Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2015 | Apr. 30, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | PENN NATIONAL GAMING INC | |
Entity Central Index Key | 921,738 | |
Document Type | 10-Q/A | |
Document Period End Date | Mar. 31, 2015 | |
Amendment Flag | true | |
Amendment Description | In this Quarterly Report on Form 10-Q/A ("Form 10-Q/A"), the terms "we", "our", the "Company" and "Penn" refer to Penn National Gaming, Inc. and its subsidiaries, unless the context indicates otherwise. As previously disclosed in the Company's Current Report on Form 8-K filed with the SEC on October 22, 2015, the Company is restating its unaudited financial statements for the interim periods ended March 31, 2015 and 2014. The Company originally concluded that its Master Lease agreement (the "Master Lease") with Gaming and Leisure Properties, Inc. ("GLPI") should be accounted for as an operating lease under Generally Accepted Accounting Principles. This accounting treatment was applied in the Company's financial statements for the years ended December 31, 2014 and 2013, respectively, which were accompanied by unqualified opinions of Ernst & Young, LLP ("EY"), the Company's independent registered public accounting firm. Upon the Company's recent reconsideration of that accounting treatment, the Company re-examined this accounting and the relevant accounting literature. The restatement primarily results from the Company's accounting for its November 1, 2013 spin-off of real estate assets to GLPI and entrance into the Master Lease, which was previously recognized as a sale-leaseback. As explained in Note 2 to the condensed consolidated financial statements included within this report, the Company did not meet all of the requirements for sale-leaseback accounting under Accounting Standards Codification ("ASC") 840, "Leases", and therefore the transaction should be accounted for as a failed spin-off-leaseback which resulted in the transaction being recorded as a financing obligation rather than a distribution of assets followed by an operating lease. As a result, the Company is precluded from derecognizing the real estate assets and is instead required to recognize a financing obligation. The restated condensed consolidated balance sheets therefore include an adjustment to property and equipment, net for the carrying value of the real property leased from GLPI of $2.02 billion and $2.04 billion at March 31, 2015 and December 31, 2014, respectively, and additional liabilities of $3.60 billion and $3.61 billion at March 31, 2015 and December 31, 2014, respectively, representing the present value of the future minimum lease payments due to GLPI under the Master Lease. Consequently, the restated condensed consolidated statements of operations no longer report rent expense for the obligations under the Master Lease, but rather include interest expense associated with the financing obligation and depreciation expense related to the real estate assets, along with the periodic reduction of the financing obligation reflected in the condensed consolidated balance sheets. The lease payment amounts previously recorded as rent expense were $108.8 million and $104.3 million for the three months ended March 31, 2015 and 2014, respectively. The increases to interest expense and depreciation expense as a result of this restatement are $96.0 million and $19.9 million, respectively, for the three months ended March 31, 2015, and $93.1 million and $22.3 million, respectively, for the three months ended March 31, 2014. Additionally, this change in accounting treatment resulted in adjustments to the carrying amounts of the Company's reporting units as well as differences in the allocation of the Company's GLPI financing obligation to the impacted reporting units, which changed each reporting unit's fair value. This resulted in a net decrease to the Company's previously recognized impairment charges related to goodwill and indefinite-lived gaming licenses for the year ended December 31, 2014. The Company has also included in the restated condensed consolidated financial statements corrections of additional errors related to the accounting classification for payments made to relocate certain gaming operations in Ohio which opened in 2014, classification of an operating lease to a capital lease which resulted in an increase of $6.5 million and $7.0 million at March 31, 2015 and December 31, 2014 to net property and equipment and an increase to long term debt of $24.9 million at both March 31, 2015 and December 31, 2014, as well as certain other miscellaneous items described in Note 2 to the condensed consolidated financial statements included in this report. Finally, the Company concluded that as a result of the failed spin-off-leaseback accounting treatment which resulted in a significant increase to our net deferred tax assets, a valuation allowance should be recorded on our net deferred tax assets given the significant negative evidence associated with being in a three year cumulative pre-tax loss position and the insufficient objectively verifiable positive evidence to support the realization of the Company's deferred tax assets. This Amendment No. 1 on Form 10-Q/A ("Form 10-Q/A") to our Quarterly Report on Form 10-Q for the three months ended March 31, 2015, initially filed with the Securities and Exchange Commission (the "SEC") on May 6, 2015 (the "Original Filing"), is being filed to reflect the restatement of (i) the Company's condensed consolidated balance sheets at March 31, 2015 and December 31, 2014 and (ii) the Company's condensed consolidated statements of income, comprehensive income, stockholders' equity (deficit) and cash flows for the three months ended March 31, 2015 and 2014, and the notes related thereto. For a more detailed description of these restatements see Note 2 to the accompanying condensed consolidated financial statements in this Form 10-Q/A. Notably, the adjustments in the Restatement did not have a significant impact on the Company's leverage ratios under its senior credit facility and other debt instruments (as the terms of those obligations require the Master Lease to be treated as an operating lease regardless of the treatment required under GAAP) had no, and will have no future impact on the following indicators of the Company's performance: • the Company's cash position; • the Company's revenues from continuing operations; or • the Company's rental payments or other obligations under the Master Lease. For the convenience of the reader, this Form 10-Q/A sets forth the Original Filing in its entirety. However, this Form 10-Q/A only amends and restates Items 1, 2, and 4 of Part I of the Original Filing, in each case, as a result of, and to reflect the restatement. No other information in the Original Filing is amended. In addition, pursuant to the rules of the SEC, Item 6 of Part II of the Original Filing has been amended to contain the currently-dated certifications from our Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of our Chief Executive Officer and Chief Financial Officer are attached to this Form 10-Q/A as Exhibits 31.1, 32.1, 31.2 and 32.2, respectively. For a more detailed description of these restatements see Note 2 to the accompanying consolidated financial statements in this Form 10-Q/A. | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 79,812,962 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2015 | Dec. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 |
Current assets | ||||
Cash and cash equivalents | $ 237,729 | $ 208,673 | $ 287,695 | $ 292,995 |
Receivables, net of allowance for doubtful accounts of $2,093 and $2,004 at March 31, 2015 and December 31, 2014, respectively | 40,918 | 41,618 | ||
Prepaid expenses | 86,420 | 70,785 | ||
Deferred income taxes | 33,907 | 40,343 | ||
Other current assets | 10,913 | 11,189 | ||
Total current assets | 409,887 | 372,608 | ||
Property and equipment, net | 2,682,661 | 2,669,732 | ||
Other assets | ||||
Investment in and advances to unconsolidated affiliates | 175,574 | 179,551 | ||
Goodwill | 874,184 | 874,184 | ||
Other intangible assets, net | 418,105 | 419,453 | ||
Advances to the Jamul Tribe | 86,443 | 62,048 | ||
Other assets | 77,631 | 87,318 | ||
Total other assets | 1,631,937 | 1,622,554 | ||
Total assets | 4,724,485 | 4,664,894 | ||
Current liabilities | ||||
Current portion of financing obligation to GLPI | 47,057 | 46,884 | ||
Current maturities of long-term debt | 40,890 | 30,853 | ||
Accounts payable | 66,587 | 43,136 | ||
Accrued expenses | 137,739 | 133,092 | ||
Accrued interest | 11,427 | 5,163 | ||
Accrued salaries and wages | 69,671 | 84,034 | ||
Gaming, pari-mutuel, property, and other taxes | 55,726 | 51,972 | ||
Insurance financing | 10,251 | 13,680 | ||
Other current liabilities | 64,771 | 75,773 | ||
Total current liabilities | 504,119 | 484,587 | ||
Long-term liabilities | ||||
Long-term financing obligation to GLPI , net of current portion | 3,551,981 | 3,564,629 | ||
Long-term debt, net of current maturities and debt issuance costs | 1,240,459 | 1,210,577 | ||
Deferred income taxes | 90,336 | 78,633 | ||
Noncurrent tax liabilities | 7,108 | 7,035 | ||
Other noncurrent liabilities | 27,110 | 27,447 | ||
Total long-term liabilities | $ 4,916,994 | $ 4,888,321 | ||
Shareholders' equity (deficit) | ||||
Series C Preferred stock ($.01 par value, 18,500 shares authorized, 8,624 shares issued at March 31, 2015 and December 31, 2014) | ||||
Common stock ($.01 par value, 200,000,000 shares authorized, 81,873,026 and 81,329,210 shares issued and 79,705,633 and 79,161,817 shares outstanding at March 31, 2015 and December 31, 2014, respectively) | $ 818 | $ 813 | ||
Treasury stock, at cost (2,167,393 shares held at March 31, 2015 and December 31, 2014) | (28,414) | (28,414) | ||
Additional paid-in capital | 967,374 | 956,146 | ||
Retained deficit | (1,633,408) | (1,635,277) | ||
Accumulated other comprehensive loss | (2,998) | (1,282) | ||
Total shareholders' equity (deficit) | (696,628) | (708,014) | $ (535,057) | $ (550,852) |
Total liabilities and shareholders' equity (deficit) | $ 4,724,485 | $ 4,664,894 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2015 | Dec. 31, 2014 | Mar. 31, 2014 |
Receivables, net of allowance for doubtful accounts (in dollars) | $ 2,093 | $ 2,004 | |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |
Common stock, shares authorized | 200,000,000 | 200,000,000 | |
Common stock, shares issued | 81,873,026 | 81,329,210 | |
Common stock, shares outstanding | 79,705,633 | 79,161,817 | |
Treasury stock, shares issued | 2,167,393 | 2,167,393 | |
Series C Preferred Stock | |||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |
Preferred stock, shares authorized | 18,500 | 18,500 | |
Preferred stock, shares issued | 8,624 | 8,624 | |
Preferred stock , shares outstanding | 8,624 | 8,624 | 8,624 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Revenues | ||
Gaming | $ 591,336 | $ 570,683 |
Food, beverage and other | 108,763 | 104,870 |
Management service fee | 1,927 | 2,458 |
Revenues | 702,026 | 678,011 |
Less promotional allowances | (37,888) | (36,931) |
Net revenues | 664,138 | 641,080 |
Operating expenses | ||
Gaming | 294,895 | 283,268 |
Food, beverage and other | 77,929 | 77,538 |
General and administrative | 116,256 | 107,575 |
Depreciation and amortization | 63,369 | 70,185 |
Total operating expenses | 552,449 | 538,566 |
Income from operations | 111,689 | 102,514 |
Other income (expenses) | ||
Interest expense | (108,346) | (104,514) |
Interest income | 1,870 | 467 |
Income from unconsolidated affiliates | 3,982 | 2,483 |
Other | 3,089 | 1,631 |
Total other expenses | (99,405) | (99,933) |
Income from operations before income taxes | 12,284 | 2,581 |
Income tax provision | 10,415 | 2,001 |
Net income | $ 1,869 | $ 580 |
Earnings per common share: | ||
Basic earnings per common share (in dollars per share) | $ 0.02 | $ 0.01 |
Diluted earnings per common share (in dollars per share) | $ 0.02 | $ 0.01 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Condensed Consolidated Statements of Comprehensive Income | ||
Net income | $ 1,869 | $ 580 |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation adjustment during the period | (1,716) | (700) |
Other comprehensive income (loss) | (1,716) | (700) |
Comprehensive income (loss) | $ 153 | $ (120) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands | Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Deficit | Accumulated Other Comprehensive Loss | Treasury Stock | Total |
Balance at Dec. 31, 2013 | $ 799 | $ 925,335 | $ (1,448,955) | $ 383 | $ (28,414) | $ (550,852) | |
Balance (in shares) at Dec. 31, 2013 | 8,624 | 77,788,393 | |||||
Increase (Decrease) in Shareholders' Equity | |||||||
Share-based compensation arrangements, net of tax benefits of $7,752 and $6,379 for the three months ended March 31, 2014 and 2015 respectively | $ 8 | 15,907 | 15,915 | ||||
Share-based compensation arrangements (in shares) | 766,722 | ||||||
Foreign currency translation adjustment | (700) | (700) | |||||
Net income | As Previously Reported | 4,537 | ||||||
Net income | Restatement Adjustments | (3,957) | ||||||
Net income | 580 | 580 | |||||
Balance at Mar. 31, 2014 | $ 807 | 941,242 | (1,448,375) | (317) | (28,414) | (535,057) | |
Balance (in shares) at Mar. 31, 2014 | 8,624 | 78,555,115 | |||||
Balance (As Previously Reported) at Dec. 31, 2014 | 554,486 | ||||||
Balance (Restatement Adjustments) | (1,262,500) | ||||||
Balance at Dec. 31, 2014 | $ 813 | 956,146 | (1,635,277) | (1,282) | (28,414) | (708,014) | |
Balance (in shares) at Dec. 31, 2014 | 8,624 | 79,161,817 | |||||
Increase (Decrease) in Shareholders' Equity | |||||||
Share-based compensation arrangements, net of tax benefits of $7,752 and $6,379 for the three months ended March 31, 2014 and 2015 respectively | $ 5 | 11,228 | 11,233 | ||||
Share-based compensation arrangements (in shares) | 543,816 | ||||||
Foreign currency translation adjustment | (1,716) | (1,716) | |||||
Net income | As Previously Reported | 10,996 | ||||||
Net income | Restatement Adjustments | (9,127) | ||||||
Net income | 1,869 | 1,869 | |||||
Balance (As Previously Reported) at Mar. 31, 2015 | 574,999 | ||||||
Balance (Restatement Adjustments) | (1,271,627) | ||||||
Balance at Mar. 31, 2015 | $ 818 | $ 967,374 | $ (1,633,408) | $ (2,998) | $ (28,414) | $ (696,628) | |
Balance (in shares) at Mar. 31, 2015 | 8,624 | 79,705,633 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Condensed Consolidated Statements of Changes in Shareholders' Equity | ||
Share-based compensation arrangements, net of tax benefits | $ 6,379 | $ 7,752 |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Operating activities | ||
Net income | $ 1,869 | $ 580 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 63,369 | 70,185 |
Amortization of items charged to interest expense | 1,505 | 1,507 |
Accretion of settlement value on other noncurrent liabilities | 351 | |
Loss (gain) on sale of fixed assets | 153 | (49) |
Income from unconsolidated affiliates | (3,982) | (2,483) |
Distributions of earnings from unconsolidated affiliates | 8,000 | 5,500 |
Deferred income taxes | 18,648 | 288 |
Charge for stock-based compensation | 2,084 | 2,579 |
Decrease (Increase) , | ||
Accounts receivable | 727 | (599) |
Prepaid expenses and other current assets | (2,742) | (13,104) |
Other assets | 6,400 | 7,087 |
Increase (decrease), | ||
Accounts payable | 2,887 | 2,186 |
Accrued expenses | 4,931 | (14,266) |
Accrued interest | 6,264 | 2,484 |
Accrued salaries and wages | (14,363) | (15,630) |
Gaming, pari-mutuel, property and other taxes | 3,754 | 2,741 |
Income taxes | (11,738) | (7,582) |
Other current and noncurrent liabilities | (11,690) | 807 |
Other noncurrent tax liabilities | 1,609 | 1,205 |
Net cash provided by operating activities | 78,036 | 43,436 |
Investing activities | ||
Capital project expenditures, net of reimbursements | (36,929) | (12,957) |
Capital maintenance expenditures | (11,860) | (24,084) |
Advances to the Jamul Tribe | (16,341) | (8,573) |
Proceeds from sale of property and equipment | 146 | 129 |
Investment in joint ventures | (328) | |
Decrease in cash in escrow | 18,000 | |
Acquisition of gaming license | (25,586) | |
Net cash used in investing activities | (65,312) | (53,071) |
Financing activities | ||
Proceeds from exercise of options | 2,743 | 5,581 |
Principal payments on financing obligation with GLPI | (12,475) | (11,255) |
Proceeds from issuance of long-term debt, net of issuance costs | 45,000 | (327) |
Principal payments on long-term debt | (21,886) | (6,898) |
Proceeds from insurance financing | 885 | 14,335 |
Payments on insurance financing | (4,314) | (4,853) |
Tax benefit from stock options exercised | 6,379 | 7,752 |
Net cash provided by financing activities | 16,332 | 4,335 |
Net increase (decrease) in cash and cash equivalents | 29,056 | (5,300) |
Cash and cash equivalents at beginning of year | 208,673 | 292,995 |
Cash and cash equivalents at end of period | 237,729 | 287,695 |
Supplemental disclosure | ||
Interest expense paid, net of amounts capitalized | 100,179 | 99,325 |
Income taxes paid | 226 | 352 |
City of Lawrenceburg Department of Redevelopment | ||
Increase (decrease), | ||
Increased property and equipment, net | 15,300 | |
Increased total debt | $ 15,300 | |
Plainridge Racecourse | ||
Increase (decrease), | ||
Increase in acquired assets | 60,500 | |
Increase in other current liabilities | 42,000 | |
Increase in other non current liabilities | 18,500 | |
Gaming and Leisure Properties Inc | ||
Increase (decrease), | ||
Increase Decrease in Property and Equipment Net | 25,600 | |
Increase Decrease in Long Term Debt | $ 25,600 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2015 | |
Organization and Basis of Presentation | |
Organization and Basis of Presentation | 1. Organization and Basis of Presentation Penn National Gaming, Inc. (“Penn”) and together with its subsidiaries (collectively, the “Company”) is a diversified, multi-jurisdictional owner and manager of gaming and pari-mutuel properties. As of March 31, 2015, the Company owned, managed, or had ownership interests in twenty-six facilities in the following seventeen jurisdictions: Florida, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia and Ontario, Canada. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated financial statements include the accounts of Penn and its subsidiaries. Investment in and advances to unconsolidated affiliates, that do not meet the consolidation criteria of the authoritative guidance for voting interest, controlling interest or variable interest entities (“VIE”), are accounted for under the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses for the reporting periods. Actual results could differ from those estimates. For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The notes to the consolidated financial statements contained in the Annual Report on Form 10-K/A for the year ended December 31, 2014 should be read in conjunction with these condensed consolidated financial statements. The December 31, 2014 financial information has been derived from the Company’s audited consolidated financial statements. |
Restatement
Restatement | 3 Months Ended |
Mar. 31, 2015 | |
Restatement | |
Restatement | 2. Restatement The restatement of the Company’s financial statements primarily results from the Company’s accounting for its November 1, 2013 distribution of real estate assets to Gaming and Leisure Properties, Inc. (GLPI) under the Master Lease Agreement (the “Master Lease”), which was previously recognized as a sale-leaseback. Upon further consideration, the Company did not meet all of the requirements for sale-leaseback accounting under Accounting Standards Codification (“ASC”) 840, “Leases”, and therefore the transaction should be accounted for as a financing obligation rather than a distribution of assets followed by an operating lease. Specifically, the lease contains provisions that would indicate that the Company has prohibited forms of continuing involvement in the leased property such that sale-leaseback accounting would not be permitted. As a result, the Company is precluded from derecognizing the real estate assets and is instead required to recognize a financing obligation for the minimum lease payments due under the Master Lease. The restated condensed consolidated balance sheets therefore include an adjustment to property and equipment, net for the carrying value of the real property of $2.02 billion and $2.04 billion at March 31, 2015 and December 31, 2014, respectively, and additional liabilities of $3.60 billion and $3.61 billion at March 31, 2015 and December 31, 2014, respectively, representing the present value of the future minimum lease payments due to GLPI under the Master Lease and the funded construction of certain leased real assets in development at the date of the Spin-Off. Consequently, the condensed restated consolidated statements of operations no longer report rent expense for the obligations under the Master Lease, but rather include interest expense associated with the financing obligation and depreciation expense related to the real estate assets. The lease payment amounts previously recorded as rent expense were $108.8 million and $104.3 million for the three months ended March 31, 2015 and 2014, respectively. The increases to interest expense and depreciation expense as a result of the correction of the accounting for the Master Lease are $96.0 million and $ 22.7 million, respectively, for the three months ended March 31, 2015, and $93.1 million and $22.3 million, respectively, for the three months ended March 31, 2014. This change in accounting treatment also resulted in adjustments to the carrying values of the Company’s reporting units as well as differences in the allocation of the GLPI rental obligation to the impacted reporting units, which altered each reporting unit’s fair value. As part of its restatement, the Company also identified certain other errors affecting the condensed consolidated financial statements as of March 31, 2015 and December 31, 2014: · The Company had originally recorded goodwill and other intangible asset impairment charges of $312.5 million and $745.9 million at October 1, 2013, the date of its annual impairment test, and November 1, 2013 (the Spin-Off date), respectively, and impairment charges of $316.5 million at October 1, 2014. The Company corrected certain errors in its goodwill and indefinite-lived gaming license intangible asset impairment analyses which incorporated the adjustments to the carrying amounts and estimated fair values of the Company’s reporting units mentioned above as well as the impact of its deferred tax valuation allowance. This resulted in a decrease to the Company’s previously recognized impairment charges of $161.2 million and $334.1 million for the years ended December 31, 2014 and 2013, respectively, which along with the relocation fee accounting error described below, resulted in a significant increase to the Company’s goodwill and other intangible assets at both March 31, 2015 and December 31, 2014. · During 2014, the Company incurred an aggregate liability of $150 million to the State of Ohio in return for the right to locate its racing operations from Toledo, Ohio to Dayton, Ohio (Hollywood Gaming at Dayton Raceway) and from Grove City, Ohio to Austintown, Ohio (Hollywood Gaming at Mahoning Valley). The Company originally accounted for these amounts as a cost of the real estate and was therefore including them in property and equipment, net and was amortizing them over the fifteen year base lease term of the Master Lease. The Company has now concluded that these costs should have been recognized as an additional cost incurred for obtaining the gaming licenses for these two properties and capitalized as other intangible assets that are not amortized, but are considered for impairment on an annual basis or more frequently if impairment indicators exist. This resulted in a decrease to depreciation expense of $2.7 million for the three months ended March 31, 2015. · The Company corrected the classification of a corporate airplane lease that had previously been accounted for as an operating lease but upon review should have been accounted for as a capital lease. This resulted in an increase to net property and equipment of $6.5 million and $7.0 million at March 31, 2015 and December 31, 2014, respectively, as well as an increase to long term debt of $24.9 million at both March 31, 2015 and December 31, 2014, respectively. It also resulted in an increase to interest expense, with an offsetting decrease to general and administrative costs of $0.2 million for the three months ended March 31, 2015 and 2014 as well as an increase to depreciation expense of $0.5 million for the three months ended March 31, 2015 and 2014. · The Company concluded that as a result of the failed spin-off-leaseback accounting treatment which resulted in a significant increase to our deferred tax assets, a valuation allowance should be recorded on the Company’s deferred tax assets given the significant negative evidence associated with being in a three year cumulative pre-tax loss position and the insufficient objectively verifiable positive evidence to support the realization of the Company’s deferred tax assets. This resulted in an increase to the Company’s income tax provision of $5.1 million and $0.2 million for the three months ended March 31, 2015 and 2014, respectively. · The Company concluded that the Carlino exchange transaction should have been accounted for as a treasury stock transaction that is measured using the fair value of the exchanged instruments. See Note 3 in the Company’s Form 10-K/A for additional information. · The Company reclassified a contingent earn-out liability from long-term debt to other non-current liabilities which totaled $19.5 million and $19.2 million at March 31, 2015 and December 31, 2014, respectively. Additionally, changes in the fair value of this liability which totaled $0.3 million for the three months ended March 31, 2015, were reclassified from interest expense to general and administrative expenses. · The Company corrected the income tax provision and related income tax balances on the condensed consolidated balance sheet and condensed consolidated statements of cash flows for each of the previously identified errors. · The Company corrected certain other errors that were not individually material to the condensed consolidated financial statements. The condensed consolidated financial statements included in this Form 10-Q/A have been restated to reflect the adjustments described above. The following is a summary of the effect of the restatement on (i) the Company’s condensed consolidated balance sheets at March 31, 2015 and December 31, 2014 (ii) the Company’s condensed consolidated statements of operations for the three months ended March 31, 2015 and 2014 and (iii) the Company’s condensed consolidated statements of cash flows for the three months ended March 31, 2015 and 2014. The Company did not present a summary of the effect of the restatement on the condensed consolidated statement of changes in shareholders’ equity (deficit) for any of the above referenced periods because the impact to retained earnings on the condensed consolidated statement of changes in shareholders’ equity (deficit) is reflected below in the balance sheet. The Company did not present a summary of the effect of the restatement on the condensed consolidated statement of comprehensive income (loss) for any of the above referenced periods because the impact to net income is reflected below in the restated condensed consolidated statement of income and the r estatement adjustments did not a ffect any other component of comprehensive income (loss). Penn National Gaming, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (in thousands, except share and per share data) The following table presents the condensed consolidated balance sheet as previously reported, restatement adjustments and the condensed consolidated balance sheet as restated at March 31, 2015: As Previously Restatement Reported Adjustments As Restated Assets Current assets Cash and cash equivalents $ $ — $ Receivables, net of allowance for doubtful accounts of $2,093 — Prepaid expenses Deferred income taxes ) Other current assets — Total current assets ) Property and equipment, net Other assets Investment in and advances to unconsolidated affiliates Goodwill Other intangible assets, net Deferred income taxes ) — Advances to the Jamul Tribe — Other assets — Total other assets Total assets $ $ $ Liabilities Current liabilities Current portion of financing obligation to GLPI $ — $ $ Current maturities of long-term debt — Accounts payable — Accrued expenses Accrued interest — Accrued salaries and wages — Gaming, pari-mutuel, property, and other taxes ) Insurance financing — Other current liabilities — Total current liabilities Long-term liabilities Long-term financing obligation to GLPI, net of current portion — Long-term debt, net of current maturities and debt issuance costs Deferred income taxes — Noncurrent tax liabilities ) Other noncurrent liabilities Total long-term liabilities Shareholders’ equity (deficit) Series C Preferred stock ($.01 par value, 18,500 shares authorized, 8,624 shares issued and outstanding at March 31, 2015) — — — Common stock ($.01 par value, 200,000,000 shares authorized, 81,873,026 shares issued and 79,705,633 shares outstanding, at March 31, 2015) Treasury stock, at cost (2,167,393 shares issued and held at March 31, 2015) — ) ) Additional paid-in capital Retained deficit ) ) ) Accumulated other comprehensive (loss) income ) — ) Total shareholders’ equity (deficit) ) ) Total liabilities and shareholders’ equity (deficit) $ $ $ The following table presents the condensed consolidated balance sheet as previously reported, restatement adjustments and the condensed consolidated balance sheet as restated at December 31, 2014: As Previously Restatement Reported Adjustments As Restated Assets Current assets Cash and cash equivalents $ $ — $ Receivables, net of allowance for doubtful accounts of $2,004 — Prepaid expenses Deferred income taxes ) Other current assets — Total current assets ) Property and equipment, net Other assets Investment in and advances to unconsolidated affiliates — Goodwill Other intangible assets, net Deferred income taxes ) — Advances to Jamul Tribe Other assets — Total other assets Total assets $ $ $ Liabilities Current liabilities Current portion of financing obligation to GLPI — Current maturities of long-term debt — Accounts payable — Accrued expenses Accrued interest — Accrued salaries and wages — Gaming, pari-mutuel, property, and other taxes ) Insurance financing — Other current liabilities Total current liabilities Long-term liabilities Long-term financing obligation to GLPI, net of current portion — Long-term debt, net of current maturities and debt issuance costs Deferred income taxes — Noncurrent tax liabilities ) Other noncurrent liabilities Total long-term liabilities Shareholders’ equity (deficit) Series C Preferred stock ($.01 par value, 18,500 shares authorized, 8,624 shares issued and outstanding at December 31, 2014) — — — Common stock ($.01 par value, 200,000,000 shares authorized, 81,329,210 shares issued and 79,161,817 share outstanding, at December 31, 2014) Treasury stock, at cost (2,167,393 shares held at December 31, 2014) — ) ) Additional paid-in capital Retained deficit ) ) ) Accumulated other comprehensive (loss) income ) — ) Total shareholders’ equity (deficit) ) ) Total liabilities and shareholders’ equity (deficit) $ $ $ The following table presents the condensed consolidated statement of income as previously reported, restatement adjustments and the condensed consolidated statement of income as restated for the three months ended March 31, 2015: As Previously Restatement Reported Adjustments As Restated Revenues Gaming $ $ — $ Food, beverage and other — Management service fee — Revenues — Less promotional allowances ) — ) Net revenues — Operating expenses Gaming expense — Food, beverage and other — General and administrative Rental expense related to Master Lease ) — Depreciation and amortization Total operating expenses ) Income from operations Other income (expenses) Interest expense ) ) ) Interest income — Income from unconsolidated affiliates — Other — Total other expenses ) ) ) Income from operations before income taxes ) Income tax (benefit) provision Net income $ $ ) $ Earnings per common share: Basic earnings per common share $ $ ) $ Diluted earnings per common share $ $ ) $ The following table presents the condensed consolidated statement of income as previously reported, restatement adjustments and the condensed consolidated statement of income as restated for the three months ended March 31, 2014: As Previously Restatement Reported Adjustments As Restated Revenues Gaming $ $ — $ Food, beverage and other — Management service fee — Revenues — Less promotional allowances ) — ) Net revenues — Operating expenses Gaming expense ) Food, beverage and other — General and administrative ) Rental expense related to Master Lease ) — Depreciation and amortization Total operating expenses ) Income from operations Other income (expenses) Interest expense ) ) ) Interest income — Income from unconsolidated affiliates — Other — Total other expenses ) ) ) Income from operations before income taxes ) Income tax (benefit) provision ) Net income $ $ ) $ Earnings per common share: Basic earnings per common share $ $ ) $ Diluted earnings per common share $ $ ) $ The following table presents the condensed consolidated statement of cash flow as previously reported, restatement adjustments and the condensed consolidated statement of cash flows as restated for the three months ended March 31, 2015: As Previously Restatement Reported Adjustments As Restated Three Months Ended March 31, 2015: Operating activities Net income $ $ ) $ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Amortization of items charged to interest expense — Accretion of settlement value on other noncurrent liabilities — Loss on sale of fixed assets — Income from unconsolidated affiliates ) — ) Distributions of earnings from unconsolidated affiliates — Deferred income taxes Charge for stock-based compensation — Decrease (increase) Accounts receivable — Prepaid expenses and other current assets ) — ) Other assets — Increase (decrease) Accounts payable — Accrued expenses ) Accrued interest — Accrued salaries and wages ) — ) Gaming, pari-mutuel, property and other taxes Income taxes ) ) ) Other current and noncurrent liabilities ) ) ) Other noncurrent tax liabilities Net cash provided by operating activities Investing activities Capital project expenditures, net of reimbursements ) — ) Capital maintenance expenditures ) — ) Advances to Jamul Tribe ) — ) Proceeds from sale of property and equipment — Investment in joint ventures ) — ) Net cash used in investing activities ) — ) Financing activities Proceeds from exercise of options Principal payments on financing obligation with GLPI — ) ) Proceeds from issuance of long-term debt, net of issuance costs — Principal payments on long-term debt ) — ) Proceeds from insurance financing — Payments on insurance financing ) — ) Tax benefit from stock options exercised — Net cash provided by (used in) financing activities ) Net increase (decrease) in cash and cash equivalents — Cash and cash equivalents at beginning of year — Cash and cash equivalents at end of year $ $ — $ Supplemental disclosure Interest expense paid, net of amounts capitalized $ $ $ Income taxes paid $ $ — $ The following table presents the condensed consolidated statement of cash flow as previously reported, restatement adjustments and the condensed consolidated statement of cash flows as restated for the three months ended March 31, 2014: As Previously Restatement Reported Adjustments As Restated Three Months Ended March 31, 2014: Operating activities Net income $ $ ) $ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Amortization of items charged to interest expense — Gain on sale of fixed assets ) — ) Income from unconsolidated affiliates ) — ) Distributions of earnings from unconsolidated affiliates — Deferred income taxes ) Charge for stock-based compensation — Decrease (increase) Accounts receivable ) — ) Prepaid expenses and other current assets ) ) ) Other assets ) Increase (decrease) Accounts payable — Accrued expenses ) ) ) Accrued interest — Accrued salaries and wages ) ) ) Gaming, pari-mutuel, property and other taxes ) Income taxes ) — ) Other current and noncurrent liabilities Other noncurrent tax liabilities ) Net cash provided by operating activities Investing activities Capital project expenditures, net of reimbursements ) — ) Capital maintenance expenditures ) — ) Advances to Jamul Tribe — ) ) Proceeds from sale of property and equipment — Decrease in cash in escrow — Acquisition of gaming license ) — ) Net cash used in investing activities ) ) ) Financing activities Proceeds from exercise of options — Principal payments on financing obligation with GLPI — ) ) Proceeds from issuance of long-term debt, net of issuance costs ) — ) Principal payments on long-term debt ) — ) Proceeds from insurance financing — Payments on insurance financing ) — ) Tax benefit from stock options exercised — Net cash provided by (used in) financing activities ) Net increase (decrease) in cash and cash equivalents ) — ) Cash and cash equivalents at beginning of year — Cash and cash equivalents at end of year $ $ — $ Supplemental disclosure Interest expense paid, net of amounts capitalized $ $ $ Income taxes paid $ $ — $ |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2015 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Revenue Recognition and Promotional Allowances Gaming revenue consists mainly of slot and video lottery gaming machine revenue as well as to a lesser extent table game and poker revenue. Gaming revenue is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs, for “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of coins played, are charged to revenue as the amount of the jackpots increases. Table game revenue is the aggregate of table drop adjusted for the change in aggregate table chip inventory. Table drop is the total dollar amount of the currency, coins, chips, tokens and outstanding markers (credit instruments) that are removed from the live gaming tables. Food, beverage and other revenue, including racing revenue, is recognized as services are performed. Racing revenue includes the Company’s share of pari-mutuel wagering on live races after payment of amounts returned as winning wagers, its share of wagering from import and export simulcasting, and its share of wagering from its off-track wagering facilities. Revenue from the management service contract for Casino Rama is based upon contracted terms and is recognized when services are performed. Revenues are recognized net of certain sales incentives in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-50, “Revenue Recognition—Customer Payments and Incentives.” The Company records certain sales incentives and points earned in point-loyalty programs as a reduction of revenue. The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. The estimated cost of providing such promotional allowances is primarily included in food, beverage and other expense. The amounts included in promotional allowances for the three months ended March 31, 2015 and 2014 are as follows: Three Months Ended March 31, 2015 2014 (in thousands) Rooms $ $ Food and beverage Other Total promotional allowances $ $ The estimated cost of providing such complimentary services for the three months ended March 31, 2015 and 2014 are as follows: Three Months Ended March 31, 2015 2014 (in thousands) Rooms $ $ Food and beverage Other Total cost of complimentary services $ $ Gaming and Racing Taxes The Company is subject to gaming and pari-mutuel taxes based on gross gaming revenue and pari-mutuel revenue in the jurisdictions in which it operates. The Company primarily recognizes gaming and pari-mutuel tax expense based on the statutorily required percentage of revenue that is required to be paid to state and local jurisdictions in the states where or in which wagering occurs. In certain states in which the Company operates, gaming taxes are based on graduated rates. The Company records gaming tax expense at the Company’s estimated effective gaming tax rate for the year, considering estimated taxable gaming revenue and the applicable rates. Such estimates are adjusted each interim period. If gaming tax rates change during the year, such changes are applied prospectively in the determination of gaming tax expense in future interim periods. Finally, the Company recognizes purse expense based on the statutorily required percentage of revenue that is required to be paid out in the form of purses to the winning owners of horse races run at the Company’s racetracks in the period in which wagering occurs. For the three months ended March 31, 2015, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $227.0 million, as compared to $216.7 million for the three months ended March 31, 2014. Failed Spin-Off-Leaseback Financing Obligation The Company’s spin-off of real property assets and corresponding Master Lease Agreement with GLPI on November 1, 2013 did not meet all of the requirements for sale-leaseback accounting treatment under Accounting Standards Codification (ASC) 840 “Leases” and therefore is accounted for as a financing obligation rather than a distribution of assets followed by an operating lease. Specifically, the Master Lease contains provisions that would indicate the Company has prohibited forms of continuing involvement in the leased assets which are not a normal leaseback. As a result of the failed spin-off-leaseback accounting, the Company calculated a financing obligation at the inception of the Master Lease based on the future minimum lease payments discounted at 9.70%. The discount rate represents the estimated incremental borrowing rate over the lease term of 35 years, which included renewal options that were reasonably assured of being exercised given the high percentage of the Company’s earnings that are derived from the Master Lease properties operations to the Company and the lack of alternative economically feasible leasing options for such real estate. The minimum lease payments are recorded as interest expense and in part as a payment of principal reducing the financing obligation. Contingent rentals are recorded as additional interest expense. The real property assets in the transaction remain on the consolidated balance sheets and continue to be depreciated over the remaining useful lives. Payments related to the Master Lease As of March 31, 2015, the Company financed with GLPI real property assets associated with eighteen of the Company’s gaming and related facilities used in the Company’s operations. The rent structure under the Master Lease, which became effective November 1, 2013, includes a fixed component, a portion of which is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met, and a variable component that is based on the performance of the facilities, which is prospectively adjusted, subject to a floor of zero (i) every five years by an amount equal to 4% of the average change to net revenues of all facilities under the Master Lease (other than Hollywood Casino Columbus and Hollywood Casino Toledo) during the preceding five years, and (ii) monthly by an amount equal to 20% of the change in net revenues of Hollywood Casino Columbus and Hollywood Casino Toledo during the preceding month. In addition, with the openings of Hollywood Gaming at Mahoning Valley Race Course and Hollywood Gaming at Dayton Raceway in the third quarter of 2014, these properties began paying rent subject to the terms of the Master Lease, for which the rental obligation is calculated as ten percent of the real estate construction costs paid for by GLPI related to these facilities. The Master Lease is commonly known as a triple-net lease. Accordingly, in addition to rent, the Company is required to pay the following, among other things: (1) all facility maintenance; (2) all insurance required in connection with the leased properties and the business conducted on the leased properties; (3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties. At the Company’s option, the Master Lease may be extended for up to four five-year renewal terms beyond the initial fifteen-year term, on the same terms and conditions. Total payments under the Master Lease were $108.8 million for the three months ended March 31, 2015, as compared to $104.3 million for the three months ended March 31, 2014. Long-term asset related to the Jamul Tribe On April 5, 2013, the Company announced that, subject to final National Indian Gaming Commission approval, it and the Jamul Indian Village of California (the “Jamul Tribe”) had entered into definitive agreements to jointly develop a Hollywood Casino-branded casino on the Jamul Tribe’s trust land in San Diego County, California. The definitive agreements were entered into to: (i) secure the development, management, and branding services of the Company to assist the Jamul Tribe during the pre-development and entitlement phase of the project; (ii) set forth the terms and conditions under which the Company will provide a loan or loans to the Jamul Tribe to fund certain development costs; and (iii) create an exclusive arrangement between the parties. The Jamul Tribe is a federally recognized Indian Tribe holding a government-to-government relationship with the U.S. through the U.S. Department of the Interior’s Bureau of Indian Affairs and possessing certain inherent powers of self-government. The Jamul Tribe is the beneficial owner of approximately six acres of reservation land located within the exterior boundaries of the State of California held by the U.S. in trust for the Jamul Tribe (the “Property”). The Jamul Tribe exercises jurisdiction over the Property pursuant to its powers of self-government and consistent with the resolutions and ordinances of the Jamul Tribe. The arrangement between the Jamul Tribe and the Company provides the Jamul Tribe with the expertise, knowledge and capacity of a proven developer and operator of gaming facilities and provides the Company with the exclusive right to administer and oversee planning, designing, development, construction management, and coordination during the development and construction of the project as well as the management of a gaming facility on the Property. The proposed $360 million development project will include a three-story gaming and entertainment facility of approximately 200,000 square feet featuring over 1,700 slot machines, 43 live table games, including poker, multiple restaurants, bars and lounges and a partially enclosed parking structure with over 1,800 spaces. In mid-January 2014, the Company announced the commencement of construction activities at the site and it is anticipated that the facility will open in mid-2016. The Company may, under certain circumstances, provide backstop financing to the Jamul Tribe in connection with the project and, upon opening, will manage and provide branding for the casino. The Company has a conditional loan commitment to the Jamul Tribe (that can be terminated under certain circumstances) for up to $400 million and anticipates it will fund approximately $360 million related to this development. The Company is accounting for the development agreement and related loan commitment letter with the Jamul Tribe as a loan (note receivable) with accrued interest in accordance with ASC 310 “Receivables.” The loan represents advances made by the Company to the Jamul Tribe for the development and construction of a gaming facility for the Jamul Tribe on reservation land. As such, the Jamul Tribe will own the casino and its related assets and liabilities. San Diego Gaming Ventures, LLC (a wholly owned subsidiary of the Company) is a separate legal entity established to account for the loan and, upon completion of the project and subsequent commencement of gaming operations on the Property, will be the Penn entity which receives management and branding fees from the Jamul Tribe. The Company has a note receivable with the Jamul Tribe for $86.4 million and $62.0 million, which includes accrued interest of $5.0 million and $3.3 million, at March 31, 2015 and December 31, 2014, respectively. Collectability of the note receivable will be derived from the revenues of the casino operations once the project is completed. Based on the Company’s current progress with this project, the Company believes collectability of the note is highly certain. However, in the event that the Company’s internal projections related to the profitability of this project and/or the timing of the opening are inaccurate, the Company may be required to record a reserve related to the collectability of this note receivable. The Company considered whether the arrangement with the Jamul Tribe represents a variable interest that should be accounted for pursuant to the VIE Subsections of ASC 810 “Consolidation” (“ASC 810”). The Company noted that the scope and scope exceptions of ASC 810-10-15-12(e) states that a reporting entity shall not consolidate a government organization or financing entity established by a government organization (other than certain financing entities established to circumvent the provisions of the VIE Subsections of ASC 810). Based on the status of the Jamul Tribe as a government organization, the Company believes its arrangement with the Jamul Tribe is not within the scope defined by ASC 810. Earnings Per Share The Company calculates earnings per share (“EPS”) in accordance with ASC 260, “Earnings Per Share” (“ASC 260”). Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the additional dilution for all potentially-dilutive securities such as stock options and unvested restricted shares. At March 31, 2015 and 2014, the Company had outstanding 8,624 shares of Series C Convertible Preferred Stock. The Company determined that the preferred stock qualified as a participating security as defined in ASC 260 since these securities participate in dividends with the Company’s common stock. In accordance with ASC 260, a company is required to use the two-class method when computing EPS when a company has a security that qualifies as a “participating security.” The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. A participating security is included in the computation of basic EPS using the two-class method. Under the two-class method, basic EPS for the Company’s common stock is computed by dividing net income applicable to common stock by the weighted-average common shares outstanding during the period. Diluted EPS for the Company’s common stock is computed using the more dilutive of the two-class method or the if-converted method. The following table sets forth the allocation of net income for the three months ended March 31, 2015 and 2014 under the two-class method: Three Months Ended March 31, 2015 2014 (Restated) (Restated) (in thousands) Net income $ $ Net income applicable to preferred stock Net income applicable to common stock $ $ The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three months ended March 31, 2015 and 2014: Three Months Ended March 31, 2015 2014 (in thousands) Determination of shares: Weighted-average common shares outstanding Assumed conversion of dilutive employee stock-based awards Assumed conversion of restricted stock Diluted weighted-average common shares outstanding before participating security Assumed conversion of preferred stock Diluted weighted-average common shares outstanding Options to purchase 1,561,562 shares and 392,289 shares were outstanding during the three months ended March 31, 2015 and 2014, respectively, but were not included in the computation of diluted EPS because they were antidilutive. The following tables present the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2015 and 2014 (in thousands, except per share data): Three Months Ended March 31, 2015 2014 (Restated) (Restated) Calculation of basic EPS: Net income applicable to common stock $ $ Weighted-average common shares outstanding Basic EPS $ $ Calculation of diluted EPS using two-class method: Net income applicable to common stock $ $ Diluted weighted-average common shares outstanding before participating security Diluted EPS $ $ Stock-Based Compensation The Company accounts for stock compensation under ASC 718, “Compensation-Stock Compensation,” which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This expense is recognized ratably over the requisite service period following the date of grant. The fair value for stock options was estimated at the date of grant using the Black-Scholes option-pricing model, which requires management to make certain assumptions. The risk-free interest rate was based on the U.S. Treasury spot rate with a term equal to the expected life assumed at the date of grant. Expected volatility was estimated based on the historical volatility of the Company’s stock price over a period of 5.45 years, in order to match the expected life of the options at the grant date. Historically, at the grant date, there has been no expected dividend yield assumption since the Company has not paid any cash dividends on its common stock since its initial public offering in May 1994 and since the Company intends to retain all of its earnings to finance the development of its business for the foreseeable future. The weighted-average expected life was based on the contractual term of the stock option and expected employee exercise dates, which was based on the historical and expected exercise behavior of the Company’s employees. The Company granted 1,662,035 stock options during the three months ended March 31, 2015. Stock-based compensation expense for the three months ended March 31, 2015 was $2.1 million, as compared to $2.6 million for the three months ended March 31, 2014, and is included within the condensed consolidated statements of income under general and administrative expense. The Company’s cash-settled phantom stock unit awards (“PSUs”), which vest over a period of three to five years, entitle employees and directors to receive cash based on the fair value of the Company’s common stock on the vesting date. The PSUs are accounted for as liability awards and are re-measured at fair value each reporting period until they become vested with compensation expense being recognized over the requisite service period in accordance with ASC 718-30, “Compensation—Stock Compensation, Awards Classified as Liabilities.” The Company had a liability, which is included in accrued salaries and wages within the condensed consolidated balance sheets, associated with its PSUs of $7.0 million and $8.2 million at March 31, 2015 and December 31, 2014, respectively. For PSUs held by Penn employees, there was $26.2 million of total unrecognized compensation cost at March 31, 2015 that will be recognized over the grants remaining weighted average vesting period of 2.30 years. For the three months ended March 31, 2015, the Company recognized $4.5 million of compensation expense associated with these awards, as compared to $1.4 million for the three months ended March 31, 2014. T he increase was primarily due to the stock price increase year-over-year for both Penn and GLPI awards held by Penn employees. Amounts paid by the Company for the three months ended March 31, 2015 on these cash-settled awards totaled $5.2 million, as compared to $5.5 million for the three months ended March 31, 2014. For the Company’s stock appreciation rights (“SARs”), the fair value of the SARs is calculated during each reporting period and estimated using the Black-Scholes option pricing model based on the various inputs discussed below. The Company’s SARs, which vest over a period of four years, are accounted for as liability awards since they will be settled in cash. The Company had a liability, which is included in accrued salaries and wages within the condensed consolidated balance sheets, associated with its SARs of $9.1 million and $6.3 million at March 31, 2015 and December 31, 2014, respectively. For SARs held by Penn employees, there was $8.7 million of total unrecognized compensation cost at March 31, 2015 that will be recognized over the awards remaining weighted average vesting period of 2.92 years. For the three months ended March 31, 2015, the Company recognized $4.6 million of compensation expense associated with these awards, as compared to $0.3 million for the three months ended March 31, 2014. T he increase was primarily due to the stock price increase year-over-year for both Penn and GLPI awards held by Penn employees. Amounts paid by the Company for the three months ended March 31, 2015 on these cash-settled awards totaled $1.8 million, as compared to $0.5 million for the three months ended March 31, 2014. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model at March 31, 2015 and 2014: 2015 2014 Risk-free interest rate % % Expected volatility % % Dividend yield — — Weighted-average expected life (years) Segment Information The Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker, as that term is defined in ASC 280, “Segment Reporting” (“ASC 280”), measures and assesses the Company’s business performance based on regional operations of various properties grouped together based primarily on their geographic locations. The Company’s reportable segments are: (i) East/Midwest, (ii) West, and (iii) Southern Plains. The East/Midwest reportable segment consists of the following properties: Hollywood Casino at Charles Town Races, Hollywood Casino Bangor, Hollywood Casino at Penn National Race Course, Hollywood Casino Lawrenceburg, Hollywood Casino Toledo, Hollywood Casino Columbus, Hollywood Gaming at Dayton Raceway, which opened on August 28, 2014, and Hollywood Gaming at Mahoning Valley Race Course, which opened on September 17, 2014. It also includes the Company’s Casino Rama management service contract and Plainridge Park Casino in Massachusetts which the Company expects to open on June 24, 2015. The West reportable segment consists of the following properties: Zia Park Casino and the M Resort, as well as the Jamul Indian Village project, which the Company anticipates completing in mid-2016. The Southern Plains reportable segment consists of the following properties: Hollywood Casino Aurora, Hollywood Casino Joliet, Argosy Casino Alton, Argosy Casino Riverside, Hollywood Casino Tunica, Hollywood Casino Gulf Coast, Boomtown Biloxi, and Hollywood Casino St. Louis, and includes the Company’s 50% investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns the Hollywood Casino at Kansas Speedway. On July 30, 2014, the Company closed Argosy Casino Sioux City. The Other category consists of the Company’s standalone racing operations, namely Rosecroft Raceway, Sanford-Orlando Kennel Club, and the Company’s joint venture interests in Sam Houston Race Park, Valley Race Park, and Freehold Raceway, as well as the Company’s 50% joint venture with the Cordish Companies in New York (which is in the process of being dissolved). If the Company is successful in obtaining gaming operations at these locations, they would be assigned to one of the Company’s regional executives and reported in their respective reportable segment. The Other category also includes the Company’s corporate overhead operations which does not meet the definition of an operating segment under ASC 280. See Note 9 for further information with respect to the Company’s segments. Other Comprehensive Income The Company accounts for comprehensive income in accordance with ASC 220, “Comprehensive Income,” which establishes standards for the reporting and presentation of comprehensive income in the consolidated financial statements. The Company presents comprehensive income in two separate but consecutive statements. For the three months ended March 31, 2015 and 2014, the only component of accumulated other comprehensive income was foreign currency translation adjustments. |
New Accounting Pronouncements
New Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2015 | |
New Accounting Pronouncements | |
New Accounting Pronouncements | 4. New Accounting Pronouncements In April 2015, the FASB issued revised guidance to simplify the presentation of debt issuance costs in the balance sheet. The revised guidance requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with the existing presentation of debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this revised guidance, and therefore there is no impact to the statement of income. The revised guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of this revised guidance is permitted for financial statements that have not been previously issued. An entity should apply the revised guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the revised guidance. The Company has elected to early adopt the revised guidance and as such debt issuance costs are now presented as a direct reduction of long-term debt on the Company’s condensed consolidated balance sheets. See Note 6 for further information regarding debt issuance costs. In February 2015, the FASB issued new consolidation guidance to modify the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The main provisions of the new guidance include modifying the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, the evaluation of fees paid to a decision maker or a service provider as a variable interest, and the effect of fee arrangements and related parties on the primary beneficiary determination, as well as provides a scope exception for certain investment funds. The new guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. A reporting entity may apply the new guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the new guidance retrospectively. Management is in the process of assessing the impact of the new guidance on existing consolidation conclusions and equity method investments, but does not anticipate any change. In May 2014, the FASB issued new revenue recognition guidance, which will supersede nearly all existing revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle, the new guidance implements a five-step process for customer contract revenue recognition. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. This new guidance was originally to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early adoption is prohibited. In April 2015, the FASB issued a one-year deferral of the effective date of this new guidance resulting in it now being effective for the Company beginning in fiscal year 2018. Entities can transition to the new guidance either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the impact the new revenue recognition guidance will have on the consolidated financial statements. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2015 | |
Property and Equipment | |
Property and Equipment | 5. Property and Equipment Property and equipment, net, consists of the following: March 31, December 31, 2015 2014 (Restated) (Restated) (in thousands) Property and equipment - non-leased Land and improvements $ $ Building and improvements Furniture, fixtures, and equipment Leasehold improvements Construction in progress Less accumulated depreciation ) ) Property and equipment - leased Land and improvements Building and improvements Less accumulated depreciation ) ) Property and equipment, net $ $ Property and equipment, net increased by $12.9 million for the three months ended March 31, 2015 primarily due to the City of Lawrenceburg’s conveyance of a hotel and event center near Hollywood Casino Lawrenceburg (see Note 6 for further detail) and construction costs for the development of Plainridge Park Casino as well as normal capital maintenance expenditures, all of which were partially offset by depreciation expense for the three months ended March 31, 2015. Depreciation expense, for property and equipment as well as capital leases, totaled $63.4 million and $64.8 million for the three months ended March 31, 2015 and March 31, 2014, respectively, of which $23.2 million, $22.3 million related to assets under the Master Lease, respectively. Interest capitalized in connection with major construction projects was $0.6 million, $0.1 million for the three months ended March 31, 2015 and March 31, 2014, respectively. |
Long-term Debt
Long-term Debt | 3 Months Ended |
Mar. 31, 2015 | |
Long-term Debt | |
Long-term Debt | 6. Long-term Debt Long-term debt, net of current maturities, is as follows: March 31, December 31, 2015 2014 (Restated) (Restated) (in thousands) Senior secured credit facility $ $ $300 million 5.875% senior unsecured notes due November 1, 2021 Other long term obligations Capital leases Less current maturities of long-term debt ) ) Less discount on senior secured credit facility Term Loan B ) ) Less debt issuance costs, net of accumulated amortization of $8.3 million and $6.8 million, respectively ) ) $ $ The following is a schedule of future minimum repayments of long-term debt as of March 31, 2015 (in thousands) : Within one year $ 1-3 years 3-5 years Over 5 years Total minimum payments $ Senior Secured Credit Facility The senior secured credit facility consists of a five year $500 million revolver, a five year $500 million Term Loan A facility, and a seven year $250 million Term Loan B facility. At March 31, 2015, the Company’s senior secured credit facility had a gross outstanding balance of $830.6 million , consisting of a $468.7 million Term Loan A facility, a $246.9 million Term Loan B facility, and $115.0 million outstanding on the revolving credit facility. Additionally, at March 31, 2015 , the Company was contingently obligated under letters of credit issued pursuant to the senior secured credit facility with face amounts aggregating $22.7 million, resulting in $362.3 million of available borrowing capacity as of March 31, 2015 under the revolving credit facility. Other Long Term Obligations Other long term obligations at March 31, 2015 of $150.3 million included $135.0 million related to the relocation fees for Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course, and $15.3 million related to the repayment obligation of a hotel and event center located near Hollywood Casino Lawrenceburg; all of which are more fully described below. Ohio Relocation Fees In June 2013, the Company finalized the terms of its memorandum of understanding with the State of Ohio, which included an agreement by the Company to pay a relocation fee in return for being able to relocate its existing racetracks in Toledo and Grove City to Dayton and Austintown, respectively. Upon opening of these two racinos in Ohio in the third quarter of 2014, the relocation fee for each new racino was recorded at the present value of the contractual obligation, which was calculated to be $75 million based on the 5% discount rate included in the agreement. The relocation fee for each facility is payable as follows: $7.5 million upon the opening of the facility and eighteen semi-annual payments of $4.8 million beginning one year from the commencement of operations. These obligations are accreted to interest expense at an effective yield of 5.0%. The amount included in interest expense related to these obligations was $1.7 million for the three months ended March 31, 2015 . Event Center The City of Lawrenceburg Department of Redevelopment recently completed construction of a hotel and event center located less than a mile away from Hollywood Casino Lawrenceburg. Effective in mid-January 2015, by contractual agreement, a repayment obligation for the hotel and event center was assumed by a wholly-owned subsidiary of the Company in the amount of $15.3 million, which was financed through a loan with the City of Lawrenceburg Department of Redevelopment. The Company is obligated to make annual payments on the loan of approximately $1 million for twenty years beginning January 2016. This obligation is accreted to interest expense at its effective yield of 3.0%. The amount included in interest expense related to this obligation was $0.1 million for the three months ended March 31, 2015 . Capital Leases Capital leases are primarily comprised of a ten year corporate airplane lease that expires in August 2016, which has a ten year renewal option. The lease obligation has been recorded at the lessor’s initial cost of the plane, which totaled $24.9 million at both March 31, 2015 and December 31, 2014, respectively, since the agreement has broad based default provisions that could result in potential damages equal to this amount. The lease obligation was classified as a capital lease based on the provisions of ASC 840 “Leases” which requires that the remedies for events of default under the provision described in this scenario be included in the minimum lease payment calculation for purposes of lease classification and that the probability of such an event of default will occur is not relevant to this determination . Debt Issuance Costs As discussed in Note 4, the Company elected to early adopt accounting guidance issued in April 2015 to simplify the presentation of debt issuance costs. This change in accounting principle was implemented retrospectively as of March 31, 2015 and had the effect of lowering other assets and long-term debt by $23.7 million and $25.2 million as of March 31, 2015 and December 31, 2014, respectively. Debt issuance costs that are incurred by the Company in connection with the issuance of debt are deferred and amortized to interest expense using the effective interest method over the contractual term of the underlying indebtedness. Covenants The Company’s senior secured credit facility and $300 million 5.875% senior unsecured notes require it, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests, including fixed charge coverage, interest coverage, senior leverage and total leverage ratios. In addition, the Company’s senior secured credit facility and $300 million 5.875% senior unsecured notes restrict, among other things, its ability to incur additional indebtedness, incur guarantee obligations, amend debt instruments, pay dividends, create liens on assets, make investments, engage in mergers or consolidations, and otherwise restrict corporate activities. At March 31, 2015, the Company was in compliance with all required financial covenants . The Company has received a waiver through March 15, 2016, from its lenders under its senior secured credit facility to file its financial statements with the SEC through the quarter ended September 30, 2015. Additionally, starting on February 8, 2016, the Company is required to pay an additional 25 basis points annually under its $300 million senior unsecured notes until the Company becomes current with its SEC filings. |
Master Lease Financing Obligati
Master Lease Financing Obligation (Restatement) | 3 Months Ended |
Mar. 31, 2015 | |
Master Lease Financing Obligation (Restatement) | |
Master Lease Financing Obligation (Restatement) | 7. Master Lease Financing Obligation (Restatement) The Company’s Master Lease with GLPI is accounted for as a financing obligation. The obligation was calculated at the inception of the transaction based on the future minimum lease payments due to GLPI under the Master Lease discounted at 9.70%, which represents the estimated incremental borrowing rate over the lease term, including renewal options that were reasonably assured of being exercised and the funded construction of certain leased real estate assets in development at the date of the Spin-Off. Total payments under the Master Lease were $108.8 million and $104.3 million for the three months ended March 31, 2015 and 2014, respectively, of which $96.4 million and $93.1 million, respectively, were recognized as interest expense. The interest expense recognized for the three months ended March 31, 2015 and 2014 includes $10.7 million and $10.2 million from contingent payments associated with the monthly variable components for Hollywood Casino Columbus and Hollywood Casino Toledo, respectively and $0.8 million from contingent payments associated with the annual escalator during the three months ended March 31, 2015. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2015 | |
Commitments and Contingencies | |
Commitments and Contingencies | 8. Commitments and Contingencies Litigation The Company is subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions and other matters arising in the ordinary course of business. The Company does not believe that the final outcome of these matters will have a material adverse effect on the Company’s consolidated financial position or results of operations. In addition, the Company maintains what it believes is adequate insurance coverage to further mitigate the risks of such proceedings. However, such proceedings can be costly, time consuming and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings may not materially impact the Company’s consolidated financial condition or results of operations. Further, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2015 | |
Segment Information | |
Segment Information | 9. Segment Information The following tables present certain information with respect to the Company’s segments. Intersegment revenues between the Company’s segments were not material in any of the periods presented below. The income (loss) from operations by segment presented below does not include allocations for corporate overhead costs or expenses associated with utilizing property subject to the Master Lease. Three months ended March 31, 2015 East/Midwest West Southern Plains Other (1) Total (Restated) (Restated) (Restated) (Restated) (Restated) Income (loss) from operations $ $ $ $ ) $ Charge for stock compensation — — — Depreciation and amortization Plainridge contingent purchase price — — — (Gain) loss on disposal of assets ) ) Income from unconsolidated affiliates — — Non-operating items for Kansas JV — — — Adjusted EBITDA $ $ $ $ ) $ Three months ended March 31, 2014 East/Midwest West Southern Plains Other (1) Total (Restated) (Restated) (Restated) (Restated) (Restated) Income (loss) from operations $ $ $ $ ) $ Charge for stock compensation — — — Depreciation and amortization (Gain) loss on disposal of assets ) ) ) ) Income from unconsolidated affiliates — — Non-operating items for Kansas JV — — — Adjusted EBITDA $ $ $ $ ) $ East/Midwest West Southern Plains Other (1) Total (Restated) (Restated) (Restated) (Restated) (Restated) (in thousands) Three months ended March 31, 2015 Net revenues $ $ $ $ $ Capital expenditures Three months ended March 31, 2014 Net revenues $ $ $ $ $ Capital expenditures Balance sheet at March 31, 2015 Total assets Investment in and advances to unconsolidated affiliates — Goodwill and other intangible assets, net Balance sheet at December 31, 2014 Total assets Investment in and advances to unconsolidated affiliates — Goodwill and other intangible assets, net (1) Includes depreciation expense associated with the real property assets under the Master Lease with GLPI. In addition, Total assets include these assets. The interest expense associated with the financing obligation is reflected in the other category. Net revenues and income (loss) from unconsolidated affiliates relate to the Company’s stand-alone racing operations, namely Rosecroft Raceway, Sanford Orlando Kennel Club and the Company’s Texas and New Jersey joint ventures which do not have gaming operations. Management uses adjusted EBITDA as the primary measure of the operating performance of its segments, including the evaluation of operating personnel and is especially relevant in evaluating large, long lived casino projects because they provide a perspective on the current effects of operating decisions separated from the substantial non-operational depreciation charges and financing costs of such projects. The Company defines adjusted EBITDA as earnings before interest, taxes, stock compensation, debt extinguishment charges, impairment charges, insurance recoveries and deductible charges, depreciation and amortization, changes in the estimated fair value of contingent purchase price to the previous owners of Plainridge Racecourse, gain or loss on disposal of assets, and other income or expenses. Adjusted EBITDA is also inclusive of results from discontinued operations, income or loss from unconsolidated affiliates, with our share of non-operating items (such as depreciation and amortization) added back for our joint venture in Kansas Entertainment. Adjusted EBITDA should not be construed as alternatives to operating income, as indicators of the Company’s operating performance, as alternatives to cash flows from operating activities, as measures of liquidity, or as any other measures of performance determined in accordance with GAAP. The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in adjusted EBITDA. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2015 | |
Income Taxes | |
Income Taxes | 10. Income Taxes At March 31, 2015 and December 31, 2014, the Company had a net deferred tax liability balance of $56.4 million and $38.3 million, respectively, within its condensed consolidated balance sheets. The Company accounts for income taxes in accordance with ASC 740 “Income Taxes”. Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amount and the tax bases of existing assets and liabilities and are measured at the prevailing enacted tax rates that will be in effect when these differences are settled or realized. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. In the fourth quarter of 2013, the Company concluded that as a result of the failed spin-off-leaseback accounting treatment which resulted in a significant increase to its deferred tax assets, a valuation allowance should be recorded on the Company’s deferred tax assets given the significant negative evidence associated with being in or expecting to be in a three year cumulative pre-tax loss position and the insufficient objectively verifiable positive evidence to support the realization of the Company’s deferred tax assets. As of March 31, 2015, we have a full valuation allowance on the Company’s deferred tax assets as a result of the negative objective evidence of being in a three year cumulative loss . This resulted in an increase to the Company’s income tax provision of $5.1 million and $0.2 million for the three months ended March 31, 2015 and 2014, respectively. The Company calculates the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate (“ETR”) to the full year projected pretax book income or loss excluding certain discrete items. The Company’s ETR (income taxes as a percentage of income from operations before income taxes) was 84.78% for the three months ended March 31, 2015, as compared to 77.52% for the three months ended March 31, 2014, primarily due to the year-over-year increase to our federal and state valuation allowance that had an unfavorable impact to our ETR. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2015 | |
Fair Value Measurements | |
Fair Value Measurements | 11 . Fair Value Measurements ASC 820, “Fair Value Measurements and Disclosures,” establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy are described below: · Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. · Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets, such as interest rates and yield curves that are observable at commonly quoted intervals. · Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions, as there is little, if any, related market activity. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy. The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate: Cash and cash equivalents The fair value of the Company’s cash and cash equivalents approximates the carrying value of the Company’s cash and cash equivalents, due to the short maturity of the cash equivalents. Long-term debt The fair value of the Company’s Term Loan A and B components of its senior secured credit facility and senior unsecured notes is estimated based on quoted prices in active markets and as such is a Level 1 measurement. The fair value of the remainder of the Company’s senior secured credit facility approximates its carrying value as it is revolving, variable rate debt and as such is a Level 2 measurement. Other long term obligations at March 31, 2015, included the relocation fees for Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course and the repayment obligation of a hotel and event center located near Hollywood Casino Lawrenceburg. The fair value of the relocation fees for Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course approximates its carrying value as the discount rate of 5.0% approximates the market rate of similar debt instruments and as such is a Level 2 measurement. Finally, the fair value of the repayment obligation for the hotel and event center is estimated based on a rate consistent with comparable municipal bonds and as such is a Level 2 measurement. See Note 6 for further details regarding the Company’s other long term obligations. Other liabilities Other liabilities at March 31, 2015 included the contingent purchase price consideration related to the purchase of Plainridge Racecourse. The fair value of the Company’s contingent purchase price consideration related to its Plainridge Racecourse acquisition is estimated based on a discounted cash flow model and as such is a Level 3 measurement. At each reporting period, the Company assesses the fair value of this obligation and changes in its value are recorded in earnings. The amount included in general and administrative expense related to the change in fair value of this obligation was $0.4 million for the three months ended March 31, 2015. The carrying amounts and estimated fair values by input level of the Company’s financial instruments at March 31, 2015 and December 31, 2014 are as follows (in thousands): March 31, 2015 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ $ $ $ — $ — Financial liabilities: Long-term debt Senior secured credit facility — Senior unsecured notes — — Other long-term obligations — — Other liabilities December 31, 2014 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ $ $ $ — $ — Financial liabilities: Long-term debt Senior secured credit facility — Senior unsecured notes — — Other long-term obligations — — Other liabilities — — |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2015 | |
Subsequent Events. | |
Subsequent Events | 12 . Subsequent Events On April 29, 2015, the Company publicly announced its plan to acquire the Tropicana Las Vegas Hotel and Casino for an approximate purchase price of $360 million. The purchase price will be funded by cash on hand and increased commitments under the Company’s existing senior secured credit facility. The merger is expected to close in the fourth quarter of 2015, subject to regulatory approvals. The Tropicana Las Vegas Hotel and Casino is situated on 35 acres of land located on the Las Vegas Strip with 1,467 remodeled guest rooms and suites, a 50,000 square foot casino gaming floor featuring 844 slot and video poker machines and 38 table games including blackjack, mini-baccarat, craps and roulette, three full-service restaurants, a 1,200 seat performance theater, a 300 seat comedy club, a nightclub, beach club and 2,950 parking spaces. For more information, see the Current Report on Form 8-K filed on April 29, 2015. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Summary of Significant Accounting Policies | |
Revenue Recognition and Promotional Allowances | Revenue Recognition and Promotional Allowances Gaming revenue consists mainly of slot and video lottery gaming machine revenue as well as to a lesser extent table game and poker revenue. Gaming revenue is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs, for “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of coins played, are charged to revenue as the amount of the jackpots increases. Table game revenue is the aggregate of table drop adjusted for the change in aggregate table chip inventory. Table drop is the total dollar amount of the currency, coins, chips, tokens and outstanding markers (credit instruments) that are removed from the live gaming tables. Food, beverage and other revenue, including racing revenue, is recognized as services are performed. Racing revenue includes the Company’s share of pari-mutuel wagering on live races after payment of amounts returned as winning wagers, its share of wagering from import and export simulcasting, and its share of wagering from its off-track wagering facilities. Revenue from the management service contract for Casino Rama is based upon contracted terms and is recognized when services are performed. Revenues are recognized net of certain sales incentives in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-50, “Revenue Recognition—Customer Payments and Incentives.” The Company records certain sales incentives and points earned in point-loyalty programs as a reduction of revenue. The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. The estimated cost of providing such promotional allowances is primarily included in food, beverage and other expense. The amounts included in promotional allowances for the three months ended March 31, 2015 and 2014 are as follows: Three Months Ended March 31, 2015 2014 (in thousands) Rooms $ $ Food and beverage Other Total promotional allowances $ $ The estimated cost of providing such complimentary services for the three months ended March 31, 2015 and 2014 are as follows: Three Months Ended March 31, 2015 2014 (in thousands) Rooms $ $ Food and beverage Other Total cost of complimentary services $ $ |
Gaming and Racing Taxes | Gaming and Racing Taxes The Company is subject to gaming and pari-mutuel taxes based on gross gaming revenue and pari-mutuel revenue in the jurisdictions in which it operates. The Company primarily recognizes gaming and pari-mutuel tax expense based on the statutorily required percentage of revenue that is required to be paid to state and local jurisdictions in the states where or in which wagering occurs. In certain states in which the Company operates, gaming taxes are based on graduated rates. The Company records gaming tax expense at the Company’s estimated effective gaming tax rate for the year, considering estimated taxable gaming revenue and the applicable rates. Such estimates are adjusted each interim period. If gaming tax rates change during the year, such changes are applied prospectively in the determination of gaming tax expense in future interim periods. Finally, the Company recognizes purse expense based on the statutorily required percentage of revenue that is required to be paid out in the form of purses to the winning owners of horse races run at the Company’s racetracks in the period in which wagering occurs. For the three months ended March 31, 2015, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $227.0 million, as compared to $216.7 million for the three months ended March 31, 2014. |
Failed Spin-Off-Leaseback Financing Obligation | Failed Spin-Off-Leaseback Financing Obligation The Company’s spin-off of real property assets and corresponding Master Lease Agreement with GLPI on November 1, 2013 did not meet all of the requirements for sale-leaseback accounting treatment under Accounting Standards Codification (ASC) 840 “Leases” and therefore is accounted for as a financing obligation rather than a distribution of assets followed by an operating lease. Specifically, the Master Lease contains provisions that would indicate the Company has prohibited forms of continuing involvement in the leased assets which are not a normal leaseback. As a result of the failed spin-off-leaseback accounting, the Company calculated a financing obligation at the inception of the Master Lease based on the future minimum lease payments discounted at 9.70%. The discount rate represents the estimated incremental borrowing rate over the lease term of 35 years, which included renewal options that were reasonably assured of being exercised given the high percentage of the Company’s earnings that are derived from the Master Lease properties operations to the Company and the lack of alternative economically feasible leasing options for such real estate. The minimum lease payments are recorded as interest expense and in part as a payment of principal reducing the financing obligation. Contingent rentals are recorded as additional interest expense. The real property assets in the transaction remain on the consolidated balance sheets and continue to be depreciated over the remaining useful lives. |
Payments related to the Master Lease | Payments related to the Master Lease As of March 31, 2015, the Company financed with GLPI real property assets associated with eighteen of the Company’s gaming and related facilities used in the Company’s operations. The rent structure under the Master Lease, which became effective November 1, 2013, includes a fixed component, a portion of which is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met, and a variable component that is based on the performance of the facilities, which is prospectively adjusted, subject to a floor of zero (i) every five years by an amount equal to 4% of the average change to net revenues of all facilities under the Master Lease (other than Hollywood Casino Columbus and Hollywood Casino Toledo) during the preceding five years, and (ii) monthly by an amount equal to 20% of the change in net revenues of Hollywood Casino Columbus and Hollywood Casino Toledo during the preceding month. In addition, with the openings of Hollywood Gaming at Mahoning Valley Race Course and Hollywood Gaming at Dayton Raceway in the third quarter of 2014, these properties began paying rent subject to the terms of the Master Lease, for which the rental obligation is calculated as ten percent of the real estate construction costs paid for by GLPI related to these facilities. The Master Lease is commonly known as a triple-net lease. Accordingly, in addition to rent, the Company is required to pay the following, among other things: (1) all facility maintenance; (2) all insurance required in connection with the leased properties and the business conducted on the leased properties; (3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties. At the Company’s option, the Master Lease may be extended for up to four five-year renewal terms beyond the initial fifteen-year term, on the same terms and conditions. Total payments under the Master Lease were $108.8 million for the three months ended March 31, 2015, as compared to $104.3 million for the three months ended March 31, 2014. |
Long-term asset related to the Jamul Tribe | Long-term asset related to the Jamul Tribe On April 5, 2013, the Company announced that, subject to final National Indian Gaming Commission approval, it and the Jamul Indian Village of California (the “Jamul Tribe”) had entered into definitive agreements to jointly develop a Hollywood Casino-branded casino on the Jamul Tribe’s trust land in San Diego County, California. The definitive agreements were entered into to: (i) secure the development, management, and branding services of the Company to assist the Jamul Tribe during the pre-development and entitlement phase of the project; (ii) set forth the terms and conditions under which the Company will provide a loan or loans to the Jamul Tribe to fund certain development costs; and (iii) create an exclusive arrangement between the parties. The Jamul Tribe is a federally recognized Indian Tribe holding a government-to-government relationship with the U.S. through the U.S. Department of the Interior’s Bureau of Indian Affairs and possessing certain inherent powers of self-government. The Jamul Tribe is the beneficial owner of approximately six acres of reservation land located within the exterior boundaries of the State of California held by the U.S. in trust for the Jamul Tribe (the “Property”). The Jamul Tribe exercises jurisdiction over the Property pursuant to its powers of self-government and consistent with the resolutions and ordinances of the Jamul Tribe. The arrangement between the Jamul Tribe and the Company provides the Jamul Tribe with the expertise, knowledge and capacity of a proven developer and operator of gaming facilities and provides the Company with the exclusive right to administer and oversee planning, designing, development, construction management, and coordination during the development and construction of the project as well as the management of a gaming facility on the Property. The proposed $360 million development project will include a three-story gaming and entertainment facility of approximately 200,000 square feet featuring over 1,700 slot machines, 43 live table games, including poker, multiple restaurants, bars and lounges and a partially enclosed parking structure with over 1,800 spaces. In mid-January 2014, the Company announced the commencement of construction activities at the site and it is anticipated that the facility will open in mid-2016. The Company may, under certain circumstances, provide backstop financing to the Jamul Tribe in connection with the project and, upon opening, will manage and provide branding for the casino. The Company has a conditional loan commitment to the Jamul Tribe (that can be terminated under certain circumstances) for up to $400 million and anticipates it will fund approximately $360 million related to this development. The Company is accounting for the development agreement and related loan commitment letter with the Jamul Tribe as a loan (note receivable) with accrued interest in accordance with ASC 310 “Receivables.” The loan represents advances made by the Company to the Jamul Tribe for the development and construction of a gaming facility for the Jamul Tribe on reservation land. As such, the Jamul Tribe will own the casino and its related assets and liabilities. San Diego Gaming Ventures, LLC (a wholly owned subsidiary of the Company) is a separate legal entity established to account for the loan and, upon completion of the project and subsequent commencement of gaming operations on the Property, will be the Penn entity which receives management and branding fees from the Jamul Tribe. The Company has a note receivable with the Jamul Tribe for $86.4 million and $62.0 million, which includes accrued interest of $5.0 million and $3.3 million, at March 31, 2015 and December 31, 2014, respectively. Collectability of the note receivable will be derived from the revenues of the casino operations once the project is completed. Based on the Company’s current progress with this project, the Company believes collectability of the note is highly certain. However, in the event that the Company’s internal projections related to the profitability of this project and/or the timing of the opening are inaccurate, the Company may be required to record a reserve related to the collectability of this note receivable. The Company considered whether the arrangement with the Jamul Tribe represents a variable interest that should be accounted for pursuant to the VIE Subsections of ASC 810 “Consolidation” (“ASC 810”). The Company noted that the scope and scope exceptions of ASC 810-10-15-12(e) states that a reporting entity shall not consolidate a government organization or financing entity established by a government organization (other than certain financing entities established to circumvent the provisions of the VIE Subsections of ASC 810). Based on the status of the Jamul Tribe as a government organization, the Company believes its arrangement with the Jamul Tribe is not within the scope defined by ASC 810. |
Earnings Per Share | Earnings Per Share The Company calculates earnings per share (“EPS”) in accordance with ASC 260, “Earnings Per Share” (“ASC 260”). Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the additional dilution for all potentially-dilutive securities such as stock options and unvested restricted shares. At March 31, 2015 and 2014, the Company had outstanding 8,624 shares of Series C Convertible Preferred Stock. The Company determined that the preferred stock qualified as a participating security as defined in ASC 260 since these securities participate in dividends with the Company’s common stock. In accordance with ASC 260, a company is required to use the two-class method when computing EPS when a company has a security that qualifies as a “participating security.” The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. A participating security is included in the computation of basic EPS using the two-class method. Under the two-class method, basic EPS for the Company’s common stock is computed by dividing net income applicable to common stock by the weighted-average common shares outstanding during the period. Diluted EPS for the Company’s common stock is computed using the more dilutive of the two-class method or the if-converted method. The following table sets forth the allocation of net income for the three months ended March 31, 2015 and 2014 under the two-class method: Three Months Ended March 31, 2015 2014 (Restated) (Restated) (in thousands) Net income $ $ Net income applicable to preferred stock Net income applicable to common stock $ $ The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three months ended March 31, 2015 and 2014: Three Months Ended March 31, 2015 2014 (in thousands) Determination of shares: Weighted-average common shares outstanding Assumed conversion of dilutive employee stock-based awards Assumed conversion of restricted stock Diluted weighted-average common shares outstanding before participating security Assumed conversion of preferred stock Diluted weighted-average common shares outstanding Options to purchase 1,561,562 shares and 392,289 shares were outstanding during the three months ended March 31, 2015 and 2014, respectively, but were not included in the computation of diluted EPS because they were antidilutive. The following tables present the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2015 and 2014 (in thousands, except per share data): Three Months Ended March 31, 2015 2014 (Restated) (Restated) Calculation of basic EPS: Net income applicable to common stock $ $ Weighted-average common shares outstanding Basic EPS $ $ Calculation of diluted EPS using two-class method: Net income applicable to common stock $ $ Diluted weighted-average common shares outstanding before participating security Diluted EPS $ $ |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock compensation under ASC 718, “Compensation-Stock Compensation,” which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This expense is recognized ratably over the requisite service period following the date of grant. The fair value for stock options was estimated at the date of grant using the Black-Scholes option-pricing model, which requires management to make certain assumptions. The risk-free interest rate was based on the U.S. Treasury spot rate with a term equal to the expected life assumed at the date of grant. Expected volatility was estimated based on the historical volatility of the Company’s stock price over a period of 5.45 years, in order to match the expected life of the options at the grant date. Historically, at the grant date, there has been no expected dividend yield assumption since the Company has not paid any cash dividends on its common stock since its initial public offering in May 1994 and since the Company intends to retain all of its earnings to finance the development of its business for the foreseeable future. The weighted-average expected life was based on the contractual term of the stock option and expected employee exercise dates, which was based on the historical and expected exercise behavior of the Company’s employees. The Company granted 1,662,035 stock options during the three months ended March 31, 2015. Stock-based compensation expense for the three months ended March 31, 2015 was $2.1 million, as compared to $2.6 million for the three months ended March 31, 2014, and is included within the condensed consolidated statements of income under general and administrative expense. The Company’s cash-settled phantom stock unit awards (“PSUs”), which vest over a period of three to five years, entitle employees and directors to receive cash based on the fair value of the Company’s common stock on the vesting date. The PSUs are accounted for as liability awards and are re-measured at fair value each reporting period until they become vested with compensation expense being recognized over the requisite service period in accordance with ASC 718-30, “Compensation—Stock Compensation, Awards Classified as Liabilities.” The Company had a liability, which is included in accrued salaries and wages within the condensed consolidated balance sheets, associated with its PSUs of $7.0 million and $8.2 million at March 31, 2015 and December 31, 2014, respectively. For PSUs held by Penn employees, there was $26.2 million of total unrecognized compensation cost at March 31, 2015 that will be recognized over the grants remaining weighted average vesting period of 2.30 years. For the three months ended March 31, 2015, the Company recognized $4.5 million of compensation expense associated with these awards, as compared to $1.4 million for the three months ended March 31, 2014. T he increase was primarily due to the stock price increase year-over-year for both Penn and GLPI awards held by Penn employees. Amounts paid by the Company for the three months ended March 31, 2015 on these cash-settled awards totaled $5.2 million, as compared to $5.5 million for the three months ended March 31, 2014. For the Company’s stock appreciation rights (“SARs”), the fair value of the SARs is calculated during each reporting period and estimated using the Black-Scholes option pricing model based on the various inputs discussed below. The Company’s SARs, which vest over a period of four years, are accounted for as liability awards since they will be settled in cash. The Company had a liability, which is included in accrued salaries and wages within the condensed consolidated balance sheets, associated with its SARs of $9.1 million and $6.3 million at March 31, 2015 and December 31, 2014, respectively. For SARs held by Penn employees, there was $8.7 million of total unrecognized compensation cost at March 31, 2015 that will be recognized over the awards remaining weighted average vesting period of 2.92 years. For the three months ended March 31, 2015, the Company recognized $4.6 million of compensation expense associated with these awards, as compared to $0.3 million for the three months ended March 31, 2014. T he increase was primarily due to the stock price increase year-over-year for both Penn and GLPI awards held by Penn employees. Amounts paid by the Company for the three months ended March 31, 2015 on these cash-settled awards totaled $1.8 million, as compared to $0.5 million for the three months ended March 31, 2014. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model at March 31, 2015 and 2014: 2015 2014 Risk-free interest rate % % Expected volatility % % Dividend yield — — Weighted-average expected life (years) |
Segment Information | Segment Information The Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker, as that term is defined in ASC 280, “Segment Reporting” (“ASC 280”), measures and assesses the Company’s business performance based on regional operations of various properties grouped together based primarily on their geographic locations. The Company’s reportable segments are: (i) East/Midwest, (ii) West, and (iii) Southern Plains. The East/Midwest reportable segment consists of the following properties: Hollywood Casino at Charles Town Races, Hollywood Casino Bangor, Hollywood Casino at Penn National Race Course, Hollywood Casino Lawrenceburg, Hollywood Casino Toledo, Hollywood Casino Columbus, Hollywood Gaming at Dayton Raceway, which opened on August 28, 2014, and Hollywood Gaming at Mahoning Valley Race Course, which opened on September 17, 2014. It also includes the Company’s Casino Rama management service contract and Plainridge Park Casino in Massachusetts which the Company expects to open on June 24, 2015. The West reportable segment consists of the following properties: Zia Park Casino and the M Resort, as well as the Jamul Indian Village project, which the Company anticipates completing in mid-2016. The Southern Plains reportable segment consists of the following properties: Hollywood Casino Aurora, Hollywood Casino Joliet, Argosy Casino Alton, Argosy Casino Riverside, Hollywood Casino Tunica, Hollywood Casino Gulf Coast, Boomtown Biloxi, and Hollywood Casino St. Louis, and includes the Company’s 50% investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns the Hollywood Casino at Kansas Speedway. On July 30, 2014, the Company closed Argosy Casino Sioux City. The Other category consists of the Company’s standalone racing operations, namely Rosecroft Raceway, Sanford-Orlando Kennel Club, and the Company’s joint venture interests in Sam Houston Race Park, Valley Race Park, and Freehold Raceway, as well as the Company’s 50% joint venture with the Cordish Companies in New York (which is in the process of being dissolved). If the Company is successful in obtaining gaming operations at these locations, they would be assigned to one of the Company’s regional executives and reported in their respective reportable segment. The Other category also includes the Company’s corporate overhead operations which does not meet the definition of an operating segment under ASC 280. See Note 9 for further information with respect to the Company’s segments. |
Other Comprehensive Income | Other Comprehensive Income The Company accounts for comprehensive income in accordance with ASC 220, “Comprehensive Income,” which establishes standards for the reporting and presentation of comprehensive income in the consolidated financial statements. The Company presents comprehensive income in two separate but consecutive statements. For the three months ended March 31, 2015 and 2014, the only component of accumulated other comprehensive income was foreign currency translation adjustments. |
Restatement (Tables)
Restatement (Tables) | 3 Months Ended |
Mar. 31, 2015 | |
Restatement | |
Summary of effects of the restatement on the Company's consolidated balance sheets , consolidated statements of operations, and consolidated statements of cash flows | (in thousands, except share and per share data) The following table presents the condensed consolidated balance sheet as previously reported, restatement adjustments and the condensed consolidated balance sheet as restated at March 31, 2015: As Previously Restatement Reported Adjustments As Restated Assets Current assets Cash and cash equivalents $ $ — $ Receivables, net of allowance for doubtful accounts of $2,093 — Prepaid expenses Deferred income taxes ) Other current assets — Total current assets ) Property and equipment, net Other assets Investment in and advances to unconsolidated affiliates Goodwill Other intangible assets, net Deferred income taxes ) — Advances to the Jamul Tribe — Other assets — Total other assets Total assets $ $ $ Liabilities Current liabilities Current portion of financing obligation to GLPI $ — $ $ Current maturities of long-term debt — Accounts payable — Accrued expenses Accrued interest — Accrued salaries and wages — Gaming, pari-mutuel, property, and other taxes ) Insurance financing — Other current liabilities — Total current liabilities Long-term liabilities Long-term financing obligation to GLPI, net of current portion — Long-term debt, net of current maturities and debt issuance costs Deferred income taxes — Noncurrent tax liabilities ) Other noncurrent liabilities Total long-term liabilities Shareholders’ equity (deficit) Series C Preferred stock ($.01 par value, 18,500 shares authorized, 8,624 shares issued and outstanding at March 31, 2015) — — — Common stock ($.01 par value, 200,000,000 shares authorized, 81,873,026 shares issued and 79,705,633 shares outstanding, at March 31, 2015) Treasury stock, at cost (2,167,393 shares issued and held at March 31, 2015) — ) ) Additional paid-in capital Retained deficit ) ) ) Accumulated other comprehensive (loss) income ) — ) Total shareholders’ equity (deficit) ) ) Total liabilities and shareholders’ equity (deficit) $ $ $ The following table presents the condensed consolidated balance sheet as previously reported, restatement adjustments and the condensed consolidated balance sheet as restated at December 31, 2014: As Previously Restatement Reported Adjustments As Restated Assets Current assets Cash and cash equivalents $ $ — $ Receivables, net of allowance for doubtful accounts of $2,004 — Prepaid expenses Deferred income taxes ) Other current assets — Total current assets ) Property and equipment, net Other assets Investment in and advances to unconsolidated affiliates — Goodwill Other intangible assets, net Deferred income taxes ) — Advances to Jamul Tribe Other assets — Total other assets Total assets $ $ $ Liabilities Current liabilities Current portion of financing obligation to GLPI — Current maturities of long-term debt — Accounts payable — Accrued expenses Accrued interest — Accrued salaries and wages — Gaming, pari-mutuel, property, and other taxes ) Insurance financing — Other current liabilities Total current liabilities Long-term liabilities Long-term financing obligation to GLPI, net of current portion — Long-term debt, net of current maturities and debt issuance costs Deferred income taxes — Noncurrent tax liabilities ) Other noncurrent liabilities Total long-term liabilities Shareholders’ equity (deficit) Series C Preferred stock ($.01 par value, 18,500 shares authorized, 8,624 shares issued and outstanding at December 31, 2014) — — — Common stock ($.01 par value, 200,000,000 shares authorized, 81,329,210 shares issued and 79,161,817 share outstanding, at December 31, 2014) Treasury stock, at cost (2,167,393 shares held at December 31, 2014) — ) ) Additional paid-in capital Retained deficit ) ) ) Accumulated other comprehensive (loss) income ) — ) Total shareholders’ equity (deficit) ) ) Total liabilities and shareholders’ equity (deficit) $ $ $ The following table presents the condensed consolidated statement of income as previously reported, restatement adjustments and the condensed consolidated statement of income as restated for the three months ended March 31, 2015: As Previously Restatement Reported Adjustments As Restated Revenues Gaming $ $ — $ Food, beverage and other — Management service fee — Revenues — Less promotional allowances ) — ) Net revenues — Operating expenses Gaming expense — Food, beverage and other — General and administrative Rental expense related to Master Lease ) — Depreciation and amortization Total operating expenses ) Income from operations Other income (expenses) Interest expense ) ) ) Interest income — Income from unconsolidated affiliates — Other — Total other expenses ) ) ) Income from operations before income taxes ) Income tax (benefit) provision Net income $ $ ) $ Earnings per common share: Basic earnings per common share $ $ ) $ Diluted earnings per common share $ $ ) $ The following table presents the condensed consolidated statement of income as previously reported, restatement adjustments and the condensed consolidated statement of income as restated for the three months ended March 31, 2014: As Previously Restatement Reported Adjustments As Restated Revenues Gaming $ $ — $ Food, beverage and other — Management service fee — Revenues — Less promotional allowances ) — ) Net revenues — Operating expenses Gaming expense ) Food, beverage and other — General and administrative ) Rental expense related to Master Lease ) — Depreciation and amortization Total operating expenses ) Income from operations Other income (expenses) Interest expense ) ) ) Interest income — Income from unconsolidated affiliates — Other — Total other expenses ) ) ) Income from operations before income taxes ) Income tax (benefit) provision ) Net income $ $ ) $ Earnings per common share: Basic earnings per common share $ $ ) $ Diluted earnings per common share $ $ ) $ The following table presents the condensed consolidated statement of cash flow as previously reported, restatement adjustments and the condensed consolidated statement of cash flows as restated for the three months ended March 31, 2015: As Previously Restatement Reported Adjustments As Restated Three Months Ended March 31, 2015: Operating activities Net income $ $ ) $ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Amortization of items charged to interest expense — Accretion of settlement value on other noncurrent liabilities — Loss on sale of fixed assets — Income from unconsolidated affiliates ) — ) Distributions of earnings from unconsolidated affiliates — Deferred income taxes Charge for stock-based compensation — Decrease (increase) Accounts receivable — Prepaid expenses and other current assets ) — ) Other assets — Increase (decrease) Accounts payable — Accrued expenses ) Accrued interest — Accrued salaries and wages ) — ) Gaming, pari-mutuel, property and other taxes Income taxes ) ) ) Other current and noncurrent liabilities ) ) ) Other noncurrent tax liabilities Net cash provided by operating activities Investing activities Capital project expenditures, net of reimbursements ) — ) Capital maintenance expenditures ) — ) Advances to Jamul Tribe ) — ) Proceeds from sale of property and equipment — Investment in joint ventures ) — ) Net cash used in investing activities ) — ) Financing activities Proceeds from exercise of options Principal payments on financing obligation with GLPI — ) ) Proceeds from issuance of long-term debt, net of issuance costs — Principal payments on long-term debt ) — ) Proceeds from insurance financing — Payments on insurance financing ) — ) Tax benefit from stock options exercised — Net cash provided by (used in) financing activities ) Net increase (decrease) in cash and cash equivalents — Cash and cash equivalents at beginning of year — Cash and cash equivalents at end of year $ $ — $ Supplemental disclosure Interest expense paid, net of amounts capitalized $ $ $ Income taxes paid $ $ — $ The following table presents the condensed consolidated statement of cash flow as previously reported, restatement adjustments and the condensed consolidated statement of cash flows as restated for the three months ended March 31, 2014: As Previously Restatement Reported Adjustments As Restated Three Months Ended March 31, 2014: Operating activities Net income $ $ ) $ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Amortization of items charged to interest expense — Gain on sale of fixed assets ) — ) Income from unconsolidated affiliates ) — ) Distributions of earnings from unconsolidated affiliates — Deferred income taxes ) Charge for stock-based compensation — Decrease (increase) Accounts receivable ) — ) Prepaid expenses and other current assets ) ) ) Other assets ) Increase (decrease) Accounts payable — Accrued expenses ) ) ) Accrued interest — Accrued salaries and wages ) ) ) Gaming, pari-mutuel, property and other taxes ) Income taxes ) — ) Other current and noncurrent liabilities Other noncurrent tax liabilities ) Net cash provided by operating activities Investing activities Capital project expenditures, net of reimbursements ) — ) Capital maintenance expenditures ) — ) Advances to Jamul Tribe — ) ) Proceeds from sale of property and equipment — Decrease in cash in escrow — Acquisition of gaming license ) — ) Net cash used in investing activities ) ) ) Financing activities Proceeds from exercise of options — Principal payments on financing obligation with GLPI — ) ) Proceeds from issuance of long-term debt, net of issuance costs ) — ) Principal payments on long-term debt ) — ) Proceeds from insurance financing — Payments on insurance financing ) — ) Tax benefit from stock options exercised — Net cash provided by (used in) financing activities ) Net increase (decrease) in cash and cash equivalents ) — ) Cash and cash equivalents at beginning of year — Cash and cash equivalents at end of year $ $ — $ Supplemental disclosure Interest expense paid, net of amounts capitalized $ $ $ Income taxes paid $ $ — $ |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2015 | |
Summary of Significant Accounting Policies | |
Schedule of promotional allowances | Three Months Ended March 31, 2015 2014 (in thousands) Rooms $ $ Food and beverage Other Total promotional allowances $ $ |
Schedule of estimated cost of providing complimentary services | Three Months Ended March 31, 2015 2014 (in thousands) Rooms $ $ Food and beverage Other Total cost of complimentary services $ $ |
Schedule of allocation of net income attributable to shareholders under the two-class method | Three Months Ended March 31, 2015 2014 (Restated) (Restated) (in thousands) Net income $ $ Net income applicable to preferred stock Net income applicable to common stock $ $ |
Schedule of reconciliation of the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS | Three Months Ended March 31, 2015 2014 (in thousands) Determination of shares: Weighted-average common shares outstanding Assumed conversion of dilutive employee stock-based awards Assumed conversion of restricted stock Diluted weighted-average common shares outstanding before participating security Assumed conversion of preferred stock Diluted weighted-average common shares outstanding |
Schedule of calculation of basic and diluted EPS for the entity's common stock | The following tables present the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2015 and 2014 (in thousands, except per share data): Three Months Ended March 31, 2015 2014 (Restated) (Restated) Calculation of basic EPS: Net income applicable to common stock $ $ Weighted-average common shares outstanding Basic EPS $ $ Calculation of diluted EPS using two-class method: Net income applicable to common stock $ $ Diluted weighted-average common shares outstanding before participating security Diluted EPS $ $ |
Weighted-average assumptions used in Black-Scholes option pricing model | 2015 2014 Risk-free interest rate % % Expected volatility % % Dividend yield — — Weighted-average expected life (years) |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2015 | |
Property and Equipment | |
Schedule of property and equipment, net | March 31, December 31, 2015 2014 (Restated) (Restated) (in thousands) Property and equipment - non-leased Land and improvements $ $ Building and improvements Furniture, fixtures, and equipment Leasehold improvements Construction in progress Less accumulated depreciation ) ) Property and equipment - leased Land and improvements Building and improvements Less accumulated depreciation ) ) Property and equipment, net $ $ |
Long-term Debt (Tables)
Long-term Debt (Tables) | 3 Months Ended |
Mar. 31, 2015 | |
Long-term Debt | |
Schedule of long-term debt, net of current maturities | March 31, December 31, 2015 2014 (Restated) (Restated) (in thousands) Senior secured credit facility $ $ $300 million 5.875% senior unsecured notes due November 1, 2021 Other long term obligations Capital leases Less current maturities of long-term debt ) ) Less discount on senior secured credit facility Term Loan B ) ) Less debt issuance costs, net of accumulated amortization of $8.3 million and $6.8 million, respectively ) ) $ $ |
Schedule of future minimum repayments of long-term debt | The following is a schedule of future minimum repayments of long-term debt as of March 31, 2015 (in thousands) : Within one year $ 1-3 years 3-5 years Over 5 years Total minimum payments $ |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2015 | |
Segment Information | |
Schedule of information with respect to the Company's segments | Three months ended March 31, 2015 East/Midwest West Southern Plains Other (1) Total (Restated) (Restated) (Restated) (Restated) (Restated) Income (loss) from operations $ $ $ $ ) $ Charge for stock compensation — — — Depreciation and amortization Plainridge contingent purchase price — — — (Gain) loss on disposal of assets ) ) Income from unconsolidated affiliates — — Non-operating items for Kansas JV — — — Adjusted EBITDA $ $ $ $ ) $ Three months ended March 31, 2014 East/Midwest West Southern Plains Other (1) Total (Restated) (Restated) (Restated) (Restated) (Restated) Income (loss) from operations $ $ $ $ ) $ Charge for stock compensation — — — Depreciation and amortization (Gain) loss on disposal of assets ) ) ) ) Income from unconsolidated affiliates — — Non-operating items for Kansas JV — — — Adjusted EBITDA $ $ $ $ ) $ East/Midwest West Southern Plains Other (1) Total (Restated) (Restated) (Restated) (Restated) (Restated) (in thousands) Three months ended March 31, 2015 Net revenues $ $ $ $ $ Capital expenditures Three months ended March 31, 2014 Net revenues $ $ $ $ $ Capital expenditures Balance sheet at March 31, 2015 Total assets Investment in and advances to unconsolidated affiliates — Goodwill and other intangible assets, net Balance sheet at December 31, 2014 Total assets Investment in and advances to unconsolidated affiliates — Goodwill and other intangible assets, net (1) Includes depreciation expense associated with the real property assets under the Master Lease with GLPI. In addition, Total assets include these assets. The interest expense associated with the financing obligation is reflected in the other category. Net revenues and income (loss) from unconsolidated affiliates relate to the Company’s stand-alone racing operations, namely Rosecroft Raceway, Sanford Orlando Kennel Club and the Company’s Texas and New Jersey joint ventures which do not have gaming operations. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2015 | |
Fair Value Measurements | |
Schedule of estimated fair values of financial instruments | The carrying amounts and estimated fair values by input level of the Company’s financial instruments at March 31, 2015 and December 31, 2014 are as follows (in thousands): March 31, 2015 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ $ $ $ — $ — Financial liabilities: Long-term debt Senior secured credit facility — Senior unsecured notes — — Other long-term obligations — — Other liabilities December 31, 2014 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ $ $ $ — $ — Financial liabilities: Long-term debt Senior secured credit facility — Senior unsecured notes — — Other long-term obligations — — Other liabilities — — |
Organization and Basis of Pre28
Organization and Basis of Presentation (Details) | Mar. 31, 2015jurisdictionfacility |
Organization and Basis of Presentation | |
Number of facilities the entity owned, managed, or had ownership interests in | facility | 26 |
Number of jurisdictions in which the entity operates | jurisdiction | 17 |
Restatement (Details)
Restatement (Details) - USD ($) $ in Thousands | Oct. 01, 2014 | Nov. 01, 2013 | Oct. 01, 2013 | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
Restatement | |||||||
Property and equipment, net | $ 2,682,661 | $ 2,669,732 | |||||
Interest expense | 108,346 | $ 104,514 | |||||
General and administrative | 116,256 | 107,575 | |||||
Depreciation expense | 63,400 | 64,800 | |||||
Income tax provision | 10,415 | 2,001 | |||||
Preliminary purchase price allocated to goodwill | 874,184 | 874,184 | |||||
Long-term debt | 1,240,459 | 1,210,577 | |||||
Other noncurrent liabilities | 27,110 | 27,447 | |||||
Long-term debt | 1,306,051 | ||||||
Retained Earnings (Accumulated Deficit) | (1,633,408) | (1,635,277) | |||||
Correction of the failed spin-off-leaseback accounting treatment | |||||||
Restatement | |||||||
Income tax provision | 5,100 | 200 | |||||
Reclassification of contingent earn-out liability | |||||||
Restatement | |||||||
Interest expense | (300) | ||||||
General and administrative | 300 | ||||||
Long-term debt | (19,500) | (19,200) | |||||
Other noncurrent liabilities | 19,500 | 19,200 | |||||
As Previously Reported | |||||||
Restatement | |||||||
Property and equipment, net | 802,520 | 769,145 | |||||
Rental expense related to Master Lease | 108,845 | 104,309 | |||||
Interest expense | 12,163 | 11,295 | |||||
General and administrative | 116,069 | 107,739 | |||||
Income tax provision | 9,260 | 6,800 | |||||
Preliminary purchase price allocated to goodwill | 276,173 | 277,582 | |||||
Long-term debt | 1,235,061 | 1,204,828 | |||||
Other noncurrent liabilities | 7,570 | 8,258 | |||||
Retained Earnings (Accumulated Deficit) | (352,392) | (363,388) | |||||
As Previously Reported | Revision of sale-leaseback to financing obligation | |||||||
Restatement | |||||||
Rental expense related to Master Lease | 108,800 | 104,300 | |||||
As Previously Reported | Correction of errors in goodwill and indefinite-lived gaming license intangible asset impairment analyses | |||||||
Restatement | |||||||
Goodwill impairment | $ 316,500 | $ 745,900 | $ 312,500 | ||||
Restatement Adjustments | |||||||
Restatement | |||||||
Property and equipment, net | 1,880,141 | 1,900,587 | |||||
Rental expense related to Master Lease | (108,845) | (104,309) | |||||
Interest expense | 96,183 | 93,219 | |||||
General and administrative | 187 | (164) | |||||
Income tax provision | 1,155 | (4,799) | |||||
Preliminary purchase price allocated to goodwill | 598,011 | 596,602 | |||||
Goodwill and other intangible asset impairment charges | (161,200) | $ (334,100) | |||||
Long-term debt | 5,398 | 5,749 | |||||
Other noncurrent liabilities | 19,540 | 19,189 | |||||
Retained Earnings (Accumulated Deficit) | (1,281,016) | (1,271,889) | |||||
Restatement Adjustments | Revision of sale-leaseback to financing obligation | |||||||
Restatement | |||||||
Property and equipment, net | 2,020,000 | 2,040,000 | |||||
Additional liabilities | 3,600,000 | 3,610,000 | |||||
Interest expense | 96,000 | 93,100 | |||||
Depreciation expense | 22,700 | 22,300 | |||||
Restatement Adjustments | Reclassification of real estate zoning costs to cost of gaming licenses within other intangible assets | |||||||
Restatement | |||||||
Depreciation expense | (2,700) | ||||||
Cost of gaming licenses with other intangible assets | 150,000 | ||||||
Restatement Adjustments | Correction of the failed spin-off-leaseback accounting treatment | |||||||
Restatement | |||||||
Income tax provision | 5,100 | 200 | |||||
Restatement Adjustments | Correction of corporate airplane lease accounting treatment | |||||||
Restatement | |||||||
Property and equipment, net | 6,500 | 7,000 | |||||
Interest expense | 200 | 200 | |||||
General and administrative | (200) | (200) | |||||
Depreciation expense | 500 | $ 500 | |||||
Long-term debt | $ 24,900 | $ 24,900 |
Restatement (Details 2)
Restatement (Details 2) - USD ($) $ / shares in Units, $ in Thousands | Mar. 31, 2015 | Dec. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 |
Current assets | ||||
Cash and cash equivalents | $ 237,729 | $ 208,673 | $ 287,695 | $ 292,995 |
Receivables, net of allowance for doubtful accounts of $2,093 | 40,918 | 41,618 | ||
Receivables, net of allowance for doubtful accounts (in dollars) | 2,093 | 2,004 | ||
Prepaid expenses | 86,420 | 70,785 | ||
Deferred income taxes | 33,907 | 40,343 | ||
Other current assets | 10,913 | 11,189 | ||
Total current assets | 409,887 | 372,608 | ||
Property and equipment, net | 2,682,661 | 2,669,732 | ||
Other assets | ||||
Investment in and advances to unconsolidated affiliates | 175,574 | 179,551 | ||
Goodwill | 874,184 | 874,184 | ||
Other intangible assets, net | 418,105 | 419,453 | ||
Advances to the Jamul Tribe | 86,443 | 62,048 | ||
Other assets | 77,631 | 87,318 | ||
Total other assets | 1,631,937 | 1,622,554 | ||
Total assets | 4,724,485 | 4,664,894 | ||
Current liabilities | ||||
Current portion of financing obligation to GLPI | 47,057 | 46,884 | ||
Current maturities of long-term debt | 40,890 | 30,853 | ||
Accounts payable | 66,587 | 43,136 | ||
Accrued expenses | 137,739 | 133,092 | ||
Accrued interest | 11,427 | 5,163 | ||
Accrued salaries and wages | 69,671 | 84,034 | ||
Gaming, pari-mutuel, property, and other taxes | 55,726 | 51,972 | ||
Insurance financing | 10,251 | 13,680 | ||
Other current liabilities | 64,771 | 75,773 | ||
Total current liabilities | 504,119 | 484,587 | ||
Long-term liabilities | ||||
Long-term financing obligation to GLPI , net of current portion | 3,551,981 | 3,564,629 | ||
Long-term debt, net of current maturities and debt issuance costs | 1,240,459 | 1,210,577 | ||
Deferred income taxes | 90,336 | 78,633 | ||
Noncurrent tax liabilities | 7,108 | 7,035 | ||
Other noncurrent liabilities | 27,110 | 27,447 | ||
Total long-term liabilities | $ 4,916,994 | $ 4,888,321 | ||
Shareholders' equity (deficit) | ||||
Series C Preferred stock ($.01 par value, 18,500 shares authorized, 8,624 shares issued and outstanding at March 31, 2015 and December 31, 2014) | ||||
Common stock ($.01 par value, 200,000,000 shares authorized, 81,873,026 shares issued and 79,705,633 shares outstanding, at March 31, 2015, 81,329,210 shares issued and 79,161,817 shares outstanding, at December 31, 2014) | $ 818 | $ 813 | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | ||
Common stock, shares authorized | 200,000,000 | 200,000,000 | ||
Common stock, shares issued | 81,873,026 | 81,329,210 | ||
Common stock, shares outstanding | 79,705,633 | 79,161,817 | ||
Treasury stock, at cost (2,167,393 shares held at March 31, 2015 and December 31, 2014) | $ (28,414) | $ (28,414) | ||
Treasury stock, shares issued | 2,167,393 | 2,167,393 | ||
Additional paid-in capital | $ 967,374 | $ 956,146 | ||
Retained deficit | (1,633,408) | (1,635,277) | ||
Accumulated other comprehensive (loss) income | (2,998) | (1,282) | ||
Total shareholders' equity (deficit) | (696,628) | (708,014) | $ (535,057) | (550,852) |
Total liabilities and shareholders' equity (deficit) | $ 4,724,485 | $ 4,664,894 | ||
Series C Preferred Stock | ||||
Shareholders' equity (deficit) | ||||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | ||
Preferred stock, shares authorized | 18,500 | 18,500 | ||
Preferred stock, shares issued | 8,624 | 8,624 | ||
Preferred stock , shares outstanding | 8,624 | 8,624 | 8,624 | |
As Previously Reported | ||||
Current assets | ||||
Cash and cash equivalents | $ 237,729 | $ 208,673 | $ 287,695 | $ 292,995 |
Receivables, net of allowance for doubtful accounts of $2,093 | 40,918 | 41,618 | ||
Receivables, net of allowance for doubtful accounts (in dollars) | 2,093 | 2,004 | ||
Prepaid expenses | 82,381 | 68,947 | ||
Deferred income taxes | 45,302 | 55,579 | ||
Other current assets | 10,913 | 11,189 | ||
Total current assets | 417,243 | 386,006 | ||
Property and equipment, net | 802,520 | 769,145 | ||
Other assets | ||||
Investment in and advances to unconsolidated affiliates | 175,574 | 179,551 | ||
Goodwill | 276,173 | 277,582 | ||
Other intangible assets, net | 370,602 | 370,562 | ||
Deferred income taxes | 74,492 | 79,067 | ||
Advances to the Jamul Tribe | 86,443 | 62,048 | ||
Other assets | 77,631 | 87,318 | ||
Total other assets | 1,060,915 | 1,056,128 | ||
Total assets | 2,280,678 | 2,211,279 | ||
Current liabilities | ||||
Current maturities of long-term debt | 40,890 | 30,853 | ||
Accounts payable | 66,587 | 43,136 | ||
Accrued expenses | 135,518 | 130,818 | ||
Accrued interest | 11,427 | 5,163 | ||
Accrued salaries and wages | 69,671 | 84,034 | ||
Gaming, pari-mutuel, property, and other taxes | 55,762 | 52,132 | ||
Insurance financing | 10,251 | 13,680 | ||
Other current liabilities | 64,771 | 75,703 | ||
Total current liabilities | 454,877 | 435,519 | ||
Long-term liabilities | ||||
Long-term debt, net of current maturities and debt issuance costs | 1,235,061 | 1,204,828 | ||
Noncurrent tax liabilities | 8,171 | 8,188 | ||
Other noncurrent liabilities | 7,570 | 8,258 | ||
Total long-term liabilities | $ 1,250,802 | $ 1,221,274 | ||
Shareholders' equity (deficit) | ||||
Series C Preferred stock ($.01 par value, 18,500 shares authorized, 8,624 shares issued and outstanding at March 31, 2015 and December 31, 2014) | ||||
Common stock ($.01 par value, 200,000,000 shares authorized, 81,873,026 shares issued and 79,705,633 shares outstanding, at March 31, 2015, 81,329,210 shares issued and 79,161,817 shares outstanding, at December 31, 2014) | $ 791 | $ 786 | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | ||
Common stock, shares authorized | 200,000,000 | 200,000,000 | ||
Common stock, shares issued | 81,873,026 | 81,329,210 | ||
Common stock, shares outstanding | 79,705,633 | 79,161,817 | ||
Treasury stock, shares issued | 2,167,393 | 2,167,393 | ||
Additional paid-in capital | $ 929,598 | $ 918,370 | ||
Retained deficit | (352,392) | (363,388) | ||
Accumulated other comprehensive (loss) income | (2,998) | (1,282) | ||
Total shareholders' equity (deficit) | 574,999 | 554,486 | ||
Total liabilities and shareholders' equity (deficit) | $ 2,280,678 | $ 2,211,279 | ||
As Previously Reported | Series C Preferred Stock | ||||
Shareholders' equity (deficit) | ||||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | ||
Preferred stock, shares authorized | 18,500 | 18,500 | ||
Preferred stock, shares issued | 8,624 | 8,624 | ||
Preferred stock , shares outstanding | 8,624 | 8,624 | ||
Restatement Adjustments | ||||
Current assets | ||||
Prepaid expenses | $ 4,039 | $ 1,838 | ||
Deferred income taxes | (11,395) | (15,236) | ||
Total current assets | (7,356) | (13,398) | ||
Property and equipment, net | 1,880,141 | 1,900,587 | ||
Other assets | ||||
Goodwill | 598,011 | 596,602 | ||
Other intangible assets, net | 47,503 | 48,891 | ||
Deferred income taxes | (74,492) | (79,067) | ||
Total other assets | 571,022 | 566,426 | ||
Total assets | 2,443,807 | 2,453,615 | ||
Current liabilities | ||||
Current portion of financing obligation to GLPI | 47,057 | 46,884 | ||
Accrued expenses | 2,221 | 2,274 | ||
Gaming, pari-mutuel, property, and other taxes | (36) | (160) | ||
Other current liabilities | 70 | |||
Total current liabilities | 49,242 | 49,068 | ||
Long-term liabilities | ||||
Long-term financing obligation to GLPI , net of current portion | 3,551,981 | 3,564,629 | ||
Long-term debt, net of current maturities and debt issuance costs | 5,398 | 5,749 | ||
Deferred income taxes | 90,336 | 78,633 | ||
Noncurrent tax liabilities | (1,063) | (1,153) | ||
Other noncurrent liabilities | 19,540 | 19,189 | ||
Total long-term liabilities | $ 3,666,192 | $ 3,667,047 | ||
Shareholders' equity (deficit) | ||||
Series C Preferred stock ($.01 par value, 18,500 shares authorized, 8,624 shares issued and outstanding at March 31, 2015 and December 31, 2014) | ||||
Common stock ($.01 par value, 200,000,000 shares authorized, 81,873,026 shares issued and 79,705,633 shares outstanding, at March 31, 2015, 81,329,210 shares issued and 79,161,817 shares outstanding, at December 31, 2014) | $ 27 | $ 27 | ||
Treasury stock, at cost (2,167,393 shares held at March 31, 2015 and December 31, 2014) | (28,414) | (28,414) | ||
Additional paid-in capital | 37,776 | 37,776 | ||
Retained deficit | (1,281,016) | (1,271,889) | ||
Total shareholders' equity (deficit) | (1,271,627) | (1,262,500) | ||
Total liabilities and shareholders' equity (deficit) | $ 2,443,807 | $ 2,453,615 |
Restatement (Details 3)
Restatement (Details 3) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Revenues | ||
Gaming | $ 591,336 | $ 570,683 |
Food, beverage and other | 108,763 | 104,870 |
Management service fee | 1,927 | 2,458 |
Revenues | 702,026 | 678,011 |
Less promotional allowances | (37,888) | (36,931) |
Net revenues | 664,138 | 641,080 |
Operating expenses | ||
Gaming expense | 294,895 | 283,268 |
Food, beverage and other | 77,929 | 77,538 |
General and administrative | 116,256 | 107,575 |
Depreciation and amortization | 63,369 | 70,185 |
Total operating expenses | 552,449 | 538,566 |
Income from operations | 111,689 | 102,514 |
Other income (expenses) | ||
Interest expense | (108,346) | (104,514) |
Interest income | 1,870 | 467 |
Income from unconsolidated affiliates | 3,982 | 2,483 |
Other | 3,089 | 1,631 |
Total other expenses | (99,405) | (99,933) |
Income from operations before income taxes | 12,284 | 2,581 |
Income tax (benefit) provision | 10,415 | 2,001 |
Net income | $ 1,869 | $ 580 |
Earnings per common share: | ||
Basic earnings per common share (in dollars per share) | $ 0.02 | $ 0.01 |
Diluted earnings per common share (in dollars per share) | $ 0.02 | $ 0.01 |
As Previously Reported | ||
Revenues | ||
Gaming | $ 591,336 | $ 570,683 |
Food, beverage and other | 108,763 | 104,870 |
Management service fee | 1,927 | 2,458 |
Revenues | 702,026 | 678,011 |
Less promotional allowances | (37,888) | (36,931) |
Net revenues | 664,138 | 641,080 |
Operating expenses | ||
Gaming expense | 294,895 | 286,077 |
Food, beverage and other | 77,929 | 77,538 |
General and administrative | 116,069 | 107,739 |
Rental expense related to Master Lease | 108,845 | 104,309 |
Depreciation and amortization | 42,922 | 47,366 |
Total operating expenses | 640,660 | 623,029 |
Income from operations | 23,478 | 18,051 |
Other income (expenses) | ||
Interest expense | (12,163) | (11,295) |
Interest income | 1,870 | 467 |
Income from unconsolidated affiliates | 3,982 | 2,483 |
Other | 3,089 | 1,631 |
Total other expenses | (3,222) | (6,714) |
Income from operations before income taxes | 20,256 | 11,337 |
Income tax (benefit) provision | 9,260 | 6,800 |
Net income | $ 10,996 | $ 4,537 |
Earnings per common share: | ||
Basic earnings per common share (in dollars per share) | $ 0.12 | $ 0.05 |
Diluted earnings per common share (in dollars per share) | $ 0.12 | $ 0.05 |
Restatement Adjustments | ||
Operating expenses | ||
Gaming expense | $ (2,809) | |
General and administrative | $ 187 | (164) |
Rental expense related to Master Lease | (108,845) | (104,309) |
Depreciation and amortization | 20,447 | 22,819 |
Total operating expenses | (88,211) | (84,463) |
Income from operations | 88,211 | 84,463 |
Other income (expenses) | ||
Interest expense | (96,183) | (93,219) |
Total other expenses | (96,183) | (93,219) |
Income from operations before income taxes | (7,972) | (8,756) |
Income tax (benefit) provision | 1,155 | (4,799) |
Net income | $ (9,127) | $ (3,957) |
Earnings per common share: | ||
Basic earnings per common share (in dollars per share) | $ (0.10) | $ (0.04) |
Diluted earnings per common share (in dollars per share) | $ (0.10) | $ (0.04) |
Restatement (Details 4)
Restatement (Details 4) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Operating activities | ||
Net income | $ 1,869 | $ 580 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 63,369 | 70,185 |
Amortization of items charged to interest expense | 1,505 | 1,507 |
Accretion of settlement value on other noncurrent liabilities | 351 | |
Loss (gain) on sale of fixed assets | 153 | (49) |
Income from unconsolidated affiliates | (3,982) | (2,483) |
Distributions of earnings from unconsolidated affiliates | 8,000 | 5,500 |
Deferred income taxes | 18,648 | 288 |
Charge for stock-based compensation | 2,084 | 2,579 |
Decrease (Increase) , | ||
Accounts receivable | 727 | (599) |
Prepaid expenses and other current assets | (2,742) | (13,104) |
Other assets | 6,400 | 7,087 |
Increase (decrease), | ||
Accounts payable | 2,887 | 2,186 |
Accrued expenses | 4,931 | (14,266) |
Accrued interest | 6,264 | 2,484 |
Accrued salaries and wages | (14,363) | (15,630) |
Gaming, pari-mutuel, property and other taxes | 3,754 | 2,741 |
Income taxes | (11,738) | (7,582) |
Other current and noncurrent liabilities | (11,690) | 807 |
Other noncurrent tax liabilities | 1,609 | 1,205 |
Net cash provided by operating activities | 78,036 | 43,436 |
Investing activities | ||
Capital project expenditures, net of reimbursements | (36,929) | (12,957) |
Capital maintenance expenditures | (11,860) | (24,084) |
Advances to the Jamul Tribe | (16,341) | (8,573) |
Proceeds from sale of property and equipment | 146 | 129 |
Decrease in cash in escrow | 18,000 | |
Investment in joint ventures | (328) | |
Acquisition of gaming license | (25,586) | |
Net cash used in investing activities | (65,312) | (53,071) |
Financing activities | ||
Proceeds from exercise of options | 2,743 | 5,581 |
Principal payments on financing obligation with GLPI | (12,475) | (11,255) |
Proceeds from issuance of long-term debt, net of issuance costs | 45,000 | (327) |
Principal payments on long-term debt | (21,886) | (6,898) |
Proceeds from insurance financing | 885 | 14,335 |
Payments on insurance financing | (4,314) | (4,853) |
Tax benefit from stock options exercised | 6,379 | 7,752 |
Net cash provided by financing activities | 16,332 | 4,335 |
Net increase (decrease) in cash and cash equivalents | 29,056 | (5,300) |
Cash and cash equivalents at beginning of year | 208,673 | 292,995 |
Cash and cash equivalents at end of period | 237,729 | 287,695 |
Supplemental disclosure | ||
Interest expense paid, net of amounts capitalized | 100,179 | 99,325 |
Income taxes paid | 226 | 352 |
As Previously Reported | ||
Operating activities | ||
Net income | 10,996 | 4,537 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 42,922 | 47,366 |
Amortization of items charged to interest expense | 1,505 | 1,507 |
Accretion of settlement value on other noncurrent liabilities | 351 | |
Loss (gain) on sale of fixed assets | 153 | (49) |
Income from unconsolidated affiliates | (3,982) | (2,483) |
Distributions of earnings from unconsolidated affiliates | 8,000 | 5,500 |
Deferred income taxes | 15,374 | 1,803 |
Charge for stock-based compensation | 2,084 | 2,579 |
Decrease (Increase) , | ||
Accounts receivable | 727 | (599) |
Prepaid expenses and other current assets | (2,742) | (12,739) |
Other assets | 6,400 | (1,854) |
Increase (decrease), | ||
Accounts payable | 2,887 | 2,186 |
Accrued expenses | 4,985 | (11,384) |
Accrued interest | 6,264 | 2,484 |
Accrued salaries and wages | (14,363) | (15,590) |
Gaming, pari-mutuel, property and other taxes | 3,630 | 2,768 |
Income taxes | (9,529) | (7,582) |
Other current and noncurrent liabilities | (11,620) | 669 |
Other noncurrent tax liabilities | 1,519 | 4,489 |
Net cash provided by operating activities | 65,561 | 23,608 |
Investing activities | ||
Capital project expenditures, net of reimbursements | (36,929) | (12,957) |
Capital maintenance expenditures | (11,860) | (24,084) |
Advances to the Jamul Tribe | (16,341) | |
Proceeds from sale of property and equipment | 146 | 129 |
Decrease in cash in escrow | 18,000 | |
Investment in joint ventures | (328) | |
Acquisition of gaming license | (25,586) | |
Net cash used in investing activities | (65,312) | (44,498) |
Financing activities | ||
Proceeds from exercise of options | 2,743 | 5,581 |
Proceeds from issuance of long-term debt, net of issuance costs | 45,000 | (327) |
Principal payments on long-term debt | (21,886) | (6,898) |
Proceeds from insurance financing | 885 | 14,335 |
Payments on insurance financing | (4,314) | (4,853) |
Tax benefit from stock options exercised | 6,379 | 7,752 |
Net cash provided by financing activities | 28,807 | 15,590 |
Net increase (decrease) in cash and cash equivalents | 29,056 | (5,300) |
Cash and cash equivalents at beginning of year | 208,673 | 292,995 |
Cash and cash equivalents at end of period | 237,729 | 287,695 |
Supplemental disclosure | ||
Interest expense paid, net of amounts capitalized | 4,036 | 7,278 |
Income taxes paid | 226 | 352 |
Restatement Adjustments | ||
Operating activities | ||
Net income | (9,127) | (3,957) |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 20,447 | 22,819 |
Deferred income taxes | 3,274 | (1,515) |
Decrease (Increase) , | ||
Prepaid expenses and other current assets | (365) | |
Other assets | 8,941 | |
Increase (decrease), | ||
Accrued expenses | (54) | (2,882) |
Accrued salaries and wages | (40) | |
Gaming, pari-mutuel, property and other taxes | 124 | (27) |
Income taxes | (2,209) | |
Other current and noncurrent liabilities | (70) | 138 |
Other noncurrent tax liabilities | 90 | (3,284) |
Net cash provided by operating activities | 12,475 | 19,828 |
Investing activities | ||
Advances to the Jamul Tribe | (8,573) | |
Net cash used in investing activities | (8,573) | |
Financing activities | ||
Principal payments on financing obligation with GLPI | (12,475) | (11,255) |
Net cash provided by financing activities | (12,475) | (11,255) |
Supplemental disclosure | ||
Interest expense paid, net of amounts capitalized | $ 96,143 | $ 92,047 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Revenue recognition | ||
Promotional allowances | $ 37,888 | $ 36,931 |
Cost of complimentary services | 12,601 | 12,690 |
Gaming and Racing Taxes | ||
Gaming expense | 227,000 | 216,700 |
Rooms | ||
Revenue recognition | ||
Promotional allowances | 8,336 | 8,071 |
Cost of complimentary services | 936 | 872 |
Food and Beverage | ||
Revenue recognition | ||
Promotional allowances | 27,448 | 26,598 |
Cost of complimentary services | 10,833 | 10,975 |
Other | ||
Revenue recognition | ||
Promotional allowances | 2,104 | 2,262 |
Cost of complimentary services | $ 832 | $ 843 |
Summary of Significant Accoun34
Summary of Significant Accounting Policies (Details 2) - Master Lease Agreement $ in Millions | Nov. 01, 2013 | Mar. 31, 2015USD ($)facilityitem | Mar. 31, 2014USD ($) |
Payments related to the Master Lease | |||
Number of lease renewal options | item | 4 | ||
Term of lease renewal options | 5 years | ||
Initial term of Master Lease | 15 years | 15 years | |
Total rental expense | $ | $ 108.8 | $ 104.3 | |
Failed Spin-Off-Leaseback Financing Obligation [Abstract] | |||
Discount rate | 9.70% | ||
Lease term | 35 years | ||
Facilities Held Under Leases | |||
Payments related to the Master Lease | |||
Number of real property assets associated with Company's gaming and related facilities | facility | 18 | ||
Percentage of escalation to fixed components of rent if certain rent coverage ratio thresholds are met | 2.00% | ||
Period over which operating lease component is adjusted | 5 years | ||
Adjustment to operating lease component as percentage of the average change to net revenues during preceding five years | 4.00% | ||
Adjustment to operating lease component as percentage of the average change to net revenues during preceding month | 20.00% | ||
Real estate construction costs paid for by GLPI to facilities (in percentage) | 10.00% |
Summary of Significant Accoun35
Summary of Significant Accounting Policies (Details 3) - Jamul Tribe $ in Millions | Apr. 05, 2013USD ($)ft²aitem | Mar. 31, 2015USD ($) | Dec. 31, 2014USD ($) |
Long-term asset related to the Jamul Tribe | |||
Land owned | a | 6 | ||
Proposed facility development cost | $ 360 | ||
Number of stories | item | 3 | ||
Size of gaming and entertainment facility | ft² | 200,000 | ||
Number of slot machines | item | 1,700 | ||
Number of table games | item | 43 | ||
Number of parking spaces | item | 1,800 | ||
Loan commitment | $ 400 | ||
Anticipated loan funding | 360 | ||
Note receivable | 86.4 | $ 62 | |
Interest Receivable | $ 5 | $ 3.3 |
Summary of Significant Accoun36
Summary of Significant Accounting Policies (Details 4) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Net income loss available to common stockholders | |||
Net income | $ 1,869 | $ 580 | |
Net income applicable to preferred stock | 183 | 58 | |
Net income applicable to common stock | $ 1,686 | $ 522 | |
Determination of shares: | |||
Weighted-average common shares outstanding (in shares) | 79,400,000 | 77,917,000 | |
Assumed conversion of dilutive employee stock-based awards (in shares) | 2,296,000 | 2,003,000 | |
Assumed conversion of restricted stock (in shares) | 72,000 | 135,000 | |
Diluted weighted-average common shares outstanding before participating security | 81,768,000 | 80,055,000 | |
Assumed conversion of preferred stock (in shares) | 8,624,000 | 8,624,000 | |
Diluted weighted-average common shares outstanding (in shares) | 90,392,000 | 88,679,000 | |
Anti-dilutive securities, options to purchase shares outstanding | 1,561,562 | 392,289 | |
Calculation of basic EPS: | |||
Net income applicable to common stock | $ 1,686 | $ 522 | |
Weighted-average common shares outstanding (in shares) | 79,400,000 | 77,917,000 | |
Basic earnings per common share (in dollars per share) | $ 0.02 | $ 0.01 | |
Calculation of diluted EPS using two-class method: | |||
Net income applicable to common stock | $ 1,686 | $ 522 | |
Diluted weighted-average common shares outstanding before participating security | 81,768,000 | 80,055,000 | |
Diluted earnings per common share (in dollars per share) | $ 0.02 | $ 0.01 | |
Series C Preferred Stock | |||
Earnings Per Share | |||
Preferred stock , shares outstanding | 8,624 | 8,624 | 8,624 |
Summary of Significant Accoun37
Summary of Significant Accounting Policies (Details 5) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Stock-based compensation costs | |||
Time period of historical volatility of stock used to estimate expected volatility | 5 years 5 months 12 days | ||
Expected dividend yield assumption (as a percent) | 0.00% | ||
Granted (in shares) | 1,662,035 | ||
Accrued salaries and wages | $ 69,671 | $ 84,034 | |
Stock based compensation expense | $ 2,100 | $ 2,600 | |
Weighted-average assumptions used in the Black-Scholes option-pricing model | |||
Risk-free interest rate (as a percent) | 1.54% | 1.68% | |
Expected volatility (as a percent) | 36.93% | 44.80% | |
Weighted-average expected life (years) | 5 years 5 months 12 days | 5 years 5 months 12 days | |
Phantom Share Units (PSUs) | |||
Stock-based compensation costs | |||
Accrued salaries and wages | $ 7,000 | $ 8,200 | |
Total compensation cost related to nonvested awards not yet recognized | $ 26,200 | ||
Period for recognition of unrecognized compensation cost | 2 years 3 months 18 days | ||
Stock based compensation expense | $ 4,500 | 1,400 | |
Amounts paid on cash settled awards | $ 5,200 | 5,500 | |
Phantom Share Units (PSUs) | Minimum | |||
Stock-based compensation costs | |||
Vesting period | 3 years | ||
Phantom Share Units (PSUs) | Maximum | |||
Stock-based compensation costs | |||
Vesting period | 5 years | ||
Stock Appreciation Rights (SARs) | |||
Stock-based compensation costs | |||
Vesting period | 4 years | ||
Accrued salaries and wages | $ 9,100 | $ 6,300 | |
Total compensation cost related to nonvested awards not yet recognized | $ 8,700 | ||
Period for recognition of unrecognized compensation cost | 2 years 11 months 1 day | ||
Stock based compensation expense | $ 4,600 | 300 | |
Amounts paid on cash settled awards | $ 1,800 | $ 500 |
Summary of Significant Accoun38
Summary of Significant Accounting Policies (Details 6) | Mar. 31, 2015 |
Kansas Entertainment | |
Segment Information | |
Ownership interest in joint venture (as a percent) | 50.00% |
Cordish | |
Segment Information | |
Ownership interest in joint venture (as a percent) | 50.00% |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Plant and equipment | |||
Property and equipment, net | $ 2,682,661 | $ 2,669,732 | |
Increase in property and equipment | 12,900 | ||
Depreciation expense | 63,400 | $ 64,800 | |
Interest capitalized in connection with major construction projects | 600 | 100 | |
Master Lease Agreement | |||
Plant and equipment | |||
Depreciation expense | 23,200 | $ 22,300 | |
Land And Land Improvements Owned | |||
Plant and equipment | |||
Property and equipment | 43,211 | 42,350 | |
Land and Land Improvements Leased | |||
Plant and equipment | |||
Property and equipment | 382,702 | 382,702 | |
Building and Building improvements Owned | |||
Plant and equipment | |||
Property and equipment | 187,696 | 173,043 | |
Buildings and Building Improvements Leased | |||
Plant and equipment | |||
Property and equipment | 2,219,018 | 2,219,018 | |
Furniture, Fixtures and Equipment | |||
Plant and equipment | |||
Property and equipment | 1,218,830 | 1,213,143 | |
Leasehold Improvements | |||
Plant and equipment | |||
Property and equipment | 120,209 | 120,984 | |
Construction in Progress | |||
Plant and equipment | |||
Property and equipment | 115,955 | 69,367 | |
Non-leased Assets | |||
Plant and equipment | |||
Property and equipment | 1,685,901 | 1,618,887 | |
Less accumulated depreciation | (1,019,401) | (988,490) | |
Property and equipment, net | 666,500 | 630,397 | |
Leased Assets | |||
Plant and equipment | |||
Property and equipment | 2,601,720 | 2,601,720 | |
Less accumulated depreciation | (585,559) | (562,385) | |
Property and equipment, net | $ 2,016,161 | $ 2,039,335 |
Long-term Debt (Details)
Long-term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2015 | Dec. 31, 2014 |
Long-term Debt | ||
Debt and Capital Lease Obligations, Total | $ 1,306,051 | $ 1,267,637 |
Less current maturities of long-term debt | (40,890) | (30,853) |
Less discount on senior secured credit facility Term Loan B | (1,014) | (1,056) |
Less debt issuance costs, net of accumulated amortization of $9.7 million and $6.8 million, respectively | (23,688) | (25,151) |
Long-term debt, net of current maturities and debt issuance costs | 1,240,459 | 1,210,577 |
Debt issuance costs, accumulated amortization | 8,300 | 6,800 |
Senior Secured Credit Facility | ||
Long-term Debt | ||
Debt and Capital Lease Obligations, Total | 830,625 | 807,500 |
Senior Unsecured 5.875% Percent Notes | ||
Long-term Debt | ||
Debt and Capital Lease Obligations, Total | $ 300,000 | 300,000 |
Debt instrument interest rate stated percentage | 5.875% | |
Principal amount | $ 300,000 | |
Other long-term obligations | ||
Long-term Debt | ||
Debt and Capital Lease Obligations, Total | 150,300 | 135,000 |
Capital leases | ||
Long-term Debt | ||
Debt and Capital Lease Obligations, Total | $ 25,126 | $ 25,137 |
Long-term Debt (Details 2)
Long-term Debt (Details 2) $ in Thousands | Feb. 08, 2016 | Jan. 31, 2015USD ($) | Mar. 31, 2015USD ($) | Sep. 30, 2014USD ($)facilityitem | Mar. 31, 2014USD ($) | Dec. 31, 2014USD ($) |
Future minimum repayments of long-term debt | ||||||
Within one year | $ 40,890 | |||||
1-3 years | 148,766 | |||||
3-5 years | 500,989 | |||||
Over 5 years | 615,406 | |||||
Total minimum payments | 1,306,051 | |||||
Long-term Debt | ||||||
Interest expense | 108,346 | $ 104,514 | ||||
Other assets | 77,631 | $ 87,318 | ||||
Long-term debt | 1,240,459 | 1,210,577 | ||||
Early adoption of accounting guidance, effect | Simplify the presentation of debt issuance costs | ||||||
Long-term Debt | ||||||
Other assets | $ (23,700) | |||||
Long-term debt | (25,200) | |||||
Capital leases | ||||||
Long-term Debt | ||||||
Lease term | 10 years | |||||
Capital lease term renewal option | 10 years | |||||
Capital Lease Obligations | $ 24,900 | $ 24,900 | ||||
Senior Secured Credit Facility | ||||||
Long-term Debt | ||||||
Gross outstanding balance | 830,600 | |||||
Letters of credit outstanding | 22,700 | |||||
Available borrowing capacity | $ 362,300 | |||||
Revolving credit facility | ||||||
Long-term Debt | ||||||
Term of debt | 5 years | |||||
Maximum borrowing capacity | $ 500,000 | |||||
Gross outstanding balance | $ 115,000 | |||||
Term Loan A Facility | ||||||
Long-term Debt | ||||||
Term of debt | 5 years | |||||
Maximum borrowing capacity | $ 500,000 | |||||
Gross outstanding balance | $ 468,700 | |||||
Term Loan B Facility | ||||||
Long-term Debt | ||||||
Term of debt | 7 years | |||||
Maximum borrowing capacity | $ 250,000 | |||||
Gross outstanding balance | $ 246,900 | |||||
Senior Unsecured 5.875% Percent Notes | ||||||
Long-term Debt | ||||||
Additional interest (as a percent) | 25.00% | |||||
Debt instrument interest rate stated percentage | 5.875% | |||||
Principal amount | $ 300,000 | |||||
Other long-term obligations | ||||||
Long-term Debt | ||||||
Other long term obligations | 150,300 | |||||
Other long-term obligations | Hollywood Gaming at Dayton Raceway And Mahoning Valley Race Course | ||||||
Long-term Debt | ||||||
Other long term obligations | $ 135,000 | |||||
Discount Rate | 5.00% | |||||
Other long-term obligations | Hollywood Casino Lawrenceburg | ||||||
Long-term Debt | ||||||
Other long term obligations | $ 15,300 | |||||
Other long-term obligations | Racetracks in Toledo and Grove City to Dayton and Austintown | ||||||
Long-term Debt | ||||||
Number of New Facilities | facility | 2 | |||||
Contractual Obligation Relocation Fee | $ 75,000 | |||||
Discount Rate | 5.00% | |||||
Relocation fee payable upon opening of the facility | $ 7,500 | |||||
Number of semi-annual payments | item | 18 | |||||
Semi-annual payment amount beginning one year from the commencement of operation | $ 4,800 | |||||
Effective yield | 5.00% | |||||
Interest expense | $ 1,700 | |||||
Other long-term obligations | City of Lawrenceburg Department of Redevelopment | ||||||
Long-term Debt | ||||||
Term of debt | 20 years | |||||
Purchase price of hotel and event center | $ 15,300 | |||||
Annual payment amount | $ 1,000 | |||||
Effective yield | 3.00% | |||||
Interest expense | $ 100 |
Master Lease Financing Obliga42
Master Lease Financing Obligation (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Capital Leased Assets [Line Items] | ||
Interest expense for the Master Lease | $ 96.4 | $ 93.1 |
Master Lease Agreement | ||
Capital Leased Assets [Line Items] | ||
Discount rate (as a percent) | 9.70% | |
Total payments under Master Lease | $ 108.8 | 104.3 |
Hollywood Casinos in Columbus, Ohio and Toledo, Ohio | Master Lease Agreement | ||
Capital Leased Assets [Line Items] | ||
Contingent payments included in Master Lease interest expense associated with the monthly variable components for Hollywood Casino Columbus and Hollywood Casino Toledo | 10.7 | $ 10.2 |
Contingent Payments associated with annual escalator | $ 0.8 |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Segment information | |||
Income (loss) from operations | $ 111,689 | $ 102,514 | |
Charge for stock-based compensation | 2,084 | 2,579 | |
Depreciation and amortization | 63,369 | 70,185 | |
Plainridge contingent purchase price | 351 | ||
(Gain) loss on disposal of assets | 153 | (49) | |
Income from unconsolidated affiliates | 3,982 | 2,483 | |
Non-operating items for Kansas JV | (99,405) | (99,933) | |
Adjusted EBITDA | 184,379 | 180,633 | |
Net revenues | 664,138 | 641,080 | |
Capital expenditures | 48,789 | 37,041 | |
Total assets | 4,724,485 | $ 4,664,894 | |
Investment in and advances to unconsolidated affiliates | 175,574 | 179,551 | |
Goodwill and other intangible assets, net | 1,292,289 | 1,293,637 | |
Kansas Entertainment | |||
Segment information | |||
Non-operating items for Kansas JV | 2,751 | 2,921 | |
East/Midwest | |||
Segment information | |||
Income (loss) from operations | 90,863 | 77,723 | |
Depreciation and amortization | 25,385 | 26,823 | |
Plainridge contingent purchase price | 351 | ||
(Gain) loss on disposal of assets | (122) | (87) | |
Adjusted EBITDA | 116,477 | 104,459 | |
Net revenues | 386,544 | 349,449 | |
Capital expenditures | 38,574 | 10,110 | |
Total assets | 1,054,919 | 1,007,162 | |
Investment in and advances to unconsolidated affiliates | 93 | 94 | |
Goodwill and other intangible assets, net | 427,351 | 427,335 | |
West | |||
Segment information | |||
Income (loss) from operations | 15,526 | 16,942 | |
Depreciation and amortization | 2,172 | 1,549 | |
(Gain) loss on disposal of assets | 181 | 66 | |
Adjusted EBITDA | 17,879 | 18,557 | |
Net revenues | 62,585 | 60,920 | |
Capital expenditures | 2,851 | 6,430 | |
Total assets | 312,054 | 287,551 | |
Goodwill and other intangible assets, net | 143,267 | 143,242 | |
Southern Plains | |||
Segment information | |||
Income (loss) from operations | 55,385 | 51,339 | |
Depreciation and amortization | 10,782 | 17,251 | |
(Gain) loss on disposal of assets | 100 | (22) | |
Income from unconsolidated affiliates | 3,788 | 2,452 | |
Adjusted EBITDA | 72,806 | 73,941 | |
Net revenues | 210,269 | 223,757 | |
Capital expenditures | 6,448 | 19,343 | |
Total assets | 1,060,493 | 1,076,290 | |
Investment in and advances to unconsolidated affiliates | 111,257 | 115,469 | |
Goodwill and other intangible assets, net | 717,593 | 718,982 | |
Southern Plains | Kansas Entertainment | |||
Segment information | |||
Non-operating items for Kansas JV | 2,751 | 2,921 | |
Other | |||
Segment information | |||
Income (loss) from operations | (50,085) | (43,490) | |
Charge for stock-based compensation | 2,084 | 2,579 | |
Depreciation and amortization | 25,030 | 24,562 | |
(Gain) loss on disposal of assets | (6) | (6) | |
Income from unconsolidated affiliates | 194 | 31 | |
Adjusted EBITDA | (22,783) | (16,324) | |
Net revenues | 4,740 | 6,954 | |
Capital expenditures | 916 | $ 1,158 | |
Total assets | 2,297,019 | 2,293,891 | |
Investment in and advances to unconsolidated affiliates | 64,224 | 63,988 | |
Goodwill and other intangible assets, net | $ 4,078 | $ 4,078 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Income Taxes | |||
Net deferred tax assets | $ 56,400 | $ 38,300 | |
Income tax provision | $ 10,415 | $ 2,001 | |
Effective income tax rate (as a percent) | 84.78% | 77.52% | |
Percent of pretax (loss) income | |||
Actual effective income tax rate (as a percent) | 84.78% | 77.52% | |
Correction of the failed spin-off-leaseback accounting treatment | |||
Income Taxes | |||
Income tax provision | $ 5,100 | $ 200 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2015 | Dec. 31, 2014 | |
Carrying Amount | ||
Financial assets: | ||
Cash and Cash Equivalents | $ 237,729 | $ 208,673 |
Fair Value | ||
Financial assets: | ||
Cash and Cash Equivalents | 237,729 | 208,673 |
Level 1 | ||
Financial assets: | ||
Cash and Cash Equivalents | 237,729 | 208,673 |
Senior Secured Credit Facility | Carrying Amount | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 810,153 | 785,683 |
Senior Secured Credit Facility | Fair Value | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 825,313 | 799,556 |
Senior Secured Credit Facility | Level 1 | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 710,313 | 714,556 |
Senior Secured Credit Facility | Level 2 | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 115,000 | 85,000 |
Senior Unsecured Notes | Carrying Amount | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 295,770 | 295,610 |
Senior Unsecured Notes | Fair Value | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 299,250 | 276,000 |
Senior Unsecured Notes | Level 1 | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | $ 299,250 | 276,000 |
Other long-term obligations | Hollywood Gaming at Dayton Raceway And Mahoning Valley Race Course | ||
Total Reduction in Fair Value Recorded during the year | ||
Discount Rate | 5.00% | |
Other long-term obligations | Carrying Amount | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | $ 150,300 | 135,000 |
Other long-term obligations | Fair Value | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 150,049 | 135,000 |
Other long-term obligations | Level 2 | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 150,049 | 135,000 |
Other Liabilities | Carrying Amount | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 19,540 | 19,189 |
Other Liabilities | Fair Value | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 19,540 | 19,189 |
Other Liabilities | Level 3 | ||
Financial assets: | ||
Debt Instrument, Fair Value Disclosure | 19,540 | $ 19,189 |
Other Liabilities | Plainridge Racecourse | General and Administrative Expense [Member] | ||
Total Reduction in Fair Value Recorded during the year | ||
Change in fair value of contingent purchase price consideration | $ 400 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event - Tropicana Las Vegas Hotel And Casino $ in Millions | Apr. 29, 2015USD ($)ft²aitemrestaurantroom |
Subsequent events | |
Approximate purchase price | $ | $ 360 |
Area of land ( in acres) | a | 35 |
Number of remodeled guest rooms and suites at facility | room | 1,467 |
Size of gaming floor at facility (in square feet) | ft² | 50,000 |
Number of slot and video poker machines | 844 |
Number of table games at facility | 38 |
Number of restaurants | restaurant | 3 |
Number of seats in performance theater | 1,200 |
Number of seats in comedy club, a night club and beach club | 300 |
Number of parking spaces | 2,950 |