- Establishes 2014 Fourth Quarter Guidance
and Updates 2014 Full Year Guidance -
Penn National Gaming, Inc. (PENN:Nasdaq):
Conference Call:
Today, October 23, 2014 at 10:00 a.m.
ET
Dial-in number:
212/231-2930
Webcast:
www.pngaming.com
Replay information provided
below
Penn National Gaming, Inc. (PENN:Nasdaq) (“Penn National
Gaming”, “Penn” or the “Company”) today reported third quarter
operating results for the three months ended September 30, 2014, as
summarized below.
Summary of Third Quarter
Results
Three Months Ended
(in millions, except per share
data)
September 30,
2014 Actual 2014 Guidance
(3) 2013 Actual Net revenues
$ 645.9 $
633.5 $ 714.4
Adjusted
EBITDAR (1) 170.3
164.4
185.0 Rental expense related to Master Lease
(104.6)
(104.0) -
Adjusted EBITDA (2)
65.7 60.4
185.0
Less: Impact of stock compensation,
insurance recoveries,
non-operating items for Kansas JV,
depreciation and amortization,
gain/loss on disposal of assets, interest
expense - net,
income taxes and other expenses
(57.2) (55.1)
(143.7)
Net income
$ 8.5 $ 5.3
$ 41.3
Diluted
earnings per common share $
0.10 $ 0.06 $
0.40 (1) Adjusted EBITDAR is adjusted EBITDA
excluding rent expense associated with our Master Lease with Gaming
and Leisure Properties, Inc. (“GLPI”). Results for the three months
ended September 30, 2013 included net revenues of $39.6 million and
adjusted EBITDAR of $9.3 million related to Hollywood Casino
Perryville and Hollywood Casino Baton Rouge, which 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. Adjusted EBITDA is also inclusive of income
or loss from unconsolidated affiliates, with our share of the
non-operating items added back for our joint venture in Kansas
Entertainment, LLC (“Kansas Entertainment”). 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
July 24, 2014 for the three months ended September 30, 2014.
Review of Third Quarter 2014 Results
vs. Guidance
Three Months Ended September 30, 2014
Pre-tax After-tax (in thousands)
Income, per guidance (1) $ 3,995 $ 5,261
EBITDA variances: Positive operating segment variance excluding
Argosy Casino Sioux City 6,662 3,865 Argosy Casino Sioux City
favorable variance 1,066 661 Lobbying costs related to the November
Massachusetts referendum (2,299 ) (2,299 ) Other
(156 ) (91 ) Total EBITDA variances
from guidance 5,273 2,136 Insurance recoveries for St. Louis
tornado 5,674 3,422 Foreign currency translation gain and other
1,599 968 Tax variance (3,288 ) Income,
as reported $ 16,541 $ 8,499
Three Months Ended September 30,
2014 2014 Guidance (1) Diluted earnings
per common share $ 0.10 $ 0.06 Argosy Casino Sioux City favorable
variance (0.01 ) - Lobbying costs related to the November
Massachusetts referendum 0.03 - Insurance recoveries for St. Louis
tornado (0.04 ) - Foreign currency translation gain (0.01 ) - Tax
variance - (0.03 )
Total $ 0.07 $ 0.03
(1) The guidance figures in the tables above
present the guidance Penn National Gaming provided on July 24, 2014
for the three months ended September 30, 2014.
Timothy J. Wilmott, President and Chief Executive Officer of
Penn National Gaming, commented, “Third quarter consolidated
revenue, adjusted EBITDAR and adjusted EBITDA exceeded guidance,
largely reflecting better than projected property operating results
including outperformance at some of our larger properties, solid
initial partial quarter contributions from Hollywood Gaming at
Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course,
and ongoing success in delivering strong consolidated adjusted
EBITDAR margins.
“Overall, third quarter adjusted EBITDA exceeded guidance by
$5.3 million, inclusive of a $7.7 million positive operating
segment variance and one-time costs of $2.3 million related to the
November Massachusetts referendum, which were excluded from the
guidance provided in July. Reflecting the strong leverage in our
operating model, and excluding the impact of Massachusetts lobbying
expenses and the results of Argosy Casino Sioux City which closed
on July 30, the 1.7% revenue outperformance relative to guidance
drove a 10.7% increase in adjusted EBITDA relative to guidance.
“Penn National Gaming is performing relatively well in the
current operating environment, underscoring the value of our
efforts to pair property-level adjusted EBITDAR growth through a
disciplined approach to facility management and ongoing margin
improvements with new facility openings. In addition, bottom line
results continue to benefit from corporate expense management
initiatives. On a year-over-year basis, third quarter corporate
overhead (inclusive of third quarter lobbying costs) declined 19.3%
to $19.7 million and we remain on track to realize full year 2014
corporate overhead expense reductions of approximately 21% (after
excluding $25 million of spin-off costs incurred in 2013).
“During the third quarter we generated adjusted EBITDAR margin
improvements in our Southern Plains and West operating segments.
These results offset a slight decline in our East/Midwest segment
which was primarily attributable to pre-opening costs at Hollywood
Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley
Race Course and an unanticipated, one time promotional-related
expense at Hollywood Gaming at Dayton Raceway in early September.
Demonstrating the effective implementation of strategies to improve
operating efficiencies, consolidated third quarter 2014 adjusted
EBITDAR margin grew approximately 50 basis points on a year over
year basis to 26.4%.
“During the quarter Penn National Gaming successfully opened our
Dayton and Austintown video lottery terminal facilities in Ohio.
Hollywood Gaming at Dayton Raceway opened on August 28 with 1,000
gaming devices and has been well received by the local community.
On September 17, Hollywood Gaming at Mahoning Valley Race Course
opened in Austintown with 850 gaming devices. On August 28, we also
opened our new $26 million, 154-room hotel at Zia Park Casino.
Consistent with the Company’s long-term record, all three projects
opened on time and on budget.
“In Massachusetts we recently reached the half-way point in
construction on our $225 million Plainridge Park Casino. Plainridge
Park Casino is expected to open in June 2015, creating 1,000
construction jobs and 500 permanent jobs in addition to protecting
the jobs of over 100 employees currently employed at Plainridge
Racecourse. We recently announced that we have far exceeded our
construction diversity vendor goals, with more than 40% of
contracts awarded to date going to minority, women-owned and
veteran businesses. During the third quarter, Penn National Gaming
continued to actively participate in a broad-based coalition effort
to support the 2011 gaming legislation which is the subject of an
Election Day referendum. We estimate that by Election Day, Penn
National will have invested more than $100 million in our
Plainridge project, inclusive of the $42 million purchase price and
the $25 million license fee.
“Recent public opinion polls continue to indicate that
Massachusetts voters recognize the importance of the gaming act and
that residents understand and appreciate the substantial economic
and employment benefits that gaming will bring to the Commonwealth.
We urge residents to vote NO on Question 3 at the ballot box on
November 4, supporting our efforts to further help small businesses
in Massachusetts and preserve the 6,500 construction jobs and
10,000 good paying permanent jobs with benefits that our industry
will collectively generate.
“Elsewhere, construction continues to move forward on the $360
million Hollywood Casino-branded gaming facility on the Jamul
Indian Village’s land in trust, which is located approximately
twenty miles east of downtown San Diego, directly off of State
Route 94. Hollywood Casino Jamul-San Diego is expected to open in
mid-2016 as the closest casino to downtown San Diego. When
complete, the property will include a three-story gaming and
entertainment facility of approximately 200,000 square feet,
including more than 1,700 slot machines, 50 live table games,
multiple restaurants, bars and lounges and 1,900 parking spaces.
This project has already created significant new construction jobs
and will result in hundreds of new permanent jobs in the region
while enabling the Jamul Indian Village of California to become
economically self-sufficient. Penn National Gaming expects to
participate in the success of the project through management and
branding fees, as well as interest payments on funds advanced to
develop the project.
“Last month, Penn National Gaming and our joint venture partner,
The Cordish Companies, made one of the sixteen presentations to New
York State officials who are expected to grant up to four new
gaming licenses sometime before year-end. Our presentation
highlighted the community and statewide employment and tax revenue
benefits associated with the planned development of ‘Live! Hotel
& Casino New York,’ a world-class gaming facility and resort
proposed for Orange County, New York with a budget of over $750
million. The proposed facility would be owned and managed by a
50/50 joint venture which brings together two of the industry’s
most financially sound companies with excellent balance sheets and
extensive records of developing and operating world-class gaming
facilities in competitive environments. The Penn National and
Cordish presentation also highlighted our unrivalled records of job
creation, employment diversity and community involvement.
“As presented, our Orange County plans include an upscale
boutique hotel with over 300 rooms and luxury suites; a destination
spa and fitness center; over 3,000 slot machines; more than 250
live poker and table games; several marquee restaurants including
Bobby Flay Steak, Smorgasburg, The Cheesecake Factory, Fornino, and
Bobby’s Burger Palace; a live entertainment venue; and a spacious
conference center. The proposal from Penn National Gaming and
Cordish Companies reflects our companies’ unwavering appreciation
for our customers, employees and the local communities in which we
operate and we look forward to New York State’s near-term
decision.
“Earlier this month, we were proud to have been named by
Spectrum Gaming Group as the gaming industry’s ‘Employer of First
Choice’ in the 14th Annual Bristol Associates/Spectrumetrix™
Executive Satisfaction Survey. Penn National Gaming placed ahead of
fourteen prominent gaming companies in this year’s survey,
including destination and regional gaming operators, Macau
operators and major Native American gaming operators. This
distinction is a testament to the strength of our senior
management, corporate staff, and our General Managers and their
respective operating teams, which together foster a collaborative
workplace environment that prioritizes a deep appreciation for our
customers and the local communities in which we operate, all of
which we bring to bear in our efforts to generate enhanced
shareholder value.”
Development and Expansion Projects
The table below summarizes Penn National Gaming’s current
facility development projects:
Project/Scope
New
Gaming
Positions
Planned
Total
Budget
Amount
ExpendedthroughSeptember 30,2014
ExpectedOpeningDate
(Unaudited, in millions)
Zia Park Casino (NM) -Opened a 154
room, five story hotel which includes
six suites, a breakfast room, a
business center, meeting and exercise rooms,
as well as additional surface
parking.
- $26
$21.5 Opened August 28, 2014
Dayton Raceway (OH) - Opened our new
Hollywood themed facility featuring
a new 5/8 mile 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)
$57.1
Opened August 28, 2014
Mahoning Valley Race Track (OH) -
Opened 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)
$52.1 Opened September 17, 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)
$91.1 June 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)
$36.4 Mid-2016
(1)
Includes a $50 million license fee and a
relocation fee of $75 million based on the present value of the
contractual obligation. We paid $7.5 million of the relocation fee
upon opening, and will pay 18 additional semi-annual payments of
$4.8 million beginning one year after opening. For the license fee,
we paid $10 million in the second quarter of 2014 as well as $15
million upon opening, and will pay the remaining license fee of $25
million on the one year anniversary of the opening. As of September
30, 2014, the amount capitalized on the balance sheet for Dayton
Raceway and Mahoning Valley Race Track was $149.7 million and
$144.9 million, respectively.
(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 $42 million purchase price, both of
which are included in the amount above.
(4)
As disclosed previously, funds advanced
for this project will be accounted for as a loan.
Financial Guidance
Reflecting current operating trends, the table below sets forth
2014 fourth quarter and full year guidance targets for financial
results, based on the following assumptions:
- Miami Valley Gaming in Lebanon, Ohio,
opened in December 2013 and continues to impact Hollywood Casino
Lawrenceburg and Hollywood Casino Columbus;
- Belterra Park in Cincinnati, opened in
May 2014, impacting Hollywood Casino Lawrenceburg;
- Horseshoe Baltimore opened in late
August 2014, impacting Hollywood Casino at Charles Town Races;
- Argosy Casino Sioux City ceased
operations in July, with minimal ongoing expenses;
- A full year contribution from the
Company’s management contract for Casino Rama;
- Full year 2014 rent expense of $420.2
million, with $106.7 million to be incurred in the fourth quarter
of 2014, excluding any potential rent escalator;
- Full year 2014 pre-opening expenses of
$9.9 million, with $1.1 million to be incurred in the fourth
quarter of 2014;
- Includes $2.3 million of costs incurred
in the nine months ended September 30, 2014 related to the November
Massachusetts referendum in the third quarter and excludes
additional expenses being incurred in the fourth quarter;
- Depreciation and amortization charges
in 2014 of $178.1 million, with $43.3 million in the fourth quarter
of 2014;
- Our share of non-operating items (such
as depreciation and amortization expense) associated with our joint
venture in Kansas Entertainment total $11.8 million for 2014, with
$3.0 million to be incurred in the fourth quarter of 2014;
- Estimated non-cash stock compensation
expenses of $10.7 million for 2014, with $2.7 million to be
incurred in the fourth quarter of 2014;
- LIBOR is based on the forward yield
curve;
- A diluted share count of approximately
88.8 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 December 31, Full Year Ending
December 31, 2014 Guidance
2013 Actual
2014 UpdatedGuidance
2014 PriorGuidance (1)
2013 Actual Net revenues
$ 621.1 $ 644.7 $
2,560.2 $ 2,547.8 $
2,918.8
Adjusted EBITDAR
162.4 153.2
697.1 690.9
776.1 Rental expense related to Master Lease
(106.7) (69.5)
(420.2)
(419.3) (69.5)
Adjusted EBITDA
55.7
83.7 276.9
271.6 706.6
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
(61.8)
(972.4) (265.8)
(269.6) (1,500.9)
Net
income (loss) $ (6.1)
$ (888.7) $ 11.1 $
2.0 $ (794.3)
Diluted earnings (loss) per common
share $ (0.07) $
(11.40) $ 0.13 $
0.02 $ (10.17)
(1) The guidance figures in the table above present
the guidance Penn National Gaming provided on July 24, 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 September 30, Three Months Ended September 30,
2014 2013 2014
2013 East/Midwest (1) $ 371,505 $ 403,900 $ 110,347 $
124,944 West (2) 58,626 57,463 13,960 10,905 Southern Plains (3)
210,309 246,443 65,959 73,480 Other (4) 5,500 6,629
(19,936) (24,357)
Total $
645,940 $ 714,435 $ 170,330
$ 184,972 NET REVENUES
ADJUSTED EBITDAR Nine Months Ended September 30,
Nine Months Ended September 30, 2014
2013 2014 2013 East/Midwest (1)
$ 1,082,310 $ 1,293,391 $ 324,307 $ 410,884 West (2) 178,579
181,057 49,516 46,419 Southern Plains (3) 658,792 773,548 212,907
241,791 Other (4) 19,485 26,056 (52,070)
(76,195)
Total $ 1,939,166 $
2,274,052 $ 534,660 $ 622,899
(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,
Hollywood Casino Columbus, Hollywood Gaming at Dayton Raceway,
which opened on August 28, 2014, and Hollywood Gaming at Mahoning
Valley Race Course, which opened on September 17, 2014. It also
includes the Company’s Casino Rama management service contract and
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 $22.7 million and $70.4 million and adjusted EBITDAR of
$4.6 million and $13.9 million for the three and nine months ended
September 30, 2013, respectively. Our East/Midwest segment results
for the three and nine months ended September 30, 2014 included
preopening costs of $5.6 million and $8.4 million, respectively,
whereas results for the nine months ended September 30, 2013
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 mid-2016. Results for
the three and nine months ended September 30, 2013 included
spin-off transaction costs of $3.8 million. (3) The Southern
Plains reportable segment consists of the following properties:
Hollywood Casino Aurora, Hollywood Casino Joliet, Argosy Casino
Alton, Argosy Casino Riverside, Hollywood Casino Tunica, Hollywood
Casino Gulf Coast, Boomtown Biloxi, and Hollywood Casino St. Louis,
and includes the Company’s 50% investment in Kansas Entertainment,
which owns the Hollywood Casino at Kansas Speedway. On July 30,
2014, the Company closed Argosy Casino Sioux City. Starting with
the second quarter of 2014, adjusted EBITDA and adjusted EBITDAR
from our joint venture in Kansas Entertainment exclude our share of
the impact of non-operating items (such as depreciation and
amortization expense). The prior year amounts were restated to
conform to this new presentation. 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 $16.9 million and $58.0 million and adjusted
EBITDAR of $4.7 million and $18.4 million for the three and nine
months ended September 30, 2013, respectively. (4) The Other
category consists of the Company’s standalone racing operations,
namely Rosecroft Raceway, Sanford-Orlando Kennel Club, and the
Company’s joint venture interests in Sam Houston Race Park, Valley
Race Park, and Freehold Raceway, as well as the Company’s 50% joint
venture with the Cordish Companies in New York. 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 $19.7 million and
$49.8 million for the three and nine months ended September 30,
2014, respectively, as compared to corporate overhead costs of
$24.4 million and $77.3 million for the three and nine months ended
September 30, 2013, respectively. Corporate overhead costs
decreased by $4.7 million for the three months ended September 30,
2014, as compared to the corresponding period in the prior year,
primarily due to lower spin-off transaction and development costs
of $7.3 million, partially offset by higher lobbying costs of $1.6
million and a favorable franchise tax resolution for $1.1 million
in the third quarter of 2013. Corporate overhead costs decreased by
$27.5 million for the nine months ended September 30, 2014, as
compared to the corresponding period in the prior year, primarily
due to lower payroll costs of $8.0 million due to the fact that
certain members of Penn’s executive management team transferred
their employment to GLPI as part of the spin-off, lower spin-off
transaction and development costs of $15.2 million, lower lobbying
costs of $0.3 million, transition service fees received from GLPI
of $1.5 million, and a reduction in various other items due to cost
containment measures, all of which was partially offset by a
favorable franchise tax resolution for $1.1 million in the third
quarter of 2013. Additionally, the Other category includes $0.1
million and $1.0 million for the three and nine months ended
September 30, 2014, respectively, in costs from our New York joint
venture.
Reconciliation of Net income (loss)
(GAAP) to Adjusted EBITDA and Adjusted EBITDAR
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
(in thousands) (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, 2014
2013 2014 2013 Net income
$ 8,499 $ 41,317 $ 17,212
$ 94,408 Income tax provision 8,042 29,132 23,596
110,466 Other (1,583) 436 (1,391) (2,630) Income from
unconsolidated affiliates (2,291) (2,296) (6,247) (7,838) Interest
income (1,025) (369) (2,282) (974) Interest expense 11,189
25,060 33,376 80,044
Income from
operations $ 22,831 $ 93,280
$ 64,264 $ 273,476 Loss on disposal of
assets 145 157 98 2,833 Insurance (recoveries) deductible charges
(5,674) - (5,674) 2,500 Impairment losses - - 4,560 71,846 Charge
for stock compensation 2,915 6,369 8,012 18,070 Depreciation and
amortization 40,253 79,968 134,802 237,654 Income from
unconsolidated affiliates 2,291 2,296 6,247 7,838 Non-operating
items for Kansas JV 2,944 2,902 8,804
8,682
Adjusted EBITDA $ 65,705 $
184,972 $ 221,113 $ 622,899
Rental expense related to Master Lease 104,625 -
313,547 -
Adjusted EBITDAR $
170,330 $ 184,972 $ 534,660
$ 622,899
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 September 30,
2014
East/Midwest West
Southern Plains Other
Total Income (loss) from operations
$
17,842
$
5,054
$
24,195
$
(24,260)
$
22,831 Charge for stock compensation - - -
2,915
2,915 Insurance recoveries - - (5,674) -
(5,674) Depreciation and amortization 24,304 2,018 12,264
1,667
40,253 Loss (gain) on disposal of assets 12 47 89 (3)
145 Income (loss) from unconsolidated affiliates - - 2,546
(255)
2,291 Non-operating items for Kansas JV (1)
- -
2,944 -
2,944 Adjusted EBITDA
$
42,158
$
7,119
$
36,364
$
(19,936)
$
65,705 Rental expense related to Master Lease
68,189 6,841
29,595 -
104,625 Adjusted EBITDAR
$
110,347
$
13,960
$
65,959
$
(19,936)
$
170,330 Three Months Ended
September 30, 2013 East/Midwest
West Southern Plains
Other Total Income (loss) from
operations
$
85,162
$
7,402
$
35,176
$
(34,460)
$
93,280 Charge for stock compensation - - - 6,369
6,369 Depreciation and amortization 39,741 3,487 32,697
4,043
79,968 Loss (gain) on disposal of assets 41 16 106 (6)
157 Income (loss) from unconsolidated affiliates - - 2,599
(303)
2,296 Non-operating items for Kansas JV (1)
- -
2,902 -
2,902 Adjusted EBITDA
$
124,944
$
10,905
$
73,480
$
(24,357)
$
184,972 Nine Months Ended
September 30, 2014 East/Midwest
West Southern Plains
Other Total Income (loss) from
operations
$
44,447
$
20,536
$
63,392
$
(64,111)
$
64,264 Charge for stock compensation - - - 8,012
8,012 Impairment losses 4,560 - - -
4,560 Insurance
recoveries - - (5,674) -
(5,674) Depreciation and
amortization 77,038 5,259 47,088 5,417
134,802 (Gain) loss
on disposal of assets (104) 112 106 (16)
98 Income (loss)
from unconsolidated affiliates - - 7,619 (1,372)
6,247
Non-operating items for Kansas JV (1) -
- 8,804
-
8,804 Adjusted EBITDA 125,941 25,907
121,335 (52,070) 221,113 Rental expense
related to Master Lease 198,366
23,609 91,572
-
313,547 Adjusted EBITDAR
$
324,307
$
49,516
$
212,907
$
(52,070)
$
534,660
Nine Months Ended September 30,
2013
East/Midwest
West
Southern Plains
Other
Total
Income (loss) from operations
$
288,808
$
33,708
$
56,595
$
(105,635)
$
273,476
Charge for stock compensation - - - 18,070
18,070
Impairment losses - - 71,846 -
71,846
Insurance deductible charges - - 2,500 -
2,500
Depreciation and amortization 121,898 10,115 93,411 12,230
237,654
Loss (gain) on disposal of assets 178 2,596 374 -315
2,833
Income (loss) from unconsolidated affiliates - - 8,383 -545
7,838
Non-operating items for Kansas JV (1) -
- 8,682
-
8,682
Adjusted EBITDA
$
410,884
$
46,419
$
241,791
$
(76,195)
$
622,899
(1)
Starting with the second quarter of 2014, adjusted EBITDA
and adjusted EBITDAR from our joint venture in Kansas Entertainment
exclude our share of the impact of non-operating items (such as
depreciation and amortization expense). Prior periods were restated
to conform to this new presentation.
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended September 30, Nine Months Ended
September 30, 2014 2013 2014
2013 Revenues Gaming $ 573,216 $
641,777 $ 1,720,057 $ 2,039,531 Food, beverage and other 107,266
112,687 322,710 355,591 Management service fee 3,240
3,685 8,803 10,399 Revenues 683,722 758,149 2,051,570
2,405,521 Less promotional allowances (37,782)
(43,714) (112,404) (131,469) Net revenues
645,940 714,435 1,939,166 2,274,052
Operating expenses Gaming 288,355 325,576 858,539 1,029,483
Food, beverage and other 79,040 84,471 236,981 263,646 General and
administrative 116,510 131,140 332,147 395,447 Rental expense
related to Master Lease 104,625 - 313,547 - Depreciation and
amortization 40,253 79,968 134,802 237,654 Impairment losses - -
4,560 71,846 Insurance (recoveries) deductible charges
(5,674) - (5,674) 2,500 Total operating
expenses 623,109 621,155 1,874,902
2,000,576 Income from operations 22,831 93,280
64,264 273,476
Other income (expenses)
Interest expense (11,189) (25,060) (33,376) (80,044) Interest
income 1,025 369 2,282 974 Income from unconsolidated affiliates
2,291 2,296 6,247 7,838 Other 1,583 (436)
1,391 2,630 Total other expenses (6,290)
(22,831) (23,456) (68,602)
Income from
operations before income taxes 16,541 70,449 40,808 204,874
Income tax provision 8,042 29,132 23,596
110,466
Net income $ 8,499 $ 41,317 $ 17,212 $ 94,408
Earnings per common share: Basic earnings per common
share $ 0.10 $ 0.43 $ 0.20 $ 0.98 Diluted earnings per common share
$ 0.10 $ 0.40 $ 0.19 $ 0.92
Weighted-average common
shares outstanding: Basic 78,510 78,635 78,297 78,169 Diluted
89,017 103,442 89,001 103,107
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Supplemental information
(in thousands) (unaudited)
September 30, 2014 December 31, 2013
Cash and cash equivalents $ 230,707 $ 292,995 Bank Debt $
773,277 $ 748,777 Notes 300,000 300,000 Other long term obligations
156,118 (1) 2,015 Total Debt (2) $ 1,229,395 $
1,050,792 (1) Other long term obligations include the
present value of the relocation fees due for both Hollywood Gaming
at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race
Course of $135.5 million. See Note 1 on page 5 of this release for
further details. It also includes a liability of $18.5 million
based on the estimated fair value of contingent purchase price
consideration that is payable over ten years to the previous owners
of Plainridge Racecourse.
(2)
Although our joint venture in Kansas Entertainment is accounted for
as an equity method investment and is not consolidated, this joint
venture had no debt outstanding at September 30, 2014 or December
31, 2013.
During the second quarter of 2014, Penn refined its definition
of adjusted EBITDA and adjusted EBITDAR to add back our share of
the impact of non-operating items (such as depreciation and
amortization) at our joint ventures which have gaming operations.
At this time, Kansas Entertainment, the operator of Hollywood
Casino at Kansas Speedway, is Penn’s only joint venture that meets
this definition. Kansas Entertainment does not currently have, nor
has it ever had, any indebtedness. Attached below is a quarterly
summary of the Company’s historical and revised adjusted EBITDA
that Penn reported over the past five quarters. We have also
presented the cash flow distributions we have received from this
investment for the three and nine months ended September 30, 2014
and 2013.
Three months ended March 31,
2014 December 31, 2013
September 30, 2013 June 30, 2013
March 31, 2013 Adjusted EBITDA as historically
reported $ 70,429 $ 80,779 $ 182,070 $ 211,398 $ 220,748
Non-operating items for Kansas JV 2,921 2,913 2,902 2,922 2,859
Adjusted EBTIDA as revised $
73,350 $ 83,692 $ 184,972 $ 214,320 $ 223,607
Three Months Ended
September 30, Nine Months Ended September 30,
2014 2013 2014
2013 Cash Flow distributions $ 6,500 $ 8,000 $
17,500 $ 17,000
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. Adjusted EBITDA is also inclusive of income or loss
from unconsolidated affiliates, with our share of non-operating
items (such as depreciation and amortization) added back for our
joint venture in Kansas Entertainment. Adjusted 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 and adjusted
EBITDAR 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
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 212/231-2930.
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. At September 30, 2014, the Company operated
twenty-six facilities in seventeen jurisdictions, including
Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Maryland,
Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio,
Pennsylvania, Texas, West Virginia, and Ontario. At September 30,
2014, in aggregate, Penn National Gaming’s operated facilities
featured approximately 31,000 gaming machines, 760 table games and
3,100 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, 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; our ability to secure
federal, state and local permits and approvals necessary for our
construction projects; construction factors, including delays,
unexpected remediation costs, local opposition, organized labor,
and increased cost of labor and materials; our ability to maintain
agreements with our horsemen, 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 Massachusetts project, the
ultimate location of the other gaming facilities in the state and,
more significantly, the outcome of the referendum to repeal the
gaming legislation in Massachusetts which could result in
substantial litigation as well as a significant loss to our
investment in the state; with respect to our joint venture project
in New York, risks related to our ability to secure local support
for our site, licensing from the state and the extent and location
of other applications and competition; 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, each 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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