- Establishes 2015 Third Quarter and Updates
Full Year Guidance -
Penn National Gaming, Inc. (PENN: Nasdaq)
Conference Call:
Today, July 23, 2015 at 9:00 a.m. ET
Dial-in number:
212/231-2919
Webcast:
www.pngaming.com
Replay information provided below
Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National
Gaming,” “Penn National,” “Penn,” or the “Company”) today reported
operating results for the three months ended June 30, 2015, as
summarized below.
Summary of Second Quarter
Results
Three Months Ended
June 30,
(in millions, except per share data)
(unaudited)
2015 Actual 2015 Guidance (3)
2014 Actual Net revenues $ 701.0 $
672.7 $ 652.1
Adjusted EBITDAR (1)
195.2 185.8 186.7
Rental expense related to Master Lease (109.5 )
(108.8 ) (104.6 )
Adjusted EBITDA
(2) 85.7 77.0
82.1 Less: Impact of stock compensation, non-operating items
for Kansas JV, depreciation and amortization, gain/loss on disposal
of assets, interest expense - net, income taxes, and other expenses
(68.8 ) (66.7 ) (77.9 )
Net
income $ 16.9 $ 10.3 $ 4.2
Diluted earnings per
common share $ 0.19 $ 0.11 $ 0.05
(1)
Adjusted EBITDAR is adjusted EBITDA
(defined below) excluding rent expense relating to 18 of our
properties under the Master Lease with Gaming and Leisure
Properties, Inc. (“GLPI”).
(2)
Adjusted EBITDA is income (loss) from
operations, excluding the impact of stock compensation, impairment
charges, insurance recoveries and deductible charges, depreciation
and amortization and gain or loss on disposal of assets. Adjusted
EBITDA is also inclusive of income or loss from unconsolidated
affiliates, with our share of the non-operating items added back
for our joint venture in Kansas Entertainment, LLC (“Kansas
Entertainment” or “Kansas JV”). A reconciliation of net income
(loss) per accounting principles generally accepted in the United
States of America (“GAAP”) to adjusted EBITDA and adjusted EBITDAR,
as well as income (loss) from operations per GAAP to adjusted
EBITDA and adjusted EBITDAR, is included in the accompanying
financial schedules.
(3)
The guidance figures in the table above
present the guidance Penn National Gaming provided on April 23,
2015 for the three months ended June 30, 2015.
Review of Second Quarter 2015 Results vs. Guidance and Second
Quarter 2014 Results
Three Months Ended June 30, 2015
Pre-tax After-tax (in thousands)
(unaudited) Income, per guidance (1) $ 18,459 $ 10,337
EBITDA variances: Positive operating segment variance 15,306
8,884 Cash-settled stock-based awards (2,978 ) (1,830 ) Higher rent
and bonus expense from out-performance (1,326 ) (792 ) Property tax
and other accruals (1,305 ) (802 ) Other, which includes higher
pre-opening expenses (995 ) (611 ) Total
EBITDA variances from guidance 8,702 4,849 Other 879 511 Tax
variance 1,189 Income, as reported $
28,040 $ 16,886
(1)
The guidance figures in the tables above
present the guidance Penn National Gaming provided on April 23,
2015 for the three months ended June 30, 2015.
Timothy J. Wilmott, President and Chief Executive Officer of
Penn National Gaming, commented, “Penn National Gaming delivered a
very strong second quarter as our consolidated adjusted EBITDAR,
adjusted EBITDA, net income and diluted EPS all exceeded guidance.
During the quarter, we also significantly advanced our long-term
growth strategies with the successful opening of Plainridge Park
Casino, our announced agreement to acquire Tropicana Las Vegas, the
ongoing development of Hollywood Casino Jamul-San Diego, and our
recent agreements that mark our entrée in digital gaming.
“Our operating results exceeded guidance partially as a result
of year-over-year improvements in both customer visits and spend
per visit at our properties on a consolidated same-store basis.
Additionally, our earnings growth reflects initial contributions
from the June 24 opening of Plainridge Park Casino, as well as
continued solid contributions from Hollywood Gaming at Dayton
Raceway and Hollywood Gaming at Mahoning Valley Racecourse, both of
which opened in the third quarter of last year and more than offset
the mid-2014 closure of Argosy Casino Sioux City.
“Overall, second quarter adjusted EBITDA exceeded guidance by
$8.7 million with a $15.3 million positive operating segment
variance partially offset by a $3.0 million impact related to
cash-settled stock based awards and $1.3 million of higher rent and
compensation expense related to the strong quarterly performance as
well as other charges disclosed in this release.
“During the second quarter, adjusted EBITDAR margin in our
operating segments rose slightly on a year-over-year basis to
31.45%. On a consolidated basis, the second quarter adjusted
EBITDAR margin of 27.9% reflects higher corporate overhead costs of
$9.3 million which were primarily attributable to a rise in
cash-settled stock award expense of $6.4 million and increased
bonus accruals of $1.8 million due to the improved results.
“We believe that Penn National remains favorably positioned for
continued adjusted EBITDA growth in the second half of 2015 based
on the disciplined management of our existing properties, growing
evidence of an improved operating environment, a full year of
operations of Hollywood Gaming at Dayton Raceway and Hollywood
Gaming at Mahoning Valley Race Course, continued growth and
efficiencies at our other recently opened or acquired properties,
and a half year of operating results from Plainridge Park
Casino.
“During the first 24 hours of operations at Plainridge Park
Casino, more than 10,000 patrons from Massachusetts and surrounding
states visited the facility, taking advantage of the convenient
location near the south I-495 and I-95 interchange. Guest response
to Plainridge Park’s unique style of gaming, dining, and
entertainment in a clean, comfortable and modern atmosphere remains
overwhelmingly positive and we look forward to further building our
presence in the community and establishing Plainridge Park as the
region’s premier entertainment and gaming facility.
“Construction on Hollywood Casino Jamul-San Diego reached a
milestone in late June as we celebrated the ‘Topping Out’ of the
casino, which remains on target to open in mid-2016. We recently
increased the overall construction budget by $30 million to $390
million for this state-of-the-art three-story gaming and
entertainment facility, which will include more than 1,700 slot
machines, 43 live table games, as well as our signature Final Cut
Steak & Seafood steakhouse, a noodle bar, an upscale sports bar
and posh lounge featuring national and regional entertainment, a
beer garden, a four-venue food court, and an eight-story partially
subterranean parking garage with over 1,800 parking spaces.
“Penn National expects to participate in Hollywood Casino
Jamul-San Diego’s success through a seven year management contract
with the Jamul Indian Tribe which, subject to receipt of regulatory
approvals, we anticipate will result in a management fee equal to
30% of the casino’s pretax income, a licensing fee of 1.5% of gross
gaming revenues for the Hollywood Brand, as well as interest on
funds advanced by the Company to develop the project. We are also
exploring other financing options to provide more permanent, lower
cost terms for the Tribe.
“With our $360 million acquisition of Tropicana Las Vegas
scheduled to close later this year, we will have achieved a key
strategic objective to identify the right resort at a reasonable
cost of entry on the Las Vegas Strip to unleash the significant
potential of our database of nearly 3 million active customers.
Tropicana Las Vegas, which recently underwent more than $200
million in facility upgrades, presents a tremendous opportunity to
drive increased visitation to a premier Strip property, while at
the same time allowing us to strengthen our competitive position in
our regional gaming markets.
“Penn National has developed a two-phase plan to realize the
full value of this transaction, which we expect to implement over
the next three to five years. In the first phase, we intend to
invest approximately $20 million in additional facility
improvements and integration activities, including upgrading the
existing technology infrastructure to integrate Penn National’s
nationwide player loyalty program, Marquee Rewards. In the second
phase, we intend to evaluate other potential facility enhancements
at the property, such as the addition of retail offerings, food and
beverage outlets, additional hotel rooms and enhanced entertainment
offerings. The scope, budget and timing of any such expansion and
improvements will be determined based upon Penn National’s early
operation of the property and customer feedback for additional
amenities.
“Notably, during the quarter, we announced our first formal
social gaming initiative with the agreement to deploy Scientific
Games’ SG Universe product suite at four Penn National properties
beginning later this month with Hollywood Casino at Charles Town
Races. The agreement will allow our customers to access Scientific
Games’ Play4Fun social casino platform and its Mobile Concierge
next-generation marketing capabilities.
“Our solid second quarter results continue to demonstrate the
commitment of our corporate and property level management teams and
employees to efficiently operate our highly diversified portfolio
of new and well-maintained regional gaming facilities with the goal
of enhancing long-term shareholder value.”
Development and Expansion Projects
The table below summarizes Penn National Gaming’s ongoing
development projects:
Project/Scope New
Gaming
Positions
Planned
Total
Budget
Amount Expended through June 30,
2015
Expected
Opening
Date
(in millions) (unaudited)
Plainridge Park Casino (MA) - Construction is completed at
the site of the Plainridge Racecourse for our new gaming operation,
which have been integrated with the existing live harness racing
and simulcasting, featuring 1,250 gaming devices (with a total of
1,500 gaming positions, attributable to approximately 28
multi-player electronic table games), as well as various dining and
entertainment options. 1,500 $ 250 (1 ) $ 220.1
Opened June 24, 2015
Jamul Indian Village project (CA) -
Construction continues at the site for this new Hollywood Casino
branded gaming operation which Penn will manage. The facility is
anticipated to feature over 1,700 slot machines, 43 live table
games as well as multiple restaurants, bars and lounges. 1,958
$ 390 (2 ) $ 90.9 Mid-2016
(1)
Includes a $25 million license fee, which
was paid in March 2014, and $42 million purchase price, both of
which are included in the amount expended above. Additionally,
amounts include cumulative pre-opening costs of $12.3 million and
$10.5 million for the initial cage cash requirements at
opening.
(2)
As disclosed previously, funds advanced
for this project will be accounted for as a loan.
Financial Guidance
Reflecting the current operating and competitive environment,
the table below sets forth 2015 third quarter and full year
guidance targets for financial results, based on the following
assumptions:
- Horseshoe Baltimore, which opened in
August 2014, will impact Hollywood Casino at Charles Town
Races;
- No impact from the anticipated
acquisition of Tropicana Las Vegas;
- A full year contribution from the
Company’s management contract for Casino Rama;
- Full year corporate overhead expenses
of $89.4 million, with $20.9 million to be incurred in the third
quarter of 2015;
- Full year 2015 rent expense of $435.4
million, with $108.7 million to be incurred in the third quarter of
2015, including an estimated annual rent escalation of $3.9 million
at the conclusion of year two of the Master Lease beginning in
November 2015 of which $0.65 million will be incurred in the fourth
quarter;
- Depreciation and amortization charges
in 2015 of $170.3 million, with $43.6 million in the third quarter
of 2015;
- Our share of non-operating items (such
as depreciation and amortization expense) associated with our
Kansas JV will total $10.3 million for 2015, with $2.5 million to
be incurred in the third quarter of 2015;
- Estimated non-cash stock compensation
expenses of $8.5 million for 2015, with $2.1 million to be incurred
in the third quarter of 2015;
- Interest expense in 2015 of $53.1
million, with $13.7 million in the third quarter of 2015;
- LIBOR is based on the forward yield
curve;
- Full year 2015 non-cash accrued
interest income on loan to Jamul Tribe of $11.7 million, with $3.0
million in the third quarter of 2015;
- A diluted share count of approximately
90.6 million shares for the full year 2015; and
- There will be no material changes in
applicable legislation, regulatory environment, world events,
weather, recent consumer trends, economic conditions, oil prices,
competitive landscape (other than listed above) or other
circumstances beyond our control that may adversely affect the
Company’s results of operations.
(in millions, except per share data) Three Months
Ending September 30, Full Year Ending December
31, 2015 Guidance 2014 Actual 2015
Revised Guidance 2015 Prior Guidance (1) 2014
Actual Net revenues $ 728.2 $ 645.9 $
2,786.3 $ 2,735.9 $ 2,590.5
Adjusted
EBITDAR 197.7 170.3 754.5
740.3 706.5 Rental expense
related to Master Lease (108.7 ) (104.6 )
(435.4 ) (433.8 ) (421.4 )
Adjusted EBITDA
89.0 65.7 319.1
306.5 285.1 Less: Impact of stock
compensation, impairment charges, insurance recoveries,
non-operating items for Kansas JV, depreciation and amortization,
gain/loss on disposal of assets, interest expense - net, income
taxes, and other expenses (72.2 ) (57.2 )
(266.4 ) (264.6 ) (518.3 )
Net income (loss) $
16.8 $ 8.5 $ 52.7 $ 41.9 $ (233.2 )
Diluted earnings
(loss) per common share $ 0.18 $ 0.10 $ 0.58
$ 0.46 $ (2.97 )
(1)
The guidance figures in the table above
present the guidance Penn National Gaming provided on April 23,
2015 for the full year ended December 31, 2015.
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Segment Information – Operations
(in thousands) (unaudited)
NET REVENUES ADJUSTED EBITDAR Three
Months Ended June 30, Three Months Ended June 30,
2015 2014 2015 2014 East/Midwest
(1) $ 417,756 $ 361,357 $ 125,974 $ 112,309 West (2) 63,664 59,033
17,958 17,000 Southern Plains (3) 213,689 224,726 74,689 73,008
Other (4) 5,847 7,030 (23,403 ) (15,647
)
Total $ 700,956 $ 652,146
$ 195,218 $ 186,670
NET REVENUES ADJUSTED EBITDAR Six Months
Ended June 30, Six Months Ended June 30, 2015
2014 2015 2014 East/Midwest (1) $ 804,300 $
710,805 $ 242,451 $ 213,959 West (2) 126,250 119,953 35,837 35,556
Southern Plains (3) 423,958 448,483 147,495 146,949 Other (4)
10,586 13,985 (46,350 ) (32,135 )
Total $ 1,365,094 $ 1,293,226
$ 379,433 $ 364,329
(1)
The East/Midwest reportable segment
consists of the following properties: Hollywood Casino at Charles
Town Races, Hollywood Casino Bangor, Hollywood Casino at Penn
National Race Course, Hollywood Casino Lawrenceburg, Hollywood
Casino Toledo, Hollywood Casino Columbus, Hollywood Gaming at
Dayton Raceway, which opened on August 28, 2014, and Hollywood
Gaming at Mahoning Valley Race Course, which opened on September
17, 2014. It also includes the Company’s Casino Rama management
service contract and the Plainville project in Massachusetts, which
the Company opened on June 24, 2015. Our East/Midwest segment
results for the three and six months ended June 30, 2015 included
preopening costs of $6.4 million and $8.9 million, whereas results
for the three and six months ended June 30, 2014 included
preopening charges of $1.6 million and $2.8 million. Results for
the six months ended June 30, 2015 also included a property tax
refund of approximately $2.0 million.
(2)
The West reportable segment consists of
the following properties: Zia Park Casino and the M Resort, as well
as the Jamul Indian Village project, which the Company anticipates
completing in mid-2016.
(3)
The Southern Plains reportable segment
consists of the following properties: Hollywood Casino Aurora,
Hollywood Casino Joliet, Argosy Casino Alton, Argosy Casino
Riverside, Hollywood Casino Tunica, Hollywood Casino Gulf Coast,
Boomtown Biloxi, and Hollywood Casino St. Louis, and includes the
Company’s 50% investment in Kansas Entertainment, which owns the
Hollywood Casino at Kansas Speedway. On July 30, 2014, the Company
closed Argosy Casino Sioux City.
(4)
The Other category consists of the
Company’s standalone racing operations, namely Rosecroft Raceway,
Sanford-Orlando Kennel Club, and the Company’s joint venture
interests in Sam Houston Race Park, Valley Race Park, and Freehold
Raceway, as well as the Company’s 50% joint venture with the
Cordish Companies in New York (which is in the process of being
dissolved). If the Company is successful in obtaining gaming
operations at these locations, they would be assigned to one of the
Company’s regional executives and reported in their respective
reportable segment.
The Other category also includes the Company’s corporate
overhead costs, which were $23.7 million and $47.0 million for the
three and six months ended June 30, 2015, as compared to corporate
overhead costs of $14.4 million and $30.1 million for the three and
six months ended June 30, 2014. Corporate overhead costs included
cash-settled stock-based compensation charges of $7.5 million and
$16.5 million for the three and six months ended June 30, 2015
compared to $1.1 million and $2.7 million for the corresponding
period in the prior year. The reason for the increase was mainly
due to stock price increases for Penn and GLPI common stock during
2015 compared to stock price declines in 2014.
Reconciliation of Net income (GAAP) to
Adjusted EBITDA and Adjusted EBITDAR
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
(in thousands) (unaudited)
Three Months Ended Six Months Ended
June 30, June 30, 2015 2014
2015 2014 Net income $ 16,886
$ 4,176 $ 27,882 $ 8,713
Income tax provision 11,154 8,754 20,414 15,554 Other 956 1,823
(2,133 ) 192 Income from unconsolidated affiliates (4,154 ) (1,473
) (8,136 ) (3,956 ) Interest income (2,443 ) (790 ) (4,313 ) (1,257
) Interest expense 12,295 10,892
24,458 22,187
Income from operations
$ 34,694 $ 23,382 $
58,172 $ 41,433 Loss (gain) on disposal of
assets 234 3 388 (47 ) Impairment Losses - 4,560 - 4,560 Charge for
stock compensation 2,337 2,517 4,421 5,096 Depreciation and
amortization 41,752 47,183 84,674 94,549 Income from unconsolidated
affiliates 4,154 1,473 8,136 3,956 Non-operating items for Kansas
JV 2,528 2,939 5,278
5,860
Adjusted EBITDA $ 85,699
$ 82,057 $ 161,069 $
155,407 Rental expense related to Master Lease
109,519 104,613 218,364
208,922
Adjusted EBITDAR $ 195,218
$ 186,670 $ 379,433
$ 364,329
Reconciliation of Income (loss) from
operations (GAAP) to Adjusted EBITDA and Adjusted EBITDAR
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Segment Information
(in thousands) (unaudited)
Three Months Ended June 30,
2015
East/Midwest West Southern
Plains Other Total Income (loss)
from operations $ 27,853 $ 7,410 $ 26,333 $ (26,902 )
$
34,694 Charge for stock compensation - - - 2,337
2,337 Depreciation and amortization 27,342 2,297 10,697
1,416
41,752 (Gain) loss on disposal of assets 78 144 19 (7
)
234 Income from unconsolidated affiliates - - 4,401 (247 )
4,154 Non-operating items for Kansas JV - -
2,528 -
2,528 Adjusted
EBITDA $ 55,273 $ 9,851 $
43,978 $ (23,403 ) $
85,699 Rental expense related to Master Lease 70,701
8,107 30,711 -
109,519
Adjusted EBITDAR $ 125,974 $
17,958 $ 74,689 $ (23,403
) $ 195,218
Three Months Ended June 30,
2014
East/Midwest West Southern
Plains Other Total Income (loss)
from operations $ 17,003 $ 7,426 $ 17,970 $ (19,017 )
$
23,382 Charge for stock compensation - - - 2,517
2,517 Impairment Losses 4,560 - - -
4,560
Depreciation and amortization 25,911 1,692 17,573 2,007
47,183 (Gain) loss on disposal of assets (30 ) - 39 (6 )
3 Income from unconsolidated affiliates - - 2,621 (1,148 )
1,473 Non-operating items for Kansas JV -
- 2,939 -
2,939
Adjusted EBITDA $ 47,444 $ 9,118
$ 41,142 $ (15,647 ) $
82,057 Rental expense related to Master Lease 64,865
7,882 31,866 -
104,613 Adjusted EBITDAR $ 112,309
$ 17,000 $ 73,008 $
(15,647 ) $ 186,670
Six Months Ended June 30, 2015
East/Midwest West Southern
Plains Other Total Income (loss)
from operations $ 46,947 $ 13,919 $ 50,907 $ (53,601 )
$
58,172 Charge for stock compensation - - - 4,421
4,421 Depreciation and amortization 55,614 4,685 21,480
2,895
84,674 (Gain) loss on disposal of assets (44 ) 324 120
(12 )
388 Income from unconsolidated affiliates - - 8,189
(53 )
8,136 Non-operating items for Kansas JV -
- 5,278 -
5,278
Adjusted EBITDA $ 102,517 $
18,928 $ 85,974 $ (46,350
) $ 161,069 Rental expense related to Master
Lease 139,934 16,909 61,521 -
218,364 Adjusted EBITDAR $
242,451 $ 35,837 $
147,495 $ (46,350 ) $
379,433
Six Months Ended June 30, 2014
East/Midwest West Southern
Plains Other Total Income (loss)
from operations $ 26,605 $ 15,482 $ 39,197 $ (39,851 )
$
41,433 Charge for stock compensation - - - 5,096
5,096 Impairment Losses 4,560 - - -
4,560
Depreciation and amortization 52,734 3,241 34,824 3,750
94,549 (Gain) loss on disposal of assets (117 ) 65 17 (12 )
(47 ) Income from unconsolidated affiliates - - 5,074
(1,118 )
3,956 Non-operating items for Kansas JV -
- 5,860 -
5,860
Adjusted EBITDA $ 83,782 $
18,788 $ 84,972 $ (32,135
) $ 155,407 Rental expense related to Master
Lease 130,177 16,768 61,977 -
208,922 Adjusted EBITDAR
$ 213,959 $ 35,556 $
146,949 $ (32,135 ) $
364,329
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended June 30, Six Months Ended June
30, 2015 2014 2015
2014 Revenues Gaming $ 618,919 $ 576,158 $
1,210,255 $ 1,146,841 Food, beverage and other 117,421 110,574
226,184 215,444 Management service fee 2,816
3,105 4,743 5,563 Revenues
739,156 689,837 1,441,182 1,367,848 Less promotional allowances
(38,200 ) (37,691 ) (76,088 ) (74,622 )
Net revenues 700,956 652,146
1,365,094 1,293,226
Operating
expenses Gaming 313,616 284,107 608,511 570,184 Food, beverage
and other 82,803 80,403 160,732 157,941 General and administrative
118,572 107,898 234,641 215,637 Rental expense related to Master
Lease 109,519 104,613 218,364 208,922 Depreciation and amortization
41,752 47,183 84,674 94,549 Impairment Losses -
4,560 - 4,560 Total
operating expenses 666,262 628,764
1,306,922 1,251,793 Income from
operations 34,694 23,382 58,172
41,433
Other income (expenses)
Interest expense (12,295 ) (10,892 ) (24,458 ) (22,187 ) Interest
income 2,443 790 4,313 1,257 Income from unconsolidated affiliates
4,154 1,473 8,136 3,956 Other (956 ) (1,823 )
2,133 (192 ) Total other expenses (6,654 )
(10,452 ) (9,876 ) (17,166 )
Income
from operations before income taxes 28,040 12,930 48,296 24,267
Income tax provision 11,154 8,754
20,414 15,554
Net income $
16,886 $ 4,176 $ 27,882 $ 8,713
Earnings per common share: Basic earnings per common share $
0.19 $ 0.05 $ 0.32 $ 0.10 Diluted earnings per common share $ 0.19
$ 0.05 $ 0.31 $ 0.10
Weighted-average common shares
outstanding: Basic 79,758 78,458 79,580 78,189 Diluted 90,729
88,936 90,565 88,813
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Supplemental information
(in thousands) (unaudited)
June 30, 2015 December 31, 2014 Cash
and cash equivalents $ 233,118 $ 208,673 Bank Debt $ 794,620
$ 785,683 Notes 295,931 295,610 Other long term obligations (1)
170,372 154,388 Total Debt (2) (3) $ 1,260,923 $
1,235,681
(1)
Other long term obligations at June 30,
2015 include $135 million for the present value of the relocation
fees due for both Hollywood Gaming at Dayton Raceway and Hollywood
Gaming at Mahoning Valley Race Course, $19.9 million based on the
estimated fair value of contingent purchase price consideration
that is payable over ten years to the previous owners of Plainridge
Racecourse, and $15.3 million related to our repayment obligation
on a hotel and event center located near Hollywood Casino
Lawrenceburg.
(2)
Although our joint venture in Kansas
Entertainment is accounted for as an equity method investment and
is not consolidated, this joint venture had no debt outstanding at
June 30, 2015 or December 31, 2014.
(3)
In accordance with new accounting guidance
issued and early adopted by the Company in the first quarter of
2015, debt issuance costs are now classified as a direct reduction
to our debt balances rather than in other assets. Debt issuance
costs were $22.2 million and $25.2 million at June 30, 2015 and
December 31, 2014, respectively. The prior period amounts were
restated to reflect this change.
Penn’s definition of adjusted EBITDA and adjusted EBITDAR
includes our share of the impact of non-operating items (such as
depreciation and amortization) at our joint ventures that have
gaming operations. At this time, Kansas Entertainment, the operator
of Hollywood Casino at Kansas Speedway, is Penn’s only joint
venture that meets this definition. Kansas Entertainment does not
currently have, nor has it ever had, any indebtedness. We have
presented the cash flow distributions we have received from this
investment for the three and six months ended June 30, 2015 and
2014.
Three Months Ended June 30, Six Months Ended June
30, 2015 2014 2015
2014 Cash Flow distributions $ 6,000 $ 5,500 $ 14,000
$ 11,000
Diluted Share Count Methodology
In connection with the spin-off, Penn National Gaming completed
its exchange and repurchase transaction with an affiliate of
Fortress Investment Group, LLC (“Fortress”) on October 11, 2013,
which resulted in the repurchase of $627 million of its Series B
Preferred Stock and the issuance of 8,624 shares of Series C
Preferred Stock, which is equivalent to 8,624,000 common shares
upon sale by Fortress to a third party.
Reconciliation of GAAP to Non-GAAP Measures
Adjusted EBITDA and adjusted EBITDAR are used by management as
the primary measure of the Company’s operating performance. We
define adjusted EBITDA as earnings before interest, taxes, stock
compensation, debt extinguishment charges, impairment charges,
insurance recoveries and deductible charges, depreciation and
amortization, gain or loss on disposal of assets, and other income
or expenses. Adjusted EBITDA is also inclusive of income or loss
from unconsolidated affiliates, with our share of non-operating
items (such as depreciation and amortization) added back for our
joint venture in Kansas Entertainment. Adjusted EBITDAR is adjusted
EBITDA excluding rent expense associated with our Master Lease
agreement with GLPI. Adjusted EBITDA and adjusted EBITDAR have
economic substance because they are used by management as a
performance measure to analyze the performance of our business, and
are especially relevant in evaluating large, long-lived casino
projects because they provide a perspective on the current effects
of operating decisions separated from the substantial
non-operational depreciation charges and financing costs of such
projects. We also present adjusted EBITDA and adjusted EBITDAR
because they are used by some investors and creditors as an
indicator of the strength and performance of ongoing business
operations, including our ability to service debt, fund capital
expenditures, acquisitions and operations. These calculations are
commonly used as a basis for investors, analysts and credit rating
agencies to evaluate and compare operating performance and value
companies within our industry. In addition, gaming companies have
historically reported adjusted EBITDA as a supplement to financial
measures in accordance with GAAP. In order to view the operations
of their casinos on a more stand-alone basis, gaming companies,
including us, have historically excluded from their adjusted EBITDA
calculations certain corporate expenses that do not relate to the
management of specific casino properties. However, adjusted EBITDA
and adjusted EBITDAR are not a measure of performance or liquidity
calculated in accordance with GAAP. Adjusted EBITDA and adjusted
EBITDAR information is presented as a supplemental disclosure, as
management believes that it is a widely used measure of performance
in the gaming industry, is the principal basis for the valuation of
gaming companies, and that it is considered by many to be a better
indicator of the Company’s operating results than net income (loss)
per GAAP. Management uses adjusted EBITDA and adjusted EBITDAR as
the primary measures of the operating performance of its segments,
including the evaluation of operating personnel. Adjusted EBITDA
and adjusted EBITDAR should not be construed as alternatives to
operating income, as indicators of the Company’s operating
performance, as alternatives to cash flows from operating
activities, as measures of liquidity, or as any other measures of
performance determined in accordance with GAAP. The Company has
significant uses of cash flows, including capital expenditures,
interest payments, taxes and debt principal repayments, which are
not reflected in adjusted EBITDA and adjusted EBITDAR. It should
also be noted that other gaming companies that report adjusted
EBITDA information may calculate adjusted EBITDA in a different
manner than the Company and therefore, comparability may be
limited.
A reconciliation of the Company’s net income per GAAP to
adjusted EBITDA and adjusted EBITDAR, as well as the Company’s
income from operations per GAAP to adjusted EBITDA and adjusted
EBITDAR, is included above. Additionally, a reconciliation of each
segment’s income (loss) from operations to adjusted EBITDA and
adjusted EBITDAR is also included above. On a segment level, income
(loss) from operations per GAAP, rather than net income (loss) per
GAAP is reconciled to adjusted EBITDA and adjusted EBITDAR due to,
among other things, the impracticability of allocating interest
expense, interest income, income taxes and certain other items to
the Company’s segments on a segment by segment basis. Management
believes that this presentation is more meaningful to investors in
evaluating the performance of the Company’s segments and is
consistent with the reporting of other gaming companies.
Conference Call, Webcast and Replay Details
Penn National Gaming is hosting a conference call and
simultaneous webcast at 9:00 am ET today, both of which are open to
the general public. The conference call number is 212/231-2919.
Please call five minutes in advance to ensure that you are
connected prior to the presentation. Questions will be reserved for
call-in analysts and investors. Interested parties may also access
the live call on the Internet at www.pngaming.com. Please allow 15
minutes to register and download and install any necessary
software. A replay of the call can be accessed for thirty days on
the Internet at www.pngaming.com.
This press release, which includes financial information to be
discussed by management during the conference call and disclosure
and reconciliation of non-GAAP financial measures, is available on
the Company’s web site, www.pngaming.com, in the “Investors”
section (select link for “Press Releases”).
About Penn National Gaming
Penn National Gaming owns, operates or has ownership interests
in gaming and racing facilities with a focus on slot machine
entertainment. At June 30, 2015, the Company operated twenty-six
facilities in seventeen jurisdictions, including Florida, Illinois,
Indiana, Kansas, Maine, Massachusetts, Maryland, Mississippi,
Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania,
Texas, West Virginia, and Ontario. At June 30, 2015, in aggregate,
Penn National Gaming’s operated facilities featured approximately
32,000 gaming machines, 760 table games and 3,100 hotel rooms.
Forward-looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements can be identified by the use of forward
looking terminology such as “expects,” “believes,” “estimates,”
“projects,” “intends,” “plans,” “seeks,” “may,” “will,” “should” or
“anticipates” or the negative or other variations of these or
similar words, or by discussions of future events, strategies or
risks and uncertainties, including future plans, strategies,
performance, developments, acquisitions, capital expenditures, and
operating results. Actual results may vary materially from
expectations. Although the Company believes that our expectations
are based on reasonable assumptions within the bounds of our
knowledge of our business, there can be no assurance that actual
results will not differ materially from our expectations.
Meaningful factors that could cause actual results to differ from
expectations include, but are not limited to, risks related to the
following: our ability to obtain timely regulatory approvals
required to own, develop and/or operate our facilities, or other
delays or impediments to completing our planned acquisitions or
projects, our ability to secure federal, state and local permits
and approvals necessary for our construction projects; construction
factors, including delays, unexpected remediation costs, local
opposition, organized labor, and increased cost of labor and
materials; our ability to maintain agreements with our horsemen,
pari-mutuel clerks and other organized labor groups; the passage of
state, federal or local legislation (including referenda) that
would expand, restrict, further tax, prevent or negatively impact
operations in or adjacent to the jurisdictions in which we do or
seek to do business (such as a smoking ban at any of our
facilities); the effects of local and national economic, credit,
capital market, housing, and energy conditions on the economy in
general and on the gaming and lodging industries in particular; the
activities of our competitors and the rapid emergence of new
competitors (traditional, internet and sweepstakes based and
taverns); increases in the effective rate of taxation at any of our
properties or at the corporate level; our ability to identify
attractive acquisition and development opportunities and to agree
to terms with, and maintain good relationships with
partners/municipalities for such transactions; the costs and risks
involved in the pursuit of such opportunities and our ability to
complete the acquisition or development of, and achieve the
expected returns from, such opportunities; our expectations for the
continued availability and cost of capital; the outcome of pending
legal proceedings, including the ongoing appeal by the Ohio
Roundtable addressing the legality of video lottery terminals in
Ohio and litigation surrounding our withdrawal from a gaming
project in Western Pennsylvania; changes in accounting standards;
the impact of weather; with respect to the proposed Jamul project
near San Diego, California, particular risks associated with
financing a project of this type, sovereign immunity, local
opposition (including several pending lawsuits), and building a
complex project on a relatively small parcel; with respect to our
Massachusetts project, the ultimate location of the other gaming
facilities in the state; with respect to our social and other
interactive gaming endeavors, risks related to ultimate
profitability, cyber-security, data privacy, intellectual property
and legal and regulatory challenges; and other factors as discussed
in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2014, subsequent Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, each as filed with the United States
Securities and Exchange Commission. The Company does not intend to
update publicly any forward-looking statements except as required
by law. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this press release may not
occur.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150723005285/en/
Penn National Gaming, Inc.Saul V. Reibstein, Chief Financial
Officer, 610/401-2049orJCIRJoseph N. Jaffoni, Richard
Land212/835-8500penn@jcir.com
PENN Entertainment (NASDAQ:PENN)
Historical Stock Chart
From Apr 2024 to May 2024
PENN Entertainment (NASDAQ:PENN)
Historical Stock Chart
From May 2023 to May 2024