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Table of Contents    

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
For the quarterly period ended September 30, 2020
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)
Delaware47-5081182
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1505 South Pavilion Center Drive, Las Vegas, Nevada
(Address of principal executive offices)
89135
(Zip Code)
(702495-3000
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 classTrading SymbolName of each exchange on which registered
Class A Common Stock, $.01 par valueRRRNASDAQ 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     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 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 filerAccelerated 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 Exchange Act). Yes     No 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding at October 30, 2020
Class A Common Stock, $0.01 par value71,216,902
Class B Common Stock, $0.00001 par value46,085,804


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)
 September 30,
2020
December 31, 2019
(unaudited)
ASSETS  
Current assets:  
Cash and cash equivalents$108,862 $128,835 
Restricted cash4,375 4,080 
Receivables, net48,591 56,683 
Inventories14,152 17,765 
Prepaid gaming tax26,708 24,424 
Prepaid expenses and other current assets15,501 17,641 
Assets held for sale32,202 32,202 
Total current assets250,391 281,630 
Property and equipment, net of accumulated depreciation of $1,184,188 and $1,030,088 at September 30, 2020 and December 31, 2019, respectively
2,916,030 3,061,762 
Goodwill195,676 195,676 
Intangible assets, net of accumulated amortization of $61,366 and $54,831 at September 30, 2020 and December 31, 2019, respectively
101,971 108,506 
Land held for development238,440 238,440 
Investments in joint ventures7,660 8,867 
Native American development costs19,454 18,749 
Deferred tax asset, net 113,185 
Other assets, net79,259 87,372 
Total assets$3,808,881 $4,114,187 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$16,722 $33,970 
Accrued interest payable19,047 7,477 
Other accrued liabilities 159,535 200,560 
Current portion of long-term debt 24,016 33,989 
Total current liabilities219,320 275,996 
Long-term debt, less current portion 2,978,375 2,999,302 
Other long-term liabilities31,938 31,228 
Payable pursuant to tax receivable agreement27,409 25,064 
Total liabilities3,257,042 3,331,590 
Commitments and contingencies (Note 16)
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; 71,216,902 and 70,465,422 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
712 705 
Class B common stock, par value $0.00001 per share, 100,000,000 shares authorized; 46,085,804 and 46,827,370 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
1 1 
Additional paid-in capital384,097 376,229 
(Accumulated deficit) retained earnings
(62,781)124,423 
Accumulated other comprehensive loss
(1,378)(641)
Total Red Rock Resorts, Inc. stockholders’ equity320,651 500,717 
Noncontrolling interest231,188 281,880 
Total stockholders’ equity551,839 782,597 
Total liabilities and stockholders’ equity$3,808,881 $4,114,187 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Operating revenues:
Casino$239,866 $238,269 $523,741 $728,470 
Food and beverage45,855 128,016 149,171 370,740 
Room22,068 48,169 67,635 145,555 
Other14,487 27,823 42,290 80,650 
Management fees30,902 23,581 56,199 70,333 
Net revenues353,178 465,858 839,036 1,395,748 
Operating costs and expenses:
Casino57,659 89,205 172,559 259,861 
Food and beverage40,356 128,376 155,266 360,767 
Room11,147 20,279 38,222 61,034 
Other4,918 14,077 17,610 39,610 
Selling, general and administrative79,491 107,756 245,996 317,423 
Depreciation and amortization57,297 57,925 173,755 164,613 
Write-downs and other charges, net1,400 34,094 25,673 66,668 
Tax receivable agreement liability adjustment (97) (97)
252,268 451,615 829,081 1,269,879 
Operating income
100,910 14,243 9,955 125,869 
Earnings from joint ventures
658 455 288 1,481 
Operating income and earnings from joint ventures
101,568 14,698 10,243 127,350 
Other (expense) income:
Interest expense, net
(29,798)(40,517)(99,836)(118,936)
Gain (loss) on extinguishment/modification of debt, net
482  235 (302)
Change in fair value of derivative instruments(108)(1,739)(21,368)(21,335)
Other
(100)(82)(262)(234)
(29,524)(42,338)(121,231)(140,807)
Income (loss) before income tax
72,044 (27,640)(110,988)(13,457)
Benefit (provision) for income tax
 842 (113,185)(124)
Net income (loss)
72,044 (26,798)(224,173)(13,581)
Less: net income (loss) attributable to noncontrolling interests
28,410 (11,141)(44,066)(5,401)
Net income (loss) attributable to Red Rock Resorts, Inc.
$43,634 $(15,657)$(180,107)$(8,180)
Earnings (loss) per common share (Note 14):
Earnings (loss) per share of Class A common stock, basic
$0.62 $(0.22)$(2.56)$(0.12)
Earnings (loss) per share of Class A common stock, diluted
$0.56 $(0.22)$(2.56)$(0.12)
Weighted-average common shares outstanding:
Basic70,824 69,618 70,436 69,525 
Diluted117,044 69,618 70,436 69,525 
Comprehensive income (loss)
$72,052 $(27,485)$(225,391)$(15,744)
Less: comprehensive income (loss) attributable to noncontrolling interests
28,411 (11,417)(44,551)(6,271)
Comprehensive income (loss) attributable to Red Rock Resorts, Inc.
$43,641 $(16,068)$(180,840)$(9,473)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands)
(unaudited)
Red Rock Resorts, Inc. Stockholders’ Equity
Common stockAdditional paid-in capitalAccumulated deficitAccumulated other comprehensive lossNoncontrolling interestTotal stockholders’ equity
Class AClass B
SharesAmountSharesAmount
Balances,
June 30, 2020
71,228 $712 46,086 $1 $383,246 $(106,420)$(1,382)$202,996 $479,153 
Net income— — — — — 43,634 — 28,410 72,044 
Other comprehensive income, net of tax— — — — — — 7 1 8 
Share-based compensation— — — — 629 — — — 629 
Dividends— — — — — 5 — — 5 
Forfeitures of restricted stock awards(11) — —  — — — — 
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco— — — — 222 — (3)(219)— 
Balances,
September 30, 2020
71,217 $712 46,086 $1 $384,097 $(62,781)$(1,378)$231,188 $551,839 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(amounts in thousands)
(unaudited)
Red Rock Resorts, Inc. Stockholders’ Equity
Common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Noncontrolling interestTotal stockholders’ equity
Class AClass B
SharesAmountSharesAmount
Balances,
June 30, 2019
70,271 $703 46,884 $1 $369,930 $149,317 $205 $297,491 $817,647 
Net loss— — — — — (15,657)— (11,141)(26,798)
Other comprehensive loss, net of tax— — — — — — (411)(276)(687)
Share-based compensation— — — — 4,386 — — — 4,386 
Distributions— — — — — — — (4,683)(4,683)
Dividends— — — — — (7,025)— — (7,025)
Issuance of restricted stock awards, net of forfeitures(12) — —  — — — — 
Exchanges of noncontrolling interests for Class A common stock57 — (57)— 368 — 1 (369)— 
Tax receivable agreement liability resulting from exchanges of noncontrolling interests for Class A common stock— — — — (213)— — — (213)
Net deferred tax assets resulting from exchanges of noncontrolling interests for Class A common stock— — — — 204 — — — 204 
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco— — — — (1,734)—  1,734 — 
Balances,
September 30, 2019
70,316 $703 46,827 $1 $372,941 $126,635 $(205)$282,756 $782,831 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(amounts in thousands)
(unaudited)
Red Rock Resorts, Inc. Stockholders’ Equity
Common stockAdditional paid-in capitalRetained earnings (accumulated deficit)Accumulated other comprehensive lossNoncontrolling interestTotal stockholders’ equity
Class AClass B
SharesAmountSharesAmount
Balances,
December 31, 2019
70,465 $705 46,827 $1 $376,229 $124,423 $(641)$281,880 $782,597 
Net loss— — — — — (180,107)— (44,066)(224,173)
Other comprehensive loss, net of tax— — — — — — (733)(485)(1,218)
Share-based compensation— — — — 8,278 — — — 8,278 
Distributions— — — — — — — (4,620)(4,620)
Dividends— — — — — (7,097)— — (7,097)
Issuance of restricted stock awards, net of forfeitures(7) — —  — — — — 
Repurchases of Class A common stock(6) — — (68)— — — (68)
Stock option exercises24  — — 485 — — — 485 
Exchanges of noncontrolling interests for Class A common stock741 7 (741) 4,404 — 1 (4,412)— 
Tax receivable agreement liability resulting from exchanges of noncontrolling interests for Class A common stock— — — — (2,345)— — — (2,345)
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco— — — — (2,886)— (5)2,891 — 
Balances,
September 30, 2020
71,217 $712 46,086 $1 $384,097 $(62,781)$(1,378)$231,188 $551,839 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(amounts in thousands)
(unaudited)
Red Rock Resorts, Inc. Stockholders’ Equity
Common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Noncontrolling interestTotal stockholders’ equity
Class AClass B
SharesAmountSharesAmount
Balances,
December 31, 2018
69,663 $697 46,884 $1 $361,970 $155,869 $1,083 $297,375 $816,995 
Net loss— — — — — (8,180)— (5,401)(13,581)
Other comprehensive loss, net of tax— — — — — — (1,293)(870)(2,163)
Share-based compensation— — — — 12,814 — — — 12,814 
Distributions— — — — — — — (14,060)(14,060)
Dividends— — — — — (21,054)— — (21,054)
Issuance of restricted stock awards, net of forfeitures394 4 — — (4)— — — — 
Repurchases of Class A common stock(14) — — (376)— — — (376)
Stock option exercises, net216 2 — — 4,263 — — — 4,265 
Exchanges of noncontrolling interests for Class A common stock57 — (57)— 368 — 1 (369)— 
Tax receivable agreement liability resulting from exchanges of noncontrolling interests for Class A common stock— — — — (213)— — — (213)
Net deferred tax assets resulting from exchanges of noncontrolling interests for Class A common stock— — — — 204 — — — 204 
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco— — — — (6,085)— 4 6,081 — 
Balances,
September 30, 2019
70,316 $703 46,827 $1 $372,941 $126,635 $(205)$282,756 $782,831 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
Nine Months Ended September 30,
20202019
Cash flows from operating activities: 
Net loss
$(224,173)$(13,581)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization173,755 164,613 
Change in fair value of derivative instruments21,368 21,335 
Reclassification of unrealized gain on derivative instruments into income
(1,351)(2,163)
Write-downs and other charges, net 6,846 4,011 
Tax receivable agreement liability adjustment (97)
Amortization of debt discount and debt issuance costs7,979 12,230 
Share-based compensation8,275 12,849 
Earnings from joint ventures
(288)(1,481)
Distributions from joint ventures668 1,286 
(Gain) loss on extinguishment/modification of debt, net
(235)302 
Deferred income tax113,185 124 
Changes in assets and liabilities:
Receivables, net3,304 (2,918)
Inventories and prepaid expenses4,489 (1,308)
Accounts payable(15,937)5,889 
Accrued interest payable11,570 6,895 
Other accrued liabilities(23,736)7,800 
Other, net(166)863 
Net cash provided by operating activities
85,553 216,649 
Cash flows from investing activities:
Capital expenditures, net of related payables(53,362)(324,435)
Acquisition of land held for development (57,354)
Proceeds from asset sales431 669 
Distributions in excess of earnings from joint ventures886 298 
Native American development costs(633)(741)
Net settlement of derivative instruments(8,317)10,305 
Other, net3,997 (5,500)
Net cash used in investing activities
(56,998)(376,758)
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RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(amounts in thousands)
(unaudited)
Nine Months Ended September 30,
20202019
Cash flows from financing activities: 
Borrowings under credit agreements with original maturity dates greater than three
months
1,057,500 570,000 
Payments under credit agreements with original maturity dates greater than three
months
(1,820,551)(382,247)
Proceeds from issuance of 4.50% Senior Notes750,000  
Payment of debt extinguishment costs(8,791) 
Proceeds from exercise of stock options485 4,265 
Distributions to noncontrolling interests(4,620)(14,060)
Dividends paid(7,305)(20,930)
Payment of debt issuance costs(14,091)(3,307)
Other, net(860)(1,365)
Net cash (used in) provided by financing activities
(48,233)152,356 
Decrease in cash, cash equivalents and restricted cash
(19,678)(7,753)
Balance, beginning of period132,915 118,258 
Balance, end of period$113,237 $110,505 
Cash, cash equivalents and restricted cash:
Cash and cash equivalents$108,862 $106,444 
Restricted cash4,375 4,061 
Balance, end of period$113,237 $110,505 
Supplemental cash flow disclosures: 
Cash paid for interest, net of $0 and $2,777 capitalized, respectively
$83,789 $102,005 
Cash paid for income taxes, net of refunds received$ $(65)
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid$3,413 $27,145 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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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 indirect equity interest in and manage Station Casinos LLC (“Station LLC”), a Nevada limited liability company. Station LLC is a gaming, development and management company established in 1976 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 northern California on behalf of a Native American tribe.
The Company owns all of the outstanding voting interests in Station LLC and has an indirect equity interest in Station LLC through its ownership of limited liability interests in Station Holdco LLC (“Station Holdco,” and such interests, “LLC Units”), which owns all of the economic interests in Station LLC. At September 30, 2020, the Company held 61% of the economic interests and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and is designated as the 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.
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, 2019.
Principles of Consolidation
Station Holdco and Station LLC are variable interest entities, 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.
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, 2019.
Recently Adopted Accounting Standards
In March 2020, the Financial Accounting Standards Board (“FASB”) issued temporary accounting guidance to ease the accounting effects of reform to the London Interbank Offered Rate (“LIBOR”) and other reference rates. The guidance contains optional expedients and exceptions that apply to accounting for contract modifications, hedging relationships, and other transactions affected by reference rate reform. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022 and may be applied from the beginning of an interim period or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. The Company adopted this guidance beginning in the first quarter of
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RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
2020 and elected to continue to assert probability of its hedging relationships regardless of any potential modifications in terms due to reference rate reform. The adoption did not have an impact on the Company’s financial position or results of operations.
In June 2016, the 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 Company adopted this guidance on January 1, 2020 using a modified retrospective transition method. The adoption did not have a material impact on the Company’s financial position or results of operations.    
2.    Impact of COVID-19
In March 2020, a global pandemic was declared due to an outbreak of a new strain of coronavirus (“COVID-19”). In an effort to contain the spread of COVID-19, a statewide emergency order was issued mandating the closure of Nevada casinos. As a result, all of the Company’s Las Vegas properties were temporarily closed on March 17, 2020. As permitted under Phase 2 of Nevada’s COVID-19 response, on June 4, 2020, the Company reopened its Red Rock, Green Valley Ranch, Santa Fe Station, Boulder Station, Palace Station and Sunset Station properties, together with its Wildfire properties, subject to state-mandated occupancy and social distancing restrictions. The Company will continue to assess the performance of the reopened properties and demand in the Las Vegas locals gaming market before considering whether to reopen its Texas Station, Fiesta Henderson, Fiesta Rancho and Palms properties. The COVID-19 pandemic has had and may continue to have a detrimental impact on the United States and Las Vegas economies, including increased unemployment as well as reduced consumer confidence, discretionary spending and travel.
In addition, the Company’s managed property, Graton Resort, located in Northern California, was temporarily closed from March 17, 2020 through June 17, 2020. The Company’s agreements to manage Graton Resort were originally scheduled to expire in November 2020. The parties have agreed that the terms and expiration dates of the management agreements will be extended as a result of the closure to February 5, 2021. Whether the management agreements provide for an additional extension beyond that date is in dispute and the length of an additional extension, if any, has not been agreed and cannot be determined at this time.
The Company has taken steps to mitigate the effects of the COVID-19 pandemic, property closures, operating restrictions and the economic downturn on its business and financial condition. In March 2020, Station LLC borrowed $997.5 million under its revolving credit facility in order to increase its cash position and preserve financial flexibility, of which $917.5 million was repaid through September 2020. The Company has also taken steps to reduce capital expenditures and operating expenses where possible, including staffing reductions. Based on these actions and financial assumptions regarding the impact of the COVID-19 pandemic on the Company’s operations, management believes the Company has sufficient liquidity to satisfy its obligations for the next twelve months.
3.    Indefinite-lived Intangibles, Long-lived Assets and Goodwill
During the first quarter of 2020, the economic effects of the COVID-19 pandemic described above had a significant adverse effect on the Company’s actual and projected operating results as well as its stock price. Management determined that those effects represented indicators of potential asset impairment. As a result, management performed interim impairment assessments as of March 31, 2020 for all of the Company’s indefinite-lived intangible assets, long-lived assets and goodwill. The impairment testing, which is discussed in the following paragraphs, resulted in the recognition of no impairment losses. Although the economic impacts of the COVID-19 pandemic are ongoing, management determined that there were no new indicators of impairment through September 30, 2020 and therefore no impairment testing was performed subsequent to March 31, 2020. However, the Company cannot predict the future impact or duration of the negative effects of the COVID-19 pandemic and as a result, cannot reasonably predict the probability or amount of impairment losses that may be incurred in future periods.
The Company’s long-lived assets and goodwill are tested for impairment at the reporting unit level, and each of the Company’s operating properties is considered a separate reporting unit. The valuations used by management to assess the Company’s assets for impairment incorporate inherent uncertainties that are difficult to predict in the current economic environment. When evaluating assets for impairment, management must make numerous highly subjective and judgmental estimates and assumptions, all of which are subject to a variety of risks and uncertainties, and many of which are based on significant unobservable inputs. The most significant assumptions and inputs used by management in evaluating the Company’s assets for impairment are projected short-term and long-term operating results and cash flows, projected capital expenditures, estimated long-term growth rates and the weighted-average cost of capital of market participants, adjusted for the risk profile of the assets being evaluated. The timing and trajectory of the expected post-pandemic economic recovery is unknown, and
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RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
accordingly, management’s estimates and assumptions are likely to change as more information becomes available. Management believes that it has made reasonable estimates and judgments in performing its analysis in light of the unprecedented risks and uncertainties surrounding the COVID-19 pandemic. However, if actual results in future periods differ materially from the Company’s projected results and the related assumptions utilized in management’s analysis, the Company could be required to recognize impairment losses in future periods.
Long-lived Assets
The Company’s business is capital intensive and a significant portion of its capital is invested in property and equipment and other long-lived assets. At September 30, 2020, the carrying amount of the Company’s long-lived assets, excluding goodwill and indefinite-lived intangible assets, was approximately $3.2 billion.
The Company reviews its long-lived assets, other than goodwill and indefinite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. The Company evaluates the recoverability of its long-lived assets’ carrying amounts by comparing the estimated future cash flows of the asset or asset group, on an undiscounted basis, to its carrying amount. If the undiscounted estimated future cash flows exceed the carrying amount of the asset or asset group, including any related goodwill, no impairment is indicated.
Management tested the Company’s long-lived assets for recoverability at March 31, 2020, and the estimated undiscounted future cash flows of all of the operating properties’ asset groups exceeded their carrying amounts. If the Company’s actual or projected operating results or cash flows decline in future periods, the Company could be required to recognize a long-lived asset impairment loss.
Goodwill and Indefinite-lived Intangibles
The Company tests its goodwill and indefinite-lived intangible assets for impairment annually as of October 1, and whenever events or circumstances indicate that it is more likely than not that impairment may have occurred. At September 30, 2020, the carrying amount of the Company’s goodwill totaled $195.7 million, of which approximately $169.9 million or 87% was associated with one of its operating properties. At September 30, 2020, the carrying amount of the Company’s indefinite-lived intangible assets totaled $77.5 million.
Management tested the Company’s goodwill for impairment as of March 31, 2020 by comparing the estimated fair value of each of its operating properties with goodwill to the carrying amount of the property, including goodwill. The fair value of each property was estimated using discounted cash flow techniques and market indications of value. Management concluded that no goodwill impairment had occurred as of the testing date because the fair value of each of the Company’s properties with goodwill exceeded its carrying amount. At March 31, 2020, the estimated fair value of the property with the majority of the Company’s goodwill exceeded its carrying amount by approximately 27%. For all other properties with goodwill, their respective estimated fair values exceeded their carrying amounts. Management also performed a sensitivity analysis for each property with goodwill by increasing the discount rate and decreasing the projected operating results. Management noted that while the changes in these inputs reduced the excess of the fair value over the carrying amount, such changes would result in no impairment loss. However, if the excess of fair value over the carrying amount of any of the Company’s properties with goodwill declines by a significant amount in the future as a result of changes in actual and projected operating results or other internal or external economic factors, the Company could be required to recognize goodwill impairment losses in future periods.    
Management tested the Company’s indefinite-lived intangible assets, primarily representing its brands, for impairment as of March 31, 2020 by comparing the estimated fair values of the assets to their respective carrying amounts. Fair values were estimated using a derivation of the income approach to value, which is based on the present value of estimated royalties avoided through ownership of the assets. The primary inputs to the valuation of the Company’s brands are projected revenues and the discount rate, which is based on the weighted-average cost of capital of market participants, adjusted for a risk premium. Management concluded that no impairment of the Company’s brands had occurred because the carrying amount of each of the brands did not exceed its respective estimated fair value. If the growth and timing of the Company’s actual revenues do not meet management’s projections, or if management’s projections of future revenues decline, the Company could be required to recognize impairment losses for its brands in future periods.
    
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RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
4.    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 nine months ended September 30, 2020, approximately 0.7 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 Class B common shares and LLC Units were exchanged for Class A common shares during the three months ended September 30, 2020. For the three and nine months ended September 30, 2019, noncontrolling interest holders exchanged approximately 0.1 million LLC Units, together with an equal number of Class B common shares, for Class A common shares.
The ownership of the LLC Units is summarized as follows:        
September 30, 2020December 31, 2019
UnitsOwnership %UnitsOwnership %
Red Rock71,216,902 60.7 %70,465,422 60.1 %
Noncontrolling interest holders46,085,804 39.3 %46,827,370 39.9 %
Total117,302,706 100.0 %117,292,792 100.0 %
The Company uses monthly weighted-average LLC Unit ownership to calculate the pretax income (loss) and other comprehensive income (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.
5.    Native American Development
North Fork Rancheria of Mono Indians
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 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 Class III 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, without limitation, 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, and has contributed significant financial support to the North Fork Project. Through September 30, 2020, the Company has paid approximately $34.6 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 cash flows from the North Fork Project’s operations; 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 September 30, 2020, the carrying amount of the advances was $19.5 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
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 6 to 12 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 75% to 85% at September 30, 2020. 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.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
The following table summarizes the Company’s evaluation at September 30, 2020 of each of the critical milestones necessary to complete the North Fork Project.
Federally recognized as an Indian tribe by the Bureau of Indian Affairs (“BIA”)Yes
Date of recognitionFederal 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 compactA compact (the “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 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 DOIThe 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 BIAIn 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 tribeThe North Fork Site was accepted into trust in February 2013.
Approval of management agreement by NIGCIn 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:
TypeThe 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 authoritiesThe 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.
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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 Secretary of the Interior’s determination that gaming on the North Fork Site would be in the best interest of the Mono and not detrimental to the surrounding community (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, the California Court of Appeal, Fifth Appellate District (the “Fifth District Court of Appeal”) ruled in favor of the Stand Up plaintiffs concluding that Governor Brown exceeded his authority in concurring in the North Fork Determination. The Mono and the State filed petitions in the Supreme Court of California seeking review of the Fifth District Court of Appeal’s decision, which petitions for review were granted in March 2017. The Supreme Court of California 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. On August 31, 2020 the Supreme Court of California announced its decision in the United Auburn case, concluding that Governor Brown’s concurrence in that case did not exceed his authority. On October 14, 2020, the Supreme Court of California transferred the Stand Up case back to the Fifth District Court of Appeal with directions to vacate its December 2016 decision against the Mono and the State and to reconsider the matter in light of the United Auburn decision.
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. The case has been stayed since 2017 pending a decision by the California Supreme Court in Stand Up for California! v. Brown.
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 (the “District Court”) alleging that the DOI’s issuance of Secretarial Procedures for the Mono was subject to the National Environmental Policies Act (“NEPA”) and the Clean Air Act (the “CAA”), 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 with the United States Court of Appeals for the Ninth Circuit. The briefing of the issues on appeal was completed on June 13, 2019. The Ninth Circuit heard oral argument on February 11, 2020 and in May 2020 rendered a decision affirming the grant of summary judgment on the Johnson Act issues and reversing and remanding for further proceedings the portion of the summary judgment decision relating to NEPA and the CAA. With respect to the portion of the case that was reversed and remanded, a briefing schedule has been established which has the briefing completed in January 2021.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
6.    Other Accrued Liabilities
Other accrued liabilities consisted of the following (amounts in thousands):
 September 30,
2020
December 31, 2019
Contract and customer-related liabilities:
Rewards Program liability$