Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National” or
the “Company”) today announced that it has closed on its
underwritten public offering of 16,100,000 shares of its common
stock, $0.01 par value per share (the “Offering”). The Offering
includes 14,000,000 shares of its common stock initially offered by
the Company and 2,100,000 shares of its common stock issued
pursuant to the option granted the underwriters, which the
underwriters exercised in full on September 25, 2020.
“This successful offering provides our Company with additional
resources to accelerate our unique omni-channel strategy, including
launching the Barstool Sportsbook app in new markets, developing
new products and features, establishing Barstool-branded sports
bars and retail sportsbooks and reimagining the customer experience
at our casinos, all while fortifying our balance sheet,” said Jay
Snowden, President and Chief Executive Officer of Penn National.
Pro forma for the transaction, as of June 30, 2020, the Company had
net traditional debt of approximately $1 billion, representing a
significant reduction from pre-COVID-19 periods.
“This is a very exciting time for our Company,” continued Mr.
Snowden. “On September 18, we officially introduced the Barstool
Sportsbook app in the state of Pennsylvania, which broke records
for the most downloads ever for the launch of a new mobile
sportsbook, and it generated impressive handle. This momentum has
continued into our second week of operation, as this weekend’s
handle grew by 14% over our initial weekend despite continuing to
spend $0 in external marketing. In addition, we are extremely
pleased with the operating performance of our properties this
quarter, despite continued occupancy restrictions. Penn National
currently continues to expect 3Q20 consolidated revenues will range
from $1,040 million to $1,145 million and 3Q20 consolidated
Adjusted EBITDAR will range from $410 million to $450 million,
consistent with the ranges previously reported in our prospectus
supplement. In short, we believe our Company is incredibly well
positioned for long-term success based on its highly differentiated
approach to both land-based and interactive gaming and sports
betting.”
Penn National is making available today a new investor
presentation. To download a copy of the investor presentation,
please visit the Presentations section of the Company’s investor
relations website at
https://pennnationalgaming.gcs-web.com/events-and-presentations/presentations.
Goldman Sachs & Co. LLC, BofA Securities and J.P. Morgan
acted as book-running managers and representatives of the
underwriters, and Fifth Third Securities, Wells Fargo Securities
and Truist Securities acted as book-running managers. BTIG,
Citizens Capital Markets, TD Securities, Macquarie Capital,
Barclays, Morgan Stanley, Stifel, Union Gaming, Craig-Hallum
Capital Group and Rosenblatt Securities acted as co-managers. The
Offering was conducted pursuant to the Company’s currently
effective shelf registration statement, which was previously filed
with the U.S. Securities and Exchange Commission (“SEC”). The
Offering was made only by means of a prospectus supplement and an
accompanying base prospectus. The preliminary and final prospectus
supplements and accompanying base prospectus relating to the
Offering were filed with the SEC and are available on the SEC’s
website at www.sec.gov. Copies of the preliminary and final
prospectus supplement and accompanying base prospectus relating to
the Offering may be obtained from Goldman Sachs & Co. LLC, 200
West Street, New York, New York 10282, Attention: Prospectus
Department, by telephone at (866) 471-2526, or by email at
prospectus-ny@ny.email.gs.com, from BofA Securities, NC1-004-03-43
200 North College Street, 3rd floor Charlotte, NC 28255-0001 Attn:
Prospectus Department or by email at
dg.prospectus_requests@bofa.com or from J.P. Morgan Securities LLC,
Attention: Broadridge Financial Solutions, 1155 Long Island Avenue,
Edgewood, NY 11717, telephone: 1-866-803-9204.
This press release does not constitute an offer to sell, or the
solicitation of an offer to buy, any share of common stock or any
other security and shall not constitute any offer, solicitation or
sale in any jurisdiction in which such offer, solicitation,
purchase or sale is unlawful. Before investing, please read the
applicable prospectus supplement and accompanying base prospectus
and other documents Penn National has filed with the SEC for more
complete information about Penn National.
About Penn National Gaming With the nation's largest and
most diversified regional gaming footprint, including 41 properties
across 19 states, Penn National continues to evolve into a highly
innovative omni-channel provider of retail and online gaming, live
racing and sports betting entertainment. The Company's properties
feature approximately 50,000 gaming machines, 1,300 table games and
8,800 hotel rooms, and operate under various well-known brands,
including Hollywood, Ameristar, and L'Auberge. Our wholly-owned
interactive division, Penn Interactive, operates retail sports
betting across the Company's portfolio, as well online social
casino, bingo, and iCasino products. In February 2020, Penn
National entered into a strategic partnership with Barstool Sports,
whereby Barstool is exclusively promoting the Company's land-based
and online casinos and sports betting products, including the
Barstool Sportsbook mobile app, to its national audience. The
Company's omni-channel approach is bolstered by the myChoice
loyalty program, which rewards and recognizes its over 20 million
members for their loyalty to both retail and online gaming and
sports betting products with the most dynamic set of offers,
experiences, and service levels in the industry.
NON-GAAP FINANCIAL MEASURES The Non-GAAP Financial
Measures used in this press release include Adjusted EBITDA and
Adjusted EBITDAR. These non-GAAP financial measures should not be
considered a substitute for, nor superior to, financial results and
measures determined or calculated in accordance with GAAP.
The Company defines Adjusted EBITDA as earnings before interest
expense, net; income taxes; depreciation and amortization;
stock-based compensation; debt extinguishment and financing
charges; impairment losses; insurance recoveries and deductible
charges; changes in the estimated fair value of the Company’s
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 EBITDA is inclusive of
income or loss from unconsolidated affiliates, with the Company’s
share of non-operating items (such as interest expense, net; income
taxes; depreciation and amortization; and stock-based compensation
expense) added back for Barstool Sports and the Company’s Kansas
Entertainment joint venture. Adjusted EBITDA is inclusive of rent
expense associated with the Company’s triple net operating leases.
Although Adjusted EBITDA includes rent expense associated with the
Company’s triple net operating leases, the Company believes
Adjusted EBITDA is useful as a supplemental measure in evaluating
the performance of the Company’s consolidated results of
operations.
Adjusted EBITDA has economic substance because it is used by
management as a performance measure to analyze the performance of
the Company’s 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. The Company presents Adjusted
EBITDA because it is used by some investors and creditors as an
indicator of the strength and performance of ongoing business
operations, including the Company’s 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 the industry in which the
Company operates. 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 is 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 commonly-used
measure of performance in the gaming industry and that it is
considered by many to be a key indicator of the Company’s operating
results.
The Company defines Adjusted EBITDAR as Adjusted EBITDA (as
defined above) plus rent expense associated with triple net
operating leases (which is a normal, recurring cash operating
expense necessary to operate the Company’s business). Adjusted
EBITDAR is presented on a consolidated basis outside the financial
statements solely as a valuation metric. Management believes that
Adjusted EBITDAR is an additional metric traditionally used by
analysts in valuing gaming companies subject to triple net leases
since it eliminates the effects of variability in leasing methods
and capital structures. This metric is included as supplemental
disclosure because (i) the Company believes Adjusted EBITDAR is
traditionally used by gaming operator analysts and investors to
determine the equity value of gaming operators and (ii) Adjusted
EBITDAR is one of the metrics used by other financial analysts in
valuing the Company’s business. The Company believes Adjusted
EBITDAR is useful for equity valuation purposes because (i) its
calculation isolates the effects of financing real estate; and (ii)
using a multiple of Adjusted EBITDAR to calculate enterprise value
allows for an adjustment to the balance sheet to recognize
estimated liabilities arising from operating leases related to real
estate. However, Adjusted EBITDAR when presented on a consolidated
basis is not a financial measure in accordance with GAAP and should
not be viewed as a measure of overall operating performance or
considered in isolation or as an alternative to net income because
it excludes the rent expense associated with the Company’s triple
net operating leases and is provided for the limited purposes
referenced herein.
Each of these non-GAAP financial 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.
A reconciliation of Adjusted EBITDAR and Adjusted EBITDA to net
income (loss) is set forth below. The Company does not provide
reconciliations of Adjusted EBITDA and Adjusted EBITDAR to net
income (loss) on a forward-looking basis because the Company is
unable to forecast the amount or significance of certain items
required to develop meaningful comparable GAAP financial measures
without unreasonable efforts. These items include gains or losses
on sale or consolidation transactions, accelerated depreciation,
impairment charges, gains or losses on retirement of debt, income
taxes, which are difficult to predict and estimate and are
primarily dependent on future events, but which are excluded from
the Company’s calculations of Adjusted EBITDA and Adjusted
EBITDAR.
The following table includes a reconciliation of net income
(loss), which is determined in accordance with GAAP, to Adjusted
EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures,
as well as related margins:
For the year ended
December 31,
(dollars in millions)
2019
2018
2017
Net income (loss)
$
43.1
$
93.5
$
473.4
Income tax expense (benefit)
43.0
(3.6
)
(498.5
)
Loss on early extinguishment of debt
-
21.0
24.0
Loss (income) from unconsolidated
affiliates
(28.4
)
(22.3
)
(18.7
)
Interest expense, net
534.2
538.4
463.2
Other expense (income)
(20.0
)
7.1
2.3
Operating income (loss)
571.9
634.1
445.7
Stock-based compensation (1)
14.9
12.0
7.8
Cash-settled stock-based award variance
(1)(2)
0.8
(19.6
)
23.4
Loss (gain) on disposal of assets (1)
5.5
3.2
0.2
Contingent purchase price (1)
7.0
0.5
(6.8
)
Pre-opening and acquisition costs (1)
22.3
95.0
9.7
Depreciation and amortization
414.2
269.0
267.1
Impairment losses
173.1
34.9
18.0
Provision for (recoveries on) loan loss
and unfunded loan commitments
-
(17.0
)
89.8
Insurance recoveries, net of deductible
charges (1)
(3.0
)
(0.1
)
(0.3
)
Income from unconsolidated affiliates
28.4
22.3
18.7
Non-operating items for Kansas JV (3)
3.7
5.1
5.8
Adjusted EBITDA
1,238.8
1,039.4
879.1
Rent expense associated with triple net
operating leases (1)
366.4
3.8
-
Adjusted EBITDAR
$
1,605.2
$
1,043.2
$
879.1
Net income margin
0.8
%
2.6
%
15.0
%
Adjusted EBITDAR margin
30.3
%
29.1
%
27.9
%
(1) These items are included in “General and administrative”
within the Company’s Consolidated Statements of Income.
(2) Our cash-settled stock-based awards are adjusted to fair
value each reporting period based primarily on the price of the
Company’s common stock. As such, significant fluctuations in the
price of the Company’s common stock during any reporting period
could cause significant variances to budget on cash-settled
stock-based awards. During the year ended December 31, 2019, the
price of the Company’s common stock increased, which resulted in an
unfavorable variance to budget. During the year ended December 31,
2018, the price of the Company’s common stock decreased, which
resulted in a favorable variance to budget.
(3) Consists principally of depreciation and amortization
associated with the operations of Hollywood Casino at Kansas
Speedway.
The following table includes a reconciliation of net income
(loss), which is determined in accordance with GAAP, to Adjusted
EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures,
as well as related margins:
(dollars in millions)
For the six months
ended June 30, 2020
Net income (loss)
$
(823.0
)
Income tax expense (benefit)
(157.9
)
Loss on early extinguishment of debt
-
Loss (income) from unconsolidated
affiliates
(2.4
)
Interest expense, net
264.8
Other expense (income)
(7.5
)
Operating income (loss)
(726.0
)
Stock-based compensation (1)
8.9
Cash-settled stock-based award variance
(1)(2)
7.2
Loss (gain) on disposal of assets (1)
(27.9
)
Contingent purchase price (1)
(1.4
)
Pre-opening and acquisition costs (1)
6.7
Depreciation and amortization
187.6
Impairment losses
616.1
Insurance recoveries, net of deductible
charges (1)
(0.1
)
Income from unconsolidated affiliates
2.4
Non-operating items of equity method
investments (3)
2.0
Adjusted EBITDA
75.5
Rent expense associated with triple net
operating leases (1)
201.3
Adjusted EBITDAR
$
276.8
Net income (loss) margin
-57.9
%
Adjusted EBITDAR margin
19.5
%
(1) These items are included in “General and administrative”
within the Company’s unaudited Condensed Consolidated Statements of
Operations.
(2) The Company’s cash-settled stock-based awards are adjusted
to fair value each reporting period based primarily on the price of
the Company’s common stock. As such, significant fluctuations in
the price of the Company’s common stock during any reporting period
could cause significant variances to budget on cash-settled
stock-based awards. During the six months ended June 30, 2020, the
price of the Company’s common stock increased significantly, which
resulted in unfavorable variances to budget.
(3) Consists principally of interest expense, net; income taxes;
depreciation and amortization; and stock-based compensation expense
associated with Barstool Sports and our Kansas Entertainment joint
venture.
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,” “goal,” “seeks,”
“may,” “will,” “should,” or “anticipates” or the negative or other
variations of these or similar words, or by discussions of future
events, current expectations for 3Q20 consolidated revenues and
ADJUSTED EBITDAR, strategies or risks and uncertainties. Such
statements are all subject to risks, uncertainties and changes in
circumstances that could significantly affect the Company’s future
financial results and business.
Accordingly, the Company cautions that the forward-looking
statements contained herein are qualified by important factors that
could cause actual results to differ materially from those
reflected by such statements. Such factors include, but are not
limited to: (a) the anticipated use of proceeds of the Offering;
(b) the assumptions included in our current expectations for 3Q20
consolidated revenues and ADJUSTED EBITDAR; (c) the magnitude and
duration of the impact of COVID-19 on general economic conditions,
capital markets, unemployment, and the Company’s liquidity,
operations, supply chain, and personnel; (d) industry, market,
economic, political, regulatory and health conditions; (e)
disruptions in operations from data protection breaches,
cyberattacks, extreme weather conditions, civil unrest, medical
epidemics or pandemics such as COVID-19 (and any reoccurrences),
and other natural or manmade disasters or catastrophic events; (f)
the reopening of the Company’s Zia Park gaming property is subject
to various conditions, including regulatory approvals, potential
delays and operational restrictions; (g) our ability to access
additional capital on favorable terms or at all; (h) our ability to
remain in compliance with the financial covenants of our debt
obligations; (i) the consummation of the Perryville transaction
with GLPI is subject to various conditions, including third party
agreements and approvals, and accordingly it may be delayed or may
not occur at all; (j) actions to reduce costs and improve
efficiencies to mitigate losses as a result of COVID-19 that could
negatively impact guest loyalty and our ability to attract and
retain employees; (k) the outcome of any legal proceedings that may
be instituted against the Company or its directors, officers or
employees; (l) the impact of new or changes in current laws,
regulations, rules or other industry standards; (m) the ability of
our operating teams to drive revenue and margins; (n) the impact of
significant competition from other gaming and entertainment
operations (including from Native American casinos, historic racing
machines, state sponsored i-lottery products and video game
terminals (“VGTs”) in or adjacent to states in which we operate);
(o) our ability (and the ability of our business partners) to
obtain timely regulatory approvals required to own, develop and/or
operate our properties, or other delays, approvals or impediments
to completing our planned acquisitions or projects, construction
factors, including delays, and increased costs; (p) 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 properties
or the potential award of additional gaming licenses proximate to
our properties, as recently occurred in Illinois, Nebraska and
Pennsylvania); (q) 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; (r) the activities of our current competitors
(commercial and tribal) and the rapid emergence of additional
significant potential competitors (traditional, tribal, internet,
social, sweepstakes based and VGTs in bars and truck stops) in or
adjacent to the jurisdictions in which we do or seek to do
business; (s) increases in the effective rate of taxation for any
of our operations or at the corporate level; (t) 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 and municipalities for
such transactions; (u) 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; (v) the impact of weather, including flooding,
hurricanes and tornadoes and the ability to recover associated
insurance proceeds; (w) changes in accounting standards; (x) the
risk of failing to maintain the integrity of our information
technology infrastructure and safeguard our business, employee and
customer data (particularly as our iGaming division grows); (y)
with respect to our iGaming and sports betting endeavors, the
impact of significant competition from other companies for online
sports betting, iGaming and sportsbooks, our ability to achieve the
expected financial returns related to our investment in Barstool
Sports, our ability (and the ability of our business partners) to
obtain timely regulatory approvals and iOS approval required to
own, develop and/or operate sportsbooks may be delayed and there
may be impediments and increased costs to launching the online
betting, iGaming and sportsbooks, including delays, and increased
costs, intellectual property and legal and regulatory challenges,
as well as our ability to successfully develop innovative products
that attract and retain a significant number of players in order to
grow our revenues and earnings, our ability to establish key
partnerships, our ability to generate meaningful returns and the
risks inherent in any new business; (z) the impact of significant
competition from other companies for online sports betting; (aa)
the Company’s ability to achieve the expected financial returns
related to its Barstool Sportsbook app; (bb) the risk of failing to
maintain the integrity of the Company’s information technology
infrastructure and safeguard its business, employee and customer
data in connection with the Company’s online sports betting; (cc)
the Company’s and its business partners’ ability to obtain various
regulatory approvals required to own, develop and/or operate the
Barstool Sportsbook app may be delayed or may not occur; and (dd)
other factors included in “Risk Factors,” of this prospectus
supplement, the Company’s Annual Report on Form 10-K for the year
ended December 31, 2019, the Company’s Quarterly Reports on Form
10-Q for the quarters ended March 31, 2020 and June 30, 2020,
subsequent Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K, each as filed with the U.S. 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200929006066/en/
General Media Inquiries: Eric Schippers, Sr. Vice
President, Public Affairs Penn National Gaming 610/373-2400
Financial Media and Analyst Inquiries: Justin Sebastiano,
Sr. Vice President of Finance and Treasurer Penn National Gaming
610/373-2400
Joseph N. Jaffoni, Richard Land JCIR 212/835-8500 or
penn@jcir.com
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