Accounting Project Final -- AWARDED
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PART I: FINANCIAL INFORMATION Item 1. Financial Statement s.
EVERI HOLDINGS INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOL IDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except loss per share amounts)
Three Months Ended March
31, 2017 2016 Revenues
Games $ 55,276 $ 48,178 Payments 182,261 157,591
Total revenues 237,537 205,769 Costs and expenses
Games cost of revenue (exclusive of depreciation and amortization) 12,444 8,436 Payments cost of revenue (exclusive of depreciation and amortization) 140,799 122,657 Operating expenses 28,993 30,005 Research and development 4,543 5,368 Depreciation 10,830 12,335 Amortization 17,325 23,183
Total costs and expenses 214,934 201,984 Operating income 22,603 3,785
Other expenses Interest expense, net of interest income 25,057 24,992
Total other expenses 25,057 24,992 Loss before income tax (2,454) (21,207)
Income tax provision (benefit) 1,054 (8,056) Net loss (3,508) (13,151)
Foreign currency translation 272 (485) Comprehensive loss $ (3,236) $ (13,636)
Loss per share Basic $ (0.05) $ (0.20) Diluted $ (0.05) $ (0.20)
Weighted average common shares outstanding Basic 66,090 66,034 Diluted 66,090 66,034
See notes to unaudited condensed consolidated financial statements.
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EVERI HOLDINGS INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET S
(In thousands, except par value amounts)
At March 31, At December 31, 2017 2016
ASSETS Current assets
Cash and cash equivalents $ 127,861 $ 119,051 Settlement receivables 42,443 128,821 Trade and other receivables, net of allowances for doubtful accounts of $4,999 million and $4,701 at March 31, 2017 and December 31, 2016, respectively 47,874 56,651 Inventory 22,386 19,068 Prepaid expenses and other assets 21,555 18,048
Total current assets 262,119 341,639 Non-current assets
Property, equipment and leased assets, net 97,303 98,439 Goodwill 640,551 640,546 Other intangible assets, net 309,450 317,997 Other receivables 3,453 2,020 Other assets 7,598 7,522
Total non-current assets 1,058,355 1,066,524 Total assets $ 1,320,474 $ 1,408,163
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities Settlement liabilities $ 127,635 $ 239,123 Accounts payable and accrued expenses 120,348 94,391 Current portion of long-term debt 10,000 10,000
Total current liabilities 257,983 343,514 Non-current liabilities
Deferred tax liability 58,238 57,611 Long-term debt, less current portion 1,110,995 1,111,880 Other accrued expenses and liabilities 2,874 2,951
Total non-current liabilities 1,172,107 1,172,442 Total liabilities 1,430,090 1,515,956
Commitments and contingencies (Note 12) Stockholders’ deficit
Common stock, $0.001 par value, 500,000 shares authorized and 90,965 and 90,952 shares issued at March 31, 2017 and December 31, 2016, respectively 91 91 Convertible preferred stock, $0.001 par value, 50,000 shares authorized and 0 shares outstanding at March 31, 2017 and December 31, 2016, respectively — — Additional paid-in capital 266,175 264,755 Accumulated deficit (197,806) (194,299) Accumulated other comprehensive loss (1,838) (2,109) Treasury stock, at cost, 24,870 and 24,867 shares at March 31, 2017 and December 31, 2016, respectively (176,238) (176,231)
Total stockholders’ deficit (109,616) (107,793) Total liabilities and stockholders’ deficit $ 1,320,474 $ 1,408,163
See notes to unaudited condensed consolidated financial statements.
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EVERI HOLDINGS INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLO WS
(In thousands)
Three Months Ended March 31, 2017 2016 Cash flows from operating activities
Net loss $ (3,508) $ (13,151) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 28,155 35,518 Amortization of financing costs 1,672 1,672 Loss on sale or disposal of assets 436 611 Accretion of contract rights 2,002 2,097 Provision for bad debts 2,817 2,444 Reserve for obsolescence 408 119 Stock-based compensation 1,412 1,061 Changes in operating assets and liabilities: Settlement receivables 86,400 16,634 Trade and other receivables 4,423 5,711 Inventory (3,739) (497) Prepaid and other assets (3,409) 2,047 Deferred income taxes 626 (8,343) Settlement liabilities (111,498) (29,603) Accounts payable and accrued expenses 25,161 8,384
Net cash provided by operating activities 31,358 24,704
Cash flows from investing activities Capital expenditures (17,184) (23,613) Proceeds from sale of fixed assets — 10 Placement fee agreements (3,044) (1,000) Changes in restricted cash and cash equivalents (125) 44
Net cash used in investing activities (20,353) (24,559)
Cash flows from financing activities Repayments of credit facility (2,500) (2,500) Debt issuance costs — (480) Proceeds from exercise of stock options 5 — Purchase of treasury stock (7) (9)
Net cash used in financing activities (2,502) (2,989)
Effect of exchange rates on cash 307 148
Cash and cash equivalents Net increase (decrease) for the period 8,810 (2,696) Balance, beginning of the period 119,051 102,030
Balance, end of the period $ 127,861 $ 99,334
See notes to unaudited condensed consolidated financial statements.
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Three Months Ended March 31, 2017 2016 Supplemental cash disclosures
Cash paid for interest $ 8,243 $ 8,846 Cash paid for income tax $ 575 $ 273 Cash refunded for income tax $ 200 $ —
Supplemental non-cash disclosures Accrued and unpaid capital expenditures $ 2,789 $ 12,424 Transfer of leased gaming equipment to inventory $ 2,301 $ 1,039
See notes to unaudited condensed consolidated financial statements.
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EVERI HOLDINGS INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
Everi Holdings Inc. (formerly known as Global Cash Access Holdings, Inc.) (“Everi Holdings,” “Holdings” or “Everi”) is a holding company, the assets of which are the issued and outstanding shares of capital stock of each of Everi Games Holding Inc. (formerly known as Multimedia Games Holding Company, Inc.) (“Everi Games Holding”), which owns all of the issued and outstanding shares of capital stock of Everi Games Inc. (formerly known as Multimedia Games, Inc.) (“Everi Games” or “Games”) and Everi Payments Inc. (formerly known as Global Cash Access, Inc.) (“Everi Payments” or “Payments”). Unless otherwise indicated, the terms the “Company,” “we,” “us” and “our” refer to Holdings together with its consolidated subsidiaries. Everi is dedicated to providing video and mechanical reel gaming content and technology solutions, integrated gaming payments solutions and compliance and efficiency software. Everi Games provides: (a) comprehensive content, electronic gaming units and systems for Native American and commercial casinos, including the award winning TournEvent® slot tournament solution; and (b) the central determinant system for the video lottery terminals installed in the State of New York. Everi Payments provides: (a) access to cash at gaming facilities via Automated Teller Machine (“ATM”) cash withdrawals, credit card cash access transactions, point of sale (“POS”) debit card transactions, and check verification and warranty services; (b) fully integrated gaming industry kiosks that provide cash access and related services; (c) products and services that improve credit decision making, automate cashier operations and enhance patron marketing activities for gaming establishments; (d) compliance, audit and data solutions; and (e) online payment processing solutions for gaming operators in states that offer intrastate, Internet-based gaming and lottery activities. 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Our unaudited Condensed Consolidated Financial Statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Some of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the three months ended March 31, 2017 are not necessarily indicative of results to be expected for the full fiscal year. The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. There have been no changes to our basis of presentation and significant accounting policies since the most recent filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Fair Values of Financial Instruments The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. The carrying amount of cash and cash equivalents, settlement receivables, trade receivables, other receivables, settlement liabilities, accounts payable and accrued expenses approximates fair value due to the short-term maturities of these instruments. The fair value of our borrowings are estimated based on various inputs to determine a market price, such as: market demand and supply, size of tranche, maturity and similar instruments trading in more active markets.
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