Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 30, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | PENN NATIONAL GAMING INC | |
Entity Central Index Key | 921,738 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
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 | 91,859,333 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 217,997 | $ 277,953 |
Receivables, net of allowance for doubtful accounts of $3,097 and $2,983 at March 31, 2018 and December 31, 2017, respectively | 56,563 | 62,805 |
Prepaid expenses | 44,252 | 43,780 |
Other current assets | 15,871 | 16,494 |
Total current assets | 334,683 | 401,032 |
Property and equipment, net | 2,710,652 | 2,756,669 |
Other assets | ||
Investment in and advances to unconsolidated affiliates | 147,658 | 148,912 |
Goodwill | 1,008,097 | 1,008,097 |
Other intangible assets, net | 469,578 | 422,606 |
Deferred income taxes | 388,058 | 390,943 |
Loans to the JIVDC, net of allowance for loan losses of $64,052 at March 31, 2018 and December 31, 2017 | 20,613 | 20,900 |
Other assets | 86,194 | 85,653 |
Total other assets | 2,120,198 | 2,077,111 |
Total assets | 5,165,533 | 5,234,812 |
Current liabilities | ||
Current portion of financing obligation to GLPI | 45,386 | 56,248 |
Current maturities of long-term debt | 35,498 | 35,612 |
Accounts payable | 18,782 | 26,048 |
Accrued expenses | 134,312 | 125,688 |
Accrued interest | 6,223 | 13,528 |
Accrued salaries and wages | 76,982 | 111,252 |
Gaming, pari-mutuel, property, and other taxes | 63,153 | 69,645 |
Insurance financing | 7,038 | 2,404 |
Other current liabilities | 87,945 | 89,584 |
Total current liabilities | 475,319 | 530,009 |
Long-term liabilities | ||
Long-term financing obligation to GLPI, net of current portion | 3,476,785 | 3,482,573 |
Long-term debt, net of current maturities and debt issuance costs | 1,164,147 | 1,214,625 |
Noncurrent tax liabilities | 35,101 | 34,099 |
Other noncurrent liabilities | 47,820 | 46,652 |
Total long-term liabilities | 4,723,853 | 4,777,949 |
Shareholders' deficit | ||
Common stock ($.01 par value, 200,000,000 shares authorized, 93,822,683 and 93,392,635 shares issued, and 91,655,290 and 91,225,242 shares outstanding at March 31, 2018 and December 31, 2017, respectively) | 937 | 933 |
Treasury stock, at cost (2,167,393 shares held at March 31, 2018 and December 31, 2017) | (28,414) | (28,414) |
Additional paid-in capital | 1,011,322 | 1,007,606 |
Retained deficit | (1,016,031) | (1,051,818) |
Accumulated other comprehensive loss | (1,453) | (1,453) |
Total shareholders' deficit | (33,639) | (73,146) |
Total liabilities and shareholders' deficit | 5,165,533 | 5,234,812 |
Series B Preferred Stock | ||
Shareholders' deficit | ||
Preferred stock | ||
Series C Preferred Stock | ||
Shareholders' deficit | ||
Preferred stock |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Receivables, allowance for doubtful accounts (in dollars) | $ 3,097 | $ 2,983 |
Loans to the JIVDC, allowance for loan losses | $ 64,052 | $ 64,052 |
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 | 93,822,683 | 93,392,635 |
Common stock, shares outstanding | 91,655,290 | 91,225,242 |
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 Operations - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues | ||
Revenues | $ 816,085 | $ 818,082 |
Less promotional allowances | (41,858) | |
Net revenues | 816,085 | 776,224 |
Operating expenses | ||
General and administrative | 121,263 | 125,815 |
Depreciation and amortization | 60,390 | 70,236 |
Impairment losses | 618 | |
Total operating expenses | 643,951 | 635,937 |
Income from operations | 172,134 | 140,287 |
Other income (expenses) | ||
Interest expense | (115,740) | (114,996) |
Interest income | 249 | 2,646 |
Income from unconsolidated affiliates | 5,361 | 4,548 |
Loss on early extinguishment of debt and modification costs | (882) | (23,390) |
Other | 4 | (1,793) |
Total other expenses | (111,008) | (132,985) |
Income from operations before income taxes | 61,126 | 7,302 |
Income tax provision | 15,689 | 2,198 |
Net income | $ 45,437 | $ 5,104 |
Earnings per common share: | ||
Basic earnings per common share (in dollars per share) | $ 0.50 | $ 0.06 |
Diluted earnings per common share (in dollars per share) | $ 0.48 | $ 0.06 |
Gaming | ||
Revenues | ||
Revenues | $ 654,494 | $ 661,256 |
Operating expenses | ||
Operating expenses | 340,516 | 332,053 |
Food, beverage, hotel and other | ||
Revenues | ||
Revenues | 130,969 | 147,741 |
Operating expenses | ||
Operating expenses | 92,980 | 101,075 |
Management service fees | ||
Revenues | ||
Revenues | 2,438 | 2,327 |
Reimbursable management costs | ||
Revenues | ||
Revenues | 28,184 | 6,758 |
Operating expenses | ||
Operating expenses | $ 28,184 | $ 6,758 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Condensed Consolidated Statements of Comprehensive Income | ||
Net income | $ 45,437 | $ 5,104 |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation adjustment during the period | 437 | |
Other comprehensive income (loss) | 437 | |
Comprehensive income | $ 45,437 | $ 5,541 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Changes in Shareholders' (Deficit) Equity - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Deficit | Accumulated Other Comprehensive Income (Loss) | Total |
Balance at Dec. 31, 2017 | $ 933 | $ (28,414) | $ 1,007,606 | $ (1,051,818) | $ (1,453) | $ (73,146) |
Balance (in shares) at Dec. 31, 2017 | 91,225,242 | |||||
Increase (Decrease) in Shareholders' Deficit | ||||||
Share-based compensation arrangements | $ 4 | 3,716 | 3,720 | |||
Share-based compensation arrangements (in shares) | 430,048 | |||||
Cumulative-effect adjustment upon adoption of ASC 606 "Revenue from Contracts with Customers" | (9,650) | (9,650) | ||||
Net income | 45,437 | 45,437 | ||||
Balance at Mar. 31, 2018 | $ 937 | $ (28,414) | $ 1,011,322 | $ (1,016,031) | $ (1,453) | $ (33,639) |
Balance (in shares) at Mar. 31, 2018 | 91,655,290 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating activities | ||
Net income | $ 45,437 | $ 5,104 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 60,390 | 70,236 |
Amortization of items charged to interest expense and interest income | 1,603 | 1,675 |
Change in fair value of contingent purchase price | 1,134 | 2,560 |
Loss (gain) on sale of property and equipment | 55 | (45) |
Income from unconsolidated affiliates | (5,361) | (4,548) |
Distributions from unconsolidated affiliates | 6,500 | 5,750 |
Deferred income taxes | 5,926 | 652 |
Charge for stock-based compensation | 2,929 | 2,173 |
Impairment losses | 618 | |
Write off of debt issuance costs and discounts | 882 | 5,377 |
Loss on early extinguishment and modification of debt | 18,012 | |
Decrease (increase), net of businesses acquired | ||
Accounts receivable | 3,973 | 6,533 |
Prepaid expenses and other current assets | (7,248) | (8,432) |
Other assets | (555) | (1,746) |
(Decrease) increase, net of businesses acquired | ||
Accounts payable | (4,142) | (2,470) |
Accrued expenses | (2,567) | 5,351 |
Accrued interest | (7,305) | (919) |
Accrued salaries and wages | (34,270) | (19,547) |
Gaming, pari-mutuel, property and other taxes | (6,492) | (6,544) |
Income taxes | 6,072 | 10,090 |
Other current and noncurrent liabilities | (642) | (4,430) |
Net cash provided by operating activities | 66,937 | 84,832 |
Investing activities | ||
Project capital expenditures | (1,211) | (6,178) |
Maintenance capital expenditures | (10,602) | (10,978) |
Insurance remediation proceeds | 577 | |
Loans to the JIVDC | (339) | (168) |
Receipts applied against nonaccrual loan to JIVDC | 512 | |
Proceeds from sale of property and equipment | 49 | 309 |
Additional contributions to joint ventures | (500) | |
Increase in cash in escrow | (4,432) | |
Consideration paid for acquisitions of businesses, gaming licenses, and other intangibles | (50,379) | (2,441) |
Net cash used in investing activities | (62,470) | (23,311) |
Financing activities | ||
Proceeds from exercise of options | 791 | 612 |
Repurchase of common stock | (5,794) | |
Principal payments on financing obligation with GLPI | (16,650) | (14,785) |
Proceeds from issuance of long-term debt, net of issuance costs | 1,175,275 | |
Proceeds from revolving credit facility draws | 30,000 | 184,435 |
Repayments on long-term debt | (45,441) | (1,086,284) |
Prepayment penalties and modification payments incurred with debt refinancing | (18,012) | |
Repayments on revolving credit facility | (30,000) | (244,435) |
Payments of other long-term obligations | (7,636) | (28,033) |
Payments of contingent purchase price | (121) | (21) |
Proceeds from insurance financing | 8,541 | 8,768 |
Payments on insurance financing | (3,907) | (3,269) |
Net cash used in financing activities | (64,423) | (31,543) |
Net increase (decrease) in cash and cash equivalents | (59,956) | 29,978 |
Cash and cash equivalents at beginning of year | 277,953 | 229,510 |
Cash and cash equivalents at end of year | 217,997 | 259,488 |
Supplemental disclosure | ||
Interest expense paid, net of amounts capitalized | 120,229 | 113,825 |
Income tax paid (refunds received) | 2,233 | (9,303) |
Non-cash investing and financing activities | ||
Accrued capital expenditures | 786 | 9,279 |
Accrued advances to Jamul Tribe | $ 82 | 1,103 |
Accrued debt issuance costs | $ 828 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2018 | |
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,” “we,” “our,” or “us”) 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 in Illinois with our Prairie State Gaming subsidiary. On May 1, 2017, we completed our acquisition of 1 st Jackpot Casino Tunica (formerly known as Bally’s Casino Tunica, (“1 st Jackpot”)) and Resorts Casino Tunica (“Resorts”). As of March 31, 2018, 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 months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The notes to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2017 should be read in conjunction with these condensed consolidated financial statements. The December 31, 2017 financial information has been derived from the Company’s audited consolidated financial statements. |
New Accounting Pronouncements
New Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2018 | |
New Accounting Pronouncements | |
New Accounting Pronouncements | 2. New Accounting Pronouncements Accounting Pronouncements Implemented in 2018 ASU 2014-09, “ Revenue from Contracts with Customers (Topic 606)” - On January 1, 2018, the Company adopted the new revenue standard ASC 606, “Revenue from Contracts with Customers (Topic 606),” and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method. As part of the adoption, the Company utilized a practical expedient that permits the evaluation of incomplete contracts (such as our loyalty point obligations) as completed contracts. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to its net income on a continuing basis and did not have a material effect for the three months ended March 31, 2018. In accordance with the new revenue standard requirement, the disclosure of the impact of adoption on our condensed consolidated statements of income and condensed consolidated balance sheets at and for the period ended March 31, 2018 are as follows (in thousands): Three Loyalty Point Impact (1) Promotional Allowance (Discretionary Comps) Impact (2) Promotional Allowance (Point Redemptions) Impact (2) Reimbursable Expense - Casino Rama Impact (3) Racing Revenue Impact (4) Balances Effect of Income Statement Revenues Gaming $ 654,494 $ (1,419) $ 33,639 $ - $ - $ - $ 686,714 $ (32,220) Food, beverage, hotel and other 130,969 (69) - 6,624 - 8,960 146,484 (15,515) Management service fees 2,438 - - - - - 2,438 - Reimbursable management costs 28,184 - - - (21,844) - 6,340 21,844 Revenues 816,085 (1,488) 33,639 6,624 (21,844) 8,960 841,976 (25,891) Less: promotional allowances - - (33,639) (6,624) - - (40,263) 40,263 Net Revenue 816,085 (1,488) - - (21,844) 8,960 801,713 14,372 Operating expenses Gaming 340,516 (1,027) - - - - 339,489 1,027 Food, beverage, hotel and other 92,980 - - - - 8,960 101,940 (8,960) General and administrative 121,263 - - - - - 121,263 - Reimbursable management costs 28,184 - - - (21,844) - 6,340 21,844 Depreciation and amortization 60,390 - - - - - 60,390 - Impairment losses 618 - - - - - 618 - Insurance recoveries - - - - - - - Total operating expenses 643,951 (1,027) - - (21,844) 8,960 630,040 13,911 Income from operations 172,134 (461) - - - - 171,673 461 Income from operations before income taxes 61,126 (461) - - - - 60,665 461 Income tax (benefit) provision 15,689 (118) - - - - 15,571 118 Net income $ 45,437 $ (343) $ - $ - $ - $ - $ 45,094 $ 343 As a result of the adoption of the new revenue standard, the following areas resulted in significant changes to the Company’s accounting: (1) The new revenue standard changed the accounting for loyalty points earned by our customers. The Company’s loyalty reward programs allow members to utilize their reward membership cards to earn loyalty points that are redeemable for slot play and complimentaries such as food and beverage at our restaurants, lodging at our hotels, and products offered at our retail stores across the vast majority of the Company’s casino properties. Under the new revenue standard, the Company is required to utilize a deferred revenue model and defer revenue at the estimated fair value when the loyalty points are earned by our customers and recognize revenue when the loyalty points are redeemed. The deferred revenue liability is based on the estimated standalone selling price of the loyalty points earned after factoring in the likelihood of redemption. Prior to the adoption of the new revenue standard, the estimated liability for unredeemed points was accrued based on expected redemption rates and the estimated costs of the service or merchandise to be provided. (2) The new revenue standard changed the accounting for promotional allowances. Under the new revenue standard, the Company will no longer be permitted to report revenue for goods and services provided to customers for free as an inducement to gamble as gross revenue with a corresponding reduction in promotional allowances to arrive at net revenues. The new revenue standard requires complimentaries related to an inducement to gamble to be recorded as a reduction to gaming revenues, and as such promotional allowances provided to customer’s as an inducement to gamble is no longer netted on our condensed consolidated statements of income. In addition, the new revenue standard changed the accounting for promotional allowances with respect to non-discretionary complimentaries (i.e. a customer’s redemption of loyalty points). Under the new revenue standard, the Company is no longer permitted to report revenue for goods and services provided to a customer resulting from loyalty point redemption with a corresponding reduction in promotional allowances to arrive at net revenue, as the new revenue standard requires the utilization of a deferred revenue model in which previously deferred revenue is recognized as revenue when the loyalty points are redeemed. As such, promotional allowances related to a customer’s redemption of loyalty points is no longer netted on our condensed consolidated statements of income. (3) The Company revised its accounting for reimbursable costs associated with our management service contract for Casino Rama. Under the new revenue standard, reimbursable costs, which primarily consist of payroll costs, must 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. Prior to this revision, the Company recorded these reimbursable amounts on a net basis. (4) The new revenue standard changed the accounting for racing revenues. Under the new revenue standard, we concluded that the Company is not the controlling entity to the arrangement(s), but rather functions as an agent to the pari-mutuel pool. As such, fees and obligations related to the Company’s share of purse funding requirements, simulcasting fees, tote fees, certain pari-mutuel taxes and other fees directly related to the Company’s racing operations must be reported on a net basis and included as a deduction to food, beverage, hotel and other revenue. Prior to the adoption of the new revenue standard, the Company recorded these fees and obligations in food, beverage, hotel and other expense . As Reported At March 31, 2018 Balances Without the Adoption of ASC 606 Effect of Change Higher (Lower) Balance Sheet Other assets Deferred income taxes 388,058 386,271 1,787 Current liabilities Accrued expenses 134,312 123,078 11,234 Shareholders' (deficit) Retained deficit (1,016,031) (1,007,175) (8,856) The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASU 2014-09, “ Revenue from Contracts with Customers (Topic 606) ” were as follows (in thousands): Balance at December 31, 2017 Adjustment Due to ASU 2014-09 Balance at January 1, 2018 Balance Sheet Other assets Deferred income taxes 390,943 2,044 392,987 Current liabilities Accrued expenses 125,688 11,694 137,382 Shareholders' (deficit) Retained deficit (1,051,818) (9,650) (1,061,468) In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Clarification of Certain Cash Receipts and Cash Payments.” The amendments are intended to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following specific cash flow issues: (a) debt prepayment or debt extinguishment costs; (b) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (c) contingent consideration payments made after a business combination; (d) proceeds from the settlement of insurance claims; (e) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (f) distributions received from equity method investees; (g) beneficial interest in securitization transactions; and (h) separately identifiable cash flows and application of the predominance principle. The new guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company adopted this new guidance on January 1, 2018 on a retrospective basis. As a result of adopting this new guidance, the impact to the comparative period ended March 31, 2017 was an increase to net cash provided by operating activities and an increase to net cash used in financing activities of $18.0 million, respectively, within the Company’s Condensed Consolidated Statement of Cash Flows. New Accounting Pronouncements to be Implemented in fiscal year 2019 In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases. Extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of expenses recognized and expected to be recognized from existing contracts. The accounting applied by a lessor is largely unchanged from that applied under the current standard. The standard must be adopted using a modified retrospective transition approach and provides for certain practical expedients. In January 2018, the FASB issued ASU No. 2018-1, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” that provides an optional transitional practical expedient regarding land easements. The new guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. Management has not yet completed its assessment of the impact of the new standard on the Company’s consolidated financial statements, however, the Company has numerous operating leases which, under the new standard, will need to be reported as an asset and a liability on our consolidated balance sheet. The precise amount of this asset and liability will be determined based on the leases that exist at the Company on the date of adoption. The adoption of this standard is expected to have a material impact on our consolidated financial statements as the Company has significant operating lease commitments that are off-balance sheet in accordance with current U.S. GAAP. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Revenue Recognition and Promotional Allowances The Company’s revenue from contracts with customers consists of gaming wagers, food and beverage transactions, retail transactions, hotel room sales, racing wagers, management services related to our management of external casino’s, and reimbursable costs associated with our management contracts. The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered. The transaction price for food and beverage, hotel and retail contracts is the net amount collected from the customer for such goods and services. Sales tax and other taxes collected on behalf of governmental authorities are accounted for on the net basis and are not included in revenues or expenses. The transaction price for our racing operations, inclusive of live racing events conducted at our racing facilities and our import and export arrangements, is the commission received from the pari-mutuel pool less contractual fees and obligations primarily consisting of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to the racing operations. The transaction price for our management service contracts is the amount collected for services rendered in accordance with the contractual terms. The transaction price for our reimbursable costs associated with our management contracts is the gross amount of the reimbursable expenditure, which primarily consists of payroll costs, incurred by the Company for the benefit of the managed entity. Gaming revenue contracts involve two performance obligations for those customers earning points under the Company’s loyalty reward programs and a single performance obligation for customers that do not participate in the programs. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the condensed consolidated financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a point that can be redeemed for slot play and complimentaries such as food and beverage at our restaurants, lodging at our hotels and products offered at our retail stores, less estimated breakage. The allocated revenue for gaming wagers is recognized when the wagering occurs as all such wagers settle immediately. The loyalty reward contract liability amount is deferred and recognized as revenue when the customer redeems the loyalty points for slot play and complimentaries and such goods and services are delivered to the customer. Food and beverage, hotel and retail services have been determined to be separate, standalone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred to the customer over their stay at the hotel or when the delivery is made for the food and beverage or retail product. Cancellation fees for hotel and meeting space services are recognized upon cancellation by the customer and are included in food, beverage, hotel and other revenue. Racing revenue contracts, inclusive of the Company’s (i) host racing facilities, (ii) import arrangements that permit the Company to simulcast in live racing events occurring at other racetracks and (iii) export arrangements that permit the Company’s live racing event to be simulcast at other racetracks, provide access to and the processing of wagers into the pari-mutuel pool. The Company has concluded it is not the controlling entity to the arrangement, but rather functions as an agent to the pari-mutuel pool. Commissions earned from the pari-mutuel pool less contractual fees and obligations are recognized on a net basis which is included within food, beverage, hotel and other revenue. Management services have been determined to be separate, standalone performance obligations and the transaction price for such contracts is recorded as services are performed. The Company records revenues on a monthly basis calculated by applying the contractual rate called for in the contract. Penn Interactive Ventures generates in-app purchase and advertising revenues from free-to-play social casino games which can be downloaded to mobile phones and tablets from digital storefronts. Players can purchase virtual playing credits within our social casino games which allows for increased playing opportunities and functionality. Penn Interactive Ventures records deferred revenue from the sale of virtual playing credits and recognizes this revenue over the average redemption period of the credits which is approximately three days. Advertising revenues are recognized in the period when the advertising impression, click or install delivery occurs. Penn Interactive Ventures also generates revenue from revenue sharing arrangements with third party content providers whereby revenues are recognized on a net basis since Penn Interactive Ventures is not the controlling entity in the arrangement. Reimbursable management costs associated with the Company’s management contracts represent amounts received or due pursuant to the Company’s management agreement for the reimbursement of expenses, primarily payroll costs, incurred by the Company on the managed facility’s behalf. The Company is the controlling entity to the arrangement, therefore the reimbursement is recorded on a gross basis with an offsetting amount charged to operating expense. Promotional Allowances The retail value of accommodations, food and beverage, and other services furnished to guests for free as an inducement to gamble is included in food, beverage, hotel and other revenue and offset as a deduction to gaming revenue in accordance with the new revenue standard and consists of the following for the period ended March 31, 2018: Three Months Ended March 31, 2018 (in thousands) Lodging $ 9,687 Food and beverage 22,976 Other 976 Total amount recorded in food, beverage, hotel and other revenues and offset to gaming revenues $ 33,639 The estimated cost of providing such complimentary services to guests for free as an inducement to gamble is included in food, beverage, hotel and other expenses and consists of the following for the period ended March 31, 2018: Three Months Ended March 31, 2018 (in thousands) Lodging $ 1,291 Food and beverage 8,619 Other 293 Total cost of complimentary services included in food, beverage, hotel and other expense $ 10,203 Revenue Disaggregation The Company is a geographically diversified, multi-jurisdictional owner and manager of gaming and racing facilities and video gaming terminal operations. Our operations are focused in regional gaming markets located within the Northeastern, South/Western and Midwestern United States. We also manage casinos for other entities in the United States and Canada. We generate revenues at our owned and operated properties by providing the following types of services: (i) gaming, (ii) food and beverage, (iii) lodging, (iv) racing, (v) reimbursable management costs and, (vi) other. Our revenue disaggregation by type of revenue and geographic location is as follows (in thousands): Three Months Ended March 31, 2018 Northeast South/West Midwest Other Total Gaming $ 355,785 $ 97,547 $ 201,162 $ - $ 654,494 Food and beverage 19,180 28,279 15,921 263 63,643 Lodging 1,967 23,601 7,953 - 33,521 Racing 5,276 7 - 1,527 6,810 Reimbursable management costs 21,844 6,340 - - 28,184 Other 10,115 5,522 5,050 8,746 29,433 Total net revenues $ 414,167 $ 161,296 $ 230,086 $ 10,536 $ 816,085 Customer-related Liabilities The Company has two general types of liabilities related to contracts with customers: (i) our loyalty credit obligation and (ii) advance payments on goods and services yet to be provided or for unpaid wagers. The Company’s loyalty reward programs allow members to utilize their reward membership cards to earn loyalty points that are redeemable for slot play and complimentaries such as food and beverages at our restaurants, lodging at our hotels and products offered at our retail stores across the vast majority of the Company’s casino properties. The Company accounts for the loyalty credit obligation utilizing a deferred revenue model, which defers revenue at the estimated fair value when the loyalty points are earned by our customers. Revenue associated with the loyalty credit obligation is subsequently recognized into revenue when the loyalty points are redeemed. The deferred revenue liability is based on the estimated standalone selling price of the loyalty points earned after factoring in the likelihood of redemption. The Company’s loyalty credit obligation was $22.4 million at March 31, 2018 compared to $24.7 million upon the adoption of the new revenue standard at January 1, 2018. Our loyalty credit obligations are generally settled within six months of issuance. Changes between the opening and closing balances primarily relate to the timing of the customer’s election to redeem loyalty points for complimentaries and products offered at our food and beverage outlets, hotels and retail stores. The Company’s advance payments on goods and services yet to be provided or for unpaid wagers primarily consist of the following: (i) deposits on rooms and convention space, (ii) money deposited on behalf of a customer in advance of their property visitation (i.e. front money), (iii) outstanding tickets generated by slot machine play or pari-mutuel wagering, (iv) outstanding chip liabilities, (v) unclaimed jackpots and (vi) gift cards redeemable at our properties. Advance payments on goods and services are recognized as revenue when the good or service is transferred to the customer. Unpaid wagers primarily relate to the Company’s obligation to settle outstanding slot tickets, pari-mutuel racing tickets and gaming tokens with customers and generally represents obligations stemming from prior wagering events of which revenue was previously recognized. The Company’s advance payments on goods and services yet to be provided or for unpaid wagers were $21.1 million and $21.2 million at March 31, 2018 and December 31, 2017, respectively, of which $1.2 million and $1.3 million are classified as long-term. Gaming and Racing Taxes The Company is subject to gaming and pari-mutuel taxes based on gross gaming revenue and pari-mutuel revenue in the jurisdictions in which it operates. The Company primarily recognizes gaming and pari-mutuel tax expense based on the statutorily required percentage of revenue that is required to be paid to state and local jurisdictions in the states where or in which wagering occurs. In certain states in which the Company operates, gaming taxes are based on graduated rates. The Company records gaming tax expense at the Company’s estimated effective gaming tax rate for the year, considering estimated taxable gaming revenue and the applicable rates. Such estimates are adjusted each interim period. If gaming tax rates change during the year, such changes are applied prospectively in the determination of gaming tax expense in future interim periods. For the three months ended March 31, 2018, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $247.4 million, as compared to $244.4 million for the three months ended March 31, 2017. Long-term asset related to the Jamul Indian Village The unpaid principal balance of the loan to the Jamul Indian Village Development Corporation (“JIVDC”) at March 31, 2018 and December 31, 2017 was $98.5 million and $98.3 million, respectively. The net carrying value of the loan to the JIVDC totaled $20.6 million and $20.9 million at March 31, 2018 and December 31, 2017, respectively. The Company’s remaining exposure at March 31, 2018 was $27.6 million inclusive of future unfunded commitments on the loan. 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. The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three months ended March 31, 2018 and 2017: Three Months Ended March 31, Three Months Ended March 31, 2018 2017 (in thousands) Determination of shares: Weighted-average common shares outstanding 91,191 90,751 Assumed conversion of dilutive employee stock-based awards 3,260 1,105 Assumed conversion of restricted stock 199 61 Diluted weighted-average common shares outstanding 94,650 91,917 Options to purchase 646,307 and 4,545,585 shares were outstanding during the three months ended March 31, 2018 and 2017, respectively, but were not included in the computation of diluted EPS because they were antidilutive. The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2018 and 2017 (in thousands, except per share data): Three Months Ended March 31, Three Months Ended March 31, 2018 2017 Calculation of basic EPS: Net income applicable to common stock $ 45,437 $ 5,104 Weighted-average common shares outstanding 91,191 90,751 Basic EPS $ 0.50 $ 0.06 Calculation of diluted EPS using two-class method: Net income applicable to common stock $ 45,437 $ 5,104 Diluted weighted-average common shares outstanding 94,650 91,917 Diluted EPS $ 0.48 $ 0.06 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 661,175 and 1,446,353 stock options during the three months ended March 31, 2018 and 2017, respectively. Stock-based compensation expense for the three months ended March 31, 2018 was $2.9 million as compared to $2.2 million for the three months ended March 31, 2017, 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 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 $0.8 million and $4.8 million at March 31, 2018 and December 31, 2017, respectively, primarily due to payouts on the awards. For PSUs held by Penn employees, there was $5.9 million of total unrecognized compensation cost at March 31, 2018 that will be recognized over the grants remaining weighted average vesting period of 2.63 years. For the three months ended March 31, 2018, the Company recognized $0.1 million of compensation expense associated with these awards, as compared to $4.3 million for the three months ended March 31, 2017. The changes are primarily due to the final vesting of the Company’s Transition Award Program on July 23, 2017 as well as changes in Penn’s stock prices at March 31 compared to December 31 in both years. Amounts paid by the Company for the three months ended March 31, 2018 on these cash-settled awards totaled $4.1 million as compared to $3.5 million for the three months ended March 31, 2017. For the Company’s cash-settled 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 $16.8 million and $24.0 million at March 31, 2018 and December 31, 2017, respectively. For SARs held by Penn employees, there was $12.9 million of total unrecognized compensation cost at March 31, 2018 that will be recognized over the awards remaining weighted average vesting period of 2.55 years. For the three months ended March 31, 2018, the Company recognized a benefit to compensation expense of $4.0 million associated with these awards, as compared to compensation expense of $4.0 million for the three months ended March 31, 2017. The changes are primarily due to changes in Penn’s stock prices at March 31 compared to December 31 in both years. Amounts paid by the Company for the three months ended March 31, 2018 on these cash-settled awards totaled $3.0 million as compared to $1.1 million for the three months ended March 31, 2017. In addition to the variances in cash-settled awards explained above, accrued salaries and wages decreased during the three months ended March 31, 2018 due to the payment of 2017 bonuses, which was $6.6 million higher compared to the prior year. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model for stock option awards granted during the March 31, 2018 and 2017, respectively: Three months ended March 31, Risk-free interest rate % 1.97 % Expected volatility % 30.67 % Dividend yield — — Weighted-average expected life (years) 5.30 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”, 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, 1st Jackpot and Resorts which were acquired on May 1, 2017, as well as our management contract with Hollywood Casino Jamul-San Diego. In late February 2018, the Company and the Jamul Tribe mutually agreed that Penn would no longer manage the facility or provide branding and development services on May 28, 2018. The Company will provide a transition that it anticipates will last through approximately late May. 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 Sanford-Orlando Kennel Club, 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 less than 2% of net revenues and income from operations for the three months ended March 31, 2018, and its total assets represent less than 2% of the Company’s total assets at March 31, 2018. 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 evaluation 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, the difference between budget and actual expense for cash-settled stock-based awards, preopening and significant transaction costs and other income or expenses. Adjusted EBITDA is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (such as depreciation and amortization) added back for our joint venture in Kansas Entertainment. Adjusted EBITDA excludes payments associated with our Master Lease agreement with GLPI as the transaction was accounted for as a financing obligation. In the first quarter of 2018, we changed the definition of adjusted EBITDA to exclude preopening costs, significant transaction costs and the variance between our budgeted and actual costs incurred on cash-settled stock based awards which are required to be marked to market each reporting period. We determined to exclude preopening costs and significant transaction costs to more closely align the Company’s calculation of adjusted EBITDA with our competitors. Preopening costs and significant transaction costs are also excluded from adjusted EBITDA for bonus calculation purposes. We have excluded the favorable or unfavorable difference between the budgeted expense and actual expense for our cash-settled stock-based awards as it is non-operational in nature. Additionally, this variance is excluded from adjusted EBITDA for bonus calculation purposes. In connection with the change to the definition of adjusted EBITDA, we reclassified our prior period results to conform to the current period presentation. Adjusted EBITDA should not be construed as an alternative to operating income, as an indicator of the Company’s operating performance, as an alternative to cash flows from operating activities, as a measure of liquidity, or as any other measure of performance determined in accordance with GAAP. The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in adjusted EBITDA. See Note 7: “Segment Information” for further information with respect to the Company’s segments. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2018 | |
Property and Equipment | |
Property and Equipment | 4. Property and Equipment Property and equipment, net, consists of the following: March 31, December 31, 2018 2017 (in thousands) Property and equipment - non-Master Lease Land and improvements $ 294,716 $ 294,695 Building and improvements 430,440 429,015 Furniture, fixtures and equipment 1,381,443 1,385,889 Leasehold improvements 131,257 130,801 Construction in progress 17,345 15,617 2,255,201 2,256,017 Less Accumulated depreciation (1,367,370) (1,345,147) 887,831 910,870 Property and equipment - Master Lease Land and improvements 424,700 424,700 Building and improvements 2,258,577 2,258,577 2,683,277 2,683,277 Less accumulated depreciation (860,456) (837,478) 1,822,821 1,845,799 Property and equipment, net $ 2,710,652 $ 2,756,669 Property and equipment, net decreased by $46.0 million for the three months ended March 31, 2018 primarily due to depreciation expense, which is partially offset by maintenance capital expenditures, as well as improvements to food and beverage offerings at Tropicana Las Vegas. Depreciation expense, for property and equipment including assets under capital leases, totaled $55.9 million and $65.0 million for the three months ended March 31, 2018 and 2017, respectively, of which $23.3 million and $22.7 million related to assets under the Master Lease, respectively. No interest was capitalized in connection with major construction projects for the three months ended March 31, 2018 and 2017. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2018 | |
Intangible Assets | |
Intangible Assets Disclosure [Text Block] | 5. 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 March 31, 2018 and December 31, 2017: March 31, 2018 December 31, 2017 (in thousands) Gross Gross Carrying Accumulated Net Book Carrying Accumulated Net Book Value Amortization Value Value Amortization Value Indefinite-life intangible assets $ 425,505 $ — $ 425,505 $ 375,405 $ — $ 375,405 Other intangible assets 132,831 88,758 44,073 131,483 84,282 47,201 Total $ 558,336 $ 88,758 $ 469,578 $ 506,888 $ 84,282 $ 422,606 Total other intangible assets increased by $47 million for the three months ended March 31, 2018 primarily due to the purchase of a Category 4 gaming license to operate up to 750 slot machines and initially up to 30 table games in York County, Pennsylvania for $50.1 million, along with the capitalization of computer software intangibles of $1.4 million, partially offset by $4.5 million in amortization of definite-lived intangible assets. Other intangible assets have a weighted average remaining amortization period of approximately 4.6 years. The Company’s intangible asset amortization expense was $4.5 million and $5.2 million, for the three months ended March 31, 2018 and 2017, respectively. The following table presents expected intangible asset amortization expense based on existing intangible assets as of March 31, 2018 (in thousands): Remaining 2018 $ 9,554 2019 8,949 2020 6,287 2021 3,644 2022 3,596 Thereafter 12,043 Total $ 44,073 |
Long-term Debt
Long-term Debt | 3 Months Ended |
Mar. 31, 2018 | |
Long-term Debt | |
Long-term Debt | 6. Long-term Debt Long-term debt, net of current maturities, is as follows: March 31, December 31, 2018 2017 (in thousands) Senior secured credit facility $ 715,000 $ 760,000 $400 million 5.625% senior unsecured notes due January 15, 2027 400,000 400,000 Other long-term obligations 111,674 119,310 Capital leases 449 891 1,227,123 1,280,201 Less current maturities of long-term debt (35,498) (35,612) Less discount on senior secured credit facility Term Loan B (2,251) (2,558) Less debt issuance costs (25,227) (27,406) $ 1,164,147 $ 1,214,625 The following is a schedule of future minimum repayments of long-term debt as of March 31, 2018 (in thousands): Within one year $ 35,498 1-3 years 94,963 3-5 years 263,187 Over 5 years 833,475 Total minimum payments $ 1,227,123 Senior Secured Credit Facility On January 19, 2017, the Company entered into a new senior secured credit facility. The new senior secured credit facility consists of a five year $700 million revolver, a five year $300 million Term Loan A facility, and a seven year $500 million Term Loan B facility (the “Amended Credit Facilities”). The Term Loan A facility was priced at LIBOR plus a spread (ranging from 3.00% to 1.25%) based on the Company’s consolidated total net leverage ratio as defined in the new senior secured credit facility. The Term Loan B facility was priced at LIBOR plus 2.50%, with a 0.75% LIBOR floor. At March 31, 2018, the Company’s senior secured credit facility had a gross outstanding balance of $715.0 million, consisting of a $285.0 million Term Loan A facility and a $430.0 million Term Loan B facility. No amounts were outstanding on the revolving credit facility at March 31, 2018. Additionally, the Company had conditional obligations under letters of credit issued pursuant to the senior secured credit facility with face amounts aggregating $22.4 million, resulting in $677.6 million of available borrowing capacity as of March 31, 2018 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 three months ended March 31, 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. In connection with Term Loan B principal prepayments, the Company recorded a $0.9 million loss on the early extinguishment of debt for the three months ended March 31, 2018. 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 three months ended March 31, 2017 related to the difference between the reacquisition price of the 5.875% Notes compared to its carrying value. 5.625% Senior Unsecured Notes On January 19, 2017, the Company completed an offering of $400 million 5.625% senior unsecured notes that mature on January 15, 2027 (the “5.625% Notes”) at a price of par. Interest on the 5.625% Notes is payable on January 15 th and July 15 th of each year. The 5.625% Notes are senior unsecured obligations of the Company. The 5.625% Notes will not be guaranteed by any of the Company’s subsidiaries except in the event that the Company in the future issues certain subsidiary‑guaranteed debt securities. The Company may redeem the 5.625% Notes at any time on or after January 15, 2022, at the declining redemption premiums set forth in the indenture governing the 5.625% Notes, and, prior to January 15, 2022, at a “make-whole” redemption premium set forth in the indenture governing the 5.625% Notes. In addition, prior to January 15, 2020, the Company may redeem the 5.625% Notes with an amount equal to the net proceeds from one or more equity offerings, at a redemption price equal to 105.625% of the principal amount of the 5.625% Notes redeemed, together with accrued and unpaid interest to, but not including, the redemption date, so long as at least 60% of the aggregate principal amount of the notes originally issued under the indenture remains outstanding and such redemption occurs within 180 days of closing of the related equity offering. The Company used a portion of the proceeds from the issuance of the 5.625% Notes to retire its existing 5.875% Notes and to fund related transaction fees and expenses. The Company used loans funded under the Amended Credit Facilities and a portion of the proceeds of the 5.625% Notes to repay amounts outstanding under its then existing Credit Agreement and to fund related transaction fees and expenses and for general corporate purposes. Covenants The Company’s senior secured credit facility and $400 million 5.625% senior unsecured notes require it, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests, including fixed charge coverage, interest coverage, senior leverage and total leverage ratios. In addition, the Company’s senior secured credit facility and $400 million 5.625% senior unsecured notes restrict, among other things, its ability to incur additional indebtedness, incur guarantee obligations, amend debt instruments, pay dividends, create liens on assets, make investments, engage in mergers or consolidations, and otherwise restrict corporate activities. At March 31, 2018, the Company was in compliance with all required financial covenants. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2018 | |
Segment Information | |
Segment Information | 7. Segment Information The following tables (in thousands) present certain information with respect to the Company’s segments. Intersegment revenues between the Company’s segments were not material in any of the periods presented below. Three months ended March 31, 2018 2017 Net Revenues Northeast $ 414,167 $ 393,465 South/West 161,296 139,820 Midwest 230,086 228,338 Other (1) 10,536 14,601 Total Reportable Segment Net Revenues 816,085 776,224 Adjusted EBITDA Northeast 132,007 126,574 South/West 45,049 36,341 Midwest 81,155 78,106 Other (1) (15,665) (13,576) Total Reportable Segment Adjusted EBITDA 242,546 227,445 Other operating costs and other expenses (income) Depreciation and amortization 60,390 70,236 Unconsolidated non-operating costs - Kansas JV 1,294 1,951 Interest expense 115,740 114,996 Interest income (249) (2,646) Loss (gain) on disposal of assets 55 (45) Impairment losses 618 — Cash-settled stock award variance (7,462) 5,164 Pre-opening and significant transaction costs 6,093 571 Loss on early extinguishment of debt and modification costs 882 23,390 Other (4) 1,793 Contingent purchase price 1,134 2,560 Charge for stock compensation 2,929 2,173 Income before income taxes 61,126 7,302 Income taxes 15,689 2,198 Net income $ 45,437 $ 5,104 Northeast South/West Midwest Other (1) Total Three months ended March 31, 2018 Capital expenditures $ 3,487 $ 3,412 $ 3,732 $ 1,182 $ 11,813 Three months ended March 31, 2017 Capital expenditures $ 3,990 $ 8,622 $ 4,331 $ 213 $ 17,156 Balance sheet at March 31, 2018 Total assets (1) $ 813,232 $ 783,634 $ 1,081,046 $ 2,487,621 $ 5,165,533 Investment in and advances to unconsolidated affiliates 105 — 87,610 59,943 147,658 Goodwill 21,242 244,695 674,558 67,602 1,008,097 Other intangible assets, net 353,143 978 100,798 14,659 469,578 Balance sheet at December 31, 2017 Total assets (1) $ 821,649 $ 794,274 $ 1,070,204 $ 2,548,685 $ 5,234,812 Investment in and advances to unconsolidated affiliates 102 — 88,296 60,514 148,912 Goodwill 21,242 244,695 674,558 67,602 1,008,097 Other intangible assets, net 303,043 1,623 101,698 16,242 422,606 (1) Total assets include the real property assets under the Master Lease with GLPI. Net revenues and adjusted EBITDA relate to the Company’s stand-alone racing operations, namely Sanford Orlando Kennel Club and the Company’s joint venture interests in Texas and New Jersey which do not have gaming operations. Other also includes corporate overhead operations as well as Penn Interactive Ventures, which is a wholly-owned subsidiary that is focused on the Company’s interactive gaming strategy. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Measurements | |
Fair Value Measurements | 8. Fair Value Measurements ASC 820, “Fair Value Measurements and Disclosures,” establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy are described below: · Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. · Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets, such as interest rates and yield curves that are observable at commonly quoted intervals. · Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions, as there is little, if any, related market activity. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy. The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate: Cash and cash equivalents The fair value of the Company’s cash and cash equivalents approximates the carrying value of the Company’s cash and cash equivalents, due to the short maturity of the cash equivalents and as such is a Level 1 measurement. Loan to the JIVDC The fair value of the Company’s loan to the JIVDC was based on the present value of the projected future cash flows discounted at 14%, which we believe approximates the return a market participant would require. Since the projections are based on management’s internal projections, the Company concluded that this instrument should be classified as a Level 3 measurement. Long-term debt The fair value of the Company’s Term Loan A and Term Loan B components of its senior secured credit facility and senior unsecured notes are estimated based on quoted prices in active markets and as such is a Level 1 measurement. The fair value of the remainder of the Company’s senior secured credit facility approximates its carrying value as it is revolving, variable rate debt and as such is a Level 2 measurement. Other long-term obligations at March 31, 2018 and December 31, 2017 included the relocation fees for Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course and the repayment obligation of a hotel and event center located near Hollywood Casino Lawrenceburg. The fair value of the relocation fees for Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course and the repayment obligation for the hotel and event center are estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and as such are Level 2 measurements. Other liabilities Other liabilities at March 31, 2018 and December 31, 2017 are primarily comprised of the contingent purchase price consideration related to the purchases of Plainridge Racecourse. The fair value of the Company’s contingent purchase price consideration related to its Plainridge Racecourse acquisition is estimated based on a discounted cash flow model and as such is a Level 3 measurement. At each reporting period, the Company assesses the fair value of 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 $1.1 million and $2.6 million for the three months ended March 31, 2018 and 2017, respectively. The carrying amounts and estimated fair values by input level of the Company’s financial instruments at March 31, 2018 and December 31, 2017 are as follows (in thousands): March 31, 2018 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 217,997 $ 217,997 $ 217,997 $ — $ — Loan to the JIVDC 20,613 16,677 — — 16,677 Financial liabilities: Long-term debt Senior secured credit facility 688,251 716,634 716,634 — — Senior unsecured notes 399,270 385,000 385,000 — — Other long-term obligations 111,674 106,402 — 106,402 — Other liabilities 23,810 23,810 — — 23,810 December 31, 2017 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 277,953 $ 277,953 $ 277,953 $ — $ — Loan to the JIVDC 20,900 16,533 — — 16,533 Financial liabilities: Long-term debt Senior secured credit facility 730,787 760,456 760,456 — — Senior unsecured notes 399,249 412,000 412,000 — — Other long-term obligations 119,310 113,460 — 113,460 — Other liabilities 22,696 22,696 — — 22,696 The following table summarizes the changes in the fair value of the Company’s Level 3 liabilities (in thousands): Three Months Ended March 31, 2018 Liabilities Contingent Purchase Price Balance at January 1, 2018 $ 22,696 Additions — Payments (20) Included in earnings 1,134 Balance at March 31, 2018 $ 23,810 The following table summarizes the significant unobservable inputs used in calculating fair value for the Company’s Level 3 liabilities: Valuation Unobservable Technique Input Discount Rate Contingent purchase price - Plainridge Discounted cash flow Discount rate 7.60 % |
Investment In and Advances to U
Investment In and Advances to Unconsolidated Affiliates | 3 Months Ended |
Mar. 31, 2018 | |
Investment In and Advances to Unconsolidated Affiliates | |
Investment In Unconsolidated Affiliates | 9. Investment in Unconsolidated Affiliates The Company has a 50% investment in Kansas Entertainment, which is a joint venture with International Speedway Corporation. 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, 2017, the Company’s investment in Kansas Entertainment met the requirements of S-X Rule 4-08(g) to provide summarized financial information. The following table provides summary income statement information for Kansas Entertainment as required under S-X Rule 1-02(bb) for the comparative periods presented in the Company’s condensed consolidated statements of income. Three Months Ended March 31, 2018 2017 Net revenues $ 39,285 $ 38,846 Operating expenses 27,658 28,838 Income from operations 11,627 10,008 Net income $ 11,627 $ 10,008 Net income attributable to Penn $ 5,814 $ 5,004 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Taxes | |
Income Taxes | 10. Income Taxes In December 2017, the President of the United States signed into law comprehensive tax reform legislation commonly known as Tax Cuts and Jobs Act (the “Tax Act”), which introduced significant changes to the previous tax law. This new legislation reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. In December 2017, the Company recorded an increase to deferred tax expense of approximately $261.3 million on the date of enactment primarily relating to a reduction of our net deferred tax asset because of the rate change. The adjustments related to the application of the Tax Act continue to be provisional amounts to the extent that they are reasonably estimable and the Company will refine them as more information becomes available. The Company has not made any material measurement period adjustments related to these items in the three month period ended March 31, 2018. In accordance with Staff Accounting Bulletin No. 118, any adjustments to the provisional changes will be included in income tax expense or benefit in the appropriate period. The Company calculates the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to the full year projected pretax book income or loss excluding certain discrete items. The effective tax rate (income taxes as a percentage of income from operations before income taxes) including discrete items was 25.67% for the three months ended March 31, 2018, as compared to 30.10% for the three months ended March 31, 2017, primarily due to the reduced federal income tax rate as a result of the Tax Act and higher earnings before income taxes. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Significant Accounting Policies | |
Revenue Recognition and Promotional Allowances | Revenue Recognition and Promotional Allowances The Company’s revenue from contracts with customers consists of gaming wagers, food and beverage transactions, retail transactions, hotel room sales, racing wagers, management services related to our management of external casino’s, and reimbursable costs associated with our management contracts. The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered. The transaction price for food and beverage, hotel and retail contracts is the net amount collected from the customer for such goods and services. Sales tax and other taxes collected on behalf of governmental authorities are accounted for on the net basis and are not included in revenues or expenses. The transaction price for our racing operations, inclusive of live racing events conducted at our racing facilities and our import and export arrangements, is the commission received from the pari-mutuel pool less contractual fees and obligations primarily consisting of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to the racing operations. The transaction price for our management service contracts is the amount collected for services rendered in accordance with the contractual terms. The transaction price for our reimbursable costs associated with our management contracts is the gross amount of the reimbursable expenditure, which primarily consists of payroll costs, incurred by the Company for the benefit of the managed entity. Gaming revenue contracts involve two performance obligations for those customers earning points under the Company’s loyalty reward programs and a single performance obligation for customers that do not participate in the programs. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the condensed consolidated financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a point that can be redeemed for slot play and complimentaries such as food and beverage at our restaurants, lodging at our hotels and products offered at our retail stores, less estimated breakage. The allocated revenue for gaming wagers is recognized when the wagering occurs as all such wagers settle immediately. The loyalty reward contract liability amount is deferred and recognized as revenue when the customer redeems the loyalty points for slot play and complimentaries and such goods and services are delivered to the customer. Food and beverage, hotel and retail services have been determined to be separate, standalone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred to the customer over their stay at the hotel or when the delivery is made for the food and beverage or retail product. Cancellation fees for hotel and meeting space services are recognized upon cancellation by the customer and are included in food, beverage, hotel and other revenue. Racing revenue contracts, inclusive of the Company’s (i) host racing facilities, (ii) import arrangements that permit the Company to simulcast in live racing events occurring at other racetracks and (iii) export arrangements that permit the Company’s live racing event to be simulcast at other racetracks, provide access to and the processing of wagers into the pari-mutuel pool. The Company has concluded it is not the controlling entity to the arrangement, but rather functions as an agent to the pari-mutuel pool. Commissions earned from the pari-mutuel pool less contractual fees and obligations are recognized on a net basis which is included within food, beverage, hotel and other revenue. Management services have been determined to be separate, standalone performance obligations and the transaction price for such contracts is recorded as services are performed. The Company records revenues on a monthly basis calculated by applying the contractual rate called for in the contract. Penn Interactive Ventures generates in-app purchase and advertising revenues from free-to-play social casino games which can be downloaded to mobile phones and tablets from digital storefronts. Players can purchase virtual playing credits within our social casino games which allows for increased playing opportunities and functionality. Penn Interactive Ventures records deferred revenue from the sale of virtual playing credits and recognizes this revenue over the average redemption period of the credits which is approximately three days. Advertising revenues are recognized in the period when the advertising impression, click or install delivery occurs. Penn Interactive Ventures also generates revenue from revenue sharing arrangements with third party content providers whereby revenues are recognized on a net basis since Penn Interactive Ventures is not the controlling entity in the arrangement. Reimbursable management costs associated with the Company’s management contracts represent amounts received or due pursuant to the Company’s management agreement for the reimbursement of expenses, primarily payroll costs, incurred by the Company on the managed facility’s behalf. The Company is the controlling entity to the arrangement, therefore the reimbursement is recorded on a gross basis with an offsetting amount charged to operating expense. Promotional Allowances The retail value of accommodations, food and beverage, and other services furnished to guests for free as an inducement to gamble is included in food, beverage, hotel and other revenue and offset as a deduction to gaming revenue in accordance with the new revenue standard and consists of the following for the period ended March 31, 2018: Three Months Ended March 31, 2018 (in thousands) Lodging $ 9,687 Food and beverage 22,976 Other 976 Total amount recorded in food, beverage, hotel and other revenues and offset to gaming revenues $ 33,639 The estimated cost of providing such complimentary services to guests for free as an inducement to gamble is included in food, beverage, hotel and other expenses and consists of the following for the period ended March 31, 2018: Three Months Ended March 31, 2018 (in thousands) Lodging $ 1,291 Food and beverage 8,619 Other 293 Total cost of complimentary services included in food, beverage, hotel and other expense $ 10,203 Revenue Disaggregation The Company is a geographically diversified, multi-jurisdictional owner and manager of gaming and racing facilities and video gaming terminal operations. Our operations are focused in regional gaming markets located within the Northeastern, South/Western and Midwestern United States. We also manage casinos for other entities in the United States and Canada. We generate revenues at our owned and operated properties by providing the following types of services: (i) gaming, (ii) food and beverage, (iii) lodging, (iv) racing, (v) reimbursable management costs and, (vi) other. Our revenue disaggregation by type of revenue and geographic location is as follows (in thousands): Three Months Ended March 31, 2018 Northeast South/West Midwest Other Total Gaming $ 355,785 $ 97,547 $ 201,162 $ - $ 654,494 Food and beverage 19,180 28,279 15,921 263 63,643 Lodging 1,967 23,601 7,953 - 33,521 Racing 5,276 7 - 1,527 6,810 Reimbursable management costs 21,844 6,340 - - 28,184 Other 10,115 5,522 5,050 8,746 29,433 Total net revenues $ 414,167 $ 161,296 $ 230,086 $ 10,536 $ 816,085 Customer-related Liabilities The Company has two general types of liabilities related to contracts with customers: (i) our loyalty credit obligation and (ii) advance payments on goods and services yet to be provided or for unpaid wagers. The Company’s loyalty reward programs allow members to utilize their reward membership cards to earn loyalty points that are redeemable for slot play and complimentaries such as food and beverages at our restaurants, lodging at our hotels and products offered at our retail stores across the vast majority of the Company’s casino properties. The Company accounts for the loyalty credit obligation utilizing a deferred revenue model, which defers revenue at the estimated fair value when the loyalty points are earned by our customers. Revenue associated with the loyalty credit obligation is subsequently recognized into revenue when the loyalty points are redeemed. The deferred revenue liability is based on the estimated standalone selling price of the loyalty points earned after factoring in the likelihood of redemption. The Company’s loyalty credit obligation was $22.4 million at March 31, 2018 compared to $24.7 million upon the adoption of the new revenue standard at January 1, 2018. Our loyalty credit obligations are generally settled within six months of issuance. Changes between the opening and closing balances primarily relate to the timing of the customer’s election to redeem loyalty points for complimentaries and products offered at our food and beverage outlets, hotels and retail stores. The Company’s advance payments on goods and services yet to be provided or for unpaid wagers primarily consist of the following: (i) deposits on rooms and convention space, (ii) money deposited on behalf of a customer in advance of their property visitation (i.e. front money), (iii) outstanding tickets generated by slot machine play or pari-mutuel wagering, (iv) outstanding chip liabilities, (v) unclaimed jackpots and (vi) gift cards redeemable at our properties. Advance payments on goods and services are recognized as revenue when the good or service is transferred to the customer. Unpaid wagers primarily relate to the Company’s obligation to settle outstanding slot tickets, pari-mutuel racing tickets and gaming tokens with customers and generally represents obligations stemming from prior wagering events of which revenue was previously recognized. The Company’s advance payments on goods and services yet to be provided or for unpaid wagers were $21.1 million and $21.2 million at March 31, 2018 and December 31, 2017, respectively, of which $1.2 million and $1.3 million are classified as long-term. |
Gaming and Racing Taxes | Gaming and Racing Taxes The Company is subject to gaming and pari-mutuel taxes based on gross gaming revenue and pari-mutuel revenue in the jurisdictions in which it operates. The Company primarily recognizes gaming and pari-mutuel tax expense based on the statutorily required percentage of revenue that is required to be paid to state and local jurisdictions in the states where or in which wagering occurs. In certain states in which the Company operates, gaming taxes are based on graduated rates. The Company records gaming tax expense at the Company’s estimated effective gaming tax rate for the year, considering estimated taxable gaming revenue and the applicable rates. Such estimates are adjusted each interim period. If gaming tax rates change during the year, such changes are applied prospectively in the determination of gaming tax expense in future interim periods. For the three months ended March 31, 2018, these expenses, which are recorded primarily within gaming expense in the condensed consolidated statements of income, were $247.4 million, as compared to $244.4 million for the three months ended March 31, 2017. |
Long-term asset related to the Jamul Tribe | Long-term asset related to the Jamul Indian Village The unpaid principal balance of the loan to the Jamul Indian Village Development Corporation (“JIVDC”) at March 31, 2018 and December 31, 2017 was $98.5 million and $98.3 million, respectively. The net carrying value of the loan to the JIVDC totaled $20.6 million and $20.9 million at March 31, 2018 and December 31, 2017, respectively. The Company’s remaining exposure at March 31, 2018 was $27.6 million inclusive of future unfunded commitments on the loan. |
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. The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three months ended March 31, 2018 and 2017: Three Months Ended March 31, Three Months Ended March 31, 2018 2017 (in thousands) Determination of shares: Weighted-average common shares outstanding 91,191 90,751 Assumed conversion of dilutive employee stock-based awards 3,260 1,105 Assumed conversion of restricted stock 199 61 Diluted weighted-average common shares outstanding 94,650 91,917 Options to purchase 646,307 and 4,545,585 shares were outstanding during the three months ended March 31, 2018 and 2017, respectively, but were not included in the computation of diluted EPS because they were antidilutive. The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2018 and 2017 (in thousands, except per share data): Three Months Ended March 31, Three Months Ended March 31, 2018 2017 Calculation of basic EPS: Net income applicable to common stock $ 45,437 $ 5,104 Weighted-average common shares outstanding 91,191 90,751 Basic EPS $ 0.50 $ 0.06 Calculation of diluted EPS using two-class method: Net income applicable to common stock $ 45,437 $ 5,104 Diluted weighted-average common shares outstanding 94,650 91,917 Diluted EPS $ 0.48 $ 0.06 |
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 661,175 and 1,446,353 stock options during the three months ended March 31, 2018 and 2017, respectively. Stock-based compensation expense for the three months ended March 31, 2018 was $2.9 million as compared to $2.2 million for the three months ended March 31, 2017, 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 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 $0.8 million and $4.8 million at March 31, 2018 and December 31, 2017, respectively, primarily due to payouts on the awards. For PSUs held by Penn employees, there was $5.9 million of total unrecognized compensation cost at March 31, 2018 that will be recognized over the grants remaining weighted average vesting period of 2.63 years. For the three months ended March 31, 2018, the Company recognized $0.1 million of compensation expense associated with these awards, as compared to $4.3 million for the three months ended March 31, 2017. The changes are primarily due to the final vesting of the Company’s Transition Award Program on July 23, 2017 as well as changes in Penn’s stock prices at March 31 compared to December 31 in both years. Amounts paid by the Company for the three months ended March 31, 2018 on these cash-settled awards totaled $4.1 million as compared to $3.5 million for the three months ended March 31, 2017. For the Company’s cash-settled 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 $16.8 million and $24.0 million at March 31, 2018 and December 31, 2017, respectively. For SARs held by Penn employees, there was $12.9 million of total unrecognized compensation cost at March 31, 2018 that will be recognized over the awards remaining weighted average vesting period of 2.55 years. For the three months ended March 31, 2018, the Company recognized a benefit to compensation expense of $4.0 million associated with these awards, as compared to compensation expense of $4.0 million for the three months ended March 31, 2017. The changes are primarily due to changes in Penn’s stock prices at March 31 compared to December 31 in both years. Amounts paid by the Company for the three months ended March 31, 2018 on these cash-settled awards totaled $3.0 million as compared to $1.1 million for the three months ended March 31, 2017. In addition to the variances in cash-settled awards explained above, accrued salaries and wages decreased during the three months ended March 31, 2018 due to the payment of 2017 bonuses. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model for stock option awards granted during the March 31, 2018 and 2017, respectively: Three months ended March 31, Risk-free interest rate % 1.97 % Expected volatility % 30.67 % Dividend yield — — Weighted-average expected life (years) 5.30 |
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”, 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, 1st Jackpot and Resorts which were acquired on May 1, 2017, as well as our management contract with Hollywood Casino Jamul-San Diego. In late February 2018, the Company and the Jamul Tribe mutually agreed that Penn would no longer manage the facility or provide branding and development services on May 28, 2018. The Company will provide a transition that it anticipates will last through approximately late May. 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 Sanford-Orlando Kennel Club, 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 less than 2% of net revenues and income from operations for the three months ended March 31, 2018, and its total assets represent less than 2% of the Company’s total assets at March 31, 2018. 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 evaluation 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, the difference between budget and actual expense for cash-settled stock-based awards, preopening and significant transaction costs and other income or expenses. Adjusted EBITDA is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (such as depreciation and amortization) added back for our joint venture in Kansas Entertainment. Adjusted EBITDA excludes payments associated with our Master Lease agreement with GLPI as the transaction was accounted for as a financing obligation. In the first quarter of 2018, we changed the definition of adjusted EBITDA to exclude preopening costs, significant transaction costs and the variance between our budgeted and actual costs incurred on cash-settled stock based awards which are required to be marked to market each reporting period. We determined to exclude preopening costs and significant transaction costs to more closely align the Company’s calculation of adjusted EBITDA with our competitors. Preopening costs and significant transaction costs are also excluded from adjusted EBITDA for bonus calculation purposes. We have excluded the favorable or unfavorable difference between the budgeted expense and actual expense for our cash-settled stock-based awards as it is non-operational in nature. Additionally, this variance is excluded from adjusted EBITDA for bonus calculation purposes. In connection with the change to the definition of adjusted EBITDA, we reclassified our prior period results to conform to the current period presentation. Adjusted EBITDA should not be construed as an alternative to operating income, as an indicator of the Company’s operating performance, as an alternative to cash flows from operating activities, as a measure of liquidity, or as any other measure of performance determined in accordance with GAAP. The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in adjusted EBITDA. See Note 7: “Segment Information” for further information with respect to the Company’s segments. |
New Accounting Pronouncements (
New Accounting Pronouncements (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
ASU 2014-09 | |
Schedule of impact of adoption of ASU-2014-09 on condensed statements of income and condensed consolidated balance sheets | In accordance with the new revenue standard requirement, the disclosure of the impact of adoption on our condensed consolidated statements of income and condensed consolidated balance sheets at and for the period ended March 31, 2018 are as follows (in thousands): Three Loyalty Point Impact (1) Promotional Allowance (Discretionary Comps) Impact (2) Promotional Allowance (Point Redemptions) Impact (2) Reimbursable Expense - Casino Rama Impact (3) Racing Revenue Impact (4) Balances Effect of Income Statement Revenues Gaming $ 654,494 $ (1,419) $ 33,639 $ - $ - $ - $ 686,714 $ (32,220) Food, beverage, hotel and other 130,969 (69) - 6,624 - 8,960 146,484 (15,515) Management service fees 2,438 - - - - - 2,438 - Reimbursable management costs 28,184 - - - (21,844) - 6,340 21,844 Revenues 816,085 (1,488) 33,639 6,624 (21,844) 8,960 841,976 (25,891) Less: promotional allowances - - (33,639) (6,624) - - (40,263) 40,263 Net Revenue 816,085 (1,488) - - (21,844) 8,960 801,713 14,372 Operating expenses Gaming 340,516 (1,027) - - - - 339,489 1,027 Food, beverage, hotel and other 92,980 - - - - 8,960 101,940 (8,960) General and administrative 121,263 - - - - - 121,263 - Reimbursable management costs 28,184 - - - (21,844) - 6,340 21,844 Depreciation and amortization 60,390 - - - - - 60,390 - Impairment losses 618 - - - - - 618 - Insurance recoveries - - - - - - - Total operating expenses 643,951 (1,027) - - (21,844) 8,960 630,040 13,911 Income from operations 172,134 (461) - - - - 171,673 461 Income from operations before income taxes 61,126 (461) - - - - 60,665 461 Income tax (benefit) provision 15,689 (118) - - - - 15,571 118 Net income $ 45,437 $ (343) $ - $ - $ - $ - $ 45,094 $ 343 As a result of the adoption of the new revenue standard, the following areas resulted in significant changes to the Company’s accounting: (1) The new revenue standard changed the accounting for loyalty points earned by our customers. The Company’s loyalty reward programs allow members to utilize their reward membership cards to earn loyalty points that are redeemable for slot play and complimentaries such as food and beverage at our restaurants, lodging at our hotels, and products offered at our retail stores across the vast majority of the Company’s casino properties. Under the new revenue standard, the Company is required to utilize a deferred revenue model and defer revenue at the estimated fair value when the loyalty points are earned by our customers and recognize revenue when the loyalty points are redeemed. The deferred revenue liability is based on the estimated standalone selling price of the loyalty points earned after factoring in the likelihood of redemption. Prior to the adoption of the new revenue standard, the estimated liability for unredeemed points was accrued based on expected redemption rates and the estimated costs of the service or merchandise to be provided. (2) The new revenue standard changed the accounting for promotional allowances. Under the new revenue standard, the Company will no longer be permitted to report revenue for goods and services provided to customers for free as an inducement to gamble as gross revenue with a corresponding reduction in promotional allowances to arrive at net revenues. The new revenue standard requires complimentaries related to an inducement to gamble to be recorded as a reduction to gaming revenues, and as such promotional allowances provided to customer’s as an inducement to gamble is no longer netted on our condensed consolidated statements of income. In addition, the new revenue standard changed the accounting for promotional allowances with respect to non-discretionary complimentaries (i.e. a customer’s redemption of loyalty points). Under the new revenue standard, the Company is no longer permitted to report revenue for goods and services provided to a customer resulting from loyalty point redemption with a corresponding reduction in promotional allowances to arrive at net revenue, as the new revenue standard requires the utilization of a deferred revenue model in which previously deferred revenue is recognized as revenue when the loyalty points are redeemed. As such, promotional allowances related to a customer’s redemption of loyalty points is no longer netted on our condensed consolidated statements of income. (3) The Company revised its accounting for reimbursable costs associated with our management service contract for Casino Rama. Under the new revenue standard, reimbursable costs, which primarily consist of payroll costs, must 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. Prior to this revision, the Company recorded these reimbursable amounts on a net basis. (4) The new revenue standard changed the accounting for racing revenues. Under the new revenue standard, we concluded that the Company is not the controlling entity to the arrangement(s), but rather functions as an agent to the pari-mutuel pool. As such, fees and obligations related to the Company’s share of purse funding requirements, simulcasting fees, tote fees, certain pari-mutuel taxes and other fees directly related to the Company’s racing operations must be reported on a net basis and included as a deduction to food, beverage, hotel and other revenue. Prior to the adoption of the new revenue standard, the Company recorded these fees and obligations in food, beverage, hotel and other expense . As Reported At March 31, 2018 Balances Without the Adoption of ASC 606 Effect of Change Higher (Lower) Balance Sheet Other assets Deferred income taxes 388,058 386,271 1,787 Current liabilities Accrued expenses 134,312 123,078 11,234 Shareholders' (deficit) Retained deficit (1,016,031) (1,007,175) (8,856) The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASU 2014-09, “ Revenue from Contracts with Customers (Topic 606) ” were as follows (in thousands): Balance at December 31, 2017 Adjustment Due to ASU 2014-09 Balance at January 1, 2018 Balance Sheet Other assets Deferred income taxes 390,943 2,044 392,987 Current liabilities Accrued expenses 125,688 11,694 137,382 Shareholders' (deficit) Retained deficit (1,051,818) (9,650) (1,061,468) |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Significant Accounting Policies | |
Schedule of promotional allowances | Three Months Ended March 31, 2018 (in thousands) Lodging $ 9,687 Food and beverage 22,976 Other 976 Total amount recorded in food, beverage, hotel and other revenues and offset to gaming revenues $ 33,639 |
Schedule of estimated cost of providing complimentary services | Three Months Ended March 31, 2018 (in thousands) Lodging $ 1,291 Food and beverage 8,619 Other 293 Total cost of complimentary services included in food, beverage, hotel and other expense $ 10,203 |
Schedule of disaggregation of revenue | Our revenue disaggregation by type of revenue and geographic location is as follows (in thousands): Three Months Ended March 31, 2018 Northeast South/West Midwest Other Total Gaming $ 355,785 $ 97,547 $ 201,162 $ - $ 654,494 Food and beverage 19,180 28,279 15,921 263 63,643 Lodging 1,967 23,601 7,953 - 33,521 Racing 5,276 7 - 1,527 6,810 Reimbursable management costs 21,844 6,340 - - 28,184 Other 10,115 5,522 5,050 8,746 29,433 Total net revenues $ 414,167 $ 161,296 $ 230,086 $ 10,536 $ 816,085 |
Schedule of reconciliation of the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS | Three Months Ended March 31, Three Months Ended March 31, 2018 2017 (in thousands) Determination of shares: Weighted-average common shares outstanding 91,191 90,751 Assumed conversion of dilutive employee stock-based awards 3,260 1,105 Assumed conversion of restricted stock 199 61 Diluted weighted-average common shares outstanding 94,650 91,917 |
Schedule of calculation of basic and diluted EPS for the entity's common stock | The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2018 and 2017 (in thousands, except per share data): Three Months Ended March 31, Three Months Ended March 31, 2018 2017 Calculation of basic EPS: Net income applicable to common stock $ 45,437 $ 5,104 Weighted-average common shares outstanding 91,191 90,751 Basic EPS $ 0.50 $ 0.06 Calculation of diluted EPS using two-class method: Net income applicable to common stock $ 45,437 $ 5,104 Diluted weighted-average common shares outstanding 94,650 91,917 Diluted EPS $ 0.48 $ 0.06 |
Weighted-average assumptions used in Black-Scholes option pricing model | Three months ended March 31, Risk-free interest rate % 1.97 % Expected volatility % 30.67 % Dividend yield — — Weighted-average expected life (years) 5.30 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Property and Equipment | |
Schedule of property and equipment, net | March 31, December 31, 2018 2017 (in thousands) Property and equipment - non-Master Lease Land and improvements $ 294,716 $ 294,695 Building and improvements 430,440 429,015 Furniture, fixtures and equipment 1,381,443 1,385,889 Leasehold improvements 131,257 130,801 Construction in progress 17,345 15,617 2,255,201 2,256,017 Less Accumulated depreciation (1,367,370) (1,345,147) 887,831 910,870 Property and equipment - Master Lease Land and improvements 424,700 424,700 Building and improvements 2,258,577 2,258,577 2,683,277 2,683,277 Less accumulated depreciation (860,456) (837,478) 1,822,821 1,845,799 Property and equipment, net $ 2,710,652 $ 2,756,669 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Intangible Assets | |
Schedule of gross carrying value, accumulated amortization, and net book value of each major class of other intangible assets | March 31, 2018 December 31, 2017 (in thousands) Gross Gross Carrying Accumulated Net Book Carrying Accumulated Net Book Value Amortization Value Value Amortization Value Indefinite-life intangible assets $ 425,505 $ — $ 425,505 $ 375,405 $ — $ 375,405 Other intangible assets 132,831 88,758 44,073 131,483 84,282 47,201 Total $ 558,336 $ 88,758 $ 469,578 $ 506,888 $ 84,282 $ 422,606 |
Schedule of expected intangible asset amortization expense | The following table presents expected intangible asset amortization expense based on existing intangible assets as of March 31, 2018 (in thousands): Remaining 2018 $ 9,554 2019 8,949 2020 6,287 2021 3,644 2022 3,596 Thereafter 12,043 Total $ 44,073 |
Long-term Debt (Tables)
Long-term Debt (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Long-term Debt | |
Schedule of long-term debt, net of current maturities | March 31, December 31, 2018 2017 (in thousands) Senior secured credit facility $ 715,000 $ 760,000 $400 million 5.625% senior unsecured notes due January 15, 2027 400,000 400,000 Other long-term obligations 111,674 119,310 Capital leases 449 891 1,227,123 1,280,201 Less current maturities of long-term debt (35,498) (35,612) Less discount on senior secured credit facility Term Loan B (2,251) (2,558) Less debt issuance costs (25,227) (27,406) $ 1,164,147 $ 1,214,625 |
Schedule of future minimum repayments of long-term debt | The following is a schedule of future minimum repayments of long-term debt as of March 31, 2018 (in thousands): Within one year $ 35,498 1-3 years 94,963 3-5 years 263,187 Over 5 years 833,475 Total minimum payments $ 1,227,123 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Information | |
Schedule of information with respect to the Company's segments | Three months ended March 31, 2018 2017 Net Revenues Northeast $ 414,167 $ 393,465 South/West 161,296 139,820 Midwest 230,086 228,338 Other (1) 10,536 14,601 Total Reportable Segment Net Revenues 816,085 776,224 Adjusted EBITDA Northeast 132,007 126,574 South/West 45,049 36,341 Midwest 81,155 78,106 Other (1) (15,665) (13,576) Total Reportable Segment Adjusted EBITDA 242,546 227,445 Other operating costs and other expenses (income) Depreciation and amortization 60,390 70,236 Unconsolidated non-operating costs - Kansas JV 1,294 1,951 Interest expense 115,740 114,996 Interest income (249) (2,646) Loss (gain) on disposal of assets 55 (45) Impairment losses 618 — Cash-settled stock award variance (7,462) 5,164 Pre-opening and significant transaction costs 6,093 571 Loss on early extinguishment of debt and modification costs 882 23,390 Other (4) 1,793 Contingent purchase price 1,134 2,560 Charge for stock compensation 2,929 2,173 Income before income taxes 61,126 7,302 Income taxes 15,689 2,198 Net income $ 45,437 $ 5,104 Northeast South/West Midwest Other (1) Total Three months ended March 31, 2018 Capital expenditures $ 3,487 $ 3,412 $ 3,732 $ 1,182 $ 11,813 Three months ended March 31, 2017 Capital expenditures $ 3,990 $ 8,622 $ 4,331 $ 213 $ 17,156 Balance sheet at March 31, 2018 Total assets (1) $ 813,232 $ 783,634 $ 1,081,046 $ 2,487,621 $ 5,165,533 Investment in and advances to unconsolidated affiliates 105 — 87,610 59,943 147,658 Goodwill 21,242 244,695 674,558 67,602 1,008,097 Other intangible assets, net 353,143 978 100,798 14,659 469,578 Balance sheet at December 31, 2017 Total assets (1) $ 821,649 $ 794,274 $ 1,070,204 $ 2,548,685 $ 5,234,812 Investment in and advances to unconsolidated affiliates 102 — 88,296 60,514 148,912 Goodwill 21,242 244,695 674,558 67,602 1,008,097 Other intangible assets, net 303,043 1,623 101,698 16,242 422,606 (1) Total assets include the real property assets under the Master Lease with GLPI. Net revenues and adjusted EBITDA relate to the Company’s stand-alone racing operations, namely Sanford Orlando Kennel Club and the Company’s joint venture interests in Texas and New Jersey which do not have gaming operations. Other also includes corporate overhead operations as well as Penn Interactive Ventures, which is a wholly-owned subsidiary that is focused on the Company’s interactive gaming strategy. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Measurements | |
Schedule of carrying amount and estimated fair values of financial instruments | The carrying amounts and estimated fair values by input level of the Company’s financial instruments at March 31, 2018 and December 31, 2017 are as follows (in thousands): March 31, 2018 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 217,997 $ 217,997 $ 217,997 $ — $ — Loan to the JIVDC 20,613 16,677 — — 16,677 Financial liabilities: Long-term debt Senior secured credit facility 688,251 716,634 716,634 — — Senior unsecured notes 399,270 385,000 385,000 — — Other long-term obligations 111,674 106,402 — 106,402 — Other liabilities 23,810 23,810 — — 23,810 December 31, 2017 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 277,953 $ 277,953 $ 277,953 $ — $ — Loan to the JIVDC 20,900 16,533 — — 16,533 Financial liabilities: Long-term debt Senior secured credit facility 730,787 760,456 760,456 — — Senior unsecured notes 399,249 412,000 412,000 — — Other long-term obligations 119,310 113,460 — 113,460 — Other liabilities 22,696 22,696 — — 22,696 |
Summary of the changes in fair value of Level 3 liabilities | The following table summarizes the changes in the fair value of the Company’s Level 3 liabilities (in thousands): Three Months Ended March 31, 2018 Liabilities Contingent Purchase Price Balance at January 1, 2018 $ 22,696 Additions — Payments (20) Included in earnings 1,134 Balance at March 31, 2018 $ 23,810 |
Summary of significant unobservable inputs used in calculating fair value Level 3 liabilities | Valuation Unobservable Technique Input Discount Rate Contingent purchase price - Plainridge Discounted cash flow Discount rate 7.60 % |
Investment In and Advances to26
Investment In and Advances to Unconsolidated Affiliates (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Investment In and Advances to Unconsolidated Affiliates | |
Schedule of summary financial information for Kansas Entertainment for the comparative periods presented in the Company's consolidated balance sheets and consolidated statements of operations | Three Months Ended March 31, 2018 2017 Net revenues $ 39,285 $ 38,846 Operating expenses 27,658 28,838 Income from operations 11,627 10,008 Net income $ 11,627 $ 10,008 Net income attributable to Penn $ 5,814 $ 5,004 |
Organization and Basis of Pre27
Organization and Basis of Presentation (Details) | Mar. 31, 2018jurisdictionfacility |
Organization and Basis of Presentation | |
Number of facilities the entity owned, managed, or had ownership interests in | facility | 29 |
Number of jurisdictions in which the entity operates | jurisdiction | 17 |
New Accounting Pronouncements -
New Accounting Pronouncements - Cumulative Effect on Statements of Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cumulative effect of adoption | ||
Revenues | $ 816,085 | |
Less promotional allowances | $ (41,858) | |
Net revenues | 816,085 | 776,224 |
Operating expenses | ||
General and administrative | 121,263 | 125,815 |
Depreciation and amortization | 60,390 | 70,236 |
Impairment losses | 618 | |
Total operating expenses | 643,951 | 635,937 |
Income from operations | 172,134 | 140,287 |
Income from operations before income taxes | 61,126 | 7,302 |
Income tax provision | 15,689 | 2,198 |
Net income | 45,437 | 5,104 |
Gaming | ||
Cumulative effect of adoption | ||
Revenues | 654,494 | |
Operating expenses | ||
Operating expenses | 340,516 | 332,053 |
Food, beverage, hotel and other | ||
Cumulative effect of adoption | ||
Revenues | 130,969 | |
Operating expenses | ||
Operating expenses | 92,980 | 101,075 |
Management service fees | ||
Cumulative effect of adoption | ||
Revenues | 2,438 | |
Reimbursable management costs | ||
Cumulative effect of adoption | ||
Revenues | 28,184 | |
Operating expenses | ||
Operating expenses | 28,184 | $ 6,758 |
Balances Without Adoption of ASC 606 | ||
Cumulative effect of adoption | ||
Revenues | 841,976 | |
Less promotional allowances | (40,263) | |
Net revenues | 801,713 | |
Operating expenses | ||
General and administrative | 121,263 | |
Depreciation and amortization | 60,390 | |
Impairment losses | 618 | |
Total operating expenses | 630,040 | |
Income from operations | 171,673 | |
Income from operations before income taxes | 60,665 | |
Income tax provision | 15,571 | |
Net income | 45,094 | |
Balances Without Adoption of ASC 606 | Gaming | ||
Cumulative effect of adoption | ||
Revenues | 686,714 | |
Operating expenses | ||
Operating expenses | 339,489 | |
Balances Without Adoption of ASC 606 | Food, beverage, hotel and other | ||
Cumulative effect of adoption | ||
Revenues | 146,484 | |
Operating expenses | ||
Operating expenses | 101,940 | |
Balances Without Adoption of ASC 606 | Management service fees | ||
Cumulative effect of adoption | ||
Revenues | 2,438 | |
Balances Without Adoption of ASC 606 | Reimbursable management costs | ||
Cumulative effect of adoption | ||
Revenues | 6,340 | |
Operating expenses | ||
Operating expenses | 6,340 | |
ASU 2014-09 | Effect of Change Higher / (Lower) | ||
Cumulative effect of adoption | ||
Revenues | (25,891) | |
Less promotional allowances | 40,263 | |
Net revenues | 14,372 | |
Operating expenses | ||
Total operating expenses | 13,911 | |
Income from operations | 461 | |
Income from operations before income taxes | 461 | |
Income tax provision | 118 | |
Net income | 343 | |
ASU 2014-09 | Effect of Change Higher / (Lower) | Gaming | ||
Cumulative effect of adoption | ||
Revenues | (32,220) | |
Operating expenses | ||
Operating expenses | 1,027 | |
ASU 2014-09 | Effect of Change Higher / (Lower) | Food, beverage, hotel and other | ||
Cumulative effect of adoption | ||
Revenues | (15,515) | |
Operating expenses | ||
Operating expenses | (8,960) | |
ASU 2014-09 | Effect of Change Higher / (Lower) | Reimbursable management costs | ||
Cumulative effect of adoption | ||
Revenues | 21,844 | |
Operating expenses | ||
Operating expenses | 21,844 | |
ASU 2014-09 | Loyalty Point Impact | ||
Cumulative effect of adoption | ||
Revenues | (1,488) | |
Net revenues | (1,488) | |
Operating expenses | ||
Total operating expenses | (1,027) | |
Income from operations | (461) | |
Income from operations before income taxes | (461) | |
Income tax provision | (118) | |
Net income | (343) | |
ASU 2014-09 | Loyalty Point Impact | Gaming | ||
Cumulative effect of adoption | ||
Revenues | (1,419) | |
Operating expenses | ||
Operating expenses | (1,027) | |
ASU 2014-09 | Loyalty Point Impact | Food, beverage, hotel and other | ||
Cumulative effect of adoption | ||
Revenues | (69) | |
ASU 2014-09 | Promotional Allowance Discretionary Complimentaries Impact | ||
Cumulative effect of adoption | ||
Revenues | 33,639 | |
Less promotional allowances | (33,639) | |
ASU 2014-09 | Promotional Allowance Discretionary Complimentaries Impact | Gaming | ||
Cumulative effect of adoption | ||
Revenues | 33,639 | |
ASU 2014-09 | Promotional Allowance Point Redemption Impact | ||
Cumulative effect of adoption | ||
Revenues | 6,624 | |
Less promotional allowances | (6,624) | |
ASU 2014-09 | Promotional Allowance Point Redemption Impact | Food, beverage, hotel and other | ||
Cumulative effect of adoption | ||
Revenues | 6,624 | |
ASU 2014-09 | Reimbursable Expense - Casino Rama Impact | ||
Cumulative effect of adoption | ||
Revenues | (21,844) | |
Net revenues | (21,844) | |
Operating expenses | ||
Total operating expenses | (21,844) | |
ASU 2014-09 | Reimbursable Expense - Casino Rama Impact | Reimbursable management costs | ||
Cumulative effect of adoption | ||
Revenues | (21,844) | |
Operating expenses | ||
Operating expenses | (21,844) | |
ASU 2014-09 | Racing Revenue Impact | ||
Cumulative effect of adoption | ||
Revenues | 8,960 | |
Net revenues | 8,960 | |
Operating expenses | ||
Total operating expenses | 8,960 | |
ASU 2014-09 | Racing Revenue Impact | Food, beverage, hotel and other | ||
Cumulative effect of adoption | ||
Revenues | 8,960 | |
Operating expenses | ||
Operating expenses | $ 8,960 |
New Accounting Pronouncements29
New Accounting Pronouncements - Cumulative Effect on Balance Sheet (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
Mar. 31, 2018 | Mar. 31, 2017 | Jan. 02, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | |
Other assets | |||||
Deferred income taxes | $ 388,058 | $ 392,987 | $ 390,943 | ||
Current liabilities | |||||
Accrued expenses | 134,312 | 137,382 | 125,688 | ||
Shareholders' deficit | |||||
Retained deficit | (1,016,031) | $ (1,061,468) | $ (1,051,818) | ||
Retrospective adjustments | |||||
Net cash provided by operating activities | 66,937 | $ 84,832 | |||
Net cash used in financing activities | 64,423 | 31,543 | |||
Balances Without Adoption of ASC 606 | |||||
Other assets | |||||
Deferred income taxes | 386,271 | ||||
Current liabilities | |||||
Accrued expenses | 123,078 | ||||
Shareholders' deficit | |||||
Retained deficit | (1,007,175) | ||||
ASU 2014-09 | Effect of Change Higher / (Lower) | |||||
Other assets | |||||
Deferred income taxes | 1,787 | $ 2,044 | |||
Current liabilities | |||||
Accrued expenses | 11,234 | 11,694 | |||
Shareholders' deficit | |||||
Retained deficit | $ (8,856) | $ (9,650) | |||
ASU 2016-15 | Adjustment | |||||
Retrospective adjustments | |||||
Net cash provided by operating activities | 18,000 | ||||
Net cash used in financing activities | $ 18,000 |
Summary of Significant Accoun30
Summary of Significant Accounting Policies - Promotional Allowances (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Promotional allowances | |
Promotion value excluded from revenue | $ 33,639 |
Cost of complimentary services | 10,203 |
Lodging | |
Promotional allowances | |
Promotion value excluded from revenue | 9,687 |
Cost of complimentary services | 1,291 |
Food And Beverage | |
Promotional allowances | |
Promotion value excluded from revenue | 22,976 |
Cost of complimentary services | 8,619 |
Other | |
Promotional allowances | |
Promotion value excluded from revenue | 976 |
Cost of complimentary services | $ 293 |
Summary of Significant Accoun31
Summary of Significant Accounting Policies - Revenue Disaggregation and Customer-related Liabilities (Details) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2018USD ($)item | Mar. 31, 2017USD ($) | Jan. 01, 2018USD ($) | Dec. 31, 2017USD ($) | |
Disaggregation of revenue | ||||
Revenues | $ 816,085 | |||
Customer-related Liabilities | ||||
Number of general types of liabilities related to contracts with customers | item | 2 | |||
Other | ||||
Disaggregation of revenue | ||||
Revenues | $ 10,536 | |||
Northeast | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 414,167 | |||
South/West | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 161,296 | |||
Midwest | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 230,086 | |||
Gaming | ||||
Disaggregation of revenue | ||||
Revenues | 654,494 | |||
Gaming and Racing Taxes | ||||
Gaming and racing taxes | 247,400 | $ 244,400 | ||
Gaming | Northeast | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 355,785 | |||
Gaming | South/West | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 97,547 | |||
Gaming | Midwest | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 201,162 | |||
Food And Beverage | ||||
Disaggregation of revenue | ||||
Revenues | 63,643 | |||
Food And Beverage | Other | ||||
Disaggregation of revenue | ||||
Revenues | 263 | |||
Food And Beverage | Northeast | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 19,180 | |||
Food And Beverage | South/West | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 28,279 | |||
Food And Beverage | Midwest | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 15,921 | |||
Lodging | ||||
Disaggregation of revenue | ||||
Revenues | 33,521 | |||
Lodging | Northeast | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 1,967 | |||
Lodging | South/West | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 23,601 | |||
Lodging | Midwest | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 7,953 | |||
Racing | ||||
Disaggregation of revenue | ||||
Revenues | 6,810 | |||
Racing | Other | ||||
Disaggregation of revenue | ||||
Revenues | 1,527 | |||
Racing | Northeast | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 5,276 | |||
Racing | South/West | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 7 | |||
Reimbursable management costs | ||||
Disaggregation of revenue | ||||
Revenues | 28,184 | |||
Reimbursable management costs | Northeast | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 21,844 | |||
Reimbursable management costs | South/West | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 6,340 | |||
Other | ||||
Disaggregation of revenue | ||||
Revenues | 29,433 | |||
Other | Other | ||||
Disaggregation of revenue | ||||
Revenues | 8,746 | |||
Other | Northeast | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 10,115 | |||
Other | South/West | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 5,522 | |||
Other | Midwest | Operating Segments | ||||
Disaggregation of revenue | ||||
Revenues | 5,050 | |||
Loyalty credit | ||||
Customer-related Liabilities | ||||
Customer-related liability | $ 22,400 | $ 24,700 | ||
Performance obligation settlement period | 6 months | |||
Advance payments on goods and services yet to be provided and unpaid wagers | ||||
Customer-related Liabilities | ||||
Customer-related liability | $ 21,100 | $ 21,200 | ||
Long-term customer-related liability | $ 1,200 | $ 1,300 |
Summary of Significant Accoun32
Summary of Significant Accounting Policies - Long-term Asset Related to Jamul Tribe (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Loan to JIVDC | ||
Loans to the JIVDC | $ 20,613 | $ 20,900 |
JIVDC | ||
Loan to JIVDC | ||
Financing loan receivable, unpaid principal balance | 98,500 | 98,300 |
Loans to the JIVDC | 20,600 | $ 20,900 |
Loans to JIVDC | Concentration of Risk, Maximum Amount of Loss | ||
Loan to JIVDC | ||
Remaining exposure inclusive of future unfunded commitments | $ 27,600 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Determination of shares: | ||
Weighted-average common shares outstanding (in shares) | 91,191,000 | 90,751,000 |
Assumed conversion of dilutive employee stock-based awards (in shares) | 3,260,000 | 1,105,000 |
Assumed conversion of restricted stock (in shares) | 199,000 | 61,000 |
Diluted weighted-average common shares outstanding before participating security | 94,650,000 | 91,917,000 |
Anti-dilutive securities, options to purchase shares outstanding | 646,307 | 4,545,585 |
Calculation of basic EPS: | ||
Net income applicable to common stock | $ 45,437 | $ 5,104 |
Weighted-average common shares outstanding (in shares) | 91,191,000 | 90,751,000 |
Basic EPS (in dollars per share) | $ 0.50 | $ 0.06 |
Calculation of diluted EPS using two class method: | ||
Net income applicable to common stock | $ 45,437 | $ 5,104 |
Diluted weighted-average common shares outstanding before participating security | 94,650,000 | 91,917,000 |
Diluted EPS (in dollars per share) | $ 0.48 | $ 0.06 |
Summary of Significant Accoun34
Summary of Significant Accounting Policies - Stock-Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Stock-based compensation costs | |||
Time period of historical volatility of stock used to estimate expected volatility | 5 years 3 months 18 days | ||
Accrued salaries and wages | $ 76,982 | $ 111,252 | |
Dividend yield (as a percent) | 0.00% | ||
Granted (in shares) | 661,175 | 1,446,353 | |
Weighted-average assumptions used in the Black-Scholes option-pricing model | |||
Risk-free interest rate (as a percent) | 2.26% | 1.97% | |
Expected volatility (as a percent) | 30.80% | 30.67% | |
Dividend yield (as a percent) | 0.00% | ||
Weighted-average expected life | 5 years 3 months 18 days | 5 years 3 months 18 days | |
Employee stock options | General and administrative expenses | |||
Stock-based compensation costs | |||
Compensation costs related to stock-based compensation | $ 2,900 | $ 2,200 | |
Phantom Share Units (PSUs) | |||
Stock-based compensation costs | |||
Accrued salaries and wages | 800 | 4,800 | |
Total compensation cost related to nonvested awards not yet recognized | $ 5,900 | ||
Period for recognition of unrecognized compensation cost | 2 years 7 months 17 days | ||
Compensation costs related to stock-based compensation | $ 100 | 4,300 | |
Amounts paid on cash settled awards | $ 4,100 | 3,500 | |
Vesting period | 4 years | ||
Stock appreciation rights (SARs) | |||
Stock-based compensation costs | |||
Accrued salaries and wages | $ 16,800 | $ 24,000 | |
Total compensation cost related to nonvested awards not yet recognized | $ 12,900 | ||
Period for recognition of unrecognized compensation cost | 2 years 6 months 18 days | ||
Compensation costs related to stock-based compensation | $ (4,000) | 4,000 | |
Amounts paid on cash settled awards | $ 3,000 | $ 1,100 | |
Vesting period | 4 years |
Summary of Significant Accoun35
Summary of Significant Accounting Policies - Segment Information (Details) | 3 Months Ended |
Mar. 31, 2018 | |
Kansas Entertainment | |
Segment Information | |
Ownership interest in joint venture (as a percent) | 50.00% |
Penn Interactive Ventures | Maximum | |
Segment Information | |
Percent of net revenue | 2.00% |
Percent of total assets | 2.00% |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Plant and equipment | |||
Property and equipment, net | $ 2,710,652 | $ 2,756,669 | |
Decrease in property and equipment | 46,000 | ||
Depreciation expense | 55,900 | $ 65,000 | |
Interest capitalized in connection with major construction projects | 0 | 0 | |
Master Lease Agreement | |||
Plant and equipment | |||
Depreciation expense | 23,300 | $ 22,700 | |
Land and improvements - non-leased | |||
Plant and equipment | |||
Property and equipment | 294,716 | 294,695 | |
Land and improvements - master lease | |||
Plant and equipment | |||
Property and equipment | 424,700 | 424,700 | |
Building and improvements - non-leased | |||
Plant and equipment | |||
Property and equipment | 430,440 | 429,015 | |
Buildings and improvements - master lease | |||
Plant and equipment | |||
Property and equipment | 2,258,577 | 2,258,577 | |
Furniture, Fixtures and Equipment | |||
Plant and equipment | |||
Property and equipment | 1,381,443 | 1,385,889 | |
Leasehold Improvements | |||
Plant and equipment | |||
Property and equipment | 131,257 | 130,801 | |
Construction in progress - non-leased | |||
Plant and equipment | |||
Property and equipment | 17,345 | 15,617 | |
Non-leased assets | |||
Plant and equipment | |||
Property and equipment | 2,255,201 | 2,256,017 | |
Less Accumulated depreciation | (1,367,370) | (1,345,147) | |
Property and equipment, net | 887,831 | 910,870 | |
Master lease assets | |||
Plant and equipment | |||
Property and equipment | 2,683,277 | 2,683,277 | |
Less Accumulated depreciation | (860,456) | (837,478) | |
Property and equipment, net | $ 1,822,821 | $ 1,845,799 |
Intangible Assets (Details)
Intangible Assets (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018USD ($)item | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) | |
Intangible assets | |||
Indefinite-life intangible assets | $ 425,505 | $ 375,405 | |
Other intangible assets, Gross Carrying Value | 132,831 | 131,483 | |
Other intangible assets, Accumulated Amortization | 88,758 | 84,282 | |
Finite-lived intangible assets, Net Book Value | 44,073 | 47,201 | |
Total intangible assets, Gross Carrying Value | 558,336 | 506,888 | |
Total intangible assets, Net Book Value | 469,578 | $ 422,606 | |
Increase in other intangible assets during the period | 47,000 | ||
Payment for Category 4 license | 50,100 | ||
Computer software capitalized | 1,400 | ||
Intangible asset amortization expense | $ 4,500 | $ 5,200 | |
Weighted average remaining amortization period | 4 years 7 months 6 days | ||
Maximum | |||
Intangible assets | |||
Number of slot machines in Category 4 facility | item | 750 | ||
Number of table games in Category 4 facility | item | 30 |
Intangible Assets - Future Amor
Intangible Assets - Future Amortization (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Expected intangible asset amortization expense | ||
Remainder of 2018 | $ 9,554 | |
2,019 | 8,949 | |
2,020 | 6,287 | |
2,021 | 3,644 | |
2,022 | 3,596 | |
Thereafter | 12,043 | |
Finite-lived intangible assets, Net Book Value | $ 44,073 | $ 47,201 |
Long-term Debt - Debt Summary (
Long-term Debt - Debt Summary (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 | Jan. 19, 2017 |
Long-term Debt | |||
Long-term debt | $ 1,227,123,000 | $ 1,280,201,000 | |
Less current maturities of long-term debt | (35,498,000) | (35,612,000) | |
Less discount on senior secured credit facility Term Loan B | (2,251,000) | (2,558,000) | |
Less debt issuance costs | (25,227,000) | (27,406,000) | |
Long-term debt, net of current maturities and debt issuance costs | 1,164,147,000 | 1,214,625,000 | |
Senior Secured Credit Facility | |||
Long-term Debt | |||
Long-term debt | 715,000,000 | 760,000,000 | |
Senior Unsecured Notes 5.625 Percent Due January 15, 2027 | |||
Long-term Debt | |||
Long-term debt | 400,000,000 | 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 | $ 111,674,000 | 119,310,000 | |
Capital leases | |||
Long-term Debt | |||
Long-term debt | $ 449,000 | $ 891,000 |
Long-term Debt - Future Minimum
Long-term Debt - Future Minimum Repayments (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Future minimum repayments of long-term debt | ||
Within one year | $ 35,498 | |
1-3 years | 94,963 | |
3-5 years | 263,187 | |
Over 5 years | 833,475 | |
Long-term debt | $ 1,227,123 | $ 1,280,201 |
Long-term Debt - Senior Secured
Long-term Debt - Senior Secured Credit Facility and Senior Notes (Details) - USD ($) | Jan. 19, 2017 | Mar. 31, 2018 | Mar. 31, 2017 |
Long-term Debt | |||
Loss on early extinguishment of debt | $ 882,000 | $ 23,390,000 | |
Interest expense | 115,740,000 | 114,996,000 | |
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 | 715,000,000 | ||
Revolving credit facility | |||
Long-term Debt | |||
Term of debt | 5 years | ||
Maximum borrowing capacity | $ 700,000,000 | ||
Available borrowing capacity | 677,600,000 | ||
Revolver amount outstanding | 0 | ||
Letters of credit outstanding | 22,400,000 | ||
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 | 285,000,000 | ||
Term Loan B Facility | |||
Long-term Debt | |||
Term of debt | 7 years | ||
Maximum borrowing capacity | $ 500,000,000 | ||
Variable interest rate | LIBOR | ||
Variable interest rate spread (as a percent) | 2.50% | ||
Variable interest base rate floor rate (as a percent) | 0.75% | ||
Loss on early extinguishment of debt | 900,000 | ||
Term loan amount outstanding | 430,000,000 | ||
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 | ||
Interest rate (as a percent) | 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 | ||
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% |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Segment information | |||
Net revenues | $ 816,085 | $ 776,224 | |
Adjusted EBITDA | 242,546 | 227,445 | |
Other operating costs and other expenses (income) | |||
Depreciation and amortization | 60,390 | 70,236 | |
Interest expense | 115,740 | 114,996 | |
Interest income | (249) | (2,646) | |
Loss (gain) on disposal of assets | 55 | (45) | |
Impairment losses | 618 | ||
Cash-settled stock award variance | (7,462) | 5,164 | |
Pre-opening and significant transaction costs | 6,093 | 571 | |
Loss on early extinguishment of debt and modification costs | 882 | 23,390 | |
Other | (4) | 1,793 | |
Contingent purchase price | 1,134 | 2,560 | |
Charge for stock compensation | 2,929 | 2,173 | |
Income from operations before income taxes | 61,126 | 7,302 | |
Income taxes | 15,689 | 2,198 | |
Net income | 45,437 | 5,104 | |
Segment information | |||
Capital expenditures | 11,813 | 17,156 | |
Total assets | 5,165,533 | $ 5,234,812 | |
Investment in and advances to unconsolidated affiliates | 147,658 | 148,912 | |
Goodwill | 1,008,097 | 1,008,097 | |
Other intangible assets, net | 469,578 | 422,606 | |
Kansas Entertainment | |||
Other operating costs and other expenses (income) | |||
Unconsolidated non-operating costs - Kansas JV | 1,294 | 1,951 | |
Operating Segments | Northeast | |||
Segment information | |||
Net revenues | 414,167 | 393,465 | |
Adjusted EBITDA | 132,007 | 126,574 | |
Segment information | |||
Capital expenditures | 3,487 | 3,990 | |
Total assets | 813,232 | 821,649 | |
Investment in and advances to unconsolidated affiliates | 105 | 102 | |
Goodwill | 21,242 | 21,242 | |
Other intangible assets, net | 353,143 | 303,043 | |
Operating Segments | South/West | |||
Segment information | |||
Net revenues | 161,296 | 139,820 | |
Adjusted EBITDA | 45,049 | 36,341 | |
Segment information | |||
Capital expenditures | 3,412 | 8,622 | |
Total assets | 783,634 | 794,274 | |
Goodwill | 244,695 | 244,695 | |
Other intangible assets, net | 978 | 1,623 | |
Operating Segments | Midwest | |||
Segment information | |||
Net revenues | 230,086 | 228,338 | |
Adjusted EBITDA | 81,155 | 78,106 | |
Segment information | |||
Capital expenditures | 3,732 | 4,331 | |
Total assets | 1,081,046 | 1,070,204 | |
Investment in and advances to unconsolidated affiliates | 87,610 | 88,296 | |
Goodwill | 674,558 | 674,558 | |
Other intangible assets, net | 100,798 | 101,698 | |
Other | |||
Segment information | |||
Net revenues | 10,536 | 14,601 | |
Adjusted EBITDA | (15,665) | (13,576) | |
Segment information | |||
Capital expenditures | 1,182 | $ 213 | |
Total assets | 2,487,621 | 2,548,685 | |
Investment in and advances to unconsolidated affiliates | 59,943 | 60,514 | |
Goodwill | 67,602 | 67,602 | |
Other intangible assets, net | $ 14,659 | $ 16,242 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Fair value of assets and liabilities | |||
Change in fair value of contingent purchase price | $ 1,134 | $ 2,560 | |
Loans to JIVDC | |||
Fair value of assets and liabilities | |||
Discount Rate | 14.00% | ||
Level 1 | |||
Fair value of assets and liabilities | |||
Cash and cash equivalents | $ 217,997 | $ 277,953 | |
Level 3 | |||
Fair value of assets and liabilities | |||
Loans to JIVDC | 16,677 | 16,533 | |
Financial liabilities: | |||
Other liabilities | 23,810 | 22,696 | |
Level 3 | Contingent Purchase Price | |||
Financial liabilities: | |||
Balance at beginning of the period | 22,696 | ||
Payments | (20) | ||
Included in earnings | 1,134 | ||
Balance at end of the period | $ 23,810 | ||
Level 3 | Contingent Purchase Price | Discounted Cash Flow | Plainridge Racecourse | |||
Fair value of assets and liabilities | |||
Discount Rate | 7.60% | ||
Senior Secured Credit Facility | Level 1 | |||
Financial liabilities: | |||
Long-term debt | $ 716,634 | 760,456 | |
Senior Unsecured Notes | Level 1 | |||
Financial liabilities: | |||
Long-term debt | 385,000 | 412,000 | |
Other long-term obligations | Level 2 | |||
Financial liabilities: | |||
Long-term debt | 106,402 | 113,460 | |
Carrying Amount | |||
Fair value of assets and liabilities | |||
Cash and cash equivalents | 217,997 | 277,953 | |
Loans to JIVDC | 20,613 | 20,900 | |
Financial liabilities: | |||
Other liabilities | 23,810 | 22,696 | |
Carrying Amount | Senior Secured Credit Facility | |||
Financial liabilities: | |||
Long-term debt | 688,251 | 730,787 | |
Carrying Amount | Senior Unsecured Notes | |||
Financial liabilities: | |||
Long-term debt | 399,270 | 399,249 | |
Carrying Amount | Other long-term obligations | |||
Financial liabilities: | |||
Long-term debt | 111,674 | 119,310 | |
Fair Value | |||
Fair value of assets and liabilities | |||
Cash and cash equivalents | 217,997 | 277,953 | |
Loans to JIVDC | 16,677 | 16,533 | |
Financial liabilities: | |||
Other liabilities | 23,810 | 22,696 | |
Fair Value | Senior Secured Credit Facility | |||
Financial liabilities: | |||
Long-term debt | 716,634 | 760,456 | |
Fair Value | Senior Unsecured Notes | |||
Financial liabilities: | |||
Long-term debt | 385,000 | 412,000 | |
Fair Value | Other long-term obligations | |||
Financial liabilities: | |||
Long-term debt | $ 106,402 | $ 113,460 |
Investment In and Advances to44
Investment In and Advances to Unconsolidated Affiliates (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018USD ($)ft²item | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) | |
Business ventures | |||
Investment in unconsolidated affiliates | $ 147,658 | $ 148,912 | |
Distributions from unconsolidated affiliates | 6,500 | $ 5,750 | |
Summary financial information | |||
Net income attributable to Penn | $ 5,361 | 4,548 | |
Kansas Entertainment | |||
Business ventures | |||
Ownership interest in joint venture under agreement of sale (as a percent) | 50.00% | ||
Area of Casino (in square foot) | ft² | 244,791 | ||
Number of slot machines | item | 2,000 | ||
Number of table games | item | 41 | ||
Number of poker tables | item | 12 | ||
Number of space parking | item | 1,253 | ||
Summary financial information | |||
Net revenues | $ 39,285 | 38,846 | |
Operating expenses | 27,658 | 28,838 | |
Income from operations | 11,627 | 10,008 | |
Net income | 11,627 | 10,008 | |
Net income attributable to Penn | $ 5,814 | $ 5,004 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Effective tax rate | ||||
Effective income tax rate (as a percent) | 25.67% | 30.10% | ||
Effect of Tax Cuts and Jobs Act of 2017 | ||||
Federal statutory tax rate | 21.00% | 35.00% | ||
Provisional increase to deferred tax expense | $ 261.3 |