Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 30, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | PENN NATIONAL GAMING INC | |
Entity Central Index Key | 921,738 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 81,537,523 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 214,238 | $ 237,009 |
Receivables, net of allowance for doubtful accounts of $2,434 and $2,428 at March 31, 2016 and December 31, 2015, respectively | 47,029 | 45,186 |
Prepaid expenses | 65,976 | 76,784 |
Other current assets | 13,177 | 13,497 |
Total current assets | 340,420 | 372,476 |
Property and equipment, net | 2,935,270 | 2,980,068 |
Other assets | ||
Investment in and advances to unconsolidated affiliates | 165,356 | 168,149 |
Goodwill | 911,942 | 911,942 |
Other intangible assets, net | 391,149 | 391,442 |
Advances to the Jamul Tribe | 246,792 | 197,722 |
Other assets | 137,759 | 116,953 |
Total other assets | 1,852,998 | 1,786,208 |
Total assets | 5,128,688 | 5,138,752 |
Current liabilities | ||
Current portion of financing obligation to GLPI | 52,685 | 50,548 |
Current maturities of long-term debt | 96,543 | 92,108 |
Accounts payable | 68,059 | 72,816 |
Accrued expenses | 94,318 | 93,666 |
Accrued interest | 8,641 | 7,091 |
Accrued salaries and wages | 76,451 | 98,671 |
Gaming, pari-mutuel, property, and other taxes | 52,382 | 57,486 |
Insurance financing | 8,534 | 3,125 |
Other current liabilities | 72,661 | 82,263 |
Total current liabilities | 530,274 | 557,774 |
Long-term liabilities | ||
Long-term financing obligation to GLPI, net of current portion | 3,499,295 | 3,514,080 |
Long-term debt, net of current maturities and debt issuance costs | 1,597,870 | 1,618,851 |
Deferred income taxes | 107,300 | 107,921 |
Other noncurrent liabilities | 43,046 | 18,169 |
Total long-term liabilities | 5,247,511 | 5,259,021 |
Shareholders' equity (deficit) | ||
Common stock ($.01 par value, 200,000,000 shares authorized, 83,451,574 and 83,056,668 shares issued and 81,284,181 and 80,889,275 shares outstanding, at March 31, 2016 and December 31, 2015, respectively) | 834 | 830 |
Treasury stock, at cost (2,167,393 shares held at March 31, 2016 and December 31, 2015) | (28,414) | (28,414) |
Additional paid-in capital | 992,608 | 988,686 |
Retained deficit | (1,610,883) | (1,634,591) |
Accumulated other comprehensive loss | (3,242) | (4,554) |
Total shareholders' equity (deficit) | (649,097) | (678,043) |
Total liabilities and shareholders' equity (deficit) | $ 5,128,688 | $ 5,138,752 |
Series B Preferred Stock | ||
Shareholders' equity (deficit) | ||
Preferred stock | ||
Series C Preferred Stock | ||
Shareholders' equity (deficit) | ||
Preferred stock |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Receivables, net of allowance for doubtful accounts (in dollars) | $ 2,434 | $ 2,428 |
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 | 83,451,574 | 83,056,668 |
Common stock, shares outstanding | 81,284,181 | 80,889,275 |
Treasury stock, shares issued | 2,167,393 | 2,167,393 |
Series B Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
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 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenues | ||
Gaming | $ 656,701 | $ 591,336 |
Food, beverage, hotel and other | 137,848 | 108,763 |
Management service fee | 2,473 | 1,927 |
Revenues | 797,022 | 702,026 |
Less promotional allowances | (40,571) | (37,888) |
Net revenues | 756,451 | 664,138 |
Operating expenses | ||
Gaming | 335,317 | 294,895 |
Food, beverage, hotel and other | 98,079 | 77,929 |
General and administrative | 116,504 | 116,256 |
Depreciation and amortization | 66,020 | 63,369 |
Total operating expenses | 615,920 | 552,449 |
Income from operations | 140,531 | 111,689 |
Other income (expenses) | ||
Interest expense | (116,512) | (108,346) |
Interest income | 5,240 | 1,870 |
Income from unconsolidated affiliates | 4,609 | 3,982 |
Other | (2,426) | 3,089 |
Total other expenses | (109,089) | (99,405) |
Income from operations before income taxes | 31,442 | 12,284 |
Income tax provision | 7,734 | 10,415 |
Net income | $ 23,708 | $ 1,869 |
Earnings per common share: | ||
Basic earnings per common share (in dollars per share) | $ 0.26 | $ 0.02 |
Diluted earnings per common share (in dollars per share) | $ 0.26 | $ 0.02 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Condensed Consolidated Statements of Comprehensive Income | ||
Net income | $ 23,708 | $ 1,869 |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation adjustment during the period | 1,312 | (1,716) |
Other comprehensive income (loss) | 1,312 | (1,716) |
Comprehensive income | $ 25,020 | $ 153 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Changes in Shareholders' Deficit - USD ($) $ in Thousands | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Deficit | Accumulated Other Comprehensive Loss | Total |
Balance at Dec. 31, 2014 | $ 813 | $ (28,414) | $ 956,146 | $ (1,635,277) | $ (1,282) | $ (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 $6,379 and $689 for the three months ended March 31, 2015 and 2016 respectively | $ 5 | 11,228 | 11,233 | ||||
Share-based compensation arrangements (in shares) | 543,816 | ||||||
Foreign currency translation adjustment | (1,716) | (1,716) | |||||
Net income | 1,869 | 1,869 | |||||
Balance at Mar. 31, 2015 | $ 818 | (28,414) | 967,374 | (1,633,408) | (2,998) | (696,628) | |
Balance (in shares) at Mar. 31, 2015 | 8,624 | 79,705,633 | |||||
Balance at Dec. 31, 2015 | $ 830 | (28,414) | 988,686 | (1,634,591) | (4,554) | (678,043) | |
Balance (in shares) at Dec. 31, 2015 | 8,624 | 80,889,275 | |||||
Increase (Decrease) in Shareholders' Equity | |||||||
Share-based compensation arrangements, net of tax benefits of $6,379 and $689 for the three months ended March 31, 2015 and 2016 respectively | $ 4 | 3,922 | 3,926 | ||||
Share-based compensation arrangements (in shares) | 394,906 | ||||||
Foreign currency translation adjustment | 1,312 | 1,312 | |||||
Net income | 23,708 | 23,708 | |||||
Balance at Mar. 31, 2016 | $ 834 | $ (28,414) | $ 992,608 | $ (1,610,883) | $ (3,242) | $ (649,097) | |
Balance (in shares) at Mar. 31, 2016 | 8,624 | 81,284,181 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Changes in Shareholders' Deficit (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Condensed Consolidated Statements of Changes in Shareholders' Deficit | ||
Share-based compensation arrangements, net of tax benefit | $ 689 | $ 6,379 |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Operating activities | ||
Net income | $ 23,708 | $ 1,869 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 66,020 | 63,369 |
Amortization of items charged to interest expense | 1,876 | 1,505 |
Change in contingent purchase price | (1,201) | 351 |
(Gain) loss on sale of property and equipment and assets held for sale | (1,101) | 153 |
Income from unconsolidated affiliates | (4,609) | (3,982) |
Distributions from unconsolidated affiliates | 7,400 | 8,000 |
Deferred income taxes | (740) | 18,648 |
Charge for stock-based compensation | 1,455 | 2,084 |
(Increase) decrease, | ||
Accounts receivable | (1,803) | 727 |
Prepaid expenses and other current assets | (11,579) | (2,742) |
Other assets | 3,039 | 6,400 |
(Decrease) Increase, | ||
Accounts payable | (1,951) | 2,887 |
Accrued expenses | 648 | 4,931 |
Accrued interest | 1,550 | 6,264 |
Accrued salaries and wages | (22,220) | (14,363) |
Gaming, pari-mutuel, property and other taxes | (4,920) | 3,754 |
Income taxes | 22,826 | (11,738) |
Other current and noncurrent liabilities | (7,065) | (10,081) |
Net cash provided by operating activities | 71,333 | 78,036 |
Investing activities | ||
Capital project expenditures | (6,496) | (36,929) |
Capital maintenance expenditures | (14,873) | (11,860) |
Advances to the Jamul Tribe | (51,781) | (16,341) |
Proceeds from sale of property and equipment and assets held for sale | 2,091 | 146 |
Investment in joint ventures | (328) | |
Acquisition of other property and equipment | 148 | |
Net cash used in investing activities | (71,207) | (65,312) |
Financing activities | ||
Proceeds from exercise of options | 1,742 | 2,743 |
Principal payments on financing obligation with GLPI | (12,648) | (12,475) |
Proceeds from issuance of long-term debt, net of issuance costs | 12,214 | 45,000 |
Principal payments on long-term debt | (23,404) | (21,886) |
Payments of other long-term obligations | (6,899) | |
Proceeds from insurance financing | 9,193 | 885 |
Payments on insurance financing | (3,784) | (4,314) |
Tax benefit from stock options exercised | 689 | 6,379 |
Net cash (used in) provided by financing activities | (22,897) | 16,332 |
Net (decrease) increase in cash and cash equivalents | (22,771) | 29,056 |
Cash and cash equivalents at beginning of year | 237,009 | 208,673 |
Cash and cash equivalents at end of period | 214,238 | 237,729 |
Supplemental disclosure | ||
Interest expense paid, net of amounts capitalized | 113,629 | 100,179 |
Income tax (refunds received)/taxes paid | $ (12,481) | $ 226 |
Condensed Consolidated Stateme9
Condensed Consolidated Statements of Cash Flows (Parenthetical) $ in Millions | 1 Months Ended |
Jan. 31, 2015USD ($) | |
Condensed Consolidated Statements of Cash Flows | |
Increased property and equipment, net | $ 15.3 |
Increased total debt | $ 15.3 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
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 racing facilities and video gaming terminal operations with a focus on slot machine entertainment. As of March 31, 2016, the Company owned, managed, or had ownership interests in twenty-seven 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. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The notes to the consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2015 should be read in conjunction with these condensed consolidated financial statements. The December 31, 2015 financial information has been derived from the Company’s audited consolidated financial statements. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. 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, hotel 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. Advance deposits on lodging are recorded as accrued liabilities until services are provided to the customer. 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, 2016 and 2015 are as follows: Three Months Ended March 31, 2016 2015 (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, 2016 and 2015 are as follows: Three Months Ended March 31, 2016 2015 (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, 2016, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $256.4 million, as compared to $227.0 million for the three months ended March 31, 2015. 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 “Tribe”) had entered into definitive agreements to jointly develop a Hollywood Casino-branded casino on the 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 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 Tribe to fund certain development costs; and (iii) create an exclusive arrangement between the parties. The 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 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 Tribe (the “Property”). The Tribe exercises jurisdiction over the Property pursuant to its powers of self-government and consistent with the resolutions and ordinances of the Tribe. The arrangement between the Tribe and the Company provides the 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 $390 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 commenced construction activities at the site and it is anticipated that the facility will open in mid-summer this year. The Company currently provides financing to the 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 Tribe (that can be terminated under certain circumstances) for up to $400 million and anticipates it will fund approximately $390 million related to this development. The Company is accounting for the development agreement and related loan commitment letter with the Tribe as a loan (the “Senior Loans”) with accrued interest in accordance with ASC 310, “Receivables.” The Senior Loans represent advances made by the Company to the Tribe for the development and construction of a gaming facility for the Tribe on reservation land. As such, the 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 Senior Loans and, upon completion of the project and subsequent commencement of gaming operations on the Property, will be the Penn entity which receives management and licensing fees from the Tribe. The Company’s Senior Loans with the Tribe totaled $246.8 million and $197.7 million, which includes accrued interest of $18.9 million, and $13.9 million, at March 31, 2016 and December 31, 2015, respectively. Collectability of the Senior Loans 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 Senior Loans 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 the Senior Loans. The Company considered whether the arrangement with the Tribe represents a variable interest that should be accounted for pursuant to the VIE subsections of 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 Tribe as a government organization, the Company believes its arrangement with the 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, 2016 and 2015, 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, 2016 and 2015 under the two-class method: Three Months Ended March 31, 2016 2015 (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, 2016 and 2015: Three Months Ended March 31, 2016 2015 (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 2,574,719 shares and 1,561,562 shares were outstanding during the three months ended March 31, 2016 and 2015, 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, 2016 and 2015 (in thousands, except per share data): Three Months Ended March 31, 2016 2015 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 5.40 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 1,535,823 stock options during the three months ended March 31, 2016. Stock-based compensation expense for the three months ended March 31, 2016 was $1.5 million, as compared to $2.1 million for the three months ended March 31, 2015, 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 four 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 $5.7 million and $7.8 million at March 31, 2016 and December 31, 2015, respectively. For PSUs held by Penn employees, there was $16.4 million of total unrecognized compensation cost at March 31, 2016 that will be recognized over the grants remaining weighted average vesting period of 1.79 years. For the three months ended March 31, 2016, the Company recognized $3.0 million of compensation expense associated with these awards, as compared to $4.5 million for the three months ended March 31, 2015. T he decrease was primarily due to changes in stock price 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, 2016 on these cash-settled awards totaled $4.4 million, as compared to $5.2 million for the three months ended March 31, 2015. 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 $8.0 million at March 31, 2016 and December 31, 2015, respectively. For SARs held by Penn employees, there was $9.8 million of total unrecognized compensation cost at March 31, 2016 that will be recognized over the awards remaining weighted average vesting period of 3.06 years. For the three months ended March 31, 2016, the Company recognized $1.9 million of compensation expense associated with these awards, as compared to $4.6 million for the three months ended March 31, 2015. T he decrease was primarily due to changes in stock price 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, 2016 on these cash-settled awards totaled $0.4 million, as compared to $1.8 million for the three months ended March 31, 2015. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model for stock option awards granted during the three month period ended March 31, 2016 and 2015, respectively: 2016 2015 Risk-free interest rate % % Expected volatility % % Dividend yield — — Weighted-average expected life (years) Segment Information The Company’s Chief Executive Officer and President, 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, Hollywood Gaming at Mahoning Valley Race Course, and Plainridge Park Casino, which opened on June 24, 2015. It also includes the Company’s Casino Rama management service contract. The West reportable segment consists of the following properties: Zia Park Casino, M Resort, and Tropicana Las Vegas, which was acquired on August 25, 2015, as well as the Hollywood Casino Jamul—San Diego project with the Tribe, which the Company anticipates completing in mid-summer this year. 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, Hollywood Casino St. Louis, and Prairie State Gaming, which the Company acquired on September 1, 2015, and includes the Company’s 50% investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns the Hollywood Casino at Kansas Speedway. 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. 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 and Penn Interactive Ventures, LLC, the Company’s wholly-owned subsidiary which represents its social online gaming initiatives and would meet the definition of an operating segment under ASC 280, but is currently immaterial to the Company’s operations. Management uses adjusted EBITDA as the primary measure of the operating performance of its segments, including the evaluation of operating personnel and believes it 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 income or loss from unconsolidated affiliates, with the Company’s share of non-operating items (such as depreciation and amortization) added back for its joint venture in Kansas Entertainment. Adjusted EBITDA excludes payments associated with our Master Lease agreement with GLPI as the transaction is accounted for as a financing obligation. Adjusted EBITDA should not be construed as an alternative to operating income, as an indicator of the Company’s operating performance, as an alternative to cash flows from operating activities, as a measure of liquidity, or as any other measure 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. The Company recently announced a realignment of its reporting structure that will result in certain changes to our reportable segments. We plan on finalizing these changes to our internal management reporting system in the second quarter, which will result in the following three geographic regions: Northeast, Midwest and South/West. The changes in the segment reporting have no effect on the Company’s previously reported consolidated operating results. See Part I, Item 2: “ Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional details. See Note 7 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, 2016 and 2015, the only component of accumulated other comprehensive income was foreign currency translation adjustments. |
New Accounting Pronouncements
New Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2016 | |
New Accounting Pronouncements | |
New Accounting Pronouncements | 3. New Accounting Pronouncements In April and March 2016, the FASB issued ASU 2016-10 and ASU 2016-08, Revenue from Contract with Customers (Topic 606). The amendments of ASU 2016-10 clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments of ASU 2016-08 relate to when another party, along with the entity, is involved in providing a good or service to a customer. The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 31, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Management is currently assessing the impact of the new revenue recognition guidance will have on the consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718). The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. Management plans to implement this change in accounting principle in 2017 and does not anticipate a material impact from this new guidance. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This ASU primarily provides new guidance for lessees on the accounting treatment of operating leases. Under the new guidance, lessees are required to recognize assets and liabilities arising from operating leases on the balance sheet. ASU 2016-02 also aligns lessor accounting with the revenue recognition guidance in Topic 606 of the Accounting Standards Codification. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018 and is required to be adopted on a modified retrospective basis, meaning the new leasing model will be applied to the earliest year presented in the financial statements and thereafter. The Company is evaluating the impact of adopting this new accounting standard on its financial statements. In February 2015, the FASB issued ASU 2015-02 with new consolidation guidance which modifies 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. 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. The adoption of this pronouncement had no impact to the Company’s financial statements. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2016 | |
Property and Equipment | |
Property and Equipment | 4. Property and Equipment Property and equipment, net, consists of the following: March 31, December 31, 2016 2015 (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 - master lease Land and improvements Building and improvements Less accumulated depreciation ) ) Property and equipment, net $ $ Property and equipment, net decreased by $44.8 million for the three months ended March 31, 2016 primarily due to depreciation expense, which is partially offset by improvements at Tropicana Las Vegas, and normal capital maintenance expenditures for the three months ended March 31, 2016. Depreciation expense, for property and equipment including assets under capital leases, totaled $65.6 million and $63.4 million for the three months ended March 31, 2016 and March 31, 2015, respectively, of which $22.9 million, $23.2 million related to assets under the Master Lease, respectively. No interest was capitalized in connection with major construction projects for the three months ended March 31, 2016 compared to $0.6 million for the three months ended March 31, 2015. |
Long-term Debt
Long-term Debt | 3 Months Ended |
Mar. 31, 2016 | |
Long-term Debt | |
Long-term Debt | 5. Long-term Debt Long-term debt, net of current maturities, is as follows: March 31, December 31, 2016 2015 (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 net discounts ) ) Less debt issuance costs, net of accumulated amortization of $15.1 million and $13.3 million, respectively ) ) $ $ The following is a schedule of future minimum repayments of long-term debt as of March 31, 2016 (in thousands) : Within one year $ 1-3 years 3-5 years Over 5 years Total minimum payments $ Senior Secured Credit Facility On April 28, 2015, the Company entered into an agreement to amend its senior secured credit facility. In August 2015, the amendment to the senior secured credit facility went into effect increasing the capacity under an existing five year revolver from $500 million to $633.2 million and increased the existing five year $500 million Term Loan A facility by $146.7 million. The seven year $250 million Term Loan B facility remained unchanged. At March 31, 2016, the Company’s senior secured credit facility had a gross outstanding balance of $1,248.8 million, consisting of a $580.4 million Term Loan A facility, a $244.4 million Term Loan B facility, and $424.0 million outstanding on the revolving credit facility. Additionally, at March 31, 2016, the Company had conditional obligations under letters of credit issued pursuant to the senior secured credit facility with face amounts aggregating $23.5 million, resulting in $185.7 million of available borrowing capacity as of March 31, 2016 under the revolving credit facility. 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, 2016, the Company was in compliance with all required financial covenants . |
Master Lease Financing Obligati
Master Lease Financing Obligation | 3 Months Ended |
Mar. 31, 2016 | |
Master Lease Financing Obligation | |
Master Lease Financing Obligation | 6. Master Lease Financing Obligation 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 $111.4 million and $108.8 million for the three months ended March 31, 2016 and 2015, respectively, of which $98.7 million and $96.4 million, respectively, were recognized as interest expense. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2016 | |
Segment Information | |
Segment Information | 7. Segment Information The following tables (in thousands) 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, 2016 East/Midwest West Southern Plains Other (1) Total Income (loss) from operations $ $ $ $ ) $ Charge for stock compensation — — — Depreciation and amortization Plainridge contingent purchase price ) — — — ) Loss (gain) on disposal of assets ) ) ) Income from unconsolidated affiliates — — ) Non-operating items for Kansas JV — — — Adjusted EBITDA $ $ $ $ ) $ Three months ended March 31, 2015 East/Midwest West Southern Plains Other (1) Total 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 $ $ $ $ ) $ East/Midwest West Southern Plains Other (1) Total Three months ended March 31, 2016 Net revenues $ $ $ $ $ Capital expenditures Three months ended March 31, 2015 Net revenues $ $ $ $ $ Capital expenditures Balance sheet at March 31, 2016 Total assets Investment in and advances to unconsolidated affiliates — Goodwill and other intangible assets, net Balance sheet at December 31, 2015 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. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Taxes | |
Income Taxes | 8. Income Taxes At March 31, 2016 and December 31, 2015, the Company had a net deferred tax liability balance of $107.3 million and $107.9 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, 2016, we have a valuation allowance only on the portion of the deferred tax assets that are more likely than not to be realized as a result of the negative objective evidence of being in a three year cumulative loss. 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) including discrete items was 24.6% for the three months ended March 31, 2016, as compared to 84.8% for the three months ended March 31, 2015, primarily due to a year-over-year reduction to our federal and state valuation allowance coupled with an increase to earnings before income taxes. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Measurements | |
Fair Value Measurements | 9 . 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, 2016, 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 5 for further details regarding the Company’s other long term obligations. Other liabilities Other liabilities at March 31, 2016 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 a credit of $1.2 million for the three months ended March 31, 2016 and a charge of $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, 2016 and December 31, 2015 are as follows (in thousands): March 31, 2016 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, 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 The following table summarizes the changes in fair value of the Company’s Level 3 liabilities (in thousands): Three Months Ended March 31, 2016 Liabilities Contingent Purchase Price Balance at January 1, 2016 $ Total (gains) (realized or unrealized): Included in earnings ) Balance at March 31, 2016 $ The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities: Valuation Unobservable Technique Input Rate Contingent purchase price Discounted cash flow Discount rate % |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
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, hotel 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. Advance deposits on lodging are recorded as accrued liabilities until services are provided to the customer. 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, 2016 and 2015 are as follows: Three Months Ended March 31, 2016 2015 (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, 2016 and 2015 are as follows: Three Months Ended March 31, 2016 2015 (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, 2016, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $256.4 million, as compared to $227.0 million for the three months ended March 31, 2015. |
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 “Tribe”) had entered into definitive agreements to jointly develop a Hollywood Casino-branded casino on the 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 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 Tribe to fund certain development costs; and (iii) create an exclusive arrangement between the parties. The 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 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 Tribe (the “Property”). The Tribe exercises jurisdiction over the Property pursuant to its powers of self-government and consistent with the resolutions and ordinances of the Tribe. The arrangement between the Tribe and the Company provides the 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 $390 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 commenced construction activities at the site and it is anticipated that the facility will open in mid-summer this year. The Company currently provides financing to the 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 Tribe (that can be terminated under certain circumstances) for up to $400 million and anticipates it will fund approximately $390 million related to this development. The Company is accounting for the development agreement and related loan commitment letter with the Tribe as a loan (the “Senior Loans”) with accrued interest in accordance with ASC 310, “Receivables.” The Senior Loans represent advances made by the Company to the Tribe for the development and construction of a gaming facility for the Tribe on reservation land. As such, the 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 Senior Loans and, upon completion of the project and subsequent commencement of gaming operations on the Property, will be the Penn entity which receives management and licensing fees from the Tribe. The Company’s Senior Loans with the Tribe totaled $246.8 million and $197.7 million, which includes accrued interest of $18.9 million, and $13.9 million, at March 31, 2016 and December 31, 2015, respectively. Collectability of the Senior Loans 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 Senior Loans 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 the Senior Loans. The Company considered whether the arrangement with the Tribe represents a variable interest that should be accounted for pursuant to the VIE subsections of 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 Tribe as a government organization, the Company believes its arrangement with the 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, 2016 and 2015, 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, 2016 and 2015 under the two-class method: Three Months Ended March 31, 2016 2015 (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, 2016 and 2015: Three Months Ended March 31, 2016 2015 (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 2,574,719 shares and 1,561,562 shares were outstanding during the three months ended March 31, 2016 and 2015, 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, 2016 and 2015 (in thousands, except per share data): Three Months Ended March 31, 2016 2015 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 5.40 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 1,535,823 stock options during the three months ended March 31, 2016. Stock-based compensation expense for the three months ended March 31, 2016 was $1.5 million, as compared to $2.1 million for the three months ended March 31, 2015, 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 four 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 $5.7 million and $7.8 million at March 31, 2016 and December 31, 2015, respectively. For PSUs held by Penn employees, there was $16.4 million of total unrecognized compensation cost at March 31, 2016 that will be recognized over the grants remaining weighted average vesting period of 1.79 years. For the three months ended March 31, 2016, the Company recognized $3.0 million of compensation expense associated with these awards, as compared to $4.5 million for the three months ended March 31, 2015. T he decrease was primarily due to changes in stock price 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, 2016 on these cash-settled awards totaled $4.4 million, as compared to $5.2 million for the three months ended March 31, 2015. 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 $8.0 million at March 31, 2016 and December 31, 2015, respectively. For SARs held by Penn employees, there was $9.8 million of total unrecognized compensation cost at March 31, 2016 that will be recognized over the awards remaining weighted average vesting period of 3.06 years. For the three months ended March 31, 2016, the Company recognized $1.9 million of compensation expense associated with these awards, as compared to $4.6 million for the three months ended March 31, 2015. T he decrease was primarily due to changes in stock price 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, 2016 on these cash-settled awards totaled $0.4 million, as compared to $1.8 million for the three months ended March 31, 2015. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model for stock option awards granted during the three month period ended March 31, 2016 and 2015, respectively: 2016 2015 Risk-free interest rate % % Expected volatility % % Dividend yield — — Weighted-average expected life (years) |
Segment Information | Segment Information The Company’s Chief Executive Officer and President, 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, Hollywood Gaming at Mahoning Valley Race Course, and Plainridge Park Casino, which opened on June 24, 2015. It also includes the Company’s Casino Rama management service contract. The West reportable segment consists of the following properties: Zia Park Casino, M Resort, and Tropicana Las Vegas, which was acquired on August 25, 2015, as well as the Hollywood Casino Jamul—San Diego project with the Tribe, which the Company anticipates completing in mid-summer this year. 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, Hollywood Casino St. Louis, and Prairie State Gaming, which the Company acquired on September 1, 2015, and includes the Company’s 50% investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns the Hollywood Casino at Kansas Speedway. 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. 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 and Penn Interactive Ventures, LLC, the Company’s wholly-owned subsidiary which represents its social online gaming initiatives and would meet the definition of an operating segment under ASC 280, but is currently immaterial to the Company’s operations. Management uses adjusted EBITDA as the primary measure of the operating performance of its segments, including the evaluation of operating personnel and believes it 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 income or loss from unconsolidated affiliates, with the Company’s share of non-operating items (such as depreciation and amortization) added back for its joint venture in Kansas Entertainment. Adjusted EBITDA excludes payments associated with our Master Lease agreement with GLPI as the transaction is accounted for as a financing obligation. Adjusted EBITDA should not be construed as an alternative to operating income, as an indicator of the Company’s operating performance, as an alternative to cash flows from operating activities, as a measure of liquidity, or as any other measure 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. The Company recently announced a realignment of its reporting structure that will result in certain changes to our reportable segments. We plan on finalizing these changes to our internal management reporting system in the second quarter, which will result in the following three geographic regions: Northeast, Midwest and South/West. The changes in the segment reporting have no effect on the Company’s previously reported consolidated operating results. See Part I, Item 2: “ Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional details. See Note 7 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, 2016 and 2015, the only component of accumulated other comprehensive income was foreign currency translation adjustments. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Schedule of promotional allowances | Three Months Ended March 31, 2016 2015 (in thousands) Rooms $ $ Food and beverage Other Total promotional allowances $ $ |
Schedule of estimated cost of providing complimentary services | Three Months Ended March 31, 2016 2015 (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, 2016 2015 (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, 2016 2015 (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, 2016 and 2015 (in thousands, except per share data): Three Months Ended March 31, 2016 2015 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 | 2016 2015 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, 2016 | |
Property and Equipment | |
Schedule of property and equipment, net | March 31, December 31, 2016 2015 (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 - master lease 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, 2016 | |
Long-term Debt | |
Schedule of long-term debt, net of current maturities | March 31, December 31, 2016 2015 (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 net discounts ) ) Less debt issuance costs, net of accumulated amortization of $15.1 million and $13.3 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, 2016 (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, 2016 | |
Segment Information | |
Schedule of information with respect to the Company's segments | The following tables (in thousands) present certain information with respect to the Company’s segments. Three months ended March 31, 2016 East/Midwest West Southern Plains Other (1) Total Income (loss) from operations $ $ $ $ ) $ Charge for stock compensation — — — Depreciation and amortization Plainridge contingent purchase price ) — — — ) Loss (gain) on disposal of assets ) ) ) Income from unconsolidated affiliates — — ) Non-operating items for Kansas JV — — — Adjusted EBITDA $ $ $ $ ) $ Three months ended March 31, 2015 East/Midwest West Southern Plains Other (1) Total 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 $ $ $ $ ) $ East/Midwest West Southern Plains Other (1) Total Three months ended March 31, 2016 Net revenues $ $ $ $ $ Capital expenditures Three months ended March 31, 2015 Net revenues $ $ $ $ $ Capital expenditures Balance sheet at March 31, 2016 Total assets Investment in and advances to unconsolidated affiliates — Goodwill and other intangible assets, net Balance sheet at December 31, 2015 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, 2016 | |
Fair Value Measurements | |
Schedule of carrying amount and 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, 2016 and December 31, 2015 are as follows (in thousands): March 31, 2016 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, 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 |
Summary of the changes in fair value of Level 3 liabilities | The following table summarizes the changes in fair value of the Company’s Level 3 liabilities (in thousands): Three Months Ended March 31, 2016 Liabilities Contingent Purchase Price Balance at January 1, 2016 $ Total (gains) (realized or unrealized): Included in earnings ) Balance at March 31, 2016 $ |
Summary of significant unobservable inputs used in calculating fair value Level 3 liabilities | Valuation Unobservable Technique Input Rate Contingent purchase price Discounted cash flow Discount rate % |
Organization and Basis of Pre25
Organization and Basis of Presentation (Details) | Mar. 31, 2016jurisdictionfacility |
Organization and Basis of Presentation | |
Number of facilities the entity owned, managed, or had ownership interests in | facility | 27 |
Number of jurisdictions in which the entity operates | jurisdiction | 17 |
Summary of Significant Accoun26
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenue recognition | ||
Promotional allowances | $ 40,571 | $ 37,888 |
Cost of complimentary services | 13,465 | 12,601 |
Gaming and Racing Taxes | ||
Gaming expense | 256,400 | 227,000 |
Rooms | ||
Revenue recognition | ||
Promotional allowances | 9,122 | 8,336 |
Cost of complimentary services | 1,197 | 936 |
Food and beverage | ||
Revenue recognition | ||
Promotional allowances | 29,521 | 27,448 |
Cost of complimentary services | 11,523 | 10,833 |
Other | ||
Revenue recognition | ||
Promotional allowances | 1,928 | 2,104 |
Cost of complimentary services | $ 745 | $ 832 |
Summary of Significant Accoun27
Summary of Significant Accounting Policies (Details 2) - Tribe $ in Millions | Apr. 05, 2013USD ($)ft²aitem | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
Long-term asset related to the Jamul Tribe | |||
Land owned (in acres) | a | 6 | ||
Proposed facility development cost | $ 390 | ||
Number of stories at facility | item | 3 | ||
Size of gaming floor at and entertainment facility (in square feet) | ft² | 200,000 | ||
Number of slot machines at facility | item | 1,700 | ||
Number of table games at facility | item | 43 | ||
Number of parking spaces | item | 1,800 | ||
Loan commitment | $ 400 | ||
Anticipated loan funding | 390 | ||
Senior Loans, includes accrued interest | 246.8 | $ 197.7 | |
Interest accrued | $ 18.9 | $ 13.9 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies (Details 3) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Net income loss available to common stockholders | |||
Net income | $ 23,708 | $ 1,869 | |
Net income applicable to preferred stock | 2,282 | 183 | |
Net income applicable to common stock | $ 21,426 | $ 1,686 | |
Determination of shares: | |||
Weighted-average common shares outstanding (in shares) | 80,968,000 | 79,400,000 | |
Assumed conversion of dilutive employee stock-based awards (in shares) | 1,448,000 | 2,296,000 | |
Assumed conversion of restricted stock (in shares) | 51,000 | 72,000 | |
Diluted weighted-average common shares outstanding before participating security | 82,467,000 | 81,768,000 | |
Assumed conversion of preferred stock (in shares) | 8,624,000 | 8,624,000 | |
Diluted weighted-average common shares outstanding (in shares) | 91,091,000 | 90,392,000 | |
Anti-dilutive securities, options to purchase shares outstanding | 2,574,719 | 1,561,562 | |
Calculation of basic EPS: | |||
Net income applicable to common stock | $ 21,426 | $ 1,686 | |
Weighted-average common shares outstanding (in shares) | 80,968,000 | 79,400,000 | |
Basic EPS (in dollars per share) | $ 0.26 | $ 0.02 | |
Calculation of diluted EPS using two class method: | |||
Net income applicable to common stock | $ 21,426 | $ 1,686 | |
Diluted weighted-average common shares outstanding before participating security | 82,467,000 | 81,768,000 | |
Diluted EPS (in dollars per share) | $ 0.26 | $ 0.02 | |
Series C Preferred Stock | |||
Earnings Per Share | |||
Preferred stock, shares outstanding | 8,624 | 8,624 | 8,624 |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Details 4) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Stock-based compensation costs | |||
Time period of historical volatility of stock used to estimate expected volatility | 5 years 4 months 24 days | ||
Expected dividend yield assumption (as a percent) | 0.00% | ||
Granted (in shares) | 1,535,823 | ||
Accrued salaries and wages | $ 76,451 | $ 98,671 | |
Weighted-average assumptions used in the Black-Scholes option-pricing model | |||
Risk-free interest rate (as a percent) | 1.20% | 1.54% | |
Expected volatility (as a percent) | 31.22% | 36.93% | |
Weighted-average expected life | 5 years 4 months 24 days | 5 years 5 months 12 days | |
Phantom Share Units (PSUs) | |||
Stock-based compensation costs | |||
Accrued salaries and wages | $ 5,700 | 7,800 | |
Total compensation cost related to nonvested awards not yet recognized | $ 16,400 | ||
Period for recognition of unrecognized compensation cost | 1 year 9 months 15 days | ||
Stock based compensation expense | $ 3,000 | $ 4,500 | |
Amounts paid on cash settled awards | $ 4,400 | 5,200 | |
Phantom Share Units (PSUs) | Minimum | |||
Stock-based compensation costs | |||
Vesting period | 3 years | ||
Phantom Share Units (PSUs) | Maximum | |||
Stock-based compensation costs | |||
Vesting period | 4 years | ||
Stock appreciation rights (SARs) | |||
Stock-based compensation costs | |||
Vesting period | 4 years | ||
Accrued salaries and wages | $ 9,100 | $ 8,000 | |
Total compensation cost related to nonvested awards not yet recognized | $ 9,800 | ||
Period for recognition of unrecognized compensation cost | 3 years 22 days | ||
Stock based compensation expense | $ 1,900 | 4,600 | |
Amounts paid on cash settled awards | $ 400 | $ 1,800 |
Summary of Significant Accoun30
Summary of Significant Accounting Policies (Details 5) | Sep. 01, 2015 |
Kansas Entertainment | |
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, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Plant and equipment | |||
Property and equipment, net | $ 2,935,270 | $ 2,980,068 | |
Increase (decrease) in property and equipment | (44,800) | ||
Depreciation expense | 65,600 | $ 63,400 | |
Interest capitalized in connection with major construction projects | 0 | 600 | |
Master Lease Agreement | |||
Plant and equipment | |||
Depreciation expense | 22,900 | $ 23,200 | |
Land and improvements - non-leased | |||
Plant and equipment | |||
Property and equipment | 289,030 | 288,910 | |
Land and improvements - master lease | |||
Plant and equipment | |||
Property and equipment | 382,246 | 382,246 | |
Building and improvements - non-leased | |||
Plant and equipment | |||
Property and equipment | 396,593 | 396,497 | |
Buildings and improvements - master lease | |||
Plant and equipment | |||
Property and equipment | 2,219,018 | 2,219,018 | |
Furniture, fixtures and equipment | |||
Plant and equipment | |||
Property and equipment | 1,308,387 | 1,303,153 | |
Leasehold improvements | |||
Plant and equipment | |||
Property and equipment | 131,760 | 129,012 | |
Construction in progress - non-leased | |||
Plant and equipment | |||
Property and equipment | 17,700 | 9,175 | |
Non-leased assets | |||
Plant and equipment | |||
Property and equipment | 2,143,470 | 2,126,747 | |
Less accumulated depreciation | (1,131,767) | (1,093,115) | |
Property and equipment, net | 1,011,703 | 1,033,632 | |
Master lease assets | |||
Plant and equipment | |||
Property and equipment | 2,601,264 | 2,601,264 | |
Less accumulated depreciation | (677,697) | (654,828) | |
Property and equipment, net | $ 1,923,567 | $ 1,946,436 |
Long-term Debt (Details)
Long-term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Long-term Debt | ||
Long-term debt | $ 1,716,561 | $ 1,735,198 |
Less current maturities of long-term debt | (96,543) | (92,108) |
Less net discounts | (669) | (686) |
Less debt issuance costs, net of accumulated amortization of $15.1 million and $13.3 million, respectively | (21,479) | (23,553) |
Long-term debt, net of current maturities | 1,597,870 | 1,618,851 |
Other assets | 137,759 | 116,953 |
Accumulated amortization for debt issuance costs | 15,100 | 13,300 |
Senior Secured Credit Facility | ||
Long-term Debt | ||
Long-term debt | 1,248,766 | 1,259,740 |
$300 million 5.875% senior unsecured notes due November 1, 2021 | ||
Long-term Debt | ||
Long-term debt | $ 300,000 | 300,000 |
Interest rate (as a percent) | 5.875% | |
Principal amount | $ 300,000 | |
Other long-term obligations | ||
Long-term Debt | ||
Long-term debt | 139,759 | 146,992 |
Capital leases | ||
Long-term Debt | ||
Long-term debt | $ 28,036 | $ 28,466 |
Long-term Debt (Details 2)
Long-term Debt (Details 2) - USD ($) $ in Thousands | Apr. 28, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | Aug. 31, 2015 |
Future minimum repayments of long-term debt | |||||
Within one year | $ 96,433 | ||||
1-3 years | 986,625 | ||||
3-5 years | 269,340 | ||||
Over 5 years | 364,163 | ||||
Total minimum payments | 1,716,561 | ||||
Long-term Debt | |||||
Long-term debt | 1,716,561 | $ 1,735,198 | |||
Interest expense | 116,512 | $ 108,346 | |||
Revolving credit facility | |||||
Long-term Debt | |||||
Term of debt | 5 years | ||||
Maximum borrowing capacity | $ 500,000 | $ 633,200 | |||
Term loan amount outstanding | 424,000 | ||||
Available borrowing capacity | 185,700 | ||||
Term Loan A Facility | |||||
Long-term Debt | |||||
Term of debt | 5 years | ||||
Maximum borrowing capacity | $ 500,000 | ||||
Increase in maximum borrowing capacity | $ 146,700 | ||||
Term loan amount outstanding | $ 580,400 | ||||
Term Loan B Facility | |||||
Long-term Debt | |||||
Term of debt | 7 years | ||||
Maximum borrowing capacity | $ 250,000 | ||||
Term loan amount outstanding | 244,400 | ||||
Senior Secured Credit Facility | |||||
Long-term Debt | |||||
Term loan amount outstanding | 1,248,800 | ||||
Long-term debt | 1,248,766 | 1,259,740 | |||
Letters of credit outstanding | $ 23,500 | ||||
$300 million 5.875% senior unsecured notes due November 1, 2021 | |||||
Long-term Debt | |||||
Interest rate (as a percent) | 5.875% | ||||
Long-term debt | $ 300,000 | 300,000 | |||
Other long-term obligations | |||||
Long-term Debt | |||||
Long-term debt | $ 139,759 | $ 146,992 |
Master Lease Financing Obliga34
Master Lease Financing Obligation (Details) - Master Lease Agreement - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Capital Leased Assets [Line Items] | ||
Discount rate (as a percent) | 9.70% | |
Total payments under Master Lease | $ 111.4 | $ 108.8 |
Interest expense for the Master Lease | $ 98.7 | $ 96.4 |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Segment information | |||
Income (loss) from operations | $ 140,531 | $ 111,689 | |
Charge for stock compensation | 1,455 | 2,084 | |
Depreciation and amortization | 66,020 | 63,369 | |
Plainridge contingent purchase price | (1,201) | 351 | |
(Gain) loss on disposal of assets | (1,101) | 153 | |
Income from unconsolidated affiliates | 4,609 | 3,982 | |
Non-operating items | 109,089 | 99,405 | |
Adjusted EBITDA | 212,883 | 184,379 | |
Net revenues | 756,451 | 664,138 | |
Capital expenditures | 21,369 | 48,789 | |
Total assets | 5,128,688 | $ 5,138,752 | |
Investment in and advances to unconsolidated affiliates | 165,356 | 168,149 | |
Goodwill and other intangible assets, net | 1,303,091 | 1,303,384 | |
Kansas Entertainment | |||
Segment information | |||
Non-operating items | (2,570) | 2,751 | |
East/Midwest | |||
Segment information | |||
Income (loss) from operations | 111,140 | 90,863 | |
Depreciation and amortization | 24,840 | 25,385 | |
Plainridge contingent purchase price | (1,201) | 351 | |
(Gain) loss on disposal of assets | 19 | (122) | |
Adjusted EBITDA | 134,798 | 116,477 | |
Net revenues | 437,457 | 386,544 | |
Capital expenditures | 7,843 | 38,574 | |
Total assets | 1,000,352 | 1,036,940 | |
Investment in and advances to unconsolidated affiliates | 83 | 84 | |
Goodwill and other intangible assets, net | 387,474 | 387,474 | |
West | |||
Segment information | |||
Income (loss) from operations | 13,833 | 15,526 | |
Depreciation and amortization | 6,205 | 2,172 | |
(Gain) loss on disposal of assets | 17 | 181 | |
Adjusted EBITDA | 20,055 | 17,879 | |
Net revenues | 87,559 | 62,585 | |
Capital expenditures | 6,823 | 2,851 | |
Total assets | 893,898 | 842,712 | |
Goodwill and other intangible assets, net | 158,339 | 158,339 | |
Southern Plains | |||
Segment information | |||
Income (loss) from operations | 60,158 | 55,385 | |
Depreciation and amortization | 10,281 | 10,782 | |
(Gain) loss on disposal of assets | (33) | 100 | |
Income from unconsolidated affiliates | 4,718 | 3,788 | |
Adjusted EBITDA | 77,694 | 72,806 | |
Net revenues | 225,235 | 210,269 | |
Capital expenditures | 6,020 | 6,448 | |
Total assets | 1,081,411 | 1,098,306 | |
Investment in and advances to unconsolidated affiliates | 100,926 | 103,608 | |
Goodwill and other intangible assets, net | 752,954 | 753,345 | |
Southern Plains | Kansas Entertainment | |||
Segment information | |||
Non-operating items | (2,570) | 2,751 | |
Other | |||
Segment information | |||
Income (loss) from operations | (44,600) | (50,085) | |
Charge for stock compensation | 1,455 | 2,084 | |
Depreciation and amortization | 24,694 | 25,030 | |
(Gain) loss on disposal of assets | (1,104) | (6) | |
Income from unconsolidated affiliates | (109) | 194 | |
Adjusted EBITDA | (19,664) | (22,783) | |
Net revenues | 6,200 | 4,740 | |
Capital expenditures | 683 | $ 916 | |
Total assets | 2,153,027 | 2,160,794 | |
Investment in and advances to unconsolidated affiliates | 64,347 | 64,457 | |
Goodwill and other intangible assets, net | $ 4,324 | $ 4,226 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Income Taxes | |||
Deferred Income Tax Liabilities, Net, Total | $ 107.3 | $ 107.9 | |
Percent of pretax income | |||
Actual effective income tax rate (as a percent) | 24.60% | 84.80% | |
Correction of the failed spin-off-leaseback accounting treatment | |||
Income Taxes | |||
Period of cumulative pre-tax loss position | 3 years |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Assets measured as fair value on a non-recurring basis | |||
Goodwill | $ 911,942 | $ 911,942 | |
Plainridge Racecourse | General and administrative expenses | |||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Total Gains (Losses), Realized Or Unrealized [Abstract] | |||
Change in fair value in long term obligation, credit (charge) to general and administrative expense | $ 1,200 | $ (400) | |
Hollywood Gaming at Dayton Raceway And Mahoning Valley Race Course | |||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Total Gains (Losses), Realized Or Unrealized [Abstract] | |||
Discount Rate | 5.00% | ||
Contingent Purchase Price | |||
Assets measured as fair value on a non-recurring basis | |||
Balance at beginning of the period | $ 13,185 | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Total Gains (Losses), Realized Or Unrealized [Abstract] | |||
Included in earnings | (1,201) | ||
Balance at end of the period | $ 12,614 | ||
Contingent Purchase Price | Income approach using discounted cash flow model | |||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Total Gains (Losses), Realized Or Unrealized [Abstract] | |||
Discount Rate | 8.30% | ||
Level 1 | |||
Financial assets: | |||
Cash and Cash Equivalents, Fair Value Disclosure | $ 214,238 | 237,009 | |
Level 3 | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 12,614 | 13,815 | |
Senior Secured Credit Facility | Level 1 | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 817,129 | 829,975 | |
Senior Secured Credit Facility | Level 2 | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 424,000 | 422,000 | |
Senior Unsecured Notes | Level 1 | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 294,750 | 291,000 | |
Other long-term obligations | Level 2 | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 140,899 | 147,358 | |
Carrying Amount | |||
Financial assets: | |||
Cash and Cash Equivalents, Fair Value Disclosure | 214,238 | 237,009 | |
Debt Instrument, Fair Value Disclosure | 12,614 | 13,815 | |
Carrying Amount | Senior Secured Credit Facility | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 1,230,032 | 1,239,049 | |
Carrying Amount | Senior Unsecured Notes | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 296,413 | 296,252 | |
Carrying Amount | Other long-term obligations | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 139,759 | 146,992 | |
Fair Value | |||
Financial assets: | |||
Cash and Cash Equivalents, Fair Value Disclosure | 214,238 | 237,009 | |
Debt Instrument, Fair Value Disclosure | 12,614 | 13,815 | |
Fair Value | Senior Secured Credit Facility | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 1,241,129 | 1,251,975 | |
Fair Value | Senior Unsecured Notes | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | 294,750 | 291,000 | |
Fair Value | Other long-term obligations | |||
Financial assets: | |||
Debt Instrument, Fair Value Disclosure | $ 140,899 | $ 147,358 |