2015 Third Quarter Reported Adjusted EBITDA
Reflects Accounting Classification Change for Company’s Master
Lease, Which WillBe Classified as a Financing
Obligation
- Establishes 2015 Fourth Quarter, Updates
Full Year Guidance -
Penn National Gaming, Inc. (PENN:Nasdaq):
Conference Call:
October 22, 2015 at 9:00 a.m.
ET
Dial-in number:
212/231-2905
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 September 30,
2015, as summarized below, which includes the effects of a change
in the classification of the Company’s Master Lease (the “Master
Lease”) with Gaming and Leisure Properties, Inc. (“GLPI”) from an
operating lease to a financing obligation. Reflecting this change
in classification, the Company’s reported Adjusted EBITDA for the
three months ended September 30, 2015, September 30, 2014 and the
guidance for the three months ended September 30, 2015 exclude the
impact of rental expense. As a result, the Company’s historical
definition of Adjusted EBITDAR will now be equivalent to our
current definition of Adjusted EBITDA (and the Company no longer
reports Adjusted EBITDAR). Additional details regarding the change
in the classification of the Company’s Master Lease are provided
below.
Summary of Third Quarter
Results
Three Months Ended
September 30,
(in millions) (unaudited)
2015 Actual
2015 Guidance (2) 2014 Actual Net
revenues $ 739.3 $ 728.2
$ 645.9
Adjusted EBITDA (1)
210.1 197.7 170.3
(1) 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. Due to the change in classification of the
Master Lease as further described below, Adjusted EBITDA presented
above for 2015 Actual, 2015 Guidance and 2014 Actual (for the three
months ended September 30), also excludes rent payments relating to
the 18 properties under the Master Lease of $109.0 million, $108.7
million and $104.6 million, respectively. As such, our prior
definition of Adjusted EBITDA whereby we deducted rent for such
periods would have been $101.1 million, $89.0 million and $65.7
million, respectively. 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”). (2) The
guidance figures in the table above present the guidance Penn
National Gaming provided on July 23, 2015 for the three months
ended September 30, 2015, as adjusted to reflect the change in
classification of the Master Lease from an operating lease to a
financing obligation (as defined below).
Review of Third Quarter 2015 Results vs.
Guidance
Three Months
Ended September 30, 2015 (in thousands)
(unaudited) Adjusted EBITDA, per guidance (1) $ 197,629
Adjusted EBITDA variances: Positive operating segment
variance 2,650 Acquisition related adjusted EBITDA net of
transaction costs (2) 191 Cash-settled stock-based awards 6,863 Net
property level refunds and other benefits 2,541 Other 223
Total Adjusted EBITDA variances from guidance 12,468
Adjusted EBITDA, as reported $ 210,097 (1) The
guidance figure in the table above presents the guidance Penn
National Gaming provided on July 23, 2015 for the three months
ended September 30, 2015, as adjusted to reflect the change in
classification of the Master Lease from an operating lease to a
financing obligation. (2) Acquisition related transaction costs of
$0.7 million were recorded in corporate overhead for the three
months ending September 30, 2015.
Reflecting the change in classification of the
Master Lease from an operating lease to a financing obligation, the
Company will restate its financial statements filed since the
spin-off (the “Spin-off”) of its real estate assets to GLPI on
November 1, 2013 (the “Restatement”). The Restatement (as more
fully described in our Current Report on Form 8-K filed with the
Securities and Exchange Commission on October 22, 2015) is being
made solely to change the classification of the Master Lease from
an operating lease to a financing obligation in accordance with
Generally Accepted Accounting Principles (“GAAP”). During the
preparation and negotiation of the Master Lease, the Company
reviewed its accounting conclusions for the Master Lease with Ernst
& Young, LLP (“EY”), its independent registered public
accounting firm. The Company and its professional advisors believed
that it was appropriate to account for the Master Lease as an
operating lease under GAAP. Subsequent to the Spin-Off, the Company
received unqualified audit opinions on its financial statements at
December 31, 2014 and 2013, respectively, from EY. Upon EY’s recent
reconsideration of that accounting treatment, the Company
re-examined this accounting and the relevant accounting literature.
Following this review, the Company and the Audit Committee of the
Company’s Board of Directors (the “Audit Committee”) determined on
October 20, 2015 that the accounting with respect to the Master
Lease should be revised in order to treat such lease as a financing
obligation. Notably, the adjustments in the Restatement will have
no impact on the following indicators of the Company’s
performance:
- the Company’s cash position;
- the Company’s cash flows;
- the Company’s leverage ratios under its
senior credit facility and other debt instruments (as the terms of
those obligations require the Master Lease to be treated as an
operating lease regardless of the treatment required under
GAAP);
- the Company’s revenues; or
- the Company’s rental payments or other
obligations under the Master Lease.
Timothy J. Wilmott, President and Chief
Executive Officer of Penn National Gaming, commented, “The
Restatement involves a revised view, initiated by our external
auditors, of the technical requirements for operating lease
accounting treatment. This change has no impact on key indicators
of the Company’s performance and the third quarter was very active
and productive for Penn National as we again generated financial
results that exceeded guidance while further advancing and
expanding our development and growth pipeline. Our quarterly
results reflect year-over-year improvements in regional gaming
trends and the continued success of our operating teams in driving
improved adjusted EBITDA margins.
“Compared to the prior year period, third
quarter operating results also benefited from the first full
quarterly contribution from Plainridge Park Casino and our two Ohio
racing and video lottery terminal facilities that opened in last
year’s third quarter. All three of these properties are performing
well and each is currently achieving adjusted EBITDA returns of
approximately 20% on invested capital. We also further expanded our
growth pipeline during the quarter with two exciting opportunities
as we closed on the Tropicana Las Vegas and Prairie State Gaming
(“PSG”) transactions and we’ve realized a partial quarter of
contributions from both operations, net of transaction costs.
“The reported third quarter operating results
reflect year-over-year improvements in both customer visits and
spend per visit at the majority of our properties on a
same-facility basis. Overall, third quarter adjusted EBITDA
exceeded guidance by $12.4 million, inclusive of a $2.7 million
positive operating segment variance but excluding net adjusted
EBITDA contributions from Tropicana Las Vegas and PSG; a $6.9
million benefit related to cash-settled stock based awards; and,
approximately $2.5 million of various non-recurring property-level
positive variances for items such as gaming tax and other
refunds.
“During the third quarter we generated adjusted
EBITDA margin improvements in our East/Midwest and Southern Plains
operating segments, while the margin decline in our West segment
was due to the inclusion of the recently acquired Tropicana Las
Vegas operations. Overall, Penn National’s ongoing execution of
strategies to improve operating efficiencies drove consolidated
third quarter 2015 adjusted EBITDA margin growth of approximately
205 basis points on a year-over-year basis to 28.4%, inclusive of
the slight impact related to our operation of Tropicana Las Vegas
for approximately five weeks during the quarter as well as Prairie
State Gaming which was acquired on September 1, 2015.
“In Massachusetts, revenue trends at Plainridge
Park Casino are largely consistent with other recent property
openings, where revenue numbers taper down over the first few
months, before typically ramping back up to a more normalized run
rate as our marketing programs take effect. Throughout the third
quarter, Plainridge Park’s player loyalty card sign-up, spend per
visit and revenue figures were solid, and we remain confident the
property will extend Penn National’s track record of generating
high returns from prudent capital deployment. Over the coming
months we are implementing several initiatives to fine tune the
gaming floor product mix and overall marketing strategy to build
upon the property’s initial success and customer database which is
now approaching 130,000 unique players.
“Our completion of the $360 million acquisition
of Tropicana Las Vegas in late August represents an exciting and
important milestone for Penn National as it fulfills a long-term
strategic objective to acquire a quality Las Vegas Strip property
with excellent growth prospects at the right location and the right
price. The addition of Tropicana Las Vegas brings significant
economic potential as we can fully leverage our database of nearly
three million active regional gaming customers, a significant
percentage of which regularly visit Las Vegas. Having owned the
property for almost two months, we’ve already begun to implement
numerous initial operational improvements and remain confident in
our two-phase plan to successfully build upon the approximately
$200 million in capital investment in Tropicana Las Vegas completed
by the former owners over the last several years.
“The first of those two phases has commenced
and includes investments at Tropicana Las Vegas to improve the
customer experience by refreshing and enhancing the gaming floor
through updates of slot product and systems and by offering a wider
array of table games; improving the breadth and quality of the
property’s food and beverage offerings; and, integrating Penn
National’s Marquee Rewards player loyalty program with the
property’s systems. In addition to these initiatives, we have
identified opportunities to improve ADR and margins at the property
and realize the high value of the nearly 1,500 recently renovated
guest rooms based on our ability to attract stronger gaming
customers from our database. Longer-term, we will evaluate other
potential facility enhancements at the Tropicana with the scope,
budget and timing of any such expansion and improvements to be
based upon our operation of the property and customer demand for
additional amenities.
“As noted above, during the third quarter, Penn
National also acquired a leading Illinois video gaming terminal
(“VGT”) operator, PSG. As one of the largest and most respected VGT
route operators in Illinois, PSG’s operations include more than
1,100 terminals across a network of 270 bar and retail gaming
establishments throughout the State. We believe PSG offers Penn
National a solid platform for future adjusted EBITDA growth in the
Illinois VGT market and potentially in other states where this form
of gaming may be authorized in the future.
“Reflecting our research and analysis that
social and online gaming represent emerging growth platforms that
complement our growing regional gaming portfolio, we believe our
entrée into these markets, which was further advanced during the
third quarter, will result in incremental adjusted EBITDA, enhanced
customer data analytics and improved marketing efficiency. We
estimate that approximately 40% of our database members participate
in social/online gaming today and our growing digital resources and
capabilities will position Penn National to participate in social
and regulated real-money online opportunities as they develop. We
are very pleased with the early results from our Play 4 Fun launch
in partnership with Scientific Games in the third quarter at our
Hollywood Casino at Charles Town Races and Hollywood Casino at Penn
National Race Course properties and are excited about the future as
we invest in this new business segment.
“Our $390 million Hollywood Casino Jamul-San
Diego development remains on schedule for a mid-2016 opening. We
remain confident its location and proximity to San Diego relative
to competitive alternatives -- combined with its state-of-the-art
design -- position Hollywood Casino Jamul-San Diego to allow the
Jamul Indian Village to become economically self-sufficient and
ultimately generate high quality education, healthcare, and
sufficient housing for tribal members. The three-story gaming and
entertainment facility will include more than 1,700 slot machines,
43 live table games, our signature Final Cut Steak & Seafood
steakhouse, a noodle bar, an upscale sports bar, a 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.
“We believe Penn National remains favorably
positioned for continued adjusted EBITDA growth and enhanced
shareholder value in 2016 and beyond. The Company stands to benefit
from the disciplined management of our existing properties coupled
with growing evidence of an improved operating environment, a full
year of operations of Plainridge Park, strengthened operations at
Tropicana Las Vegas, the addition of PSG and the opportunity to
strategically expand our presence in the VGT market, new
online/social gaming opportunities, continued growth and
efficiencies at our other recently opened or acquired properties,
and a meaningful contribution in 2016 from Hollywood Casino
Jamul-San Diego.”
Development and Expansion Projects
The table below summarizes Penn National
Gaming’s ongoing and recently completed development
projects:
Project/Scope New
Gaming
Positions
Planned
Total
Budget
Amount Expended
through
September 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 operations, which have been integrated with the existing
live harness racing and simulcasting, featuring 1,250 gaming
devices (with a total of 1,414 gaming positions, attributable to
approximately 28 multi-player electronic table games), as well as
various dining and entertainment options. 1,414
$266 (1) $253.4 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 including poker, multiple
restaurants, bars and lounges. 1,958 $390 (2)
$116.7 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 $12.5 million and $10.5
million for the initial cage cash requirements at opening, which
had been anticipated to be $14 million in total. Also includes $2.7
million for the purchase of electronic table games in lieu of
leasing. (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 fourth
quarter and full year guidance targets for financial results based
on the following assumptions:
- Includes operations at Tropicana Las
Vegas (West segment) and Prairie State Gaming (Southern Plains
segment);
- Does not include professional fees and
other costs to be incurred in connection with the change in the
classification of the Master Lease;
- A full year contribution from the
Company’s management contract for Casino Rama;
- Full year corporate overhead expenses
of $82.4 million, with $21.4 million to be incurred in the fourth
quarter of 2015;
- Full year 2015 payments related to the
rental of properties from GLPI of $436.4 million, with $109.0
million to be incurred in the fourth quarter of 2015, including an
estimated annual rent escalation of $5.0 million at the conclusion
of year two of the Master Lease beginning in November 2015 of which
$0.8 million will be incurred in the fourth quarter;
- Depreciation and amortization charges
in 2015 of $176.9 million, with $47.0 million in the fourth quarter
of 2015, which excludes depreciation expense related to real
property leased from GLPI;
- Interest expense in 2015 of $48.5
million, with $17.3 million in the fourth quarter of 2015, which
excludes additional interest expense related to the Master Lease
financing obligation with GLPI;
- 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 fourth quarter of 2015;
- Estimated non-cash stock compensation
expenses of $8.5 million for 2015, with $2.0 million to be incurred
in the fourth 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 $10.6 million, with $3.8
million in the fourth quarter of 2015;
- A diluted share count of approximately
90.9 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.
Three Months Ending
December 31, Full Year Ending December 31,
(in millions), (unaudited) (in
millions), (unaudited) 2015
Guidance 2014 Actual
2015 RevisedGuidance
2015 PriorGuidance (1)
2014 Actual Net revenues $ 722.5
$ 651.4 $ 2,826.9 $ 2,786.3 $ 2,590.5
Adjusted EBITDA 181.6
171.8 771.1 754.5 706.5
1. The guidance figures in the table above present the
guidance Penn National Gaming provided on July 23, 2015 for the
year ended December 31, 2015, as adjusted to reflect the change in
classification of the Master Lease from an operating lease to a
financing obligation.
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Segment Information – Operations
(in thousands) (unaudited)
NET REVENUES ADJUSTED EBITDA
Three Months Ended September 30, Three Months Ended
September 30, 2015 2014 2015
2014 East/Midwest (1) $ 449,821 $ 371,505 $ 136,939 $
110,347 West (2) 70,828 58,626 15,321 13,960 Southern Plains (3)
213,284 210,309 70,993 65,959 Other (4) 5,364 5,500 (13,156)
(19,936)
Total $ 739,297 $ 645,940 $
210,097 $ 170,330 NET REVENUES
ADJUSTED EBITDA Nine Months Ended September 30,
Nine Months Ended September 30, 2015 2014
2015 2014 East/Midwest (1) $ 1,254,121 $ 1,082,310 $
379,390 $ 324,307 West (2) 197,078 178,579 51,158 49,516 Southern
Plains (3) 637,242 658,792 218,488 212,907 Other (4) 15,950 19,485
(59,506) (52,070)
Total $ 2,104,391 $
1,939,166 $ 589,530 $ 534,660 (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 Plainridge
Park Casino, which opened on June 24, 2015. Our East/Midwest
segment results for the three and nine months ended September 30,
2015 included preopening costs of $0.3 million and $9.2 million,
respectively, whereas results for the three and nine months ended
September 30, 2014 included preopening charges of $5.6 million and
$8.4 million, respectively. Results for the nine months ended
September 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, the M
Resort, and Tropicana Las Vegas which was acquired on August 25,
2015 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, Hollywood Casino St. Louis and Prairie
State Gaming which the Company acquired on September 1, 2015, 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 Penn Interactive Ventures, the Company’s interactive
division which represents Penn’s social and other online gaming
initiatives. The Other category also includes the Company’s
corporate overhead costs, which were $13.9 million and $60.9
million for the three and nine months ended September 30, 2015,
respectively, as compared to corporate overhead costs of $19.7
million and $49.8 million for the three and nine months ended
September 30, 2014, respectively. Corporate overhead costs
decreased by $5.8 million for the three months ended September 30,
2015, as compared to the corresponding period in the prior year,
primarily due to lower cash-settled stock-based compensation of
$3.3 million due to stock price declines during the quarter for
Penn and GLPI common stock compared to the same period in 2014 and
lower lobbying expenses of $2.5 million due to the Massachusetts
campaign in 2014. Corporate overhead costs increased $11.1 million
for the nine months ended September 30, 2015, as compared to the
corresponding period in the prior year. This was primarily
attributable to higher cash-settled stock-based compensation of
$10.5 million due to stock price increases for Penn and GLPI common
stock for the nine months ended September 30, 2015 compared to
decreases during the same period in 2014, higher bonus expense of
$3.2 million due to better overall company performance against its
budget, $1.5 million of acquisition related costs, lower transition
service fee payments of $1.2 million due to less departments
supporting GLPI in 2015, and higher severance expenses of $0.7
million, all of which were partially offset by lower lobbying
expenses of $3.1 million due to the Massachusetts campaign in 2014,
lower outside services of $2.0 million and lower payroll costs of
$1.0 million due to a reduction in headco unt.
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Supplemental information
(in thousands) (unaudited)
September 30, 2015 December 31,
2014 Cash and cash equivalents $ 223,489 $ 208,673
Bank Debt $ 1,214,633 $ 785,683 Notes 296,091 295,610 Other
long term obligations (1) 164,196 154,388 Total Debt
(2) (3) $ 1,674,920 $ 1,235,681 1) Other long term
obligations (excluding the financing obligation with GLPI) at
September 30, 2015 include $131.7 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, $13.2 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, $15.3 million related to our repayment
obligation on a hotel and event center located near Hollywood
Casino Lawrenceburg, and $4.0 million related to capital lease
obligations which were primarily attributable to our acquisition of
Tropicana Las Vegas. 2) Although our joint venture in Kansas
Entertainment is accounted for as an equity method investment and
is not consolidated, this joint venture had no debt outstanding at
September 30, 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 $24.9 million and $25.2 million at
September 30, 2015 and December 31, 2014, respectively. The prior
period amounts were restated to reflect this change.
Penn’s definition of adjusted EBITDA 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 nine months ended September 30, 2015
and 2014.
Three Months Ended
September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Cash Flow distributions $ 8,050 $ 6,500 $ 22,050 $ 17,500
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 is 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 EBITDA excludes
rent payments associated with our Master Lease agreement with GLPI
as it was determined that this transaction should have been
accounted for as a financing transaction. Adjusted EBITDA has
economic substance because it is used by management as a
performance measure to analyze the performance of our business, and
is 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 because it is 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 is not a
measure of performance or liquidity calculated in accordance with
GAAP. Adjusted EBITDA information is presented as a supplemental
disclosure, as management believes that it is a 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 as
the primary measures of the operating performance of its segments,
including the evaluation of operating personnel. Adjusted EBITDA
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.
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.
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
212/231-2905. 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 and video
gaming terminal operations with a focus on slot machine
entertainment. At September 30, 2015, the Company operated
twenty-seven facilities in seventeen jurisdictions, including
Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Maryland,
Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio,
Pennsylvania, Texas, West Virginia, and Ontario. At September 30,
2015, in aggregate, Penn National Gaming operated approximately
34,000 gaming machines, 800 table games and 4,600 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; with regard to the Restatement, risks
relating to the final impact of the Restatement on the Company’s
financial statements; the impact of the Restatement on the
Company’s evaluation of the effectiveness of its internal control
over financial reporting; delays in the preparation of the
financial statements; the risk that additional information will
come to light during the course of the preparation of restated
financial statements that alters the scope or magnitude of the
Restatement; potential reviews, litigation or other proceedings by
governmental authorities; stockholders or other parties; the risk
that the Company will be unable to obtain the lenders’ waivers it
has requested under the Company’s senior secured credit facility
and note indenture, which could give rise to a default thereunder,
risks relating to our liquidity and ability to raise capital and
risks related to the impact on the Restatement on the Company’s
reputation, development projects, joint ventures and other
commercial contracts; 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/20151022005379/en/
Penn National GamingSaul V. Reibstein, 610-401-2049Chief
Financial OfficerorJCIRJoseph N. Jaffoni/Richard
Land212-835-8500penn@jcir.com
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