Penn National Gaming Reports Record Fourth Quarter Net Revenues of $1.155 Billion and Operating Income of $124.4 Million
- All Reportable Segments Saw Continued Improvement to Industry Leading Adjusted EBITDAR Margins on a Same-Store Basis -
2018 Fourth Quarter Financial Highlights:
- Net revenues of
$1.155 billion , an increase of$386.3 million , driven primarily by contributions from the Pinnacle acquisition; - Operating income of
$124.4 million , an increase of$97.6 million , with a net loss of$42.0 million , driven largely by one-time transaction costs associated with the Pinnacle acquisition; - Adjusted EBITDAR of
$323.9 million , an increase of$124.8 million , driven by a$113.0 million contribution from the Pinnacle acquisition and growth of$11.8 million , or 5.9%, in the Company’s same-store portfolio of properties; - Adjusted EBITDAR margins increased by 210 basis points to 28.0%; the Company’s same-store Adjusted EBITDAR margin increased by 150 basis points to 27.4%, with 17 of 23 gaming operations delivering improved same-store margins;
- Adjusted EBITDA, after Lease Payments of
$133.5 million ; and - Traditional debt increased by
$1.36 billion during the quarter, principally as a result of the additional debt incurred to partially finance the Pinnacle acquisition and a$100.0 million draw on our revolving credit facility to finance our acquisition ofMargaritaville Resort Casino (“Margaritaville”) onJanuary 1, 2019. As ofDecember 31, 2018 , on a pro forma basis for the acquisitions of Pinnacle andMargaritaville , our traditional net debt ratio was 3.12x and gross and net leverage inclusive of master lease obligations were 6.12x and 5.87x, respectively.
“The fourth quarter marked the end of a transformational year for Penn
National,” continued Mr. Wilmott. “With the closing of our acquisition
of Pinnacle in October, we added over 10,000 new team members and 12
gaming properties to what was already the industry’s leading regional
gaming portfolio. In addition, we obtained the approvals for our
acquisition of
Pinnacle Integration Update
“As anticipated, we remain well on pace to achieve our two-year,
Strong M&A and Expansion Opportunities
“On
“In November, we announced another accretive transaction in combination
with VICI for the acquisition of the operations of Greektown for
approximately
“Meanwhile, in
Return of Capital
“Finally, in December, the Company repurchased approximately 2.3 million
shares at an average price per share of
Near Term Focus
“As we head into 2019, we’ll be principally focused on completing the integration of Pinnacle and our latest acquisitions, with a goal of creating a new organization that capitalizes on the talents and strengths of all of our team members, while continuing to generate significant free cash flow for our shareholders,” concluded Mr. Wilmott.
Summary of Fourth Quarter Results
For the three months ended December 31, | ||||||||||||||
(in millions, except per share data, unaudited) |
2018 Actual | 2018 Guidance (1) | 2017 Actual | |||||||||||
Net revenues | $ | 1,155.3 | $ | 1,149.1 | $ | 769.0 | ||||||||
Net loss | $ | (42.0 | ) | $ | (48.8 | ) | $ | (338.1 | ) | |||||
Adjusted EBITDAR (2) | $ | 323.9 | $ | 318.4 | $ | 199.1 | ||||||||
Less: Lease Payments (2) | (190.4 | ) | (189.7 | ) | (114.5 | ) | ||||||||
Adjusted EBITDA, after Lease Payments (2) | $ | 133.5 | $ | 128.7 | $ | 84.6 | ||||||||
Diluted loss per common share | $ | (0.37 | ) | $ | (0.40 | ) | $ | (3.72 | ) | |||||
(1) | As provided by Penn National on November 1, 2018. | ||
(2) | In the fourth quarter 2018, in connection with the Pinnacle acquisition, we began utilizing Adjusted EBITDAR instead of Adjusted EBITDA. The difference between Adjusted EBITDAR and Adjusted EBITDA is the exclusion of rent expense associated with the triple net operating lease of our Meadows Racetrack and Casino (the “Meadows Lease”) with Gaming and Leisure Properties, Inc. (GLPI: Nasdaq) (“GLPI”), a real estate investment trust (“REIT”). During the first quarter 2018, the Company changed its definition of Adjusted EBITDA to exclude pre-opening and acquisition costs and the variance between budget and actual expense for cash-settled stock-based awards. In connection with these changes, we have reclassified our prior period results, where applicable, to conform to the current period presentation. 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 2018Fourth Quarter Results vs. Guidance
For the three months ended December 31, 2018 | ||||||||||
(in millions, unaudited) |
Pre-tax | Post-tax | ||||||||
Loss, per guidance (1) | $ | (56.6 | ) | $ | (48.8 | ) | ||||
Adjusted EBITDAR variances: | ||||||||||
Favorable performance of properties | 4.5 | 3.4 | ||||||||
Other, mainly due to corporate overhead | 1.0 | 0.8 | ||||||||
Total Adjusted EBITDAR variances | 5.5 | 4.2 | ||||||||
Other favorable (unfavorable) variances: | ||||||||||
Interest expense | 8.5 | 6.6 | ||||||||
Rent expense associated with triple net operating lease (2) | 1.7 | 1.3 | ||||||||
Depreciation and amortization | (26.6 | ) | (20.5 | ) | ||||||
Cash-settled stock-based awards | 18.3 | 14.1 | ||||||||
Impairment losses | (34.3 | ) | (26.4 | ) | ||||||
Pre-opening and acquisition costs | (6.7 | ) | (5.1 | ) | ||||||
Loss on early extinguishment of debt | 8.8 | 6.8 | ||||||||
Other | (4.2 | ) | (3.3 | ) | ||||||
Income taxes | — | 29.1 | ||||||||
Loss, as reported | $ | (85.6 | ) | $ | (42.0 | ) | ||||
(1) | As provided by Penn National on November 1, 2018 | ||
(2) | During the three months ended December 31, 2018, the Company’s only triple net operating lease was the Meadows Lease. | ||
Financial Guidance for the 2019 First Quarter and Full Year
The Company’s first quarter and full year guidance targets reflect the
anticipated impacts of several items, including the ongoing bridge work
in
-
Corporate overhead expenses, which is net of allocations to our
properties, of
$98.6 million , with$24.7 million to be incurred in the first quarter; -
Depreciation and amortization charges of
$398.8 million , with$102.8 million in the first quarter; -
Lease payments (which continue to be fully tax deductible) to our REIT
landlords under our triple net leases of
$839.4 million , with$209.8 million in the first quarter. This includes projected full escalator payments of$0.9 million under our existing triple net master lease with GLPI (the “Penn Master Lease”),$0.7 million under the triple net master lease with GLPI, which we assumed and amended as a part of the Pinnacle acquisition (the “Pinnacle Master Lease” and collectively with the Penn Master Lease, the “Master Leases”) and$0.2 million under the Meadows Lease; -
Maintenance capital expenditures of
$188.4 million , with$27.8 million in the first quarter; -
Project capital expenditures for Hollywood Casino York and
Hollywood Casino Morgantown of$15.0 million and$21.5 million , respectively, with$0.7 million of spend in the first quarter for each facility; -
Cash interest on traditional debt of
$126.0 million , with$38.5 million in the first quarter; -
Interest expense of
$854.4 million , with$212.3 million in the first quarter, inclusive of interest expense related to the financing obligations associated with our Master Leases; -
Cash taxes of
$16.8 million , with$5.0 million in the first quarter; -
Our share of non-operating items (such as depreciation and
amortization expense) associated with our Kansas JV of
$3.7 million , with$1.1 million to be incurred in the first quarter; -
Estimated non-cash stock compensation expenses of
$14.0 million , with$3.5 million to be incurred in the first 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.
For the three months ending/ended March 31, | For the full year ending/ended December 31, | ||||||||||||||||
(in millions, except per share data, unaudited) |
2019 Guidance | 2018 Actual | 2019 Guidance | 2018 Actual | |||||||||||||
Net revenues | $ | 1,301.4 | $ | 816.1 | $ | 5,207.7 | $ | 3,587.9 | |||||||||
Net income (1) | $ | 47.5 | $ | 45.4 | $ | 162.9 | $ | 93.5 | |||||||||
Income tax expense (benefit) | 17.1 | 15.7 | 58.1 | (3.6 | ) | ||||||||||||
Loss on early extinguishment of debt | — | 0.9 | — | 21.0 | |||||||||||||
Income from unconsolidated affiliates | (6.2 | ) | (5.4 | ) | (24.6 | ) | (22.3 | ) | |||||||||
Interest income (1) | (0.3 | ) | (0.3 | ) | (1.0 | ) | (1.0 | ) | |||||||||
Interest expense | 212.3 | 115.8 | 854.4 | 539.4 | |||||||||||||
Other expense | 1.0 | — | 12.0 | 7.1 | |||||||||||||
Operating income (1) | 271.4 | 172.1 | 1,061.8 | 634.1 | |||||||||||||
Rent expense associated with triple net operating leases(1)(2) | 9.1 | — | 36.8 | 3.8 | |||||||||||||
Charge for stock compensation | 3.5 | 2.9 | 14.0 | 12.0 | |||||||||||||
Cash-settled stock award variance (3) | — | (7.5 | ) | — | (19.6 | ) | |||||||||||
Loss on disposal of assets | — | 0.1 | — | 3.2 | |||||||||||||
Contingent purchase price | 0.4 | 1.1 | 1.4 | 0.5 | |||||||||||||
Pre-opening and acquisition costs | — | 6.1 | — | 95.0 | |||||||||||||
Depreciation and amortization (1) | 102.8 | 60.4 | 398.8 | 269.0 | |||||||||||||
Provision for loan loss and unfunded loan commitments to the JIVDC, net of recoveries, and impairment losses | — | 0.6 | — | 17.9 | |||||||||||||
Insurance recoveries, net of deductible charges | — | — | — | (0.1 | ) | ||||||||||||
Income from unconsolidated affiliates | 6.2 | 5.4 | 24.6 | 22.3 | |||||||||||||
Non-operating items for Kansas JV (3) | 1.1 | 1.3 | 3.7 | 5.1 | |||||||||||||
Adjusted EBITDAR | $ | 394.5 | $ | 242.5 | $ | 1,541.1 | $ | 1,043.2 | |||||||||
Less: Lease Payments (4) | (209.8 | ) | (115.9 | ) | (839.4 | ) | (537.4 | ) | |||||||||
Adjusted EBITDA, after Lease Payments | $ | 184.7 | $ | 126.6 | $ | 701.7 | $ | 505.8 | |||||||||
Diluted earnings per common share | $ | 0.40 | $ | 0.48 | $ | 1.37 | $ | 0.93 | |||||||||
(1) | Amounts do not include the impact of the adoption of the new accounting standard related to leases, Accounting Standards Codification (“ASC”) Topic 842, Leases. | ||
(2) | During the three months and year ended December 31, 2018, the Company’s only triple net operating lease was the Meadows Lease. The three months and year ending December 31, 2019 also include the Margaritaville Lease, which is expected to be accounted for as an operating lease. | ||
(3) | For a description of these items, see “Non-GAAP Financial Measures” section below. | ||
(4) | The three months and year ending December 31, 2019 includes amounts paid to VICI under 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 periods prior to
Net Revenues | Operating Income (Loss) | Adjusted EBITDAR | |||||||||||||||||||||||
For the three months ended December 31, | For the three months ended December 31, | For the three months ended December 31, | |||||||||||||||||||||||
(in thousands, unaudited) |
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Northeast segment (1) | $ | 526,145 | $ | 425,762 | $ | 129,925 | $ | 100,974 | $ | 149,144 | $ | 128,045 | |||||||||||||
South segment (2) | 207,983 | 58,169 | 47,326 | 9,635 | 60,199 | 12,753 | |||||||||||||||||||
West segment (3) | 146,602 | 93,373 | 34,752 | (67,368 | ) | 42,422 | 16,134 | ||||||||||||||||||
Midwest segment (4) | 264,661 | 180,231 | 75,275 | 43,278 | 93,212 | 57,269 | |||||||||||||||||||
Other (5) | 9,878 | 11,501 | (162,918 | ) | (59,744 | ) | (21,087 | ) | (15,120 | ) | |||||||||||||||
Total | $ | 1,155,269 | $ | 769,036 | $ | 124,360 | $ | 26,775 | $ | 323,890 | $ | 199,081 | |||||||||||||
Net Revenues | Operating Income (Loss) | Adjusted EBITDAR | |||||||||||||||||||||||
For the year ended December 31, | For the year ended December 31, | For the year ended December 31, | |||||||||||||||||||||||
(in thousands, unaudited) |
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Northeast segment (1) | $ | 1,891,514 | $ | 1,756,579 | $ | 514,290 | $ | 451,084 | $ | 583,791 | $ | 549,304 | |||||||||||||
South segment (2) | 394,351 | 224,247 | 97,862 | 51,501 | 118,962 | 62,580 | |||||||||||||||||||
West segment (3) | 437,887 | 380,418 | 106,473 | (57,282 | ) | 114,267 | 72,744 | ||||||||||||||||||
Midwest segment (4) | 823,717 | 735,033 | 233,552 | 191,313 | 294,332 | 249,744 | |||||||||||||||||||
Other (5) | 40,449 | 51,693 | (318,085 | ) | (190,902 | ) | (68,111 | ) | (55,223 | ) | |||||||||||||||
Total | $ | 3,587,918 | $ | 3,147,970 | $ | 634,092 | $ | 445,714 | $ | 1,043,241 | $ | 879,149 | |||||||||||||
(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 year ended December 31, 2018 also includes the Company’s Casino Rama management service contract, which terminated in July 2018. During the year ended December 31, 2018, net revenues were $46.8 million higher due to reimbursable costs associated with our management service contract for Casino Rama following the implementation of the new revenue standard (as defined below), effective January 1, 2018. | ||
(2) | The South segment consists of the following properties: 1st Jackpot Casino (f/k/a Bally’s Casino Tunica), 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, and Resorts Casino Tunica. Beginning January 1, 2019, Margaritaville will also be included in the South segment in connection with the closing of the acquisition. | ||
(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 year ended December 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 and the year ended December 31, 2018, corporate overhead costs were $23.8 million and $80.1 million, respectively, compared to $17.9 million and $71.4 million for the corresponding prior year periods. | ||
Reconciliation of Comparable GAAP Financial Measure
to
Adjusted EBITDAR and Adjusted EBITDA, after Lease Payments
For the three months ended | For the year ended | ||||||||||||||||
(in thousands, unaudited) |
December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | |||||||||||||
Net income (loss) | $ | (42,036 | ) | $ | (338,060 | ) | $ | 93,514 | $ | 473,463 | |||||||
Income tax expense (benefit) | (43,594 | ) | 252,134 | (3,593 | ) | (498,507 | ) | ||||||||||
Loss on early extinguishment of debt | 17,192 | 573 | 20,964 | 23,963 | |||||||||||||
Income from unconsolidated affiliates | (5,535 | ) | (4,321 | ) | (22,326 | ) | (18,671 | ) | |||||||||
Interest income | (269 | ) | (367 | ) | (1,005 | ) | (3,552 | ) | |||||||||
Interest expense | 192,960 | 116,761 | 539,417 | 466,761 | |||||||||||||
Other expense | 5,642 | 55 | 7,121 | 2,257 | |||||||||||||
Operating income | 124,360 | 26,775 | 634,092 | 445,714 | |||||||||||||
Rent expense associated with triple net operating lease | 3,797 | — | 3,797 | — | |||||||||||||
Charge for stock compensation | 3,187 | 1,953 | 12,034 | 7,780 | |||||||||||||
Cash-settled stock award variance | (18,257 | ) | 10,632 | (19,611 | ) | 23,471 | |||||||||||
Loss (gain) on disposal of assets | (55 | ) | 70 | 3,168 | 172 | ||||||||||||
Contingent purchase price | (1,289 | ) | 9,953 | 454 | (6,840 | ) | |||||||||||
Pre-opening and acquisition costs | 77,861 | 5,138 | 95,020 | 9,732 | |||||||||||||
Depreciation and amortization | 93,189 | 61,374 | 268,990 | 267,062 | |||||||||||||
Provision for loan loss and unfunded loan commitments to the JIVDC, net of recoveries, and impairment losses (1) | 34,288 | 77,858 | 17,921 | 107,810 | |||||||||||||
Insurance recoveries, net of deductible charges | — | (289 | ) | (68 | ) | (289 | ) | ||||||||||
Income from unconsolidated affiliates | 5,535 | 4,321 | 22,326 | 18,671 | |||||||||||||
Non-operating items for Kansas JV | 1,274 | 1,296 | 5,118 | 5,866 | |||||||||||||
Adjusted EBITDAR | $ | 323,890 | $ | 199,081 | $ | 1,043,241 | $ | 879,149 | |||||||||
Less: Lease Payments | (190,417 | ) | (114,532 | ) | (537,447 | ) | (455,439 | ) | |||||||||
Adjusted EBITDA, after Lease Payments | $ | 133,473 | $ | 84,549 | $ | 505,794 | $ | 423,710 | |||||||||
(1) | We recorded an impairment on certain of our long-lived assets of $34.3 million during the three months ended December 31, 2018, offset by a loan loss recovery of $17.0 million that was recorded during the year ended December 31, 2018 on the sale of our Jamul loan, as compared to provisions of $77.9 million and $89.8 million for the three months and year ended December 31, 2017, respectively. The year ended December 31, 2017 also includes a goodwill impairment charge of $18.0 million. | ||
Consolidated Statements of Operations
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||||
(in thousands, except per share data, unaudited) |
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | |||||||||||||||||
Gaming (1) | $ | 928,938 | $ | 658,758 | $ | 2,894,861 | $ | 2,692,021 | |||||||||
Food, beverage, hotel, and other (1) | 226,331 | 148,009 | 629,733 | 601,731 | |||||||||||||
Management service and licensing fees | — | 2,845 | 6,043 | 11,654 | |||||||||||||
Reimbursable management costs (1) | — | 6,236 | 57,281 | 26,060 | |||||||||||||
Revenues | 1,155,269 | 815,848 | 3,587,918 | 3,331,466 | |||||||||||||
Less: Promotional allowances (1) | — | (46,812 | ) | — | (183,496 | ) | |||||||||||
Net revenues | 1,155,269 | 769,036 | 3,587,918 | 3,147,970 | |||||||||||||
Operating expenses | |||||||||||||||||
Gaming (1) | 508,225 | 336,933 | 1,551,430 | 1,364,989 | |||||||||||||
Food, beverage, hotel and other (1) | 155,194 | 108,485 | 439,253 | 421,848 | |||||||||||||
General and administrative | 240,013 | 151,375 | 618,951 | 514,487 | |||||||||||||
Depreciation and amortization | 93,189 | 61,374 | 268,990 | 267,062 | |||||||||||||
Reimbursable management costs (1) | — | 6,236 | 57,281 | 26,060 | |||||||||||||
Provision for loan loss and unfunded loan commitments to the JIVDC, net of recoveries, and impairment losses | 34,288 | 77,858 | 17,921 | 107,810 | |||||||||||||
Total operating expenses | 1,030,909 | 742,261 | 2,953,826 | 2,702,256 | |||||||||||||
Operating income | 124,360 | 26,775 | 634,092 | 445,714 | |||||||||||||
Other income (expenses) | |||||||||||||||||
Interest expense | (192,960 | ) | (116,761 | ) | (539,417 | ) | (466,761 | ) | |||||||||
Interest income | 269 | 367 | 1,005 | 3,552 | |||||||||||||
Income from unconsolidated affiliates | 5,535 | 4,321 | 22,326 | 18,671 | |||||||||||||
Loss on early extinguishment of debt | (17,192 | ) | (573 | ) | (20,964 | ) | (23,963 | ) | |||||||||
Other | (5,642 | ) | (55 | ) | (7,121 | ) | (2,257 | ) | |||||||||
Total other expenses | (209,990 | ) | (112,701 | ) | (544,171 | ) | (470,758 | ) | |||||||||
Income (loss) before income taxes | (85,630 | ) | (85,926 | ) | 89,921 | (25,044 | ) | ||||||||||
Income tax benefit (expense) | 43,594 | (252,134 | ) | 3,593 | 498,507 | ||||||||||||
Net income (loss) | (42,036 | ) | (338,060 | ) | 93,514 | 473,463 | |||||||||||
Less: Net loss attributable to non-controlling interest | 5 | — | 5 | — | |||||||||||||
Net income (loss) attributable to Penn National Gaming, Inc. | $ | (42,031 | ) | $ | (338,060 | ) | $ | 93,519 | $ | 473,463 | |||||||
Earnings (loss) per common share: | |||||||||||||||||
Basic earnings (loss) per common share | $ | (0.37 | ) | $ | (3.72 | ) | $ | 0.96 | $ | 5.21 | |||||||
Diluted earnings (loss) per common share | $ | (0.37 | ) | $ | (3.72 | ) | $ | 0.93 | $ | 5.07 | |||||||
Weighted average basic shares outstanding | 113,581 | 90,827 | 97,105 | 90,854 | |||||||||||||
Weighted average diluted shares outstanding | 113,581 | 90,827 | 100,338 | 93,378 | |||||||||||||
(1) | Penn National adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606” or the “new revenue standard”), on January 1, 2018 using the modified retrospective method which impacts the comparability of these line items. See the following page of this release for further details. | ||
Supplemental Information
2018 Impact of Adopting New
Revenue Standard
(in thousands, unaudited) |
For the Three Months Ended December 31, 2018, as Reported | Balances Without Adoption of ASC 606 | Effect of Change Higher / (Lower) | For the Year Ended December 31, 2018, as Reported | Balances Without Adoption of ASC 606 | Effect of Change Higher / (Lower) | |||||||||||||||||||
Revenues | |||||||||||||||||||||||||
Gaming (1)(2) | $ | 928,938 | $ | 1,025,305 | $ | (96,367 | ) | $ | 2,894,861 | $ | 3,100,965 | $ | (206,104 | ) | |||||||||||
Food, beverage, hotel and other (2)(4) | 226,331 | 240,800 | (14,469 | ) | 629,733 | 699,085 | (69,352 | ) | |||||||||||||||||
Management service and licensing fees | — | — | — | 6,043 | 6,043 | — | |||||||||||||||||||
Reimbursable management costs (3) | — | — | — | 57,281 | 10,459 | 46,822 | |||||||||||||||||||
Revenues | 1,155,269 | 1,266,105 | (110,836 | ) | 3,587,918 | 3,816,552 | (228,634 | ) | |||||||||||||||||
Less: Promotional allowances (2) | — | (97,075 | ) | 97,075 | — | (236,766 | ) | 236,766 | |||||||||||||||||
Net revenues | 1,155,269 | 1,169,030 | (13,761 | ) | 3,587,918 | 3,579,786 | 8,132 | ||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||
Gaming (1) | 508,225 | 512,572 | (4,347 | ) | 1,551,430 | 1,554,245 | (2,815 | ) | |||||||||||||||||
Food, beverage, hotel and other (4) | 155,194 | 165,337 | (10,143 | ) | 439,253 | 476,545 | (37,292 | ) | |||||||||||||||||
General and administrative | 240,013 | 240,013 | — | 618,951 | 618,951 | — | |||||||||||||||||||
Depreciation and amortization | 93,189 | 93,189 | — | 268,990 | 268,990 | — | |||||||||||||||||||
Reimbursable management costs (3) | — | — | — | 57,281 | 10,459 | 46,822 | |||||||||||||||||||
Provision for loan loss and unfunded loan commitments to the JIVDC, net of recoveries, and impairment losses | 34,288 | 34,288 | — | 17,921 | 17,921 | — | |||||||||||||||||||
Total operating expenses |
1,030,909 | 1,045,399 | (14,490 | ) | 2,953,826 | 2,947,111 | 6,715 | ||||||||||||||||||
Operating income | $ | 124,360 | $ | 123,631 | $ | 729 | $ | 634,092 | $ | 632,675 | $ | 1,417 | |||||||||||||
(1) | The new revenue standard changed the accounting for loyalty rewards earned by our customers. The Company is now required to defer revenue at the estimated standalone selling price of the loyalty rewards as they are earned by our customers and recognize revenue when the rewards are redeemed. Prior to the adoption of ASC 606, the estimated liability for unredeemed rewards was accrued based on the estimated costs of the service or merchandise to be provided. | ||
(2) | The new revenue standard changed the accounting for promotional allowances. The Company is no longer 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 (discretionary comps). 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 are no longer netted on our consolidated statements of operations. In addition, ASC 606 changed the accounting for promotional allowances with respect to non-discretionary complimentaries (i.e., a customer’s redemption of loyalty points). Under ASC 606, the Company is no longer permitted to report revenue for goods and services provided to a customer resulting from loyalty reward redemptions with a corresponding reduction in promotional allowances to arrive at net revenue. As such, promotional allowances related to a customer’s redemption of loyalty rewards is no longer netted on our consolidated statements of operations. Lastly, ASC 606 required that goods and services provided to customers for free, whether through discretionary or non-discretionary comps, be recorded at their estimated standalone selling prices. | ||
(3) | The new revenue standard changed the accounting for reimbursable costs associated with our former management service contract for Casino Rama (terminated in July 2018). Under ASC 606, reimbursable costs, which primarily consisted of payroll costs, must be recognized as revenue on a gross basis, with an offsetting amount charged to reimbursable management costs within operating expenses. Prior to the adoption of ASC 606, we recorded these reimbursable amounts on a net basis, and as such they were not recorded in revenues or operating expenses. | ||
(4) | The new revenue standard changed the accounting for racing revenues. Under ASC 606, we are not the controlling entity to the arrangement(s), but rather function 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 our 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 ASC 606, we recorded these fees and obligations in food, beverage, hotel and other expense. | ||
Selected Financial Information
Balance Sheet Data
(in thousands) |
December 31, 2018 |
December 31, 2017 |
|||||||
Cash and cash equivalents (1) | $ | 479,598 | $ | 277,953 | |||||
Bank debt (1) | $ | 1,907,932 | $ | 730,788 | |||||
Notes | 399,332 | 399,249 | |||||||
Other long-term obligations (2) | 104,964 | 120,200 | |||||||
Total traditional debt (3) | $ | 2,412,228 | $ | 1,250,237 | |||||
Traditional net debt | $ | 1,932,630 | $ | 972,284 | |||||
(1) | Includes a $100.0 million draw on our revolving credit facility in December 2018 in order to close the Margaritaville acquisition on January 1, 2019. | ||
(2) | Other long-term obligations as of December 31, 2018 include $91.3 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 $13.2 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 $41.2 million and $30.0 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 December 31, | For the year ended December 31, | ||||||||||||||||
(in thousands) |
2018 | 2017 | 2018 | 2017 | |||||||||||||
Cash flow distributions | $ | 5,400 | $ | 4,750 | $ | 26,950 | $ | 25,950 | |||||||||
Cash Flow Data
The table below summarizes certain cash expenditures incurred by the Company.
For the three months ended December 31, | For the year ended December 31, | |||||||||||||||||
(in thousands) |
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Lease Payments (1) | $ | 190,417 | $ | 114,532 | $ | 537,447 | $ | 455,439 | ||||||||||
Cash payments (refunds) related to income taxes, net | $ | 630 | $ | (21,615 | ) | $ | 24,418 | $ | (43,067 | ) | ||||||||
Cash paid for interest on traditional debt | $ | 15,364 | $ | 7,356 | $ | 66,257 | $ | 54,785 | ||||||||||
Maintenance capital expenditures | $ | 34,872 | $ | 27,597 | $ | 89,685 | $ | 74,228 | ||||||||||
(1) | Includes payments made to GLPI for the Master Leases, which are accounted for as financing obligations, and the Meadows Lease, which is a triple net operating lease. The three months and year ended December 31, 2018 include $70.3 million relating to the Pinnacle Master Lease and $5.6 million relating to the Meadows Lease. | ||
Share Repurchase Activity
During the fourth quarter 2018, the Company repurchased a total of
2,299,498 shares of its common stock at an average price of
On
Supplemental Segment Information - Combined for Pinnacle Acquisition
Although Penn National did not own Pinnacle for the entirety of the periods and year presented below, the Company believes the following financial information is useful to investors to assess the value this transaction brings to the Company and its stakeholders.
The following financial information shows the Company’s reported results for the periods or year presented, the results of the acquired Pinnacle properties for the applicable pre-acquisition period or year presented, and the combined Company results as if the Pinnacle acquisition was completed at the beginning of the period or year presented. Combined Net Revenues and Combined Adjusted EBITDAR are non-GAAP financial measures. Further, the financial information below depicts the historical results of both Penn National and Pinnacle and do not reflect any cost savings or revenue synergies from potential operating efficiencies or associated costs to achieve such savings or synergies that are expected to result from the transaction. See the “Non-GAAP Financial Measures” section below for more information as well as the definitions of Adjusted EBITDAR; Lease Payments; Adjusted EBITDA, after Lease Payments; Combined Net Revenues; and Combined Adjusted EBITDAR. Additionally, see below for reconciliations of these Non-GAAP financial measures to their GAAP equivalent financial measure.
Net Revenues | |||||||||||||||||||||||||
Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | ||||||||||||||||||||
(in thousands, unaudited) |
For the three months |
For the period from October 1 |
For the three months ended |
For the three months ended December 31, 2017 (2) | |||||||||||||||||||||
Northeast | $ | 526,145 | $ | 18,185 | $ | 544,330 | $ | 425,762 | $ | 115,463 | $ | 541,225 | |||||||||||||
South | 207,983 | 25,211 | 233,194 | 58,169 | 184,083 | 242,252 | |||||||||||||||||||
West | 146,602 | 9,173 | 155,775 | 93,373 | 60,132 | 153,505 | |||||||||||||||||||
Midwest | 264,661 | 14,517 | 279,178 | 180,231 | 95,637 | 275,868 | |||||||||||||||||||
Other | 9,878 | 258 | 10,136 | 11,501 | 1,403 | 12,904 | |||||||||||||||||||
Total | $ | 1,155,269 | $ | 67,344 | $ | 1,222,613 | $ | 769,036 | $ | 456,718 | $ | 1,225,754 | |||||||||||||
Adjusted EBITDAR | |||||||||||||||||||||||||
Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | ||||||||||||||||||||
(in thousands, unaudited) |
For the three months |
For the period from October 1 |
For the three months ended |
For the three months ended December 31, 2017 (2) | |||||||||||||||||||||
Northeast | $ | 149,144 | $ | 3,266 | $ | 152,410 | $ | 128,045 | $ | 21,016 | $ | 149,061 | |||||||||||||
South | 60,199 | 6,800 | 66,999 | 12,753 | 58,629 | 71,382 | |||||||||||||||||||
West | 42,422 | 3,378 | 45,800 | 16,134 | 21,657 | 37,791 | |||||||||||||||||||
Midwest | 93,212 | 5,107 | 98,319 | 57,269 | 36,475 | 93,744 | |||||||||||||||||||
Other | (21,087 | ) | (3,290 | ) | (24,377 | ) | (15,120 | ) | (15,349 | ) | (30,469 | ) | |||||||||||||
Total | $ | 323,890 | $ | 15,261 | $ | 339,151 | $ | 199,081 | $ | 122,428 | $ | 321,509 | |||||||||||||
Net Revenues | |||||||||||||||||||||||||
Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | ||||||||||||||||||||
(in thousands, unaudited) |
For the year ended |
For the period from January 1 |
For the year ended |
For the year ended December 31, 2017 (2) | |||||||||||||||||||||
Northeast | $ | 1,891,514 | $ | 382,174 | $ | 2,273,688 | $ | 1,756,579 | $ | 483,276 | $ | 2,239,855 | |||||||||||||
South | 394,351 | 591,085 | 985,436 | 224,247 | 767,073 | 991,320 | |||||||||||||||||||
West | 437,887 | 198,764 | 636,651 | 380,418 | 242,205 | 622,623 | |||||||||||||||||||
Midwest | 823,717 | 304,901 | 1,128,618 | 735,033 | 390,422 | 1,125,455 | |||||||||||||||||||
Other | 40,449 | 4,582 | 45,031 | 51,693 | 5,614 | 57,307 | |||||||||||||||||||
Total | $ | 3,587,918 | $ | 1,481,506 | $ | 5,069,424 | $ | 3,147,970 | $ | 1,888,590 | $ | 5,036,560 | |||||||||||||
Adjusted EBITDAR | |||||||||||||||||||||||||
Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | ||||||||||||||||||||
(in thousands, unaudited) |
For the year ended |
For the period from January 1 |
For the year ended |
For the year ended December 31, 2017 (2) | |||||||||||||||||||||
Northeast | $ | 583,791 | $ | 73,274 | $ | 657,065 | $ | 549,304 | $ | 92,494 | $ | 641,798 | |||||||||||||
South | 118,962 | 181,731 | 300,693 | 62,580 | 242,346 | 304,926 | |||||||||||||||||||
West | 114,267 | 76,883 | 191,150 | 72,744 | 90,602 | 163,346 | |||||||||||||||||||
Midwest | 294,332 | 113,039 | 407,371 | 249,744 | 146,977 | 396,721 | |||||||||||||||||||
Other | (68,111 | ) | (42,784 | ) | (110,895 | ) | (55,223 | ) | (61,760 | ) | (116,983 | ) | |||||||||||||
Total | $ | 1,043,241 | $ | 402,143 | $ | 1,445,384 | $ | 879,149 | $ | 510,659 | $ | 1,389,808 | |||||||||||||
Net Revenues | Adjusted EBITDAR | ||||||||||||||||||||||||
Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | ||||||||||||||||||||
(in thousands, unaudited) |
For the three months ended March 31, 2018 | ||||||||||||||||||||||||
Northeast | $ | 458,719 | $ | 119,726 | $ | 578,445 | $ | 144,977 | $ | 23,925 | $ | 168,902 | |||||||||||||
South | 63,330 | 190,093 | 253,423 | 21,118 | 61,707 | 82,825 | |||||||||||||||||||
West | 97,966 | 59,646 | 157,612 | 23,931 | 22,565 | 46,496 | |||||||||||||||||||
Midwest | 185,534 | 97,479 | 283,013 | 68,185 | 37,163 | 105,348 | |||||||||||||||||||
Other | 10,536 | 1,110 | 11,646 | (15,665 | ) | (14,298 | ) | (29,963 | ) | ||||||||||||||||
Total | $ | 816,085 | $ | 468,054 | $ | 1,284,139 | $ | 242,546 | $ | 131,062 | $ | 373,608 | |||||||||||||
Net Revenues | Adjusted EBITDAR | ||||||||||||||||||||||||
Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | ||||||||||||||||||||
(in thousands, unaudited) |
For the three months ended June 30, 2018 | ||||||||||||||||||||||||
Northeast | $ | 465,285 | $ | 124,709 | $ | 589,994 | $ | 148,394 | $ | 26,228 | $ | 174,622 | |||||||||||||
South | 62,618 | 190,869 | 253,487 | 20,545 | 59,454 | 79,999 | |||||||||||||||||||
West | 100,751 | 62,554 | 163,305 | 26,103 | 24,231 | 50,334 | |||||||||||||||||||
Midwest | 188,162 | 95,938 | 284,100 | 67,543 | 35,592 | 103,135 | |||||||||||||||||||
Other | 10,097 | 1,308 | 11,405 | (15,479 | ) | (14,055 | ) | (29,534 | ) | ||||||||||||||||
Total | $ | 826,913 | $ | 475,378 | $ | 1,302,291 | $ | 247,106 | $ | 131,450 | $ | 378,556 | |||||||||||||
Net Revenues | Adjusted EBITDAR | ||||||||||||||||||||||||
Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | Penn National, as Reported | Pinnacle, Pre- Acquisition (1) |
Combined | ||||||||||||||||||||
(in thousands, unaudited) |
For the three months ended September 30, 2018 | ||||||||||||||||||||||||
Northeast | $ | 441,365 | $ | 119,554 | $ | 560,919 | $ | 141,276 | $ | 20,686 | $ | 161,962 | |||||||||||||
South | 60,420 | 184,913 | 245,333 | 17,100 | 55,203 | 72,303 | |||||||||||||||||||
West | 92,568 | 67,391 | 159,959 | 21,811 | 27,056 | 48,867 | |||||||||||||||||||
Midwest | 185,360 | 96,967 | 282,327 | 65,392 | 35,860 | 101,252 | |||||||||||||||||||
Other | 9,938 | 1,906 | 11,844 | (15,880 | ) | (14,435 | ) | (30,315 | ) | ||||||||||||||||
Total | $ | 789,651 | $ | 470,731 | $ | 1,260,382 | $ | 229,699 | $ | 124,370 | $ | 354,069 | |||||||||||||
(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. In addition, the operating results of Pinnacle were adjusted to conform to Penn National’s methodology of allocating certain corporate expenses to the properties. | ||
(2) | Both Penn National and Pinnacle adopted ASC 606 using a modified retrospective transition approach, which did not require that the prior periods be recast. | ||
Reconciliation of Comparable GAAP Financial Measure
to
Combined Adjusted EBITDAR
For the three months ended | For the year ended | ||||||||||||||||||||||||||||
(in thousands, unaudited) |
December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | ||||||||||||||||||||||
Net income (loss) | $ | (42,036 | ) | $ | 36,125 | $ | 53,988 | $ | 45,437 | $ | (338,060 | ) | $ | 93,514 | $ | 473,463 | |||||||||||||
Income tax expense (benefit) | (43,594 | ) | 9,070 | 15,242 | 15,689 | 252,134 | (3,593 | ) | (498,507 | ) | |||||||||||||||||||
Loss on early extinguishment of debt | 17,192 | 311 | 2,579 | 882 | 573 | 20,964 | 23,963 | ||||||||||||||||||||||
Income from unconsolidated affiliates | (5,535 | ) | (5,696 | ) | (5,734 | ) | (5,361 | ) | (4,321 | ) | (22,326 | ) | (18,671 | ) | |||||||||||||||
Interest income | (269 | ) | (246 | ) | (241 | ) | (249 | ) | (367 | ) | (1,005 | ) | (3,552 | ) | |||||||||||||||
Interest expense | 192,960 | 114,844 | 115,873 | 115,740 | 116,761 | 539,417 | 466,761 | ||||||||||||||||||||||
Other expense (income) | 5,642 | 1,435 | 48 | (4 | ) | 55 | 7,121 | 2,257 | |||||||||||||||||||||
Operating income | 124,360 | 155,843 | 181,755 | 172,134 | 26,775 | 634,092 | 445,714 | ||||||||||||||||||||||
Pinnacle Adjusted EBITDAR, pre-acquisition (1) | 15,261 | 124,370 | 131,450 | 131,062 | 122,428 | 402,143 | 510,659 | ||||||||||||||||||||||
Rent expense associated with triple net operating lease | 3,797 | — | — | — | — | 3,797 | — | ||||||||||||||||||||||
Charge for stock compensation | 3,187 | 2,915 | 3,003 | 2,929 | 1,953 | 12,034 | 7,780 | ||||||||||||||||||||||
Cash-settled stock award variance | (18,257 | ) | (1,692 | ) | 7,800 | (7,462 | ) | 10,632 | (19,611 | ) | 23,471 | ||||||||||||||||||
Loss (gain) on disposal of assets | (55 | ) | 3,220 | (52 | ) | 55 | 70 | 3,168 | 172 | ||||||||||||||||||||
Contingent purchase price | (1,289 | ) | 407 | 202 | 1,134 | 9,953 | 454 | (6,840 | ) | ||||||||||||||||||||
Pre-opening and acquisition costs | 77,861 | 5,187 | 5,879 | 6,093 | 5,138 | 95,020 | 9,732 | ||||||||||||||||||||||
Depreciation and amortization | 93,189 | 56,852 | 58,559 | 60,390 | 61,374 | 268,990 | 267,062 | ||||||||||||||||||||||
Provision (recovery) for loan loss and unfunded loan commitments to the JIVDC and impairment losses | 34,288 | — | (16,985 | ) | 618 | 77,858 | 17,921 | 107,810 | |||||||||||||||||||||
Insurance recoveries, net of deductible charges | — | — | (68 | ) | — | (289 | ) | (68 | ) | (289 | ) | ||||||||||||||||||
Income from unconsolidated affiliates | 5,535 | 5,696 | 5,734 | 5,361 | 4,321 | 22,326 | 18,671 | ||||||||||||||||||||||
Non-operating items for Kansas JV | 1,274 | 1,271 | 1,279 | 1,294 | 1,296 | 5,118 | 5,866 | ||||||||||||||||||||||
Combined Adjusted EBITDAR (2) | $ | 339,151 | $ | 354,069 | $ | 378,556 | $ | 373,608 | $ | 321,509 | $ | 1,445,384 | $ | 1,389,808 | |||||||||||||||
(1) | For the three months and year ended December 31, 2018, the Pinnacle Adjusted EBITDAR is for the periods from October 1, 2018 through October 14, 2018 and January 1, 2018 through October 14, 2018, respectively. | ||
(2) | See the “Non-GAAP Financial Measures” section below for more information, including the definition of Combined Adjusted EBITDAR. | ||
Non-GAAP Financial Measures
In addition to GAAP financial measures, Adjusted EBITDAR; Adjusted EBITDA, after Lease Payments; Combined Net 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 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
In the fourth quarter 2018, in connection with the Pinnacle acquisition, we began utilizing Adjusted EBITDAR instead of Adjusted EBITDA. The difference between Adjusted EBITDAR and Adjusted EBITDA is the exclusion of rent expense associated with the Meadows Lease.
In the first quarter 2018, we changed the definition of Adjusted EBITDA to exclude pre-opening and acquisition costs and the variance between budget and actual expense for cash-settled stock-based awards, which are required to be re-measured at fair market value at the end of each reporting period. We decided to exclude pre-opening and acquisition costs to more closely align the Company’s calculation of Adjusted EBITDA with our competitors. We decided to exclude both the favorable and unfavorable difference between the budgeted expense and actual expense for our cash-settled stock-based awards due to its non-operational nature. In connection with these changes, we have reclassified our prior period results, where applicable, to conform to the current period presentation.
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 the metric that our management team is measured
against for incentive-based compensation purposes. As of
The Company defines Combined Net Revenues as net revenues of Penn
National and Pinnacle assuming that Pinnacle was a part of Penn National
during the historical periods beginning on
Combined Net Revenues and Combined Adjusted EBITDAR are being presently
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 Net 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 and Pinnacle on a combined basis assuming
Pinnacle was a part of the Company for the historical periods beginning
on
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;
our expectations relative to margin improvement initiatives; our
expectations regarding economic and consumer conditions; and our
expectations for the continued availability and cost of capital. 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 award
of additional 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 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 ability to maintain market share
in established markets and to continue to ramp up operations at our
recently opened facilities; 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/20190207005224/en/
Source:
William J. Fair
Chief Financial Officer
610/373-2400
Joseph
N. Jaffoni, Richard Land
JCIR
212/835-8500 or penn@jcir.com