Red Rock Resorts Annual Report 2020 Form 10-K (NASDAQ:RRR) Published: February 21st, 2020 PDF generated by stocklight.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 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 47-5081182 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1505 South Pavilion Center Drive, Las Vegas, Nevada 89135 (Address of principal executive offices, Zip Code) (702) 495-3000 (Registrant’s telephone number, including area code) 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 Securities registered pursuant to Section 12(g) of the Act None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Y es ☑ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes☐ No ☑ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☑ ☐ Large accelerated filer Accelerated filer ☐ ☐ Non-accelerated filer Smaller reporting company ☐ Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑ As of June 28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s Class A common stock held by non-affiliates (all persons other than executive officers or directors) was $1.5 billion, based on the closing price on that date as reported by the NASDAQ Stock Market LLC. Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. Class Outstanding at February 14, 2020 Class A Common Stock, $0.01 par value 70,465,422 Class B Common Stock, $0.00001 par value 46,827,370 Documents Incorporated by Reference Portions of the registrant’s definitive Proxy Statement for the 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year end of December 31, 2019. TABLE OF CONTENTS PART I Item 1. Business 3 Item 1A. Risk Factors 20 Item 1B. Unresolved Staff Comments 36 Item 2. Properties 36 Item 3. Legal Proceedings 37 Item 4. Mine Safety Disclosures 37 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 6. Selected Financial Data 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 41 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 53 Item 8. Financial Statements and Supplementary Data 56 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 103 Item 9A. Controls and Procedures 103 Item 9B. Other Information 106 PART III Item 10. Directors, Executive Officers and Corporate Governance 106 Item 11. Executive Compensation 106 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 106 Item 13. Certain Relationships and Related Transactions, and Director Independence 106 Item 14. Principal Accountant Fees and Services 106 PART IV Item 15. Exhibits, Financial Statement Schedules 107 Item 16. Form 10-K Summary 111 Signatures 112 PART I ITEM 1. BUSINESS Introduction Red Rock Resorts, Inc. (“we,” “our,” “us,” “Red Rock” or the “Company”) is a holding company that owns an indirect equity interest in and manages Station Casinos LLC (“Station LLC”), through which we conduct all of our operations. Station LLC is a gaming, development and management company established in 1976 that develops and operates strategically-located casino and entertainment properties. Station LLC currently owns and operates ten major gaming and entertainment facilities and ten smaller casinos (three of which are 50% owned), offering approximately 20,400 slot machines, 375 table games and 5,000 hotel rooms in the Las Vegas regional market. In addition, Station LLC also manages Graton Resort & Casino in northern California on behalf of a Native American tribe. We hold an indirect equity interest in Station LLC through our ownership of limited liability interests in Station Holdco LLC (“Station Holdco,” and such interests, “LLC Units”), which holds all of the economic interests in Station LLC. At December 31, 2019, we held 60.1% of the equity interests in Station Holdco. We operate and control all of the business and affairs of Station LLC and Station Holdco through our ownership of 100% of the voting interests in Station LLC and our designation as the sole managing member of both Station LLC and Station Holdco. Our only assets are our ownership interests in Station LLC and Station Holdco, other than cash and tax-related assets and liabilities. We have no operations outside of our management of Station LLC. Our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K (the “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 casino properties are conveniently located throughout the Las Vegas valley and provide our customers a wide variety of entertainment and dining options. Over 90% of the Las Vegas population is located within five miles of one of our gaming facilities. We provide friendly service and exceptional value in a comfortable environment. We believe we surpass our competitors in offering casino patrons the newest and most popular slot and video games featuring the latest technology. We also believe the high-quality entertainment experience we provide our customers differentiates us from our competitors. Most of our major properties are master-planned for expansion, enabling us to incrementally expand our facilities as demand dictates. We also control seven highly desirable gaming-entitled development sites in Las Vegas and Reno, Nevada. 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 2019. Based on a recent U.S. Census Bureau release, Nevada was second among all states in percentage growth of population from July 2018 to July 2019. In addition, based on preliminary data for December 2019 from the U.S. Bureau of Labor Statistics, Las Vegas experienced a 2.5% year-over-year increase in employment to 1,048,500. This resulted in an unemployment rate of 3.5% which has declined from 14.1% in September 2010. Businesses and consumers in Las Vegas continue to increase their spending as evidenced by 77 consecutive months of year-over-year increases in taxable retail sales from July 2013 to November 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 180% at December 2019 compared to January 2012, as reported by the Las Vegas 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.