Notes to the Consolidated Financial Statements
1.
Business and Basis of Presentation
Gaming and Leisure Properties, Inc. ("GLPI") is a self-administered and self-managed Pennsylvania real estate investment trust ("REIT"). GLPI (together with its subsidiaries, the "Company") was incorporated on February 13, 2013, as a wholly-owned subsidiary of Penn National Gaming, Inc. ("Penn"). On November 1, 2013, Penn contributed to GLPI, through a series of internal corporate restructurings, substantially all of the assets and liabilities associated with Penn’s real property interests and real estate development business, as well as the assets and liabilities of Hollywood Casino Baton Rouge and Hollywood Casino Perryville, which are referred to as the "TRS Properties," and then spun-off GLPI to holders of Penn's common and preferred stock in a tax-free distribution (the "Spin-Off"). The assets and liabilities of GLPI were recorded at their respective historical carrying values at the time of the Spin-Off in accordance with the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 505-60, "Spinoffs and Reverse Spinoffs."
The Company elected on its United States ("U.S.") federal income tax return for its taxable year that began on January 1, 2014 to be treated as a REIT and the Company, together with an indirect wholly-owned subsidiary of the Company, GLP Holdings, Inc., jointly elected to treat each of GLP Holdings, Inc., Louisiana Casino Cruises, Inc. (d/b/a Hollywood Casino Baton Rouge) and Penn Cecil Maryland, Inc. (d/b/a Hollywood Casino Perryville) as a "taxable REIT subsidiary" ("TRS") effective on the first day of the first taxable year of GLPI as a REIT. In connection with the Spin-Off, Penn allocated its accumulated earnings and profits (as determined for U.S. federal income tax purposes) for periods prior to the consummation of the Spin-Off between Penn and GLPI. In connection with its election to be taxed as a REIT for U.S. federal income tax purposes, GLPI declared a special dividend to its shareholders to distribute any accumulated earnings and profits relating to the real property assets and attributable to any pre-REIT years, including any earnings and profits allocated to GLPI in connection with the Spin-Off, to comply with certain REIT qualification requirements.
As a result of the Spin-Off, GLPI owns substantially all of Penn’s former real property assets and leases back most of those assets to Penn for use by its subsidiaries, under a unitary master lease, a triple-net operating lease with an initial term of
15 years
(expiring October 31, 2028) with no purchase option, followed by
four
5
-year renewal options (exercisable by Penn) on the same terms and conditions (the "Penn Master Lease"), and GLPI also owns and operates the TRS Properties through an indirect wholly-owned subsidiary, GLP Holdings, Inc. In April 2016, the Company acquired substantially all of the real estate assets of Pinnacle Entertainment, Inc. ("Pinnacle") for approximately
$4.8 billion
. GLPI leases these assets back to Pinnacle, under a unitary triple-net lease with an initial term of
10 years
(expiring April 30, 2026) with no purchase option, followed by
five
5
-year renewal options (exercisable by Pinnacle) on the same terms and conditions (the "Pinnacle Master Lease"). See Note 4 for further details surrounding the Pinnacle acquisition.
GLPI’s primary business consists of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements. As of
December 31, 2017
, GLPI’s portfolio consisted of
38
gaming and related facilities, including the TRS Properties, the real property associated with
20
gaming and related facilities operated by Penn, the real property associated with
15
gaming and related facilities operated by Pinnacle and the real property associated with the Casino Queen in East St. Louis, Illinois. These facilities are geographically diversified across
14
states and contain approximately
15.2 million
of rentable square feet. As of
December 31, 2017
, the Company's properties were
100%
occupied.
GLPI expects to grow its portfolio by pursuing opportunities to acquire additional gaming facilities to lease to gaming operators under prudent terms. For example, on December 17, 2017, the Company entered into agreements to purchase two additional properties, Plainridge Park Casino and Belterra Park Gaming & Entertainment Center from Penn and Pinnacle, respectively. We will acquire these properties in connection with the proposed acquisition of Pinnacle by Penn pursuant to a definitive agreement and plan of merger between them, also dated December 17, 2017 (the "Merger"). Subject to and concurrently with the completion of the Merger, we have agreed to, among other things, amend our master lease with Pinnacle to allow for the sale by Pinnacle of the operating assets at Ameristar Casino Hotel Kansas City, Ameristar Casino Resort Spa St. Charles and Belterra Casino Resort to Boyd Gaming Corporation (“Boyd”) and to enter into a new master lease agreement with Boyd on terms similar to the Company’s existing leases. The transaction which is subject to regulatory approval is expected to close in the second half of 2018.
In order to conform to the current presentation of the statement of income, the Company combined certain line items on the consolidated statements of income for the years ended December 31, 2016 and 2015. Specifically, the Company aggregated the former revenue line items gaming revenue and food, beverage and other revenue into the line item gaming, food, beverage and other revenues and aggregated the former expense line items gaming expenses and food, beverage and other expenses into the line item gaming, food, beverage and other expenses. Furthermore, also to conform to the current
presentation of the statement of income, the Company separated the general and administrative line item into the line items general and administrative expenses and land rights and ground lease expense on the consolidated statements of income for the years ended December 31, 2016 and 2015. This new line item includes the amortization of land rights and rent expense related to the Company's long-term ground leases. These reclassifications were made only for presentation purposes and had no impact on the Company's financial results for the years ended December 31, 2016 and 2015.
The consolidated financial statements include the accounts of GLPI and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses for the reporting periods. Actual results may differ from those estimates.
2. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
("ASU 2016-09"). This ASU amends certain aspects of accounting for share-based payments to employees, including (i) requiring all income tax effects of share-based awards to be recognized in the income statement when the award vests or settles and eliminating APIC pools, (ii) permitting employers to withhold the share equivalent of an employee's maximum tax liability without triggering liability accounting and (iii) allowing companies to make a policy election to account for forfeitures as they occur. The Company adopted ASU 2016-09 on January 1, 2017 and it did not have a significant impact on how the Company accounts for share-based payments.
Accounting Pronouncements Not Yet Adopted
In May 2017, the FASB issued ASU No. 2017-09,
Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting
("ASU 2017-09"). This ASU provides clarity about which changes to the terms or conditions of a share-based payment award require the application of modification accounting. Specifically, ASU 2017-09 clarifies that changes to the terms or conditions of an award should be accounted for as a modification unless all of the following are met: 1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified, 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. ASU 2017-09 is effective for annual reporting periods beginning after December 15, 2017. The Company adopted ASU 2017-09 on January 1, 2018 and does not expect the adoption of ASU 2017-09 to significantly impact its accounting for share-based payment awards, as changes to awards' terms and conditions subsequent to the grant date are unusual and infrequent in nature.
In January 2017, the FASB issued ASU No. 2017-04,
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
("ASU 2017-04"). This ASU simplifies an entity's goodwill impairment test by eliminating Step 2 from the test. The new guidance also amends the definition of impairment to a condition that exists when the carrying amount of goodwill exceeds its fair value. By eliminating Step 2 from the test, entities are no longer required to determine the implied fair value of goodwill by computing the fair value (at impairment testing date) of all assets and liabilities in a manner similar to that required in conjunction with business combinations. Upon the adoption of ASU 2017-04, an impairment charge is simply recorded as the difference between carrying value and fair value, when carrying value exceeds fair value. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company does not expect the adoption of ASU 2017-04 to significantly impact its goodwill impairment testing.
In January 2017, the FASB issued ASU No. 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business
("ASU 2017-01"). This ASU provides clarifying guidance on what constitutes a business acquisition versus an asset acquisition. Specifically, the new guidance lays out a screen to more easily determine if a set of integrated assets and activities does in fact represent a business. Under the ASU 2017-01, when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the assets do not represent a business. ASU 2017-01 is effective for annual reporting periods beginning after December 15, 2017. The Company adopted ASU 2017-01 on January 1, 2018 with no impact to the Company's accounting treatment of its acquisitions.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, a Consensus of the FASB Emerging Issues Task Force
("ASU 2016-15")
.
This ASU provides clarifying guidance on the presentation of certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017. The Company adopted ASU 2016-15 on January 1, 2018, with no impact to its presentation of cash receipts and payments on its consolidated statements of cash flows.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument
("ASU 2016-13"). This ASU introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 sets forth an "expected credit loss" impairment model to replace the current "incurred loss" method of recognizing credit losses, which is intended to improve financial reporting by requiring timely recording of credit losses on loans and other financial instruments. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. The Company does not expect the adoption of ASU 2016-13 to have a significant impact on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
("ASU 2016-02"). This ASU primarily provides new guidance for lessees on the accounting treatment of operating leases. Under the new guidance, lessees are required to recognize assets and liabilities arising from operating leases on the balance sheet. ASU 2016-02 also aligns lessor accounting with the revenue recognition guidance in Topic 606 of the Accounting Standards Codification. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018 and is required to be adopted on a modified retrospective basis, meaning the new leasing model will be applied to the earliest year presented in the financial statements and thereafter. However, in November 2017, the FASB issued a proposed ASU, which would permit companies to apply the transition provisions of the lease accounting standard at its effective date (i.e. comparative financial statements would not be required).
The Company is evaluating the impact of adopting this new accounting standard on its financial statements but does not expect the adoption of the new guidance to have a significant impact on the accounting treatment of its triple-net tenant leases, which are the primary source of revenue to the Company. Generally speaking, ASU 2016-02 will more significantly impact the accounting for leases in which GLPI is the lessee by requiring the Company to record a right of use asset and lease liability on its consolidated balance sheet for these leases.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
("ASU 2014-09"). This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. ASU 2014-09 provides a unified five-step model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. At the April 1, 2015 FASB meeting, the board voted to defer the effective date for the new revenue recognition standard to annual reporting periods beginning after December 15, 2017. The pronouncement was originally effective for annual reporting periods beginning after December 15, 2016, and companies were permitted to elect the adoption of the standard as of the original effective date. When adopted, the new guidance can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption.
The Company has completed its evaluation of the impact of adopting this new accounting standard on its financial statements and internal revenue recognition policies. The majority of the Company's revenue recognition policies will not be impacted by the new standard, as leases (the source of the Company's majority of revenues) are excluded from ASU 2014-09. Only the accounting treatment for the customer loyalty programs at the TRS properties will be impacted by the adoption of ASU 2014-09. Specifically, the recognition of revenue associated with these points based programs will be impacted by eliminating the current accrual for the cost of the points awarded at the time of play and instead deferring the portion of the revenue received from the customer at the time of play and attributed to the awarded points until a later period when the points are redeemed or forfeited. The revenue deferral will be calculated from the portion of the transaction price allocated to the points based upon their retail value. Under the former guidance, the cost of the points was recorded as an operating expense through the gaming, food, beverage and other expense line item of the Company's consolidated statement of income. In addition, upon the adoption of ASU 2014-09, promotional allowances representing the retail value of food, beverages and other services furnished to guests without charge will no longer be presented as a separate line item on the consolidated statements of income, rather they will be presented on a net basis within gaming, food, beverage and other revenue. This change has no impact to net revenues and is for presentation purposes only. The Company adopted ASU 2014-09 on January 1, 2018 using the modified retrospective approach and recorded a cumulative adjustment to retained earnings of approximately
$400,000
at the adoption date.
3.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all cash balances and highly-liquid investments with original maturities of
three months
or less to be cash and cash equivalents.
Concentration of Credit Risk
Concentrations of credit risk arise when a number of operators, tenants, or obligors related to the Company's investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. Additionally, concentrations of credit risk may arise when revenues of the Company are derived from a small number of tenants. As of
December 31, 2017
, substantially all of the Company's real estate properties were leased to Penn or Pinnacle and approximately
53%
and
45%
of the Company's collective rental revenues and income from direct financing lease were derived from tenant leases with Penn and Pinnacle, respectively. Revenues from Penn and Pinnacle are reported in the Company's GLP Capital, L.P. reportable segment. Both Penn and Pinnacle are publicly traded companies that are subject to the informational filing requirements of the Securities Exchange Act of 1934, as amended, and are required to file periodic reports on Form 10-K and Form 10-Q and current reports on Form 8-K with the Securities and Exchange Commission ("SEC"). Readers are directed to Penn and Pinnacle's respective websites for further financial information on these companies. Other than the Company's tenant concentration, management believes the Company's portfolio was reasonably diversified by geographical location and did not contain any other significant concentrations of credit risk. As of
December 31, 2017
, the Company's portfolio of
36
leased properties and the TRS properties is diversified by location across
14
states.
Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, accounts receivable, loans receivable and the Company's net investment in direct financing lease related to the Pinnacle Master Lease. (See Note 8 for further details on the net investment in direct financing lease).
The Company's policy is to limit the amount of credit exposure to any one financial institution and place investments with financial institutions evaluated as being creditworthy, or in short-term money market and tax-free bond funds which are exposed to minimal interest rate and credit risk. At times, the Company has bank deposits and overnight repurchase agreements that exceed federally-insured limits.
Prepaid Expenses and Other Assets
Prepaid expenses consist of expenditures for goods (other than inventories) or services before the goods are used or the services are received. These amounts are deferred and charged to operations as the benefits are realized and primarily consist of prepayments for insurance and other contracts that will be expensed during the subsequent year. It also includes property taxes that were paid in advance, as well as transaction costs that will be allocated to purchase price upon the closing of an asset acquisition. Other assets consists primarily of accounts receivable, deposits, food and beverage inventory and deferred compensation plan assets (See Note 10 for further details on the deferred compensation plan).
Fair Value of Financial Instruments
The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate:
Cash and Cash Equivalents
The fair value of the Company’s cash and cash equivalents approximates the carrying value of the Company’s cash and cash equivalents, due to the short maturity of the cash equivalents.
Deferred Compensation Plan Assets
The Company's deferred compensation plan assets consist of open-ended mutual funds and as such the fair value measurement of the assets is considered a Level 1 measurement as defined under ASC 820 "Fair Value Measurements and Disclosures" ("ASC 820"). Deferred compensation plan assets are included within other assets on the consolidated balance sheets.
Loan Receivable
The fair value of the loan receivable approximates the carrying value of the Company's loan receivable, as collection on the outstanding loan balance is reasonably assured and the interest rate approximates market rates for a similar instrument. The fair value measurement of the loan receivable is considered a Level 3 measurement as defined under ASC 820.
Long-term Debt
The fair value of the senior unsecured notes and senior unsecured credit facility is estimated based on quoted prices in active markets and as such is a Level 1 measurement as defined under ASC 820.
The estimated fair values of the Company’s financial instruments are as follows (in thousands):
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December 31, 2017
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December 31, 2016
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Carrying
Amount
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Fair
Value
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Carrying
Amount
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Fair
Value
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Financial assets:
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Cash and cash equivalents
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$
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29,054
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$
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29,054
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$
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36,556
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$
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36,556
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Deferred compensation plan assets
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22,617
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22,617
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17,593
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17,593
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Loan receivable
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13,000
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13,000
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26,200
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26,200
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Financial liabilities:
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Long-term debt:
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Senior unsecured credit facility
|
1,055,000
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1,045,600
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1,290,000
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1,272,852
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Senior unsecured notes
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3,425,000
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3,574,688
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3,425,000
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3,573,500
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Real Estate Investments
Real estate investments primarily represent land and buildings leased to the Company's tenants. The Company records the acquisition of real estate assets at fair value, including acquisition and closing costs. The cost of properties developed by the Company include costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. The Company considers the period of future benefit of the asset to determine the appropriate useful lives. Depreciation is computed using a straight-line method over the estimated useful lives of the buildings and building improvements which are generally between
10
to
31 years
.
The Company continually monitors events and circumstances that could indicate that the carrying amount of its real estate investments may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of a real estate investment may not be recoverable, the Company estimates the fair value of the investment by calculating the undiscounted future cash flows from the use and eventual disposition of the investment. This amount is compared to the asset's carrying value. If the Company determines the carrying amount is not recoverable, it would recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value, calculated in accordance with GAAP. The Company groups its real estate investments together by lease, the lowest level for which identifiable cash flows are available, in evaluating impairment. In assessing the recoverability of the carrying value, the Company must make assumptions regarding future cash flows and other factors. The factors considered by the Company in performing this assessment include current operating results, market and other applicable trends and residual values, as well as the effect of obsolescence, demand, competition and other factors. If these estimates or the related assumptions change in the future, the Company may be required to record an impairment loss.
Land Rights
Land rights represent the Company's rights to land subject to long-term ground leases. The Company records land rights at the acquisition date fair value of the long-term rights purchased from sellers. Essentially, land rights represent the below market value of the related ground leases. Land rights are amortized over the individual lease term of each ground lease, including all renewal options. Amortization expense related to the land rights is recorded within land rights and ground lease expense in the Company's consolidated statements of income. Land rights are monitored for potential impairment in much the same way as the Company's real estate assets. If the Company determines the carrying amount of a land right is not recoverable, it would recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value, calculated in accordance with GAAP.
Property and Equipment Used in Operations
Property and equipment are stated at cost, less accumulated depreciation and represent assets used by the Company's TRS operations and certain corporate assets. Maintenance and repairs that neither add materially to the value of the asset nor appreciably prolong its useful life are charged to expense as incurred. Gains or losses on the disposal of property and equipment are included in the determination of income.
Depreciation of property and equipment is recorded using the straight-line method over the following estimated useful lives:
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Land improvements
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15 years
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Building and improvements
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5 to 31 years
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Furniture, fixtures, and equipment
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3 to 31 years
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Leasehold improvements are depreciated over the shorter of the estimated useful life of the improvement or the related lease term. The estimated useful lives are determined based on the nature of the assets as well as the Company's current operating strategy.
The Company reviews the carrying value of its property and equipment for possible impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based upon the estimated undiscounted future cash flows expected to result from its use and eventual disposition. If the Company determines the carrying amount is not recoverable, it would recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value, calculated in accordance with GAAP. In estimating expected future cash flows for determining whether an asset is impaired, assets are grouped at the individual property level. In assessing the recoverability of the carrying value of property and equipment, the Company must make assumptions regarding future cash flows and other factors. The factors considered by the Company in performing this assessment include current operating results, market and other applicable trends and residual values, as well as the effect of obsolescence, demand, competition and other factors. If these estimates or the related assumptions change in the future, the Company may be required to record an impairment loss for these assets.
Investments in Direct Financing Leases
The Company's investment in direct financing lease represents the building portion of the real estate assets acquired in the Pinnacle acquisition. As discussed in Note 8, the Pinnacle Master Lease is bifurcated between an operating lease and a direct financing lease, with the land assets qualifying for operating lease treatment and the building assets triggering direct financing lease treatment. Upon entry into a direct financing lease, the Company records the acquisition date fair value of the purchased buildings as the net investment in direct financing lease on its consolidated balance sheet. The gross investment in a direct financing lease represents the total future minimum lease payments attributable to the direct financing lease as well as the estimated residual value of the property. At any point in time, the difference between the net investment and gross investment in a direct financing lease represents the unearned income which is subsequently recognized as interest income and included in income from direct financing lease in the Company's consolidated statements of income. Unearned income is recognized over the applicable lease term using the effective interest rate method which produces a constant periodic rate of return on the net investment in the leased property. Furthermore, the Company's investment in direct financing leases is reduced over the applicable lease term to its residual value by the building portion of rent.
If and when an investment in direct financing lease is identified for impairment evaluation, the Company will apply the guidance in both ASC 310 "Receivables" ("ASC 310") and ASC 360 "Property, Plant and Equipment" ("ASC 360"). Under ASC 310, the lease receivable portion of the net investment in direct financing leases is classified as a loan and identified for impairment when it becomes probable GLPI, as the lessor, will be unable to collect all rental payments associated with the Company's investment in direct financing leases. Under ASC 360, the residual value portion of the net investment in direct financing leases is monitored for impairment under the same method the Company applies to real estate investments.
Goodwill and Other Intangible Assets
At both
December 31, 2017
and
2016
, the Company had
$75.5 million
of goodwill and
$9.6 million
of other intangible assets within its consolidated balance sheets, resulting from the contribution of Hollywood Casino Baton Rouge and Hollywood Casino Perryville in connection with the Spin-Off. The Company's goodwill resides on the books of its Hollywood Casino Baton Rouge subsidiary, while the other intangible asset represents a gaming license on the books of its Hollywood Casino Perryville subsidiary. Both subsidiaries are members of the TRS Properties segment and are considered separate
reporting units under ASC 350, "Intangibles - Goodwill and Other" ("ASC 350"). Goodwill is tested at the reporting unit level, which is an operating segment or one level below an operating segment for which discrete financial information is available.
Under ASC 350, the Company is required to test goodwill for impairment at least annually and whenever events or circumstances indicate that it is more likely than not that goodwill may be impaired. The Company has elected to perform its annual goodwill impairment test as of October 1 of each year. ASC 350 prescribes a two-step goodwill impairment test, the first step which involves the determination of the fair value of each reporting unit and its comparison to the carrying amount. In order to determine the fair value of the Baton Rouge reporting unit, the Company utilized a discounted cash flow model, which relied on projected EBITDA to determine the reporting unit's future cash flows. If the carrying amount exceeds the fair value in step 1, then step 2 of the impairment test is performed to determine the implied value of goodwill. If the implied value of goodwill is less than the goodwill allocated to the reporting unit, an impairment loss is recognized.
In accordance with ASC 350, the Company considers its Hollywood Casino Perryville gaming license an indefinite-lived intangible asset that does not require amortization based on the Company's future expectations to operate this casino indefinitely, as well as the gaming industry's historical experience in renewing these intangible assets at minimal cost with various state gaming commissions. Rather, the Company's gaming license is tested annually, or more frequently if indicators of impairment exist, for impairment by comparing the fair value of the recorded asset to its carrying amount. If the carrying amount of the indefinite-life intangible asset exceeds its fair value, an impairment loss is recognized. Hollywood Casino Perryville's gaming license will expire in September 2025, fifteen years from the casino's opening date. The Company expects to expense any costs related to the gaming license renewal as incurred.
We assessed the fair value of our gaming license using the Greenfield Method under the income approach. The Greenfield Method estimates the fair value of the gaming license assuming the Company built a casino with similar utility to that of the existing facility. The method assumes a theoretical start-up company going into business without any assets other than the intangible asset being valued. As such the value of the license is a function of the following items:
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•
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Projected revenues and operating cash flows;
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•
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Theoretical construction costs and duration;
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•
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Discounting that reflects the level of risk associated with receiving future cash flows attributable to the license; and
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•
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Remaining useful life of the license
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The evaluation of goodwill and indefinite-lived intangible assets requires the use of estimates about future operating results to determine the estimated fair value of the reporting unit and the indefinite-lived intangible assets. The Company must make various assumptions and estimates in performing its impairment testing. The implied fair value includes estimates of future cash flows that are based on reasonable and supportable assumptions, which represent the Company's best estimates of the cash flows expected to result from the use of the assets. Changes in estimates, increases in the Company's cost of capital, reductions in transaction multiples, changes in operating and capital expenditure assumptions or application of alternative assumptions and definitions could produce significantly different results. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company's estimates. If the Company's ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future accounting periods. The Company's estimates of cash flows are based on the current regulatory and economic climates, as well as recent operating information and budgets. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events.
Forecasted cash flows can be significantly impacted by the local economy in which the Company's subsidiaries operate. For example, increases in unemployment rates can result in decreased customer visitations and/or lower customer spend per visit. In addition, new legislation which approves gaming in nearby jurisdictions or further expands gaming in jurisdictions in which the Company operates can result in increased competition for the property. This generally has a negative effect on profitability once competitors become established, as a certain level of cannibalization occurs absent an overall increase in customer visitations. Lastly, increases in gaming taxes approved by state regulatory bodies can negatively impact forecasted cash flows.
Assumptions and estimates about future cash flow levels are complex and subjective. They are sensitive to changes in underlying assumptions and can be affected by a variety of factors, including external factors, such as industry, geopolitical and economic trends, and internal factors, such as changes in the Company's business strategy, which may reallocate capital and resources to different or new opportunities which management believes will enhance the Company's overall value but may be to the detriment of its existing operations.
The Company determined the fair value of its goodwill and gaming license as of October 1,
2017
utilizing the forecasted cash flow methods described above and compared these values to the carrying value of the assets on its balance sheet. In determining the fair value of each asset, the Company incorporated recent operating trends of both TRS properties into its current year projections. After consideration of these facts, the fair value of both assets substantially exceeded their carrying amount, and as of October 1,
2017
, the Company's goodwill and gaming license were not impaired.
As discussed in Note 2, the FASB recently issued ASU 2017-04, which simplifies the goodwill impairment test for public companies by eliminating Step 2 from the test. Upon the adoption of ASU 2017-04, an impairment charge is simply recorded as the difference between the carrying value and fair value of a reporting unit's goodwill, when the carrying value exceeds fair value. See Note 2 for further details on the new standard. The Company does not expect the adoption of ASU 2017-04 to significantly impact its goodwill impairment testing, as it has not recognized an impairment charge for goodwill or intangible assets since inception.
Debt Issuance Costs
Debt issuance costs that are incurred by the Company in connection with the issuance of debt are deferred and amortized to interest expense over the contractual term of the underlying indebtedness. In accordance with ASU 2015-03,
Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,
the Company records long-term debt net of unamortized debt issuance costs on its consolidated balance sheets.
Loan Receivable
The Company may periodically loan funds to tenants. Loans are made at prevailing market interest rates and recorded on the Company's consolidated balance sheets at carrying value which approximates fair value. If the collectability of an outstanding loan balance is not reasonably assured, the Company will assess the loan's carrying value for potential impairment. If it is determined the loan is in fact impaired it will be written down or off completely. Currently, the Company does not have any allowances recorded against its loan receivable as the collection of the remaining principal and interest payments is reasonable assured. Interest income related to loans receivable is recorded in interest income within the Company's consolidated statements of income in the period earned.
Income Taxes
The TRS Properties are able to engage in activities resulting in income that would not be qualifying income for a REIT. As a result, certain activities of the Company which occur within its TRS Properties are subject to federal and state income taxes.
The Company accounts for income taxes in accordance with ASC 740, "Income Taxes" ("ASC 740"). Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and are measured at the prevailing enacted tax rates that will be in effect when these differences are settled or realized. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realizability of the deferred tax assets is evaluated by assessing the valuation allowance and by adjusting the amount of the allowance, if any, as necessary. The factors used to assess the likelihood of realization are the forecast of future taxable income.
ASC 740 also creates a single model to address uncertainty in tax positions, and clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in an enterprise's financial statements. It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company did not have any uncertain tax positions for the three
years ended
December 31, 2017
.
The Company is required under ASC 740 to disclose its accounting policy for classifying interest and penalties, the amount of interest and penalties charged to expense each period, as well as the cumulative amounts recorded in the consolidated balance sheets. If and when they occur, the Company will classify any income tax-related penalties and interest accrued related to unrecognized tax benefits in taxes on income within the consolidated statements of income. During the year ended
December 31, 2017
, the Company recognized
no
penalties and interest, net of deferred income taxes and during the years ended
December 31, 2016
and
2015
, the Company recognized
$1 thousand
and
$59 thousand
of penalties and interest, net of deferred income taxes, respectively.
The Company elected on its U.S. federal income tax return for its taxable year that began on January 1, 2014 to be treated as a REIT and the Company, together with an indirect wholly-owned subsidiary of the Company, GLP Holdings, Inc., jointly elected to treat each of GLP Holdings, Inc., Louisiana Casino Cruises, Inc. and Penn Cecil Maryland, Inc. as a "taxable REIT subsidiary" effective on the first day of the first taxable year of GLPI as a REIT. The Company continues to be organized
and to operate in a manner that will permit the Company to qualify as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least
90%
of its annual REIT taxable income to shareholders. As a REIT, the Company generally will not be subject to federal, state or local income tax on income that it distributes as dividends to its shareholders, except in those jurisdictions that do not allow a deduction for such distributions. If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal, state and local income tax, including any applicable alternative minimum tax, on its taxable income at regular corporate income tax rates, and dividends paid to its shareholders would not be deductible by the Company in computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely affect the Company's net income and net cash available for distribution to shareholders. Unless the Company was entitled to relief under certain Internal Revenue Code provisions, the Company also would be disqualified from re-electing to be taxed as a REIT for the
4
taxable years following the year in which it failed to qualify to be taxed as a REIT.
Revenue Recognition
The Company recognizes rental revenue from tenants, including rental abatements, lease incentives and contractually fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured. Additionally, percentage rent that is fixed and determinable at the lease inception date is recorded on a straight-line basis over the lease term, resulting in the recognition of deferred rental revenue on the Company’s consolidated balance sheets. Deferred rental revenue is amortized to rental revenue on a straight-line basis over the remainder of the lease term. The lease term includes the initial non-cancelable lease term and any reasonably assured renewable periods. Contingent rental income that is not fixed and determinable at lease inception is recognized only when the lessee achieves the specified target. Recognition of rental income commences when control of the facility has been transferred to the tenant.
The Company recognizes income from tenants subject to direct financing leases ratably over the lease term using the effective interest rate method which produces a constant periodic rate of return on the net investment in the leased property. At lease inception, the Company records an asset which represents the Company's net investment in the direct financing lease. This initial net investment is determined by aggregating the total future minimum lease payments attributable to the direct financing lease and the estimated residual value of the property, less unearned income. Over the lease term, the investment in the direct financing lease is reduced and income is recognized for the building portion of rent. Furthermore, as the net investment in direct financing lease includes only future minimum lease payments, percentage rent that is not fixed and determinable at the lease inception is excluded from the determination of the rent attributable to the leased assets and will therefore be recorded as income from the direct financing lease in the period earned. For further detail on the Company's direct financing lease refer to Note 8.
Additionally, in accordance with ASC 605, "Revenue Recognition," the Company records revenue for the real estate taxes paid by its tenants on the leased properties with an offsetting expense in real estate taxes within the consolidated statement of income as the Company has concluded it is the primary obligor. Similarly, the Company records revenue for the ground lease rent paid by its tenants with an offsetting expense in land rights and ground lease expense within the consolidated statements of income as the Company has concluded that as the lessee it is the primary obligor under the ground leases. The Company subleases these ground leases back to its tenants, who are responsible for payment directly to the landlord.
Gaming revenue generated by the TRS Properties mainly consists of video lottery gaming revenue and to a lesser extent, table game and poker revenue. Video lottery gaming revenue is the aggregate net difference between gaming wins and losses with liabilities recognized for funds deposited by customers before gaming play occurs, for "ticket-in, ticket-out" coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of coins played, are charged to revenue as the amount of the jackpots increase. Table game gaming revenue is the aggregate of table drop adjusted for the change in aggregate table chip inventory. Table drop is the total dollar amount of the currency, coins, chips, tokens, outstanding counter checks (markers), and front money that are removed from the live gaming tables. Additionally, food and beverage revenue is recognized as services are performed.
Gaming revenue is recognized net of certain sales incentives in accordance with ASC 605-50, "Revenue Recognition— Customer Payments and Incentives." The Company records certain sales incentives and points earned in point-loyalty programs as a reduction of revenue. See Note 2 for a summary of anticipated changes to the recognition of revenue at the TRS Properties upon the adoption of ASU 2014-09 on January 1, 2018.
Gaming and Admission Taxes
For the TRS Properties, the Company is subject to gaming and admission taxes based on gross gaming revenues in the jurisdictions in which it operates. The Company primarily recognizes gaming tax expense based on the statutorily required percentage of revenue that is required to be paid to state and local jurisdictions in the states where wagering occurs. At Hollywood Casino Baton Rouge, the state gaming tax rate is flat, while the admission tax is based on graduated tax rates that increase as gross gaming revenues increase. At Hollywood Casino Perryville the state gaming tax rate is flat. The Company records gaming and admission taxes at the Company’s estimated effective gaming tax rate for the year, considering estimated taxable gaming revenue and the applicable rates. Such estimates are adjusted each interim period. If gaming and admission tax rates change during the year, such changes are applied prospectively in the determination of gaming tax expense in future interim periods. For the three
years ended
December 31, 2017
, these expenses, which are recorded within gaming, food, beverage and other expense in the consolidated statements of income, totaled
$57.4 million
,
$57.7 million
and
$60.1 million
, respectively.
Earnings Per Share
The Company calculates earnings per share ("EPS") in accordance with ASC 260, "Earnings Per Share." Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period, excluding net income attributable to participating securities (unvested restricted stock awards). Diluted EPS reflects the additional dilution for all potentially-dilutive securities such as stock options, unvested restricted shares and unvested performance-based restricted shares.
The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the
years ended
December 31, 2017
,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
(in thousands)
|
|
Determination of shares:
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
210,705
|
|
|
178,594
|
|
|
114,432
|
|
|
Assumed conversion of dilutive employee stock-based awards
|
644
|
|
|
1,699
|
|
|
3,755
|
|
|
Assumed conversion of restricted stock
|
155
|
|
|
171
|
|
|
170
|
|
|
Assumed conversion of performance-based restricted stock awards
|
1,248
|
|
|
158
|
|
|
82
|
|
|
Diluted weighted-average common shares outstanding
|
212,752
|
|
|
180,622
|
|
|
118,439
|
|
The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the
years ended
December 31, 2017
,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
(in thousands, except per share amounts)
|
|
Calculation of basic EPS:
|
|
|
|
|
|
|
|
|
Net income
|
$
|
380,598
|
|
|
$
|
289,305
|
|
|
$
|
128,122
|
|
|
Less: Net income allocated to participating securities
|
(622
|
)
|
|
(668
|
)
|
|
(517
|
)
|
|
Net income attributable to common shareholders
|
$
|
379,976
|
|
|
$
|
288,637
|
|
|
$
|
127,605
|
|
|
Weighted-average common shares outstanding
|
210,705
|
|
|
178,594
|
|
|
114,432
|
|
|
Basic EPS
|
$
|
1.80
|
|
|
$
|
1.62
|
|
|
$
|
1.12
|
|
|
|
|
|
|
|
|
|
Calculation of diluted EPS:
|
|
|
|
|
|
|
|
|
Net income
|
$
|
380,598
|
|
|
$
|
289,305
|
|
|
$
|
128,122
|
|
|
Diluted weighted-average common shares outstanding
|
212,752
|
|
|
180,622
|
|
|
118,439
|
|
|
Diluted EPS
|
$
|
1.79
|
|
|
$
|
1.60
|
|
|
$
|
1.08
|
|
There were
3,483
,
23,954
and
24,233
outstanding equity based awards during the years ended
December 31, 2017
,
2016
and
2015
, respectively, that were not included in the computation of diluted EPS because they were antidilutive.
Stock-Based Compensation
The Company's 2013 Long Term Incentive Compensation Plan (the "2013 Plan") provides for the Company to issue restricted stock awards, including performance-based restricted stock awards, and other equity or cash based awards to employees. Any director, employee or consultant shall be eligible to receive such awards.
The Company accounts for stock compensation under ASC 718, "Compensation - Stock Compensation," which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This expense is recognized ratably over the requisite service period following the date of grant. The fair value of the Company's time-based restricted stock awards is equivalent to the closing stock price on the day of grant. The Company utilizes a third party valuation firm to measure the fair value of performance-based restricted stock awards at grant date using the Monte Carlo model.
The unrecognized compensation cost relating to restricted stock awards and performance-based restricted stock awards will be amortized to expense over the awards’ remaining vesting periods.
See Note 14 for further information related to the stock-based compensation.
Segment Information
Consistent with how the Company’s Chief Operating Decision Maker reviews and assesses the Company’s financial performance, the Company has
two
reportable segments, GLP Capital, L.P. (a wholly-owned subsidiary of GLPI through which GLPI owns substantially all of its real estate assets) ("GLP Capital") and the TRS Properties. The GLP Capital reportable segment consists of the leased real property and represents the majority of the Company’s business. The TRS Properties reportable segment consists of Hollywood Casino Perryville and Hollywood Casino Baton Rouge. See Note 15 for further information with respect to the Company’s segments.
Statements of Cash Flows
The Company has presented the consolidated statements of cash flows using the indirect method, which involves the reconciliation of net income to net cash flow from operating activities.
4.
Acquisitions
Current Year Acquisition
On May 1, 2017, the Company acquired the real property assets of Bally's Casino Tunica (subsequently re-branded as the 1
st
Jackpot Casino) and Resorts Casino Tunica (the "Tunica Properties") for
$82.9 million
. The Company acquired both Bally's Casino Tunica and Resorts Casino Tunica, as well as the Resorts Hotel and land at Bally's Casino Tunica. Land rights to three long-term ground leases related to the Tunica Properties were also acquired in the transaction. The Company records revenue for the ground lease rent paid by its tenants with an offsetting expense in land rights and ground lease expense within the consolidated statements of income as the Company has concluded that as the lessee it is the primary obligor under these ground leases. As the primary obligor under these ground leases, the Company will record annual obligations of
$2.7 million
in its financial statements as both revenue and expense. However, the Company subleases these ground leases back to its tenants, who are responsible for payment directly to the landlord.
Penn purchased the operating assets of the Tunica Properties directly from the seller, operates both properties and leases the real property assets from the Company under the Penn Master Lease. The initial annual cash rent of
$9.0 million
for the Tunica Properties will be subject to rent escalators and adjustments consistent with the other properties under the Penn Master Lease.
Prior Year Acquisitions
On September 9, 2016, the Company acquired the real property assets of the Meadows Racetrack and Casino (the "Meadows") from Cannery Casino Resorts ("CCR") for approximately
$323.3 million
. Concurrent with the Company's purchase of the Meadows' real estate assets, Pinnacle purchased the entities holding the Meadows' gaming and racing licenses and operating assets from CCR. GLPI leases the Meadows' real property assets to Pinnacle under a triple-net lease separate from the Pinnacle Master Lease with an initial term of
10 years
with no purchase option and the option to renew for
three
successive
5
-year terms and
one
4
-year term, at Pinnacle's option (the "Meadows Lease").
On April 28, 2016, the Company acquired substantially all of the real estate assets of Pinnacle, adding
14
properties to its real estate portfolio. The acquisition of Pinnacle's real estate assets was the final step in a series of transactions contemplated by the July 20, 2015 merger agreement between GLPI, Gold Merger Sub, LLC, a wholly owned subsidiary of GLPI ("Merger Sub"), and Pinnacle providing for the merger of Pinnacle with and into Merger Sub, with Merger Sub surviving the merger as a wholly owned subsidiary of GLPI (the "Pinnacle Merger"). Following the Pinnacle Merger, GLPI contributed all of the equity interests of Gold Merger Sub to GLP Capital, L.P., a Pennsylvania limited partnership and a wholly owned subsidiary of GLPI ("GLP Capital"). At
December 31, 2017
, GLPI owns all of Pinnacle’s real property assets, other than Pinnacle’s Belterra Park Gaming & Entertainment Center property and excess land at certain locations. Approval of the Pinnacle Merger by GLPI shareholders and Pinnacle stockholders was obtained at separate special meetings held on March 15, 2016.
In order to effect the acquisition of Pinnacle’s real property assets (other than the Belterra Park property and excess land at certain locations), prior to the Pinnacle Merger, Pinnacle caused certain assets relating to its operating business to be transferred to, and liabilities relating thereto to be assumed by a newly formed wholly owned subsidiary of Pinnacle ("OpCo"). Immediately following the separation of its real property assets and gaming and other operating assets, Pinnacle distributed to its stockholders all of the issued and outstanding shares of common stock of OpCo. As described above, on April 28, 2016, Pinnacle merged with and into Merger Sub, as described in more detail in the joint proxy statement/prospectus filed with a Registration Statement on Form S-4 (No. 333-206649) initially filed by GLPI with the SEC on December 23, 2015 and declared effective on February 16, 2016 (the "Joint Proxy Statement/Prospectus"), completing the Pinnacle Merger. Merger Sub, as the surviving company in the Pinnacle Merger, owns substantially all of Pinnacle’s real estate assets that were retained or transferred to Pinnacle in the separation and leases those assets back to Pinnacle pursuant to the triple-net
35
-year (including extension renewals) Pinnacle Master Lease. A wholly-owned subsidiary of Pinnacle operates the leased gaming facilities as a tenant under the Pinnacle Master Lease Agreement.
At the effective time of the Pinnacle Merger, each share of Pinnacle common stock issued and outstanding immediately prior to the effective time of the Pinnacle Merger was converted into
0.85
of a share of GLPI common stock, with cash paid in lieu of the issuance of fractional shares of GLPI common stock. Shares of GLPI common stock were also issued to satisfy GLPI's portion of the outstanding Pinnacle employee equity and cash-based incentive awards outstanding at the closing date. Approximately
56.0 million
shares of GLPI common stock were issued as consideration in the Pinnacle Merger. Additionally, GLPI repaid
$2.7 billion
of Pinnacle's debt and paid
$226.8 million
of Pinnacle's transaction expenses related to the Pinnacle Merger. The acquisition of the Pinnacle real estate assets is accounted for as an asset acquisition under ASC 805 - Business Combinations. Under asset acquisition accounting, transaction costs incurred to acquire the purchased assets are also included as part of the asset cost. Inclusive of
$28.3 million
of the Company's own transaction expenses, the purchase price of the Pinnacle real estate assets was
$4.8 billion
. The Pinnacle Merger contributed approximately
$352.5 million
and
$237.5 million
to the Company's net revenues for the years ended December 31, 2017 and 2016, respectively and resulted in approximately
$54.2 million
and
$36.2 million
of additional operating expenses for the same periods. Pinnacle is a publicly traded company that is subject to the informational filing requirements of the Securities and Exchange Act of 1934, as amended, and is required to file periodic reports on Form 10-K, Form 10-Q and Form 8-K with the SEC. Readers are directed to Pinnacle's website for further financial information on Pinnacle.
Purchase price allocations are primarily based on the fair values of assets acquired and liabilities assumed at the time of acquisition. The following tables summarize the consideration transferred in the Pinnacle Merger and the purchase price allocation to the assets acquired in the Pinnacle Merger (in thousands):
|
|
|
|
|
|
|
|
Consideration
|
|
|
Cash
|
$
|
2,955,090
|
|
|
GLPI common stock
|
1,823,991
|
|
|
Fair value of total consideration transferred
|
$
|
4,779,081
|
|
|
|
|
|
|
|
|
|
Real estate investments, net
|
$
|
1,422,547
|
|
|
Land rights, net
|
596,920
|
|
|
Investment in direct financing lease, net
|
2,759,244
|
|
|
Prepaid expenses
|
111
|
|
|
Other assets
|
259
|
|
|
Total purchase price
|
$
|
4,779,081
|
|
As detailed above, the Company paid
$3.0 billion
in cash for the acquired Pinnacle real estate assets. In addition, as part of the consideration paid for the Pinnacle real estate assets acquired in the Pinnacle Merger, the Company issued shares of its common stock to Pinnacle stockholders and to Pinnacle to satisfy the Company's portion of Pinnacle's employee equity and cash-based incentive awards. The dollar value of the issued shares was
$1.8 billion
and is considered purchase price.
The real estate investments, net represent the land purchased from Pinnacle, while the land rights, net represent the Company's rights to land subject to long-term ground leases. The Company acquired ground leases at several of the Pinnacle properties and immediately subleased the land back to Pinnacle. The investment in direct financing lease, net is the Company's investment in the buildings and building improvements purchased from Pinnacle. As detailed in Note 8, the Pinnacle Master Lease was bifurcated between an operating lease and direct financing lease. The accounting treatment for the buildings purchased under a direct financing lease required the Company to record its initial investment in the buildings as a receivable on its consolidated balance sheet, which is subsequently reduced over the lease term to its estimated residual value. The purchase price allocated to prepaid expenses and other assets represents the current and long-term portions of a director and officer liability insurance policy purchased from Pinnacle.
5.
Real Estate Investments
Real estate investments, net, represents investments in
36
rental properties and the corporate headquarters building and is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
(in thousands)
|
|
Land and improvements
|
$
|
2,057,928
|
|
|
$
|
2,057,391
|
|
|
Building and improvements
|
2,461,573
|
|
|
2,438,581
|
|
|
Total real estate investments
|
4,519,501
|
|
|
4,495,972
|
|
|
Less accumulated depreciation
|
(857,456
|
)
|
|
(756,881
|
)
|
|
Real estate investments, net
|
$
|
3,662,045
|
|
|
$
|
3,739,091
|
|
6. Land Rights
Land rights, net represent the Company's rights to land subject to long-term ground leases. The Company obtained ground lease rights through the acquisition of several of its rental properties and immediately subleased the land to its tenants. These land rights represent the below market value of the related ground leases. The Company assessed the acquired ground leases to determine if the lease terms were favorable or unfavorable, given market conditions at the acquisition date. Because the market rents to be received under the Company's triple-net tenant leases were greater than the rents to be paid under the acquired ground leases, the Company concluded that the ground leases were below market and were therefore required to be recorded as a definite lived asset (land rights) on its books.
The land rights are amortized over the individual lease term of each ground lease, including all renewal options, which ranged from
25 years
to
92 years
at their respective acquisition dates. Land rights net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
(in thousands)
|
|
Land rights
|
$
|
656,666
|
|
|
$
|
596,921
|
|
|
Less accumulated amortization
|
(16,518
|
)
|
|
(6,163
|
)
|
|
Land rights, net
|
$
|
640,148
|
|
|
$
|
590,758
|
|
Amortization expense related to the ground leases is recorded within land rights and ground lease expense in the consolidated statements of income and totaled
$10.4 million
and
$6.2 million
for the years ended
December 31, 2017
and
2016
, respectively.
As of
December 31, 2017
, estimated future amortization expense related to the Company’s ground leases by fiscal year is as follows (in thousands):
|
|
|
|
|
|
|
|
Year ending December 31,
|
|
|
2018
|
$
|
10,910
|
|
|
2019
|
10,910
|
|
|
2020
|
10,910
|
|
|
2021
|
10,910
|
|
|
2022
|
10,910
|
|
|
Thereafter
|
585,598
|
|
|
Total
|
$
|
640,148
|
|
Details of the significant ground leases are as follows. The Company leases land at the Belterra Casino Resort under
two
ground leases, each with an initial term of
5 years
and
nine
automatic renewals of
5 years
each. The renewal options extend the leases through 2049 and are not terminable by the Company. The lease includes a base portion which is adjusted at each renewal based upon the CPI and a variable portion which is adjusted annually based upon
1.5%
of gross gaming wins in excess of
$100 million
.
The Company leases land at the Ameristar East Chicago property under a ground lease with an initial term of
30 years
and
two
optional renewals of
30 years
each. The lease extends through 2086 with all renewals. Rent under the lease is adjusted every
3 years
based upon the CPI and does not include a variable portion.
The Company leases land at the River City Hotel and Casino under a ground lease with a term of
99 years
that extends through 2108. The lease includes a base portion which is fixed and a variable portion which is adjusted annually based upon
2.5%
of the annual gross receipts of the property less fixed rent payments made in the same year.
The Company leases land at the L'Auberge Lakes Charles property under a ground lease with an initial term of
10 years
and
six
optional renewals of
10 years
each. The lease extends through 2075 with all renewals. Rent under the lease is adjusted annually based upon the CPI and does not include a variable portion.
The Company leases land at the Resorts Casino Tunica property under a ground lease with an initial term of
3 years
and
nine
optional renewals of
5 years
each. The lease extends through 2042 with all renewals. The lease has an annual fixed rent provision and does not include a variable portion.
The Company leases land at the 1
st
Jackpot Casino (formerly known as Bally's Casino Tunica) under
two
ground leases. The first ground lease has an initial term of
6 years
and
nine
optional renewals of
6 years
each. The lease extends through 2054 with all renewals. Rent under this lease is adjusted annually based upon the CPI and does not include a variable portion. The second lease has an initial term of
10 years
with
ten
optional renewals of
5 years
each. The lease extends through 2055 with all renewals. The lease has an annual fixed rent provision and a variable portion which is adjusted annually based upon net gaming revenues of up to
4%
, dependent on the property's operating results.
7.
Property and Equipment Used in Operations
Property and equipment used in operations, net, consists of the following and primarily represents the assets utilized in the TRS Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
(in thousands)
|
|
Land and improvements
|
$
|
30,276
|
|
|
$
|
30,965
|
|
|
Building and improvements
|
116,286
|
|
|
117,350
|
|
|
Furniture, fixtures, and equipment
|
114,972
|
|
|
114,965
|
|
|
Construction in progress
|
8
|
|
|
330
|
|
|
Total property and equipment
|
261,542
|
|
|
263,610
|
|
|
Less accumulated depreciation
|
(153,249
|
)
|
|
(144,183
|
)
|
|
Property and equipment, net
|
$
|
108,293
|
|
|
$
|
119,427
|
|
8. Receivables
Investment in Direct Financing Lease, Net
Under ASC 840 - Leases ("ASC 840"), the Pinnacle Master Lease is bifurcated between an operating lease and a direct financing lease. The fair value assigned to the land (inclusive of the land rights) qualifies for operating lease treatment, while the fair value assigned to the buildings is classified as a direct financing lease. Under ASC 840, the accounting treatment for direct financing leases requires the Company to record an investment in direct financing leases on its books at lease inception and subsequently recognize interest income and a reduction in the investment for the building portion of rent. This initial net investment is determined by aggregating the total future minimum lease payments attributable to the direct financing lease and the estimated residual value of the property, less unearned income. The interest income recorded under the direct financing lease is included in income from direct financing lease in the Company's consolidated statements of income and is recognized over the
35
-year lease term using the effective interest rate method which produces a constant periodic rate of return on the net investment in the leased property. Furthermore, as the net investment in direct financing lease includes only future minimum lease payments, rent that is not fixed and determinable at the lease inception is excluded from the determination of the rent attributable to the leased assets and will therefore be recorded as income from direct financing lease in the period earned. The unguaranteed residual value is the Company's estimate of what it could realize upon the sale of the property at the end of the lease term.
The net investment in the direct financing lease is evaluated for impairment as necessary, if indicators of impairment are present, to determine if there has been an-other-than-temporary decline in the residual value of the property or a change in the lessee's credit worthiness. At
December 31, 2017
, there were no indicators of a decline in the estimated residual value of the property and collectability of the remaining receivable balance is reasonably assured.
The Company's investment in direct financing lease, net, consists of the following and represents the building assets acquired from Pinnacle:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
(in thousands)
|
|
Minimum lease payments receivable
|
$
|
3,263,387
|
|
|
$
|
3,405,131
|
|
|
Unguaranteed residual value
|
689,811
|
|
|
689,811
|
|
|
Gross investment in direct financing lease
|
3,953,198
|
|
|
4,094,942
|
|
|
Less: unearned income
|
(1,315,559
|
)
|
|
(1,384,231
|
)
|
|
Investment in direct financing lease, net
|
$
|
2,637,639
|
|
|
$
|
2,710,711
|
|
Loan Receivable
In January 2014, the Company completed the asset acquisition of the real property associated with the Casino Queen in East St. Louis, Illinois for
$140.7 million
. GLPI leases the property back to Casino Queen on a triple-net basis on terms similar to those in the Master Leases. The lease has an initial term of
15 years
and the tenant has an option to renew it at the same terms and conditions for
four
successive
five
-year periods (the "Casino Queen Lease").
Simultaneously with the Casino Queen acquisition, GLPI also provided Casino Queen with a
$43.0 million
,
five
-year term loan at
7%
interest, pre-payable at any time, which, together with the sale proceeds, completely refinanced and retired all of Casino Queen’s outstanding long-term debt obligations. On March 13, 2017, the outstanding principal and interest on this loan was repaid in full and GLPI simultaneously provided a new unsecured
$13.0 million
,
5.5
year term loan to CQ Holding Company, Inc., an affiliate of Casino Queen, to partially finance their acquisition of Lady Luck Casino in Marquette, Iowa. The cash proceeds were net settled. The new loan bears an interest rate of
15%
and is pre-payable at any time. As of
December 31, 2017
, the balance of the new loan is
$13.0 million
. The collectability of the loan balance is reasonably assured, and as of
December 31, 2017
, there is no indication that the obligor will not remit all mandatory principal and interest payments in full and on time. The loan balance is recorded at carrying value which approximates fair value. Interest income related to the loan is recorded in interest income within the Company's consolidated statements of income in the period earned.
9.
Long-term Debt
Long-term debt, net of current maturities and unamortized debt issuance costs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
(in thousands)
|
|
Unsecured term loan A
|
$
|
230,000
|
|
|
$
|
300,000
|
|
|
Unsecured term loan A-1
|
825,000
|
|
|
825,000
|
|
|
Unsecured $700 million revolver
|
—
|
|
|
165,000
|
|
|
$550 million 4.375% senior unsecured notes due November 2018
|
550,000
|
|
|
550,000
|
|
|
$1,000 million 4.875% senior unsecured notes due November 2020
|
1,000,000
|
|
|
1,000,000
|
|
|
$400 million 4.375% senior unsecured notes due April 2021
|
400,000
|
|
|
400,000
|
|
|
$500 million 5.375% senior unsecured notes due November 2023
|
500,000
|
|
|
500,000
|
|
|
$975 million 5.375% senior unsecured notes due April 2026
|
975,000
|
|
|
975,000
|
|
|
Capital lease
|
1,230
|
|
|
1,341
|
|
|
Total long-term debt
|
4,481,230
|
|
|
4,716,341
|
|
|
Less: unamortized debt issuance costs
|
(38,350
|
)
|
|
(51,376
|
)
|
|
Total long-term debt, net of unamortized debt issuance costs
|
$
|
4,442,880
|
|
|
$
|
4,664,965
|
|
The following is a schedule of future minimum repayments of long-term debt as of
December 31, 2017
(in thousands):
|
|
|
|
|
|
|
|
2018
|
$
|
780,117
|
|
|
2019
|
123
|
|
|
2020
|
1,000,129
|
|
|
2021
|
1,225,136
|
|
|
2022
|
142
|
|
|
Over 5 years
|
1,475,583
|
|
|
Total minimum payments
|
$
|
4,481,230
|
|
Senior Unsecured Credit Facility
The Company has a
$1,825 million
dollar senior unsecured credit facility (the "Credit Facility"), consisting of a
$700 million
revolving credit facility, a
$300 million
Term Loan A facility, and an
$825 million
Term Loan A-1 facility. The revolving credit facility and the Term Loan A facility mature on October 28, 2018 and the Term Loan A-1 facility matures on April 28, 2021.
The interest rates payable on the loans are, at the Company's option, equal to either a LIBOR rate or a base rate plus an applicable margin, which ranges from
1.0%
to
2.0%
per annum for LIBOR loans and
0.0%
to
1.0%
per annum for base rate loans, in each case, depending on the credit ratings assigned to the Credit Facility. At
December 31, 2017
, the applicable margin was
1.50%
for LIBOR loans and
0.50%
for base rate loans. In addition, the Company is required to pay a commitment fee on the unused portion of the commitments under the revolving facility at a rate that ranges from
0.15%
to
0.35%
per annum, depending on the credit ratings assigned to the Credit Facility. At
December 31, 2017
, the commitment fee rate was
0.25%
. The Company is not required to repay any loans under the Credit Facility prior to maturity on October 28, 2018 and may prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, subject to reimbursement of any LIBOR breakage costs of the lenders. The Company's wholly owned subsidiary, GLP Capital is the primary obligor under the Credit Facility, which is guaranteed by GLPI.
At
December 31, 2017
, the Credit Facility had a gross outstanding balance of
$1,055 million
. Additionally, at
December 31, 2017
, the Company was contingently obligated under letters of credit issued pursuant to the senior unsecured credit facility with face amounts aggregating approximately
$0.4 million
, resulting in
$699.6 million
of available borrowing capacity under the revolving credit facility as of
December 31, 2017
.
The Credit Facility contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of GLPI and its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in
acquisitions, mergers or consolidations or pay certain dividends and other restricted payments. The Credit Facility contains the following financial covenants, which are measured quarterly on a trailing four-quarter basis: a maximum total debt to total asset value ratio, a maximum senior secured debt to total asset value ratio, a maximum ratio of certain recourse debt to unencumbered asset value and a minimum fixed charge coverage ratio. In addition, GLPI is required to maintain a minimum tangible net worth and its status as a REIT on and after the effective date of its election to be treated as a REIT, which the Company elected on its 2014 U.S. federal income tax return. GLPI is permitted to pay dividends to its shareholders as may be required in order to maintain REIT status, subject to the absence of payment or bankruptcy defaults. GLPI is also permitted to make other dividends and distributions subject to pro forma compliance with the financial covenants and the absence of defaults. The Credit Facility also contains certain customary affirmative covenants and events of default, including the occurrence of a change of control and termination of the Penn Master Lease (subject to certain replacement rights). The occurrence and continuance of an event of default under the Credit Facility will enable the lenders under the Credit Facility to accelerate the loans and terminate the commitments thereunder. At
December 31, 2017
, the Company was in compliance with all required financial covenants under the Credit Facility.
Senior Unsecured Notes
At
December 31, 2017
, the Company had
$550 million
outstanding of
4.375%
senior unsecured notes maturing on November 1, 2018 (the "2018 Notes"),
$1,000 million
outstanding of
4.875%
senior unsecured notes maturing on November 1, 2020 (the "2020 Notes"),
$400 million
of
4.375%
senior unsecured notes maturing on April 15, 2021 (the "2021 Notes"),
$500 million
outstanding of
5.375%
senior unsecured notes maturing on November 1, 2023 (the "2023 Notes") and
$975 million
of
5.375%
senior unsecured notes maturing on April 15, 2026 (the "2026 Notes"and collectively with the 2018 Notes, the 2020 Notes, the 2021 Notes and the 2023 Notes, the "Notes"). Interest on each of the 2018 Notes, 2020 Notes and 2023 Notes, is payable semi-annually on May 1 and November 1 of each year. Interest on the 2021 Notes and 2026 Notes is payable semi-annually on April 15 and October 15 of each year and commenced on October 15, 2016.
The Company may redeem the Notes of any series at any time, and from time to time, at a redemption price of
100%
of the principal amount of the Notes redeemed, plus a "make-whole" redemption premium described in the indenture governing the Notes, together with accrued and unpaid interest to, but not including, the redemption date, except that if Notes of a series are redeemed
90
or fewer days prior to their maturity, the redemption price will be
100%
of the principal amount of the Notes redeemed, together with accrued and unpaid interest to, but not including, the redemption date. If GLPI experiences a change of control accompanied by a decline in the credit rating of the Notes of a particular series, the Company will be required to give holders of the Notes of such series the opportunity to sell their Notes of such series at a price equal to
101%
of the principal amount of the Notes of such series, together with accrued and unpaid interest to, but not including, the repurchase date. The Notes also are subject to mandatory redemption requirements imposed by gaming laws and regulations.
The Notes were issued by GLP Capital, L.P. and GLP Financing II, Inc. (the "Issuers"),
two
wholly-owned subsidiaries of GLPI, and are guaranteed on a senior unsecured basis by GLPI. The guarantees of GLPI are full and unconditional. The Notes are the Issuers' senior unsecured obligations and rank
pari passu
in right of payment with all of the Issuers' senior indebtedness, including the Credit Facility, and senior in right of payment to all of the Issuers' subordinated indebtedness, without giving effect to collateral arrangements. See Note 19 for additional financial information on the parent guarantor and subsidiary issuers of the Notes.
The Notes contain covenants limiting the Company’s ability to: incur additional debt and use its assets to secure debt; merge or consolidate with another company; and make certain amendments to the Penn Master Lease. The Notes also require the Company to maintain a specified ratio of unencumbered assets to unsecured debt. These covenants are subject to a number of important and significant limitations, qualifications and exceptions.
At
December 31, 2017
, the Company was in compliance with all required financial covenants under the Notes.
Capital Lease
The Company assumed the capital lease obligation related to certain assets at its Aurora, Illinois property. GLPI recorded the asset and liability associated with the capital lease on its balance sheet. The original term of the capital lease was
30 years
and it will terminate in 2026.
10.
Commitments and Contingencies
Separation and Distribution Agreements
Pursuant to a Separation and Distribution Agreement between Penn and GLPI, any liability arising from or relating to legal proceedings involving the businesses and operations of Penn’s real property holdings prior to the Spin-Off (other than any liability arising from or relating to legal proceedings where the dispute arises from the operation or ownership of the TRS Properties) will be retained by Penn, and Penn will indemnify GLPI (and its subsidiaries, directors, officers, employees and agents and certain other related parties) against any losses it may incur arising from or relating to such legal proceedings. Similarly, pursuant to a Separation and Distribution Agreement between Pinnacle's operating company and GLPI (as successor to Pinnacle Entertainment), any liability arising from or relating to legal proceedings involving the business and operations of Pinnacle's real property holdings prior to the Pinnacle Merger will be retained by Pinnacle, and Pinnacle will indemnify GLPI (and its subsidiaries, directors, officers, employees and agents and certain other related parties) against any losses it may incur arising from or relating to such legal proceedings. There can be no assurance that Penn or Pinnacle will be able to fully satisfy their indemnification obligations. Moreover, even if we ultimately succeed in recovering from Penn or Pinnacle any amounts for which we are liable, we may be temporarily required to bear those losses.
Litigation
The Company is subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions, and other matters arising in the normal course of business. The Company does not believe that the final outcome of these matters will have a material adverse effect on the Company’s consolidated financial position or results of operations. In addition, the Company maintains what it believes is adequate insurance coverage to further mitigate the risks of such proceedings. However, such proceedings can be costly, time consuming, and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings may not materially impact the Company’s financial condition or results of operations. Further, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters.
Operating Lease Commitments
As part of the Spin-Off, Penn assigned to GLPI various leases on the land and buildings acquired in connection with the Spin-Off. The leases consist of annual base lease payments and, in some instances, a percentage rent based on a percent of adjusted gaming wins, as described in the respective leases. The following is a description of some of the more significant lease contracts that Penn assigned to GLPI:
The Company has an operating lease for the land utilized in connection with the operations of the Boomtown Biloxi casino in Biloxi, Mississippi. The lease commenced March 3, 1994 and is for a term of
99 years
. The annual rental payments are increased every
5 years
by
fifteen
percent. The next reset period is in March 2019.
The Company has an operating lease for the land utilized in connection with the operations of Hollywood Casino Tunica in Tunica, Mississippi. The lease commenced on October 11, 1993 with a
five
year initial term and
nine
five
year renewals at the tenant's option. The lease agreement has an annual fixed rent provision, as well as an annual revenue-sharing provision, which is equal to the result obtained by subtracting the fixed rent provision from
4%
of gross revenues.
The Company has an operating lease with the City of Bangor for the land utilized in connection with the operations of Hollywood Casino Bangor, which opened on July 1, 2008. Under the lease agreement, there is a fixed rent provision, for which GLPI is responsible, which totals
$0.1 million
per year. The term of the lease, which commenced with the opening of Hollywood Casino Bangor, is for an initial term of
fifteen years
, with
three
ten
-year renewal options.
During May 2017, the Company acquired the real estate assets of the Tunica Properties, including the rights to land subject to long-term ground leases. The Company assumed
three
ground leases related to the acquired Tunica Properties and immediately subleased the land to Penn, who is responsible for payment directly to the landlord. The Company records revenue for the ground lease rent paid by its tenants with an offsetting expense in land rights and ground lease expense within the consolidated statements of income as the Company has concluded that as the lessee it is the primary obligor under these ground leases. The portion of the ground lease rent that is fixed and determinable is included in the schedule below as a future commitment, while the portion of the ground lease rent that is variable is excluded from future commitments as the amounts are not fixed and determinable at
December 31, 2017
and therefore considered contingent rent. For those ground leases with optional renewal terms extending beyond the
35
-year lease term of the Penn Master Lease, the Company has included only the renewals that align most closely to the 2048 termination date of the Penn Master Lease in the schedule below, as it cannot be reasonably assured it will renew ground leases for land subleased to Penn beyond the term of the Penn Master Lease. The following is a description of the lease contracts assumed from the acquisition of the Tunica Properties:
The Company leases land at the Resorts Casino Tunica property under a ground lease with an initial term of
3 years
and
nine
optional renewals of
5 years
each. The lease extends through 2042 with all renewals. The lease has an annual fixed rent provision and does not include a variable portion.
The Company leases land at the 1
st
Jackpot Casino (formerly known as Bally's Casino Tunica) under
two
ground leases. The first ground lease has an initial term of
6 years
and
nine
optional renewals of
6 years
each. The lease extends through 2054 with all renewals. Rent under this lease is adjusted annually based upon the CPI and does not include a variable portion. The second lease has an initial term of
10 years
with
ten
optional renewals of
5 years
each. The lease extends through 2055 with all renewals. The lease has an annual fixed rent provision and a variable portion which is adjusted annually based upon net gaming revenues of up to
4%
, dependent on the property's operating results.
During April 2016, the Company acquired the real estate assets of Pinnacle, including the rights to land subject to long-term ground leases. The Company assumed ground leases at several of the acquired Pinnacle properties and immediately subleased the land back to Pinnacle, who is responsible for payment directly to the landlord. For those ground leases with optional renewal terms extending beyond the
35
-year lease term of the Pinnacle Master Lease, the Company has included only the renewals that align most closely to the 2051 termination date of the Pinnacle Master Lease in the schedule below, as it cannot be reasonably assured it will renew ground leases for land subleased to Pinnacle beyond the term of the Pinnacle Master Lease. The following is a description of the more significant lease contracts assumed from Pinnacle:
The Company leases land at the Belterra Casino Resort under
two
ground leases, each with an initial term of
5 years
and
nine
automatic renewals of
5 years
each. The renewal options extend the leases through 2049 and are not terminable by the Company. The lease includes a base portion which is adjusted at each renewal based upon the CPI and a variable portion which is adjusted annually based upon
1.5%
of gross gaming wins in excess of
$100 million
.
The Company leases land at the Ameristar East Chicago property under a ground lease with an initial term of
30 years
and
two
optional renewals of
30 years
each. The lease extends through 2086 with all renewals. Rent under the lease is adjusted every
3 years
based upon the CPI and does not include a variable portion.
The Company leases land at the River City Hotel and Casino under a ground lease with a term of
99 years
that extends through 2108. The lease includes a base portion which is fixed and a variable portion which is adjusted annually based upon
2.5%
of the annual gross receipts of the property less fixed rent payments made in the same year.
The Company leases land at the L'Auberge Lakes Charles property under a ground lease with an initial term of
10 years
and
six
optional renewals of
10 years
each. The lease extends through 2075 with all renewals. Rent under the lease is adjusted annually based upon the CPI and does not include a variable portion.
In addition, the Company is liable under numerous operating leases for equipment and other miscellaneous assets, which expire at various dates through 2023.
Total rental expense under these agreements was
$15.8 million
,
$11.0 million
and
$5.4 million
for the years ended
December 31, 2017
,
2016
and
2015
. This includes rent expense under the leases assigned to the Company at Spin-Off, leases for equipment and miscellaneous assets and the fixed and variable rent under the ground leases discussed above.
The future minimum lease commitments, as of inception of the lease, relating to noncancelable operating leases at
December 31, 2017
are as follows (in thousands):
|
|
|
|
|
|
|
|
Year ending December 31,
(1)
|
|
|
2018
|
$
|
10,735
|
|
|
2019
|
10,743
|
|
|
2020
|
10,705
|
|
|
2021
|
10,691
|
|
|
2022
|
10,679
|
|
|
Thereafter
|
546,433
|
|
|
Total
|
$
|
599,986
|
|
(1)
The above table excludes contingent rent in accordance with ASC 840.
Employee Benefit Plans
The Company maintains a defined contribution plan under the provisions of Section 401(k) of the Internal Revenue Code of 1986, as amended, which covers all eligible employees. The plan enables participating employees to defer a portion of their salary and/or their annual bonus in a retirement fund to be administered by the Company. The Company makes a discretionary match contribution of
50%
of employees' elective salary deferrals, up to a maximum of
6%
of eligible employee compensation. The matching contributions for the defined contribution plan were
$0.3 million
for each of the years ended
December 31, 2017
,
2016
and
2015
.
The Company maintains a non-qualified deferred compensation plan that covers most management and other highly-compensated employees. The plan allows the participants to defer, on a pre-tax basis, a portion of their base annual salary and/or their annual bonus, and earn tax-deferred earnings on these deferrals. The plan also provides for matching Company contributions that vest over a
five
-year period. The Company has established a Trust, and transfers to the Trust, on a periodic basis, an amount necessary to provide for its respective future liabilities with respect to participant deferral and Company contribution amounts. The Company's matching contributions for the non-qualified deferred compensation plan for the years ended
December 31, 2017
,
2016
and
2015
were
$0.6 million
,
$0.7 million
and
$0.5 million
, respectively. The Company's deferred compensation liability, which was included in other liabilities within the consolidated balance sheet, was
$22.7 million
and
$17.7 million
at
December 31, 2017
and
2016
, respectively and primarily relates to balances contributed as part of the Spin-Off as related to the Company's executive officers that were previously employed by Penn. Assets held in the Trust were
$22.6 million
and
$17.6 million
at
December 31, 2017
and
2016
, respectively, and are included in other assets within the consolidated balance sheet.
Labor Agreements
Some of Hollywood Casino Perryville's employees are currently represented by labor unions. The Seafarers Entertainment and Allied Trade Union represents
161
of Hollywood Casino Perryville's employees under an agreement that expires in February 2020. Additionally, Local No. 27 United Food and Commercial Workers and United Industrial Service Transportation Professional and Government Workers of North America represent certain employees under collective bargaining agreements that expire in 2020, neither of which represents more than
50
of Hollywood Casino Perryville's employees. If the Company fails to renew or modify existing agreements on satisfactory terms, this failure could have a material adverse effect on Hollywood Casino Perryville's business, financial condition and results of operations. There can be no assurance that Hollywood Casino Perryville will be able to maintain these agreements.
11. Revenue Recognition
As of
December 31, 2017
,
20
of the Company’s real estate investment properties were leased to a subsidiary of Penn under the Penn Master Lease and
14
of the Company's real estate investment properties were leased to a subsidiary of Pinnacle under the Pinnacle Master Lease. The obligations under the Penn and Pinnacle Master Leases are guaranteed by Penn and Pinnacle, respectively and by most of Penn and Pinnacle subsidiaries that occupy and operate the facilities leased under the Master Leases. A default by Penn or its subsidiaries with regard to any facility will cause a default with regard to the Penn Master Lease and a default by Pinnacle or its subsidiaries with regard to any facility will cause a default with regard to the Pinnacle Master Lease. Additionally, the Meadows real estate assets are leased to Pinnacle under a single property triple-net lease separate from the Pinnacle Master Lease. GLPI also leases the Casino Queen property back to its operator on a triple-net basis on terms similar to those in the Master Leases.
The rent structure under the Penn Master Lease includes a fixed component, a portion of which is subject to an annual
2%
escalator if certain rent coverage ratio thresholds are met, and a component that is based on the performance of the facilities, which is adjusted, subject to certain floors (i) every
five years
to an amount equal to
4%
of the average net revenues of all facilities under the Penn Master Lease (other than Hollywood Casino Columbus and Hollywood Casino Toledo) during the preceding
five years
, and (ii) monthly by an amount equal to
20%
of the net revenues of Hollywood Casino Columbus and Hollywood Casino Toledo during the preceding month.
Similar to the Penn Master Lease, the Pinnacle Master Lease also includes a fixed component, a portion of which is subject to an annual
2%
escalator if certain rent coverage ratio thresholds are met and a component that is based on the performance of the facilities, which is adjusted, subject to certain floors every
two years
to an amount equal to
4%
of the average annual net revenues of all facilities under the Pinnacle Master Lease during the preceding
two years
.
The Meadows Lease contains a fixed component, subject to annual escalators, and a component that is based on the performance of the facility, which is reset every
two years
to a fixed amount determined by multiplying (i)
4%
by (ii) the average annual net revenues of the facility for the trailing
two
year period. The Meadows Lease contains an annual escalator
provision for up to
5%
of the base rent, if certain rent coverage ratio thresholds are met, which remains at
5%
until the earlier of
ten years
or the year in which total rent is
$31.0 million
, at which point the escalator will be reduced to
2%
annually thereafter.
The rent structure under the Casino Queen Lease also includes a fixed component, a portion of which is subject to an annual
2%
escalator if certain rent coverage ratio thresholds are met, and a component that is based on the performance of the facility, which is reset every
five years
to a fixed amount equal to the greater of (i) the annual amount of non-fixed rent applicable for the lease year immediately preceding such rent reset year and (ii) an amount equal to
4%
of the average annual net revenues of the facility for the trailing
five
year period.
In addition to rent, as triple-net lessees, all of the Company's tenants are required to pay the following executory costs: (1) all facility maintenance, (2) all insurance required in connection with the leased properties and the business conducted on the leased properties, including coverage of the landlord's interests, (3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor) and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.
The Company determined, based on facts and circumstances prevailing at the time of each lease's inception, that neither Penn, Casino Queen or Pinnacle could continue as a going concern without the properties that are leased to it under the respective master lease agreements (in the instance of Penn and Pinnacle) and single property lease (in the instance of Casino Queen) with GLPI. At lease inception, all of Casino Queen's revenues and substantially all of Penn and Pinnacle's revenues were generated from operations in connection with the leased properties. There are also various legal restrictions in the jurisdictions in which Penn, Casino Queen and Pinnacle operate that limit the availability and location of gaming facilities, which makes relocation or replacement of the leased gaming facilities restrictive and potentially impracticable or unavailable. Moreover, under the terms of the master leases, Penn and Pinnacle must make renewal elections with respect to all of the leased property together; the tenant is not entitled to selectively renew certain of the leased property while not renewing other property. Accordingly, the Company concluded that failure by Penn, Casino Queen or Pinnacle to renew the lease would impose a significant penalty on such tenant such that renewal of all lease renewal options appears at lease inception to be reasonably assured. Therefore, the Company concluded that the term of the leases with both Penn and Casino Queen is
35 years
, equal to the initial
15
-year term plus all
four
of the
5
-year renewal options. The lease term of the Pinnacle Master Lease is also
35 years
, equal to the initial
10
-year term plus all
five
of the
5
-year renewal options.
As described in Note 4, subsequent to purchasing the majority of Pinnacle's real estate assets and leasing them back to Pinnacle, GLPI entered into a separate triple-net lease with Pinnacle to lease the Meadows real estate assets to Pinnacle. Because this lease involves only a single property within Pinnacle's portfolio, GLPI concluded it was not reasonably assured at lease inception that Pinnacle would elect to exercise all lease renewal options. The Company concluded that failure by Pinnacle to renew the Meadows Lease would not impose a significant penalty on such tenant as this property's operations represent only an incremental portion of Pinnacle's total business at lease inception. Therefore, the Company concluded that the lease term of the Meadows Lease is
10 years
, equal to the initial
10
year term only.
As of
December 31, 2017
, the future minimum rental income from the Company's properties under non-cancelable operating leases, including any reasonably assured rental periods, was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ending December 31,
|
Future Rental Payments Receivable
|
|
Straight-Line Rent Adjustments
|
|
Future Income to be Recognized Related to Operating Leases
|
|
2018
|
$
|
683,054
|
|
|
$
|
(51,866
|
)
|
|
$
|
631,188
|
|
|
2019
|
632,578
|
|
|
11,215
|
|
|
643,793
|
|
|
2020
|
632,578
|
|
|
11,215
|
|
|
643,793
|
|
|
2021
|
632,578
|
|
|
11,215
|
|
|
643,793
|
|
|
2022
|
632,578
|
|
|
11,215
|
|
|
643,793
|
|
|
Thereafter
|
16,641,083
|
|
|
239,029
|
|
|
16,880,112
|
|
|
Total
|
$
|
19,854,449
|
|
|
$
|
232,023
|
|
|
$
|
20,086,472
|
|
For the years ended
December 31, 2017
,
2016
and
2015
, GLPI recognized
$46.8 million
,
$43.8 million
and
$43.5 million
, respectively, in contingent rental income from Hollywood Casino Columbus and Hollywood Casino Toledo related to clause (ii) in the paragraph above. The expected future minimum rental income from these properties, as well as the portion of the expected future rent based on the performance of the Company's leased facilities that will reset after a certain passage of
time as detailed above are excluded from the table above as they are considered contingent rental income under ASC 840 "Leases." Furthermore, during the years ended
December 31, 2017
,
2016
and
2015
the Company recognized
$17.5 million
,
$9.1 million
and
$4.0 million
, respectively of rental income related to the annual rent escalators described above. Any anticipated future rent escalations are also excluded from the table above.
As of
December 31, 2017
, the expected future cash receipts to be recognized as income, as well as the cash receipts to be applied against the investment in direct financing lease from the Company's properties under the non-cancelable direct financing lease, inclusive of the fixed portion of ground lease rent and including any reasonably assured rental periods, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year ending December 31,
|
Cash Receipts to be Recorded as Income
|
|
Cash Receipts to be Applied Against the Investment in Direct Financing Lease
|
|
2018
|
$
|
72,283
|
|
|
$
|
45,244
|
|
|
2019
|
70,497
|
|
|
32,881
|
|
|
2020
|
68,831
|
|
|
34,546
|
|
|
2021
|
67,166
|
|
|
36,212
|
|
|
2022
|
65,500
|
|
|
37,878
|
|
|
Thereafter
|
1,163,686
|
|
|
1,761,067
|
|
|
Total
|
$
|
1,507,963
|
|
|
$
|
1,947,828
|
|
The portion of the ground lease rent that is fixed and determinable is included in the schedule above as future income, while the portion of the ground lease rent that is variable, as well as, the property taxes the Company's records as revenue are excluded from future minimum revenue as the amounts are not fixed and determinable at
December 31, 2017
. Furthermore, any contingent rent the Company expects to receive from tenants is excluded from the above schedules as it is not fixed and determinable at
December 31, 2017
.
Gaming revenue generated by the TRS Properties mainly consists of video lottery gaming revenue, and to a lesser extent, table game and poker revenue. Video lottery gaming revenue is the aggregate net difference between gaming wins and losses with liabilities recognized for funds deposited by customers before gaming play occurs, for "ticket-in, ticket-out" coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of coins played, are charged to revenue as the amount of the jackpots increases. Table game gaming revenue is the aggregate of table drop adjusted for the change in aggregate table chip inventory. Table drop is the total dollar amount of the currency, coins, chips, tokens, outstanding counter checks (markers), and front money that are removed from the live gaming tables. Additionally, food and beverage revenue is recognized as services are performed.
Gaming revenue is recognized net of certain sales incentives in accordance with ASC 605-50, "Revenue Recognition— Customer Payments and Incentives." The Company records certain sales incentives and points earned in point-loyalty programs as a reduction of revenue. See Note 2 for a summary of anticipated changes to the recognition of revenue at the TRS Properties upon the adoption of ASU 2014-09 on January 1, 2018.
The following table discloses the components of gaming, food, beverage and other revenue within the consolidated statements of income for the
years ended
December 31, 2017
,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
(in thousands)
|
|
Video lottery
|
$
|
118,998
|
|
|
$
|
119,390
|
|
|
$
|
122,292
|
|
|
Table game
|
17,218
|
|
|
18,069
|
|
|
18,799
|
|
|
Poker
|
1,182
|
|
|
1,135
|
|
|
1,219
|
|
|
Food, beverage and other
|
9,468
|
|
|
11,067
|
|
|
11,213
|
|
|
Total gaming, food, beverage and other revenue, net of cash incentives
|
$
|
146,866
|
|
|
$
|
149,661
|
|
|
$
|
153,523
|
|
The retail value of food and beverage and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances.
12. Income Taxes
The Company elected on its U.S. federal income tax return for its taxable year that began on January 1, 2014 to be treated as a REIT. The benefits of the intended REIT conversion on the Company's tax provision and effective income tax rate are reflected in the tables below. Deferred tax assets and liabilities are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years. As a result of the Tax Cuts and Job Act, the corporate tax rate was permanently lowered from the existing maximum rate of
35%
to
21%
, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate tax rate, U.S. generally accepted accounting principles require companies to re-value their deferred tax assets and liabilities as of the date of the enactment, with resulting tax effects accounted for in the reported period of enactment. As such, the Company revalued its net deferred tax asset at December 31, 2017. This revaluation resulted in a reduction in the value of its net deferred tax asset of approximately
$1.8 million
, which was recorded as additional income tax expense in the Company’s consolidated statement of income for the year ended December 31, 2017.
The components of the Company's deferred tax assets and liabilities, related to its TRS, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2017
|
|
2016
|
|
|
(in thousands)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Accrued expenses
|
$
|
1,597
|
|
|
$
|
1,655
|
|
|
Property and equipment
|
4,823
|
|
|
5,818
|
|
|
Net deferred tax assets
|
6,420
|
|
|
7,473
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Property and equipment
|
(902
|
)
|
|
(2,192
|
)
|
|
Intangibles
|
(1,284
|
)
|
|
(1,624
|
)
|
|
Net deferred tax liabilities
|
(2,186
|
)
|
|
(3,816
|
)
|
|
Net:
|
$
|
4,234
|
|
|
$
|
3,657
|
|
The provision for income taxes charged to operations for years ended
December 31, 2017
,
2016
and
2015
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2017
|
|
2016
|
|
2015
|
|
|
(in thousands)
|
|
Current tax expense
|
|
|
|
|
|
|
|
|
|
Federal
|
$
|
7,039
|
|
|
$
|
6,004
|
|
|
$
|
4,945
|
|
|
State
|
3,309
|
|
|
3,076
|
|
|
3,310
|
|
|
Total current
|
10,348
|
|
|
9,080
|
|
|
8,255
|
|
|
Deferred tax (benefit) expense
|
|
|
|
|
|
|
|
|
|
Federal
|
(166
|
)
|
|
(1,324
|
)
|
|
(533
|
)
|
|
State
|
(395
|
)
|
|
(211
|
)
|
|
(280
|
)
|
|
Total deferred
|
(561
|
)
|
|
(1,535
|
)
|
|
(813
|
)
|
|
Total provision
|
$
|
9,787
|
|
|
$
|
7,545
|
|
|
$
|
7,442
|
|
The following tables reconcile the statutory federal income tax rate to the actual effective income tax rate for the years ended
December 31, 2017
,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2017
|
|
2016
|
|
2015
|
|
Percent of pretax income
|
|
|
|
|
|
|
|
|
|
U.S. federal statutory income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
State and local income taxes
|
0.6
|
%
|
|
0.7
|
%
|
|
1.3
|
%
|
|
Federal tax rate change
|
0.5
|
%
|
|
—
|
%
|
|
—
|
%
|
|
REIT conversion benefit
|
(33.6
|
)%
|
|
(33.2
|
)%
|
|
(31.3
|
)%
|
|
Other miscellaneous items
|
—
|
%
|
|
—
|
%
|
|
0.5
|
%
|
|
|
2.5
|
%
|
|
2.5
|
%
|
|
5.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2017
|
|
2016
|
|
2015
|
|
|
(in thousands)
|
|
Amount based upon pretax income
|
|
|
|
|
|
|
|
|
|
U.S. federal statutory income tax
|
$
|
136,636
|
|
|
$
|
103,897
|
|
|
$
|
47,447
|
|
|
State and local income taxes
|
2,284
|
|
|
2,039
|
|
|
1,702
|
|
|
Federal tax rate change
|
1,818
|
|
|
—
|
|
|
—
|
|
|
REIT conversion benefit
|
(130,876
|
)
|
|
(98,459
|
)
|
|
(42,438
|
)
|
|
Permanent differences
|
49
|
|
|
44
|
|
|
61
|
|
|
Other miscellaneous items
|
(124
|
)
|
|
24
|
|
|
670
|
|
|
|
$
|
9,787
|
|
|
$
|
7,545
|
|
|
$
|
7,442
|
|
The Company is still subject to federal income tax examinations for its years ended December 31, 2014 and forward.
13.
Shareholders' Equity
Common Stock
ATM Program
During August 2016, the Company commenced a continuous equity offering under which the Company may sell up to an aggregate of
$400 million
of its common stock from time to time through a sales agent in "at the market" offerings (the "ATM Program"). Actual sales will depend on a variety of factors, including market conditions, the trading price of the Company's common stock and determinations of the appropriate sources of funding for proposed transactions. The Company may sell the shares in amounts and at times to be determined by the Company, but has no obligation to sell any of the shares in the ATM Program. The ATM Program also allows the Company to enter into forward sale agreements. In no event will the aggregate number of shares sold under the ATM Program (whether under any forward sale agreement or through a sales agent), have an aggregate sales price in excess of
$400 million
. The Company expects, that if it enters into a forward sale contract, to physically settle each forward sale agreement with the forward purchaser on one or more dates specified by the Company prior to the maturity date of that particular forward sale agreement, in which case the aggregate net cash proceeds at settlement will equal the number of shares underlying the particular forward sale agreement multiplied by the relevant forward sale price. However, the Company may also elect to cash settle or net share settle a particular forward sale agreement, in which case proceeds may or may not be received or cash may be owed to the forward purchaser.
In connection with the ATM Program, the Company engaged a sales agent who may receive compensation of up to
2%
of the gross sales price of the shares sold. Similarly, in the event the Company enters into a forward sale agreement, it will pay the relevant forward seller a commission of up to
2%
of the sales price of all borrowed shares of common stock sold during the applicable selling period of the forward sale agreement.
During the year ended
December 31, 2017
, GLPI sold
3,864,872
shares of its common stock at an average price of
$36.22
per share under the ATM Program, which generated gross proceeds of approximately
$140.0 million
(net proceeds of approximately
$139.4 million
). Program to date, the Company has sold
5,186,871
shares of its common stock at an average
price of
$35.91
per share under the ATM Program and generated gross proceeds of approximately
$186.3 million
(net proceeds of approximately
$185.0 million
). The Company used the net proceeds from the ATM Program to partially fund its acquisition of the Meadows' and Tunica real estate assets. As of
December 31, 2017
, the Company had
$213.7 million
remaining for issuance under the ATM Program and had not entered into any forward sale agreements.
Stock Issued in Connection with Pinnacle Transaction
On April 6, 2016, the Company closed a public offering of
28,750,000
shares of its common stock, at a public offering price of
$30.00
per share, before underwriting discount, which included
3,750,000
shares of common stock issued in connection with the exercise in full of the underwriters’ option to purchase additional shares.
The Company received approximately
$825.2 million
in net proceeds from the offering and used the net proceeds from the offering to partially fund its acquisition of substantially all of the real estate assets of Pinnacle, including the repayment, redemption and/or discharge of a portion of certain debt of Pinnacle assumed by the Company in connection with the Pinnacle Merger and the payment of transaction-related fees and expenses.
Additionally, on April 28, 2016, in connection with the Pinnacle Merger, the Company issued approximately
56.0 million
shares of its common stock to Pinnacle stockholders and to Pinnacle to satisfy the Company's portion of Pinnacle's employee equity and cash-based incentive awards as consideration for the Pinnacle real estate assets.
The following table lists the regular dividends declared and paid by the Company during the years ended
December 31, 2017
,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Shareholder Record Date
|
|
Securities Class
|
|
Dividend Per Share
|
|
Period Covered
|
|
Distribution Date
|
|
Dividend Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 1, 2017
|
|
March 13, 2017
|
|
Common Stock
|
|
$
|
0.62
|
|
|
First Quarter 2017
|
|
March 24, 2017
|
|
$
|
129,007
|
|
|
April 25, 2017
|
|
June 16, 2017
|
|
Common Stock
|
|
$
|
0.62
|
|
|
Second Quarter 2017
|
|
June 30, 2017
|
|
$
|
131,554
|
|
|
July 25, 2017
|
|
September 8, 2017
|
|
Common Stock
|
|
$
|
0.63
|
|
|
Third Quarter 2017
|
|
September 22, 2017
|
|
$
|
133,936
|
|
|
October 19, 2017
|
|
December 1, 2017
|
|
Common Stock
|
|
$
|
0.63
|
|
|
Fourth Quarter 2017
|
|
December 15, 2017
|
|
$
|
133,942
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 29, 2016
|
|
February 22, 2016
|
|
Common Stock
|
|
$
|
0.56
|
|
|
First Quarter 2016
|
|
March 25, 2016
|
|
$
|
65,345
|
|
|
April 25, 2016
|
|
June 2, 2016
|
|
Common Stock
|
|
$
|
0.56
|
|
|
Second Quarter 2016
|
|
June 17, 2016
|
|
$
|
113,212
|
|
|
August 3, 2016
|
|
September 12, 2016
|
|
Common Stock
|
|
$
|
0.60
|
|
|
Third Quarter 2016
|
|
September 23, 2016
|
|
$
|
124,262
|
|
|
November 4, 2016
|
|
December 5, 2016
|
|
Common Stock
|
|
$
|
0.60
|
|
|
Fourth Quarter 2016
|
|
December 16, 2016
|
|
$
|
124,466
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 3, 2015
|
|
March 10, 2015
|
|
Common Stock
|
|
$
|
0.545
|
|
|
First Quarter 2015
|
|
March 27, 2015
|
|
$
|
62,072
|
|
|
May 1, 2015
|
|
June 11, 2015
|
|
Common Stock
|
|
$
|
0.545
|
|
|
Second Quarter 2015
|
|
June 26, 2015
|
|
$
|
62,348
|
|
|
July 30, 2015
|
|
September 14, 2015
|
|
Common Stock
|
|
$
|
0.545
|
|
|
Third Quarter 2015
|
|
September 25, 2015
|
|
$
|
62,456
|
|
|
October 28, 2015
|
|
December 1, 2015
|
|
Common Stock
|
|
$
|
0.545
|
|
|
Fourth Quarter 2015
|
|
December 18, 2015
|
|
$
|
62,814
|
|
In addition for the years ended
December 31, 2017
,
2016
and
2015
, dividend payments were made to or accrued for GLPI restricted stock award holders and for both GLPI and Penn unvested employee stock options in the amount of
$0.9 million
,
$1.1 million
and
$2.0 million
, respectively.
A summary of the Company's common stock distributions for the years ended
December 31, 2017
,
2016
and
2015
is as follows (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
(in dollars per share)
|
|
Qualified dividends
|
$
|
0.0543
|
|
|
$
|
0.1050
|
|
|
$
|
0.0698
|
|
|
Non-qualified dividends
|
2.2436
|
|
|
2.0746
|
|
|
1.9462
|
|
|
Capital gains
|
0.0371
|
|
|
0.0624
|
|
|
0.0012
|
|
|
Non-taxable return of capital
|
0.1650
|
|
|
0.0780
|
|
|
0.1628
|
|
|
Total distributions per common share
|
$
|
2.50
|
|
|
$
|
2.32
|
|
|
$
|
2.18
|
|
|
|
|
|
|
|
|
|
Percentage classified as qualified dividends
|
2.17
|
%
|
|
4.53
|
%
|
|
3.21
|
%
|
|
Percentage classified as non-qualified dividends
|
89.75
|
%
|
|
89.42
|
%
|
|
89.45
|
%
|
|
Percentage classified as capital gains
|
1.48
|
%
|
|
2.69
|
%
|
|
—
|
%
|
|
Percentage classified as non-taxable return of capital
|
6.60
|
%
|
|
3.36
|
%
|
|
7.34
|
%
|
|
|
100.00
|
%
|
|
100.00
|
%
|
|
100.00
|
%
|
14. Stock-Based Compensation
As of
December 31, 2017
, the Company had
2,755,796
shares available for future issuance under the 2013 Long Term Incentive Compensation Plan (the "2013 Plan") that was approved by shareholders on October 23, 2013. The 2013 Plan provides for the Company to issue restricted stock awards, including performance-based restricted stock awards and other equity or cash based awards to employees. Any director, employee or consultant shall be eligible to receive such awards.
In connection with the Spin-Off, each outstanding option with respect to Penn common stock outstanding on the distribution date was converted into
two
awards, an adjusted Penn option and a GLPI option. The adjustment preserved the aggregate intrinsic value of the options. Additionally, in connection with the Spin-Off, holders of outstanding restricted stock and phantom stock units ("PSUs") with respect to Penn common stock became entitled to an additional share of restricted stock or PSU with respect to GLPI common stock for each share of Penn restricted stock or PSU held. These awards are not counted against the 2013 Plan limit mentioned above.
The adjusted options, as well as the restricted stock awards and PSUs, otherwise remain subject to their original terms, except that for purposes of the adjusted Penn awards (including in determining exercisability and the post-termination exercise period), continued service with GLPI following the distribution date shall be deemed continued service with Penn; and for purposes of the GLPI awards (including in determining exercisability and the post-termination exercise period), continued service with Penn following the distribution date shall be deemed continued service with GLPI.
The unrecognized compensation cost relating to restricted stock awards and performance-based restricted stock awards will be amortized to expense over the awards’ remaining vesting periods.
As of
December 31, 2017
, there was
no
remaining unrecognized compensation cost related to stock options. For the
years ended
December 31, 2016
and
2015
, the Company recognized
$20 thousand
and
$2.8 million
, respectively of compensation expense associated with these awards. In addition, for the
years ended
December 31, 2016
and
2015
the Company also recognized
$4.5 million
and
$11.3 million
, respectively, of compensation expense relating to the
$2.32
and
$2.18
, respectively, per share dividends paid on vested employee stock options.
The following tables contain information on stock options issued and outstanding for the year ended
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Option Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term (in years)
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|
Outstanding at December 31, 2016
|
|
2,056,382
|
|
|
$
|
20.25
|
|
|
|
|
|
|
|
Exercised
|
|
(1,013,984
|
)
|
|
20.71
|
|
|
|
|
|
|
|
Canceled
|
|
(1,653
|
)
|
|
24.15
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
1,040,745
|
|
|
$
|
19.80
|
|
|
0.77
|
|
$
|
17,902
|
|
The Company had
1,040,745
stock options that were exercisable at
December 31, 2017
with an exercise price range from
$17.33
to
$26.45
and a weighted average exercise price of
$19.80
which had an intrinsic value of
$17.9 million
and a weighted-average remaining contractual term of
0.77 years
. The aggregate intrinsic value of stock options exercised for the
years ended
December 31, 2017
,
2016
and
2015
was
$14.9 million
,
$75.0 million
and
$47.8 million
, respectively. The Company issues new authorized common shares to satisfy stock option exercises and restricted stock award releases.
As of
December 31, 2017
, there was
$5.4 million
of total unrecognized compensation cost for restricted stock awards that will be recognized over the grants' remaining weighted average vesting period of
1.75 years
. For the
years ended
December 31, 2017
,
2016
and
2015
, the Company recognized
$6.0 million
,
$7.3 million
and
$5.9 million
, respectively, of compensation expense associated with these awards. The total fair value of awards released for the
years ended
December 31, 2017
,
2016
and
2015
, was
$7.3 million
,
$5.3 million
and
$4.5 million
, respectively.
The following table contains information on restricted stock award activity for the years ended
December 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Award
Shares
|
|
Weighted Average Grant-Date Fair Value
|
|
Outstanding at December 31, 2015
|
463,764
|
|
|
$
|
32.76
|
|
|
Granted
|
168,966
|
|
|
$
|
27.80
|
|
|
Released
|
(204,596
|
)
|
|
$
|
33.21
|
|
|
Canceled
|
(14,892
|
)
|
|
$
|
30.51
|
|
|
December 31, 2016
|
413,242
|
|
|
$
|
30.59
|
|
|
Granted
|
184,791
|
|
|
$
|
30.89
|
|
|
Released
|
(251,313
|
)
|
|
$
|
32.05
|
|
|
Canceled
|
(1,976
|
)
|
|
$
|
30.37
|
|
|
Outstanding at December 31, 2017
|
344,744
|
|
|
$
|
29.69
|
|
Performance-based restricted stock awards have a
three
-year cliff vesting with the amount of restricted shares vesting at the end of the
three
-year period determined based upon the Company’s performance as measured against its peers. More specifically, the percentage of shares vesting at the end of the measurement period will be based on the Company’s
three
-year total shareholder return measured against the
three
-year return of the companies included in the MSCI US REIT index and the Company's stock performance ranking among a group of triple-net REIT peer companies. The triple-net measurement group includes publicly traded REITs deriving at least
75%
of revenues from triple-net leases. As of
December 31, 2017
, there was
$9.9 million
of total unrecognized compensation cost, which will be recognized over the awards' remaining weighted average vesting period of
1.68 years
. For the years ended
December 31, 2017
,
2016
and
2015
, the Company recognized
$9.7 million
,
$11.0 million
and
$8.1 million
, respectively, of compensation expense associated with these awards.
The following table contains information on performance-based restricted stock award activity for the years ended
December 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
Number of Performance-Based Award Shares
|
|
Weighted Average Grant-Date Fair Value
|
|
Outstanding at December 31, 2015
|
1,091,556
|
|
|
$
|
20.10
|
|
|
Granted
|
558,000
|
|
|
$
|
17.22
|
|
|
Released
|
—
|
|
|
$
|
—
|
|
|
Canceled
(1)
|
(543,556
|
)
|
|
$
|
22.93
|
|
|
December 31, 2016
|
1,106,000
|
|
|
$
|
17.25
|
|
|
Granted
|
558,000
|
|
|
$
|
17.95
|
|
|
Released
|
—
|
|
|
$
|
—
|
|
|
Canceled
|
—
|
|
|
$
|
—
|
|
|
Outstanding at December 31, 2017
|
1,664,000
|
|
|
$
|
17.49
|
|
|
|
|
|
(1)
|
The performance-based restricted stock awards granted in 2014 did not vest as the Company's performance was below the threshold for vesting.
|
15.
Segment Information
The following tables present certain information with respect to the Company’s segments. Intersegment revenues between the Company’s segments were not material in any of the periods presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GLP Capital
|
|
TRS Properties
|
|
Eliminations
(1)
|
|
Total
|
|
|
|
(in thousands)
|
|
For the year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
829,221
|
|
|
$
|
142,086
|
|
|
$
|
—
|
|
|
$
|
971,307
|
|
|
Income from operations
|
|
578,661
|
|
|
26,857
|
|
|
—
|
|
|
605,518
|
|
|
Interest, net
|
|
215,136
|
|
|
10,403
|
|
|
(10,406
|
)
|
|
215,133
|
|
|
Income before income taxes
|
|
373,931
|
|
|
16,454
|
|
|
—
|
|
|
390,385
|
|
|
Income tax expense
|
|
1,099
|
|
|
8,688
|
|
|
—
|
|
|
9,787
|
|
|
Net income
|
|
372,832
|
|
|
7,766
|
|
|
—
|
|
|
380,598
|
|
|
Depreciation
|
|
102,652
|
|
|
10,828
|
|
|
—
|
|
|
113,480
|
|
|
Capital project expenditures
|
|
78
|
|
|
—
|
|
|
—
|
|
|
78
|
|
|
Capital maintenance expenditures
|
|
—
|
|
|
3,178
|
|
|
—
|
|
|
3,178
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
684,204
|
|
|
$
|
144,051
|
|
|
$
|
—
|
|
|
$
|
828,255
|
|
|
Income from operations
|
|
454,682
|
|
|
25,941
|
|
|
—
|
|
|
480,623
|
|
|
Interest, net
|
|
183,777
|
|
|
10,402
|
|
|
(10,406
|
)
|
|
183,773
|
|
|
Income before income taxes
|
|
281,311
|
|
|
15,539
|
|
|
—
|
|
|
296,850
|
|
|
Income tax expense
|
|
1,016
|
|
|
6,529
|
|
|
—
|
|
|
7,545
|
|
|
Net income
|
|
280,295
|
|
|
9,010
|
|
|
—
|
|
|
289,305
|
|
|
Depreciation
|
|
98,171
|
|
|
11,383
|
|
|
—
|
|
|
109,554
|
|
|
Capital project expenditures
|
|
229
|
|
|
101
|
|
|
—
|
|
|
330
|
|
|
Capital maintenance expenditures
|
|
—
|
|
|
3,111
|
|
|
—
|
|
|
3,111
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
427,125
|
|
|
$
|
147,928
|
|
|
$
|
—
|
|
|
$
|
575,053
|
|
|
Income from operations
|
|
232,701
|
|
|
24,714
|
|
|
—
|
|
|
257,415
|
|
|
Interest, net
|
|
121,855
|
|
|
10,402
|
|
|
(10,406
|
)
|
|
121,851
|
|
|
Income before income taxes
|
|
121,252
|
|
|
14,312
|
|
|
—
|
|
|
135,564
|
|
|
Income tax expense
|
|
1,338
|
|
|
6,104
|
|
|
—
|
|
|
7,442
|
|
|
Net income
|
|
119,914
|
|
|
8,208
|
|
|
—
|
|
|
128,122
|
|
|
Depreciation
|
|
97,424
|
|
|
12,359
|
|
|
—
|
|
|
109,783
|
|
|
Capital project expenditures
|
|
10,252
|
|
|
5,897
|
|
|
—
|
|
|
16,149
|
|
|
Capital maintenance expenditures
|
|
—
|
|
|
2,953
|
|
|
—
|
|
|
2,953
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet at December 31, 2017
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,045,747
|
|
|
$
|
201,135
|
|
|
$
|
—
|
|
|
$
|
7,246,882
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet at December 31, 2016
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,156,501
|
|
|
$
|
212,829
|
|
|
$
|
—
|
|
|
$
|
7,369,330
|
|
(1)
Amounts in the "Eliminations" column represent the elimination of intercompany interest payments from the Company’s TRS Properties business segment to its GLP Capital business segment.
16. Summarized Quarterly Data (Unaudited)
The following table summarizes the quarterly results of operations for the years ended
December 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
(in thousands, except per share data)
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
242,713
|
|
|
$
|
243,391
|
|
|
$
|
244,506
|
|
|
$
|
240,697
|
|
|
|
Income from operations
|
150,006
|
|
|
152,696
|
|
|
152,699
|
|
|
150,117
|
|
|
|
Net income
|
93,991
|
|
|
96,334
|
|
|
97,014
|
|
|
93,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
$
|
0.45
|
|
|
$
|
0.46
|
|
|
$
|
0.46
|
|
|
$
|
0.44
|
|
|
|
Diluted earnings per common share
|
$
|
0.45
|
|
|
$
|
0.45
|
|
|
$
|
0.45
|
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
148,820
|
|
|
$
|
207,361
|
|
|
$
|
233,275
|
|
|
$
|
238,799
|
|
(1)
|
|
Income from operations
|
67,637
|
|
|
120,817
|
|
|
143,306
|
|
|
148,863
|
|
(1)
|
|
Net income
|
32,749
|
|
|
73,264
|
|
|
89,600
|
|
|
93,692
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
$
|
0.28
|
|
|
$
|
0.40
|
|
|
$
|
0.43
|
|
|
$
|
0.45
|
|
|
|
Diluted earnings per common share
|
$
|
0.27
|
|
|
$
|
0.39
|
|
|
$
|
0.43
|
|
|
$
|
0.45
|
|
|
|
|
|
|
(1)
|
During April 2016, the Company acquired substantially all of the real estate assets of Pinnacle and subsequently leased these assets back to Pinnacle under a triple-net master lease, which significantly increased the Company's net revenues, income from operations and net income. The acquisition of the Meadows' real property assets in September 2016 also contributed to the Company's improved operating results in the fourth quarter of 2016 as compared to the third quarter of 2016. See Note 4 for further details surrounding the Pinnacle and Meadows acquisitions.
|
17.
Supplemental Disclosures of Cash Flow Information and Noncash Activities
Supplemental disclosures of cash flow information are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2017
|
|
2016
|
|
2015
|
|
|
(in thousands)
|
|
Cash paid for income taxes, net of refunds received
|
11,646
|
|
|
7,362
|
|
|
9,785
|
|
|
Cash paid for interest
|
204,442
|
|
|
154,527
|
|
|
109,966
|
|
Noncash investing and financing activities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2017
|
|
2016
|
|
2015
|
|
|
(in thousands)
|
|
Equity raised to partially finance the Pinnacle transaction
|
$
|
—
|
|
|
$
|
1,823,991
|
|
|
$
|
—
|
|
18. Related Party Transactions
During the year ended December 31, 2014, the Company entered into an Agreement of Sale (the "Sale Agreement") with Wyomissing Professional Center Inc. ("WPC") and acquired certain land in an office complex known as The Wyomissing Professional Center Campus, located in Wyomissing, Pennsylvania (on which to build its corporate headquarters), in exchange for the payment of
$725,000
in cash to WPC, plus taxes and closing costs. In addition, the Company reimbursed WPC approximately
$270,000
for site work and pre-development costs previously completed per the Sale Agreement. Also in connection with the completion of construction of its corporate headquarters building, the Company entered into an agreement (the "Construction Management Agreement") with CB Consulting Group LLC (the "Construction Manager") during the year ended December 31, 2014. Construction of the Company's corporate headquarters building was completed in October 2015 and the Company did not incur additional costs related to the building with WPC or the Construction Manager subsequent to 2015.
The Company paid approximately
$433,000
and
$244,000
, respectively, to WPC during the years ended December 31, 2015 and 2014 in connection with construction costs paid by WPC on the Company's behalf. Pursuant to the Construction Management Agreement, the Construction Manager, among other things, provided certain construction management services to the Company in exchange for three percent (
3%
) of the total cost of work to complete the building construction project, and certain additional costs for added services. During the years ended December 31, 2015 and 2014, the Company paid approximately
$175,000
and
$59,000
, respectively, to the Construction Manager.
Upon completion of the building in October 2015, the Company became responsible for the payment of monthly common area maintenance fees to the Wyomissing Professional Center Owners' Association ("WPCOA"). During the years ended
December 31, 2017
,
2016
and 2015, the Company paid approximately
$35,000
,
$30,000
and
$10,000
to the WPCOA, respectively.
Peter M. Carlino, the Company’s Chairman of the Board of Directors and Chief Executive Officer, is also the sole owner of WPC and associated with the WPCOA. In addition, Mr. Carlino’s son owns a material interest in the Construction Manager.
19.
Supplementary Consolidating Financial Information of Parent Guarantor and Subsidiary Issuers
GLPI guarantees the Notes issued by its subsidiaries, GLP Capital, L.P. and GLP Financing II, Inc. Each of the subsidiary issuers is
100%
owned by GLPI. The guarantees of GLPI are full and unconditional. GLPI is not subject to any material or significant restrictions on its ability to obtain funds from its subsidiaries by dividend or loan or to transfer assets from such subsidiaries, except as provided by applicable law. None of GLPI's subsidiaries guarantee the Notes.
Summarized balance sheet information as of
December 31, 2017
and
2016
and summarized income statement and cash flow information for the
years ended
December 31, 2017
,
2016
and
2015
for GLPI as the parent guarantor, for GLP Capital, L.P. and GLP Financing II, Inc. as the subsidiary issuers and the other subsidiary non-issuers is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
Consolidating Balance Sheet
|
|
Parent
Guarantor
|
|
Subsidiary
Issuers
|
|
Other
Subsidiary
Non-Issuers
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investments, net
|
|
$
|
—
|
|
|
$
|
1,794,840
|
|
|
$
|
1,867,205
|
|
|
$
|
—
|
|
|
$
|
3,662,045
|
|
|
Land rights, net
|
|
—
|
|
|
58,635
|
|
|
581,513
|
|
|
—
|
|
|
640,148
|
|
|
Property and equipment, used in operations, net
|
|
—
|
|
|
20,568
|
|
|
87,725
|
|
|
—
|
|
|
108,293
|
|
|
Investment in direct financing lease, net
|
|
—
|
|
|
—
|
|
|
2,637,639
|
|
|
—
|
|
|
2,637,639
|
|
|
Cash and cash equivalents
|
|
—
|
|
|
6,734
|
|
|
22,320
|
|
|
—
|
|
|
29,054
|
|
|
Prepaid expenses
|
|
—
|
|
|
4,067
|
|
|
2,746
|
|
|
1,639
|
|
|
8,452
|
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
75,521
|
|
|
—
|
|
|
75,521
|
|
|
Other intangible assets
|
|
—
|
|
|
—
|
|
|
9,577
|
|
|
—
|
|
|
9,577
|
|
|
Loan receivable
|
|
—
|
|
|
—
|
|
|
13,000
|
|
|
—
|
|
|
13,000
|
|
|
Intercompany loan receivable
|
|
—
|
|
|
193,595
|
|
|
—
|
|
|
(193,595
|
)
|
|
—
|
|
|
Intercompany transactions and investment in subsidiaries
|
|
2,458,247
|
|
|
5,087,893
|
|
|
2,959,174
|
|
|
(10,505,314
|
)
|
|
—
|
|
|
Deferred tax assets
|
|
|
|
|
—
|
|
|
4,478
|
|
|
—
|
|
|
4,478
|
|
|
Other assets
|
|
—
|
|
|
42,485
|
|
|
16,190
|
|
|
—
|
|
|
58,675
|
|
|
Total assets
|
|
$
|
2,458,247
|
|
|
$
|
7,208,817
|
|
|
$
|
8,277,088
|
|
|
$
|
(10,697,270
|
)
|
|
$
|
7,246,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
$
|
619
|
|
|
$
|
96
|
|
|
$
|
—
|
|
|
$
|
715
|
|
|
Accrued expenses
|
|
—
|
|
|
672
|
|
|
7,241
|
|
|
—
|
|
|
7,913
|
|
|
Accrued interest
|
|
—
|
|
|
33,241
|
|
|
—
|
|
|
—
|
|
|
33,241
|
|
|
Accrued salaries and wages
|
|
—
|
|
|
7,832
|
|
|
2,977
|
|
|
—
|
|
|
10,809
|
|
|
Gaming, property, and other taxes
|
|
—
|
|
|
21,135
|
|
|
14,264
|
|
|
—
|
|
|
35,399
|
|
|
Income taxes
|
|
—
|
|
|
(306
|
)
|
|
(1,333
|
)
|
|
1,639
|
|
|
—
|
|
|
Long-term debt, net of unamortized debt issuance costs
|
|
—
|
|
|
4,442,880
|
|
|
—
|
|
|
—
|
|
|
4,442,880
|
|
|
Intercompany loan payable
|
|
—
|
|
|
—
|
|
|
193,595
|
|
|
(193,595
|
)
|
|
—
|
|
|
Deferred rental revenue
|
|
—
|
|
|
220,019
|
|
|
12,004
|
|
|
—
|
|
|
232,023
|
|
|
Deferred tax liabilities
|
|
—
|
|
|
—
|
|
|
244
|
|
|
—
|
|
|
244
|
|
|
Other liabilities
|
|
—
|
|
|
24,478
|
|
|
933
|
|
|
—
|
|
|
25,411
|
|
|
Total liabilities
|
|
—
|
|
|
4,750,570
|
|
|
230,021
|
|
|
(191,956
|
)
|
|
4,788,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued or outstanding at December 31, 2017)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Common stock ($.01 par value, 500,000,000 shares authorized, 212,717,549 shares issued at December 31, 2017)
|
|
2,127
|
|
|
2,127
|
|
|
2,127
|
|
|
(4,254
|
)
|
|
2,127
|
|
|
Additional paid-in capital
|
|
3,933,829
|
|
|
3,933,831
|
|
|
9,498,755
|
|
|
(13,432,586
|
)
|
|
3,933,829
|
|
|
Retained accumulated (deficit) earnings
|
|
(1,477,709
|
)
|
|
(1,477,711
|
)
|
|
(1,453,815
|
)
|
|
2,931,526
|
|
|
(1,477,709
|
)
|
|
Total shareholders’ equity (deficit)
|
|
2,458,247
|
|
|
2,458,247
|
|
|
8,047,067
|
|
|
(10,505,314
|
)
|
|
2,458,247
|
|
|
Total liabilities and shareholders’ equity (deficit)
|
|
$
|
2,458,247
|
|
|
$
|
7,208,817
|
|
|
$
|
8,277,088
|
|
|
$
|
(10,697,270
|
)
|
|
$
|
7,246,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
Consolidating Statement of Income
|
|
Parent
Guarantor
|
|
Subsidiary
Issuers
|
|
Other
Subsidiary
Non-Issuers
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
—
|
|
|
$
|
398,070
|
|
|
$
|
273,120
|
|
|
$
|
—
|
|
|
$
|
671,190
|
|
|
Income from direct financing lease
|
|
—
|
|
|
—
|
|
|
74,333
|
|
|
—
|
|
|
74,333
|
|
|
Real estate taxes paid by tenants
|
|
—
|
|
|
43,672
|
|
|
40,026
|
|
|
—
|
|
|
83,698
|
|
|
Total rental revenue and income from direct financing lease
|
|
—
|
|
|
441,742
|
|
|
387,479
|
|
|
—
|
|
|
829,221
|
|
|
Gaming, food, beverage and other
|
|
—
|
|
|
—
|
|
|
146,866
|
|
|
—
|
|
|
146,866
|
|
|
Total revenues
|
|
—
|
|
|
441,742
|
|
|
534,345
|
|
|
—
|
|
|
976,087
|
|
|
Less promotional allowances
|
|
—
|
|
|
—
|
|
|
(4,780
|
)
|
|
—
|
|
|
(4,780
|
)
|
|
Net revenues
|
|
—
|
|
|
441,742
|
|
|
529,565
|
|
|
—
|
|
|
971,307
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming, food, beverage and other
|
|
—
|
|
|
—
|
|
|
80,487
|
|
|
—
|
|
|
80,487
|
|
|
Real estate taxes
|
|
—
|
|
|
43,755
|
|
|
40,911
|
|
|
—
|
|
|
84,666
|
|
|
Land rights and ground lease expense
|
|
—
|
|
|
5,895
|
|
|
18,110
|
|
|
—
|
|
|
24,005
|
|
|
General and administrative
|
|
—
|
|
|
39,863
|
|
|
23,288
|
|
|
—
|
|
|
63,151
|
|
|
Depreciation
|
|
—
|
|
|
93,948
|
|
|
19,532
|
|
|
—
|
|
|
113,480
|
|
|
Total operating expenses
|
|
—
|
|
|
183,461
|
|
|
182,328
|
|
|
—
|
|
|
365,789
|
|
|
Income from operations
|
|
—
|
|
|
258,281
|
|
|
347,237
|
|
|
—
|
|
|
605,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
—
|
|
|
(217,068
|
)
|
|
—
|
|
|
—
|
|
|
(217,068
|
)
|
|
Interest income
|
|
—
|
|
|
—
|
|
|
1,935
|
|
|
—
|
|
|
1,935
|
|
|
Intercompany dividends and interest
|
|
—
|
|
|
451,295
|
|
|
12,318
|
|
|
(463,613
|
)
|
|
—
|
|
|
Total other expenses
|
|
—
|
|
|
234,227
|
|
|
14,253
|
|
|
(463,613
|
)
|
|
(215,133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
—
|
|
|
492,508
|
|
|
361,490
|
|
|
(463,613
|
)
|
|
390,385
|
|
|
Income tax expense
|
|
—
|
|
|
1,099
|
|
|
8,688
|
|
|
—
|
|
|
9,787
|
|
|
Net income
|
|
$
|
—
|
|
|
$
|
491,409
|
|
|
$
|
352,802
|
|
|
$
|
(463,613
|
)
|
|
$
|
380,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
Consolidating Statement of Cash Flows
|
|
Parent
Guarantor
|
|
Subsidiary
Issuers
|
|
Other
Subsidiary
Non-Issuers
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
—
|
|
|
$
|
491,409
|
|
|
$
|
352,802
|
|
|
$
|
(463,613
|
)
|
|
$
|
380,598
|
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
—
|
|
|
95,058
|
|
|
28,777
|
|
|
—
|
|
|
123,835
|
|
|
Amortization of debt issuance costs
|
|
—
|
|
|
13,026
|
|
|
—
|
|
|
—
|
|
|
13,026
|
|
|
Losses on dispositions of property
|
|
—
|
|
|
—
|
|
|
530
|
|
|
—
|
|
|
530
|
|
|
Deferred income taxes
|
|
—
|
|
|
—
|
|
|
(561
|
)
|
|
—
|
|
|
(561
|
)
|
|
Stock-based compensation
|
|
—
|
|
|
15,636
|
|
|
—
|
|
|
—
|
|
|
15,636
|
|
|
Straight-line rent adjustments
|
|
—
|
|
|
56,815
|
|
|
9,156
|
|
|
—
|
|
|
65,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
—
|
|
|
(5,703
|
)
|
|
1,268
|
|
|
(897
|
)
|
|
(5,332
|
)
|
|
Intercompany
|
|
—
|
|
|
317
|
|
|
(317
|
)
|
|
—
|
|
|
—
|
|
|
(Decrease) increase,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
—
|
|
|
148
|
|
|
(569
|
)
|
|
—
|
|
|
(421
|
)
|
|
Accrued expenses
|
|
—
|
|
|
103
|
|
|
308
|
|
|
—
|
|
|
411
|
|
|
Accrued interest
|
|
—
|
|
|
(502
|
)
|
|
—
|
|
|
—
|
|
|
(502
|
)
|
|
Accrued salaries and wages
|
|
—
|
|
|
(79
|
)
|
|
269
|
|
|
—
|
|
|
190
|
|
|
Gaming, property and other taxes
|
|
—
|
|
|
(505
|
)
|
|
(12
|
)
|
|
—
|
|
|
(517
|
)
|
|
Income taxes
|
|
—
|
|
|
(325
|
)
|
|
(572
|
)
|
|
897
|
|
|
—
|
|
|
Other liabilities
|
|
—
|
|
|
6,591
|
|
|
(744
|
)
|
|
—
|
|
|
5,847
|
|
|
Net cash provided by (used in) operating activities
|
|
—
|
|
|
671,989
|
|
|
390,335
|
|
|
(463,613
|
)
|
|
598,711
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital project expenditures
|
|
—
|
|
|
(78
|
)
|
|
—
|
|
|
—
|
|
|
(78
|
)
|
|
Capital maintenance expenditures
|
|
—
|
|
|
—
|
|
|
(3,178
|
)
|
|
—
|
|
|
(3,178
|
)
|
|
Proceeds from sale of property and equipment
|
|
—
|
|
|
10
|
|
|
924
|
|
|
—
|
|
|
934
|
|
|
Principal payments on loan receivable
|
|
—
|
|
|
—
|
|
|
13,200
|
|
|
—
|
|
|
13,200
|
|
|
Acquisition of real estate assets
|
|
—
|
|
|
(82,866
|
)
|
|
(386
|
)
|
|
—
|
|
|
(83,252
|
)
|
|
Collection of principal payments on investment in direct financing lease
|
|
—
|
|
|
—
|
|
|
73,072
|
|
|
—
|
|
|
73,072
|
|
|
Net cash provided by (used in) investing activities
|
|
—
|
|
|
(82,934
|
)
|
|
83,632
|
|
|
—
|
|
|
698
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
(529,370
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(529,370
|
)
|
|
Proceeds from exercise of options, net of taxes paid related to shares withheld for tax purposes on restricted stock award vestings
|
|
18,157
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,157
|
|
|
Proceeds from issuance of common stock, net of issuance costs
|
|
139,414
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
139,414
|
|
|
Proceeds from issuance of long-term debt
|
|
—
|
|
|
100,000
|
|
|
—
|
|
|
—
|
|
|
100,000
|
|
|
Financing costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Payments of long-term debt
|
|
—
|
|
|
(335,112
|
)
|
|
|
|
|
—
|
|
|
(335,112
|
)
|
|
Intercompany financing
|
|
371,799
|
|
|
(358,983
|
)
|
|
(476,429
|
)
|
|
463,613
|
|
|
—
|
|
|
Net cash (used in) provided by financing activities
|
|
—
|
|
|
(594,095
|
)
|
|
(476,429
|
)
|
|
463,613
|
|
|
(606,911
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
—
|
|
|
(5,040
|
)
|
|
(2,462
|
)
|
|
—
|
|
|
(7,502
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
—
|
|
|
11,774
|
|
|
24,782
|
|
|
—
|
|
|
36,556
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
6,734
|
|
|
$
|
22,320
|
|
|
$
|
—
|
|
|
$
|
29,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
Consolidating Balance Sheet
|
|
Parent
Guarantor
|
|
Subsidiary
Issuers
|
|
Other
Subsidiary
Non-Issuers
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investments, net
|
|
$
|
—
|
|
|
$
|
1,863,568
|
|
|
$
|
1,875,523
|
|
|
$
|
—
|
|
|
$
|
3,739,091
|
|
|
Land rights, net
|
|
—
|
|
|
—
|
|
|
590,758
|
|
|
—
|
|
|
590,758
|
|
|
Property and equipment, used in operations, net
|
|
—
|
|
|
22,598
|
|
|
96,829
|
|
|
—
|
|
|
119,427
|
|
|
Investment in direct financing lease, net
|
|
—
|
|
|
—
|
|
|
2,710,711
|
|
|
—
|
|
|
2,710,711
|
|
|
Cash and cash equivalents
|
|
—
|
|
|
11,774
|
|
|
24,782
|
|
|
—
|
|
|
36,556
|
|
|
Prepaid expenses
|
|
—
|
|
|
3,106
|
|
|
3,629
|
|
|
742
|
|
|
7,477
|
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
75,521
|
|
|
—
|
|
|
75,521
|
|
|
Other intangible assets
|
|
—
|
|
|
—
|
|
|
9,577
|
|
|
—
|
|
|
9,577
|
|
|
Loan receivable
|
|
—
|
|
|
—
|
|
|
26,200
|
|
|
—
|
|
|
26,200
|
|
|
Intercompany loan receivable
|
|
—
|
|
|
193,595
|
|
|
—
|
|
|
(193,595
|
)
|
|
—
|
|
|
Intercompany transactions and investment in subsidiaries
|
|
2,433,869
|
|
|
5,211,835
|
|
|
2,947,915
|
|
|
(10,593,619
|
)
|
|
—
|
|
|
Deferred tax assets
|
|
—
|
|
|
—
|
|
|
3,922
|
|
|
—
|
|
|
3,922
|
|
|
Other assets
|
|
—
|
|
|
37,335
|
|
|
12,755
|
|
|
—
|
|
|
50,090
|
|
|
Total assets
|
|
$
|
2,433,869
|
|
|
$
|
7,343,811
|
|
|
$
|
8,378,122
|
|
|
$
|
(10,786,472
|
)
|
|
$
|
7,369,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
$
|
413
|
|
|
$
|
666
|
|
|
$
|
—
|
|
|
$
|
1,079
|
|
|
Accrued expenses
|
|
—
|
|
|
434
|
|
|
6,156
|
|
|
—
|
|
|
6,590
|
|
|
Accrued interest
|
|
—
|
|
|
33,743
|
|
|
—
|
|
|
—
|
|
|
33,743
|
|
|
Accrued salaries and wages
|
|
—
|
|
|
7,911
|
|
|
2,708
|
|
|
—
|
|
|
10,619
|
|
|
Gaming, property, and other taxes
|
|
—
|
|
|
21,364
|
|
|
11,220
|
|
|
—
|
|
|
32,584
|
|
|
Income taxes
|
|
—
|
|
|
18
|
|
|
(760
|
)
|
|
742
|
|
|
—
|
|
|
Long-term debt, net of unamortized debt issuance costs
|
|
—
|
|
|
4,664,965
|
|
|
—
|
|
|
—
|
|
|
4,664,965
|
|
|
Intercompany loan payable
|
|
—
|
|
|
—
|
|
|
193,595
|
|
|
(193,595
|
)
|
|
—
|
|
|
Deferred rental revenue
|
|
—
|
|
|
163,204
|
|
|
2,848
|
|
|
—
|
|
|
166,052
|
|
|
Deferred tax liabilities
|
|
—
|
|
|
—
|
|
|
265
|
|
|
—
|
|
|
265
|
|
|
Other liabilities
|
|
—
|
|
|
17,890
|
|
|
1,674
|
|
|
—
|
|
|
19,564
|
|
|
Total liabilities
|
|
—
|
|
|
4,909,942
|
|
|
218,372
|
|
|
(192,853
|
)
|
|
4,935,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued or outstanding at December 31, 2016)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Common stock ($.01 par value, 500,000,000 shares authorized, 207,676,827 shares issued at December 31, 2016)
|
|
2,077
|
|
|
2,077
|
|
|
2,077
|
|
|
(4,154
|
)
|
|
2,077
|
|
|
Additional paid-in capital
|
|
3,760,730
|
|
|
3,760,730
|
|
|
9,338,083
|
|
|
(13,098,814
|
)
|
|
3,760,729
|
|
|
Retained accumulated (deficit) earnings
|
|
(1,328,938
|
)
|
|
(1,328,938
|
)
|
|
(1,180,410
|
)
|
|
2,509,349
|
|
|
(1,328,937
|
)
|
|
Total shareholders’ equity (deficit)
|
|
2,433,869
|
|
|
2,433,869
|
|
|
8,159,750
|
|
|
(10,593,619
|
)
|
|
2,433,869
|
|
|
Total liabilities and shareholders’ equity (deficit)
|
|
$
|
2,433,869
|
|
|
$
|
7,343,811
|
|
|
$
|
8,378,122
|
|
|
$
|
(10,786,472
|
)
|
|
$
|
7,369,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2016
Consolidating Statement of Income
|
|
Parent
Guarantor
|
|
Subsidiary
Issuers
|
|
Other
Subsidiary
Non-
Issuers
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
—
|
|
|
$
|
383,553
|
|
|
$
|
183,891
|
|
|
$
|
—
|
|
|
$
|
567,444
|
|
|
Income from direct financing lease
|
|
—
|
|
|
—
|
|
|
48,917
|
|
|
—
|
|
|
48,917
|
|
|
Real estate taxes paid by tenants
|
|
—
|
|
|
41,441
|
|
|
26,402
|
|
|
—
|
|
|
67,843
|
|
|
Total rental revenue
|
|
—
|
|
|
424,994
|
|
|
259,210
|
|
|
—
|
|
|
684,204
|
|
|
Gaming, food, beverage and other
|
|
—
|
|
|
—
|
|
|
149,661
|
|
|
—
|
|
|
149,661
|
|
|
Total revenues
|
|
—
|
|
|
424,994
|
|
|
408,871
|
|
|
—
|
|
|
833,865
|
|
|
Less promotional allowances
|
|
—
|
|
|
—
|
|
|
(5,610
|
)
|
|
—
|
|
|
(5,610
|
)
|
|
Net revenues
|
|
—
|
|
|
424,994
|
|
|
403,261
|
|
|
—
|
|
|
828,255
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming, food, beverage and other
|
|
—
|
|
|
—
|
|
|
82,463
|
|
|
—
|
|
|
82,463
|
|
|
Real estate taxes
|
|
—
|
|
|
41,510
|
|
|
27,938
|
|
|
—
|
|
|
69,448
|
|
|
Land rights and ground lease expense
|
|
—
|
|
|
2,685
|
|
|
12,114
|
|
|
—
|
|
|
14,799
|
|
|
General and administrative
|
|
—
|
|
|
48,452
|
|
|
22,916
|
|
|
—
|
|
|
71,368
|
|
|
Depreciation
|
|
—
|
|
|
93,476
|
|
|
16,078
|
|
|
—
|
|
|
109,554
|
|
|
Total operating expenses
|
|
—
|
|
|
186,123
|
|
|
161,509
|
|
|
—
|
|
|
347,632
|
|
|
Income from operations
|
|
—
|
|
|
238,871
|
|
|
241,752
|
|
|
—
|
|
|
480,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
—
|
|
|
(185,896
|
)
|
|
—
|
|
|
—
|
|
|
(185,896
|
)
|
|
Interest income
|
|
—
|
|
|
169
|
|
|
1,954
|
|
|
—
|
|
|
2,123
|
|
|
Intercompany dividends and interest
|
|
—
|
|
|
318,047
|
|
|
19,670
|
|
|
(337,717
|
)
|
|
—
|
|
|
Total other expenses
|
|
—
|
|
|
132,320
|
|
|
21,624
|
|
|
(337,717
|
)
|
|
(183,773
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
—
|
|
|
371,191
|
|
|
263,376
|
|
|
(337,717
|
)
|
|
296,850
|
|
|
Income tax expense
|
|
—
|
|
|
1,016
|
|
|
6,529
|
|
|
—
|
|
|
7,545
|
|
|
Net income
|
|
$
|
—
|
|
|
$
|
370,175
|
|
|
$
|
256,847
|
|
|
$
|
(337,717
|
)
|
|
$
|
289,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2016
Consolidating Statement of Cash Flows
|
|
Parent
Guarantor
|
|
Subsidiary
Issuers
|
|
Other
Subsidiary
Non-Issuers
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
—
|
|
|
$
|
370,175
|
|
|
$
|
256,847
|
|
|
$
|
(337,717
|
)
|
|
$
|
289,305
|
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
—
|
|
|
93,476
|
|
|
22,241
|
|
|
—
|
|
|
115,717
|
|
|
Amortization of debt issuance costs
|
|
—
|
|
|
15,146
|
|
|
—
|
|
|
—
|
|
|
15,146
|
|
|
(Gains) losses on dispositions of property
|
|
—
|
|
|
(471
|
)
|
|
16
|
|
|
—
|
|
|
(455
|
)
|
|
Deferred income taxes
|
|
—
|
|
|
—
|
|
|
(1,535
|
)
|
|
—
|
|
|
(1,535
|
)
|
|
Stock-based compensation
|
|
—
|
|
|
18,312
|
|
|
—
|
|
|
—
|
|
|
18,312
|
|
|
Straight-line rent adjustments
|
|
—
|
|
|
55,825
|
|
|
2,848
|
|
|
—
|
|
|
58,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase),
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
—
|
|
|
6,939
|
|
|
(1,554
|
)
|
|
2,180
|
|
|
7,565
|
|
|
Intercompany
|
|
—
|
|
|
21
|
|
|
(21
|
)
|
|
—
|
|
|
—
|
|
|
(Decrease) increase,
|
|
0
|
|
|
0
|
|
|
|
|
|
0
|
|
|
|
|
Accounts payable
|
|
—
|
|
|
119
|
|
|
387
|
|
|
—
|
|
|
506
|
|
|
Accrued expenses
|
|
—
|
|
|
(4,303
|
)
|
|
(369
|
)
|
|
—
|
|
|
(4,672
|
)
|
|
Accrued interest
|
|
—
|
|
|
16,120
|
|
|
—
|
|
|
—
|
|
|
16,120
|
|
|
Accrued salaries and wages
|
|
—
|
|
|
(2,817
|
)
|
|
(283
|
)
|
|
—
|
|
|
(3,100
|
)
|
|
Gaming, property and other taxes
|
|
—
|
|
|
899
|
|
|
14
|
|
|
—
|
|
|
913
|
|
|
Income taxes
|
|
—
|
|
|
59
|
|
|
2,121
|
|
|
(2,180
|
)
|
|
—
|
|
|
Other liabilities
|
|
—
|
|
|
1,589
|
|
|
286
|
|
|
—
|
|
|
1,875
|
|
|
Net cash provided by (used in) operating activities
|
|
—
|
|
|
571,089
|
|
|
280,998
|
|
|
(337,717
|
)
|
|
514,370
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital project expenditures
|
|
—
|
|
|
(229
|
)
|
|
(101
|
)
|
|
—
|
|
|
(330
|
)
|
|
Capital maintenance expenditures
|
|
—
|
|
|
—
|
|
|
(3,111
|
)
|
|
—
|
|
|
(3,111
|
)
|
|
Proceeds from sale of property and equipment
|
|
—
|
|
|
897
|
|
|
237
|
|
|
—
|
|
|
1,134
|
|
|
Principal payments on loan receivable
|
|
—
|
|
|
—
|
|
|
3,150
|
|
|
—
|
|
|
3,150
|
|
|
Acquisition of real estate assets
|
|
—
|
|
|
—
|
|
|
(3,267,992
|
)
|
|
—
|
|
|
(3,267,992
|
)
|
|
Collection of principal payments on investment in direct financing lease
|
|
—
|
|
|
—
|
|
|
48,533
|
|
|
—
|
|
|
48,533
|
|
|
Net cash provided by (used in) investing activities
|
|
—
|
|
|
668
|
|
|
(3,219,284
|
)
|
|
—
|
|
|
(3,218,616
|
)
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
(428,352
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(428,352
|
)
|
|
Proceeds from exercise of options, net of taxes paid related to shares withheld for tax purposes on restricted stock award vestings
|
|
113,484
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
113,484
|
|
|
Proceeds from issuance of common stock, net of issuance costs
|
|
870,810
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
870,810
|
|
|
Proceeds from issuance of long-term debt
|
|
—
|
|
|
2,552,000
|
|
|
—
|
|
|
—
|
|
|
2,552,000
|
|
|
Financing costs
|
|
—
|
|
|
(31,911
|
)
|
|
—
|
|
|
—
|
|
|
(31,911
|
)
|
|
Payments of long-term debt
|
|
—
|
|
|
(377,104
|
)
|
|
—
|
|
|
—
|
|
|
(377,104
|
)
|
|
Intercompany financing
|
|
(555,942
|
)
|
|
(2,711,684
|
)
|
|
2,929,909
|
|
|
337,717
|
|
|
—
|
|
|
Net cash (used in) provided by financing activities
|
|
—
|
|
|
(568,699
|
)
|
|
2,929,909
|
|
|
337,717
|
|
|
2,698,927
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
—
|
|
|
3,058
|
|
|
(8,377
|
)
|
|
—
|
|
|
(5,319
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
—
|
|
|
8,716
|
|
|
33,159
|
|
|
—
|
|
|
41,875
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
11,774
|
|
|
$
|
24,782
|
|
|
$
|
—
|
|
|
$
|
36,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
Consolidating Statement of Income
|
|
Parent
Guarantor
|
|
Subsidiary
Issuers
|
|
Other
Subsidiary
Non-
Issuers
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
—
|
|
|
$
|
378,075
|
|
|
$
|
14,000
|
|
|
$
|
—
|
|
|
$
|
392,075
|
|
|
Real estate taxes paid by tenants
|
|
—
|
|
|
33,041
|
|
|
2,009
|
|
|
—
|
|
|
35,050
|
|
|
Total rental revenue
|
|
—
|
|
|
411,116
|
|
|
16,009
|
|
|
—
|
|
|
427,125
|
|
|
Gaming, food, beverage and other
|
|
—
|
|
|
—
|
|
|
153,523
|
|
|
—
|
|
|
153,523
|
|
|
Total revenues
|
|
—
|
|
|
411,116
|
|
|
169,532
|
|
|
—
|
|
|
580,648
|
|
|
Less promotional allowances
|
|
—
|
|
|
—
|
|
|
(5,595
|
)
|
|
—
|
|
|
(5,595
|
)
|
|
Net revenues
|
|
—
|
|
|
411,116
|
|
|
163,937
|
|
|
—
|
|
|
575,053
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming, food, beverage and other
|
|
—
|
|
|
—
|
|
|
85,774
|
|
|
—
|
|
|
85,774
|
|
|
Real estate taxes
|
|
—
|
|
|
33,041
|
|
|
3,371
|
|
|
—
|
|
|
36,412
|
|
|
Land rights and ground lease expense
|
|
—
|
|
|
2,812
|
|
|
—
|
|
|
—
|
|
|
2,812
|
|
|
General and administrative
|
|
—
|
|
|
59,138
|
|
|
23,719
|
|
|
—
|
|
|
82,857
|
|
|
Depreciation
|
|
—
|
|
|
94,380
|
|
|
15,403
|
|
|
—
|
|
|
109,783
|
|
|
Total operating expenses
|
|
—
|
|
|
189,371
|
|
|
128,267
|
|
|
—
|
|
|
317,638
|
|
|
Income from operations
|
|
—
|
|
|
221,745
|
|
|
35,670
|
|
|
—
|
|
|
257,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
—
|
|
|
(124,183
|
)
|
|
—
|
|
|
—
|
|
|
(124,183
|
)
|
|
Interest income
|
|
—
|
|
|
10
|
|
|
2,322
|
|
|
—
|
|
|
2,332
|
|
|
Intercompany dividends and interest
|
|
—
|
|
|
36,292
|
|
|
7,094
|
|
|
(43,386
|
)
|
|
—
|
|
|
Total other expenses
|
|
—
|
|
|
(87,881
|
)
|
|
9,416
|
|
|
(43,386
|
)
|
|
(121,851
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
—
|
|
|
133,864
|
|
|
45,086
|
|
|
(43,386
|
)
|
|
135,564
|
|
|
Income tax expense
|
|
—
|
|
|
1,338
|
|
|
6,104
|
|
|
—
|
|
|
7,442
|
|
|
Net income
|
|
$
|
—
|
|
|
$
|
132,526
|
|
|
$
|
38,982
|
|
|
$
|
(43,386
|
)
|
|
$
|
128,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
Consolidating Statement of Cash Flows
|
|
Parent
Guarantor
|
|
Subsidiary
Issuers
|
|
Other
Subsidiary
Non-Issuers
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
—
|
|
|
$
|
132,526
|
|
|
$
|
38,982
|
|
|
$
|
(43,386
|
)
|
|
$
|
128,122
|
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
—
|
|
|
94,380
|
|
|
15,403
|
|
|
—
|
|
|
109,783
|
|
|
Amortization of debt issuance costs
|
|
—
|
|
|
14,016
|
|
|
—
|
|
|
—
|
|
|
14,016
|
|
|
Losses on sales of property
|
|
—
|
|
|
152
|
|
|
33
|
|
|
—
|
|
|
185
|
|
|
Deferred income taxes
|
|
—
|
|
|
—
|
|
|
(813
|
)
|
|
—
|
|
|
(813
|
)
|
|
Stock-based compensation
|
|
—
|
|
|
16,811
|
|
|
—
|
|
|
—
|
|
|
16,811
|
|
|
Straight-line rent adjustments
|
|
—
|
|
|
55,825
|
|
|
—
|
|
|
—
|
|
|
55,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
—
|
|
|
(9,988
|
)
|
|
1,699
|
|
|
(1,423
|
)
|
|
(9,712
|
)
|
|
Intercompany
|
|
—
|
|
|
2,484
|
|
|
(2,484
|
)
|
|
—
|
|
|
—
|
|
|
Increase (decrease),
|
|
0
|
|
|
0
|
|
|
|
|
|
0
|
|
|
|
|
Accounts payable
|
|
—
|
|
|
(1,013
|
)
|
|
67
|
|
|
—
|
|
|
(946
|
)
|
|
Accrued expenses
|
|
—
|
|
|
4,104
|
|
|
137
|
|
|
—
|
|
|
4,241
|
|
|
Accrued interest
|
|
—
|
|
|
95
|
|
|
—
|
|
|
—
|
|
|
95
|
|
|
Accrued salaries and wages
|
|
—
|
|
|
715
|
|
|
423
|
|
|
—
|
|
|
1,138
|
|
|
Gaming, property and other taxes
|
|
—
|
|
|
(898
|
)
|
|
(58
|
)
|
|
—
|
|
|
(956
|
)
|
|
Income taxes
|
|
—
|
|
|
125
|
|
|
(1,548
|
)
|
|
1,423
|
|
|
—
|
|
|
Other liabilities
|
|
—
|
|
|
1,934
|
|
|
(35
|
)
|
|
—
|
|
|
1,899
|
|
|
Net cash provided by (used in) operating activities
|
|
—
|
|
|
311,268
|
|
|
51,806
|
|
|
(43,386
|
)
|
|
319,688
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital project expenditures
|
|
—
|
|
|
(10,252
|
)
|
|
(5,897
|
)
|
|
—
|
|
|
(16,149
|
)
|
|
Capital maintenance expenditures
|
|
—
|
|
|
—
|
|
|
(2,953
|
)
|
|
—
|
|
|
(2,953
|
)
|
|
Proceeds from sale of property and equipment
|
|
—
|
|
|
304
|
|
|
6
|
|
|
—
|
|
|
310
|
|
|
Principal payments on loan receivable
|
|
—
|
|
|
—
|
|
|
4,650
|
|
|
—
|
|
|
4,650
|
|
|
Net cash used in investing activities
|
|
—
|
|
|
(9,948
|
)
|
|
(4,194
|
)
|
|
—
|
|
|
(14,142
|
)
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
(251,732
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(251,732
|
)
|
|
Proceeds from exercise of options, net of taxes paid related to shares withheld for tax purposes on restricted stock award vestings
|
|
29,686
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,686
|
|
|
Financing costs
|
|
—
|
|
|
(9,500
|
)
|
|
—
|
|
|
—
|
|
|
(9,500
|
)
|
|
Payments of long-term debt
|
|
—
|
|
|
(68,098
|
)
|
|
—
|
|
|
—
|
|
|
(68,098
|
)
|
|
Intercompany financing
|
|
219,403
|
|
|
(219,456
|
)
|
|
(43,333
|
)
|
|
43,386
|
|
|
—
|
|
|
Net cash (used in) provided by financing activities
|
|
(2,643
|
)
|
|
(297,054
|
)
|
|
(43,333
|
)
|
|
43,386
|
|
|
(299,644
|
)
|
|
Net (decrease) increase in cash and cash equivalents
|
|
(2,643
|
)
|
|
4,266
|
|
|
4,279
|
|
|
—
|
|
|
5,902
|
|
|
Cash and cash equivalents at beginning of period
|
|
2,643
|
|
|
4,450
|
|
|
28,880
|
|
|
$
|
—
|
|
|
35,973
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
8,716
|
|
|
$
|
33,159
|
|
|
$
|
—
|
|
|
$
|
41,875
|
|
20. Subsequent Events
On
February 1, 2018
, the Company declared a regular quarterly cash dividend of
$0.63
per share, which is payable on
March 23, 2018
to shareholders of record as of
March 9, 2018
.
During January 2018, the Company repaid
$45 million
of borrowings under its Term Loan A facility.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
December 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Cost to Company
|
|
Net Capitalized Costs (Retirements) Subsequent to Acquisition
|
|
Gross Amount at which Carried at Close of Period
|
|
|
|
|
|
|
|
Life on
which
Depreciation
in Latest
Income
Statement is
Computed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original
Date of
Construction /
Renovation
|
|
|
|
|
Description
|
|
Location
|
|
Encumbrances
|
|
Land and Improvements
|
|
Buildings and
Improvements
|
|
|
Land and Improvements
|
|
Buildings and
Improvements
|
|
Total
(1)
|
|
Accumulated
Depreciation
|
|
|
Date Acquire
d
|
|
|
Rental Properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hollywood Casino Lawrenceburg
|
|
Lawrenceburg, IN
|
|
$
|
—
|
|
|
$
|
15,251
|
|
|
$
|
342,393
|
|
|
$
|
(30
|
)
|
|
$
|
15,222
|
|
|
$
|
342,392
|
|
|
$
|
357,614
|
|
|
$
|
124,203
|
|
|
1997/2009
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino Aurora
|
|
Aurora, IL
|
|
—
|
|
|
4,937
|
|
|
98,378
|
|
|
(383
|
)
|
|
4,936
|
|
|
97,996
|
|
|
102,932
|
|
|
60,978
|
|
|
1993/2002/ 2012
|
|
11/1/2013
|
|
30
|
|
Hollywood Casino Joliet
|
|
Joliet, IL
|
|
—
|
|
|
19,214
|
|
|
101,104
|
|
|
—
|
|
|
19,214
|
|
|
101,104
|
|
|
120,318
|
|
|
55,119
|
|
|
1992/2003/ 2010
|
|
11/1/2013
|
|
31
|
|
Argosy Casino Alton
|
|
Alton, IL
|
|
—
|
|
|
—
|
|
|
6,462
|
|
|
—
|
|
|
—
|
|
|
6,462
|
|
|
6,462
|
|
|
4,302
|
|
|
1991/1999
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino Toledo
|
|
Toledo, OH
|
|
—
|
|
|
12,003
|
|
|
144,093
|
|
|
—
|
|
|
12,003
|
|
|
144,093
|
|
|
156,096
|
|
|
29,566
|
|
|
2012
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino Columbus
|
|
Columbus, OH
|
|
—
|
|
|
38,240
|
|
|
188,543
|
|
|
105
|
|
|
38,266
|
|
|
188,622
|
|
|
226,888
|
|
|
38,132
|
|
|
2012
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino at Charles Town Races
|
|
Charles Town, WV
|
|
—
|
|
|
35,102
|
|
|
233,069
|
|
|
—
|
|
|
35,102
|
|
|
233,069
|
|
|
268,171
|
|
|
120,949
|
|
|
1997/2010
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino at Penn National Race Course
|
|
Grantville, PA
|
|
—
|
|
|
25,500
|
|
|
161,810
|
|
|
—
|
|
|
25,500
|
|
|
161,810
|
|
|
187,310
|
|
|
68,266
|
|
|
2008/2010
|
|
11/1/2013
|
|
31
|
|
M Resort
|
|
Henderson, NV
|
|
—
|
|
|
66,104
|
|
|
126,689
|
|
|
(436
|
)
|
|
65,668
|
|
|
126,689
|
|
|
192,357
|
|
|
30,973
|
|
|
2009/2012
|
|
11/1/2013
|
|
30
|
|
Hollywood Casino Bangor
|
|
Bangor, ME
|
|
—
|
|
|
12,883
|
|
|
84,257
|
|
|
—
|
|
|
12,883
|
|
|
84,257
|
|
|
97,140
|
|
|
28,896
|
|
|
2008/2012
|
|
11/1/2013
|
|
31
|
|
Zia Park Casino
|
|
Hobbs, NM
|
|
—
|
|
|
9,313
|
|
|
38,947
|
|
|
—
|
|
|
9,313
|
|
|
38,947
|
|
|
48,260
|
|
|
18,020
|
|
|
2005
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino Gulf Coast
|
|
Bay St. Louis, MS
|
|
—
|
|
|
59,388
|
|
|
87,352
|
|
|
(229
|
)
|
|
59,176
|
|
|
87,335
|
|
|
146,511
|
|
|
47,006
|
|
|
1992/2006/ 2011
|
|
11/1/2013
|
|
40
|
|
Argosy Casino Riverside
|
|
Riverside, MO
|
|
—
|
|
|
23,468
|
|
|
143,301
|
|
|
(77
|
)
|
|
23,391
|
|
|
143,301
|
|
|
166,692
|
|
|
58,364
|
|
|
1994/2007
|
|
11/1/2013
|
|
37
|
|
Hollywood Casino Tunica
|
|
Tunica, MS
|
|
—
|
|
|
4,634
|
|
|
42,031
|
|
|
—
|
|
|
4,634
|
|
|
42,031
|
|
|
46,665
|
|
|
25,293
|
|
|
1994/2012
|
|
11/1/2013
|
|
31
|
|
Boomtown Biloxi
|
|
Biloxi, MS
|
|
—
|
|
|
3,423
|
|
|
63,083
|
|
|
(137
|
)
|
|
3,286
|
|
|
63,083
|
|
|
66,369
|
|
|
43,434
|
|
|
1994/2006
|
|
11/1/2013
|
|
15
|
|
Hollywood Casino St. Louis
|
|
Maryland Heights, MO
|
|
—
|
|
|
44,198
|
|
|
177,063
|
|
|
—
|
|
|
44,198
|
|
|
177,063
|
|
|
221,261
|
|
|
63,611
|
|
|
1997/2013
|
|
11/1/2013
|
|
13
|
|
Hollywood Casino at Dayton Raceway
(2)
|
|
Dayton, OH
|
|
—
|
|
|
3,211
|
|
|
—
|
|
|
86,288
|
|
|
3,211
|
|
|
86,288
|
|
|
89,499
|
|
|
9,382
|
|
|
2014
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino at Mahoning Valley Race Track
(2)
|
|
Youngstown, OH
|
|
—
|
|
|
5,683
|
|
|
—
|
|
|
94,314
|
|
|
5,833
|
|
|
94,164
|
|
|
99,997
|
|
|
9,970
|
|
|
2014
|
|
11/1/2013
|
|
31
|
|
Resorts Casino Tunica
|
|
Tunica, MS
|
|
—
|
|
|
—
|
|
|
12,860
|
|
|
—
|
|
|
—
|
|
|
12,860
|
|
|
12,860
|
|
|
791
|
|
|
1994/1996/ 2005/2014
|
|
5/1/2017
|
|
31
|
|
1
st
Jackpot Casino (formerly known as Bally's Casino Tunica)
|
|
Tunica, MS
|
|
—
|
|
|
161
|
|
|
10,100
|
|
|
—
|
|
|
161
|
|
|
10,100
|
|
|
10,261
|
|
|
234
|
|
|
1995
|
|
5/1/2017
|
|
31
|
|
Casino Queen
|
|
East St. Louis, IL
|
|
—
|
|
|
70,716
|
|
|
70,014
|
|
|
—
|
|
|
70,716
|
|
|
70,014
|
|
|
140,730
|
|
|
12,049
|
|
|
1999
|
|
1/23/2014
|
|
31
|
|
Ameristar Black Hawk
|
|
Black Hawk, CO
|
|
—
|
|
|
238,864
|
|
|
—
|
|
|
—
|
|
|
238,864
|
|
|
—
|
|
|
238,864
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
Belterra Casino Resort
|
|
Florence, IN
|
|
—
|
|
|
56,368
|
|
|
—
|
|
|
—
|
|
|
56,368
|
|
|
—
|
|
|
56,368
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ameristar Council Bluffs
|
|
Council Bluffs, IA
|
|
—
|
|
|
78,707
|
|
|
—
|
|
|
—
|
|
|
78,707
|
|
|
—
|
|
|
78,707
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
L'Auberge Baton Rouge
|
|
Baton Rouge, LA
|
|
—
|
|
|
199,316
|
|
|
—
|
|
|
—
|
|
|
199,316
|
|
|
—
|
|
|
199,316
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
Boomtown Bossier City
|
|
Bossier City, LA
|
|
—
|
|
|
77,152
|
|
|
—
|
|
|
—
|
|
|
77,152
|
|
|
—
|
|
|
77,152
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
Boomtown New Orleans
|
|
Boomtown, LA
|
|
—
|
|
|
43,761
|
|
|
—
|
|
|
—
|
|
|
43,761
|
|
|
—
|
|
|
43,761
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
Ameristar Vicksburg
|
|
Vicksburg, MS
|
|
—
|
|
|
97,900
|
|
|
—
|
|
|
—
|
|
|
97,900
|
|
|
—
|
|
|
97,900
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
Ameristar Kansas City
|
|
Kansas City, MO
|
|
—
|
|
|
222,231
|
|
|
—
|
|
|
—
|
|
|
222,231
|
|
|
—
|
|
|
222,231
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
Ameristar St. Charles
|
|
St. Charles, MO
|
|
—
|
|
|
363,203
|
|
|
—
|
|
|
—
|
|
|
363,203
|
|
|
—
|
|
|
363,203
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
Jackpot Properties
|
|
Jackpot, NV
|
|
—
|
|
|
45,045
|
|
|
—
|
|
|
—
|
|
|
45,045
|
|
|
—
|
|
|
45,045
|
|
|
—
|
|
|
N/A
|
|
4/28/2016
|
|
N/A
|
|
The Meadows Racetrack and Casino
|
|
Washington, PA
|
|
—
|
|
|
181,532
|
|
|
141,370
|
|
|
386
|
|
|
181,918
|
|
|
141,370
|
|
|
323,288
|
|
|
7,311
|
|
|
2006
|
|
9/9/2016
|
|
31
|
|
|
|
|
|
$
|
—
|
|
|
$
|
2,057,508
|
|
|
$
|
2,272,919
|
|
|
$
|
179,801
|
|
|
$
|
2,057,178
|
|
|
$
|
2,453,050
|
|
|
$
|
4,510,228
|
|
|
$
|
856,849
|
|
|
|
|
|
|
|
|
Headquarters Property:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GLPI Corporate Office
(3)
|
|
Wyomissing, PA
|
|
$
|
—
|
|
|
$
|
750
|
|
|
$
|
8,465
|
|
|
$
|
58
|
|
|
$
|
750
|
|
|
$
|
8,523
|
|
|
$
|
9,273
|
|
|
$
|
607
|
|
|
2014/2015
|
|
9/19/2014
|
|
31
|
|
|
|
|
|
$
|
—
|
|
|
$
|
2,058,258
|
|
|
$
|
2,281,384
|
|
|
$
|
179,859
|
|
|
$
|
2,057,928
|
|
|
$
|
2,461,573
|
|
|
$
|
4,519,501
|
|
|
$
|
857,456
|
|
|
|
|
|
|
|
(1)
The Company acquired substantially all of the real estate assets of Pinnacle Entertainment, Inc. and subsequently leased the assets back to Pinnacle in April 2016. As discussed further in the footnotes to the Consolidated Financial Statements, however, the Pinnacle Master Lease was bifurcated between an operating lease and a direct financing lease, resulting in the land that is subject to operating lease treatment being recorded as a real estate asset on the Company's consolidated balance sheet, while the building assets that triggered direct financing lease treatment are recorded as an investment in direct financing lease on the Company's consolidated balance sheet. Additionally, at several of the properties acquired from Pinnacle, the Company acquired land lease rights only (rights to land subject to long-term ground leases). Land lease rights are recorded as land rights on the Company's consolidated balance sheet and amortized through land rights and ground lease expense on the Company's consolidated statement of income. Therefore, although the schedule above discloses the Company's real estate investments as required, the Company directs readers to the Consolidated Financial Statements for a complete understanding of the assets acquired from Pinnacle. The aggregate cost for federal income tax purposes of the properties listed above was
$6.92 billion
at
December 31, 2017
. This amount includes the tax basis of all real property assets acquired from Pinnacle, including building assets.
(2)
Hollywood Casino at Dayton Raceway and Hollywood Casino at Mahoning Valley Race Course were jointly developed with Penn National Gaming, Inc. The costs capitalized subsequent to acquisition represent the capital expenditures incurred by the Company subsequent to the transfer of the development properties at Spin-Off. Both properties commenced operations and began paying rent during the year ended December 31, 2014.
(3)
The Company's corporate headquarters building was completed in October 2015. The land was purchased on September 19, 2014 and construction on the building occurred through October 2015.
A summary of activity for real estate and accumulated depreciation for the years ended
December 31, 2017
,
2016
and
2015
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2017
|
|
2016
|
|
2015
|
|
Real Estate:
|
(in thousands)
|
|
Balance at the beginning of the period
|
$
|
4,495,972
|
|
|
$
|
2,750,867
|
|
|
$
|
2,742,845
|
|
|
Acquisitions
|
23,507
|
|
|
1,745,449
|
|
|
—
|
|
|
Capital expenditures and assets placed in service
|
32
|
|
|
82
|
|
|
8,478
|
|
|
Dispositions
|
(10
|
)
|
|
(426
|
)
|
|
(456
|
)
|
|
Balance at the end of the year
|
$
|
4,519,501
|
|
|
$
|
4,495,972
|
|
|
$
|
2,750,867
|
|
|
Accumulated Depreciation:
|
|
|
|
|
|
|
Balance at the beginning of the period
|
$
|
(756,881
|
)
|
|
$
|
(660,808
|
)
|
|
$
|
(565,297
|
)
|
|
Depreciation expense
|
(100,576
|
)
|
|
(96,073
|
)
|
|
(95,511
|
)
|
|
Dispositions
|
1
|
|
|
—
|
|
|
—
|
|
|
Balance at the end of the year
|
$
|
(857,456
|
)
|
|
$
|
(756,881
|
)
|
|
$
|
(660,808
|
)
|