Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | Apr. 27, 2017 | |
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, 2017 | |
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 | 91,099,858 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 259,488 | $ 229,510 |
Receivables, net of allowance for doubtful accounts of $3,148 and $3,180 at March 31, 2017 and December 31, 2016, respectively | 49,490 | 61,855 |
Prepaid expenses | 55,631 | 59,707 |
Other current assets | 52,508 | 48,193 |
Total current assets | 417,117 | 399,265 |
Property and equipment, net | 2,774,323 | 2,820,383 |
Other assets | ||
Investment in and advances to unconsolidated affiliates | 154,974 | 156,176 |
Goodwill | 989,859 | 989,685 |
Other intangible assets, net | 432,558 | 435,494 |
Advances to the Jamul Tribe | 91,843 | 91,401 |
Other assets | 86,366 | 82,080 |
Total other assets | 1,755,600 | 1,754,836 |
Total assets | 4,947,040 | 4,974,484 |
Current liabilities | ||
Current portion of financing obligation to GLPI | 57,936 | 56,595 |
Current maturities of long-term debt | 35,561 | 85,595 |
Accounts payable | 29,292 | 35,091 |
Accrued expenses | 107,699 | 101,906 |
Accrued interest | 5,426 | 6,345 |
Accrued salaries and wages | 72,691 | 92,238 |
Gaming, pari-mutuel, property, and other taxes | 53,840 | 60,384 |
Insurance financing | 8,135 | 2,636 |
Other current liabilities | 96,542 | 95,526 |
Total current liabilities | 467,122 | 536,316 |
Long-term liabilities | ||
Long-term financing obligation to GLPI, net of current portion | 3,441,359 | 3,457,485 |
Long-term debt, net of current maturities and debt issuance costs | 1,387,542 | 1,329,939 |
Deferred income taxes | 127,576 | 126,924 |
Noncurrent tax liabilities | 27,312 | 26,791 |
Other noncurrent liabilities | 36,861 | 40,349 |
Total long-term liabilities | 5,020,650 | 4,981,488 |
Shareholders' deficit | ||
Common stock ($.01 par value, 200,000,000 shares authorized, 93,126,159 and 93,289,701 shares issued, and 90,958,766 and 91,122,308 shares outstanding at March 31, 2017 and December 31, 2016, respectively) | 931 | 932 |
Treasury stock, at cost (2,167,393 shares held at March 31, 2017 and December 31, 2016) | (28,414) | (28,414) |
Additional paid-in capital | 1,011,167 | 1,014,119 |
Retained deficit | (1,520,177) | (1,525,281) |
Accumulated other comprehensive loss | (4,239) | (4,676) |
Total shareholders' deficit | (540,732) | (543,320) |
Total liabilities and shareholders' deficit | 4,947,040 | 4,974,484 |
Series B Preferred Stock | ||
Shareholders' deficit | ||
Preferred stock | ||
Series C Preferred Stock | ||
Shareholders' deficit | ||
Preferred stock |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Receivables, allowance for doubtful accounts (in dollars) | $ 3,148 | $ 3,180 |
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 | 93,126,159 | 93,289,701 |
Common stock, shares outstanding | 90,958,766 | 91,122,308 |
Treasury stock, shares held | 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 | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Gaming | $ 661,256 | $ 656,701 |
Food, beverage, hotel and other | 147,741 | 137,848 |
Management service and licensing fees | 2,327 | 2,473 |
Reimbursable management costs | 6,758 | |
Revenues | 818,082 | 797,022 |
Less promotional allowances | (41,858) | (40,571) |
Net revenues | 776,224 | 756,451 |
Operating expenses | ||
Gaming | 332,053 | 335,317 |
Food, beverage, hotel and other | 101,075 | 98,079 |
General and administrative | 125,815 | 116,504 |
Reimbursable management costs | 6,758 | |
Depreciation and amortization | 70,236 | 66,020 |
Total operating expenses | 635,937 | 615,920 |
Income from operations | 140,287 | 140,531 |
Other income (expenses) | ||
Interest expense | (114,996) | (116,512) |
Interest income | 2,646 | 5,240 |
Income from unconsolidated affiliates | 4,548 | 4,609 |
Loss on early extinguishment of debt | (23,390) | |
Other | (1,793) | (2,426) |
Total other expenses | (132,985) | (109,089) |
Income from operations before income taxes | 7,302 | 31,442 |
Income tax provision | 2,198 | 7,734 |
Net income | $ 5,104 | $ 23,708 |
Earnings per common share: | ||
Basic earnings per common share (in dollars per share) | $ 0.06 | $ 0.26 |
Diluted earnings per common share (in dollars per share) | $ 0.06 | $ 0.26 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Condensed Consolidated Statements of Comprehensive Income | ||
Net income | $ 5,104 | $ 23,708 |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation adjustment during the period | 437 | 1,312 |
Other comprehensive (loss) income | 437 | 1,312 |
Comprehensive income | $ 5,541 | $ 25,020 |
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) Earnings | Accumulated Other Comprehensive (Loss) Income | Total |
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' Deficit | |||||||
Share-based compensation arrangements, net of tax benefits of $689 for the period ended March 31, 2016 | $ 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 | |||||
Balance at Dec. 31, 2016 | $ 932 | (28,414) | 1,014,119 | (1,525,281) | (4,676) | (543,320) | |
Balance (in shares) at Dec. 31, 2016 | 91,122,308 | ||||||
Increase (Decrease) in Shareholders' Deficit | |||||||
Repurchase of Preferred Stock | $ (4) | (5,790) | (5,794) | ||||
Repurchase of Preferred Stock (in shares) | (416,886) | ||||||
Share-based compensation arrangements, net of tax benefits of $689 for the period ended March 31, 2016 | $ 3 | 2,838 | 2,841 | ||||
Share-based compensation arrangements (in shares) | 253,344 | ||||||
Foreign currency translation adjustment | 437 | 437 | |||||
Net income | 5,104 | 5,104 | |||||
Balance at Mar. 31, 2017 | $ 931 | $ (28,414) | $ 1,011,167 | $ (1,520,177) | $ (4,239) | $ (540,732) | |
Balance (in shares) at Mar. 31, 2017 | 90,958,766 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Changes in Shareholders' Deficit (Parenthetical) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Condensed Consolidated Statements of Changes in Shareholders' Deficit | |
Share-based compensation arrangements, tax benefit | $ 689 |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities | ||
Net income | $ 5,104 | $ 23,708 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 70,236 | 66,020 |
Amortization of items charged to interest expense and interest income | 1,675 | 1,876 |
Change in fair value of contingent purchase price | 2,560 | (1,201) |
Gain on sale of property and equipment and assets held for sale | (45) | (1,101) |
Income from unconsolidated affiliates | (4,548) | (4,609) |
Distributions from unconsolidated affiliates | 5,750 | 7,400 |
Deferred income taxes | 652 | (740) |
Charge for stock-based compensation | 2,173 | 1,455 |
Write off of debt issuance costs | 5,377 | |
Decrease (increase), net of businesses acquired | ||
Accounts receivable | 6,533 | (1,803) |
Prepaid expenses and other current assets | (8,432) | (11,579) |
Other assets | (1,746) | 3,039 |
(Decrease) increase, net of businesses acquired | ||
Accounts payable | (2,470) | (1,951) |
Accrued expenses | 5,351 | 648 |
Accrued interest | (919) | 1,550 |
Accrued salaries and wages | (19,547) | (22,220) |
Gaming, pari-mutuel, property and other taxes | (6,544) | (4,920) |
Income taxes | 10,090 | 23,515 |
Other current and noncurrent liabilities | (4,430) | (7,065) |
Net cash provided by operating activities | 66,820 | 72,022 |
Investing activities | ||
Project capital expenditures, net of reimbursements | (6,178) | (6,496) |
Maintenance capital expenditures | (10,978) | (14,873) |
Proceeds for insurance claim | 577 | |
Advances to the Jamul Tribe | (51,781) | |
Delayed draw term loan C commitments with Jamul Tribe | (168) | |
Proceeds from sale of property and equipment and assets held for sale | 309 | 2,091 |
Increase in cash in escrow | (4,432) | |
Acquisition of businesses and other licenses | (2,441) | (148) |
Net cash used in investing activities | (23,311) | (71,207) |
Financing activities | ||
Proceeds from exercise of options | 612 | 1,742 |
Repurchase of common stock | (5,794) | |
Principal payments on financing obligation with GLPI | (14,785) | (12,648) |
Proceeds from issuance of long-term debt, net of issuance costs | 1,359,710 | 12,214 |
Principal payments on long-term debt | (1,330,719) | (23,404) |
Payments of other long-term obligations | (28,033) | (6,899) |
Payments of contingent purchase price | (21) | |
Proceeds from insurance financing | 8,768 | 9,193 |
Payments on insurance financing | (3,269) | (3,784) |
Net cash used in financing activities | (13,531) | (23,586) |
Net increase (decrease) in cash and cash equivalents | 29,978 | (22,771) |
Cash and cash equivalents at beginning of year | 229,510 | 237,009 |
Cash and cash equivalents at end of year | 259,488 | 214,238 |
Supplemental disclosure | ||
Interest expense paid, net of amounts capitalized | 113,825 | 113,629 |
Income tax refunds received | (9,303) | (12,481) |
Non-cash investing and financing activities | ||
Accrued capital expenditures | 9,279 | 5,795 |
Accrued advances to Jamul Tribe | 1,103 | $ 36,914 |
Accrued debt issuance costs | $ 828 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
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. We have also recently expanded into social onling gaming offerings via our Penn Interative Ventures, LLC (“Penn Interactive Ventures”) division and our recent acquisition of Rocket Speed, Inc. (“Rocket Speed”) and into retail gaming with our Prairie State Gaming subsidiary. As of March 31, 2017, the Company owned, managed, or had ownership interests in twenty-seven facilities in the following seventeen jurisdictions: California, Florida, Illinois, Indiana, Kansas, Maine, 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 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, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The notes to the consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2016 should be read in conjunction with these condensed consolidated financial statements. The December 31, 2016 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, 2017 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | XBRL-Only Content Section 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 (“OTWs’). Revenue from our management service contracts for Casino Rama and Hollywood Casino Jamul – San Diego are based upon contracted terms and are recognized when services are performed and collection is reasonably assured. The Company records revenues generated from its management service contract and licensing contract with the Jamul Tribe, as well as interest income associated with advances to the Jamul Tribe in accordance with ASC 605-25 “Multiple Element Arrangements.” The fair value of each arrangement element is based on the separate standalone selling price determined by either vendor-specific objective evidence (“VSOE”), if available, or third-party evidence ("TPE") if VSOE is not available. We concluded revenues generated with respect to each element contained within the arrangement is representative of the separate standalone selling price which is reflective of fair value. Revenues include reimbursable costs associated with the Company’s management contract with Jamul Indian Village of California (the “Jamul Tribe”), which represent amounts received or due pursuant to the Company’s management agreement for the reimbursement of expenses, primarily payroll costs, incurred on their behalf. The Company recognizes the reimbursable costs associated with this contract as revenue on a gross basis, with an offsetting amount charged to operating expense as it is the primary obligor for these costs. Revenues are recognized net of certain sales incentives in accordance with 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, 2017 and 2016 are as follows: Three Months Ended March 31, 2017 2016 (in thousands) Rooms $ 9,196 $ 9,122 Food and beverage 30,566 29,521 Other 2,096 1,928 Total promotional allowances $ 41,858 $ 40,571 The estimated cost of providing such complimentary services for the three months ended March 31, 2017 and 2016 are as follows: Three Months Ended March 31, 2017 2016 (in thousands) Rooms $ 1,268 $ 1,197 Food and beverage 11,631 11,523 Other 854 745 Total cost of complimentary services $ 13,753 $ 13,465 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. For the three months ended March 31, 2017, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $244.4 million, as compared to $243.2 million for the three months ended March 31, 2016. Long-term asset related to the Jamul Tribe The Company is accounting for the development agreement and related loan commitment letter with the Jamul Tribe as a loan (the “Loan”) with accrued interest in accordance with ASC 310, “Receivables.” The Loan represented advances made by the Company to the Jamul Tribe for the development and construction of a gaming facility for the Jamul Tribe on reservation land. As such, the Jamul Tribe owns the casino and its related assets and liabilities. Repayment of funds advanced to the Jamul Tribe is primarily predicated on cash flows from the operations of the facility. San Diego Gaming Ventures, LLC (“SDGV”) (a wholly-owned subsidiary of the Company) is a separate legal entity and is the Penn entity that has the Loan with and is entitled to receive management and licensing fees from the Jamul Tribe. Additionally, in December 2015, the Company entered into an agreement to purchase a $60 million subordinated note from the previous developer of the Jamul Indian Village project for $24 million. Interest on this subordinated note, as of the effective date and at all times thereafter until the Loan has been paid in full, shall accrue as follows: as of the effective date, no interest shall accrue initially; at the opening date, interest shall accrue at a simple fixed rate of 4.25% per annum. The subordinated note is subordinated to the Loan, and payments on the subordinated note may only be made after all necessary payments are made on the Loan subject to certain limitations. The Company recorded the subordinated note at its acquisition price of $24 million, which was considered to be its fair value and represents the expected cash flows to be received. As described below, this subordinated note was repaid in connection with the Jamul Tribe refinancing of its existing indebtedness and the Company received a $6 million premium on such repayment which was accounted for as an origination fee on our new loan to the Tribe. On October 20, 2016, the Jamul Tribe obtained long term secured financing, consisting of revolving and term loan credit facilities (the “Credit Facilities”) totaling approximately $460 million. The Credit Facilities, all of which are due in 2022, consist of a $5 million revolving credit facility, a $340 million term loan B facility and a $98 million term loan C facility. The revolving credit facility was provided by various commercial banks; the term loan B facility is held by an affiliate of Och-Ziff Real Estate; and the term loan C facility is held by SDGV. SDGV will also provide up to an additional $15 million of delayed draw term loan C commitments to fund certain roadway improvement costs. The various Credit Facilities rank pari passu with each other. However, if, on the first anniversary of the opening of Hollywood Casino Jamul – San Diego, the Jamul Tribe has not achieved a senior secured net leverage ratio equal to or less than 5.0 to 1.0, then all or a portion of the term loan C facility will become subordinated to the other Credit Facilities to the extent necessary such that, after giving effect to such conversion, such senior secured net leverage ratio is 5.0 to 1.0. The rights of SDGV to receive management and license fees are subordinated to the claims of the lenders under the Credit Facilities and are subject to certain conditions contained in the Credit Facilities. SDGV’s Loan with the Jamul Tribe totaled $92.3 million (net of unamortized loan origination fees of $5.9 million and inclusive of a current portion of $0.5 million in other current assets) and $92.1 million (net of unamortized loan origination fee of $5.9 million and inclusive of a current portion of $0.7 million in other current assets) at March 31, 2017 and December 31, 2016, respectively. As a condition to the Credit Facilities, SDGV provided a limited completion guarantee, in favor of the administrative agent under the Credit Facilities, to provide up to $15 million of additional loans related to the construction and opening of the Casino, as well as certain post opening construction costs. Of these loans, $10 million may be funded under the Credit Facilities as part of the term loan C facility, while any additional loans would be subordinated loans. The term loan C facility bears interest at LIBOR plus 8.50% with a 1% LIBOR floor (or, at the Jamul Tribe’s election, a base rate determined by reference to the prime rate, the federal funds effective rate or LIBOR, as applicable, plus 8.50%), and the subordinated loans will bear interest at 14.0% (with 12.0% to be paid in cash and 2.0% to be paid-in-kind). As mentioned previously, the Company is accounting for its loan in accordance with ASC 310, “Receivables”. Although Hollywood Casino Jamul San-Diego opened to strong business and earnings volumes in October 2016, which met our expectations, results began to soften earlier and with a steeper dropoff than anticipated. Based on the actual performance of the facility to date and projections for the second quarter of 2017, the Company believes the Jamul Tribe is likely to be in technical default of certain financial covenant requirements with respect to debt to earnings ratios at June 30, 2017, in the absence of a waiver being obtained prior to such date. As a result, we have concluded the Loan is impaired at both March 31, 2017 and December 31, 2016. A loan is considered impaired when, based on current information, events and projections, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when contractually due under the terms of the loan agreement. Impairment is measured by the present value of expected future cash flows discounted at the loan’s effective interest rate. An allowance for loan losses would be established in the event the carrying value exceeds the present value calculation previously described. The Company performed a comprehensive review of various possible future cash flow projections for the facility that were benchmarked against recent openings in the Company’s regional operations. The expected cash flows were then discounted at the Loan’s original interest rate in accordance with ASC 310 which was in excess of our Loan’s carrying value at both March 31, 2017 and December 31, 2016, and as such no reserve was required. The unpaid principal balance of our loan at March 31, 2017 and December 31, 2016 was $98.2 million and $98.0 million, respectively. 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. As of March 31, 2017, there were no outstanding shares of Series C Preferred Stock. At March 31, 2016, 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, 2017 and 2016 under the two-class method: Three Months Ended March 31, Three Months Ended March 31, 2017 2016 (in thousands) Net income $ 5,104 $ 23,708 Net income applicable to preferred stock — 2,282 Net income applicable to common stock $ 5,104 $ 21,426 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, 2017 and 2016: Three Months Ended March 31, Three Months Ended March 31, 2017 2016 (in thousands) Determination of shares: Weighted-average common shares outstanding 90,751 80,968 Assumed conversion of dilutive employee stock-based awards 1,105 1,448 Assumed conversion of restricted stock 61 51 Diluted weighted-average common shares outstanding before participating security 91,917 82,467 Assumed conversion of preferred stock — 8,624 Diluted weighted-average common shares outstanding 91,917 91,091 Options to purchase 4,545,585 shares and 2,574,719 shares were outstanding during the three months ended March 31, 2017 and 2016, respectively, but were not included in the computation of diluted EPS because they were antidilutive. The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2017 and 2016 (in thousands, except per share data): Three Months Ended March 31, Three Months Ended March 31, 2017 2016 Calculation of basic EPS: Net income applicable to common stock $ 5,104 $ 21,426 Weighted-average common shares outstanding 90,751 80,968 Basic EPS $ 0.06 $ 0.26 Calculation of diluted EPS using two-class method: Net income applicable to common stock $ 5,104 $ 21,426 Diluted weighted-average common shares outstanding before participating security 91,917 82,467 Diluted EPS $ 0.06 $ 0.26 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 is 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 5.30 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 1,446,353 stock options during the three months ended March 31, 2017. Stock-based compensation expense for the three months ended March 31, 2017 was $2.2 million as compared to $1.5 million for the three months ended March 31, 2016, 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 $5.8 million and $5.6 million at March 31, 2017 and December 31, 2016, respectively. For PSUs held by Penn employees, there was $7.1 million of total unrecognized compensation cost at March 31, 2017 that will be recognized over the grants remaining weighted average vesting period of 2.07 years. For the three months ended March 31, 2017, the Company recognized $4.3 million of compensation expense associated with these awards, as compared to $3.0 million for the three months ended March 31, 2016. The changes are primarily due to volatility in Penn’s stock price year-over-year. Amounts paid by the Company for the three months ended March 31, 2017 on these cash-settled awards totaled $3.5 million as compared to $4.4 million for the three months ended March 31, 2016. 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 $10.4 million and $7.3 million at March 31, 2017 and December 31, 2016, respectively. For SARs held by Penn employees, there was $11.2 million of total unrecognized compensation cost at March 31, 2017 that will be recognized over the awards remaining weighted average vesting period of 2.99 years. For the three months ended March 31, 2017, the Company recognized compensation expense of $4.0 million associated with these awards, as compared to $1.9 million for the three months ended March 31, 2016. The changes are primarily due to volatility in Penn’s stock price year-over-year. Amounts paid by the Company for the three months ended March 31, 2017 on these cash-settled awards totaled $1.1 million as compared to $0.4 million for the three months ended March 31, 2016. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model for stock option awards granted during the three months ended March 31, 2017 and 2016, respectively: Three months ended March 31, 2017 2016 Risk-free interest rate % 1.20 % Expected volatility % 31.22 % Dividend yield — — Weighted-average expected life (years) 5.40 Segment Information The Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”), 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. During the second quarter of 2016, the Company changed its three reportable segments from East/Midwest, West and Southern Plains to Northeast, South/West, and Midwest in connection with the addition of a new regional vice president and a realignment of responsibilities within our segments. This realignment changed the manner in which information is provided to the CODM and therefore how performance is assessed and resources are allocated to the business. Segment information for prior periods has been restated for comparability. The Northeast 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 Toledo, Hollywood Casino Columbus, Hollywood Gaming at Dayton Raceway, Hollywood Gaming at Mahoning Valley Race Course, and Plainridge Park Casino. It also includes the Company’s Casino Rama management service contract. The South/West reportable segment consists of the following properties: Zia Park Casino, Hollywood Casino Tunica, Hollywood Casino Gulf Coast, Boomtown Biloxi, M Resort, and Tropicana Las Vegas, as well as our management contract with Hollywood Casino Jamul-San Diego, which opened on October 10, 2016. The Midwest reportable segment consists of the following properties: Hollywood Casino Aurora, Hollywood Casino Joliet, Argosy Casino Alton, Argosy Casino Riverside, Hollywood Casino Lawrenceburg, Hollywood Casino St. Louis, and Prairie State Gaming, 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, which was sold on July 31, 2016, 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. Additionally, the Other category includes Penn Interactive Ventures, the Company’s wholly-owned subsidiary that represents its social online gaming initiatives, including the recently acquired Rocket Speed. Penn Interactive Ventures meets the definition of an operating segment under ASC 280, but is quantitatively not significant to the Company’s operations as it represents 1.5% of net revenues and $(1.4) million impact to income from operations for the three months ended March 31, 2017, and its total assets represent 2.2% of the Company’s total assets at March 31, 2017. In addition to GAAP financial measures, management uses adjusted EBITDA as an important 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 it provides 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 and financing charges, impairment charges, insurance recoveries and deductible charges, depreciation and amortization, changes in the estimated fair value of our contingent purchase price obligations, 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. 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, 2017 and 2016, the only component of accumulated other comprehensive income was foreign currency translation adjustments. |
New Accounting Pronouncements
New Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2017 | |
New Accounting Pronouncements | |
New Accounting Pronouncements | 3. New Accounting Pronouncements Accounting Pronouncements Implemented in 2017 In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting.” 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. The Company adopted this change in accounting principle effective January 1, 2017. As a result of adopting the change to accounting for income taxes, for the three months ended March 31, 2017, the Company recognized an income tax benefit of $0.6 million related to excess tax deductions that would have previously been recognized as additional paid in capital within Shareholders Deficit. The Company did not record a cumulative effect adjustment to Retained Earnings due to having a full valuation allowance against all deferred tax assets. Deferred tax assets and the valuation allowance increased by $16.4 million at January 1, 2017 for the tax effect previously unrecognized for excess tax deductions. The Company has elected to present the change in classification of excess /(deficient) tax deductions from a financing activity to a operating activity within its consolidated statement of cash flows on a retrospective basis. The impact to the comparative period ended March 31, 2016 was an increase to net cash provided by operating activities and an increase in cash used in financing activities of $0.7 million, respectively. The Company has also made an accounting policy election to account for forfeitures when they occur which had no cumulative effect to retained earnings. Finally, effective January 1, 2017, the Company adopted the change related to diluted EPS on a prospective basis such that the net benefit/ (deficiency) attributable to taxes is no longer included in the computation of assumed proceeds. New Accounting Pronouncements to be Implemented In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which impacts virtually all aspects of an entity’s revenue recognition. The core principle of Topic 606 is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of the standard by one year which results in the new standard being effective for the Company at the beginning of its first quarter of fiscal year 2018. In addition, during March, April and May 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, respectively, which clarified the guidance on certain items such as reporting revenue as a principal versus agent, identifying performance obligations, accounting for intellectual property licenses, assessing collectability and presentation of sales taxes. Management has not yet completed its assessment of the impact of the new standard on the Company’s consolidated financial statements. Although the Company is currently assessing the impact that the adoption of the new standard will have on its consolidated financial statements and related disclosures, we believe one area that will result in changes is our accounting for loyalty points which are earned by our customers. The Company’s Marquee Rewards program allows members to utilize their rewards membership card to earn promotional points that are redeemable for slot play and complimentaries. The accumulated points can be redeemed for food and beverages at our restaurants, and products offered at our retail stores across the vast majority of Penn’s casino properties. The estimated liability for unredeemed points is currently accrued based on expected redemption rates and the estimated costs of the services or merchandise to be provided. Under the new standard, we will need to defer the full retail value of the complimentaries until the future revenue transaction occurs. Although the exact amount of the increase to our point liabilities has not yet been determined, we do not anticipate it will have a significant impact on our earnings. The new standard will also require us to allocate the revenues associated with players’ activity between gaming revenue and the value of the points and to measure the liability based on the estimated standalone selling price of the points earned after factoring in the likelihood of redemption. As a result, we expect that gaming revenues will be reduced and that promotional allowance will no longer be netted on our statement of income. The revenue associated with the points earned will be recognized in the period in which they are redeemed. Additionally, at this time, we expect to adopt Topic 606 using the modified retrospective method on January 1, 2018. The Company is continuing to evaluate the new guidance both internally and through following the industry working group and plans to provide additional information at a future date. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2017 | |
Property and Equipment | |
Property and Equipment | 4. Property and Equipment Property and equipment, net, consists of the following: March 31, December 31, 2017 2016 (in thousands) Property and equipment - non-master lease Land and improvements $ 294,590 $ 294,590 Building and improvements 404,875 404,158 Furniture, fixtures and equipment 1,358,002 1,355,615 Leasehold improvements 119,404 118,940 Construction in progress 26,903 16,375 2,203,774 2,189,678 Less Accumulated depreciation (1,261,519) (1,224,596) 942,255 965,082 Property and equipment - master lease Land and improvements 381,680 382,246 Building and improvements 2,219,017 2,219,018 2,600,697 2,601,264 Less accumulated depreciation (768,629) (745,963) 1,832,068 1,855,301 Property and equipment, net $ 2,774,323 $ 2,820,383 Property and equipment, net decreased by $46.1 million for the three months ended March 31, 2017 primarily due to depreciation expense, which is partially offset by improvements at Tropicana Las Vegas, and normal maintenance capital expenditures for the three months ended March 31, 2017. Depreciation expense, for property and equipment including assets under capital leases, totaled $65.0 million and $65.6 million for the three months ended March 31, 2017 and 2016, respectively, of which $22.7 million and $22.9 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, 2017 and 2016. |
Long-term Debt
Long-term Debt | 3 Months Ended |
Mar. 31, 2017 | |
Long-term Debt | |
Long-term Debt | 5. Long-term Debt Long-term debt, net of current maturities, is as follows: March 31, December 31, 2017 2016 (in thousands) Senior secured credit facility $ 931,000 $ 976,845 $300 million 5.875 % senior subordinated notes due November 1, 2021 — 300,000 $400 million 5.625 % senior unsecured notes due January 15, 2027 400,000 — Other long-term obligations 126,052 154,084 Capital leases 1,321 1,760 1,458,373 1,432,689 Less current maturities of long-term debt (35,561) (85,595) Less net discounts (2,937) (620) Less debt issuance costs (32,333) (16,535) $ 1,387,542 $ 1,329,939 The following is a schedule of future minimum repayments of long-term debt as of March 31, 2017 (in thousands): Within one year $ 35,497 1-3 years 78,612 3-5 years 422,517 Over 5 years 921,747 Total minimum payments $ 1,458,373 Senior Secured Credit Facility On January 19, 2017, the Company entered into a new senior secured credit facility. The new senior secured credit facility consists of a five year $700 million revolver, a five year $300 million Term Loan A facility, and a seven year $500 million Term Loan B facility (the “Amended Credit Facilities”). The Term Loan A facility was priced at LIBOR plus a spread (ranging from 3.00% to 1.25%) based on the Company’s consolidated total net leverage ratio as defined in the new senior secured credit facility. The Term Loan B facility was priced at LIBOR plus 2.50%, with a 0.75% LIBOR floor. At March 31, 2017, the Company’s senior secured credit facility had a gross outstanding balance of $931.0 million, consisting of a $300.0 million Term Loan A facility, a $500.0 million Term Loan B facility, and $131.0 million outstanding on the revolving credit facility. Additionally, at March 31, 2017, the Company had conditional obligations under letters of credit issued pursuant to the senior secured credit facility with face amounts aggregating $22.1 million, resulting in $546.9 million of available borrowing capacity as of March 31, 2017 under the revolving credit facility. In connection with the repayment of the previous senior secured credit facility, the Company recorded $1.7 million in refinancing costs and a $2.3 million loss on the early extinguishment of debt for the quarter ended March 31, 2017 related to the write-off of deferred debt issuance costs and the write‑off of the discount on the Term Loan B facility of the previous senior secured credit facility. Redemption of 5.875% Senior Subordinated Notes In the first quarter of 2017, the Company redeemed all of its $300 million 5.875% senior subordinated notes, which were due in 2021 (“5.875% Notes”). In connection with this redemption, the Company recorded a $21.1 million loss on the early extinguishment of debt for the quarter ended March 31, 2017 related to the difference between the reacquisition price of the 5.875% Notes compared to its carrying value. 5.625% Senior Unsecured Notes On January 19, 2017, the Company completed an offering of $400 million 5.625% senior unsecured notes that mature on January 15, 2027 (the “5.625% Notes”) at a price of par. Interest on the 5.625% Notes is payable on January 15 th and July 15 th of each year. The 5.625% Notes are senior unsecured obligations of the Company. The 5.625% Notes will not be guaranteed by any of the Company’s subsidiaries except in the event that the Company in the future issues certain subsidiary‑guaranteed debt securities. The Company may redeem the 5.625% Notes at any time on or after January 15, 2022, at the declining redemption premiums set forth in the indenture governing the 5.625% Notes, and, prior to January 15, 2022, at a “make-whole” redemption premium set forth in the indenture governing the 5.625% Notes. In addition, prior to January 15, 2020, the Company may redeem the 5.625% Notes with an amount equal to the net proceeds from one or more equity offerings, at a redemption price equal to 105.625% of the principal amount of the 5.625% Notes redeemed, together with accrued and unpaid interest to, but not including, the redemption date, so long as at least 60% of the aggregate principal amount of the notes originally issued under the indenture remains outstanding and such redemption occurs within 180 days of closing of the related equity offering. The Company used a portion of the proceeds from the issuance of the 5.625% Notes to retire its existing 5.875% Notes and to fund related transaction fees and expenses. The Company used loans funded under the Amended Credit Facilities and a portion of the proceeds of the 5.625% Notes to repay amounts outstanding under its then existing Credit Agreement and to fund related transaction fees and expenses and for general corporate purposes. Corporate Airplane Loan In January 2017, the Company’s corporate airplane loan of $20.8 million was paid in full. At December 31, 2016 the corporate airplane loan was included with other long-term obligations. Covenants The Company’s senior secured credit facility and $400 million 5.625% 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 $400 million 5.625% 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, 2017, the Company was in compliance with all required financial covenants. |
Master Lease Financing Obligati
Master Lease Financing Obligation | 3 Months Ended |
Mar. 31, 2017 | |
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 spin-off of GLPI 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 $112.4 million and $111.4 for the three months ended March 31, 2017 and 2016, respectively. The interest expense recognized for the three months ended March 31, 2017 was $97.7 million as compared to $98.7 million the three months ended March 31, 2016, respectively. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2017 | |
Segment Information | |
Segment Information | 7. Segment Information During the second quarter of 2016, the Company changed its three reportable segments from East/Midwest, West and Southern Plains to Northeast, South/West, and Midwest in connection with the addition of a new regional vice president and a realignment of responsibilities within the Company’s segments. Segment information for prior periods has been restated for comparability. 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, 2017 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 102,633 $ 27,118 $ 61,529 $ (50,993) $ 140,287 Charge for stock compensation — — — 2,173 2,173 Depreciation and amortization 23,023 9,218 9,671 28,324 70,236 Contingent purchase price 904 — 9 1,647 2,560 (Gain) loss on disposal of assets 14 5 (58) (6) (45) Insurance recoveries — — — — — Income (loss) from unconsolidated affiliates — — 5,004 (456) 4,548 Non-operating items for Kansas JV — — 1,951 — 1,951 Adjusted EBITDA $ 126,574 $ 36,341 $ 78,106 $ (19,311) $ 221,710 Three months ended March 31, 2016 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 100,921 $ 25,985 $ 58,225 $ (44,600) $ 140,531 Charge for stock compensation — — — 1,455 1,455 Depreciation and amortization 22,994 8,764 9,568 24,694 66,020 Contingent purchase price (1,201) — — — (1,201) Loss on disposal of assets 21 (24) 6 (1,104) (1,101) Income (loss) from unconsolidated affiliates — — 4,718 (109) 4,609 Non-operating items for Kansas JV — — 2,570 — 2,570 Adjusted EBITDA $ 122,735 $ 34,725 $ 75,087 $ (19,664) $ 212,883 Northeast South/West Midwest Other (1) Total (in thousands) Three months ended March 31, 2017 Net revenues $ 393,465 $ 139,820 $ 228,338 $ 14,601 $ 776,224 Capital expenditures 3,990 8,622 4,331 213 17,156 Three months ended March 31, 2016 Net revenues $ 393,205 $ 135,968 $ 221,078 $ 6,200 $ 756,451 Capital expenditures 7,119 7,585 5,982 683 21,369 Balance sheet at March 31, 2017 Total assets $ 837,808 $ 829,872 $ 1,087,737 $ 2,191,623 $ 4,947,040 Investment in and advances to unconsolidated affiliates 76 — 93,022 61,876 154,974 Goodwill and other intangible assets, net 324,285 224,693 776,347 97,092 1,422,417 Balance sheet at December 31, 2016 Total assets $ 861,951 $ 840,076 $ 1,103,231 $ 2,169,226 $ 4,974,484 Investment in and advances to unconsolidated affiliates 76 — 93,768 62,332 156,176 Goodwill and other intangible assets, net 324,285 224,719 775,377 100,798 1,425,179 (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, which was sold on July 31, 2016, Sanford Orlando Kennel Club and the Company’s Texas and New Jersey joint ventures, which do not have gaming operations. Other also includes Penn Interactive Ventures, which is a wholly-owned subsidiary that is pursuing our interactive gaming strategy and our recent acquisition of Rocket Speed. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value Measurements | |
Fair Value Measurements | 8. 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 and as such is a Level 1 measurement. Advances to the Jamul Tribe The fair value of the Company’s advances to the Jamul Tribe was based on market interest rates for similarly rated observable instruments. Although we determined that these inputs fell within Level 2 of the fair value hierarchy, the probability of the Company’s loan being subordinated is based on internal projections of the cash flows of the facility which is a Level 3 measurement. Therefore, the Company concluded that this instrument should be classified as a Level 3 measurement due to the high probability of the loan being subordinated. See Note 2 for further details. 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, 2017, 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. Other liabilities Other liabilities at March 31, 2017 is primarily comprised of the contingent purchase price consideration related to the purchases of Plainridge Racecourse and Rocket Speed. 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. The fair value of the Company’s contingent purchase price consideration related to its Rocket Speed acquisition is estimated by applying an option pricing method using a Monte Carlo simulation which is a quantitative technique that estimates the distribution of an outcome variable that depends on probabilistic input variables and as such is a Level 3 measurement. At each reporting period, the Company assesses the fair value of these liabilities and changes in their fair values are recorded in earnings. The amount related to the change in fair value of these obligations resulted in a charge to general and administrative expense of $2.6 million for the three months ended March 31, 2017 compared to a reduction of $1.2 million for the three months ended March 31, 2016. The carrying amounts and estimated fair values by input level of the Company’s financial instruments at March 31, 2017 and December 31, 2016 are as follows (in thousands): March 31, 2017 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 259,488 $ 259,488 $ 259,488 $ — $ — Advances to Jamul Tribe 92,334 98,198 — — 98,198 Financial liabilities: Long-term debt Senior secured credit facility 896,539 934,750 803,750 131,000 — Senior unsecured notes 399,228 394,000 394,000 — — Other long-term obligations 126,052 124,424 — 124,424 — Other liabilities 50,783 50,783 — — 50,783 December 31, 2016 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 229,510 $ 229,510 $ 229,510 $ — $ — Advances to Jamul Tribe 92,100 98,000 — — 98,000 Financial liabilities: Long-term debt Senior secured credit facility 962,703 976,092 785,092 191,000 — Senior unsecured notes 296,895 312,000 312,000 — — Other long-term obligations 154,084 152,132 — 152,132 — Other liabilities 48,244 48,244 — — 48,244 The following table summarizes the changes in fair value of the Company’s Level 3 liabilities (in thousands): Three Months Ended March 31, 2017 Liabilities Contingent Purchase Price Balance at January 1, 2017 $ 48,244 Additions — Payments (21) Included in earnings 2,560 Balance at March 31, 2017 $ 50,783 The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities: Valuation Unobservable Technique Input Discount Rate Volatility Rate Contingent purchase price - Plainridge Discounted cash flow Discount rate 8.30 % N/A % Contingent purchase price - Rocket Speed Option pricing method Discount rate, Volatility rate 12.00 % 83.11 % |
Investment In Unconsolidated Af
Investment In Unconsolidated Affiliates | 3 Months Ended |
Mar. 31, 2017 | |
Investment In Unconsolidated Affiliates | |
Investment In Unconsolidated Affiliates | 9. Investment in Unconsolidated Affiliates The Company has a 50% investment in Kansas Entertainment, which is a joint venture with International Speedway Corporation (“International Speedway”). Kansas Entertainment owns Hollywood Casino at Kansas Speedway which is a Hollywood themed facility featuring 244,791 of property square footage with 2,000 slot machines, 41 table games and 12 poker tables, a 1,253 space parking structure, as well as a variety of dining and entertainment facilities. For the year ended December 31, 2016 (and expected for the year ending December 31, 2017), the Company’s investment in Kansas Entertainment met the requirements of S-X Rule 4-08(g) to provide summarized financial information. The following table provides summary income statement information for Kansas Entertainment as required under S-X Rule 1-02(bb) for the comparative periods presented in the Company’s condensed consolidated statements of income. Three Months Ended March 31, 2017 2016 Net revenues $ 38,846 $ 39,882 Operating expenses 28,838 30,446 Income from operations 10,008 9,436 Net income $ 10,008 $ 9,436 Net income attributable to Penn $ 5,004 $ 4,718 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events | |
Subsequent Events | 10. Subsequent Events On March 28, 2017, the Company announced that it entered into a definitive agreement to acquire RIH Acquisitions MS I, LLC and RIH Acquisitions MS II, LLC, the holding companies for the gaming operations of Bally’s Casino Tunica and Resorts Casino Tunica, in Tunica, Mississippi, for a total consideration of approximately $44.0 million in cash, subject to customary working capital adjustments. The transaction closed on May 1, 2017. The acquisition was funded by Penn with cash on hand and revolving commitments under the Company’s senior secured credit facility. The Company will operate both of these Tunica properties and lease the underlying real property associated with these two businesses from GLPI pursuant to the terms of the Company’s existing Master Lease with GLPI, with a total initial annual payment of $9.0 million subject to the provisions included in the terms of the Master Lease. The underlying real property leased from GLPI will be accounted for as a financing obligation, which is expected to increase the Company’s Master Lease financing obligation by approximately $82.6 million which represents the purchase price GLPI paid for the underlying real estate assets. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
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 (“OTWs’). Revenue from our management service contracts for Casino Rama and Hollywood Casino Jamul – San Diego are based upon contracted terms and are recognized when services are performed and collection is reasonably assured. The Company records revenues generated from its management service contract and licensing contract with the Jamul Tribe, as well as interest income associated with advances to the Jamul Tribe in accordance with ASC 605-25 “Multiple Element Arrangements.” The fair value of each arrangement element is based on the separate standalone selling price determined by either vendor-specific objective evidence (“VSOE”), if available, or third-party evidence ("TPE") if VSOE is not available. We concluded revenues generated with respect to each element contained within the arrangement is representative of the separate standalone selling price which is reflective of fair value. Revenues include reimbursable costs associated with the Company’s management contract with Jamul Indian Village of California (the “Jamul Tribe”), which represent amounts received or due pursuant to the Company’s management agreement for the reimbursement of expenses, primarily payroll costs, incurred on their behalf. The Company recognizes the reimbursable costs associated with this contract as revenue on a gross basis, with an offsetting amount charged to operating expense as it is the primary obligor for these costs. Revenues are recognized net of certain sales incentives in accordance with 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, 2017 and 2016 are as follows: Three Months Ended March 31, 2017 2016 (in thousands) Rooms $ 9,196 $ 9,122 Food and beverage 30,566 29,521 Other 2,096 1,928 Total promotional allowances $ 41,858 $ 40,571 The estimated cost of providing such complimentary services for the three months ended March 31, 2017 and 2016 are as follows: Three Months Ended March 31, 2017 2016 (in thousands) Rooms $ 1,268 $ 1,197 Food and beverage 11,631 11,523 Other 854 745 Total cost of complimentary services $ 13,753 $ 13,465 |
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. For the three months ended March 31, 2017, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $244.4 million, as compared to $243.2 million for the three months ended March 31, 2016. |
Long-term asset related to the Jamul Tribe | Long-term asset related to the Jamul Tribe The Company is accounting for the development agreement and related loan commitment letter with the Jamul Tribe as a loan (the “Loan”) with accrued interest in accordance with ASC 310, “Receivables.” The Loan represented advances made by the Company to the Jamul Tribe for the development and construction of a gaming facility for the Jamul Tribe on reservation land. As such, the Jamul Tribe owns the casino and its related assets and liabilities. Repayment of funds advanced to the Jamul Tribe is primarily predicated on cash flows from the operations of the facility. San Diego Gaming Ventures, LLC (“SDGV”) (a wholly-owned subsidiary of the Company) is a separate legal entity and is the Penn entity that has the Loan with and is entitled to receive management and licensing fees from the Jamul Tribe. Additionally, in December 2015, the Company entered into an agreement to purchase a $60 million subordinated note from the previous developer of the Jamul Indian Village project for $24 million. Interest on this subordinated note, as of the effective date and at all times thereafter until the Loan has been paid in full, shall accrue as follows: as of the effective date, no interest shall accrue initially; at the opening date, interest shall accrue at a simple fixed rate of 4.25% per annum. The subordinated note is subordinated to the Loan, and payments on the subordinated note may only be made after all necessary payments are made on the Loan subject to certain limitations. The Company recorded the subordinated note at its acquisition price of $24 million, which was considered to be its fair value and represents the expected cash flows to be received. As described below, this subordinated note was repaid in connection with the Jamul Tribe refinancing of its existing indebtedness and the Company received a $6 million premium on such repayment which was accounted for as an origination fee on our new loan to the Tribe. On October 20, 2016, the Jamul Tribe obtained long term secured financing, consisting of revolving and term loan credit facilities (the “Credit Facilities”) totaling approximately $460 million. The Credit Facilities, all of which are due in 2022, consist of a $5 million revolving credit facility, a $340 million term loan B facility and a $98 million term loan C facility. The revolving credit facility was provided by various commercial banks; the term loan B facility is held by an affiliate of Och-Ziff Real Estate; and the term loan C facility is held by SDGV. SDGV will also provide up to an additional $15 million of delayed draw term loan C commitments to fund certain roadway improvement costs. The various Credit Facilities rank pari passu with each other. However, if, on the first anniversary of the opening of Hollywood Casino Jamul – San Diego, the Jamul Tribe has not achieved a senior secured net leverage ratio equal to or less than 5.0 to 1.0, then all or a portion of the term loan C facility will become subordinated to the other Credit Facilities to the extent necessary such that, after giving effect to such conversion, such senior secured net leverage ratio is 5.0 to 1.0. The rights of SDGV to receive management and license fees are subordinated to the claims of the lenders under the Credit Facilities and are subject to certain conditions contained in the Credit Facilities. SDGV’s Loan with the Jamul Tribe totaled $92.3 million (net of unamortized loan origination fees of $5.9 million and inclusive of a current portion of $0.5 million in other current assets) and $92.1 million (net of unamortized loan origination fee of $5.9 million and inclusive of a current portion of $0.7 million in other current assets) at March 31, 2017 and December 31, 2016, respectively. As a condition to the Credit Facilities, SDGV provided a limited completion guarantee, in favor of the administrative agent under the Credit Facilities, to provide up to $15 million of additional loans related to the construction and opening of the Casino, as well as certain post opening construction costs. Of these loans, $10 million may be funded under the Credit Facilities as part of the term loan C facility, while any additional loans would be subordinated loans. The term loan C facility bears interest at LIBOR plus 8.50% with a 1% LIBOR floor (or, at the Jamul Tribe’s election, a base rate determined by reference to the prime rate, the federal funds effective rate or LIBOR, as applicable, plus 8.50%), and the subordinated loans will bear interest at 14.0% (with 12.0% to be paid in cash and 2.0% to be paid-in-kind). As mentioned previously, the Company is accounting for its loan in accordance with ASC 310, “Receivables”. Although Hollywood Casino Jamul San-Diego opened to strong business and earnings volumes in October 2016, which met our expectations, results began to soften earlier and with a steeper dropoff than anticipated. Based on the actual performance of the facility to date and projections for the second quarter of 2017, the Company believes the Jamul Tribe is likely to be in technical default of certain financial covenant requirements with respect to debt to earnings ratios at June 30, 2017, in the absence of a waiver being obtained prior to such date. As a result, we have concluded the Loan is impaired at both March 31, 2017 and December 31, 2016. A loan is considered impaired when, based on current information, events and projections, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when contractually due under the terms of the loan agreement. Impairment is measured by the present value of expected future cash flows discounted at the loan’s effective interest rate. An allowance for loan losses would be established in the event the carrying value exceeds the present value calculation previously described. The Company performed a comprehensive review of various possible future cash flow projections for the facility that were benchmarked against recent openings in the Company’s regional operations. The expected cash flows were then discounted at the Loan’s original interest rate in accordance with ASC 310 which was in excess of our Loan’s carrying value at both March 31, 2017 and December 31, 2016, and as such no reserve was required. The unpaid principal balance of our loan at March 31, 2017 and December 31, 2016 was $98.2 million and $98.0 million, respectively. |
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. As of March 31, 2017, there were no outstanding shares of Series C Preferred Stock. At March 31, 2016, 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, 2017 and 2016 under the two-class method: Three Months Ended March 31, Three Months Ended March 31, 2017 2016 (in thousands) Net income $ 5,104 $ 23,708 Net income applicable to preferred stock — 2,282 Net income applicable to common stock $ 5,104 $ 21,426 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, 2017 and 2016: Three Months Ended March 31, Three Months Ended March 31, 2017 2016 (in thousands) Determination of shares: Weighted-average common shares outstanding 90,751 80,968 Assumed conversion of dilutive employee stock-based awards 1,105 1,448 Assumed conversion of restricted stock 61 51 Diluted weighted-average common shares outstanding before participating security 91,917 82,467 Assumed conversion of preferred stock — 8,624 Diluted weighted-average common shares outstanding 91,917 91,091 Options to purchase 4,545,585 shares and 2,574,719 shares were outstanding during the three months ended March 31, 2017 and 2016, respectively, but were not included in the computation of diluted EPS because they were antidilutive. The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2017 and 2016 (in thousands, except per share data): Three Months Ended March 31, Three Months Ended March 31, 2017 2016 Calculation of basic EPS: Net income applicable to common stock $ 5,104 $ 21,426 Weighted-average common shares outstanding 90,751 80,968 Basic EPS $ 0.06 $ 0.26 Calculation of diluted EPS using two-class method: Net income applicable to common stock $ 5,104 $ 21,426 Diluted weighted-average common shares outstanding before participating security 91,917 82,467 Diluted EPS $ 0.06 $ 0.26 |
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 is 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 5.30 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 1,446,353 stock options during the three months ended March 31, 2017. Stock-based compensation expense for the three months ended March 31, 2017 was $2.2 million as compared to $1.5 million for the three months ended March 31, 2016, 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 $5.8 million and $5.6 million at March 31, 2017 and December 31, 2016, respectively. For PSUs held by Penn employees, there was $7.1 million of total unrecognized compensation cost at March 31, 2017 that will be recognized over the grants remaining weighted average vesting period of 2.07 years. For the three months ended March 31, 2017, the Company recognized $4.3 million of compensation expense associated with these awards, as compared to $3.0 million for the three months ended March 31, 2016. The changes are primarily due to volatility in Penn’s stock price year-over-year. Amounts paid by the Company for the three months ended March 31, 2017 on these cash-settled awards totaled $3.5 million as compared to $4.4 million for the three months ended March 31, 2016. 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 $10.4 million and $7.3 million at March 31, 2017 and December 31, 2016, respectively. For SARs held by Penn employees, there was $11.2 million of total unrecognized compensation cost at March 31, 2017 that will be recognized over the awards remaining weighted average vesting period of 2.99 years. For the three months ended March 31, 2017, the Company recognized compensation expense of $4.0 million associated with these awards, as compared to $1.9 million for the three months ended March 31, 2016. The changes are primarily due to volatility in Penn’s stock price year-over-year. Amounts paid by the Company for the three months ended March 31, 2017 on these cash-settled awards totaled $1.1 million as compared to $0.4 million for the three months ended March 31, 2016. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model for stock option awards granted during the three months ended March 31, 2017 and 2016, respectively: Three months ended March 31, 2017 2016 Risk-free interest rate % 1.20 % Expected volatility % 31.22 % Dividend yield — — Weighted-average expected life (years) 5.40 |
Segment Information | Segment Information The Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”), 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. During the second quarter of 2016, the Company changed its three reportable segments from East/Midwest, West and Southern Plains to Northeast, South/West, and Midwest in connection with the addition of a new regional vice president and a realignment of responsibilities within our segments. This realignment changed the manner in which information is provided to the CODM and therefore how performance is assessed and resources are allocated to the business. Segment information for prior periods has been restated for comparability. The Northeast 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 Toledo, Hollywood Casino Columbus, Hollywood Gaming at Dayton Raceway, Hollywood Gaming at Mahoning Valley Race Course, and Plainridge Park Casino. It also includes the Company’s Casino Rama management service contract. The South/West reportable segment consists of the following properties: Zia Park Casino, Hollywood Casino Tunica, Hollywood Casino Gulf Coast, Boomtown Biloxi, M Resort, and Tropicana Las Vegas, as well as our management contract with Hollywood Casino Jamul-San Diego, which opened on October 10, 2016. The Midwest reportable segment consists of the following properties: Hollywood Casino Aurora, Hollywood Casino Joliet, Argosy Casino Alton, Argosy Casino Riverside, Hollywood Casino Lawrenceburg, Hollywood Casino St. Louis, and Prairie State Gaming, 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, which was sold on July 31, 2016, 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. Additionally, the Other category includes Penn Interactive Ventures, the Company’s wholly-owned subsidiary that represents its social online gaming initiatives, including the recently acquired Rocket Speed. Penn Interactive Ventures meets the definition of an operating segment under ASC 280, but is quantitatively not significant to the Company’s operations as it represents 1.5% of net revenues and $(1.4) million impact to income from operations for the three months ended March 31, 2017, and its total assets represent 2.2% of the Company’s total assets at March 31, 2017. In addition to GAAP financial measures, management uses adjusted EBITDA as an important 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 it provides 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 and financing charges, impairment charges, insurance recoveries and deductible charges, depreciation and amortization, changes in the estimated fair value of our contingent purchase price obligations, 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. 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, 2017 and 2016, 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, 2017 | |
Summary of Significant Accounting Policies | |
Schedule of promotional allowances | Three Months Ended March 31, 2017 2016 (in thousands) Rooms $ 9,196 $ 9,122 Food and beverage 30,566 29,521 Other 2,096 1,928 Total promotional allowances $ 41,858 $ 40,571 |
Schedule of estimated cost of providing complimentary services | Three Months Ended March 31, 2017 2016 (in thousands) Rooms $ 1,268 $ 1,197 Food and beverage 11,631 11,523 Other 854 745 Total cost of complimentary services $ 13,753 $ 13,465 |
Schedule of allocation of net income attributable to shareholders under the two-class method | Three Months Ended March 31, Three Months Ended March 31, 2017 2016 (in thousands) Net income $ 5,104 $ 23,708 Net income applicable to preferred stock — 2,282 Net income applicable to common stock $ 5,104 $ 21,426 |
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, Three Months Ended March 31, 2017 2016 (in thousands) Determination of shares: Weighted-average common shares outstanding 90,751 80,968 Assumed conversion of dilutive employee stock-based awards 1,105 1,448 Assumed conversion of restricted stock 61 51 Diluted weighted-average common shares outstanding before participating security 91,917 82,467 Assumed conversion of preferred stock — 8,624 Diluted weighted-average common shares outstanding 91,917 91,091 |
Schedule of calculation of basic and diluted EPS for the entity's common stock | The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2017 and 2016 (in thousands, except per share data): Three Months Ended March 31, Three Months Ended March 31, 2017 2016 Calculation of basic EPS: Net income applicable to common stock $ 5,104 $ 21,426 Weighted-average common shares outstanding 90,751 80,968 Basic EPS $ 0.06 $ 0.26 Calculation of diluted EPS using two-class method: Net income applicable to common stock $ 5,104 $ 21,426 Diluted weighted-average common shares outstanding before participating security 91,917 82,467 Diluted EPS $ 0.06 $ 0.26 |
Weighted-average assumptions used in Black-Scholes option pricing model | Three months ended March 31, 2017 2016 Risk-free interest rate % 1.20 % Expected volatility % 31.22 % Dividend yield — — Weighted-average expected life (years) 5.40 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Property and Equipment | |
Schedule of property and equipment, net | March 31, December 31, 2017 2016 (in thousands) Property and equipment - non-master lease Land and improvements $ 294,590 $ 294,590 Building and improvements 404,875 404,158 Furniture, fixtures and equipment 1,358,002 1,355,615 Leasehold improvements 119,404 118,940 Construction in progress 26,903 16,375 2,203,774 2,189,678 Less Accumulated depreciation (1,261,519) (1,224,596) 942,255 965,082 Property and equipment - master lease Land and improvements 381,680 382,246 Building and improvements 2,219,017 2,219,018 2,600,697 2,601,264 Less accumulated depreciation (768,629) (745,963) 1,832,068 1,855,301 Property and equipment, net $ 2,774,323 $ 2,820,383 |
Long-term Debt (Tables)
Long-term Debt (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Long-term Debt | |
Schedule of long-term debt, net of current maturities | March 31, December 31, 2017 2016 (in thousands) Senior secured credit facility $ 931,000 $ 976,845 $300 million 5.875 % senior subordinated notes due November 1, 2021 — 300,000 $400 million 5.625 % senior unsecured notes due January 15, 2027 400,000 — Other long-term obligations 126,052 154,084 Capital leases 1,321 1,760 1,458,373 1,432,689 Less current maturities of long-term debt (35,561) (85,595) Less net discounts (2,937) (620) Less debt issuance costs (32,333) (16,535) $ 1,387,542 $ 1,329,939 |
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, 2017 (in thousands): Within one year $ 35,497 1-3 years 78,612 3-5 years 422,517 Over 5 years 921,747 Total minimum payments $ 1,458,373 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Information | |
Schedule of information with respect to the Company's segments | Three months ended March 31, 2017 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 102,633 $ 27,118 $ 61,529 $ (50,993) $ 140,287 Charge for stock compensation — — — 2,173 2,173 Depreciation and amortization 23,023 9,218 9,671 28,324 70,236 Contingent purchase price 904 — 9 1,647 2,560 (Gain) loss on disposal of assets 14 5 (58) (6) (45) Insurance recoveries — — — — — Income (loss) from unconsolidated affiliates — — 5,004 (456) 4,548 Non-operating items for Kansas JV — — 1,951 — 1,951 Adjusted EBITDA $ 126,574 $ 36,341 $ 78,106 $ (19,311) $ 221,710 Three months ended March 31, 2016 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 100,921 $ 25,985 $ 58,225 $ (44,600) $ 140,531 Charge for stock compensation — — — 1,455 1,455 Depreciation and amortization 22,994 8,764 9,568 24,694 66,020 Contingent purchase price (1,201) — — — (1,201) Loss on disposal of assets 21 (24) 6 (1,104) (1,101) Income (loss) from unconsolidated affiliates — — 4,718 (109) 4,609 Non-operating items for Kansas JV — — 2,570 — 2,570 Adjusted EBITDA $ 122,735 $ 34,725 $ 75,087 $ (19,664) $ 212,883 Northeast South/West Midwest Other (1) Total (in thousands) Three months ended March 31, 2017 Net revenues $ 393,465 $ 139,820 $ 228,338 $ 14,601 $ 776,224 Capital expenditures 3,990 8,622 4,331 213 17,156 Three months ended March 31, 2016 Net revenues $ 393,205 $ 135,968 $ 221,078 $ 6,200 $ 756,451 Capital expenditures 7,119 7,585 5,982 683 21,369 Balance sheet at March 31, 2017 Total assets $ 837,808 $ 829,872 $ 1,087,737 $ 2,191,623 $ 4,947,040 Investment in and advances to unconsolidated affiliates 76 — 93,022 61,876 154,974 Goodwill and other intangible assets, net 324,285 224,693 776,347 97,092 1,422,417 Balance sheet at December 31, 2016 Total assets $ 861,951 $ 840,076 $ 1,103,231 $ 2,169,226 $ 4,974,484 Investment in and advances to unconsolidated affiliates 76 — 93,768 62,332 156,176 Goodwill and other intangible assets, net 324,285 224,719 775,377 100,798 1,425,179 (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, which was sold on July 31, 2016, Sanford Orlando Kennel Club and the Company’s Texas and New Jersey joint ventures, which do not have gaming operations. Other also includes Penn Interactive Ventures, which is a wholly-owned subsidiary that is pursuing our interactive gaming strategy and our recent acquisition of Rocket Speed. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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, 2017 and December 31, 2016 are as follows (in thousands): March 31, 2017 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 259,488 $ 259,488 $ 259,488 $ — $ — Advances to Jamul Tribe 92,334 98,198 — — 98,198 Financial liabilities: Long-term debt Senior secured credit facility 896,539 934,750 803,750 131,000 — Senior unsecured notes 399,228 394,000 394,000 — — Other long-term obligations 126,052 124,424 — 124,424 — Other liabilities 50,783 50,783 — — 50,783 December 31, 2016 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 229,510 $ 229,510 $ 229,510 $ — $ — Advances to Jamul Tribe 92,100 98,000 — — 98,000 Financial liabilities: Long-term debt Senior secured credit facility 962,703 976,092 785,092 191,000 — Senior unsecured notes 296,895 312,000 312,000 — — Other long-term obligations 154,084 152,132 — 152,132 — Other liabilities 48,244 48,244 — — 48,244 |
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, 2017 Liabilities Contingent Purchase Price Balance at January 1, 2017 $ 48,244 Additions — Payments (21) Included in earnings 2,560 Balance at March 31, 2017 $ 50,783 |
Summary of significant unobservable inputs used in calculating fair value Level 3 liabilities | Valuation Unobservable Technique Input Discount Rate Volatility Rate Contingent purchase price - Plainridge Discounted cash flow Discount rate 8.30 % N/A % Contingent purchase price - Rocket Speed Option pricing method Discount rate, Volatility rate 12.00 % 83.11 % |
Investment In Unconsolidated 25
Investment In Unconsolidated Affiliates (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Investment In Unconsolidated Affiliates | |
Schedule of summary financial information for Kansas Entertainment for the comparative periods presented in the Company's consolidated balance sheets and consolidated statements of operations | Three Months Ended March 31, 2017 2016 Net revenues $ 38,846 $ 39,882 Operating expenses 28,838 30,446 Income from operations 10,008 9,436 Net income $ 10,008 $ 9,436 Net income attributable to Penn $ 5,004 $ 4,718 |
Organization and Basis of Pre26
Organization and Basis of Presentation (Details) | Mar. 31, 2017jurisdictionfacility |
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 Accoun27
Summary of Significant Accounting Policies -Revenue Recognition, Player Loyalty Programs, and Gaming and Racing Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue Recognition and Promotional Allowances | ||
Promotional allowances | $ 41,858 | $ 40,571 |
Cost of complimentary services | 13,753 | 13,465 |
Gaming and Racing Taxes | ||
Gaming expense | 244,400 | 243,200 |
Rooms | ||
Revenue Recognition and Promotional Allowances | ||
Promotional allowances | 9,196 | 9,122 |
Cost of complimentary services | 1,268 | 1,197 |
Food And Beverage | ||
Revenue Recognition and Promotional Allowances | ||
Promotional allowances | 30,566 | 29,521 |
Cost of complimentary services | 11,631 | 11,523 |
Other | ||
Revenue Recognition and Promotional Allowances | ||
Promotional allowances | 2,096 | 1,928 |
Cost of complimentary services | $ 854 | $ 745 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies - Long-term Asset Related to Jamul Tribe (Details) - Jamul Tribe - USD ($) $ in Millions | 1 Months Ended | |
Dec. 31, 2015 | Oct. 20, 2016 | |
Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality | ||
Loans receivable acquired, face amount | $ 60 | |
Consideration for loans receivable acquired | $ 24 | |
Loans receivable acquired, simple fixed interest per annum, percentage rate | 4.25% | |
Loan repayment premium applied as new financing loan origination fee | $ 6 |
Summary of Significant Accoun29
Summary of Significant Accounting Policies - Jamul Tribe Financing (Details) - Jamul Tribe $ in Millions | Oct. 20, 2016USD ($) |
Credit Facilities | |
Jamul Tribe long-term financing | |
Credit facilities borrowing capacity | $ 460 |
Credit Facilities | Maximum | |
Jamul Tribe long-term financing | |
Senior secured net leverage ratio requirement | 5 |
Revolving credit facility - Commercial banks | |
Jamul Tribe long-term financing | |
Credit facilities borrowing capacity | $ 5 |
Term Loan B Facility | |
Jamul Tribe long-term financing | |
Credit facilities borrowing capacity | 340 |
Term Loan C Facility | |
Jamul Tribe long-term financing | |
Credit facilities borrowing capacity | 98 |
Delayed Draw Term Loan C Facility Commitments | |
Jamul Tribe long-term financing | |
Credit facilities borrowing capacity | $ 15 |
Summary of Significant Accoun30
Summary of Significant Accounting Policies - Financing Extended to Jamul Tribe (Details) - Jamul Tribe - USD ($) $ in Millions | Oct. 20, 2016 | Mar. 31, 2017 | Dec. 31, 2016 |
Loan Receivable | |||
Unamortized financing loan origination fee | $ 6 | ||
Term Loan C Facility | San Diego Gaming Ventures | |||
Loan Receivable | |||
Financing loan receivable, carrying value | $ 92.3 | $ 92.1 | |
Unamortized financing loan origination fee | 5.9 | 5.9 | |
Additional borrowing capacity under the financing facility | 10 | ||
Financing loan receivable, reserve allowance | 0 | 0 | |
Financing loan receivable, unpaid principal balance | 98.2 | 98 | |
Delayed Draw Term Loan C Facility Commitments | San Diego Gaming Ventures | Maximum | |||
Loan Receivable | |||
Additional borrowing capacity under the financing facility | $ 15 | ||
Subordinated Loans | San Diego Gaming Ventures | |||
Loan Receivable | |||
Financing interest rate margin - Rate two (as a percent) | 14.00% | ||
Portion of contract financing interest rate to be paid in cash (as a percent) | 12.00% | ||
Portion of contract interest rate to be paid-in-kind (as a percent) | 2.00% | ||
LIBOR | Term Loan C Facility | San Diego Gaming Ventures | |||
Loan Receivable | |||
Financing variable rate basis | LIBOR | ||
Financing interest rate margin (as a percent) | 8.50% | ||
Financing variable rate basis floor (as a percent) | 1.00% | ||
Prime Rate | Term Loan C Facility | San Diego Gaming Ventures | |||
Loan Receivable | |||
Financing variable rate basis | prime rate | ||
Financing interest rate margin (as a percent) | 8.50% | ||
Federal Funds Effective Rate | Term Loan C Facility | San Diego Gaming Ventures | |||
Loan Receivable | |||
Financing variable rate basis | federal funds | ||
Financing interest rate margin (as a percent) | 8.50% | ||
Other current assets | Term Loan C Facility | San Diego Gaming Ventures | |||
Loan Receivable | |||
Current portion of financing note receivable | $ 0.5 | $ 0.7 |
Summary of Significant Accoun31
Summary of Significant Accounting Policies - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Net income loss available to common stockholders | |||
Net income | $ 5,104 | $ 23,708 | |
Net income applicable to preferred stock | 2,282 | ||
Net income applicable to common stock | $ 5,104 | $ 21,426 | |
Determination of shares: | |||
Weighted-average common shares outstanding (in shares) | 90,751,000 | 80,968,000 | |
Assumed conversion of dilutive employee stock-based awards (in shares) | 1,105,000 | 1,448,000 | |
Assumed conversion of restricted stock (in shares) | 61,000 | 51,000 | |
Diluted weighted-average common shares outstanding before participating security | 91,917,000 | 82,467,000 | |
Assumed conversion of preferred stock (in shares) | 8,624,000 | ||
Diluted weighted-average common shares outstanding (in shares) | 91,917,000 | 91,091,000 | |
Calculation of basic EPS: | |||
Net income applicable to common stock | $ 5,104 | $ 21,426 | |
Weighted-average common shares outstanding (in shares) | 90,751,000 | 80,968,000 | |
Basic EPS (in dollars per share) | $ 0.06 | $ 0.26 | |
Calculation of diluted EPS using two class method: | |||
Net income applicable to common stock | $ 5,104 | $ 21,426 | |
Diluted weighted-average common shares outstanding before participating security | 91,917,000 | 82,467,000 | |
Diluted EPS (in dollars per share) | $ 0.06 | $ 0.26 | |
Anti-dilutive securities, options to purchase shares outstanding | 4,545,585 | 2,574,719 | |
Series C Preferred Stock | |||
Earnings Per Share | |||
Preferred stock, shares outstanding | 0 | 8,624 | 0 |
Summary of Significant Accoun32
Summary of Significant Accounting Policies - Stock-Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Stock-based compensation costs | |||
Time period of historical volatility of stock used to estimate expected volatility | 5 years 3 months 18 days | ||
Dividend yield (as a percent) | 0.00% | ||
Granted (in shares) | 1,446,353 | ||
Accrued salaries and wages | $ 72,691 | $ 92,238 | |
Weighted-average assumptions used in the Black-Scholes option-pricing model | |||
Risk-free interest rate (as a percent) | 1.97% | 1.20% | |
Expected volatility (as a percent) | 30.67% | 31.22% | |
Dividend yield (as a percent) | 0.00% | ||
Weighted-average expected life | 5 years 3 months 18 days | 5 years 4 months 24 days | |
Employee stock options | General and administrative expenses | |||
Stock-based compensation costs | |||
Compensation costs related to stock-based compensation | $ 2,200 | $ 1,500 | |
Phantom Share Units (PSUs) | |||
Stock-based compensation costs | |||
Compensation costs related to stock-based compensation | 4,300 | 3,000 | |
Accrued salaries and wages | 5,800 | 5,600 | |
Total compensation cost related to nonvested awards not yet recognized | $ 7,100 | ||
Period for recognition of unrecognized compensation cost | 2 years 26 days | ||
Amounts paid on cash settled awards | $ 3,500 | 4,400 | |
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 | ||
Compensation costs related to stock-based compensation | $ 4,000 | 1,900 | |
Accrued salaries and wages | 10,400 | $ 7,300 | |
Total compensation cost related to nonvested awards not yet recognized | $ 11,200 | ||
Period for recognition of unrecognized compensation cost | 2 years 11 months 27 days | ||
Amounts paid on cash settled awards | $ 1,100 | $ 400 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies - Segment Information (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017USD ($)segment | Jun. 30, 2016segment | Mar. 31, 2016USD ($) | |
Segment Information | |||
Number of reportable segments | segment | 3 | 3 | |
Impact to income from operations | $ 140,287 | $ 140,531 | |
Kansas Entertainment | |||
Segment Information | |||
Ownership interest in joint venture (as a percent) | 50.00% | ||
Penn Interactive Ventures | |||
Segment Information | |||
Percent of net revenue | 1.50% | ||
Impact to income from operations | $ (1,400) | ||
Percent of total assets | 2.20% |
New Accounting Pronouncements (
New Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 |
New Accounting Pronouncements | ||||
Income tax benefit | $ (2,198) | $ (7,734) | ||
Net cash provided by (used in) operating activities | 66,820 | 72,022 | ||
Net cash provided by (used in) financing activities | (13,531) | $ (23,586) | ||
Accounting Standards Update 2016-09 | ||||
New Accounting Pronouncements | ||||
Income tax benefit | $ 600 | |||
Accounting Standards Update 2016-09 | Adjustment | ||||
New Accounting Pronouncements | ||||
Increase in deferred tax assets | $ 16,400 | |||
Increase of valuation allowance | $ 16,400 | |||
Net cash provided by (used in) operating activities | $ 700 | |||
Net cash provided by (used in) financing activities | $ (700) |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Plant and equipment | |||
Property and equipment, net | $ 2,774,323 | $ 2,820,383 | |
Decrease in property and equipment | 46,100 | ||
Depreciation expense | 65,000 | $ 65,600 | |
Interest capitalized in connection with major construction projects | 0 | 0 | |
Master Lease Agreement | |||
Plant and equipment | |||
Depreciation expense | 22,700 | $ 22,900 | |
Land and improvements - non-leased | |||
Plant and equipment | |||
Property and equipment | 294,590 | 294,590 | |
Land and improvements - master lease | |||
Plant and equipment | |||
Property and equipment | 381,680 | 382,246 | |
Building and improvements - non-leased | |||
Plant and equipment | |||
Property and equipment | 404,875 | 404,158 | |
Buildings and improvements - master lease | |||
Plant and equipment | |||
Property and equipment | 2,219,017 | 2,219,018 | |
Furniture, Fixtures and Equipment | |||
Plant and equipment | |||
Property and equipment | 1,358,002 | 1,355,615 | |
Leasehold Improvements | |||
Plant and equipment | |||
Property and equipment | 119,404 | 118,940 | |
Construction in progress - non-leased | |||
Plant and equipment | |||
Property and equipment | 26,903 | 16,375 | |
Non-leased assets | |||
Plant and equipment | |||
Property and equipment | 2,203,774 | 2,189,678 | |
Less Accumulated depreciation | (1,261,519) | (1,224,596) | |
Property and equipment, net | 942,255 | 965,082 | |
Master lease assets | |||
Plant and equipment | |||
Property and equipment | 2,600,697 | 2,601,264 | |
Less Accumulated depreciation | (768,629) | (745,963) | |
Property and equipment, net | $ 1,832,068 | $ 1,855,301 |
Long-term Debt - Debt Summary (
Long-term Debt - Debt Summary (Details) - USD ($) | Mar. 31, 2017 | Jan. 19, 2017 | Dec. 31, 2016 |
Long-term Debt | |||
Long-term debt | $ 1,458,373,000 | $ 1,432,689,000 | |
Less current maturities of long-term debt | (35,561,000) | (85,595,000) | |
Less net discounts | (2,937,000) | (620,000) | |
Less debt issuance costs | (32,333,000) | (16,535,000) | |
Long-term debt, net of current maturities and debt issuance costs | 1,387,542,000 | 1,329,939,000 | |
Senior Secured Credit Facility | |||
Long-term Debt | |||
Long-term debt | $ 931,000,000 | 976,845,000 | |
Senior Subordinated Notes, 5.875 Percent, Due November 2021 | |||
Long-term Debt | |||
Long-term debt | 300,000,000 | ||
Principal amount | $ 300,000,000 | ||
Interest rate (as a percent) | 5.875% | 5.875% | |
Senior Unsecured Notes 5.625 Percent Due January 15, 2027 | |||
Long-term Debt | |||
Long-term debt | $ 400,000,000 | ||
Principal amount | $ 400,000,000 | $ 400,000,000 | |
Interest rate (as a percent) | 5.625% | 5.625% | |
Other long-term obligations | |||
Long-term Debt | |||
Long-term debt | $ 126,052,000 | $ 154,084,000 | |
Capital leases | |||
Long-term Debt | |||
Long-term debt | $ 1,321,000 | $ 1,760,000 |
Long-term Debt - Future Minimum
Long-term Debt - Future Minimum Repayments (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Future minimum repayments of long-term debt | ||
Within one year | $ 35,497 | |
1-3 years | 78,612 | |
3-5 years | 422,517 | |
Over 5 years | 921,747 | |
Long-term debt | $ 1,458,373 | $ 1,432,689 |
Long-term Debt - Senior Secured
Long-term Debt - Senior Secured Credit Facility and Senior Notes (Details) - USD ($) | Jan. 19, 2017 | Jan. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Long-term Debt | ||||
Loss on early extinguishment of debt | $ 23,390,000 | |||
Long-term debt | 1,458,373,000 | $ 1,432,689,000 | ||
Senior Secured Credit Facility | ||||
Long-term Debt | ||||
Refinancing costs | 1,700,000 | |||
Loss on early extinguishment of debt | 2,300,000 | |||
Term loan amount outstanding | 931,000,000 | |||
Long-term debt | 931,000,000 | 976,845,000 | ||
Revolving credit facility | ||||
Long-term Debt | ||||
Term of debt | 5 years | |||
Maximum borrowing capacity | $ 700,000,000 | |||
Available borrowing capacity | 546,900,000 | |||
Term loan amount outstanding | 131,000,000 | |||
Letters of credit outstanding | 22,100,000 | |||
Term Loan A Facility | ||||
Long-term Debt | ||||
Term of debt | 5 years | |||
Maximum borrowing capacity | $ 300,000,000 | |||
Variable interest rate | LIBOR | |||
Term loan amount outstanding | 300,000,000 | |||
Term Loan B Facility | ||||
Long-term Debt | ||||
Term of debt | 7 years | |||
Maximum borrowing capacity | $ 500,000,000 | |||
Variable interest rate | LIBOR | |||
Variable interest rate spread (as a percent) | 2.50% | |||
Variable interest base rate floor rate (as a percent) | 0.75% | |||
Term loan amount outstanding | 500,000,000 | |||
Senior Subordinated Notes, 5.875 Percent, Due November 2021 | ||||
Long-term Debt | ||||
Loss on early extinguishment of debt | 21,100,000 | |||
Long-term debt | 300,000,000 | |||
Amount of debt extinguished | $ 300,000,000 | |||
Principal amount | $ 300,000,000 | |||
Interest rate (as a percent) | 5.875% | 5.875% | ||
Senior Unsecured Notes 5.625 Percent Due January 15, 2027 | ||||
Long-term Debt | ||||
Long-term debt | $ 400,000,000 | |||
Principal amount | $ 400,000,000 | $ 400,000,000 | ||
Interest rate (as a percent) | 5.625% | 5.625% | ||
Percentage of principal amount at which the entity may redeem notes from net proceeds raised in connection with an equity offering | 105.625% | |||
Percentage of the aggregate principal amount of the notes originally issued which must remain outstanding at redemption under terms of the notes | 60.00% | |||
Period from completion of equity offering, during which notes can be redeemed | 180 days | |||
Corporate airplane loan | ||||
Long-term Debt | ||||
Amount of debt extinguished | $ 20,800,000 | |||
Minimum | Term Loan A Facility | ||||
Long-term Debt | ||||
Variable interest rate spread (as a percent) | 1.25% | |||
Maximum | Term Loan A Facility | ||||
Long-term Debt | ||||
Variable interest rate spread (as a percent) | 3.00% |
Master Lease Financing Obliga39
Master Lease Financing Obligation (Details) - Master Lease Agreement - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Capital Leased Assets | ||
Discount rate (as a percent) | 9.70% | |
Total payments under Master Lease | $ 112.4 | $ 111.4 |
Interest expense for the Master Lease | $ 97.7 | $ 98.7 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2017USD ($)segment | Jun. 30, 2016segment | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | |
Segment information | ||||
Number of reportable segments | segment | 3 | 3 | ||
Income (loss) from operations | $ 140,287 | $ 140,531 | ||
Charge for stock compensation | 2,173 | 1,455 | ||
Depreciation and amortization | 70,236 | 66,020 | ||
Contingent purchase price | 2,560 | (1,201) | ||
Loss (gain) loss on disposal of assets | (45) | (1,101) | ||
Income from unconsolidated affiliates | 4,548 | 4,609 | ||
Adjusted EBITDA | 221,710 | 212,883 | ||
Net revenues | 776,224 | 756,451 | ||
Capital expenditures | 17,156 | 21,369 | ||
Total assets | 4,947,040 | $ 4,974,484 | ||
Investment in and advances to unconsolidated affiliates | 154,974 | 156,176 | ||
Goodwill and other intangible assets, net | 1,422,417 | 1,425,179 | ||
Kansas Entertainment | ||||
Segment information | ||||
Non-operating items | 1,951 | 2,570 | ||
Operating Segments | Northeast | ||||
Segment information | ||||
Income (loss) from operations | 102,633 | 100,921 | ||
Depreciation and amortization | 23,023 | 22,994 | ||
Contingent purchase price | 904 | (1,201) | ||
Loss (gain) loss on disposal of assets | 14 | 21 | ||
Adjusted EBITDA | 126,574 | 122,735 | ||
Net revenues | 393,465 | 393,205 | ||
Capital expenditures | 3,990 | 7,119 | ||
Total assets | 837,808 | 861,951 | ||
Investment in and advances to unconsolidated affiliates | 76 | 76 | ||
Goodwill and other intangible assets, net | 324,285 | 324,285 | ||
Operating Segments | South/West | ||||
Segment information | ||||
Income (loss) from operations | 27,118 | 25,985 | ||
Depreciation and amortization | 9,218 | 8,764 | ||
Loss (gain) loss on disposal of assets | 5 | (24) | ||
Adjusted EBITDA | 36,341 | 34,725 | ||
Net revenues | 139,820 | 135,968 | ||
Capital expenditures | 8,622 | 7,585 | ||
Total assets | 829,872 | 840,076 | ||
Goodwill and other intangible assets, net | 224,693 | 224,719 | ||
Operating Segments | Midwest | ||||
Segment information | ||||
Income (loss) from operations | 61,529 | 58,225 | ||
Depreciation and amortization | 9,671 | 9,568 | ||
Contingent purchase price | 9 | |||
Loss (gain) loss on disposal of assets | (58) | 6 | ||
Income from unconsolidated affiliates | 5,004 | 4,718 | ||
Adjusted EBITDA | 78,106 | 75,087 | ||
Net revenues | 228,338 | 221,078 | ||
Capital expenditures | 4,331 | 5,982 | ||
Total assets | 1,087,737 | 1,103,231 | ||
Investment in and advances to unconsolidated affiliates | 93,022 | 93,768 | ||
Goodwill and other intangible assets, net | 776,347 | 775,377 | ||
Operating Segments | Midwest | Kansas Entertainment | ||||
Segment information | ||||
Non-operating items | 1,951 | 2,570 | ||
Other | ||||
Segment information | ||||
Income (loss) from operations | (50,993) | (44,600) | ||
Charge for stock compensation | 2,173 | 1,455 | ||
Depreciation and amortization | 28,324 | 24,694 | ||
Contingent purchase price | 1,647 | |||
Loss (gain) loss on disposal of assets | (6) | (1,104) | ||
Income from unconsolidated affiliates | (456) | (109) | ||
Adjusted EBITDA | (19,311) | (19,664) | ||
Net revenues | 14,601 | 6,200 | ||
Capital expenditures | 213 | $ 683 | ||
Total assets | 2,191,623 | 2,169,226 | ||
Investment in and advances to unconsolidated affiliates | 61,876 | 62,332 | ||
Goodwill and other intangible assets, net | $ 97,092 | $ 100,798 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Hollywood Gaming at Dayton Raceway And Mahoning Valley Race Course | |||
Fair value of assets and liabilities | |||
Discount Rate | 5.00% | ||
Contingent Purchase Price | Plainridge Racecourse | |||
Fair value of assets and liabilities | |||
Charge (reduction) to general and administrative expense related to change in fair value measurement of contingent obligations | $ 2,600 | $ (1,200) | |
Level 1 | |||
Financial assets: | |||
Cash and cash equivalents | 259,488 | $ 229,510 | |
Level 3 | |||
Financial assets: | |||
Advances to Jamul Tribe | 98,198 | 98,000 | |
Financial liabilities: | |||
Other liabilities | 50,783 | 48,244 | |
Level 3 | Contingent Purchase Price | |||
Financial liabilities: | |||
Balance at beginning of the period | 48,244 | ||
Total (gains) (realized or unrealized): | |||
Payments | (21) | ||
Included in earnings | 2,560 | ||
Balance at end of the period | $ 50,783 | ||
Level 3 | Contingent Purchase Price | Discounted Cash Flow | Plainridge Racecourse | |||
Fair value of assets and liabilities | |||
Discount Rate | 8.30% | ||
Level 3 | Contingent Purchase Price | Option Pricing Method | Rocket Speed | |||
Fair value of assets and liabilities | |||
Discount Rate | 12.00% | ||
Volatility rate | 83.11% | ||
Senior Secured Credit Facility | Level 1 | |||
Financial liabilities: | |||
Long-term debt | $ 803,750 | 785,092 | |
Senior Secured Credit Facility | Level 2 | |||
Financial liabilities: | |||
Long-term debt | 131,000 | 191,000 | |
Senior Unsecured Notes | Level 1 | |||
Financial liabilities: | |||
Long-term debt | 394,000 | 312,000 | |
Other long-term obligations | Level 2 | |||
Financial liabilities: | |||
Long-term debt | 124,424 | 152,132 | |
Carrying Amount | |||
Financial assets: | |||
Cash and cash equivalents | 259,488 | 229,510 | |
Advances to Jamul Tribe | 92,334 | 92,100 | |
Financial liabilities: | |||
Other liabilities | 50,783 | 48,244 | |
Carrying Amount | Senior Secured Credit Facility | |||
Financial liabilities: | |||
Long-term debt | 896,539 | 962,703 | |
Carrying Amount | Senior Unsecured Notes | |||
Financial liabilities: | |||
Long-term debt | 399,228 | 296,895 | |
Carrying Amount | Other long-term obligations | |||
Financial liabilities: | |||
Long-term debt | 126,052 | 154,084 | |
Fair Value | |||
Financial assets: | |||
Cash and cash equivalents | 259,488 | 229,510 | |
Advances to Jamul Tribe | 98,198 | 98,000 | |
Financial liabilities: | |||
Other liabilities | 50,783 | 48,244 | |
Fair Value | Senior Secured Credit Facility | |||
Financial liabilities: | |||
Long-term debt | 934,750 | 976,092 | |
Fair Value | Senior Unsecured Notes | |||
Financial liabilities: | |||
Long-term debt | 394,000 | 312,000 | |
Fair Value | Other long-term obligations | |||
Financial liabilities: | |||
Long-term debt | $ 124,424 | $ 152,132 |
Investment In Unconsolidated 42
Investment In Unconsolidated Affiliates (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017USD ($)ft²item | Mar. 31, 2016USD ($) | |
Summary financial information | ||
Net income attributable to Penn | $ 4,548 | $ 4,609 |
Kansas Entertainment | ||
Business ventures | ||
Ownership interest in joint venture under agreement of sale (as a percent) | 50.00% | |
Area of Casino (in square foot) | ft² | 244,791 | |
Number of slot machines | item | 2,000 | |
Number of table games | item | 41 | |
Number of poker tables | item | 12 | |
Number of space parking | item | 1,253 | |
Summary financial information | ||
Net revenues | $ 38,846 | 39,882 |
Operating expenses | 28,838 | 30,446 |
Income from operations | 10,008 | 9,436 |
Net income | 10,008 | 9,436 |
Net income attributable to Penn | $ 5,004 | $ 4,718 |
Subsequent Events (Details)
Subsequent Events (Details) - RIH Acquisitions MS I, LLC and RIH Acquisitions MS II, LLC - Subsequent Event $ in Millions | May 01, 2017USD ($)item |
Estimate | |
Subsequent events | |
Cash consideration | $ 44 |
Master Lease Agreement | |
Subsequent events | |
Number of businesses added to the Master Lease with GLPI | item | 2 |
Master Lease Agreement | Estimate | |
Subsequent events | |
Increase in annual rental expense | $ 9 |
Expected increase in Master Lease financing obligation | $ 82.6 |