Penn National Gaming Reports Record First Quarter Operating Income of $182.4 Million, Net Income of $41.0 Million, and Adjusted EBITDA, After Lease Payments of $183.5 Million
- Anticipated Cost Synergies Associated with Pinnacle Transaction
Increased to
2019 First Quarter Financial Highlights:
- Revenues of
$1.28 billion , an increase of$466.5 million year over year; - Operating income of
$182.4 million , an increase of$10.3 million year over year, with net income of$41.0 million ; - Adjusted EBITDAR of
$391.4 million , an increase of$148.9 million year over year; - Adjusted EBITDAR marginsof 30.5% markingan 80-basis points year over year increase;
- Adjusted EBITDA, after Lease Payments of
$183.5 million , an increase of$56.8 million year over year; and - Traditional debt decreased by
$38.3 million during the quarter. As ofMarch 31, 2019 , our GAAP traditional net debt ratio was 2.60x and gross and net leverage on a lease-adjusted basis were 6.09x and 5.79x, respectively.
Pinnacle Synergies Update
“We continue to make great strides with the integration of the Pinnacle
properties, having achieved
M&A and Development Update
“Our
“Our development projects in
Free Cash Flow Allocation
“Despite the weather challenges we faced this quarter, our strong
operating performance allowed us to reduce debt by approximately
Summary of First Quarter Results
For the three months ended March 31, | ||||||||||||||
(in millions, except per share data, unaudited) |
2019 Actual | 2019 Guidance (1) | 2018 Actual | |||||||||||
Revenues | $ | 1,282.6 | $ | 1,301.4 | $ | 816.1 | ||||||||
Net income | $ | 41.0 | $ | 47.5 | $ | 45.4 | ||||||||
Adjusted EBITDAR (2) | $ | 391.4 | $ | 394.5 | $ | 242.6 | ||||||||
Less: Lease Payments (2) | (207.9 | ) | (209.8 | ) | (115.9 | ) | ||||||||
Adjusted EBITDA, after Lease Payments (2) | $ | 183.5 | $ | 184.7 | $ | 126.7 | ||||||||
Diluted earnings per common share | $ | 0.35 | $ | 0.40 | $ | 0.48 |
(1) | As provided by Penn National on February 7, 2019. | ||
(2) | See the “Non-GAAP Financial Measures” section below for more information as well as the definitions of Adjusted EBITDAR; Lease Payments; and Adjusted EBITDA, after Lease Payments. Additionally, see below for reconciliations of these Non-GAAP financial measures to their GAAP equivalent financial measure. | ||
Review of 2019First Quarter Results vs. Guidance
For the three months ended March 31, 2019 | ||||||||||
(in millions, unaudited) |
Pre-tax | Post-tax | ||||||||
Income, per guidance (1) | $ | 64.6 | $ | 47.5 | ||||||
Adjusted EBITDAR favorable (unfavorable) variances: | ||||||||||
Adjustment to customer loyalty program liability (2) | (3.1 | ) | (2.4 | ) | ||||||
Performance of properties and corporate overhead, net | — | — | ||||||||
Total Adjusted EBITDAR variances | (3.1 | ) | (2.4 | ) | ||||||
Other favorable (unfavorable) variances: | ||||||||||
Interest expense (3) | 79.7 | 61.4 | ||||||||
Rent expense associated with triple net operating leases (3) (4) | (75.6 | ) | (58.3 | ) | ||||||
Depreciation and amortization | (1.2 | ) | (0.9 | ) | ||||||
Cash-settled stock-based awards | (0.5 | ) | (0.4 | ) | ||||||
Pre-opening and acquisition costs | (4.4 | ) | (3.4 | ) | ||||||
Other | (3.7 | ) | (2.9 | ) | ||||||
Income taxes | — | 0.4 | ||||||||
Income, as reported | $ | 55.8 | $ | 41.0 |
(1) | As provided by Penn National on February 7, 2019. | ||
(2) | During the three months ended March 31, 2019, the Company trued-up its liabilities related to its customer loyalty program. As a result, the Company recorded a $3.1 million adjustment during the first quarter 2019 as an out-of-period expense. | ||
(3) | As previously disclosed, the guidance provided by the Company on February 7, 2019 did not include the impact of the new accounting standard related to leases, Accounting Standards Codification Topic 842, Leases, which was adopted by the Company on January 1, 2019 and impacted the classification of expenses between interest and rent associated with our triple net operating leases. The combined variance between actual results and guidance of interest expense and rent expense associated with triple net operating leases was $4.1 million on a pre-tax basis and $3.1 million on a post-tax basis. | ||
(4) | During the three months ended March 31, 2019, the Company’s triple net operating leases included components of the Master Leases (which principally pertains to the land), the Meadows Lease, and the Margaritaville Lease. | ||
Financial Guidance for the 2019 Second Quarter and Full Year 2019
The Company’s second quarter and full year guidance targets reflect the
anticipated impacts of several items, including ongoing bridge work in
-
Corporate overhead expenses, which is net of allocations to our
properties, of
$97.9 million , with$24.7 million to be incurred in the second quarter; -
Depreciation and amortization charges of
$403.4 million , with$101.8 million in the second quarter; -
Lease payments (which continue to be fully tax deductible) to our REIT
landlords under our triple net leases of
$835.9 million , with$209.1 million in the second quarter. This includes projected escalator payments of$0.9 million under the Penn triple net master lease with GLPI, no escalator under the Pinnacle triple net master lease with GLPI, and no escalator under the Meadows lease; -
Maintenance capital expenditures of
$188.4 million , with$70.1 million in the second quarter; -
Project capital expenditures for Hollywood York of
$15.0 million , with$2.4 million in the second quarter; -
Project capital expenditures for Hollywood Morgantown of
$21.5 million , with$9.8 million in the second quarter; -
Cash interest on traditional debt of
$123.2 million , with$23.3 million in the second quarter; -
Interest expense of
$534.3 million , with$133.7 million in the second quarter, inclusive of interest expense related to the finance lease components associated with our Master Leases; -
Rent expense associated with our triple net operating leases with our
REIT landlords of
$337.9 million , with$84.5 million in the second quarter (1); -
Cash taxes of
$16.8 million , with$10.1 million in the second quarter; -
Our share of non-operating items (such as depreciation and
amortization expense) associated with our Kansas JV of
$3.7 million , with$0.8 million to be incurred in the second quarter; -
Estimated non-cash stock compensation expense of
$13.9 million , with$3.5 million in the second quarter; - LIBOR is based on the forward yield curve;
- A diluted share count of approximately 119.0 million; and
- There will be no material changes in applicable legislation, regulatory environment, world events, weather, recent consumer trends, economic conditions, oil prices, competitive landscape (other than listed above) or other circumstances beyond our control that may adversely affect the Company’s results of operations.
The guidance table below includes comparative prior period actual results.
________________________
(1) On
The new lease standard requires operating leases to be recognized on the balance sheet as an asset and liability based on the net present value of future minimum lease payments. Subsequent to the recognition on the balance sheet, the Company records rent expense on a straight-line basis over the expected term of the lease, which is recorded as a reduction to operating income within the unaudited Condensed Consolidated Statements of Operations.
For the three months |
For the full year |
||||||||||||||||||
(in millions, except per share data, unaudited) |
2019 |
2018 |
2019 |
2018 |
|||||||||||||||
Revenues | $ | 1,314.3 | $ | 826.9 | $ | 5,173.1 | $ | 3,587.9 | |||||||||||
Net income | $ | 41.2 | $ | 54.0 | $ | 162.0 | $ | 93.5 | |||||||||||
Income tax expense (benefit) | 16.5 | 15.2 | 61.8 | (3.6 | ) | ||||||||||||||
Loss on early extinguishment of debt | — | 2.6 | — | 21.0 | |||||||||||||||
Income from unconsolidated affiliates | (6.3 | ) | (5.7 | ) | (24.4 | ) | (22.3 | ) | |||||||||||
Interest income | (0.2 | ) | (0.2 | ) | (1.1 | ) | (1.0 | ) | |||||||||||
Interest expense | 133.7 | 115.9 | 534.3 | 539.4 | |||||||||||||||
Other expense | 10.0 | — | 11.0 | 7.1 | |||||||||||||||
Operating income | 194.9 | 181.8 | 743.6 | 634.1 | |||||||||||||||
Rent expense associated with triple net operating leases(1) | 84.5 | — | 337.9 | 3.8 | |||||||||||||||
Stock-based compensation | 3.5 | 3.0 | 13.9 | 12.0 | |||||||||||||||
Cash-settled stock award variance (2) | — | 7.8 | 0.5 | (19.6 | ) | ||||||||||||||
Loss (gain) on disposal of assets | — | (0.1 | ) | 0.5 | 3.2 | ||||||||||||||
Contingent purchase price | 0.4 | 0.2 | 5.7 | 0.5 | |||||||||||||||
Pre-opening and acquisition costs | — | 5.9 | 4.4 | 95.0 | |||||||||||||||
Depreciation and amortization | 101.8 | 58.6 | 403.4 | 269.0 | |||||||||||||||
Provision (recovery) for loan loss and unfunded loan commitments to the JIVDC and impairment losses | — | (17.0 | ) | — | 17.9 | ||||||||||||||
Insurance recoveries, net of deductible charges | — | (0.1 | ) | — | (0.1 | ) | |||||||||||||
Income from unconsolidated affiliates | 6.3 | 5.7 | 24.4 | 22.3 | |||||||||||||||
Non-operating items for Kansas JV (2) | 0.8 | 1.3 | 3.7 | 5.1 | |||||||||||||||
Adjusted EBITDAR | $ | 392.2 | $ | 247.1 | $ | 1,538.0 | $ | 1,043.2 | |||||||||||
Less: Lease Payments (3) | (209.1 | ) | (115.9 | ) | (835.9 | ) | (537.4 | ) | |||||||||||
Adjusted EBITDA, after Lease Payments | $ | 183.1 | $ | 131.2 | $ | 702.1 | $ | 505.8 | |||||||||||
Diluted earnings per common share | $ | 0.35 | $ | 0.57 | $ | 1.36 | $ | 0.93 | |||||||||||
(1) | The three months ending June 30, 2019 and the year ending December 31, 2019, include rent expense associated with the Company’s Master Leases (which principally pertains to the land), the Meadows Lease, and the Margaritaville Lease. | ||
(2) | For a description of these items, see “Non-GAAP Financial Measures” section below. | ||
(3) | The three months ending June 30, 2019 and the year ending December 31, 2019, include payments made to GLPI associated with the Company’s Master Leases and the Meadows Lease, as well as payments made to VICI Properties Inc. (“VICI”) associated with the Margaritaville Lease. | ||
Segment
Information
During the fourth quarter 2018, the Company made revisions to its
reportable segments upon the consummation of the Pinnacle acquisition in
order to maintain alignment with its internal organizational structure.
Apart from the addition of the new properties, the most significant
change was dividing the South/West segment into two separate reportable
segments. The three months ended
Revenues | Operating Income (Loss) | Adjusted EBITDAR | ||||||||||||||||||||||||||
For the three months ended |
For the three months ended |
For the three months ended |
||||||||||||||||||||||||||
(in thousands, unaudited) |
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||
Northeast segment (1) | $ | 550,578 | $ | 458,719 | $ | 142,177 | $ | 127,420 | $ | 164,754 | $ | 144,977 | ||||||||||||||||
South segment (2) | 291,942 | 63,330 | 78,123 | 18,157 | 97,844 | 21,118 | ||||||||||||||||||||||
West segment (3) | 158,654 | 97,966 | 41,818 | 17,729 | 49,923 | 23,931 | ||||||||||||||||||||||
Midwest segment (4) | 271,262 | 185,534 | 80,970 | 53,788 | 99,219 | 68,185 | ||||||||||||||||||||||
Other (5) | 10,135 | 10,536 | (160,702 | ) | (44,960 | ) | (20,303 | ) | (15,665 | ) | ||||||||||||||||||
Total | $ | 1,282,571 | $ | 816,085 | $ | 182,386 | $ | 172,134 | $ | 391,437 | $ | 242,546 | ||||||||||||||||
(1) | The Northeast segment consists of the following properties: Ameristar East Chicago, Hollywood Casino Bangor, Hollywood Casino at Charles Town Races, Hollywood Casino Columbus, Hollywood Casino Lawrenceburg, Hollywood Casino at Penn National Race Course, Hollywood Casino Toledo, Hollywood Gaming at Dayton Raceway, Hollywood Gaming at Mahoning Valley Race Course, Meadows Racetrack and Casino, and Plainridge Park Casino. The financial information for the three months ended March 31, 2018 also includes the Company’s Casino Rama management service contract, which terminated in July 2018. | ||
(2) | The South segment consists of the following properties: 1st Jackpot Casino, Ameristar Vicksburg, Boomtown Biloxi, Boomtown Bossier City, Boomtown New Orleans, Hollywood Casino Gulf Coast, Hollywood Casino Tunica, L’Auberge Baton Rouge, L’Auberge Lake Charles, Margaritaville Resort Casino, and Resorts Casino Tunica. We acquired Margaritaville Resort Casino on January 1, 2019. | ||
(3) | The West segment consists of the following properties: Ameristar Black Hawk, Cactus Petes and Horseshu, M Resort, Tropicana Las Vegas, and Zia Park Casino. The financial information for the three months ended March 31, 2018 also includes the Company’s investments in and the management contract of Hollywood Casino Jamul-San Diego, which terminated in July 2018. | ||
(4) | The Midwest segment consists of the following properties: Ameristar Council Bluffs; Argosy Casino Alton; Argosy Casino Riverside; Hollywood Casino Aurora; Hollywood Casino Joliet; our 50% investment in Kansas Entertainment, which owns Hollywood Casino at Kansas Speedway; Hollywood Casino St. Louis; Prairie State Gaming; and River City Casino. | ||
(5) | The Other category consists of the Company’s standalone racing operations, namely Sanford-Orlando Kennel Club, and the Company’s joint venture interests in Sam Houston Race Park, Valley Race Park, and Freehold Raceway. The Other category also includes Penn Interactive Ventures, the Company’s interactive division which represents Penn National’s social gaming initiatives, our management contract for Retama Park Racetrack, and our live and televised poker tournament series that operates under the trade name, Heartland Poker Tour. Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property. The Other category also includes corporate overhead costs, which consists of certain expenses, such as: payroll, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have otherwise been allocated to a property. For the three months ended March 31, 2019, corporate overhead costs were $23.1 million, compared to $18.8 million for the corresponding prior year period. | ||
Supplemental
Segment Information - Combined for
the Acquisitions of
Pinnacle and
Although Penn National did not own Pinnacle or
The following financial information for the three months ended
Revenues | ||||||||||||||||
Penn National, as |
Pinnacle and |
Combined | ||||||||||||||
(in thousands, unaudited) |
For the three months ended March 31, 2018 | |||||||||||||||
Northeast | $ | 458,719 | $ | 119,726 | $ | 578,445 | ||||||||||
South | 63,330 | 229,201 | 292,531 | |||||||||||||
West | 97,966 | 59,646 | 157,612 | |||||||||||||
Midwest | 185,534 | 97,479 | 283,013 | |||||||||||||
Other | 10,536 | 1,110 | 11,646 | |||||||||||||
Total | $ | 816,085 | $ | 507,162 | $ | 1,323,247 | ||||||||||
Adjusted EBITDAR |
||||||||||||||||
Penn National, as |
Pinnacle and |
Combined |
||||||||||||||
(in thousands, unaudited) | For the three months ended March 31, 2018 | |||||||||||||||
Northeast | $ | 144,977 | $ | 23,925 | $ | 168,902 | ||||||||||
South | 21,118 | 73,407 | 94,525 | |||||||||||||
West | 23,931 | 22,565 | 46,496 | |||||||||||||
Midwest | 68,185 | 37,163 | 105,348 | |||||||||||||
Other | (15,665 | ) | (14,298 | ) | (29,963 | ) | ||||||||||
Total | $ | 242,546 | $ | 142,762 | $ | 385,308 | ||||||||||
(1) | The operating results of Pinnacle were derived from historical financial information of Pinnacle, adjusted to exclude the operating results of the four divested properties, and the operating results of Margaritaville were derived from historical financial information. In addition, the operating results were adjusted to conform to Penn National’s methodology of allocating certain corporate expenses to properties. | ||
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES |
||||||||||
For the three months ended March 31, | ||||||||||
(in thousands, unaudited) |
2019 | 2018 | ||||||||
Net income | $ | 40,987 | $ | 45,437 | ||||||
Income tax expense | 14,818 | 15,689 | ||||||||
Loss on early extinguishment of debt | — | 882 | ||||||||
Income from unconsolidated affiliates | (5,687 | ) | (5,361 | ) | ||||||
Interest income | (319 | ) | (249 | ) | ||||||
Interest expense | 132,587 | 115,740 | ||||||||
Other expense | — | (4 | ) | |||||||
Operating income | 182,386 | 172,134 | ||||||||
Rent expense associated with triple net operating leases(1) | 84,730 | — | ||||||||
Stock-based compensation | 3,417 | 2,929 | ||||||||
Cash-settled stock award variance | 472 | (7,462 | ) | |||||||
Loss on disposal of assets | 522 | 55 | ||||||||
Contingent purchase price | 4,717 | 1,134 | ||||||||
Pre-opening and acquisition costs | 4,380 | 6,093 | ||||||||
Depreciation and amortization | 104,053 | 60,390 | ||||||||
Impairment losses | — | 618 | ||||||||
Income from unconsolidated affiliates | 5,687 | 5,361 | ||||||||
Non-operating items for Kansas JV | 1,073 | 1,294 | ||||||||
Adjusted EBITDAR | $ | 391,437 | $ | 242,546 | ||||||
Less: Lease Payments | (207,966 | ) | (115,874 | ) | ||||||
Adjusted EBITDA, after Lease Payments | $ | 183,471 | $ | 126,672 | ||||||
(1) | During the three months ended March 31, 2019, the Company’s triple net operating leases, included components of the Master Leases (which principally pertains to the land), the Meadows Lease, and the Margaritaville Lease. |
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES |
||||||
(in thousands, unaudited) |
For the three |
|||||
Net income | $ | 45,437 | ||||
Income tax expense | 15,689 | |||||
Loss on early extinguishment of debt | 882 | |||||
Income from unconsolidated affiliates | (5,361 | ) | ||||
Interest income | (249 | ) | ||||
Interest expense | 115,740 | |||||
Other income | (4 | ) | ||||
Operating income | 172,134 | |||||
Pinnacle and Margaritaville Adjusted EBITDAR, pre-acquisition | 142,762 | |||||
Stock-based compensation | 2,929 | |||||
Cash-settled stock award variance | (7,462 | ) | ||||
Loss on disposal of assets | 55 | |||||
Contingent purchase price | 1,134 | |||||
Pre-opening and acquisition costs | 6,093 | |||||
Depreciation and amortization | 60,390 | |||||
Impairment losses | 618 | |||||
Income from unconsolidated affiliates | 5,361 | |||||
Non-operating items for Kansas JV | 1,294 | |||||
Combined Adjusted EBITDAR (1) | $ | 385,308 | ||||
(1) | See the “Non-GAAP Financial Measures” section below for more information, including the definition of Combined Adjusted EBITDAR. | ||
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES |
||||||||||
For the three months ended March 31, | ||||||||||
(in thousands, except per share data, unaudited) |
2019 | 2018 | ||||||||
Revenues: | ||||||||||
Gaming | $ | 1,034,511 | $ | 654,494 | ||||||
Food, beverage, hotel, and other | 248,060 | 130,969 | ||||||||
Management service and license fees | — | 2,438 | ||||||||
Reimbursable management costs | — | 28,184 | ||||||||
Total revenues | 1,282,571 | 816,085 | ||||||||
Operating expenses | ||||||||||
Gaming | 547,445 | 340,516 | ||||||||
Food, beverage, hotel and other | 161,759 | 92,980 | ||||||||
General and administrative | 286,928 | 121,263 | ||||||||
Reimbursable management costs | — | 28,184 | ||||||||
Depreciation and amortization | 104,053 | 60,390 | ||||||||
Impairment losses | — | 618 | ||||||||
Total operating expenses | 1,100,185 | 643,951 | ||||||||
Operating income | 182,386 | 172,134 | ||||||||
Other income (expenses) | ||||||||||
Interest expense | (132,587 | ) | (115,740 | ) | ||||||
Interest income | 319 | 249 | ||||||||
Income from unconsolidated affiliates | 5,687 | 5,361 | ||||||||
Loss on early extinguishment of debt | — | (882 | ) | |||||||
Other | — | 4 | ||||||||
Total other expenses | (126,581 | ) | (111,008 | ) | ||||||
Income before income taxes | 55,805 | 61,126 | ||||||||
Income tax expense | (14,818 | ) | (15,689 | ) | ||||||
Net income | 40,987 | 45,437 | ||||||||
Less: Net loss attributable to non-controlling interest | 5 | — | ||||||||
Net income attributable to Penn National Gaming, Inc. | $ | 40,992 | $ | 45,437 | ||||||
Earnings per common share: | ||||||||||
Basic earnings per common share | $ | 0.35 | $ | 0.50 | ||||||
Diluted earnings per common share | $ | 0.35 | $ | 0.48 | ||||||
Weighted average basic shares outstanding | 116,293 | 91,191 | ||||||||
Weighted average diluted shares outstanding | 118,595 | 94,650 | ||||||||
Selected Financial Information
Balance Sheet Data
(in thousands) |
March 31, |
December 31, |
|||||||
Cash and cash equivalents (1) | $ | 400,280 | $ | 479,598 | |||||
Bank debt (1) | $ | 1,877,885 | $ | 1,907,932 | |||||
Notes | 399,353 | 399,332 | |||||||
Other long-term obligations (2) | 96,646 | 104,964 | |||||||
Total traditional debt (3) | $ | 2,373,884 | $ | 2,412,228 | |||||
Traditional net debt | $ | 1,973,604 | $ | 1,932,630 | |||||
(1) | The December 31, 2018 balance includes a $100.0 million draw on our revolving credit facility in order to close the acquisition of Margaritaville Resort Casino on January 1, 2019. | ||
(2) | Other long-term obligations as of March 31, 2019 include $84.0 million for the present value of the relocation fees due for both Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course, and $12.6 million related to our repayment obligation on a hotel and event center located near Hollywood Casino Lawrenceburg. | ||
(3) | Amounts are inclusive of debt discount and debt issuance costs of $39.5 million and $41.2 million, respectively. | ||
Kansas Entertainment Distributions
The Company’s definition of Adjusted EBITDAR adds back our share of the
impact of non-operating items (such as depreciation and amortization) at
our joint ventures that have gaming operations. At this time,
For the three months ended March 31, | ||||||||
(in thousands) |
2019 | 2018 | ||||||
Cash flow distributions | $ | 6,500 | $ | 6,500 | ||||
Cash Flow Data
The table below summarizes certain cash expenditures incurred by the Company.
For the three months ended March 31, | |||||||||
(in thousands) |
2019 | 2018 | |||||||
Lease Payments (1) | $ | 207,966 | $ | 115,874 | |||||
Cash payments (refunds) related to income taxes, net | $ | (1,727 | ) | $ | 2,233 | ||||
Cash paid for interest on traditional debt | $ | 38,482 | $ | 22,193 | |||||
Maintenance capital expenditures | $ | 36,220 | $ | 10,602 | |||||
(1) | See the “Non-GAAP Financial Measures” section below for the definition of Lease Payments. The three months ended March 31, 2019 include $81.3 million, $6.6 million, and $5.7 million, relating to the Pinnacle Master Lease, the Meadows Lease, and the Margaritaville Lease, respectively. | ||
Non-GAAP Financial Measures
In addition to GAAP financial measures, Adjusted EBITDAR; Adjusted EBITDA, after Lease Payments; Combined Revenues; and Combined Adjusted EBITDAR are used by management as important measures of the Company’s operating performance and to compare operating results between accounting periods.
We define Adjusted EBITDAR as earnings before interest income and
expense, income taxes, depreciation and amortization, rent expense
associated with triple net operating leases, stock-based compensation,
debt extinguishment and financing charges, impairment charges, insurance
recoveries and deductible charges, 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, pre-opening and acquisition costs, and
other income or expenses. Adjusted EBITDAR 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
Adjusted EBITDAR has economic substance because it is used by management as a performance measure to analyze the performance of our business, and is especially relevant in evaluating large, long-lived casino-hotel 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. We also present Adjusted EBITDAR because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry. In addition, other gaming companies also utilize Adjusted EBITDAR as a supplement to financial measures in accordance with GAAP. In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their Adjusted EBITDAR calculations certain corporate expenses that do not relate to the management of specific casino properties. However, Adjusted EBITDAR is not a measure of performance or liquidity calculated in accordance with GAAP. Adjusted EBITDAR information is presented as a supplemental disclosure, as management believes that it is a commonly-used measure of performance in the gaming industry, is used in the valuation of gaming companies, and that it is considered by many to be a key indicator of the Company’s operating results. Management uses Adjusted EBITDAR as an important measure of the operating performance of its segments, including the evaluation of operating personnel.
Adjusted EBITDA, after Lease Payments is defined as Adjusted EBITDAR
less Lease Payments, which is defined as lease payments made to our REIT
landlords under our triple net leases. Adjusted EBITDA, after Lease
Payments is a measure we believe provides useful information to
investors because it is an indicator of the performance of ongoing
business operations after incorporating the cash flow impact of the
Lease Payments to our REIT landlords. In addition, Adjusted EBITDA,
after Lease Payments is one of the metrics that our management team is
measured against for incentive-based compensation purposes. As of
The Company defines Combined Revenues as revenues of Penn National,
Pinnacle, and
Combined Revenues and Combined Adjusted EBITDAR are being presented
solely as supplemental disclosure, as these are methods that management
reviews and uses to analyze the performance of its business and to
compare operating results between accounting periods. Management
believes that Combined Revenues and Combined Adjusted EBITDAR are useful
to investors because they are indicators of the strength and performance
of the ongoing business and for evaluating the historical results of
Penn National, Pinnacle, and
Each of these measures is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure of comparing performance among different companies. See the attached “supplemental information” tables for reconciliations of these measures to the GAAP equivalent financial measures.
Conference Call, Webcast and Replay Details
This press release, which includes financial information to be discussed by management during the conference call and disclosure and reconciliation of non-GAAP financial measures, is available on the Company’s web site, www.pngaming.com, in the “Investors” section (select link for “Press Releases”).
About
Forward Looking Statements
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements can be identified by the use of forward-looking terminology
such as “expects,” “believes,” “estimates,” “projects,” “intends,”
“plans,” “seeks,” “may,” “will,” “should” or “anticipates” or the
negative or other variations of these or similar words, or by
discussions of future events, strategies or risks and uncertainties.
Specifically, forward-looking statements may include, among others,
statements concerning: our expectations of future results of operations
and financial condition; expectations for our properties or our
development projects; the timing, cost and expected impact of planned
capital expenditures on our results of operations; our expectations with
regard to the impact of competition; our expectations with regard to
acquisitions and development opportunities, as well as the integration
of and synergies related to any companies we have acquired or may
acquire; the outcome and financial impact of the litigation in which we
are or will be periodically involved; the actions of regulatory,
legislative, executive or judicial decisions at the federal, state or
local level with regard to our business and the impact of any such
actions; our ability to maintain regulatory approvals for our existing
businesses and to receive regulatory approvals for our new businesses;
and our expectations regarding economic and consumer conditions. As a
result, actual results may vary materially from expectations. Although
the Company believes that its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business, there
can be no assurance that actual results will not differ materially from
our expectations. Meaningful factors that could cause actual results to
differ from expectations include, but are not limited to, risks related
to the following: the assumptions included in our financial guidance;
the ability of our operating teams to drive revenue and margins; the
impact of significant competition from other gaming and entertainment
operations; our ability to obtain timely regulatory approvals required
to own, develop and/or operate our facilities, or other delays,
approvals or impediments to completing our planned acquisitions or
projects, construction factors, including delays, and increased costs;
the passage of state, federal or local legislation (including referenda)
that would expand, restrict, further tax, prevent or negatively impact
operations in or adjacent to the jurisdictions in which we do or seek to
do business (such as a smoking ban at any of our facilities or the
relocation or award of gaming licenses proximate to our facilities); the
effects of local and national economic, credit, capital market, housing,
and energy conditions on the economy in general and on the gaming and
lodging industries in particular; the activities of our competitors
(commercial and tribal) and the rapid emergence of new competitors
(traditional, internet, social, sweepstakes based and video gaming
terminals (“VGTs”) in bars and truck stops); increases in the effective
rate of taxation for any of our operations or at the corporate level;
our ability to identify attractive acquisition and development
opportunities (especially in new business lines) and to agree to terms
with, and maintain good relationships with partners/municipalities for
such transactions; the costs and risks involved in the pursuit of such
opportunities and our ability to complete the acquisition or development
of, and achieve the expected returns from, such opportunities; our
expectations for the continued availability and cost of capital; the
impact of weather; changes in accounting standards; the risk of failing
to maintain the integrity of our information technology infrastructure
and safeguard our business, employee and customer data; factors which
may cause the Company to curtail or suspend the share repurchase
program; with respect to our
View source version on businesswire.com: https://www.businesswire.com/news/home/20190502005198/en/
Source:
William J. Fair
Chief Financial Officer
610/373-2400
Joseph N. Jaffoni, Richard Land
JCIR
212/835-8500 or penn@jcir.com