Business context and reporting period
This is Twin River Worldwide Holdings, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2020. The company operated gaming, racing, hotel, and related facilities across several U.S. markets. The filing identifies the issuer as Twin River Worldwide Holdings, Inc. (NYSE: TRWH).
COVID-19 closures and operating limits dominated the period. Properties were closed by mid-March; reopening began in May and June under reduced capacity and with amenities restricted. The filing also reports the January acquisition of the Black Hawk Casinos and, as a subsequent event, the July 1 acquisition of Casino KC and Casino Vicksburg.
Financial results and liquidity
Amounts below are in millions of dollars except per-share data. Revenue and earnings comparisons are year over year.
| Metric | Q2 2020 | H1 2020 |
|---|---|---|
| Revenue | $28.9; down 79.8% | $138.1; down 47.7% |
| Operating income (loss) | $(21.0), versus $33.8 income | $(24.1), versus $64.2 income |
| Net income (loss) | $(23.6), versus $17.2 income | $(32.4), versus $34.8 income |
| Diluted EPS | $(0.77), versus $0.42 | $(1.04), versus $0.87 |
| Adjusted EBITDA, non-GAAP | $(10.7), versus $47.5 | $11.3, down 87.6% from $91.3 |
| Operating cash flow | Not separately presented here | $(16.4), versus $56.7 provided |
Q2 operating loss margin was approximately 72.5% negative, compared with a 23.6% positive margin in Q2 2019. H1 operating loss margin was approximately 17.5% negative, versus a 24.3% positive margin. Interest expense was $15.2 million in Q2 and $26.7 million in H1, reflecting increased borrowings and higher weighted-average rates.
At June 30, cash and cash equivalents were $331.1 million ($332.7 million including restricted cash), versus $182.6 million at year-end. Working capital was $315.2 million. Long-term debt principal comprised a $572 million term loan and $400 million of 6.75% senior notes; the balance-sheet carrying amount, net of discounts and fees and including current debt, was $943.9 million. The $250 million revolver was undrawn at quarter-end. H1 investing cash outflow was $55.9 million, including $50.5 million for Black Hawk; capital expenditures were $5.4 million.
Material changes and unusual items
- COVID-19 caused the steep revenue decline, with Q2 revenue down 79.8%. Cost reductions did not offset the loss of revenue; advertising, general and administrative expense was $24.0 million in Q2.
- The company recorded $8.6 million of H1 goodwill and intangible impairment related to Black Hawk, attributed to pandemic-related economic and market conditions. The acquisition-date purchase price allocation remained preliminary.
- Income tax benefit was $12.5 million in Q2 and $18.2 million in H1; management cited lower pretax income and CARES Act effects.
- H1 included $1.0 million of insurance recovery gains for roof damage at Arapahoe Park. The company also reported a $2.9 million CARES Act employee-retention credit in its Adjusted EBITDA reconciliation.
- Share repurchases and a $0.10-per-share dividend occurred in Q1. The April credit amendment subsequently barred dividends and other restricted payments, including repurchases, during the covenant-relief period.
Outlook, financing, and risks
Management gave no quantified earnings or revenue guidance. It expected COVID-related restrictions to materially hurt Q3 results, though less than in Q2 because all properties were open in some capacity. It could not estimate when demand or operations would return to pre-pandemic levels. Management said available cash and revolver capacity were sufficient for obligations, debt service, and required capital expenditures for the foreseeable future, while noting that this outlook depended on an uncertain operating environment.
In May, the company increased its term loan by $275 million; the incremental borrowing carries interest at LIBOR plus 8.00%, with a 1.00% floor, through May 2026. The April amendment replaced the leverage-ratio test through the period covering Q1 2021 reporting with monthly minimum-liquidity requirements: $65 million at June 30, $55 million at July 31, and $50 million at each month-end thereafter through March 2021. The company reported compliance at June 30. Acquisition restrictions apply during the relief period, subject to exceptions for previously announced deals.
Casino KC and Casino Vicksburg were acquired July 1 for approximately $230 million. Pending transactions included Shreveport and MontBleu for $155 million, expected to close in the first half of 2021, and Bally’s Atlantic City for $25 million, expected in mid-to-late Q4 2020; both were subject to regulatory approvals and other conditions. The filing highlights risks from renewed closures, reduced capacity and customer demand, fixed costs, financing access, covenant compliance, acquisition approvals and integration, gaming regulation, and potential effects of cost cuts on employees and customer loyalty.
Important facts for investors to verify
- Whether reopening restrictions, customer demand, and operating results improved or deteriorated after June 30; the filing states Q3 would remain materially affected.
- Liquidity and compliance with monthly minimum-cash covenants, including the impact of post-quarter acquisitions and financing.
- The final purchase accounting and financing for Black Hawk, Casino KC, and Casino Vicksburg, and the status and approval conditions of the pending acquisitions.
- The incremental term loan’s ongoing interest cost and the company’s capacity to service debt while operating below full capacity.
- The eventual availability and conditions of CARES Act tax benefits, and the court’s approval of the settlement involving Chatham Asset Management’s claims.