PARTIES UPON OR BY REASON OF ANY MATTER ARISING OUT OF HIS EMPLOYMENT BY THE COMPANY AND ITS SUBSIDIARIES AND THE CESSATION OF SAID EMPLOYMENT, AND INCLUDING, BUT NOT LIMITED TO, ANY ALLEGED VIOLATION OF THE CIVIL RIGHTS ACTS OF 1964 AND 1991, THE EQUAL PAY ACT OF 1963, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967 (INCLUDING THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990), THE REHABILITATION ACT OF 1973, THE FAMILY AND MEDICAL LEAVE ACT OF 1993, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974, THE NEVADA FAIR EMPLOYMENT PRACTICES ACT, THE LABOR LAWS OF THE UNITED STATES AND NEVADA, AND ANY OTHER FEDERAL, STATE OR LOCAL LAW, REGULATION OR ORDINANCE, OR PUBLIC POLICY, CONTRACT OR TORT LAW, HAVING ANY BEARING WHATSOEVER ON THE TERMS AND CONDITIONS OR CESSATION OF HIS EMPLOYMENT WITH THE COMPANY AND ITS SUBSIDIARIES. THIS RELEASE DOES NOT AFFECT ANY RIGHTS THE EXECUTIVE MAY HAVE TO FILE A CHARGE WITH ANY FEDERAL OR STATE ADMINISTRATIVE


AGENCY; PROVIDED, HOWEVER, THAT THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE EXECUTIVE IS NOT ENTITLED TO ANY PERSONAL RECOVERY IN ANY SUCH AGENCY PROCEEDINGS (EXCEPT AS OTHERWISE PERMITTED PURSUANT TO SECTION 10.8 OF THE EMPLOYMENT AGREEMENT).
2.     DUE CARE . THE EXECUTIVE ACKNOWLEDGES THAT HE HAS RECEIVED A COPY OF THIS RELEASE PRIOR TO ITS EXECUTION AND HAS BEEN ADVISED HEREBY OF HIS OPPORTUNITY TO REVIEW AND CONSIDER THIS RELEASE FOR TWENTY-ONE (21) DAYS PRIOR TO ITS EXECUTION. THE EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS BEEN ADVISED HEREBY TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE. THE EXECUTIVE ENTERS INTO THIS RELEASE HAVING FREELY AND KNOWINGLY ELECTED, AFTER DUE CONSIDERATION, TO EXECUTE THIS RELEASE AND TO FULFILL THE PROMISES SET FORTH HEREIN. THIS RELEASE SHALL BE REVOCABLE BY THE EXECUTIVE DURING THE SEVEN (7) DAY PERIOD FOLLOWING ITS EXECUTION, AND SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. IN THE EVENT OF SUCH A REVOCATION, THE EXECUTIVE SHALL NOT BE ENTITLED TO THE CONSIDERATION FOR THIS RELEASE SET FORTH ABOVE.
3.     RELIANCE BY THE EXECUTIVE . THE EXECUTIVE ACKNOWLEDGES THAT, IN HIS DECISION TO ENTER INTO THIS RELEASE, HE HAS NOT RELIED ON ANY REPRESENTATIONS, PROMISES OR ARRANGEMENT OF ANY KIND, INCLUDING ORAL STATEMENTS BY REPRESENTATIVES OF THE COMPANY, EXCEPT AS SET FORTH IN THIS RELEASE.
4.     MISCELLANEOUS . THIS RELEASE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. IF ANY PROVISION OF THIS RELEASE IS HELD INVALID OR UNENFORCEABLE FOR ANY REASON, THE REMAINING PROVISIONS SHALL BE CONSTRUED AS IF THE INVALID OR UNENFORCEABLE PROVISION HAD NOT BEEN INCLUDED.
This GENERAL RELEASE AND COVENANT NOT TO SUE is executed by the Executive and delivered to the Company on ___________________, 20___.
“Executive”
_______________________________
ROBERT A. FINCH



Exhibit 31.1

CERTIFICATION
I, Frank J. Fertitta III, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Red Rock Resorts, Inc.;
2.
Based on my knowledge, this quarterly 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;
3.
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;
4.
The registrant's other certifying officer 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
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 quarterly report is being prepared;
(b)
designed such internal controls over financial reporting, or caused such internal controls 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;
(c)
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
(d)
disclosed in this report any change in the registrant's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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.
5.
The registrant's other certifying officer 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 registrant's board of directors (or persons performing the equivalent functions):
(a)
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
(b)
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.
Date: May 8, 2019
/s/ FRANK J. FERTITTA III
Frank J. Fertitta III
Chief Executive Officer





Exhibit 31.2

CERTIFICATION
I, Stephen L. Cootey, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Red Rock Resorts, Inc.;
2.
Based on my knowledge, this quarterly 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;
3.
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;
4.
The registrant's other certifying officer 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
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 quarterly report is being prepared;
(b)
designed such internal controls over financial reporting, or caused such internal controls 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;
(c)
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
(d)
disclosed in this report any change in the registrant's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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.
5.
The registrant's other certifying officer 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 registrant's board of directors (or persons performing the equivalent functions):
(a)
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
(b)
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.
Date: May 8, 2019
/s/ STEPHEN L. COOTEY
Stephen L. Cootey
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)





Exhibit 32.1

Red Rock Resorts, Inc.
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
        Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certifies as follows:
1.
Frank J. Fertitta III is the Chief Executive Officer of Red Rock Resorts, Inc. (the "Company").
2.
The undersigned certifies to the best of his knowledge:
(A)
The Company's Form 10-Q for the quarter ended March 31, 2019 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the "Exchange Act"); and
(B)
The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: May 8, 2019
/s/ FRANK J. FERTITTA III
Frank J. Fertitta III
Chief Executive Officer





Exhibit 32.2

Red Rock Resorts, Inc.
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
        Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certifies as follows:
1.
Stephen L. Cootey is the Principal Financial Officer of Red Rock Resorts, Inc. (the "Company").
2.
The undersigned certifies to the best of his knowledge:
(A)
The Company's Form 10-Q for the quarter ended March 31, 2019 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the "Exchange Act"); and
(B)
The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: May 8, 2019
/s/ STEPHEN L. COOTEY
Stephen L. Cootey
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)