Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 28, 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 | Jun. 30, 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 | 91,336,780 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 224,399 | $ 229,510 |
Receivables, net of allowance for doubtful accounts of $3,118 and $3,180 at June 30, 2017 and December 31, 2016, respectively | 48,984 | 61,855 |
Prepaid expenses | 48,213 | 59,707 |
Other current assets | 51,957 | 48,193 |
Total current assets | 373,553 | 399,265 |
Property and equipment, net | 2,827,717 | 2,820,383 |
Other assets | ||
Investment in and advances to unconsolidated affiliates | 152,913 | 156,176 |
Goodwill | 1,025,887 | 989,685 |
Other intangible assets, net | 430,332 | 435,494 |
Loans to the Jamul Tribe, net of reserves of $5,635 at June 30, 2017 and $0 at December 31, 2016 | 84,152 | 91,401 |
Other assets | 89,465 | 82,080 |
Total other assets | 1,782,749 | 1,754,836 |
Total assets | 4,984,019 | 4,974,484 |
Current liabilities | ||
Current portion of financing obligation to GLPI | 61,302 | 56,595 |
Current maturities of long-term debt | 35,675 | 85,595 |
Accounts payable | 28,975 | 35,091 |
Accrued expenses | 113,529 | 101,906 |
Accrued interest | 13,096 | 6,345 |
Accrued salaries and wages | 86,292 | 92,238 |
Gaming, pari-mutuel, property, and other taxes | 56,757 | 60,384 |
Insurance financing | 3,222 | 2,636 |
Other current liabilities | 101,728 | 95,526 |
Total current liabilities | 500,576 | 536,316 |
Long-term liabilities | ||
Long-term financing obligation to GLPI, net of current portion | 3,506,053 | 3,457,485 |
Long-term debt, net of current maturities and debt issuance costs | 1,303,023 | 1,329,939 |
Deferred income taxes | 129,011 | 126,924 |
Noncurrent tax liabilities | 27,062 | 26,791 |
Other noncurrent liabilities | 35,819 | 40,349 |
Total long-term liabilities | 5,000,968 | 4,981,488 |
Shareholders' deficit | ||
Common stock ($.01 par value, 200,000,000 shares authorized, 93,507,060 and 93,289,701 shares issued, and 91,339,667 and 91,122,308 shares outstanding at June 30, 2017 and December 31, 2016, respectively) | 934 | 932 |
Treasury stock, at cost (2,167,393 shares held at June 30, 2017 and December 31, 2016) | (28,414) | (28,414) |
Additional paid-in capital | 1,016,075 | 1,014,119 |
Retained deficit | (1,503,098) | (1,525,281) |
Accumulated other comprehensive loss | (3,022) | (4,676) |
Total shareholders' deficit | (517,525) | (543,320) |
Total liabilities and shareholders' deficit | 4,984,019 | 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 | Jun. 30, 2017 | Dec. 31, 2016 |
Receivables, allowance for doubtful accounts (in dollars) | $ 3,118 | $ 3,180 |
Loans to the Jamul Tribe, reserves | $ 5,635 | $ 0 |
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 | 93,507,060 | 93,289,701 |
Common stock, shares outstanding | 91,339,667 | 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 | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Revenues | ||||
Gaming | $ 680,979 | $ 663,326 | $ 1,342,235 | $ 1,320,027 |
Food, beverage, hotel and other | 152,148 | 144,390 | 299,889 | 282,238 |
Management service and licensing fees | 2,932 | 2,964 | 5,259 | 5,437 |
Reimbursable management costs | 6,387 | 2,855 | 13,145 | 2,855 |
Revenues | 842,446 | 813,535 | 1,660,528 | 1,610,557 |
Less promotional allowances | (45,983) | (44,113) | (87,841) | (84,684) |
Net revenues | 796,463 | 769,422 | 1,572,687 | 1,525,873 |
Operating expenses | ||||
Gaming | 345,156 | 339,201 | 677,209 | 674,518 |
Food, beverage, hotel and other | 105,231 | 101,873 | 206,306 | 199,952 |
General and administrative | 130,096 | 109,974 | 255,911 | 226,478 |
Reimbursable management costs | 6,387 | 2,855 | 13,145 | 2,855 |
Depreciation and amortization | 68,969 | 66,182 | 139,205 | 132,202 |
Impairment losses on Loans to the Jamul Tribe | 5,635 | 5,635 | ||
Total operating expenses | 661,474 | 620,085 | 1,297,411 | 1,236,005 |
Income from operations | 134,989 | 149,337 | 275,276 | 289,868 |
Other income (expenses) | ||||
Interest expense | (116,768) | (114,687) | (231,764) | (231,199) |
Interest income | 235 | 6,597 | 2,881 | 11,837 |
Income from unconsolidated affiliates | 5,021 | 3,548 | 9,569 | 8,157 |
Loss on early extinguishment of debt | (23,390) | |||
Other | (173) | 44 | (1,966) | (2,382) |
Total other expenses | (111,685) | (104,498) | (244,670) | (213,587) |
Income from operations before income taxes | 23,304 | 44,839 | 30,606 | 76,281 |
Income tax provision | 6,225 | 10,804 | 8,423 | 18,538 |
Net income | $ 17,079 | $ 34,035 | $ 22,183 | $ 57,743 |
Earnings per common share: | ||||
Basic earnings per common share (in dollars per share) | $ 0.19 | $ 0.38 | $ 0.24 | $ 0.64 |
Diluted earnings per common share (in dollars per share) | $ 0.18 | $ 0.37 | $ 0.24 | $ 0.63 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Condensed Consolidated Statements of Comprehensive Income | ||||
Net income | $ 17,079 | $ 34,035 | $ 22,183 | $ 57,743 |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustment during the period | 1,217 | (40) | 1,654 | 1,272 |
Other comprehensive income (loss) | 1,217 | (40) | 1,654 | 1,272 |
Comprehensive income | $ 18,296 | $ 33,995 | $ 23,837 | $ 59,015 |
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 $4,375 for the period ended June 30, 2016 | $ 7 | 12,097 | 12,104 | ||||
Share-based compensation arrangements (in shares) | 730,483 | ||||||
Foreign currency translation adjustment | 1,272 | 1,272 | |||||
Conversion of preferred stock | $ 12 | (12) | |||||
Conversion of preferred stock (in shares) | (1,177) | 1,177,000 | |||||
Net income | 57,743 | 57,743 | |||||
Balance at Jun. 30, 2016 | $ 849 | (28,414) | 1,000,771 | (1,576,848) | (3,282) | (606,924) | |
Balance (in shares) at Jun. 30, 2016 | 7,447 | 82,796,758 | |||||
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 $4,375 for the period ended June 30, 2016 | $ 6 | 7,746 | 7,752 | ||||
Share-based compensation arrangements (in shares) | 634,245 | ||||||
Foreign currency translation adjustment | 1,654 | 1,654 | |||||
Net income | 22,183 | 22,183 | |||||
Balance at Jun. 30, 2017 | $ 934 | $ (28,414) | $ 1,016,075 | $ (1,503,098) | $ (3,022) | $ (517,525) | |
Balance (in shares) at Jun. 30, 2017 | 91,339,667 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Changes in Shareholders' Deficit (Parenthetical) $ in Thousands | 6 Months Ended |
Jun. 30, 2016USD ($) | |
Condensed Consolidated Statements of Changes in Shareholders' Deficit | |
Share-based compensation arrangements, tax benefit | $ 4,375 |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Operating activities | ||
Net income | $ 22,183 | $ 57,743 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 139,205 | 132,202 |
Amortization of items charged to interest expense and interest income | 3,275 | 3,701 |
Change in fair value of contingent purchase price | 3,922 | (1,081) |
Loss (gain) on sale of property and equipment and assets held for sale | 7 | (660) |
Income from unconsolidated affiliates | (9,569) | (8,157) |
Distributions from unconsolidated affiliates | 13,000 | 13,350 |
Deferred income taxes | 2,087 | 3,540 |
Charge for stock-based compensation | 3,974 | 3,037 |
Impairment losses on Loans to the Jamul Tribe | 5,635 | |
Write off of debt issuance costs and discounts | 5,377 | |
Decrease (increase), net of businesses acquired | ||
Accounts receivable | 7,378 | (1,800) |
Prepaid expenses and other current assets | (4,829) | (6,855) |
Other assets | (2,876) | (321) |
(Decrease) increase, net of businesses acquired | ||
Accounts payable | (3,929) | (6,025) |
Accrued expenses | 8,895 | 7,231 |
Accrued interest | 6,751 | (1,386) |
Accrued salaries and wages | (9,177) | (17,927) |
Gaming, pari-mutuel, property and other taxes | (3,997) | (7,601) |
Income taxes | 14,657 | 27,340 |
Other current and noncurrent liabilities | (6,063) | (2,293) |
Net cash provided by operating activities | 195,906 | 194,038 |
Investing activities | ||
Project capital expenditures | (14,673) | (10,991) |
Maintenance capital expenditures | (28,287) | (32,543) |
Proceeds for insurance claim | 577 | |
Loans to the Jamul Tribe | (372) | (102,220) |
Principal and interest receipts applied against Loans to the Jamul Tribe | 2,720 | |
Proceeds from sale of property and equipment and assets held for sale | 477 | 2,272 |
Consideration paid for acquisitions of businesses and other property and equipment, net of cash acquired | (126,653) | (280) |
Net cash used in investing activities | (166,211) | (143,762) |
Financing activities | ||
Proceeds from exercise of options | 3,721 | 4,609 |
Repurchase of common stock | (5,794) | |
Principal payments on financing obligation with GLPI | (29,328) | (25,598) |
Proceeds from issuance of long-term debt, net of issuance costs | 1,370,797 | 24,204 |
Increase to financing obligation in connection with acquisition | 82,603 | |
Principal payments on long-term debt | (1,429,161) | (63,815) |
Payments of other long-term obligations | (28,189) | (6,899) |
Payments of contingent purchase price | (41) | |
Proceeds from insurance financing | 8,768 | 9,524 |
Payments on insurance financing | (8,182) | (7,950) |
Net cash used in financing activities | (34,806) | (65,925) |
Net decrease in cash and cash equivalents | (5,111) | (15,649) |
Cash and cash equivalents at beginning of year | 229,510 | 237,009 |
Cash and cash equivalents at end of year | 224,399 | 221,360 |
Supplemental disclosure | ||
Interest expense paid, net of amounts capitalized | 222,641 | 229,979 |
Income tax refunds received | (5,659) | (12,133) |
Non-cash investing and financing activities | ||
Accrued capital expenditures | 9,595 | 8,898 |
Accrued advances to Jamul Tribe | $ 1,274 | $ 38,775 |
Organization and Basis of Prese
Organization and Basis of Presentation | 6 Months Ended |
Jun. 30, 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 expanded into social online gaming offerings via our Penn Interactive Ventures, LLC (“Penn Interactive Ventures”) division and our acquisition of Rocket Speed, Inc. (“Rocket Speed”) and into retail gaming with our Prairie State Gaming subsidiary. On May 1, 2017, we completed our acquisition of Bally’s Casino Tunica (“Bally’s”) and Resorts Casino Tunica (“Resorts”). In the first half of 2017, our subsidiary, Prairie State Gaming acquired the assets of two small video gaming terminal operators in Illinois. As of June 30, 2017, the Company owned, managed, or had ownership interests in twenty-nine 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 and six months ended June 30, 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 our 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 | 6 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Revenue Recognition and Promotional Allowances Gaming revenue consists mainly of slot and video lottery gaming machine revenue as well as to a lesser extent table game and poker revenue. Gaming revenue is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs, for "ticket-in, ticket-out" coupons in the customers' possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of coins played, are charged against 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 Indian Village of California (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 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 and six months ended June 30, 2017 and 2016 are as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) Rooms $ 10,298 $ 10,098 $ 19,493 $ 19,220 Food and beverage 33,386 31,796 63,953 61,318 Other 2,299 2,219 4,395 4,146 Total promotional allowances $ 45,983 $ 44,113 $ 87,841 $ 84,684 The estimated cost of providing such complimentary services for the three and six months ended June 30, 2017 and 2016 are as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) Rooms $ 1,480 $ 1,349 $ 2,736 $ 2,546 Food and beverage 13,009 12,194 24,629 23,718 Other 972 911 1,811 1,655 Total cost of complimentary services $ 15,461 $ 14,454 $ 29,176 $ 27,919 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 and six months ended June 30, 2017, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $252.5 million and $498.9 million, as compared to $248.8 million and $494.5 million for the three and six months ended June 30, 2016. Long-term asset related to the Jamul Tribe The Company is accounting for its term loan C and related $15 million delayed draw commitments with the Jamul Tribe as a loans (the “Loan”) in accordance with ASC 310, “Receivables.” The Loan represents advances made by the Company to the Jamul Tribe for the development and construction of Hollywood Casino Jamul-San Diego for the Jamul Tribe on reservation land. As such, the Jamul Tribe owns the casino and its related assets and liabilities. Repayment of the Loan is primarily predicated on cash flows from the operations of the facility. 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. As a result, we concluded the Loan was impaired at 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. An impairment charge is recorded to the extent the present value of expected future cash flows discounted at the loan’s effective interest rate exceeds the carrying amount of the loan. The Company records interest income on a cash basis to the extent a reserve is not required for the impaired loan. As of June 30, 2017, the Jamul Tribe will be in breach of a financial covenant requirement with respect to debt to earnings ratios. As a result, the Jamul Tribe is in active negotiations with its lenders to modify certain terms of its loan agreements. We anticipate that we may grant certain concessions on our Loan in connection with the negotiations. We also anticipate our Loan will be fully subordinated to the other lenders that have extended credit to the Jamul Tribe. The Company performed a comprehensive analysis of the future cash flows that we will receive on the Loan based upon our best estimates of the operations of the facility and the concessions we may be required to grant to the Jamul Tribe. The expected cash flows to be received by the Company on the Loan were then discounted at the Loan’s effective interest rate in accordance with ASC 310 which was less than its carrying value at June 30, 2017. Therefore, the Company recorded a charge to establish a reserve of $5.6 million in the condensed consolidated statement of income for the three and six months ended June 30, 2017. If the concessions granted on our Loan are more severe than anticipated or if the Jamul Tribe and its Lenders are not able to reach an agreement, additional charges may be required, which could be material to the Company’s condensed consolidated statement of income. The unpaid principal balance of the Loan at June 30, 2017 and December 31, 2016 was $98.1 million and $98.0 million, respectively. The carrying value of the Loan totaled $84.2 million and $92.1 million at June 30, 2017 and December 31, 2016, 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 June 30, 2017, there were no outstanding shares of Series C Preferred Stock. At June 30, 2016, the Company had outstanding 7,447 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 and six months ended June 30, 2017 and 2016 under the two-class method: Three Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) (in thousands) Net income $ 17,079 $ 34,035 $ 22,183 $ 57,743 Net income applicable to preferred stock — 3,151 — 5,452 Net income applicable to common stock $ 17,079 $ 30,884 $ 22,183 $ 52,291 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 and six months ended June 30, 2017 and 2016: Three Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) (in thousands) Determination of shares: Weighted-average common shares outstanding 90,928 81,647 90,840 81,308 Assumed conversion of dilutive employee stock-based awards 2,230 1,474 1,629 1,459 Assumed conversion of restricted stock 81 34 74 42 Diluted weighted-average common shares outstanding before participating security 93,239 83,155 92,543 82,809 Assumed conversion of preferred stock — 8,331 — 8,478 Diluted weighted-average common shares outstanding 93,239 91,486 92,543 91,287 Options to purchase 55,062 and 1,598,500 shares and 1,696,858 and 2,889,501 shares were outstanding during the three and six months ended June 30, 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 and six months ended June 30, 2017 and 2016 (in thousands, except per share data): Three Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Calculation of basic EPS: Net income applicable to common stock $ 17,079 $ 30,884 $ 22,183 $ 52,291 Weighted-average common shares outstanding 90,928 81,647 90,840 81,308 Basic EPS $ 0.19 $ 0.38 $ 0.24 $ 0.64 Calculation of diluted EPS using two-class method: Net income applicable to common stock $ 17,079 $ 30,884 $ 22,183 $ 52,291 Diluted weighted-average common shares outstanding before participating security 93,239 83,155 92,543 82,809 Diluted EPS $ 0.18 $ 0.37 $ 0.24 $ 0.63 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 1,475,224 and 1,561,035 stock options during the six months ended June 30, 2017 and 2016, respectively. Stock-based compensation expense for the three and six months ended June 30, 2017 was $1.8 million and $4.0 million as compared to $1.6 million and $3.1 million for the three and six months ended June 30, 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 $10.5 million and $5.6 million at June 30, 2017 and December 31, 2016, respectively. For PSUs held by Penn employees, there was $6.7 million of total unrecognized compensation cost at June 30, 2017 that will be recognized over the grants remaining weighted average vesting period of 2.44 years. For the three and six months ended June 30, 2017, the Company recognized $4.6 million and $8.9 million of compensation expense associated with these awards, as compared to $0.6 million and $3.6 million for the three and six months ended June 30, 2016. The changes are primarily due to the increase in Penn’s stock price year-over-year. Amounts paid by the Company for the three and six months ended June 30, 2017 on these cash-settled awards totaled $0.1 million and $3.6 million as compared to $0.1 million and $4.5 million for the three and six months ended June 30, 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 $13.7 million and $7.3 million at June 30, 2017 and December 31, 2016, respectively. For SARs held by Penn employees, there was $12.8 million of total unrecognized compensation cost at June 30, 2017 that will be recognized over the awards remaining weighted average vesting period of 2.82 years. For the three and six months ended June 30, 2017, the Company recognized compensation expense of $4.6 million and $8.6 million associated with these awards, as compared to a credit of $0.5 million and compensation expense of $1.4 million for the three and six months ended June 30, 2016. The changes are primarily due to the increase in Penn’s stock price year-over-year. Amounts paid by the Company for the three and six months ended June 30, 2017 on these cash-settled awards totaled $1.5 million and $2.6 million as compared to $1.1 million and $1.5 million for the three and six months ended June 30, 2016. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model for stock option awards granted during the June 30, 2017 and 2016, respectively: Six months ended June 30, 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. 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, Tropicana Las Vegas, Bally’s Casino Tunica and Resorts Casino Tunica, which were acquired on May 1, 2017, 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 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 1.4% of net revenues and $(2.3) million impact to income from operations for the six months ended June 30, 2017, and its total assets represent 2.2% of the Company’s total assets at June 30, 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 9 for further information with respect to the Company’s segments. Other Comprehensive Income The Company accounts for comprehensive income in accordance with ASC 220, “Comprehensive Income,” which establishes standards for the reporting and presentation of comprehensive income in the consolidated financial statements. The Company presents comprehensive income in two separate but consecutive statements. For the three and six months ended June 30, 2017 and 2016, the only component of accumulated other comprehensive income was foreign currency translation adjustments. |
New Accounting Pronouncements
New Accounting Pronouncements | 6 Months Ended |
Jun. 30, 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 six months ended June 30, 2017, the Company recognized an income tax benefit of $1.9 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 an operating activity within its consolidated statement of cash flows on a retrospective basis. The impact to the comparative period ended June 30, 2016 was an increase to net cash provided by operating activities and an increase in cash used in financing activities of $4.4 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 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718) – Scope of Modification Accounting.” The amendments are intended to provide clarity and reduce both the diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award. An entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; (2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendment is effective for all entities for annual periods, and interim periods within those periods, beginning after December 15, 2017, with early adoption permitted. The Company will adopt this standard next year and does not believe the prospective amendments of this standard will have a material impact on the financial statements. 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, the following areas that are expected to result in changes to our accounting are: (1) The 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 the Company’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. (2) 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. (3) Further, we believe the reimbursable costs associated with our management service contract for Casino Rama, which are primarily payroll costs, will need to be recognized as revenue on a gross basis, with an offsetting amount charged to reimbursable management costs within operating expenses as we are the controlling entity to the arrangement. For the six months ended June 30, 2017 and twelve months ended December 31, 2016 and 2015, these reimbursable costs were $42.8 million, $83.6 million and $81.3 million, respectively. 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 | 6 Months Ended |
Jun. 30, 2017 | |
Property and Equipment | |
Property and Equipment | 4. Property and Equipment Property and equipment, net, consists of the following: June 30, December 31, 2017 2016 (in thousands) Property and equipment - non-master lease Land and improvements $ 294,535 $ 294,590 Building and improvements 405,024 404,158 Furniture, fixtures and equipment 1,374,884 1,355,615 Leasehold improvements 119,730 118,940 Construction in progress 38,619 16,375 2,232,792 2,189,678 Less Accumulated depreciation (1,296,962) (1,224,596) 935,830 965,082 Property and equipment - master lease Land and improvements 435,043 382,246 Building and improvements 2,248,257 2,219,018 2,683,300 2,601,264 Less accumulated depreciation (791,413) (745,963) 1,891,887 1,855,301 Property and equipment, net $ 2,827,717 $ 2,820,383 Property and equipment, net increased by $7.3 million for the six months ended June 30, 2017 primarily due to the addition of Bally’s and Resorts in Tunica as well as improvements at Tropicana Las Vegas and Hollywood Casino St. Louis. This net increase is partially offset by depreciation expense for the six months ended June 30, 2017. Depreciation expense, for property and equipment including assets under capital leases, totaled $63.7 million and $128.7 million and $65.7 million and $131.3 million for the three and six months ended June 30, 2017 and 2016, respectively, of which $23.0 million and $45.7 million and $22.8 million and $45.7 million related to assets under the Master Lease, respectively. Interest capitalized in connection with major construction projects totaled $0.1 million for the three and six months ended June 30, 2017 as compared to zero for the three and six months ended June 30, 2016. |
Acquisitions
Acquisitions | 6 Months Ended |
Jun. 30, 2017 | |
Acquisitions | |
Acquisitions | 5. Acquisitions Bally’s and Resorts On May 1, 2017, the Company acquired RIH Acquisitions MS I, LLC and RIH Acquisitions MS II, LLC, the holding companies for the gaming operations of Bally’s and Resorts, in Tunica, Mississippi, for consideration of $45.9 million in cash, subject to final working capital adjustments. The Company is operating both of these casino properties and it leases the underlying real estate associated with these two businesses from 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 estate leased from GLPI has been accounted for as a financing obligation, which is included in the total consideration for the transaction and has increased the Company’s Master Lease financing obligation by $82.6 million, which represents the purchase price GLPI paid for the underlying real estate assets. The preliminary purchase price allocation has resulted in $35.5 million of goodwill which is deductible for tax purposes. Property and equipment under the Master Lease is comprised of buildings and improvements and land rights that are amortized on a straight-line basis over thirty-one years. This time period represents the remaining life of the Master Lease with GLPI, including renewal options that are reasonably assured of being exercised. Additionally, prior to the acquisition date, the Company incurred transaction costs of $0.7 million, which were reported in general and administrative expenses for the three and six months ended June 30, 2017. This acquisition was not material to the Company’s consolidated financial statements. May 1, 2017 Cash $ 6,725 Other current assets 2,847 Property and equipment - non-master lease 8,368 Property and equipment - master lease 82,603 Goodwill 35,534 Other intangible assets 851 Total Assets $ 136,928 Current portion of financing obligation $ 1,968 Accrued expenses 3,716 Accrued salaries and wages 3,256 Other current liabilities 1,448 Long-term financing obligation 80,635 Total liabilities $ 91,023 Cash paid 45,905 Total consideration transferred $ 136,928 |
Intangible Assets
Intangible Assets | 6 Months Ended |
Jun. 30, 2017 | |
Intangible Assets | |
Intangible Assets | 6 . Intangible Assets Indefinite‑life intangible assets consist primarily of gaming licenses. The table below presents the gross carrying value, accumulated amortization, and net book value of each major class of other intangible assets at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 (in thousands) Gross Gross Carrying Accumulated Net Book Carrying Accumulated Net Book Value Amortization Value Value Amortization Value Indefinite-life intangible assets $ 375,405 $ — $ 375,405 $ 375,405 $ — $ 375,405 Other intangible assets 130,852 75,925 54,927 125,584 65,495 60,089 Total $ 506,257 $ 75,925 $ 430,332 $ 500,989 $ 65,495 $ 435,494 Total other intangible assets decreased by $5.2 million for the six months ended June 30, 2017 primarily due to amortization expense of $10.5 million for the six months ended June 30, 2017, partially offset by $3.7 million and $0.9 million of definite-lived other intangible assets related to customer intangibles from our acquisitions of Illinois video gaming terminal operators and Bally’s and Resorts, respectively, in 2017. Other intangible assets have a weighted average remaining amortization period of 5.5 years. The Company’s intangible asset amortization expense was $5.3 million and $10.5 million, for the three and six months ended June 30, 2017, respectively, as compared to $0.5 million and $1.0 million for the three and six months ended June 30, 2016, respectively. The increase is primarily due to the intangible assets recognized with our acquisition of Rocket Speed on August 1, 2016. The following table presents expected intangible asset amortization expense based on existing intangible assets as of June 30, 2017 (in thousands): Remaining 2017 $ 8,241 2018 12,885 2019 8,418 2020 5,854 2021 3,705 Thereafter 15,824 Total $ 54,927 |
Long-term Debt
Long-term Debt | 6 Months Ended |
Jun. 30, 2017 | |
Long-term Debt | |
Long-term Debt | 7. Long-term Debt Long-term debt, net of current maturities, is as follows: June 30, December 31, 2017 2016 (in thousands) Senior secured credit facility $ 845,000 $ 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 126,573 154,084 Capital leases 879 1,760 1,372,452 1,432,689 Less current maturities of long-term debt (35,675) (85,595) Less net discounts (2,862) (620) Less debt issuance costs (30,892) (16,535) $ 1,303,023 $ 1,329,939 The following is a schedule of future minimum repayments of long-term debt as of June 30, 2017 (in thousands): Within one year $ 35,638 1-3 years 82,300 3-5 years 334,017 Over 5 years 920,497 Total minimum payments $ 1,372,452 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 June 30, 2017, the Company’s senior secured credit facility had a gross outstanding balance of $845.0 million, consisting of a $296.2 million Term Loan A facility, a $498.8 million Term Loan B facility, and $50.0 million outstanding on the revolving credit facility. Additionally, at June 30, 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 $627.9 million of available borrowing capacity as of June 30, 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 six months ended June 30, 2017 related to the write-off of deferred debt issuance costs and 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 six months ended June 30, 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. 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 June 30, 2017, the Company was in compliance with all required financial covenants. 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. |
Master Lease Financing Obligati
Master Lease Financing Obligation | 6 Months Ended |
Jun. 30, 2017 | |
Master Lease Financing Obligation | |
Master Lease Financing Obligation | 8. 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 represented 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. As of May 1, 2017, in connection with the acquisition of Bally’s and Resorts (see Note 5 for more information), the Company’s Master Lease financing obligation was increased by $82.6 million which was the purchase price paid by GLPI for the casinos underlying real estate assets. Total payments under the Master Lease were $114.0 million and $226.4 as compared to $110.8 million and $222.2 million for the three and six months ended June 30, 2017 and 2016, respectively. The interest expense recognized for the three and six months ended June 30, 2017 was $99.4 million and $197.1 million as compared to $97.8 million and $196.5 million for the three and six months ended June 30, 2016, respectively. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2017 | |
Segment Information | |
Segment Information | 9. Segment Information The following tables (in thousands) present certain information with respect to the Company’s segments. Intersegment revenues between the Company’s segments were not material in any of the periods presented below. The income (loss) from operations by segment presented below does not include allocations for corporate overhead costs or expenses associated with utilizing property subject to the Master Lease. Three months ended June 30, 2017 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 108,119 $ 20,062 $ 59,283 $ (52,475) $ 134,989 Charge for stock compensation — — — 1,801 1,801 Depreciation and amortization 21,525 9,353 9,508 28,583 68,969 Contingent purchase price 277 — 16 1,069 1,362 (Gain) loss on disposal of assets (45) (1) 88 10 52 Impairment losses on Loans to the Jamul Tribe — 5,635 — — 5,635 Income (loss) from unconsolidated affiliates — — 5,286 (265) 5,021 Non-operating items for Kansas JV — — 1,309 — 1,309 Adjusted EBITDA $ 129,876 $ 35,049 $ 75,490 $ (21,277) $ 219,138 Three months ended June 30, 2016 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 103,695 $ 27,622 $ 57,446 $ (39,426) $ 149,337 Charge for stock compensation — — — 1,582 1,582 Depreciation and amortization 23,209 8,839 9,460 24,674 66,182 Contingent purchase price 119 — — — 119 Loss on disposal of assets (14) 11 (52) 496 441 Income (loss) from unconsolidated affiliates — — 3,744 (196) 3,548 Non-operating items for Kansas JV — — 2,571 — 2,571 Adjusted EBITDA $ 127,009 $ 36,472 $ 73,169 $ (12,870) $ 223,780 Six months ended June 30, 2017 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 210,752 $ 47,180 $ 120,813 $ (103,469) $ 275,276 Charge for stock compensation — — — 3,974 3,974 Depreciation and amortization 44,548 18,570 19,179 56,908 139,205 Contingent purchase price 1,182 — 25 2,715 3,922 (Gain) loss on disposal of assets (31) 5 29 4 7 Impairment losses on Loans to the Jamul Tribe — 5,635 — — 5,635 Income (loss) from unconsolidated affiliates — — 10,290 (721) 9,569 Non-operating items for Kansas JV — — 3,260 — 3,260 Adjusted EBITDA $ 256,451 $ 71,390 $ 153,596 $ (40,589) $ 440,848 Six months ended June 30, 2016 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 204,616 $ 53,607 $ 115,670 $ (84,025) $ 289,868 Charge for stock compensation — — — 3,037 3,037 Depreciation and amortization 46,202 17,604 19,028 49,368 132,202 Contingent purchase price (1,081) — — — (1,081) Loss on disposal of assets 7 (14) (45) (608) (660) Income (loss) from unconsolidated affiliates — — 8,462 (305) 8,157 Non-operating items for Kansas JV — — 5,141 — 5,141 Adjusted EBITDA $ 249,744 $ 71,197 $ 148,256 $ (32,533) $ 436,664 Northeast South/West Midwest Other (1) Total (in thousands) Three months ended June 30, 2017 Net revenues $ 405,099 $ 153,151 $ 224,847 $ 13,366 $ 796,463 Capital expenditures 5,533 11,924 7,345 1,002 25,804 Three months ended June 30, 2016 Net revenues $ 401,516 $ 140,108 $ 220,256 $ 7,542 $ 769,422 Capital expenditures 8,268 6,726 6,348 823 22,165 Six months ended June 30, 2017 Net revenues $ 798,564 $ 292,970 $ 453,185 $ 27,968 $ 1,572,687 Capital expenditures 9,523 20,546 11,676 1,215 42,960 Six months ended June 30, 2016 Net revenues $ 794,722 $ 276,076 $ 441,334 $ 13,741 $ 1,525,873 Capital expenditures 15,387 14,311 12,330 1,506 43,534 Balance sheet at June 30, 2017 Total assets $ 808,144 $ 876,910 $ 1,081,316 $ 2,217,649 $ 4,984,019 Investment in and advances to unconsolidated affiliates 76 — 91,058 61,779 152,913 Goodwill and other intangible assets, net 324,285 260,978 778,056 92,900 1,456,219 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 | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Fair Value Measurements | 10. 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. Loans to the Jamul Tribe The fair value of the Company’s loans 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 Company’s loan is impaired and as such the fair value is estimated based on the present value of expected future cash flows of the facility discounted at the loan’s effective interest rate which is a Level 3 measurement. Therefore, the Company concluded that this instrument should be classified as a Level 3 measurement. 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 June 30, 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 June 30, 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 $1.4 million and $3.9 million for the three and six months ended June 30, 2017, respectively, compared to a charge of $0.1 million and a reduction of $1.1 million for the three and six months ended June 30, 2016, respectively. The carrying amounts and estimated fair values by input level of the Company’s financial instruments at June 30, 2017 and December 31, 2016 are as follows (in thousands): June 30, 2017 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 224,399 $ 224,399 $ 224,399 $ — $ — Loans to the Jamul Tribe 84,152 84,152 — — 84,152 Financial liabilities: Long-term debt Senior secured credit facility 812,001 847,494 797,494 50,000 — Senior unsecured notes 399,208 406,000 406,000 — — Other long-term obligations 126,573 127,301 — 127,301 — Other liabilities 52,955 52,955 — — 52,955 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 $ — $ — Loans to the 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): Six Months Ended June 30, 2017 Liabilities Assets Contingent Loans to the Purchase Price Jamul Tribe Balance at January 1, 2017 $ 48,244 $ 98,000 Unamortized discount — (5,865) Additions 830 372 Payments (41) (2,720) Included in earnings 3,922 (5,635) Balance at June 30, 2017 $ 52,955 $ 84,152 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 11.00 % 70.92 % |
Investment In Unconsolidated Af
Investment In Unconsolidated Affiliates | 6 Months Ended |
Jun. 30, 2017 | |
Investment In Unconsolidated Affiliates | |
Investment In Unconsolidated Affiliates | 11. 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 June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net revenues $ 38,924 $ 37,872 $ 77,770 $ 77,754 Operating expenses 28,352 30,384 57,190 60,829 Income from operations 10,572 7,488 20,580 16,925 Net income $ 10,572 $ 7,488 $ 20,580 $ 16,925 Net income attributable to Penn $ 5,286 $ 3,744 $ 10,290 $ 8,462 |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 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 against 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 Indian Village of California (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 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 and six months ended June 30, 2017 and 2016 are as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) Rooms $ 10,298 $ 10,098 $ 19,493 $ 19,220 Food and beverage 33,386 31,796 63,953 61,318 Other 2,299 2,219 4,395 4,146 Total promotional allowances $ 45,983 $ 44,113 $ 87,841 $ 84,684 The estimated cost of providing such complimentary services for the three and six months ended June 30, 2017 and 2016 are as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) Rooms $ 1,480 $ 1,349 $ 2,736 $ 2,546 Food and beverage 13,009 12,194 24,629 23,718 Other 972 911 1,811 1,655 Total cost of complimentary services $ 15,461 $ 14,454 $ 29,176 $ 27,919 |
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 and six months ended June 30, 2017, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $252.5 million and $498.9 million, as compared to $248.8 million and $494.5 million for the three and six months ended June 30, 2016. |
Long-term asset related to the Jamul Tribe | Long-term asset related to the Jamul Tribe The Company is accounting for its term loan C and related $15 million delayed draw commitments with the Jamul Tribe as a loans (the “Loan”) in accordance with ASC 310, “Receivables.” The Loan represents advances made by the Company to the Jamul Tribe for the development and construction of Hollywood Casino Jamul-San Diego for the Jamul Tribe on reservation land. As such, the Jamul Tribe owns the casino and its related assets and liabilities. Repayment of the Loan is primarily predicated on cash flows from the operations of the facility. 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. As a result, we concluded the Loan was impaired at 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. An impairment charge is recorded to the extent the present value of expected future cash flows discounted at the loan’s effective interest rate exceeds the carrying amount of the loan. The Company records interest income on a cash basis to the extent a reserve is not required for the impaired loan. As of June 30, 2017, the Jamul Tribe will be in breach of a financial covenant requirement with respect to debt to earnings ratios. As a result, the Jamul Tribe is in active negotiations with its lenders to modify certain terms of its loan agreements. We anticipate that we may grant certain concessions on our Loan in connection with the negotiations. We also anticipate our Loan will be fully subordinated to the other lenders that have extended credit to the Jamul Tribe. The Company performed a comprehensive analysis of the future cash flows that we will receive on the Loan based upon our best estimates of the operations of the facility and the concessions we may be required to grant to the Jamul Tribe. The expected cash flows to be received by the Company on the Loan were then discounted at the Loan’s effective interest rate in accordance with ASC 310 which was less than its carrying value at June 30, 2017. Therefore, the Company recorded a charge to establish a reserve of $5.6 million in the condensed consolidated statement of income for the three and six months ended June 30, 2017. If the concessions granted on our Loan are more severe than anticipated or if the Jamul Tribe and its Lenders are not able to reach an agreement, additional charges may be required, which could be material to the Company’s condensed consolidated statement of income. The unpaid principal balance of the Loan at June 30, 2017 and December 31, 2016 was $98.1 million and $98.0 million, respectively. The carrying value of the Loan totaled $84.2 million and $92.1 million at June 30, 2017 and December 31, 2016, 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 June 30, 2017, there were no outstanding shares of Series C Preferred Stock. At June 30, 2016, the Company had outstanding 7,447 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 and six months ended June 30, 2017 and 2016 under the two-class method: Three Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) (in thousands) Net income $ 17,079 $ 34,035 $ 22,183 $ 57,743 Net income applicable to preferred stock — 3,151 — 5,452 Net income applicable to common stock $ 17,079 $ 30,884 $ 22,183 $ 52,291 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 and six months ended June 30, 2017 and 2016: Three Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) (in thousands) Determination of shares: Weighted-average common shares outstanding 90,928 81,647 90,840 81,308 Assumed conversion of dilutive employee stock-based awards 2,230 1,474 1,629 1,459 Assumed conversion of restricted stock 81 34 74 42 Diluted weighted-average common shares outstanding before participating security 93,239 83,155 92,543 82,809 Assumed conversion of preferred stock — 8,331 — 8,478 Diluted weighted-average common shares outstanding 93,239 91,486 92,543 91,287 Options to purchase 55,062 and 1,598,500 shares and 1,696,858 and 2,889,501 shares were outstanding during the three and six months ended June 30, 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 and six months ended June 30, 2017 and 2016 (in thousands, except per share data): Three Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Calculation of basic EPS: Net income applicable to common stock $ 17,079 $ 30,884 $ 22,183 $ 52,291 Weighted-average common shares outstanding 90,928 81,647 90,840 81,308 Basic EPS $ 0.19 $ 0.38 $ 0.24 $ 0.64 Calculation of diluted EPS using two-class method: Net income applicable to common stock $ 17,079 $ 30,884 $ 22,183 $ 52,291 Diluted weighted-average common shares outstanding before participating security 93,239 83,155 92,543 82,809 Diluted EPS $ 0.18 $ 0.37 $ 0.24 $ 0.63 |
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 1,475,224 and 1,561,035 stock options during the six months ended June 30, 2017 and 2016, respectively. Stock-based compensation expense for the three and six months ended June 30, 2017 was $1.8 million and $4.0 million as compared to $1.6 million and $3.1 million for the three and six months ended June 30, 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 $10.5 million and $5.6 million at June 30, 2017 and December 31, 2016, respectively. For PSUs held by Penn employees, there was $6.7 million of total unrecognized compensation cost at June 30, 2017 that will be recognized over the grants remaining weighted average vesting period of 2.44 years. For the three and six months ended June 30, 2017, the Company recognized $4.6 million and $8.9 million of compensation expense associated with these awards, as compared to $0.6 million and $3.6 million for the three and six months ended June 30, 2016. The changes are primarily due to the increase in Penn’s stock price year-over-year. Amounts paid by the Company for the three and six months ended June 30, 2017 on these cash-settled awards totaled $0.1 million and $3.6 million as compared to $0.1 million and $4.5 million for the three and six months ended June 30, 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 $13.7 million and $7.3 million at June 30, 2017 and December 31, 2016, respectively. For SARs held by Penn employees, there was $12.8 million of total unrecognized compensation cost at June 30, 2017 that will be recognized over the awards remaining weighted average vesting period of 2.82 years. For the three and six months ended June 30, 2017, the Company recognized compensation expense of $4.6 million and $8.6 million associated with these awards, as compared to a credit of $0.5 million and compensation expense of $1.4 million for the three and six months ended June 30, 2016. The changes are primarily due to the increase in Penn’s stock price year-over-year. Amounts paid by the Company for the three and six months ended June 30, 2017 on these cash-settled awards totaled $1.5 million and $2.6 million as compared to $1.1 million and $1.5 million for the three and six months ended June 30, 2016. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model for stock option awards granted during the June 30, 2017 and 2016, respectively: Six months ended June 30, 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. 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, Tropicana Las Vegas, Bally’s Casino Tunica and Resorts Casino Tunica, which were acquired on May 1, 2017, 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 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 1.4% of net revenues and $(2.3) million impact to income from operations for the six months ended June 30, 2017, and its total assets represent 2.2% of the Company’s total assets at June 30, 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 9 for further information with respect to the Company’s segments. |
Other Comprehensive Income | Other Comprehensive Income The Company accounts for comprehensive income in accordance with ASC 220, “Comprehensive Income,” which establishes standards for the reporting and presentation of comprehensive income in the consolidated financial statements. The Company presents comprehensive income in two separate but consecutive statements. For the three and six months ended June 30, 2017 and 2016, the only component of accumulated other comprehensive income was foreign currency translation adjustments. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Schedule of promotional allowances | Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) Rooms $ 10,298 $ 10,098 $ 19,493 $ 19,220 Food and beverage 33,386 31,796 63,953 61,318 Other 2,299 2,219 4,395 4,146 Total promotional allowances $ 45,983 $ 44,113 $ 87,841 $ 84,684 |
Schedule of estimated cost of providing complimentary services | Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) Rooms $ 1,480 $ 1,349 $ 2,736 $ 2,546 Food and beverage 13,009 12,194 24,629 23,718 Other 972 911 1,811 1,655 Total cost of complimentary services $ 15,461 $ 14,454 $ 29,176 $ 27,919 |
Schedule of allocation of net income attributable to shareholders under the two-class method | Three Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) (in thousands) Net income $ 17,079 $ 34,035 $ 22,183 $ 57,743 Net income applicable to preferred stock — 3,151 — 5,452 Net income applicable to common stock $ 17,079 $ 30,884 $ 22,183 $ 52,291 |
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 June 30, Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) (in thousands) Determination of shares: Weighted-average common shares outstanding 90,928 81,647 90,840 81,308 Assumed conversion of dilutive employee stock-based awards 2,230 1,474 1,629 1,459 Assumed conversion of restricted stock 81 34 74 42 Diluted weighted-average common shares outstanding before participating security 93,239 83,155 92,543 82,809 Assumed conversion of preferred stock — 8,331 — 8,478 Diluted weighted-average common shares outstanding 93,239 91,486 92,543 91,287 |
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 and six months ended June 30, 2017 and 2016 (in thousands, except per share data): Three Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Calculation of basic EPS: Net income applicable to common stock $ 17,079 $ 30,884 $ 22,183 $ 52,291 Weighted-average common shares outstanding 90,928 81,647 90,840 81,308 Basic EPS $ 0.19 $ 0.38 $ 0.24 $ 0.64 Calculation of diluted EPS using two-class method: Net income applicable to common stock $ 17,079 $ 30,884 $ 22,183 $ 52,291 Diluted weighted-average common shares outstanding before participating security 93,239 83,155 92,543 82,809 Diluted EPS $ 0.18 $ 0.37 $ 0.24 $ 0.63 |
Weighted-average assumptions used in Black-Scholes option pricing model | Six months ended June 30, 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) | 6 Months Ended |
Jun. 30, 2017 | |
Property and Equipment | |
Schedule of property and equipment, net | June 30, December 31, 2017 2016 (in thousands) Property and equipment - non-master lease Land and improvements $ 294,535 $ 294,590 Building and improvements 405,024 404,158 Furniture, fixtures and equipment 1,374,884 1,355,615 Leasehold improvements 119,730 118,940 Construction in progress 38,619 16,375 2,232,792 2,189,678 Less Accumulated depreciation (1,296,962) (1,224,596) 935,830 965,082 Property and equipment - master lease Land and improvements 435,043 382,246 Building and improvements 2,248,257 2,219,018 2,683,300 2,601,264 Less accumulated depreciation (791,413) (745,963) 1,891,887 1,855,301 Property and equipment, net $ 2,827,717 $ 2,820,383 |
Acquisitions (Tables)
Acquisitions (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Acquisitions | |
Schedule of estimated fair values of assets acquired and liabilities assumed as of the acquisition date | May 1, 2017 Cash $ 6,725 Other current assets 2,847 Property and equipment - non-master lease 8,368 Property and equipment - master lease 82,603 Goodwill 35,534 Other intangible assets 851 Total Assets $ 136,928 Current portion of financing obligation $ 1,968 Accrued expenses 3,716 Accrued salaries and wages 3,256 Other current liabilities 1,448 Long-term financing obligation 80,635 Total liabilities $ 91,023 Cash paid 45,905 Total consideration transferred $ 136,928 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Intangible Assets | |
Schedule of gross carrying value, accumulated amortization, and net book value of each major class of other intangible assets | June 30, 2017 December 31, 2016 (in thousands) Gross Gross Carrying Accumulated Net Book Carrying Accumulated Net Book Value Amortization Value Value Amortization Value Indefinite-life intangible assets $ 375,405 $ — $ 375,405 $ 375,405 $ — $ 375,405 Other intangible assets 130,852 75,925 54,927 125,584 65,495 60,089 Total $ 506,257 $ 75,925 $ 430,332 $ 500,989 $ 65,495 $ 435,494 |
Schedule of expected intangible asset amortization expense | The following table presents expected intangible asset amortization expense based on existing intangible assets as of June 30, 2017 (in thousands): Remaining 2017 $ 8,241 2018 12,885 2019 8,418 2020 5,854 2021 3,705 Thereafter 15,824 Total $ 54,927 |
Long-term Debt (Tables)
Long-term Debt (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Long-term Debt | |
Schedule of long-term debt, net of current maturities | June 30, December 31, 2017 2016 (in thousands) Senior secured credit facility $ 845,000 $ 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 126,573 154,084 Capital leases 879 1,760 1,372,452 1,432,689 Less current maturities of long-term debt (35,675) (85,595) Less net discounts (2,862) (620) Less debt issuance costs (30,892) (16,535) $ 1,303,023 $ 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 June 30, 2017 (in thousands): Within one year $ 35,638 1-3 years 82,300 3-5 years 334,017 Over 5 years 920,497 Total minimum payments $ 1,372,452 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Segment Information | |
Schedule of information with respect to the Company's segments | Three months ended June 30, 2017 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 108,119 $ 20,062 $ 59,283 $ (52,475) $ 134,989 Charge for stock compensation — — — 1,801 1,801 Depreciation and amortization 21,525 9,353 9,508 28,583 68,969 Contingent purchase price 277 — 16 1,069 1,362 (Gain) loss on disposal of assets (45) (1) 88 10 52 Impairment losses on Loans to the Jamul Tribe — 5,635 — — 5,635 Income (loss) from unconsolidated affiliates — — 5,286 (265) 5,021 Non-operating items for Kansas JV — — 1,309 — 1,309 Adjusted EBITDA $ 129,876 $ 35,049 $ 75,490 $ (21,277) $ 219,138 Three months ended June 30, 2016 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 103,695 $ 27,622 $ 57,446 $ (39,426) $ 149,337 Charge for stock compensation — — — 1,582 1,582 Depreciation and amortization 23,209 8,839 9,460 24,674 66,182 Contingent purchase price 119 — — — 119 Loss on disposal of assets (14) 11 (52) 496 441 Income (loss) from unconsolidated affiliates — — 3,744 (196) 3,548 Non-operating items for Kansas JV — — 2,571 — 2,571 Adjusted EBITDA $ 127,009 $ 36,472 $ 73,169 $ (12,870) $ 223,780 Six months ended June 30, 2017 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 210,752 $ 47,180 $ 120,813 $ (103,469) $ 275,276 Charge for stock compensation — — — 3,974 3,974 Depreciation and amortization 44,548 18,570 19,179 56,908 139,205 Contingent purchase price 1,182 — 25 2,715 3,922 (Gain) loss on disposal of assets (31) 5 29 4 7 Impairment losses on Loans to the Jamul Tribe — 5,635 — — 5,635 Income (loss) from unconsolidated affiliates — — 10,290 (721) 9,569 Non-operating items for Kansas JV — — 3,260 — 3,260 Adjusted EBITDA $ 256,451 $ 71,390 $ 153,596 $ (40,589) $ 440,848 Six months ended June 30, 2016 Northeast South/West Midwest Other (1) Total Income (loss) from operations $ 204,616 $ 53,607 $ 115,670 $ (84,025) $ 289,868 Charge for stock compensation — — — 3,037 3,037 Depreciation and amortization 46,202 17,604 19,028 49,368 132,202 Contingent purchase price (1,081) — — — (1,081) Loss on disposal of assets 7 (14) (45) (608) (660) Income (loss) from unconsolidated affiliates — — 8,462 (305) 8,157 Non-operating items for Kansas JV — — 5,141 — 5,141 Adjusted EBITDA $ 249,744 $ 71,197 $ 148,256 $ (32,533) $ 436,664 Northeast South/West Midwest Other (1) Total (in thousands) Three months ended June 30, 2017 Net revenues $ 405,099 $ 153,151 $ 224,847 $ 13,366 $ 796,463 Capital expenditures 5,533 11,924 7,345 1,002 25,804 Three months ended June 30, 2016 Net revenues $ 401,516 $ 140,108 $ 220,256 $ 7,542 $ 769,422 Capital expenditures 8,268 6,726 6,348 823 22,165 Six months ended June 30, 2017 Net revenues $ 798,564 $ 292,970 $ 453,185 $ 27,968 $ 1,572,687 Capital expenditures 9,523 20,546 11,676 1,215 42,960 Six months ended June 30, 2016 Net revenues $ 794,722 $ 276,076 $ 441,334 $ 13,741 $ 1,525,873 Capital expenditures 15,387 14,311 12,330 1,506 43,534 Balance sheet at June 30, 2017 Total assets $ 808,144 $ 876,910 $ 1,081,316 $ 2,217,649 $ 4,984,019 Investment in and advances to unconsolidated affiliates 76 — 91,058 61,779 152,913 Goodwill and other intangible assets, net 324,285 260,978 778,056 92,900 1,456,219 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) | 6 Months Ended |
Jun. 30, 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 June 30, 2017 and December 31, 2016 are as follows (in thousands): June 30, 2017 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 224,399 $ 224,399 $ 224,399 $ — $ — Loans to the Jamul Tribe 84,152 84,152 — — 84,152 Financial liabilities: Long-term debt Senior secured credit facility 812,001 847,494 797,494 50,000 — Senior unsecured notes 399,208 406,000 406,000 — — Other long-term obligations 126,573 127,301 — 127,301 — Other liabilities 52,955 52,955 — — 52,955 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 $ — $ — Loans to the 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): Six Months Ended June 30, 2017 Liabilities Assets Contingent Loans to the Purchase Price Jamul Tribe Balance at January 1, 2017 $ 48,244 $ 98,000 Unamortized discount — (5,865) Additions 830 372 Payments (41) (2,720) Included in earnings 3,922 (5,635) Balance at June 30, 2017 $ 52,955 $ 84,152 |
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 11.00 % 70.92 % |
Investment In Unconsolidated 28
Investment In Unconsolidated Affiliates (Tables) | 6 Months Ended |
Jun. 30, 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 June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net revenues $ 38,924 $ 37,872 $ 77,770 $ 77,754 Operating expenses 28,352 30,384 57,190 60,829 Income from operations 10,572 7,488 20,580 16,925 Net income $ 10,572 $ 7,488 $ 20,580 $ 16,925 Net income attributable to Penn $ 5,286 $ 3,744 $ 10,290 $ 8,462 |
Organization and Basis of Pre29
Organization and Basis of Presentation (Details) | 6 Months Ended |
Jun. 30, 2017jurisdictionfacilityitem | |
Number of facilities the entity owned, managed, or had ownership interests in | facility | 29 |
Number of jurisdictions in which the entity operates | jurisdiction | 17 |
Prairie State Gaming | |
Number of video gaming terminal route operators acquired | item | 2 |
Summary of Significant Accoun30
Summary of Significant Accounting Policies -Revenue Recognition, Player Loyalty Programs, and Gaming and Racing Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Revenue Recognition and Promotional Allowances | ||||
Promotional allowances | $ 45,983 | $ 44,113 | $ 87,841 | $ 84,684 |
Cost of complimentary services | 15,461 | 14,454 | 29,176 | 27,919 |
Gaming and Racing Taxes | ||||
Gaming expense | 252,500 | 248,800 | 498,900 | 494,500 |
Rooms | ||||
Revenue Recognition and Promotional Allowances | ||||
Promotional allowances | 10,298 | 10,098 | 19,493 | 19,220 |
Cost of complimentary services | 1,480 | 1,349 | 2,736 | 2,546 |
Food And Beverage | ||||
Revenue Recognition and Promotional Allowances | ||||
Promotional allowances | 33,386 | 31,796 | 63,953 | 61,318 |
Cost of complimentary services | 13,009 | 12,194 | 24,629 | 23,718 |
Other | ||||
Revenue Recognition and Promotional Allowances | ||||
Promotional allowances | 2,299 | 2,219 | 4,395 | 4,146 |
Cost of complimentary services | $ 972 | $ 911 | $ 1,811 | $ 1,655 |
Summary of Significant Accoun31
Summary of Significant Accounting Policies - Long-term Asset Related to Jamul Tribe (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality | ||
Financing loan receivable, reserve allowance | $ 5,635 | $ 0 |
Financing loan receivable, unpaid principal balance | 98,100 | 98,000 |
Loans to the Jamul Tribe | 84,152 | $ 91,401 |
Delayed Draw Term Loan C Facility Commitments | ||
Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality | ||
Additional borrowing capacity under the financing facility | $ 15,000 |
Summary of Significant Accoun32
Summary of Significant Accounting Policies - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Net income loss available to common stockholders | |||||
Net income | $ 17,079 | $ 34,035 | $ 22,183 | $ 57,743 | |
Net income applicable to preferred stock | 3,151 | 5,452 | |||
Net income applicable to common stock | $ 17,079 | $ 30,884 | $ 22,183 | $ 52,291 | |
Determination of shares: | |||||
Weighted-average common shares outstanding (in shares) | 90,928,000 | 81,647,000 | 90,840,000 | 81,308,000 | |
Assumed conversion of dilutive employee stock-based awards (in shares) | 2,230,000 | 1,474,000 | 1,629,000 | 1,459,000 | |
Assumed conversion of restricted stock (in shares) | 81,000 | 34,000 | 74,000 | 42,000 | |
Diluted weighted-average common shares outstanding before participating security | 93,239,000 | 83,155,000 | 92,543,000 | 82,809,000 | |
Assumed conversion of preferred stock (in shares) | 8,331,000 | 8,478,000 | |||
Diluted weighted-average common shares outstanding (in shares) | 93,239,000 | 91,486,000 | 92,543,000 | 91,287,000 | |
Calculation of basic EPS: | |||||
Net income applicable to common stock | $ 17,079 | $ 30,884 | $ 22,183 | $ 52,291 | |
Weighted-average common shares outstanding (in shares) | 90,928,000 | 81,647,000 | 90,840,000 | 81,308,000 | |
Basic EPS (in dollars per share) | $ 0.19 | $ 0.38 | $ 0.24 | $ 0.64 | |
Calculation of diluted EPS using two class method: | |||||
Net income applicable to common stock | $ 17,079 | $ 30,884 | $ 22,183 | $ 52,291 | |
Diluted weighted-average common shares outstanding before participating security | 93,239,000 | 83,155,000 | 92,543,000 | 82,809,000 | |
Diluted EPS (in dollars per share) | $ 0.18 | $ 0.37 | $ 0.24 | $ 0.63 | |
Anti-dilutive securities, options to purchase shares outstanding | 55,062 | 1,696,858 | 1,598,500 | 2,889,501 | |
Series C Preferred Stock | |||||
Earnings Per Share | |||||
Preferred stock, shares outstanding | 0 | 7,447 | 0 | 7,447 | 0 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies - Stock-Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 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) | 1,475,224 | 1,561,035 | |||
Accrued salaries and wages | $ 86,292 | $ 86,292 | $ 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 | 1,800 | $ 1,600 | $ 4,000 | $ 3,100 | |
Phantom Share Units (PSUs) | |||||
Stock-based compensation costs | |||||
Compensation costs related to stock-based compensation | 4,600 | 600 | 8,900 | 3,600 | |
Accrued salaries and wages | 10,500 | 10,500 | 5,600 | ||
Total compensation cost related to nonvested awards not yet recognized | 6,700 | $ 6,700 | |||
Period for recognition of unrecognized compensation cost | 2 years 5 months 9 days | ||||
Amounts paid on cash settled awards | 100 | 100 | $ 3,600 | 4,500 | |
Phantom Share Units (PSUs) | Minimum | |||||
Stock-based compensation costs | |||||
Vesting period | 3 years | ||||
Phantom Share Units (PSUs) | Maximum | |||||
Stock-based compensation costs | |||||
Vesting period | 4 years | ||||
Stock appreciation rights (SARs) | |||||
Stock-based compensation costs | |||||
Vesting period | 4 years | ||||
Compensation costs related to stock-based compensation | 4,600 | (500) | $ 8,600 | 1,400 | |
Accrued salaries and wages | 13,700 | 13,700 | $ 7,300 | ||
Total compensation cost related to nonvested awards not yet recognized | 12,800 | $ 12,800 | |||
Period for recognition of unrecognized compensation cost | 2 years 9 months 26 days | ||||
Amounts paid on cash settled awards | $ 1,500 | $ 1,100 | $ 2,600 | $ 1,500 |
Summary of Significant Accoun34
Summary of Significant Accounting Policies - Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Segment Information | ||||
Impact to income from operations | $ 134,989 | $ 149,337 | $ 275,276 | $ 289,868 |
Kansas Entertainment | ||||
Segment Information | ||||
Ownership interest in joint venture (as a percent) | 50.00% | 50.00% | ||
Penn Interactive Ventures | ||||
Segment Information | ||||
Percent of net revenue | 1.40% | |||
Impact to income from operations | $ (2,300) | |||
Percent of total assets | 2.20% | 2.20% |
New Accounting Pronouncements (
New Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
New Accounting Pronouncements | |||||||
Income tax benefit | $ (6,225) | $ (10,804) | $ (8,423) | $ (18,538) | |||
Net cash provided by (used in) operating activities | 195,906 | 194,038 | |||||
Net cash provided by (used in) financing activities | (34,806) | (65,925) | |||||
Reimbursable management costs | $ 6,387 | $ 2,855 | 13,145 | $ 2,855 | |||
Accounting Standards Update 2016-09 | |||||||
New Accounting Pronouncements | |||||||
Income tax benefit | 1,900 | ||||||
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 | 4,400 | ||||||
Net cash provided by (used in) financing activities | (4,400) | ||||||
Casino Rama | |||||||
New Accounting Pronouncements | |||||||
Reimbursable management costs | $ 42,800 | $ 83,600 | $ 81,300 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Plant and equipment | |||||
Property and equipment, net | $ 2,827,717 | $ 2,827,717 | $ 2,820,383 | ||
Decrease in property and equipment | (7,300) | ||||
Depreciation expense | 63,700 | $ 65,700 | 128,700 | $ 131,300 | |
Interest capitalized in connection with major construction projects | 100 | 0 | 100 | 0 | |
Master Lease Agreement | |||||
Plant and equipment | |||||
Depreciation expense | 23,000 | 45,700 | |||
Land and improvements - non-leased | |||||
Plant and equipment | |||||
Property and equipment | 294,535 | 294,535 | 294,590 | ||
Land and improvements - master lease | |||||
Plant and equipment | |||||
Property and equipment | 435,043 | 435,043 | 382,246 | ||
Building and improvements - non-leased | |||||
Plant and equipment | |||||
Property and equipment | 405,024 | 405,024 | 404,158 | ||
Buildings and improvements - master lease | |||||
Plant and equipment | |||||
Property and equipment | 2,248,257 | 2,248,257 | 2,219,018 | ||
Furniture, Fixtures and Equipment | |||||
Plant and equipment | |||||
Property and equipment | 1,374,884 | 1,374,884 | 1,355,615 | ||
Leasehold Improvements | |||||
Plant and equipment | |||||
Property and equipment | 119,730 | 119,730 | 118,940 | ||
Construction in progress - non-leased | |||||
Plant and equipment | |||||
Property and equipment | 38,619 | 38,619 | 16,375 | ||
Non-leased assets | |||||
Plant and equipment | |||||
Property and equipment | 2,232,792 | 2,232,792 | 2,189,678 | ||
Less Accumulated depreciation | (1,296,962) | (1,296,962) | (1,224,596) | ||
Property and equipment, net | 935,830 | 935,830 | 965,082 | ||
Master lease assets | |||||
Plant and equipment | |||||
Property and equipment | 2,683,300 | 2,683,300 | 2,601,264 | ||
Less Accumulated depreciation | (791,413) | (791,413) | (745,963) | ||
Property and equipment, net | $ 1,891,887 | $ 1,891,887 | $ 1,855,301 | ||
Depreciation expense | $ 22,800 | $ 45,700 |
Acquisitions (Details)
Acquisitions (Details) $ in Thousands | May 01, 2017USD ($)company | Jun. 30, 2017USD ($) | Dec. 31, 2016USD ($) |
Acquisitions | |||
Initial annual payment under Master Lease with GLPI | $ 61,302 | $ 56,595 | |
Purchase price allocation | |||
Goodwill | 1,025,887 | $ 989,685 | |
Bally's and Resorts | |||
Acquisitions | |||
Number of businesses acquired | company | 2 | ||
Initial annual payment under Master Lease with GLPI | $ 9,000 | ||
Increase in financing obligation | 82,600 | ||
Purchase price allocation | |||
Cash | 6,725 | ||
Other current assets | 2,847 | ||
Goodwill | 35,534 | ||
Other intangible assets | 851 | ||
Total assets | 136,928 | ||
Current portion of financing obligation | 1,968 | ||
Long-term financing obligation | 80,635 | ||
Accrued expenses | 3,716 | ||
Accrued salaries and wages | 3,256 | ||
Other current liabilities | 1,448 | ||
Total liabilities | 91,023 | ||
Cash paid | 45,905 | ||
Total consideration transferred | 136,928 | ||
Bally's and Resorts | General and administrative expenses | |||
Acquisitions | |||
Transaction costs | $ 700 | ||
Non-leased assets | Bally's and Resorts | |||
Purchase price allocation | |||
Property and equipment | 8,368 | ||
Master lease assets | Bally's and Resorts | |||
Acquisitions | |||
Increase in financing obligation | $ 82,600 | ||
Useful lives | 31 years | ||
Purchase price allocation | |||
Property and equipment | $ 82,603 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Intangible assets | |||||
Indefinite-life intangible assets | $ 375,405 | $ 375,405 | $ 375,405 | ||
Other intangible assets, Gross Carrying Value | 130,852 | 130,852 | 125,584 | ||
Other intangible assets, Accumulated Amortization | 75,925 | 75,925 | 65,495 | ||
Other intangible assets, Net Book Value | 54,927 | 54,927 | 60,089 | ||
Total intangible assets, Gross Carrying Value | 506,257 | 506,257 | 500,989 | ||
Total intangible assets, Net Book Value | 430,332 | 430,332 | $ 435,494 | ||
Change in other intangible assets during the period | $ (5,200) | ||||
Weighted average remaining amortization period | 5 years 6 months | ||||
Intangible asset amortization expense | $ 5,300 | $ 500 | $ 10,500 | $ 1,000 | |
Illinois video gaming terminal operators | |||||
Intangible assets | |||||
Change in other intangible assets during the period | 3,700 | ||||
Bally's and Resorts | |||||
Intangible assets | |||||
Change in other intangible assets during the period | $ 900 |
Intangible Assets - Future Amor
Intangible Assets - Future Amortization (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Expected intangible asset amortization expense | ||
Remainder of 2017 | $ 8,241 | |
2,018 | 12,885 | |
2,019 | 8,418 | |
2,020 | 5,854 | |
2,021 | 3,705 | |
Thereafter | 15,824 | |
Other intangible assets, Net Book Value | $ 54,927 | $ 60,089 |
Long-term Debt - Debt Summary (
Long-term Debt - Debt Summary (Details) - USD ($) | Jun. 30, 2017 | Mar. 31, 2017 | Jan. 19, 2017 | Dec. 31, 2016 |
Long-term Debt | ||||
Long-term debt | $ 1,372,452,000 | $ 1,432,689,000 | ||
Less current maturities of long-term debt | (35,675,000) | (85,595,000) | ||
Less net discounts | (2,862,000) | (620,000) | ||
Less debt issuance costs | (30,892,000) | (16,535,000) | ||
Long-term debt, net of current maturities and debt issuance costs | 1,303,023,000 | 1,329,939,000 | ||
Senior Secured Credit Facility | ||||
Long-term Debt | ||||
Long-term debt | 845,000,000 | 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 | $ 126,573,000 | $ 154,084,000 | ||
Capital leases | ||||
Long-term Debt | ||||
Long-term debt | $ 879,000 | $ 1,760,000 |
Long-term Debt - Future Minimum
Long-term Debt - Future Minimum Repayments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Future minimum repayments of long-term debt | ||
Within one year | $ 35,638 | |
1-3 years | 82,300 | |
3-5 years | 334,017 | |
Over 5 years | 920,497 | |
Long-term debt | $ 1,372,452 | $ 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 | Jun. 30, 2017 | Dec. 31, 2016 |
Long-term Debt | |||||
Loss on early extinguishment of debt | $ 23,390,000 | ||||
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 | 845,000,000 | ||||
Revolving credit facility | |||||
Long-term Debt | |||||
Term of debt | 5 years | ||||
Maximum borrowing capacity | $ 700,000,000 | ||||
Available borrowing capacity | 627,900,000 | ||||
Term loan amount outstanding | 50,000,000 | ||||
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 | 296,200,000 | ||||
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 | 498,800,000 | ||||
Senior Subordinated Notes, 5.875 Percent, Due November 2021 | |||||
Long-term Debt | |||||
Loss on early extinguishment of debt | 21,100,000 | ||||
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 | |||||
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 Obliga43
Master Lease Financing Obligation (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | May 01, 2017 | |
Master Lease Agreement | |||||
Capital Leased Assets | |||||
Discount rate (as a percent) | 9.70% | ||||
Total payments under Master Lease | $ 114 | $ 110.8 | $ 226.4 | $ 222.2 | |
Interest expense for the Master Lease | $ 99.4 | $ 97.8 | $ 197.1 | $ 196.5 | |
Bally's and Resorts | |||||
Capital Leased Assets | |||||
Increase in financing obligation | $ 82.6 |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Segment information | |||||
Income (loss) from operations | $ 134,989 | $ 149,337 | $ 275,276 | $ 289,868 | |
Charge for stock compensation | 1,801 | 1,582 | 3,974 | 3,037 | |
Depreciation and amortization | 68,969 | 66,182 | 139,205 | 132,202 | |
Contingent purchase price | 1,362 | 119 | 3,922 | (1,081) | |
Loss (gain) loss on disposal of assets | 52 | 441 | 7 | (660) | |
Income from unconsolidated affiliates | 5,021 | 3,548 | 9,569 | 8,157 | |
Impairment losses on Loans to the Jamul Tribe | 5,635 | 5,635 | |||
Adjusted EBITDA | 219,138 | 223,780 | 440,848 | 436,664 | |
Net revenues | 796,463 | 769,422 | 1,572,687 | 1,525,873 | |
Capital expenditures | 25,804 | 22,165 | 42,960 | 43,534 | |
Total assets | 4,984,019 | 4,984,019 | $ 4,974,484 | ||
Investment in and advances to unconsolidated affiliates | 152,913 | 152,913 | 156,176 | ||
Goodwill and other intangible assets, net | 1,456,219 | 1,456,219 | 1,425,179 | ||
Kansas Entertainment | |||||
Segment information | |||||
Non-operating items | 1,309 | 2,571 | 3,260 | 5,141 | |
Operating Segments | Northeast | |||||
Segment information | |||||
Income (loss) from operations | 108,119 | 103,695 | 210,752 | 204,616 | |
Depreciation and amortization | 21,525 | 23,209 | 44,548 | 46,202 | |
Contingent purchase price | 277 | 119 | 1,182 | (1,081) | |
Loss (gain) loss on disposal of assets | (45) | (14) | (31) | 7 | |
Adjusted EBITDA | 129,876 | 127,009 | 256,451 | 249,744 | |
Net revenues | 405,099 | 401,516 | 798,564 | 794,722 | |
Capital expenditures | 5,533 | 8,268 | 9,523 | 15,387 | |
Total assets | 808,144 | 808,144 | 861,951 | ||
Investment in and advances to unconsolidated affiliates | 76 | 76 | 76 | ||
Goodwill and other intangible assets, net | 324,285 | 324,285 | 324,285 | ||
Operating Segments | South/West | |||||
Segment information | |||||
Income (loss) from operations | 20,062 | 27,622 | 47,180 | 53,607 | |
Depreciation and amortization | 9,353 | 8,839 | 18,570 | 17,604 | |
Loss (gain) loss on disposal of assets | (1) | 11 | 5 | (14) | |
Impairment losses on Loans to the Jamul Tribe | 5,635 | 5,635 | |||
Adjusted EBITDA | 35,049 | 36,472 | 71,390 | 71,197 | |
Net revenues | 153,151 | 140,108 | 292,970 | 276,076 | |
Capital expenditures | 11,924 | 6,726 | 20,546 | 14,311 | |
Total assets | 876,910 | 876,910 | 840,076 | ||
Goodwill and other intangible assets, net | 260,978 | 260,978 | 224,719 | ||
Operating Segments | Midwest | |||||
Segment information | |||||
Income (loss) from operations | 59,283 | 57,446 | 120,813 | 115,670 | |
Depreciation and amortization | 9,508 | 9,460 | 19,179 | 19,028 | |
Contingent purchase price | 16 | 25 | |||
Loss (gain) loss on disposal of assets | 88 | (52) | 29 | (45) | |
Income from unconsolidated affiliates | 5,286 | 3,744 | 10,290 | 8,462 | |
Adjusted EBITDA | 75,490 | 73,169 | 153,596 | 148,256 | |
Net revenues | 224,847 | 220,256 | 453,185 | 441,334 | |
Capital expenditures | 7,345 | 6,348 | 11,676 | 12,330 | |
Total assets | 1,081,316 | 1,081,316 | 1,103,231 | ||
Investment in and advances to unconsolidated affiliates | 91,058 | 91,058 | 93,768 | ||
Goodwill and other intangible assets, net | 778,056 | 778,056 | 775,377 | ||
Operating Segments | Midwest | Kansas Entertainment | |||||
Segment information | |||||
Non-operating items | 1,309 | 2,571 | 3,260 | 5,141 | |
Other | |||||
Segment information | |||||
Income (loss) from operations | (52,475) | (39,426) | (103,469) | (84,025) | |
Charge for stock compensation | 1,801 | 1,582 | 3,974 | 3,037 | |
Depreciation and amortization | 28,583 | 24,674 | 56,908 | 49,368 | |
Contingent purchase price | 1,069 | 2,715 | |||
Loss (gain) loss on disposal of assets | 10 | 496 | 4 | (608) | |
Income from unconsolidated affiliates | (265) | (196) | (721) | (305) | |
Adjusted EBITDA | (21,277) | (12,870) | (40,589) | (32,533) | |
Net revenues | 13,366 | 7,542 | 27,968 | 13,741 | |
Capital expenditures | 1,002 | $ 823 | 1,215 | $ 1,506 | |
Total assets | 2,217,649 | 2,217,649 | 2,169,226 | ||
Investment in and advances to unconsolidated affiliates | 61,779 | 61,779 | 62,332 | ||
Goodwill and other intangible assets, net | $ 92,900 | $ 92,900 | $ 100,798 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 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 | $ 1,400 | $ 100 | $ 3,900 | $ (1,100) | |
Level 1 | |||||
Fair value of assets and liabilities | |||||
Cash and cash equivalents | 224,399 | 224,399 | $ 229,510 | ||
Level 3 | |||||
Fair value of assets and liabilities | |||||
Loans to Jamul Tribe | 84,152 | 84,152 | 98,000 | ||
Financial liabilities: | |||||
Other liabilities | 52,955 | 52,955 | 48,244 | ||
Level 3 | Loans to the Jamul Tribe | |||||
Fair value of assets and liabilities | |||||
Balance at beginning of the period | 98,000 | ||||
Unamortized discount | (5,865) | ||||
Additions | 372 | ||||
Payments | (2,720) | ||||
Included in earnings | (5,635) | ||||
Balance at end of the period | 84,152 | 84,152 | |||
Level 3 | Contingent Purchase Price | |||||
Financial liabilities: | |||||
Balance at beginning of the period | 48,244 | ||||
Additions | 830 | ||||
Payments | (41) | ||||
Included in earnings | 3,922 | ||||
Balance at end of the period | 52,955 | $ 52,955 | |||
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 | 11.00% | ||||
Volatility rate | 70.92% | ||||
Senior Secured Credit Facility | Level 1 | |||||
Financial liabilities: | |||||
Long-term debt | 797,494 | $ 797,494 | 785,092 | ||
Senior Secured Credit Facility | Level 2 | |||||
Financial liabilities: | |||||
Long-term debt | 50,000 | 50,000 | 191,000 | ||
Senior Unsecured Notes | Level 1 | |||||
Financial liabilities: | |||||
Long-term debt | 406,000 | 406,000 | 312,000 | ||
Other long-term obligations | Level 2 | |||||
Financial liabilities: | |||||
Long-term debt | 127,301 | 127,301 | 152,132 | ||
Carrying Amount | |||||
Fair value of assets and liabilities | |||||
Cash and cash equivalents | 224,399 | 224,399 | 229,510 | ||
Loans to Jamul Tribe | 84,152 | 84,152 | 92,100 | ||
Financial liabilities: | |||||
Other liabilities | 52,955 | 52,955 | 48,244 | ||
Carrying Amount | Senior Secured Credit Facility | |||||
Financial liabilities: | |||||
Long-term debt | 812,001 | 812,001 | 962,703 | ||
Carrying Amount | Senior Unsecured Notes | |||||
Financial liabilities: | |||||
Long-term debt | 399,208 | 399,208 | 296,895 | ||
Carrying Amount | Other long-term obligations | |||||
Financial liabilities: | |||||
Long-term debt | 126,573 | 126,573 | 154,084 | ||
Fair Value | |||||
Fair value of assets and liabilities | |||||
Cash and cash equivalents | 224,399 | 224,399 | 229,510 | ||
Loans to Jamul Tribe | 84,152 | 84,152 | 98,000 | ||
Financial liabilities: | |||||
Other liabilities | 52,955 | 52,955 | 48,244 | ||
Fair Value | Senior Secured Credit Facility | |||||
Financial liabilities: | |||||
Long-term debt | 847,494 | 847,494 | 976,092 | ||
Fair Value | Senior Unsecured Notes | |||||
Financial liabilities: | |||||
Long-term debt | 406,000 | 406,000 | 312,000 | ||
Fair Value | Other long-term obligations | |||||
Financial liabilities: | |||||
Long-term debt | $ 127,301 | $ 127,301 | $ 152,132 |
Investment In Unconsolidated 46
Investment In Unconsolidated Affiliates (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)ft²item | Jun. 30, 2016USD ($) | |
Summary financial information | ||||
Net income attributable to Penn | $ 5,021 | $ 3,548 | $ 9,569 | $ 8,157 |
Kansas Entertainment | ||||
Business ventures | ||||
Ownership interest in joint venture under agreement of sale (as a percent) | 50.00% | 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 | $ 38,924 | 37,872 | $ 77,770 | 77,754 |
Operating expenses | 28,352 | 30,384 | 57,190 | 60,829 |
Income from operations | 10,572 | 7,488 | 20,580 | 16,925 |
Net income | 10,572 | 7,488 | 20,580 | 16,925 |
Net income attributable to Penn | $ 5,286 | $ 3,744 | $ 10,290 | $ 8,462 |