Ballys Corp

19. STOCKHOLDERS’ EQUITY

Capital Return Program

The Company has a Board of Directors approved capital return program under which the Company may expend a total of up to $700 million for share repurchases and payment of dividends. Future share repurchases may be effected in various ways, which could include open-market or private repurchase transactions, accelerated stock repurchase programs, tender offers or other transactions. The amount, timing and terms of any return of capital transaction will be determined based on prevailing market conditions and other factors. There is no fixed time period to complete share repurchases. As of December 31, 2023, $95.5 million was available for use under the capital return program.

Total share repurchase activity during the years ended December 31, 2023, 2022 and 2021 is as follows:

(1) Includes 4.7 million shares repurchased from the Company’s modified Dutch auction tender offer completed July 27, 2022 at a price of $22.00 per share for an aggregate purchase price of $103.3 million.

All shares repurchased during the years ended December 31, 2023, 2022, and 2021 were transferred to treasury stock. The Company retired 7,581,428, 7,394,642 and 3,492,222 shares of its common stock held in treasury during the years ended December 31, 2023, 2022, and 2021, respectively. The shares were returned to the status of authorized but unissued shares. As of December 31, 2023, there wereno shares remaining in treasury.

There wereno cash dividends paid during the years ended December 31, 2023, 2022, and 2021.

Common Stock Offering

On April 20, 2021, the Company issued a total of 12,650,000 shares of Bally’s common stock in an underwritten public offering at a price to the public of $55.00 per share. Net proceeds from the offering were approximately $671.4 million, after deducting underwriting discounts, but before expenses.

On April 20, 2021, the Company issued to affiliates of Sinclair a warrant to purchase 909,090 common shares for an aggregate purchase price of $50.0 million, or $55.00 per share. The net proceeds were used to finance a portion of the purchase price of the Gamesys acquisition. The exercise price of the warrant is nominal and its exercise is subject to, among other conditions, requisite gaming authority approvals. Sinclair agreed not to acquire more than 4.9% of Bally’s outstanding common shares without such approvals. In addition, in accordance with the agreements that Bally’s and Sinclair entered into in November 2020, Sinclair exchanged 2,086,908 common shares for substantially identical warrants.

Preferred Stock

The Company has authorized the issuance of up to 10 million shares of $0.01 par value preferred stock. As of December 31, 2023 and 2022, no shares of preferred stock have been issued.

Shares Outstanding

As of December 31, 2023, the Company had 39,973,202 common shares issued and outstanding. The Company issued warrants, options and other contingent consideration in acquisitions and strategic partnerships that are expected to result in the issuance of common shares in future periods resulting from the exercise of warrants and options or the achievement of certain performance targets. These incremental shares are summarized below:

(1) Consists of four equal tranches to purchase shares with exercise prices ranging from $30.00 to $45.00 per share, exercisable over aseven-year period beginning on the fourth anniversary of the November 18, 2020 closing of the Framework Agreement.

Accumulated Other Comprehensive Income (Loss)

The following table reflects the change in accumulated other comprehensive loss by component for the years ended December 31, 2023, 2022 and 2021:

(1) As of December 31, 2023, approximately $5.0 million of existing gains and losses are estimated to be reclassified into earnings within the next 12 months.

20. EMPLOYEE BENEFIT PLANS

Multi-employer Defined Benefit Plans

The Company participates in and contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of its union-represented employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects:

•Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

•If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

•If the Company chooses to stop participating in some of its multi-employer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The following table outlines the Company’s participation in multi-employer pension plans for the years ended December 31, 2023, 2022 and 2021 and sets forth the calendar year contributions and accruals for each plan. The “EIN/Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three-digit plan number. The most recent Pension Protection Act zone status available in 2023 and 2022 relates to the plans’ two most recent fiscal year-ends. The zone status is based on information that the Company received from the plans’ administrators and is certified by each plan’s actuary. Plans certified in the red zone are generally less than 65% funded, plans certified in the orange zone are both less than 80% funded and have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years, plans certified in the yellow zone are less than 80% funded and plans certified in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates whether a financial improvement plan (“FIP”) for yellow/orange zone plans, or a rehabilitation plan (“RP”) for red zone plans, is either pending or has been implemented. As of December 31, 2023 and 2022, all plans that have either a FIP or RP requirement have had the respective plan implemented.

(1)The Plan is not subject to the Pension Protection Act of 2016 zone status certification rule.

(2)Formerly listed as Hotel & Restaurant Employees International Pension Fund - Allocations of contributions between the two plans are determined by the plan administrator. Unions at Bally’s Twin River and Bally’s Atlantic City participate in the UNITE HERE Retirement funds.

Contributions, based on wages paid to covered employees totaled approximately $3.3 million, $3.2 million and $3.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. These aggregate contributions were not individually significant to any of the respective plans. The Company’s share of the unfunded vested liability related to its multi-employer plans, if any, other than the New England Teamsters and Trucking Industry Pension Fund discussed below, is not determinable.

Under the terms of certain collective bargaining agreements, the Company contributes to a number of multi-employer annuity funds. Contributions are made at a fixed rate per hour worked, in accordance with the collective bargaining agreements. These plans are not subject to the withdrawal liability provisions applicable to multi-employer defined benefit pension plans. Contributions made to these plans by the Company were$2.8 million, $2.6 million and $2.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Dover Downs Defined Benefit Pension Plan

The Company sponsors a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011. As of December 31, 2023 and 2022, the benefit obligation was $16.9 million and $20.8 million, respectively, and the fair value of plan assets were $16.5 million and $19.0 million, respectively. The Company did not make any contributions to the plan during the year ended December 31, 2023 and does not expect to contribute in 2024. Net periodic benefit income and total income recognized in other comprehensive income for the year ended December 31, 2023 were $0.3 million and $0.7 million, respectively. Amounts relating to the plan recognized in the consolidated balance sheets as of December 31, 2023 and 2022 consist of non-current liabilities of $0.5 million and $1.8 million, respectively.

During the year ended December 31, 2023, a settlement was recognized under the Dover Downs Defined Benefit Pension Plan as the total amount of lump sum benefit payments was greater than the sum of the service and interest costs for the fiscal year. The settlement reduced the Company’s benefit obligation by $3.4 million and reduced total income recognized in other comprehensive income for the year by $0.2 million.

Defined Contribution Plans

The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering its US non-union employees and certain union employees. The plan allows employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plan. Gamesys also operates defined contribution retirement benefit plans for their U.K., US, Toronto, Isle of Man and Gibraltar offices. Eligible employees are allowed to contribute between 3-5% of their base salary to the various plans and the Company matches all employee contributions. Total employer contribution expense attributable to defined contribution plans was $8.5 million,$7.1 million and $4.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

21. INCOME TAXES

The components of income (loss) before taxes are as follows:

The components of the provision (benefit) for income taxes are as follows:

The effective rate varies from the statutory US federal tax rate as follows:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income taxes at December 31, 2023 and 2022 are as follows:

The Company will only recognize a deferred tax asset when, based on available evidence, realization is more likely than not. The Company has assessed its deferred tax liabilities arising from taxable temporary differences and has concluded such liabilities are not a sufficient source of income for the realization of deferred tax assets, including indefinite life taxable temporary differences which offset, subject to limitation, deferred tax assets with unlimited carryovers, such as the Section 163(j) interest limitation. Accordingly, a $154.9 million and $60.1 million valuation allowance has been established as of December 31, 2023 and 2022, respectively. The change in valuation allowance for the years ended December 31, 2023 and 2022 was $94.9 million and $60.1 million, respectively. There wasno change in valuation allowance for the year ended December 31, 2021.

At December 31, 2023, the Company’s cash and cash equivalents totaled $163.2 million, of which approximately 10% was held in locations outside the US. During the year ended December 31, 2022, the Company changed its assertion and will not indefinitely reinvest undistributed earnings. Accordingly, the Company has determined that no deferred tax liability is required for undistributed foreign earnings at December 31, 2023 and 2022 and will continue to monitor for future changes.

For the years ended December 31, 2023 and 2022 the net deferred tax liabilities decreased by $22.9 million and decreased by $90.1 million, respectively. For the year ended December 31, 2023, a decrease of $23.9 million was included in income from operations, a decrease related to the foreign exchange remeasurement of $1.2 million, and offset by an increase of $2.2 million included in other comprehensive loss. For the year ended December 31, 2022, a decrease of $88.1 million was included in income from operations, a decrease related to the foreign exchange remeasurement of $1.4 million and a decrease of $0.6 million included in other comprehensive loss.

As of December 31, 2023, the Company has $25.4 million of federal net operating carryforwards subject to a section 382 limitation with an unlimited carryforward period. There was $9.1 million of federal net operating carryforwards subject to a section 382 limitation with an unlimited carryforward period as of December 31, 2022. As of December 31, 2023 and 2022, the Company had $310.3 million and $174.5 million of state net operating loss carryforwards, respectively, which expire at various dates through 2041.

The Internal Revenue Code (IRC) Section 382 provides for a limitation of the annual use of net operating loss and tax credit carryforwards following certain ownership changes (as defined by the IRC Section 382) that limits the Company’s ability to utilize these carryforwards prior to expiration. Section 382 can also apply when we acquire subsidiaries with net operating loss carryforwards, as there may be limitations on the use of acquired net operating losses against our taxable income. As of December 31, 2023, the Company expects to utilize all acquired tax attributes prior to expiration.

CARES Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees, including those that operate in the gaming area. The benefits of the CARES Act that were available to us included:

a. refund of federal income taxes due to five-year carryback of net operating loss incurred in 2020 when our 2020 tax return was filed in 2021;

b. relaxation of interest expense deduction limitation for income tax purposes; and

c. the employee retention credit, providing a refundable federal tax credit equal to 50% of the first $10,000 of qualified wages and benefits, including qualified medical plan contributions, paid to employees while they are not performing services after March 12, 2020 and before January 1, 2021.

The Company realized a tax benefit of $5.3 million in the year ended December 31, 2021. The Company realizedno tax benefit during the years ended December 31, 2023 and 2022. The Company intends to continue to review and consider any available potential benefits under the CARES Act for which it qualifies, including those described above. The Company cannot predict the manner in which such benefits or any of the other benefits described herein will be allocated or administered and the Company cannot provide assurances that it will be able to access such benefits in a timely manner or at all. If the US government or any other governmental authority agrees to provide such aid under the CARES Act or any other crisis relief assistance, it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full.

From time to time, the Company may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where the Company conducts business. While the Company believes that the tax returns filed and tax positions taken are supportable and accurate, some tax authorities may not agree with the positions taken. This can give rise to tax uncertainties which, upon audit, may not be resolved in the Company’s favor. As of December 31, 2023, there was $29.3 million tax contingency accruals and deferred tax asset reductions for uncertain tax positions, of which $25.7 million would impact the effective tax rate, if recognized. A reconciliation of the beginning and ending balances of the gross liability for uncertain tax positions is as follows:

(1) There was an acquired tax contingency accrual of $5.1 million for uncertain tax positions recorded as of December 31, 2021.

It is reasonably possible that the Company’s unrecognized tax benefits could change in the next twelve months, however the Company is unable to estimate a range at this time.

The Company records interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit). The Company has reserved interest and penalties on uncertain tax positions of $0.7 million and $0.1 million as of December 31, 2023 and 2022, respectively. The Company has recorded $0.6 million and $0.1 million of interest on uncertain tax positions on the consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively.

The Company and its subsidiaries file tax returns in several jurisdictions including the US and various US state and foreign jurisdictions. The Company remains subject to examination for US federal income tax purposes for the years ended December 31, 2015 through 2023, as a result of a 2020 net operating loss carryback claim. The Company remains subject to examination for state and foreign income tax purposes for the years ended December 31, 2013 through 2023. The Company is currently appealing an audit by the State of Colorado for tax years ended December 31, 2012 through 2015. Based on the current status of the Colorado appeal, the Company believes no additional reserves are necessary. In addition, the disallowance of a loss carryforward generated in a period outside of the normal statute of limitations is generally open until the statute of limitations expires in the year of the utilization of the loss.