Penn National Gaming Reports Second Quarter Operating Income of $198.4 Million, Net Income of $51.4 Million, Adjusted EBITDAR of $406.5 Million, and Adjusted EBITDA, After Lease Payments of $191.6 Million
- Increases 2019 Full Year Guidance and Raises Anticipated Pinnacle Cost Synergies to
- Provides Sports Betting and iGaming Update -
2019 Second Quarter Financial Highlights:
- Revenues of
$1.32 billion , an increase of$496.2 million year over year; - Operating income of
$198.4 million , an increase of$16.6 million year over year, with net income of$51.4 million and net income margin of 3.9%; - Adjusted EBITDAR of
$406.5 million , an increase of$159.4 million year over year; - Adjusted EBITDAR margins of 30.7% marking an increase of 80 basis points year over year;
- Adjusted EBITDA, after Lease Payments of
$191.6 million , an increase of$60.4 million year over year; and - Traditional debt increased by
$178.2 million during the quarter, principally due to borrowings under our senior secured credit facilities for the acquisition of Greektown. As ofJune 30, 2019 , our GAAP traditional net debt ratio was 2.67x and net leverage on a lease-adjusted basis was 5.80x.
Pinnacle Synergies
“The integration of the Pinnacle properties continues to go extremely well,” said Mr. Wilmott. “We now expect to achieve at least
Sports Betting and iGaming
“Yesterday, we announced additional details regarding our sports betting and iGaming strategies and businesses,” said Mr. Wilmott. “Penn National entered into multi-year agreements with leading sports betting operators
M&A and Development Projects
“On
“Our development projects in
Free Cash Flow Allocation
“In the second quarter, the Company repurchased approximately 1.3 million shares of its common stock at an average price per share of
Summary of Second Quarter Results
|
For the three months ended June 30, |
||||||||||
(in millions, except per share data, unaudited) |
2019 Actual (1) |
|
2019 Guidance (2) |
|
2018 Actual |
||||||
Revenues |
$ |
1,323.1 |
|
|
$ |
1,314.3 |
|
|
$ |
826.9 |
|
Net income |
$ |
51.4 |
|
|
$ |
41.2 |
|
|
$ |
54.0 |
|
|
|
|
|
|
|
||||||
Adjusted EBITDAR (3) |
$ |
406.5 |
|
|
$ |
392.2 |
|
|
$ |
247.1 |
|
Less: Lease Payments (3) |
(214.9 |
) |
|
(209.1 |
) |
|
(115.9 |
) |
|||
Adjusted EBITDA, after Lease Payments (3) |
$ |
191.6 |
|
|
$ |
183.1 |
|
|
$ |
131.2 |
|
|
|
|
|
|
|
||||||
Diluted earnings per common share |
$ |
0.44 |
|
|
$ |
0.35 |
|
|
$ |
0.57 |
|
(1) |
Includes the results of operations of Greektown for the period from May 23, 2019, the date of acquisition, through June 30, 2019. |
||
(2) |
As provided by Penn National on May 2, 2019, which did not include the results of operations of Greektown. |
||
(3) |
See the “Non-GAAP Financial Measures” section below for more information as well as the definitions of Adjusted EBITDAR; Lease Payments;
|
Review of 2019Second Quarter Results vs. Guidance
|
For the three months ended
|
||||||
(in millions, unaudited) |
Pre-tax |
|
Post-tax |
||||
Income, per guidance (1) |
$ |
57.7 |
|
|
$ |
41.2 |
|
|
|
|
|
||||
Adjusted EBITDAR favorable variances: |
|
|
|
||||
Greektown Casino-Hotel (2) |
9.2 |
|
|
7.1 |
|
||
Performance of properties, exclusive of Greektown Casino-Hotel (2)(3) |
3.9 |
|
|
3.0 |
|
||
Corporate overhead |
1.1 |
|
|
0.8 |
|
||
Total Adjusted EBITDAR variances |
14.2 |
|
|
10.9 |
|
||
|
|
|
|
||||
Other favorable (unfavorable) variances (2): |
|
|
|
||||
Interest expense |
(1.3 |
) |
|
(1.0 |
) |
||
Rent expense associated with triple net operating leases (4) |
(5.5 |
) |
|
(4.3 |
) |
||
Depreciation and amortization |
(4.2 |
) |
|
(3.2 |
) |
||
Cash-settled stock-based awards |
3.4 |
|
|
2.6 |
|
||
Pre-opening and acquisition costs |
(3.7 |
) |
|
(2.8 |
) |
||
Other |
9.3 |
|
|
7.1 |
|
||
Income taxes |
— |
|
|
0.9 |
|
||
Income, as reported |
$ |
69.9 |
|
|
$ |
51.4 |
|
(1) |
As provided by Penn National on May 2, 2019, which did not include the results of operations of Greektown. |
||
(2) |
We acquired Greektown on May 23, 2019. As noted above, Greektown results of operations were not included in the guidance provided on May 2,
|
||
(3) |
Offsetting the favorable performance of the properties is the negative impact from flooding at Argosy Casino Alton, Ameristar Council Bluffs,
|
||
(4) |
Includes the operating lease components of the Master Leases (primarily land), the Meadows Lease, the Margaritaville Lease, and the Greektown
|
Financial Guidance for the 2019 Third Quarter and Full Year 2019
The Company’s third 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
$97.0 million , with$25.1 million to be incurred in the third quarter; -
Depreciation and amortization charges of
$419.5 million , with$106.5 million in the third quarter; -
Lease payments (which continue to be fully tax deductible) to our REIT landlords under our triple net leases of
$869.1 million , with$222.7 million in the third 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$65.8 million in the third quarter; -
Project capital expenditures for Hollywood York of
$15.0 million , with$4.8 million in the third quarter; -
Project capital expenditures for Hollywood Morgantown of
$21.5 million , with$5.0 million in the third quarter; -
Cash interest on traditional debt of
$124.6 million , with$38.2 million in the third quarter; -
Interest expense of
$536.2 million , with$134.7 million in the third 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
$368.4 million , with$96.8 million in the third quarter; -
Cash taxes of
$21.5 million , with$11.9 million in the third quarter; -
Our share of non-operating items (such as depreciation and amortization expense) associated with our Kansas JV of
$3.7 million , with$0.9 million to be incurred in the third quarter; -
Estimated non-cash stock compensation expense of
$13.7 million , with$3.5 million in the third quarter; - LIBOR is based on the forward yield curve;
- A diluted share count of approximately 117.7 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
|
|
For the full year
|
||||||||||||
(in millions, except per share data, unaudited) |
2019
|
|
2018 Actual |
|
2019
|
|
2018 Actual |
||||||||
Revenues |
$ |
1,370.5 |
|
|
$ |
789.7 |
|
|
$ |
5,338.0 |
|
|
$ |
3,587.9 |
|
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Penn National |
$ |
49.3 |
|
|
$ |
36.1 |
|
|
$ |
184.8 |
|
|
$ |
93.5 |
|
Net loss attributable to noncontrolling interest |
— |
|
|
— |
|
|
(0.2 |
) |
|
— |
|
||||
Net income |
49.3 |
|
|
36.1 |
|
|
184.6 |
|
|
93.5 |
|
||||
Income tax expense (benefit) |
16.4 |
|
|
9.1 |
|
|
62.8 |
|
|
(3.6 |
) |
||||
Loss on early extinguishment of debt |
— |
|
|
0.3 |
|
|
— |
|
|
21.0 |
|
||||
Income from unconsolidated affiliates |
(7.1 |
) |
|
(5.7 |
) |
|
(25.8 |
) |
|
(22.3 |
) |
||||
Interest income |
(0.2 |
) |
|
(0.2 |
) |
|
(1.1 |
) |
|
(1.0 |
) |
||||
Interest expense |
134.7 |
|
|
114.8 |
|
|
536.2 |
|
|
539.4 |
|
||||
Other expense |
0.6 |
|
|
1.4 |
|
|
1.0 |
|
|
7.1 |
|
||||
Operating income |
193.7 |
|
|
155.8 |
|
|
757.7 |
|
|
634.1 |
|
||||
Rent expense associated with triple net operating leases(1) |
96.8 |
|
|
— |
|
|
368.4 |
|
|
3.8 |
|
||||
Stock-based compensation |
3.5 |
|
|
2.9 |
|
|
13.7 |
|
|
12.0 |
|
||||
Cash-settled stock-based awards variance (2) |
— |
|
|
(1.7 |
) |
|
(3.0 |
) |
|
(19.6 |
) |
||||
Loss on disposal of assets |
— |
|
|
3.2 |
|
|
0.9 |
|
|
3.2 |
|
||||
Contingent purchase price |
0.3 |
|
|
0.4 |
|
|
6.4 |
|
|
0.5 |
|
||||
Pre-opening and acquisition costs |
— |
|
|
5.2 |
|
|
8.1 |
|
|
95.0 |
|
||||
Depreciation and amortization |
106.5 |
|
|
56.9 |
|
|
419.5 |
|
|
269.0 |
|
||||
Provision for loan loss and unfunded loan commitments, net of recoveries, and impairment losses |
— |
|
|
— |
|
|
— |
|
|
17.9 |
|
||||
Insurance recoveries, net of deductible charges |
— |
|
|
— |
|
|
— |
|
|
(0.1 |
) |
||||
Income from unconsolidated affiliates |
7.1 |
|
|
5.7 |
|
|
25.8 |
|
|
22.3 |
|
||||
Non-operating items for Kansas JV (2) |
0.9 |
|
|
1.3 |
|
|
3.7 |
|
|
5.1 |
|
||||
Adjusted EBITDAR |
$ |
408.8 |
|
|
$ |
229.7 |
|
|
$ |
1,601.2 |
|
|
$ |
1,043.2 |
|
Less: Lease Payments (3) |
(222.7 |
) |
|
(115.2 |
) |
|
(869.1 |
) |
|
(537.4 |
) |
||||
Adjusted EBITDA, after Lease Payments |
$ |
186.1 |
|
|
$ |
114.5 |
|
|
$ |
732.1 |
|
|
$ |
505.8 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per common share |
$ |
0.42 |
|
|
$ |
0.38 |
|
|
$ |
1.57 |
|
|
$ |
0.93 |
|
(1) |
The three months ending September 30, 2019 and the year ending December 31, 2019, include rent expense associated with the operating lease components of the Master Leases (primarily land), the Meadows Lease, the Margaritaville Lease, and the Greektown Lease. |
||
(2) |
For a description of these items, see “Non-GAAP Financial Measures” section below. |
||
(3) |
The three months ending September 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 associated with the Margaritaville Lease and the Greektown 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 and six 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) |
$ |
599,086 |
|
|
$ |
465,285 |
|
|
$ |
156,410 |
|
|
$ |
132,013 |
|
|
$ |
186,190 |
|
|
$ |
148,394 |
|
South segment (2) |
282,188 |
|
|
62,618 |
|
|
72,319 |
|
|
17,827 |
|
|
92,761 |
|
|
20,545 |
|
||||||
West segment (3) |
164,250 |
|
|
100,751 |
|
|
42,179 |
|
|
37,525 |
|
|
50,460 |
|
|
26,103 |
|
||||||
Midwest segment (4) |
268,160 |
|
|
188,162 |
|
|
78,892 |
|
|
53,379 |
|
|
97,793 |
|
|
67,543 |
|
||||||
Other (5) |
9,410 |
|
|
10,097 |
|
|
(151,420 |
) |
|
(58,989 |
) |
|
(20,747 |
) |
|
(15,479 |
) |
||||||
Total |
$ |
1,323,094 |
|
|
$ |
826,913 |
|
|
$ |
198,380 |
|
|
$ |
181,755 |
|
|
$ |
406,457 |
|
|
$ |
247,106 |
|
|
Revenues |
|
Operating Income (Loss) |
|
Adjusted EBITDAR |
||||||||||||||||||
|
For the six months ended
|
|
For the six months ended
|
|
For the six months ended
|
||||||||||||||||||
(in thousands, unaudited) |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||||||
Northeast segment (1) |
$ |
1,149,664 |
|
|
$ |
924,004 |
|
|
$ |
298,587 |
|
|
$ |
259,433 |
|
|
$ |
350,944 |
|
|
$ |
293,371 |
|
South segment (2) |
574,130 |
|
|
125,948 |
|
|
150,442 |
|
|
35,984 |
|
|
190,605 |
|
|
41,663 |
|
||||||
West segment (3) |
322,904 |
|
|
198,717 |
|
|
83,997 |
|
|
55,254 |
|
|
100,383 |
|
|
50,034 |
|
||||||
Midwest segment (4) |
539,422 |
|
|
373,696 |
|
|
159,862 |
|
|
107,167 |
|
|
197,012 |
|
|
135,728 |
|
||||||
Other (5) |
19,545 |
|
|
20,633 |
|
|
(312,122 |
) |
|
(103,949 |
) |
|
(41,050 |
) |
|
(31,144 |
) |
||||||
Total |
$ |
2,605,665 |
|
|
$ |
1,642,998 |
|
|
$ |
380,766 |
|
|
$ |
353,889 |
|
|
$ |
797,894 |
|
|
$ |
489,652 |
|
(1) |
Northeast segment consists of the following properties: Ameristar East Chicago, Greektown Casino-Hotel, Hollywood Casino Bangor,
|
||
(2) |
The South segment consists of the following properties: 1st Jackpot Casino, Ameristar Vicksburg, Boomtown Biloxi, Boomtown Bossier City,
|
||
(3) |
The West segment consists of the following properties: Ameristar Black Hawk, Cactus Petes and Horseshu, M Resort, Tropicana Las Vegas, and Zia
|
||
(4) |
The Other category consists of the Company’s standalone racing operations, namely Sanford-Orlando Kennel Club, and the Company’s joint
|
||
(5) |
The Midwest segment consists of the following properties: Ameristar Council Bluffs; Argosy Casino Alton; Argosy Casino Riverside; Hollywood
|
Supplemental Segment Information - Combined for
the Acquisitions of Pinnacle,
Although Penn National did not own Pinnacle,
The following financial information for the three and six months ended
|
Revenues |
||||||||||||||||||||||
|
Penn
|
|
Pinnacle,
|
|
Combined |
|
Penn
|
|
Pinnacle,
|
|
Combined |
||||||||||||
(in thousands, unaudited) |
For the three months ended June 30, 2018 |
|
For the six months ended June 30, 2018 |
||||||||||||||||||||
Northeast (2) |
$ |
465,285 |
|
|
$ |
208,059 |
|
|
$ |
673,344 |
|
|
$ |
924,004 |
|
|
$ |
408,339 |
|
|
$ |
1,332,343 |
|
South |
62,618 |
|
|
230,623 |
|
|
293,241 |
|
|
125,948 |
|
|
459,824 |
|
|
585,772 |
|
||||||
West |
100,751 |
|
|
62,554 |
|
|
163,305 |
|
|
198,717 |
|
|
122,200 |
|
|
320,917 |
|
||||||
Midwest |
188,162 |
|
|
95,938 |
|
|
284,100 |
|
|
373,696 |
|
|
193,417 |
|
|
567,113 |
|
||||||
Other |
10,097 |
|
|
1,308 |
|
|
11,405 |
|
|
20,633 |
|
|
2,418 |
|
|
23,051 |
|
||||||
Total |
$ |
826,913 |
|
|
$ |
598,482 |
|
|
$ |
1,425,395 |
|
|
$ |
1,642,998 |
|
|
$ |
1,186,198 |
|
|
$ |
2,829,196 |
|
|
Adjusted EBITDAR |
||||||||||||||||||||||
|
Penn
|
|
Pinnacle,
|
|
Combined |
|
Penn
|
|
Pinnacle,
|
|
Combined |
||||||||||||
(in thousands, unaudited) |
For the three months ended June 30, 2018 |
|
For the six months ended June 30, 2018 |
||||||||||||||||||||
Northeast (3) |
$ |
148,394 |
|
|
$ |
49,073 |
|
|
$ |
197,467 |
|
|
$ |
293,371 |
|
|
$ |
94,940 |
|
|
$ |
388,311 |
|
South |
20,545 |
|
|
71,827 |
|
|
92,372 |
|
|
41,663 |
|
|
145,234 |
|
|
186,897 |
|
||||||
West |
26,103 |
|
|
24,231 |
|
|
50,334 |
|
|
50,034 |
|
|
46,796 |
|
|
96,830 |
|
||||||
Midwest |
67,543 |
|
|
35,592 |
|
|
103,135 |
|
|
135,728 |
|
|
72,755 |
|
|
208,483 |
|
||||||
Other |
(15,479 |
) |
|
(14,055 |
) |
|
(29,534 |
) |
|
(31,144 |
) |
|
(28,353 |
) |
|
(59,497 |
) |
||||||
Total |
$ |
247,106 |
|
|
$ |
166,668 |
|
|
$ |
413,774 |
|
|
$ |
489,652 |
|
|
$ |
331,372 |
|
|
$ |
821,024 |
|
(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 and Greektown 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. |
||
(2) |
Revenues specific to Greektown were $83,350 thousand and $163,904 thousand for the three and six months ended June 30, 2018, respectively. |
||
(3) |
Adjusted EBITDAR specific to Greektown were $22,845 thousand and $44,787 thousand for the three and six months ended June 30, 2018, respectively. |
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
|
|||||||||||||||
|
For the three months ended
|
|
For the six months ended
|
||||||||||||
(in thousands, unaudited) |
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Net income |
$ |
51,357 |
|
|
$ |
53,988 |
|
|
$ |
92,344 |
|
|
$ |
99,425 |
|
Income tax expense |
18,539 |
|
|
15,242 |
|
|
33,357 |
|
|
30,931 |
|
||||
Loss on early extinguishment of debt |
— |
|
|
2,579 |
|
|
— |
|
|
3,461 |
|
||||
Income from unconsolidated affiliates |
(6,255 |
) |
|
(5,734 |
) |
|
(11,942 |
) |
|
(11,095 |
) |
||||
Interest income |
(257 |
) |
|
(241 |
) |
|
(576 |
) |
|
(490 |
) |
||||
Interest expense |
135,039 |
|
|
115,873 |
|
|
267,626 |
|
|
231,613 |
|
||||
Other expense (income) |
(43 |
) |
|
48 |
|
|
(43 |
) |
|
44 |
|
||||
Operating income |
198,380 |
|
|
181,755 |
|
|
380,766 |
|
|
353,889 |
|
||||
Rent expense associated with triple net operating leases(1) |
90,025 |
|
|
— |
|
|
174,755 |
|
|
— |
|
||||
Stock-based compensation |
3,247 |
|
|
3,003 |
|
|
6,664 |
|
|
5,932 |
|
||||
Cash-settled stock-based awards variance |
(3,436 |
) |
|
7,800 |
|
|
(2,964 |
) |
|
338 |
|
||||
Loss (gain) on disposal of assets |
371 |
|
|
(52 |
) |
|
893 |
|
|
3 |
|
||||
Contingent purchase price |
1,040 |
|
|
202 |
|
|
5,757 |
|
|
1,337 |
|
||||
Pre-opening and acquisition costs |
3,700 |
|
|
5,879 |
|
|
8,080 |
|
|
11,972 |
|
||||
Depreciation and amortization |
106,020 |
|
|
58,559 |
|
|
210,073 |
|
|
118,949 |
|
||||
Recoveries on loan loss and unfunded loan commitments, net of impairment losses |
— |
|
|
(16,985 |
) |
|
— |
|
|
(16,367 |
) |
||||
Insurance recoveries, net of deductible charges |
— |
|
|
(68 |
) |
|
— |
|
|
(68 |
) |
||||
Income from unconsolidated affiliates |
6,255 |
|
|
5,734 |
|
|
11,942 |
|
|
11,095 |
|
||||
Non-operating items for Kansas JV |
855 |
|
|
1,279 |
|
|
1,928 |
|
|
2,572 |
|
||||
Adjusted EBITDAR |
$ |
406,457 |
|
|
$ |
247,106 |
|
|
$ |
797,894 |
|
|
$ |
489,652 |
|
Less: Lease Payments |
(214,822 |
) |
|
(115,916 |
) |
|
(422,788 |
) |
|
(231,790 |
) |
||||
Adjusted EBITDA, after Lease Payments |
$ |
191,635 |
|
|
$ |
131,190 |
|
|
$ |
375,106 |
|
|
$ |
257,862 |
|
Net income margin |
3.9 |
% |
|
6.5 |
% |
|
3.5 |
% |
|
6.0 |
% |
||||
Adjusted EBITDAR margin |
30.7 |
% |
|
29.9 |
% |
|
30.6 |
% |
|
29.8 |
% |
(1) |
During the three and six months ended June 30, 2019, the Company’s triple net operating leases included certain components of the Master Leases
|
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
|
|||||||
(in thousands, unaudited) |
For the three
|
|
For the six
|
||||
Net income |
$ |
53,988 |
|
|
$ |
99,425 |
|
Income tax expense |
15,242 |
|
|
30,931 |
|
||
Loss on early extinguishment of debt |
2,579 |
|
|
3,461 |
|
||
Income from unconsolidated affiliates |
(5,734 |
) |
|
(11,095 |
) |
||
Interest income |
(241 |
) |
|
(490 |
) |
||
Interest expense |
115,873 |
|
|
231,613 |
|
||
Other expense |
48 |
|
|
44 |
|
||
Operating income |
181,755 |
|
|
353,889 |
|
||
Pinnacle, Margaritaville, and Greektown Adjusted EBITDAR, pre-acquisition |
166,668 |
|
|
331,372 |
|
||
Stock-based compensation |
3,003 |
|
|
5,932 |
|
||
Cash-settled stock-based awards variance |
7,800 |
|
|
338 |
|
||
Loss (gain) on disposal of assets |
(52 |
) |
|
3 |
|
||
Contingent purchase price |
202 |
|
|
1,337 |
|
||
Pre-opening and acquisition costs |
5,879 |
|
|
11,972 |
|
||
Depreciation and amortization |
58,559 |
|
|
118,949 |
|
||
Recoveries on loan loss and unfunded loan commitments, net of impairment losses |
(16,985 |
) |
|
(16,367 |
) |
||
Insurance recoveries, net of deductible charges |
(68 |
) |
|
(68 |
) |
||
Income from unconsolidated affiliates |
5,734 |
|
|
11,095 |
|
||
Non-operating items for Kansas JV |
1,279 |
|
|
2,572 |
|
||
Combined Adjusted EBITDAR (1) |
$ |
413,774 |
|
|
$ |
821,024 |
|
(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
|
|
For the six months ended
|
||||||||||||
(in thousands, except per share data, unaudited) |
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Revenues: |
|
|
|
|
|
|
|
||||||||
Gaming |
$ |
1,062,139 |
|
|
$ |
665,094 |
|
|
$ |
2,096,650 |
|
|
$ |
1,319,588 |
|
Food, beverage, hotel, and other |
260,955 |
|
|
133,664 |
|
|
509,015 |
|
|
264,633 |
|
||||
Management service and license fees |
— |
|
|
2,968 |
|
|
— |
|
|
5,406 |
|
||||
Reimbursable management costs |
— |
|
|
25,187 |
|
|
— |
|
|
53,371 |
|
||||
Total revenues |
1,323,094 |
|
|
826,913 |
|
|
2,605,665 |
|
|
1,642,998 |
|
||||
Operating expenses |
|
|
|
|
|
|
|
||||||||
Gaming |
564,155 |
|
|
350,694 |
|
|
1,111,600 |
|
|
691,210 |
|
||||
Food, beverage, hotel and other |
167,571 |
|
|
95,112 |
|
|
329,330 |
|
|
188,092 |
|
||||
General and administrative |
286,968 |
|
|
132,591 |
|
|
573,896 |
|
|
253,854 |
|
||||
Reimbursable management costs |
— |
|
|
25,187 |
|
|
— |
|
|
53,371 |
|
||||
Depreciation and amortization |
106,020 |
|
|
58,559 |
|
|
210,073 |
|
|
118,949 |
|
||||
Recoveries on loan loss and unfunded loan commitments, net of impairment losses |
— |
|
|
(16,985 |
) |
|
— |
|
|
(16,367 |
) |
||||
Total operating expenses |
1,124,714 |
|
|
645,158 |
|
|
2,224,899 |
|
|
1,289,109 |
|
||||
Operating income |
198,380 |
|
|
181,755 |
|
|
380,766 |
|
|
353,889 |
|
||||
Other income (expenses) |
|
|
|
|
|
|
|
||||||||
Interest expense |
(135,039 |
) |
|
(115,873 |
) |
|
(267,626 |
) |
|
(231,613 |
) |
||||
Interest income |
257 |
|
|
241 |
|
|
576 |
|
|
490 |
|
||||
Income from unconsolidated affiliates |
6,255 |
|
|
5,734 |
|
|
11,942 |
|
|
11,095 |
|
||||
Loss on early extinguishment of debt |
— |
|
|
(2,579 |
) |
|
— |
|
|
(3,461 |
) |
||||
Other |
43 |
|
|
(48 |
) |
|
43 |
|
|
(44 |
) |
||||
Total other expenses |
(128,484 |
) |
|
(112,525 |
) |
|
(255,065 |
) |
|
(223,533 |
) |
||||
Income before income taxes |
69,896 |
|
|
69,230 |
|
|
125,701 |
|
|
130,356 |
|
||||
Income tax expense |
(18,539 |
) |
|
(15,242 |
) |
|
(33,357 |
) |
|
(30,931 |
) |
||||
Net income |
51,357 |
|
|
53,988 |
|
|
92,344 |
|
|
99,425 |
|
||||
Less: Net loss attributable to non-controlling interest |
190 |
|
|
— |
|
|
195 |
|
|
— |
|
||||
Net income attributable to Penn National |
$ |
51,547 |
|
|
$ |
53,988 |
|
|
$ |
92,539 |
|
|
$ |
99,425 |
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share: |
|
|
|
|
|
|
|
||||||||
Basic earnings per common share |
$ |
0.44 |
|
|
$ |
0.59 |
|
|
$ |
0.80 |
|
|
$ |
1.09 |
|
Diluted earnings per common share |
$ |
0.44 |
|
|
$ |
0.57 |
|
|
$ |
0.78 |
|
|
$ |
1.05 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted average basic shares outstanding |
115,982 |
|
|
91,468 |
|
|
116,137 |
|
|
91,330 |
|
||||
Weighted average diluted shares outstanding |
117,676 |
|
|
94,995 |
|
|
118,161 |
|
|
94,834 |
|
Selected Financial Information
Balance Sheet Data
(in thousands, unaudited) |
June 30,
|
|
December 31,
|
||||
Cash and cash equivalents (1) |
$ |
378,766 |
|
|
$ |
479,598 |
|
|
|
|
|
||||
Bank debt (1) |
$ |
2,056,100 |
|
|
$ |
1,907,932 |
|
Notes |
399,374 |
|
|
399,332 |
|
||
Other long-term obligations (2) |
96,644 |
|
|
104,964 |
|
||
Total traditional debt (3) |
$ |
2,552,118 |
|
|
$ |
2,412,228 |
|
|
|
|
|
||||
Traditional net debt |
$ |
2,173,352 |
|
|
$ |
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
|
||
(2) |
Other long-term obligations as of June 30, 2019 include $84.0 million for the present value of the relocation fees due for both Hollywood Gaming at
|
||
(3) |
Amounts are inclusive of debt discount and debt issuance costs of $37.6 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
|
|
For the six months ended
|
||||||||||||
(in thousands, unaudited) |
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Cash flow distributions |
$ |
7,000 |
|
|
$ |
6,800 |
|
|
$ |
13,500 |
|
|
$ |
13,300 |
|
|
|
|
|
Cash Flow Data
The table below summarizes certain cash expenditures incurred by the Company.
|
For the three months ended
|
|
For the six months ended
|
||||||||||||
(in thousands, unaudited) |
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Lease Payments (1) |
$ |
214,822 |
|
|
$ |
115,916 |
|
|
$ |
422,788 |
|
|
$ |
231,790 |
|
Cash payments related to income taxes, net |
$ |
6,227 |
|
|
$ |
4,274 |
|
|
$ |
4,500 |
|
|
$ |
6,507 |
|
Cash paid for interest on traditional debt |
$ |
24,003 |
|
|
$ |
8,262 |
|
|
$ |
62,485 |
|
|
$ |
30,455 |
|
Maintenance capital expenditures |
$ |
46,800 |
|
|
$ |
20,695 |
|
|
$ |
83,020 |
|
|
$ |
31,297 |
|
(1) |
See the “Non-GAAP Financial Measures” section below for the definition of Lease Payments. The three and six months ended June 30, 2019
|
Share Repurchase Activity
During the second quarter 2019, the Company repurchased a total of 1,271,823 shares of its common stock at an average price per share of
Non-GAAP Financial Measures
In addition to GAAP financial measures, Adjusted EBITDAR; Adjusted EBITDAR margin; 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 (see below), 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 believe that investors and analysts use Adjusted EBITDAR as a valuation metric in determining the enterprise value of the Company. We 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.
Since Adjusted EBITDAR excludes real property operating lease charges, which are normal, recurring cash operating expenses that are necessary to operate our business, Adjusted EBITDAR should not be viewed as the only measure of overall performance of the Company. For the foregoing reason, Adjusted EBITDAR has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this financial measure.
Adjusted EBITDAR margin is defined as Adjusted EBITDAR on a consolidated basis divided by revenues on a consolidated basis. 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 cash lease payments made to our REIT landlords under our triple net leases (see below). 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 Lease Payments to our REIT landlords. We believe that given the significant cash payments made to our REIT Landlords in the form of Lease Payments that understanding the amount of Adjusted EBITDA, after Lease Payments is important in understanding the performance of the Company and relative health of the Company. In addition, Adjusted EBITDA, after Lease Payments is one of the financial metrics that our management team is measured against for incentive-based compensation purposes as this metric is an objective and quantifiable measurement of the Company’s financial performance. For purposes of the definition above, the Company’s REIT landlords under our triple net leases were GLPI, as it pertains to the Master Leases and the Meadows Lease, and VICI, as it pertains to the Margaritaville Lease and the Greektown Lease.
The Company defines Combined Revenues as revenues of Penn National, Pinnacle,
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,
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
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 with regard to the impact of competition in online sports betting, iGaming and sportsbooks as well as the potential impact of this business line on our existing businesses; the performance of our partners in online sports betting, iGaming and sportsbooks, including the risks associated with any new business, the actions of regulatory, legislative, executive or judicial decisions at the federal, state or local level with regard to online sports betting, iGaming and sportsbooks and the impact of any such actions; our ability and the ability of our business partners to obtain and maintain regulatory approvals for online sports betting, iGaming and sportsbooks; and our expectations regarding economic and consumer conditions. As a result, actual results may vary materially from expectations. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our 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 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, including flooding, hurricanes and tornadoes; 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 (particularly as our interactive segment grows); factors which may cause the Company to curtail or suspend the share repurchase program; with respect to
View source version on businesswire.com: https://www.businesswire.com/news/home/20190801005266/en/
Source:
William J. Fair
Chief Financial Officer
610-373-2400
Joseph N. Jaffoni, Richard Land
JCIR
212-835-8500 or penn@jcir.com