- Establishes 2014 Second Quarter Guidance
and Modifies 2014 Full Year Guidance -
Penn National Gaming, Inc. (PENN: Nasdaq):
Conference Call:
Today, April 24, 2014 at 10:00 a.m.
ET
Dial-in number:
212/231-2920
Webcast:
www.pngaming.com
Replay information provided
below
Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National
Gaming” or the “Company”) today reported first quarter operating
results for the three months ended March 31, 2014, as summarized
below.
On November 1, 2013, the Company completed the tax-free spin-off
to its shareholders of Gaming and Leisure Properties, Inc.
(“GLPI”). As a result, Penn National Gaming leases from GLPI the
real estate associated with 19 Penn National Gaming casino
facilities and makes monthly rent payments to GLPI pursuant to a
master lease. In addition, two other gaming facilities which were
owned by Penn National Gaming prior to the spin-off, Hollywood
Casino Perryville and Hollywood Casino Baton Rouge, are now owned
and operated exclusively by subsidiaries of GLPI.
Summary of First Quarter
Results
(in millions, except per share data)
Three Months Ended
March 31,
2014 Actual 2014 Guidance
(3) 2013 Actual Net revenues
$ 641.1 $ 640.4 $ 798.2
Adjusted EBITDAR (1) 174.7
174.7 220.7 Rental
expense related to Master Lease (104.3 )
(103.2 ) -
Adjusted EBITDA
(2) 70.4 71.5
220.7 Less: Impact of stock compensation,
insurance recoveries and deductible charges, depreciation and
amortization, gain/loss on disposal of assets, interest expense -
net, income taxes, and other expenses (65.9 )
(67.2 ) (155.4 )
Net income
$ 4.5 $ 4.3 $ 65.3
Diluted
earnings per common share $ 0.05 $
0.05 $ 0.63
(1)
Adjusted EBITDAR is adjusted EBITDA
excluding rent expense associated with our Master Lease with GLPI.
Results for the three months ended March 31, 2013 included $10.4
million of adjusted EBITDAR related to Hollywood Casino Perryville
and Hollywood Casino Baton Rouge that were contributed to GLPI on
November 1, 2013 as part of the spin-off.
(2)
Adjusted EBITDA is income (loss) from
operations, excluding the impact of stock compensation, impairment
losses, insurance recoveries and deductible charges, depreciation
and amortization, and gain or loss on disposal of assets, and is
inclusive of gain or loss from unconsolidated affiliates. A
reconciliation of net income (loss) per accounting principles
generally accepted in the United States of America (“GAAP”) to
adjusted EBITDA and adjusted EBITDAR, as well as income (loss) from
operations per GAAP to adjusted EBITDA and adjusted EBITDAR, is
included in the accompanying financial schedules.
(3)
The guidance figures in the table above
present the guidance Penn National Gaming provided on February 6,
2014 for the three months ended March 31, 2014.
Review of First Quarter 2014 Results vs. Guidance and First
Quarter 2013 Results
Three Months Ended
March 31, 2014
Pre-tax After-tax (in thousands)
Income, per guidance (1) $ 6,997 $ 4,268 EBITDA
variances: Total segment variance, mainly East/Midwest (4,474 )
(2,090 ) Liability based stock compensation charges variance 3,597
2,170 Rent expense variance, primarily due to Ohio properties
(1,104 ) (516 ) Lower other corporate overhead costs 890
537 Total EBITDA variances from
guidance (1,091 ) 101 Depreciation and gain/loss on disposal
variance 3,185 1,488 Foreign currency and other 2,246 1,353 Tax
variance, including additional FIN 48 reserves -
(2,673 ) Income, as reported $ 11,337 $
4,537
Three Months Ended
March 31, 2014 2014 Guidance (1)
2013 Diluted earnings per common share $ 0.05 $ 0.05
$ 0.63 Liability based stock compensation charges (0.03 ) -
0.02 Rent expense variance 0.01 - - Development costs - - 0.01
Spin-off transaction costs - - 0.01 Depreciation and gain/loss on
disposal variance - 0.02 - Tax variance - (0.03 ) - Loss on
disposals - - 0.02 Foreign currency and other (0.01 )
- -
Total $ 0.02 $
0.04 $ 0.69
(1)
The guidance figures in the tables above present the
guidance Penn National Gaming provided on February 6, 2014 for the
three months ended March 31, 2014.
Timothy J. Wilmott, President and Chief Executive Officer of
Penn National Gaming, commented, “Despite challenging operating
conditions, first quarter consolidated results were in line with
our expectations, with revenue, adjusted EBITDAR, adjusted EBITDA
and diluted EPS at or near guidance. During the quarter, we saw a
significant increase in both the number and severity of weather
impacted days compared to the first quarter of 2013. While weather
presented a significant drag on earnings -- particularly to our
newly defined East/Midwest segment which includes our three largest
properties -- our property level management teams continue to be
diligent in maintaining margins.
“On non-weather affected days, first quarter customer visitation
and spending levels from our rated customers remained largely
consistent with recent trends and our forecasts, while these
metrics for customers spending less than $100 per visit remain
challenged. The Company continued to address weather-related and
non-rated customer trends by aggressively managing costs, including
rational marketing and promotional activity, and driving operating
efficiencies. Our success with these efforts is evident in our
first quarter property level EBITDAR margins, with the East/Midwest
region achieving a 29.4% margin (excluding pre-opening/development
costs), the West region delivering a 30.5% margin and the Southern
Plains region generating a 31.7% margin. Notably, both the West and
Southern Plains segments exceeded the property level EBITDAR margin
of the comparable 2013 period. We remain focused on expanding the
EBITDAR contribution across our property portfolio as we actively
manage operating costs, fine tune the slot floor and table game
mix, build customer databases at our newly opened facilities,
refine marketing efforts and adjust food, beverage and
entertainment offerings.
“Adjusted EBITDA was also impacted by higher than budgeted rent
expense due to higher than projected revenue levels at our Ohio
casinos. Conversely, first quarter results did not include $3
million of expenses that had been contemplated in our guidance
related to dividend payments to Penn National Gaming employees who
hold vested GLPI stock options as a result of the spin-off.
Reflecting organization-wide cost management measures, we
anticipate corporate overhead expenses for 2014 to approximate
$70.0 million, or 21% lower than 2013 levels when excluding $25
million of spin-off costs incurred in 2013.
“During the quarter, Penn National Gaming made notable progress
advancing our slate of expansion and development projects, as
highlighted by the Massachusetts Gaming Commission’s decision in
late February to award us with the Commonwealth’s sole Category 2
(slots) gaming license. As the largest owner of both regional
gaming and pari-mutuel racing facilities in the country, we believe
Penn National Gaming has an unrivalled record of developing
pari-mutuel facilities into successful racing and gaming
entertainment operations that benefit local horsemen, local
communities and all state residents through economic development
which leads to the creation of new jobs and new tax revenues. We
are confident that our development in Massachusetts will extend our
record.
“Our $225 million Plainridge Park Casino in Plainville,
Massachusetts, with a planned opening in June 2015, is wholly-owned
by Penn National Gaming, and we believe the project will further
diversify our operating base and generate strong returns on
invested capital. In March, we executed our purchase agreement for
the land and real estate for this project and also paid the $25
million gaming license fee. We expect the new facility to create
1,000 construction related jobs and employ over 500 people, of
which 90% are being hired from the local area and most of whom will
be represented by local unions. In mid-March, Penn National Gaming
conducted a ground breaking event at the site and hosted a
construction vendor event focused on Massachusetts-based
minority-owned, women-owned, veteran-owned and locally owned
businesses interested in contracting with the Company in the
development of Plainridge Park Casino. Penn National Gaming has
also entered into cross-marketing agreements with nearly 50 area
businesses to help the community participate more fully in the
benefits of this economic development project. Conveniently located
one exit west of the I-495 /I-95 interchange, Plainridge Park
Casino is within a 10 minute drive of four major entertainment
venues -- Gillette Stadium at Patriot Place, Wrentham Village
Premium Outlets, TPC Boston, and the Comcast Center in Mansfield.
This facility will preserve live harness racing, create jobs in the
Commonwealth and generate attractive returns as we anticipate it
will be the first facility to open in the Commonwealth. Overall,
the project represents a significant opportunity for the
Commonwealth, its residents and Penn National Gaming.
“During the first quarter, we also commenced construction
related to our pending management contract for the $360 million
Hollywood Casino-branded facility on the Jamul Indian Village’s
land in trust, which is located approximately 7 miles east of the
San Diego Beltway, directly off of State Route 94. Hollywood Casino
Jamul-San Diego, which is expected to open in early 2016, will be
the closest casino to downtown San Diego and its population base of
over 700,000 adults. Current construction activity is focused on a
parking structure with over 1,900 spaces. When complete, the
property will include a three-story gaming and entertainment
facility of approximately 200,000 square feet, over 1,700 slot
machines, 50 live table games including poker, multiple
restaurants, bars and lounges. As with all of our developments, the
project will create significant new construction and permanent jobs
in the region and will enable the Jamul Indian Village of
California to become economically self-sufficient. Penn National
Gaming plans to participate in the success of the project through
management and branding fees, as well as interest payments.
“Given our focus on prudently expanding and diversifying our
operating base with return focused projects, last week we announced
a strategic alliance with The Cordish Companies, developer and
operator of the successful Maryland Live! facility in Hanover,
Maryland, to pursue the development of a world class gaming
facility and resort in New York’s Hudson Valley-Catskill region as
well as a potential facility in the state’s Capital Region. We
believe our alignment with Cordish brings together two of the
industry’s most financially sound companies with proven gaming
facility development and operations skills as well as unparalleled
records of developing and operating highly successful regional
gaming facilities in competitive environments.
“In Orange County, our focus is on a 120 acre parcel of
undeveloped land in the Village of South Blooming Grove. With
excellent access to both The New York State Thruway/Interstate 87
and New York State Highway 17, this site is ideally situated to
maximize the revenue potential and job creation for the Hudson
Valley Catskill region and the entire State of New York. Our plan
is to build a $750 million world class casino and resort including
a hotel, spa, marquee restaurants, an entertainment venue and other
amenities. Our proposed investment in Orange County would deliver a
wide range of benefits to the region including significant and
sustainable economic, employment and tourism activity. Under the
terms of an agreement being finalized between the companies, a
Catskill Region facility in Orange County will be owned and managed
by a 50/50 joint venture between Penn National Gaming and Cordish
and will feature Cordish’s Live! brand. On April 17, both the
Village of South Blooming Grove and the town of Blooming Grove
approved a resolution in support of the companies’ gaming resort
application.
“In the Capital Region, Cordish and Penn National Gaming are
evaluating the feasibility of several potential sites in and around
Albany. Applications for New York’s four new gaming licenses are
due June 30 and the State has announced its intent to award
licenses as soon as late 2014.
“Elsewhere, Hollywood Casino St. Louis, which experienced
construction disruptions throughout 2013 as we completed an
extensive facility upgrade and re-branding, performed well during
the first quarter despite the impact of weather and related costs
for snow removal, repairs and heat.
“Construction on our Dayton and Austintown video lottery
terminal facilities in Ohio, which will feature 1,000 and 850
gaming devices, respectively, continues on budget and, despite the
harsh winter, both facilities are on scheduled to open early this
fall.
“Since the spin-off, the Company has announced several senior
level management appointments. Early in the second quarter, we
promoted Ameet Patel, who has been with Penn National Gaming since
2001, to Senior Vice President of Regional Operations. Ameet has
successfully led several of our largest and most successful
properties including new facilities and those undergoing major
expansions and upgrades. A key driver of our long-term growth has
been our ability to attract and retain premier, results-oriented
management and Ameet’s appointment further bolsters Penn National
Gaming’s leadership depth both for our current operations and new
facility openings.
“Last week, the Iowa Racing and Gaming Commission ruled that the
Argosy Casino Sioux City must cease operations by July 1, 2014. We
are extremely disappointed with this decision and are exploring all
available legal options to change this outcome.
“In conclusion, the first quarter results highlight the
commitment of our corporate and property level management teams and
employees to efficiently operate our highly diversified portfolio
of new and well-maintained regional gaming facilities despite
adverse conditions. With our pipeline of expansion and development
projects, which are expected to deliver strong returns on invested
capital, our solid balance sheet and liquidity, and the Company’s
proven management team, we believe we have a solid foundation on
which to create value for our shareholders.”
Development and Expansion ProjectsThe table below
summarizes Penn National Gaming’s current facility development
projects:
Project/Scope
New
Gaming
Positions
Planned
Total
Budget
Amount
Expended
through
March 31,
2014
Expected
Opening
Date
(Unaudited, in millions)
Zia Park Casino (NM) - Addition of 154
room, five story hotel which will include six suites, a breakfast
room, a business center, meeting and exercise rooms, as well as
additional surface parking. $26
$7.3 Fourth quarter of 2014
Mahoning Valley
Race Track (OH) - Construction began in May 2013 at Austintown’s
Centrepointe Business Park, with our new Hollywood themed facility
featuring a new one-mile thoroughbred racetrack and simulcasting
and the ability to hold up to 1,000 video lottery terminals, as
well as various restaurants, bars and other amenities.
850 $161 (1) (2) $2.2 Fall 2014
Dayton Raceway (OH) - Construction began in May 2013 at the site
of an abandoned Delphi Automotive plant, with our new Hollywood
themed facility featuring a new 5/8 harness racetrack and
simulcasting and the ability to hold up to 1,500 video lottery
terminals, as well as various restaurants, bars and other
amenities. 1,000 $165 (1) (2) $2.2
Fall 2014
Plainridge Park Casino (MA) - Construction
is underway at the site of the Plainridge Racecourse for our new
gaming operation, which will be integrated with the existing live
harness racing and simulcasting, featuring 1,250 slot machines, as
well as various dining and entertainment options.
1,250 $225 (3) $26.0 Second quarter 2015
Jamul Indian Village project (CA) - Construction is
underway at the site for this new Hollywood Casino branded gaming
operation which Penn will manage. The facility is anticipated to
feature over 1,700 slot machines, 50 live table games including
poker, multiple restaurants, bars and lounges.
2,100 $360 (4) $15.5 First quarter 2016 (1)
Includes a relocation fee of $75 million based on the present value
of the contractual obligation, which is $7.5 million upon opening,
and 18 additional semi-annual payments of $4.8 million beginning
one year after opening. We anticipate the license fee will be paid
as follows: 1) $10 million in the second quarter, 2) $15 million
upon opening and 3) $25 million on the one year anniversary of the
commencement of gaming. (2) GLPI is responsible for certain
construction related real estate costs associated with these
projects that are not included in the budgeted figures above. (3)
Includes a $25 million license fee, which was paid in March 2014
and included in the amount expended to date. (4) As more fully
described above, this project will be accounted for as an
investment.
Financial Guidance
Given recent operating trends that have occurred since
quarter-end, the table below sets forth current guidance targets
for financial results for the 2014 second quarter and full year,
based on the following assumptions:
- Horseshoe Baltimore opens in early
September 2014, impacting Hollywood Casino at Charles Town
Races;
- A full year of Miami Valley Gaming in
Lebanon, Ohio impacting Hollywood Casino Lawrenceburg and Hollywood
Casino Columbus;
- Belterra Park in Cincinnati opens in
early May 2014, impacting Hollywood Casino Lawrenceburg;
- Hollywood Gaming at Dayton Raceway
opens in the fall of 2014, impacting Hollywood Casino
Columbus;
- Hollywood Gaming at Mahoning Valley
Race Track opens in the fall of 2014;
- Operations from the Company’s Argosy
Casino Sioux City facility cease as of July 1, 2014;
- A full year contribution from the
Company’s management contract for Casino Rama;
- Full year rent expense of $418.1
million, with $104.3 million in the second quarter of 2014;
- Full year pre-opening expenses of $8.9
million, with $1.9 million in the second quarter of 2014;
- Depreciation and amortization charges
in 2014 of $170.8 million, with $46.5 million in the second quarter
of 2014;
- Estimated non-cash stock compensation
expenses of $12.9 million for 2014, with $3.4 million in the second
quarter of 2014;
- LIBOR is based on the forward yield
curve;
- A blended GAAP basis income tax rate of
approximately 63% for 2014;
- A diluted share count of approximately
89.4 million shares for the full year 2014; and
- There will be no material changes in
applicable legislation, regulatory environment, world events,
weather, recent consumer trends, economic conditions, competitive
landscape (other than listed above) or other circumstances beyond
our control that may adversely affect the Company’s results of
operations.
(in millions, except per share data)
Three Months Ending June 30, Full Year Ending
December 31, 2014 Guidance
2013 Actual
2014 Revised
Guidance
2014 Prior
Guidance (3)
2013 Actual Net revenues $ 640.5
$ 761.4 $ 2,513.8 $
2,625.4 $ 2,918.8
Adjusted EBITDAR (1)
180.2 211.4
674.3 701.9 764.5
Rental expense related to Master Lease
(104.3 ) - (418.1 )
(421.6 ) (69.5 )
Adjusted EBITDA (2)
75.9 211.4
256.2 280.3 695.0
Less: Impact of stock compensation, impairment losses,
insurance recoveries and deductible charges, depreciation and
amortization, gain/loss on disposal of assets, interest expense -
net, income taxes, loss on early extinguishment of debt, and other
expenses (70.4 ) (223.6 )
(245.8 ) (258.4 ) (1,489.3 )
Net income (loss) $ 5.5 $ (12.2
) $ 10.4 $ 21.9 $ (794.3 )
Diluted earnings (loss) per common
share $ 0.06 $ (0.16 ) $
0.12 $ 0.24 $ (10.17 ) (1)
Adjusted EBITDAR is adjusted EBITDA excluding rent expense
associated with our Master Lease with GLPI. (2) Adjusted EBITDA is
income (loss) from operations, excluding the impact of stock
compensation, impairment losses, insurance recoveries and
deductible charges, depreciation and amortization, and gain or loss
on disposal of assets, and is inclusive of gain or loss from
unconsolidated affiliates. A reconciliation of net income (loss)
per GAAP to adjusted EBITDA and adjusted EBITDAR, as well as income
(loss) from operations per GAAP to adjusted EBITDA and adjusted
EBITDAR, is included in the accompanying financial schedules. (3)
The guidance figures in the table above present the guidance Penn
National Gaming provided on February 6, 2014 for the full year
ended December 31, 2014.
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Segment Information – Operations
(in thousands) (unaudited)
NET REVENUES ADJUSTED
EBITDAR Three Months Ended March 31, Three Months
Ended March 31, 2014 2013 2014
2013 East/Midwest (1) $ 349,449 $ 458,548 $ 101,650 $
147,546 West (2) 60,920 62,152 18,557 17,922 Southern Plains (3)
223,757 268,344 71,020 81,847 Other (4) 6,954 9,202
(16,488 ) (26,567 )
Total $
641,080 $ 798,246 $ 174,739
$ 220,748
In January 2014, the Company named Jay Snowden as its Chief
Operating Officer and the Company decided in connection with this
decision to re-align its reporting structure. Starting in 2014, the
Company’s reportable segments are: (i) East/Midwest,
(ii) West, and (iii) Southern Plains. The prior year
amounts were reclassified to conform to the Company’s new reporting
structure.
(1) The East/Midwest reportable segment consists of the
following properties: Hollywood Casino at Charles Town Races,
Hollywood Casino Bangor, Hollywood Casino at Penn National Race
Course, Hollywood Casino Lawrenceburg, Hollywood Casino Toledo and
Hollywood Casino Columbus. It also includes the Company’s Casino
Rama management service contract and the Mahoning Valley and Dayton
Raceway projects in Ohio, which the Company anticipates completing
in the second half of 2014, as well as the Plainville project in
Massachusetts, which the Company expects to open in the second
quarter of 2015. Current year results do not include results for
Hollywood Casino Perryville as it was contributed to GLPI on
November 1, 2013. This property had net revenues of $21.7 million
and adjusted EBITDAR of $3.5 million for the three months ended
March 31, 2013. Our East/Midwest segment results for the three
months ended March 31, 2014 included development costs of $0.8
million whereas results for the corresponding period in the prior
year included preopening charges of $0.2 million. (2) The
West reportable segment consists of the following properties: Zia
Park Casino and the M Resort, as well as the Jamul development
project, which the Company anticipates completing in early 2016.
(3) The Southern Plains reportable segment consists of the
following properties: Hollywood Casino Aurora, Hollywood Casino
Joliet, Argosy Casino Alton, Argosy Casino Riverside, Argosy Casino
Sioux City, Hollywood Casino Tunica, Hollywood Casino Bay St.
Louis, Boomtown Biloxi, and Hollywood Casino St. Louis, and
includes the Company’s 50% investment in Kansas Entertainment, LLC,
which owns the Hollywood Casino at Kansas Speedway. Additionally,
current year results do not include results for Hollywood Casino
Baton Rouge as it was contributed to GLPI on November 1, 2013. This
property had net revenues of $20.9 million and adjusted EBITDAR of
$6.9 million for the three months ended March 31, 2013. (4)
The Other category consists of the Company’s standalone racing
operations, namely Beulah Park, Raceway Park, Rosecroft Raceway,
Sanford-Orlando Kennel Club, and the Company’s joint venture
interests in Sam Houston Race Park, Valley Race Park and Freehold
Raceway. Results in the prior year also included the Company’s
Bullwhackers property which was sold in July 2013. If the Company
is successful in obtaining gaming operations at these locations,
they would be assigned to one of the Company’s regional executives
and reported in their respective reportable segment. The Other
category also includes the Company’s corporate overhead costs,
which was $15.7 million for the three months ended March 31, 2014
compared to corporate overhead costs of $27.2 million for the three
months ended March 31, 2013. Corporate overhead costs decreased by
$11.5 million for the three months ended March 31, 2014, compared
to the corresponding period in the prior year, primarily due to
lower liability based stock compensation charges of $4.0 million,
lower spin-off transaction costs and development costs of $3.5
million, a reduction in various other items of approximately $2.6
million due to cost containment measures and transition service
fees received from GLPI of $0.8 million.
Reconciliation of Net income (GAAP) to
Adjusted EBITDA and Adjusted EBITDAR
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
(in thousands) (unaudited)
Three Months Ended March 31,
2014 2013 Net income $
4,537 $ 65,271 Income tax provision 6,800
42,767 Other (1,631 ) (664 ) Income from unconsolidated affiliates
(2,483 ) (1,721 ) Interest income (467 ) (262 ) Interest expense
11,295 27,924
Income from
operations $ 18,051 $ 133,315
(Gain) loss on disposal of assets (49 ) 2,390 Charge for stock
compensation 2,579 6,251 Depreciation and amortization 47,366
77,071 Income from unconsolidated affiliates 2,483
1,721
Adjusted EBITDA $ 70,430
$ 220,748 Rental expense related to Master Lease
104,309 -
Adjusted EBITDAR
$ 174,739 $ 220,748
Reconciliation of Income (loss) from
operations (GAAP) to Adjusted EBITDA and Adjusted EBITDAR
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Segment Information
(in thousands) (unaudited)
Three Months Ended March 31,
2014
East/Midwest
West Southern Plains
Other Total Income (loss) from operations $
9,602 $ 8,057 $ 21,227 $ (20,835 )
$ 18,051 Charge
for stock compensation - - - 2,579
2,579 Depreciation and
amortization 26,823 1,549 17,251 1,743
47,366 (Gain) loss on
disposal of assets (87 ) 66 (22 ) (6 )
(49 ) Income
from unconsolidated affiliates (1) - -
2,452 31
2,483 Adjusted EBITDA $ 36,338
$ 9,672 $ 40,908 $
(16,488 ) $ 70,430 Rental expense
related to Master Lease 65,312 8,885
30,112 -
104,309 Adjusted EBITDAR $
101,650 $ 18,557 $
71,020 $ (16,488 )
$ 174,739
Three Months Ended March 31,
2013
East/Midwest West Southern
Plains Other Total Income (loss)
from operations $ 105,827 $ 12,047 $ 52,038 $ (36,597 )
$
133,315 Charge for stock compensation - - - 6,251
6,251 Depreciation and amortization 41,689 3,305 27,984
4,093
77,071 Loss (gain) on disposal of assets 30 2,570 88
(298 )
2,390 Income (loss) from unconsolidated affiliates
(1) - - 1,737
(16 )
1,721 Adjusted
EBITDA $ 147,546 $
17,922 $ 81,847 $
(26,567 ) $ 220,748
(1) On February 3, 2012, our joint venture in Kansas
Entertainment commenced operations of Hollywood Casino at Kansas
Speedway. We record 50% of the joint venture’s earnings in our
income from unconsolidated affiliates line in the Southern Plains
column which includes the impact of depreciation and amortization
expense. Our 50% share of depreciation and amortization expense was
$2.9 million for the three months ended March 31, 2014 and 2013.
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
2014 2013 Revenues Gaming $
570,683 $ 717,925 Food, beverage and other 104,870 121,860
Management service fee 2,458 3,047
Revenues 678,011 842,832 Less promotional allowances (36,931
) (44,586 ) Net revenues 641,080
798,246
Operating expenses Gaming 286,077
362,018 Food, beverage and other 77,538 90,265 General and
administrative 107,739 135,577 Rental expense related to Master
Lease 104,309 - Depreciation and amortization 47,366
77,071 Total operating expenses 623,029
664,931 Income from operations 18,051
133,315
Other income (expenses)
Interest expense (11,295 ) (27,924 ) Interest income 467 262 Income
from unconsolidated affiliates 2,483 1,721 Other 1,631
664 Total other expenses (6,714 )
(25,277 )
Income from operations before income
taxes 11,337 108,038 Income tax provision 6,800
42,767
Net income $ 4,537 $ 65,271
Earnings per common share: Basic earnings per
common share $ 0.05 $ 0.68 Diluted earnings per common share $ 0.05
$ 0.63
Weighted-average common shares outstanding:
Basic 77,917 77,553 Diluted 88,679 102,887
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Supplemental information
(in thousands) (unaudited)
March 31, 2014 December 31, 2013
Cash and cash equivalents $ 287,695 $ 292,995 Bank Debt $
741,944 $ 748,777 Notes 300,000 300,000 Other long term obligations
20,491
(1)
2,015 Total Debt $ 1,062,435 $ 1,050,792
(1)
Other long term obligations include contingent purchase
price consideration measured at its estimated fair value that is
payable over ten years to the previous owners of Plainridge
Racecourse.
The schedule below presents selected results for the second,
third and fourth quarters of 2013 based on our new segment
reporting structure. See page 8 of this release for further
details.
East/Midwest West
Southern
Plains
Other Total Net revenues
Three months ended June 30, 2013 (1) $ 430,944
$ 61,442 $ 258,760 $ 10,225 $ 761,371 Three months ended September
30, 2013 (2) 403,899 57,463 246,444 6,629 714,435 Three months
ended December 31, 2013 (3) 359,194 59,026 220,549 5,933 644,702
Adjusted EBITDAR Three months ended June 30, 2013 (1)
$ 138,395 $ 17,592 $ 80,682 $ (25,271 ) $ 211,398 Three months
ended September 30, 2013 (2) 124,944 10,906 70,577 (24,357 )
182,070 Three months ended December 31, 2013 (3) 111,694 15,105
61,665 (38,183 ) 150,281 (1) Hollywood Casino
Perryville and Hollywood Casino Baton Rouge had net revenues of
$25.9 million and $20.2 million, respectively, and adjusted EBITDAR
of $5.9 million and $6.8 million, respectively, for the three
months ended June 30, 2013. (2) Hollywood Casino Perryville and
Hollywood Casino Baton Rouge had net revenues of $22.7 million and
$16.9 million, respectively, and adjusted EBITDAR of $4.6 million
and $4.7 million, respectively, for the three months ended
September 30, 2013. (3) Hollywood Casino Perryville and Hollywood
Casino Baton Rouge had net revenues of $7.2 million and $5.4
million, respectively, and adjusted EBITDAR of $1.4 million and
$1.6 million, respectively, for the three months ended December 31,
2013.
Diluted Share Count Methodology
In connection with the spin-off, Penn National Gaming completed
its exchange and repurchase transaction with an affiliate of
Fortress Investment Group, LLC (“Fortress”) on October 11, 2013,
which resulted in the repurchase of $627 million of its Series B
Preferred Stock and the issuance of 8,624 shares of Series C
Preferred Stock, which is equivalent to 8,624,000 common shares
upon sale by Fortress to a third party.
Reconciliation of GAAP to Non-GAAP Measures
Adjusted EBITDA and adjusted EBITDAR are used by management as
the primary measure of the Company’s operating performance. We
define adjusted EBITDA as earnings before interest, taxes, stock
compensation, debt extinguishment charges, impairment charges,
insurance recoveries and deductible charges, depreciation and
amortization, gain or loss on disposal of assets, and other income
or expenses, and inclusive of gain or loss from unconsolidated
affiliates. Adjusted EBITDAR is adjusted EBITDA excluding rent
expense associated with our Master Lease agreement with GLPI.
Adjusted EBITDA and adjusted EBITDAR have economic substance
because they are used by management as a performance measure to
analyze the performance of our business, and are especially
relevant in evaluating large, long-lived casino projects because
they provide 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 EBITDA and adjusted EBITDAR because they are used
by some investors and creditors as an indicator of the strength and
performance of ongoing business operations, including our ability
to service debt, 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, gaming companies have historically reported
adjusted EBITDA 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 EBITDA calculations
certain corporate expenses that do not relate to the management of
specific casino properties. However, adjusted EBITDA and adjusted
EBITDAR are not a measure of performance or liquidity calculated in
accordance with GAAP. Adjusted EBITDA information is presented as a
supplemental disclosure, as management believes that it is a widely
used measure of performance in the gaming industry, is the
principal basis for the valuation of gaming companies, and that it
is considered by many to be a better indicator of the Company’s
operating results than net income (loss) per GAAP. Management uses
adjusted EBITDA and adjusted EBITDAR as the primary measures of the
operating performance of its segments, including the evaluation of
operating personnel. Adjusted EBITDA and adjusted EBITDAR should
not be construed as alternatives to operating income, as indicators
of the Company’s operating performance, as alternatives to cash
flows from operating activities, as measures of liquidity, or as
any other measures of performance determined in accordance with
GAAP. The Company has significant uses of cash flows, including
capital expenditures, interest payments, taxes and debt principal
repayments, which are not reflected in adjusted EBITDA and adjusted
EBITDAR. It should also be noted that other gaming companies that
report adjusted EBITDA information may calculate adjusted EBITDA in
a different manner than the Company and therefore, comparability
may be limited.
A reconciliation of the Company’s net income (loss) per GAAP to
adjusted EBITDA and adjusted EBITDAR, as well as the Company’s net
income (loss) from operations per GAAP to adjusted EBITDA and
adjusted EBITDAR, is included above. Additionally, a reconciliation
of each segment’s income (loss) from operations to adjusted EBITDA
and adjusted EBITDAR is also included above. On a segment level,
income (loss) from operations per GAAP, rather than net income
(loss) per GAAP is reconciled to adjusted EBITDA and adjusted
EBITDAR due to, among other things, the impracticability of
allocating interest expense, interest income, income taxes and
certain other items to the Company’s segments on a segment by
segment basis. Management believes that this presentation is more
meaningful to investors in evaluating the performance of the
Company’s segments and is consistent with the reporting of other
gaming companies.
Conference Call, Webcast and Replay Details
Penn National Gaming is hosting a conference call and
simultaneous webcast at 10:00 am ET today, both of which are open
to the general public. The conference call number is 212-231-2920.
Please call five minutes in advance to ensure that you are
connected prior to the presentation. Questions will be reserved for
call-in analysts and investors. Interested parties may also access
the live call on the Internet at www.pngaming.com. Please allow 15
minutes to register and download and install any necessary
software. A replay of the call can be accessed for thirty days on
the Internet at www.pngaming.com.
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 Penn National Gaming
Penn National Gaming owns, operates or has ownership interests
in gaming and racing facilities with a focus on slot machine
entertainment. The Company presently operates twenty-seven
facilities in eighteen jurisdictions, including Florida, Illinois,
Indiana, Iowa, Kansas, Maine, Massachusetts, Maryland, Mississippi,
Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania,
Texas, West Virginia, and Ontario. At March 31, 2014, in aggregate,
Penn National Gaming’s operated facilities featured approximately
31,100 gaming machines, 790 table games and 2,900 hotel rooms.
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, including future plans, strategies,
performance, developments, acquisitions, capital expenditures, and
operating results. Actual results may vary materially from
expectations. Although the Company believes that our expectations
are based on reasonable assumptions within the bounds of our
knowledge of our business and operations, 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: our ability to obtain timely regulatory
approvals required to own, develop and/or operate our facilities,
or other delays or impediments to completing our planned
acquisitions or projects, including favorable resolution of any
related litigation, including the ongoing appeal by the Ohio
Roundtable addressing the legality of video lottery terminals in
Ohio and litigation against the Ohio Racing Commission concerning
opposition to relocating the Company’s Toledo racetrack to the
Dayton area; our ability to secure federal, state and local permits
and approvals necessary for construction; construction factors,
including delays, unexpected remediation costs, local opposition,
organized labor, and increased cost of labor and materials; our
ability to reach agreements with the thoroughbred and harness
horseman in Ohio in connection with the proposed relocations and to
otherwise maintain agreements with our horseman, pari-mutuel clerks
and other organized labor groups; with respect to the proposed
Jamul project near San Diego, California, particular risks
associated with financing a project of this type, sovereign
immunity, local opposition (including several pending lawsuits),
and building a complex project on a relatively small parcel; 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); with respect to our proposed Massachusetts
project, the ultimate location of the various other gaming
facilities in the state and the ongoing efforts to repeal the
enabling legislation; with respect to proposed New York projects,
risks related to our ability to secure favorable sites and
licensing from the State and the extent/location of other
applications; 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 and the rapid emergence of new
competitors (traditional, internet and sweepstakes based and
taverns); increases in the effective rate of taxation at any of our
properties or at the corporate level; our ability to identify
attractive acquisition and development opportunities and to agree
to terms 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 outcome of pending legal proceedings; changes in accounting
standards; our dependence on key personnel; the impact of terrorism
and other international hostilities; the impact of weather; and
other factors as discussed in the Company’s Annual Report on Form
10-K for the year ended December 31, 2013, subsequent Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K as filed with
the United States Securities and Exchange Commission. The Company
does not intend to update publicly any forward-looking statements
except as required by law. In light of these risks, uncertainties
and assumptions, the forward-looking events discussed in this press
release may not occur.
Penn National Gaming, Inc.Saul V. Reibstein, 610-401-2049Chief
Financial OfficerorJCIRJoseph N. Jaffoni / Richard Land,
212-835-8500penn@jcir.com
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