Pinnacle Entertainment, Inc. (NASDAQ: PNK) ("Pinnacle" or the
"Company") today reported financial results for the second quarter
ended June 30, 2018. The results reflect the Company’s
adoption of the new revenue recognition standard ("ASC 606"),
effective January 1, 2018. The Company adopted ASC 606 using
the modified retrospective method, therefore, prior period amounts
have not been adjusted.
2018 Second Quarter
Highlights:
- Net revenues decreased by $6.0 million or 0.9%
year over year to $647.6 million. The adoption of ASC 606 resulted
in a reduction of 2018 second quarter net revenues of approximately
$3.6 million or 0.6%, relative to the Company's prior accounting
methodology.
- Net income increased by $13.4 million to $21.8
million from $8.4 million in the prior year period, while the
related margin increased to 3.4% from 1.3% in the prior year
period. GAAP diluted net income per share was $0.35 versus
$0.15 in the prior year period. Net income was positively impacted
by $3.6 million, or $0.06 of GAAP diluted net income per share,
relating to the release of an income tax reserve. The
adoption of ASC 606 resulted in an increase of 2018 second quarter
net income of approximately $0.2 million or 1.2%, relative to the
Company's prior accounting methodology.
- Consolidated Adjusted EBITDAR increased by
$1.2 million or 0.7% year over year to $181.9 million from $180.7
million in the prior year period. The adoption of ASC 606 resulted
in an increase of 2018 second quarter Consolidated Adjusted EBITDAR
of approximately $0.2 million or 0.1%, relative to the Company's
prior accounting methodology.
- Consolidated Adjusted EBITDAR margin increased
by 50 basis points year over year to 28.1%. The adoption of ASC 606
resulted in a 20 basis point positive impact to 2018 second quarter
Consolidated Adjusted EBITDAR margin, relative to the Company's
prior accounting methodology.
- Consolidated Adjusted EBITDAR growth and margin expansion were
led by strong performance of Belterra Resort, The Meadows,
Ameristar Black Hawk, Ameristar St. Charles, and Ameristar
Vicksburg.
Additional Highlights:• The
Company repaid $46.5 million of Conventional Debt in the 2018
second quarter, reducing the Company's Conventional Debt balance to
$757.6 million as of June 30, 2018. The Company
anticipates achieving a Conventional Debt balance of below $700
million by the end of the 2018 third quarter.• On December 17,
2017, the Company entered into a definitive agreement under
which Penn National Gaming, Inc. (NASDAQ:PENN) ("Penn
National") will acquire the Company. Under the terms of the
agreement, Pinnacle stockholders will receive consideration
of $20.00 in cash and 0.42 shares of Penn National common
stock for each Pinnacle share they own. The transaction was
approved by the shareholders of both companies at special meetings
held on March 29, 2018. • The proposed acquisition of the
Company by Penn National has been approved by gaming regulators in
Illinois, Indiana, Louisiana, Mississippi, Ohio (Casino Control
Commission), Pennsylvania (Gaming Control
Board and Racing Commission) and West Virginia. The
transaction is subject to remaining required regulatory approvals
and is expected to close early in the 2018 fourth quarter.
Summary of 2018 Second Quarter Financial
Results
|
|
|
Three months ended June 30, |
(amounts in thousands,
except per share data, unaudited) |
2018 |
|
2017 |
Net revenues |
$647,634 |
|
$653,642 |
Net income (1) |
$21,766 |
|
$8,426 |
Net income margin
(1) |
3.4% |
|
1.3% |
Consolidated Adjusted
EBITDAR (2) |
$181,903 |
|
$180,707 |
Consolidated Adjusted
EBITDAR margin (2) |
28.1% |
|
27.6% |
Consolidated Adjusted
EBITDA, net of Lease Payments (2) |
$79,041 |
|
$79,392 |
Operating income
(1) |
$119,949 |
|
$106,453 |
Net income attributable
to Pinnacle Entertainment, Inc. |
$21,897 |
|
$9,377 |
Diluted net income per
share |
$0.35 |
|
$0.15 |
|
|
|
|
(1) Net income and operating income for the three months
ended June 30, 2018 include $0.7 million in pre-opening,
development and other costs and $2.6 million of write-downs,
reserves and recoveries, net, versus $1.8 million and $7.9 million,
respectively, in the prior year period.
(2) For a further description of Consolidated Adjusted
EBITDAR, Consolidated Adjusted EBITDAR margin and Consolidated
Adjusted EBITDA, net of Lease Payments, see the Glossary of Terms
and Non-GAAP Financial Measures and the reconciliations to the GAAP
equivalent financial measures below.
Anthony Sanfilippo, Chief Executive Officer of Pinnacle
Entertainment, commented, "Our 2018 second quarter financial
performance continued our trend of driving more efficient
operations and improving our balance sheet, as we move toward
completing our transaction with Penn National. Our Consolidated
Adjusted EBITDAR and margins grew year over year, despite a modest
decline in net revenue. We also repaid $46.5 million of debt,
reducing our Conventional Debt balance to $757.6 million at the end
of the 2018 second quarter. In what is historically our
strongest free cash flow quarter of each year, we believe we will
reduce our Conventional Debt balance to below $700 million by the
end of the 2018 third quarter.
“We made significant progress on the renovation
of the Ameristar East Chicago casino floors and expansion of this
business. In the 2018 second quarter, we unveiled the new
land-based high limit space. The new high limit gaming space
contains approximately 95 slot machines and 14 table games, as well
as other dedicated amenities, and has been very well received by
the guests of Ameristar East Chicago.
“Significant milestones have been achieved in
completing our transaction with Penn National, including the
approval of the transaction by the shareholders of both companies
and gaming regulatory approvals in several states. We
continue to work closely with the Penn National team to obtain
the remaining regulatory approvals and in coordinating a smooth
transition and seamless integration upon the closing of the
transaction. We expect to complete the transaction early in the
2018 fourth quarter,” concluded Mr. Sanfilippo.
2018 Second Quarter Operational
Review
Midwest Segment
In the Midwest segment, net revenues increased
by $3.2 million or 0.8% year over year to $392.9 million in the
2018 second quarter. Adjusted EBITDAR increased by $5.3 million or
4.9% year over year to $114.4 million and Adjusted EBITDAR margin
was 29.1%, an increase of 110 basis points year over year.
Belterra Casino Resort generated Adjusted
EBITDAR growth in excess of 20% and margin expansion of
approximately 380 basis points, driven by low single digit net
revenue growth and marketing and advertising and general and
administrative expense reductions.
The Meadows generated Adjusted EBITDAR growth in
excess of 10% and margin expansion of approximately 210 basis
points despite a low-single digit decline in net revenues. These
results were achieved by continuing to drive profitable table
gaming revenues and through strategic marketing efficiencies, which
have been aided by the implementation of the Company's
mychoice guest loyalty program in the 2018 first
quarter. Additionally, the financial performance of The
Meadows benefited from general and administrative expense
reductions.
Ameristar St. Charles generated mid-single digit
Adjusted EBITDAR growth and margin expansion of approximately 100
basis points, driven by low single digit net revenue growth and
marketing and advertising and general and administrative expense
reductions.
South Segment
In the South segment, net revenues decreased by
$10.9 million or 5.4% year over year to $190.9 million in the 2018
second quarter. Adjusted EBITDAR decreased by $6.5 million or 9.6%
to $61.3 million. Adjusted EBITDAR margin was 32.1%, a decrease of
150 basis points year over year.
Ameristar Vicksburg generated high-single digit
Adjusted EBITDAR growth and margin expansion of 160 basis points,
driven principally by low-single digit net revenue growth.
Revenue growth at Ameristar Vicksburg was achieved in conjunction
with expense discipline, with the overall cost structure of the
property unchanged year over year.
L'Auberge Lake Charles continues to perform
well, by prudently managing its cost structure and generating
growth of key business metrics. Slot machine coin-in and revenue
increased at a meaningful high single digit and low single digit
pace, respectively, in the 2018 second quarter, which mitigated a
decline in table gaming revenue. Table gaming volume and hold
percentage experienced normal volatility and both declined year
over year, which affected the profitability of L'Auberge Lake
Charles in the 2018 second quarter. As a result, Adjusted EBITDAR
experienced a low-double digit decline and margins contracted
approximately 250 basis points in the 2018 second quarter.
L'Auberge Baton Rouge effectively managed its
business through a period that contained difficult comparisons.
L'Auberge Baton Rouge experienced a decline of Adjusted EBITDAR of
approximately 22% and a 310 basis point contraction in margins,
driven by a mid-teens decline in net revenues. Net revenues
at L'Auberge Baton Rouge were negatively affected, in part, by
difficult comparisons from elevated economic activity in the
greater Baton Rouge area from flood recovery efforts in the prior
year period. Additionally, 2018 second quarter financial results
reflect the initial negative impact of the smoking ban put in place
in Baton Rouge, which went into effect on June 1, 2018.
Efficiencies implemented in the cost structure of the business and
streamlined marketing expenditures helped mitigate lower revenues
in comparison to the prior year period.
West Segment
West segment net revenues were $62.5 million in
the 2018 second quarter, an increase of $1.7 million or 2.8% year
over year. Adjusted EBITDAR was $24.9 million, an increase of $1.3
million or 5.5% year over year. Adjusted EBITDAR margin was
39.8%, an increase of 100 basis points year over year.
Ameristar Black Hawk produced low-single digit
growth in net revenues coupled with mid-single digit Adjusted
EBITDAR growth. Adjusted EBITDAR margin expanded approximately 120
basis points year over year. The operating results at Ameristar
Black Hawk were driven by a mid-single digit increase in gaming
revenues and continued marketing and advertising efficiencies.
Corporate Expenses and
Other
Corporate expenses and other, which is
principally comprised of corporate overhead expenses, as well as
the Retama Park Racetrack management operations, decreased by $1.1
million in the 2018 second quarter to $18.7 million.
Adoption of ASC 606
The Company's 2018 second quarter financial
results reflect the adoption of the new revenue recognition
standard ("ASC 606"), effective January 1, 2018. The Company
adopted ASC 606 using the modified retrospective method, therefore,
year over year comparability is reduced since prior period amounts
have not been adjusted. The adoption of ASC 606 resulted in an
approximate $3.6 million, or 0.6%, and $6.4 million, or 0.5%,
reduction in net revenues for the three and six months ended June
30, 2018, respectively, with no material impact on operating
income, net income or Consolidated Adjusted EBITDAR.
- ASC 606 changed the accounting for our
mychoice program reward credits earned by our
customers. The Company is now required to defer revenue at the
estimated standalone selling price of mychoice
credits as they are earned by our customers and recognize revenue
when the credits are redeemed. Prior to the adoption of ASC
606, the estimated liability for unredeemed credits was accrued
based on the estimated cost of the goods or services to be
provided.
- ASC 606 changed the classification of charges associated with
our mychoice tier accrual for third-party annual
gifts. These charges were previously recorded to gaming expenses
and now are recognized as a reduction to gaming revenue.
- ASC 606 changed the accounting for complimentaries. The
Company previously did not present revenue for goods and services
provided to customers for free as an inducement to gamble
(discretionary and non-discretionary
complimentaries). Complimentaries related to an inducement to
gamble (i.e., gaming contracts) are now recognized at standalone
selling prices with an offsetting reduction to gaming
revenues.
The amount by which each line item in our
unaudited Condensed Consolidated Statement of Operations for the
three and six months ended June 30, 2018 was affected by ASC
606 as compared with the accounting literature that was in effect
before the change was as follows:
|
For the three months ended June 30,
2018 |
|
As Reported -With Adoption of ASC
606 |
|
As Adjusted - Without Adoption of ASC
606 |
|
Effect of Accounting Change
Increase/(Decrease) |
|
|
|
|
|
|
|
(amounts in thousands, except per share data,
unaudited) |
Revenues
(1): |
|
|
|
|
|
Gaming |
$ |
505,903 |
|
|
$ |
579,585 |
|
|
$ |
(73,682 |
) |
Food and
beverage |
72,421 |
|
|
33,318 |
|
|
39,103 |
|
Lodging |
42,552 |
|
|
13,854 |
|
|
28,698 |
|
Retail,
entertainment and other |
26,758 |
|
|
24,522 |
|
|
2,236 |
|
Total
revenues |
647,634 |
|
|
651,279 |
|
|
(3,645 |
) |
Expenses and
other costs (2): |
|
|
|
|
|
Gaming |
265,955 |
|
|
315,591 |
|
|
(49,636 |
) |
Food and
beverage |
63,735 |
|
|
30,263 |
|
|
33,472 |
|
Lodging |
15,451 |
|
|
7,031 |
|
|
8,420 |
|
Retail,
entertainment and other |
14,301 |
|
|
10,451 |
|
|
3,850 |
|
Other
expenses and other costs |
168,243 |
|
|
168,243 |
|
|
— |
|
Total
expenses and other costs |
527,685 |
|
|
531,579 |
|
|
(3,894 |
) |
Operating
income |
$ |
119,949 |
|
|
$ |
119,700 |
|
|
$ |
249 |
|
|
|
|
|
|
|
Net
income |
$ |
21,766 |
|
|
$ |
21,517 |
|
|
$ |
249 |
|
Net income
attributable to Pinnacle Entertainment, Inc. |
$ |
21,897 |
|
|
$ |
21,648 |
|
|
$ |
249 |
|
Net income per
common share: |
|
|
|
|
|
Basic |
$ |
0.38 |
|
|
$ |
0.38 |
|
|
$ |
— |
|
Diluted |
$ |
0.35 |
|
|
$ |
0.35 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The decrease in gaming revenues is principally
attributable to the allocation of portions of the transaction price
in gaming transactions to (a) complimentary hospitality and other
revenues of $70.7 million, which increased food and beverage;
lodging; and retail, entertainment and other, and (b) certain tier
benefits, such as the annual gift, of $3.5 million, which was
previously included in gaming expenses. These decreases were offset
by a net $0.5 million increase in other adjustments.
(2) The decrease in gaming expenses is principally
attributable to (a) the cessation of the Company’s prior accounting
practice of including the estimated costs of providing
complimentaries in gaming expenses rather than in food and
beverage; lodging; and retail, entertainment and other; expenses of
$40.7 million, and (b) the allocation of a portion of the
transaction price in gaming transactions to certain tier benefits,
such as the annual gift, of $3.5 million, which was previously
included in gaming expenses.
|
|
|
For the six months ended June 30,
2018 |
|
As Reported - With Adoption of ASC
606 |
|
As Adjusted - Without Adoption of ASC
606 |
|
Effect of Accounting Change
Increase/(Decrease) |
|
|
|
|
|
|
|
(amounts in thousands, except per share data,
unaudited) |
Revenues
(1): |
|
|
|
|
|
Gaming |
$ |
1,005,166 |
|
|
$ |
1,148,095 |
|
|
$ |
(142,929 |
) |
Food and
beverage |
142,088 |
|
|
64,943 |
|
|
77,145 |
|
Lodging |
80,371 |
|
|
25,287 |
|
|
55,084 |
|
Retail,
entertainment and other |
48,404 |
|
|
44,150 |
|
|
4,254 |
|
Total
revenues |
1,276,029 |
|
|
1,282,475 |
|
|
(6,446 |
) |
Expenses and
other costs (2): |
|
|
|
|
|
Gaming |
524,718 |
|
|
621,899 |
|
|
(97,181 |
) |
Food and
beverage |
126,459 |
|
|
59,835 |
|
|
66,624 |
|
Lodging |
29,797 |
|
|
12,871 |
|
|
16,926 |
|
Retail,
entertainment and other |
24,732 |
|
|
17,789 |
|
|
6,943 |
|
Other
expenses and other costs |
335,037 |
|
|
335,037 |
|
|
— |
|
Total
expenses and other costs |
1,040,743 |
|
|
1,047,431 |
|
|
(6,688 |
) |
Operating
income |
$ |
235,286 |
|
|
$ |
235,044 |
|
|
$ |
242 |
|
|
|
|
|
|
|
Net
income |
$ |
43,560 |
|
|
$ |
43,318 |
|
|
$ |
242 |
|
Net income
attributable to Pinnacle Entertainment, Inc. |
$ |
43,840 |
|
|
$ |
43,598 |
|
|
$ |
242 |
|
Net income per
common share |
|
|
|
|
|
Basic |
$ |
0.77 |
|
|
$ |
0.76 |
|
|
$ |
0.01 |
|
Diluted |
$ |
0.70 |
|
|
$ |
0.70 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The decrease in gaming revenues is principally
attributable to the allocation of portions of the transaction price
in gaming transactions to (a) complimentary hospitality and other
revenues of $137.6 million, which increased food and beverage;
lodging; and retail, entertainment and other, and (b) certain tier
benefits, such as the annual gift, of $5.9 million, which was
previously included in gaming expenses. These decreases were offset
by a net $0.6 million increase in other adjustments.
(2) The decrease in gaming expenses is principally
attributable to (a) the cessation of the Company’s prior accounting
practice of including the estimated costs of providing
complimentaries in gaming expenses rather than in food and
beverage; lodging; and retail, entertainment and other; expenses of
$80.5 million, and (b) the allocation of a portion of the
transaction price in gaming transactions to certain tier benefits,
such as the annual gift, of $5.9 million, which was previously
included in gaming expenses.
Lease Payments
|
For the three months ended June
30, |
|
For the six months ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
(amounts in thousands, unaudited) |
Reduction of Financing
Obligation |
$ |
6,167 |
|
|
$ |
12,239 |
|
|
$ |
19,254 |
|
|
$ |
24,036 |
|
Percentage rent credit
receivable (1) |
191 |
|
|
— |
|
|
191 |
|
|
— |
|
Interest expense
attributable to Financing Obligation (2) |
90,058 |
|
|
82,718 |
|
|
171,354 |
|
|
163,880 |
|
Total payments to GLPI related to Master Lease
(2) |
$ |
96,416 |
|
|
$ |
94,957 |
|
|
$ |
190,799 |
|
|
$ |
187,916 |
|
|
|
|
|
|
|
|
|
Long-term prepaid
rent |
$ |
2,275 |
|
|
$ |
2,275 |
|
|
$ |
4,550 |
|
|
$ |
4,550 |
|
Rent expense
attributable to Meadows Lease (3) |
4,171 |
|
|
4,083 |
|
|
8,343 |
|
|
8,166 |
|
Total payments to GLPI related to Meadows Lease
(3) |
$ |
6,446 |
|
|
$ |
6,358 |
|
|
$ |
12,893 |
|
|
$ |
12,716 |
|
(1) Prior to the finalization of the reset percentage rent
in July 2018, the Company continued to make the monthly lease
payment based on the initial percentage rent established at lease
inception. Consequently, the lease payment made in August 2018 was
reduced by the $0.2 million overpayment from the May and June 2018
lease payments.
(2) In May 2017 and May 2018, the rent due under the
Master Lease was increased by the building base rent escalator,
which were for annual amounts of $5.8 million and $5.9 million,
respectively. The building base rent escalator is recorded as
interest expense as incurred. Furthermore, in May 2018, the
percentage rent under the Master Lease was reset to a new two-year
annual amount of $43.0 million.
(3) In October 2017, the annual rent due under the Meadows
Lease was increased by the base rent escalator. The base rent
escalator is recorded as rent expense as incurred.
Interest Expense
|
For the three months ended June
30, |
|
For the six months ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
(amounts in thousands, unaudited) |
Interest expense from
Financing Obligation |
$ |
90,058 |
|
|
$ |
82,718 |
|
|
$ |
171,354 |
|
|
$ |
163,880 |
|
Interest expense from
Conventional Debt |
11,177 |
|
|
13,982 |
|
|
22,441 |
|
|
27,087 |
|
Interest income |
(34 |
) |
|
(62 |
) |
|
(207 |
) |
|
(216 |
) |
Capitalized
interest |
(72 |
) |
|
(8 |
) |
|
(106 |
) |
|
(13 |
) |
Interest expense, net |
$ |
101,129 |
|
|
$ |
96,630 |
|
|
$ |
193,482 |
|
|
$ |
190,738 |
|
Liquidity and Capital Expenditures
Liquidity
As of June 30, 2018, the Company had $148.6
million in cash and cash equivalents. As of June 30,
2018, $162.5 million was drawn on the Company's $400.0 million
revolving credit facility and $9.2 million of letters of credit
were outstanding.
As of June 30, 2018, the Company had a
total principal balance of Conventional Debt of $757.6 million, a
decrease of $46.5 million compared to the balance as of March 31,
2018.
Capital Expenditures
Capital expenditures were approximately $21.3
million in the 2018 second quarter and related to the Company's
existing assets, businesses and corporate initiatives.
Pending Merger
As previously announced, on December 17, 2017,
Pinnacle entered into an agreement and plan of merger with Penn
National, pursuant to which Penn National will acquire all of the
outstanding common shares of Pinnacle in a cash and stock
transaction. Under the terms of the agreement and plan of merger,
Pinnacle stockholders will receive $20.00 in cash and 0.42 shares
of Penn National common stock for each Pinnacle share.
At a special meeting held on March 29, 2018,
Pinnacle stockholders approved the acquisition of the Company by
Penn National by voting affirmatively to adopt the merger agreement
for the transaction. Additionally, on that same day, the
stockholders of Penn National approved the acquisition of Pinnacle
by voting affirmatively for the issuance of Penn National’s common
stock to Pinnacle stockholders as consideration in the proposed
transaction. The proposed acquisition of the Company by Penn
National Gaming, Inc. has been approved by gaming regulators in
Illinois, Indiana, Louisiana, Mississippi, Ohio (Casino Control
Commission), Pennsylvania (Gaming Control
Board and Racing Commission) and West Virginia. The
transaction is subject to customary closing conditions and
remaining regulatory approvals. The transaction is expected
to close early in the 2018 fourth quarter.
Investor Call
Pinnacle will not host an investor conference call or webcast
related to the announcement of its 2018 second quarter financial
results due to its pending acquisition by Penn National. Investors
may find a detailed report of the Company’s 2018 second quarter
results in the tables below, as well as in financial statements and
related footnotes on Form 10-Q to be filed with the U.S. Securities
and Exchange Commission (“SEC”) on August 7, 2018.
Additional Information
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities. In connection with
the proposed merger, Penn National has filed with the SEC a
registration statement on Form S-4 (File No. 333-222936) that
includes a preliminary joint proxy statement of Penn National and
Pinnacle that also constitutes a prospectus of Penn National. Penn
National and Pinnacle also plan to file other relevant documents
with the SEC regarding the proposed merger. INVESTORS AND SECURITY
HOLDERS ARE URGED TO READ THE FORM S-4, INCLUDING THE PRELIMINARY
JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
You may obtain a free copy of the preliminary joint proxy
statement/prospectus and other relevant documents filed by Penn
National and Pinnacle with the SEC at the SEC’s website at
www.sec.gov. Copies of the documents filed with the SEC by Penn
National can be obtained, without charge, by directing a request to
Justin Sebastiano, Penn National Gaming, Inc., 825 Berkshire
Boulevard, Suite 200, Wyomissing, Pennsylvania 19610, Tel. No.
(610) 401-2029. Copies of the documents filed with the SEC by
Pinnacle can be obtained, without charge, by directing a request to
Vincent Zahn, Pinnacle Entertainment, Inc., 3980 Howard Hughes
Parkway, Las Vegas, Nevada 89169, Tel. No. (702) 541-7777.
Glossary of Terms
Adjusted EBITDAR: is
defined for each segment as earnings before interest income and
expense; income taxes; depreciation; amortization; rent expense
associated with the Meadows Lease; pre-opening, development and
other costs; non-cash share-based compensation; asset impairment
costs; write-downs, reserves, recoveries; inter-company management
fees, gain (loss) on sale of certain assets; gain (loss) on early
extinguishment of debt; gain (loss) on sale of discontinued
operations; and discontinued operations. The Company uses
Adjusted EBITDAR to compare operating results among its properties
and between accounting periods.
Adjusted EBITDAR margin: is
defined as each segment’s Adjusted EBITDAR divided by net revenues
for such segment. The Company uses Adjusted EBITDAR margin to
compare operating results among its properties and between
accounting periods.
Cash Income Taxes: is defined
as the cash payments made for income taxes to Federal and State
governmental agencies during the period.
Cash Interest Expense: is
defined as the cash paid for interest on Conventional Debt (which
is defined below) in the period.
Capital expenditures: is
defined as cash payments made in connection with capital
improvements at the Company's existing operating businesses, for
corporate initiatives or on growth and expansion projects, both
stand alone and to improve the Company's existing operating
businesses. These reflect cash payments made during the
period as opposed to accrued capital expenditures reflected in the
financial statements.
Consolidated Adjusted
EBITDAR: is defined as earnings before interest
income and expense, income taxes, depreciation, amortization, rent
expense associated with the Meadows Lease, pre-opening, development
and other costs, non-cash share-based compensation, asset
impairment costs, write-downs, reserves, recoveries, gain (loss) on
sale of certain assets, gain (loss) on early extinguishment of
debt, gain (loss) on sale of equity security investments, income
(loss) from equity method investments, non-controlling interest and
discontinued operations. Management eliminates the results from
discontinued operations at the time they are deemed
discontinued.
Consolidated Adjusted EBITDA, net of
Lease Payments: is defined as Consolidated
Adjusted EBITDAR (which is defined above) minus Lease Payments
(which is defined below).
Consolidated Adjusted EBITDAR
Margin: The Company defines Consolidated Adjusted
EBITDAR margin as Consolidated Adjusted EBITDAR divided by revenues
on a consolidated basis.
Conventional Debt:
is defined as debt from borrowed money, which substantially
consists of the outstanding principal amount from the Company's
senior secured credit facilities, which consists of a $400 million
revolving credit facility, a term loan A facility, and the
Company's 5.625% Senior Notes due 2024.
Financing Obligation: is
defined as the liability recorded on the Company's balance sheet in
connection with the Master Lease. As a result of the transaction
with GLPI, the Company's Master Lease with GLPI is accounted for as
a financing obligation in accordance with GAAP. The financing
obligation is calculated based upon the present value of the future
minimum lease payments made to GLPI under the Master Lease over the
remaining lease term, which includes all renewal options. The
derivation of the present value of the future minimum lease
payments is made using an imputed borrowing rate of 10.5%.
Lease Payments: is defined as
cash rent payments made to GLPI for the Master Lease and the
Meadows Lease. The Company’s annual rent payment is currently
$387.5 million under the Master Lease. The Company began making
rent payments to GLPI under the Master Lease on April 28,
2016. The Company’s annual rent payment is currently $25.8
million under the Meadows Lease. The Company began making rent
payments to GLPI under the Meadows Lease on September 9, 2016.
Master Lease or GLPI Master
Lease: is defined as the lease the Company entered
into on April 28, 2016 through which it leases real property for
the operation of 14 gaming entertainment businesses from
GLPI. The lease has a 35-year term, with an initial term of
10-years and five, five year renewal periods (at the Company's
option). The Master Lease is subject to annual escalation,
contingent upon meeting a minimum rent coverage ratio of 1.8x, and
periodic percentage rent resets equal to 4% of the
increase/decrease of average trailing revenue above/below benchmark
year revenues in each reset year (resets occur every two years,
beginning with lease year three, which commenced May 1, 2018).
Meadows Lease: is defined
as the lease the Company entered into on September 9, 2016 through
which it leases real property for the operation of The Meadows
Racetrack and Casino (The Meadows) gaming entertainment
business. The lease has a 10-year initial term with renewal
terms up to a total of 29 years (at the Company's option).
The Master Lease is subject to annual escalation, contingent upon
meeting a minimum rent coverage ratio of 1.8x in lease year one,
1.9x in lease year two, and 2.0x thereafter. Additionally,
the lease is subject to periodic percentage rent resets equal to 4%
of the increase/decrease of average trailing revenue above/below
benchmark year revenues in each reset year (resets occur every two
years, beginning in lease year three).
Non-GAAP Financial Measures
The Non-GAAP Financial Measures used in this
press release include Consolidated Adjusted EBITDAR, Consolidated
Adjusted EBITDAR margin and Consolidated Adjusted EBITDA, net of
Lease Payments.
The Company uses Consolidated Adjusted EBITDAR
and Consolidated Adjusted EBITDAR margin as relevant and useful
measures to compare operating results between accounting
periods. The presentation of Consolidated Adjusted EBITDAR
has economic substance because it is used by management as a
performance measure to analyze the performance of its business and
is especially relevant in evaluating large, long-lived casino-hotel
projects because it provides a perspective on the current effects
of operating decisions separated from the substantial,
non-operational depreciation charges and financing costs of such
projects. Management also reviews pre-opening, development
and other costs separately, as such expenses are also included in
total project costs when assessing budgets and project returns, and
because such costs relate to anticipated future revenues and
income. Management believes that Consolidated Adjusted
EBITDAR and Consolidated Adjusted EBITDAR margin are useful
measures for investors because they are indicators of the strength
and performance of ongoing business operations. These calculations
are commonly used as a basis for investors, analysts and credit
rating agencies to evaluate and compare operating performance and
value of companies within our industry. Consolidated Adjusted
EBITDAR also approximates the measures used in the debt covenants
within the Company’s debt agreements. Consolidated Adjusted
EBITDAR does not include depreciation or interest expense and
therefore does not reflect current or future capital expenditures
or the cost of capital. The Company compensates for these
limitations by using other comparative measures to assist in the
evaluation of operating performance.
In addition, the Company uses Consolidated
Adjusted EBITDA, net of Lease Payments as a relevant and useful
measure to compare operating results between accounting periods.
Management believes that Consolidated Adjusted EBITDA, net of Lease
Payments is useful to investors because it is an indicator of the
performance of ongoing business operations after incorporating the
cash flow impact of Lease Payments.
Not all of the aforementioned benefits and costs
occur in each reporting period, but have been included in the
definitions based on historical activity.
Each of these measures is not calculated in the
same manner by all companies and, accordingly, may not be an
appropriate measure of comparing performance among different
companies. See the attached “supplemental information” tables for
reconciliations of these measures to the GAAP equivalent financial
measures.
About Pinnacle Entertainment
Pinnacle Entertainment, Inc. owns and operates
16 gaming entertainment businesses, located in Colorado, Indiana,
Iowa, Louisiana, Mississippi, Missouri, Nevada, Ohio and
Pennsylvania. Pinnacle holds a majority interest in the racing
license owner, as well as a management contract, for Retama Park
Racetrack outside of San Antonio, Texas.
Forward Looking Statements
This communication may contain certain
forward-looking statements, including certain plans, expectations,
goals, projections, and statements regarding Pinnacle’s business
generally, expected results of operations and future operating
performance and future growth, about the benefits of the proposed
merger, adequacy of resources to fund development and expansion
projects, liquidity, financing options, Pinnacle’s plans,
objectives, expectations and intentions, the expected timing of the
completion of the proposed merger, and other statements that are
not historical facts. Such statements are subject to numerous
assumptions, risks, and uncertainties. Statements that do not
describe historical or current facts, including statements about
beliefs and expectations, are forward-looking statements.
Forward-looking statements may be identified by words such as
“expect,” “anticipate,” “believe,” “intend,” “estimate,” “plan,”
“target,” “goal,” or similar expressions, or future or conditional
verbs such as “will,” “may,” “might,” “should,” “would,” “could,”
or similar variations. The forward-looking statements are intended
to be subject to the safe harbor provided by Section 27A of
the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934, and the Private Securities Litigation Reform
Act of 1995. While there is no assurance that any list of risks and
uncertainties or risk factors is complete, below are certain
factors which could cause actual results to differ materially from
those contained or implied in the forward-looking statements
including: Pinnacle’s sensitivity to reductions in consumers’
discretionary spending as a result of downturns in the economy;
significant competition in the gaming industry in all of Pinnacle’s
markets, which could adversely affect revenues and
profitability; Pinnacle is required to pay a significant portion of
its cash flows pursuant to and subject to the terms and conditions
of the Master Lease and Meadows Lease, which could adversely affect
our ability to fund Pinnacle’s operations and growth and limit
Pinnacle’s ability to react to competitive and economic changes;
fluctuations in the trading volume and market price of shares of
Pinnacle’s common stock, general business and market conditions;
risks related to the acquisition of Pinnacle by Penn National and
the integration of the businesses and assets to be acquired; the
possibility that the proposed merger does not close when expected
or at all because required regulatory, or other, approvals are not
received or other conditions to the closing are not satisfied on a
timely basis or at all; the risk that the financing required to
fund the proposed merger is not obtained on the terms anticipated
or at all; the possibility that the Boyd Gaming Corporation and/or
Gaming and Leisure Properties, Inc. deals do not close in a timely
fashion or at all; potential adverse reactions or changes to
business or employee relationships, including those resulting from
the announcement or completion of the proposed merger; potential
litigation challenging the transaction; the possibility that the
anticipated benefits of the proposed merger are not realized when
expected or at all, including as a result of the impact of, or
issues arising from, the integration of the two companies; the
possibility that the anticipated divestitures are not completed in
the anticipated time frame or at all; the possibility that
additional divestitures may be required; the possibility that the
transaction may be more expensive to complete than anticipated,
including as a result of unexpected factors or events; diversion of
management’s attention from ongoing business operations and
opportunities; litigation relating to the proposed merger; risks
associated with increased leverage from the transaction; and
additional factors discussed in the sections entitled “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Penn National’s and
Pinnacle’s respective most recent Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as
filed with the Securities and Exchange Commission (the “SEC”).
Other unknown or unpredictable factors may also cause actual
results to differ materially from those projected by the
forward-looking statements. Most of these factors are difficult to
anticipate and are generally beyond the control of Penn National
and Pinnacle. Pinnacle does not undertake any obligation to release
publicly any revisions to any forward-looking statements, to report
events or to report the occurrence of unanticipated events unless
required to do so by law.
References in this press release to "Pinnacle
Entertainment, Inc.," "Pinnacle," "Company," "we," "our" or "us"
refer to Pinnacle Entertainment, Inc. and its subsidiaries, except
where stated or the context otherwise indicates.
Ameristar, Belterra, Boomtown, Casino Magic,
L’Auberge, River City, Meadows, mychoice, and Belterra Park are
registered trademarks of Pinnacle Entertainment, Inc. All
rights reserved.
Investor Relations
& Financial Media Inquiries |
Vincent J. Zahn,
CFA |
Vice President &
Treasurer |
investors@pnkmail.com |
(702) 541-7777 |
- financial tables follow -
Pinnacle Entertainment,
Inc.Condensed Consolidated Statements of
Operations(amounts in thousands, except per share data,
unaudited)
|
For the three months ended June
30, |
|
For the six months ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenues: |
|
|
|
|
|
|
|
Gaming |
$ |
505,903 |
|
|
$ |
581,974 |
|
|
$ |
1,005,166 |
|
|
$ |
1,156,143 |
|
Food and
beverage |
72,421 |
|
|
33,974 |
|
|
142,088 |
|
|
67,229 |
|
Lodging |
42,552 |
|
|
13,475 |
|
|
80,371 |
|
|
25,462 |
|
Retail,
entertainment and other |
26,758 |
|
|
24,219 |
|
|
48,404 |
|
|
44,782 |
|
Total
revenues |
647,634 |
|
|
653,642 |
|
|
1,276,029 |
|
|
1,293,616 |
|
Expenses and
other costs: |
|
|
|
|
|
|
|
Gaming |
265,955 |
|
|
316,234 |
|
|
524,718 |
|
|
629,473 |
|
Food and
beverage |
63,735 |
|
|
32,277 |
|
|
126,459 |
|
|
63,691 |
|
Lodging |
15,451 |
|
|
6,501 |
|
|
29,797 |
|
|
12,563 |
|
Retail,
entertainment and other |
14,301 |
|
|
11,638 |
|
|
24,732 |
|
|
19,930 |
|
General
and administrative |
115,316 |
|
|
114,659 |
|
|
227,850 |
|
|
227,274 |
|
Depreciation and amortization |
49,625 |
|
|
56,157 |
|
|
99,664 |
|
|
112,175 |
|
Pre-opening, development and other costs |
705 |
|
|
1,795 |
|
|
2,525 |
|
|
2,594 |
|
Write-downs, reserves and recoveries, net |
2,597 |
|
|
7,928 |
|
|
4,998 |
|
|
8,452 |
|
Total
expenses and other costs |
527,685 |
|
|
547,189 |
|
|
1,040,743 |
|
|
1,076,152 |
|
Operating
income |
119,949 |
|
|
106,453 |
|
|
235,286 |
|
|
217,464 |
|
Interest expense,
net |
(101,129 |
) |
|
(96,630 |
) |
|
(193,482 |
) |
|
(190,738 |
) |
Loss from equity method
investment |
(89 |
) |
|
(90 |
) |
|
(89 |
) |
|
(90 |
) |
Income before
income taxes |
18,731 |
|
|
9,733 |
|
|
41,715 |
|
|
26,636 |
|
Income tax benefit
(expense) |
3,035 |
|
|
(1,307 |
) |
|
1,845 |
|
|
(1,002 |
) |
Net
income |
21,766 |
|
|
8,426 |
|
|
43,560 |
|
|
25,634 |
|
Less: net loss
attributable to non-controlling interest |
131 |
|
|
951 |
|
|
280 |
|
|
960 |
|
Net income
attributable to Pinnacle Entertainment, Inc. |
$ |
21,897 |
|
|
$ |
9,377 |
|
|
$ |
43,840 |
|
|
$ |
26,594 |
|
Net income per
common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.38 |
|
|
$ |
0.17 |
|
|
$ |
0.77 |
|
|
$ |
0.47 |
|
Diluted |
$ |
0.35 |
|
|
$ |
0.15 |
|
|
$ |
0.70 |
|
|
$ |
0.43 |
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
Basic |
57,543 |
|
|
56,648 |
|
|
57,225 |
|
|
56,314 |
|
Diluted |
62,266 |
|
|
61,884 |
|
|
62,255 |
|
|
61,463 |
|
Pinnacle Entertainment,
Inc.Supplemental
InformationRevenues, Adjusted EBITDAR,
Consolidated Adjusted EBITDAR andConsolidated
Adjusted EBITDA, net of Lease Payments(amounts in
thousands, unaudited)
|
For the three months ended June
30, |
|
For the six months ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenues: |
|
|
|
|
|
|
|
Midwest (1) |
$ |
392,904 |
|
|
$ |
389,722 |
|
|
$ |
770,449 |
|
|
$ |
780,023 |
|
South (2) |
190,868 |
|
|
201,794 |
|
|
380,962 |
|
|
394,265 |
|
West (3) |
62,554 |
|
|
60,773 |
|
|
122,200 |
|
|
116,750 |
|
Total
Segment Revenues |
646,326 |
|
|
652,289 |
|
|
1,273,611 |
|
|
1,291,038 |
|
Corporate and Other
(4) |
1,308 |
|
|
1,353 |
|
|
2,418 |
|
|
2,578 |
|
Total
Revenues |
$ |
647,634 |
|
|
$ |
653,642 |
|
|
$ |
1,276,029 |
|
|
$ |
1,293,616 |
|
|
|
|
|
|
|
|
|
Adjusted
EBITDAR: |
|
|
|
|
|
|
|
Midwest (1) |
$ |
114,437 |
|
|
$ |
109,150 |
|
|
$ |
224,292 |
|
|
$ |
222,035 |
|
South (2) |
61,327 |
|
|
67,783 |
|
|
124,929 |
|
|
129,529 |
|
West (3) |
24,845 |
|
|
23,591 |
|
|
48,005 |
|
|
44,080 |
|
Segment
Adjusted EBITDAR |
200,609 |
|
|
200,524 |
|
|
397,226 |
|
|
395,644 |
|
Corporate Expenses and
Other (4) |
(18,706 |
) |
|
(19,817 |
) |
|
(37,660 |
) |
|
(40,082 |
) |
Consolidated Adjusted EBITDAR (5,7) |
181,903 |
|
|
180,707 |
|
|
359,566 |
|
|
355,562 |
|
Lease Payments (6) |
(102,862 |
) |
|
(101,315 |
) |
|
(203,691 |
) |
|
(200,632 |
) |
Consolidated Adjusted EBITDA, net of Lease Payments
(5,7) |
$ |
79,041 |
|
|
$ |
79,392 |
|
|
$ |
155,875 |
|
|
$ |
154,930 |
|
Consolidated Adjusted
EBITDAR margin % (5,7) |
28.1 |
% |
|
27.6 |
% |
|
28.2 |
% |
|
27.5 |
% |
(1) Consists of Council Bluffs, East Chicago, Kansas City,
St. Charles, Belterra Resort, Belterra Park, Meadows and River
City.
(2) Consists of Vicksburg, Bossier City, New Orleans,
Baton Rouge, and Lake Charles.
(3) Consists of Black Hawk, Cactus Petes, and
Horseshu.
(4) Includes corporate expenses, as well as results from
the management of Retama Park Racetrack.
(5) The Master Lease is accounted for as a financing
obligation. Payments made to GLPI for the Master Lease are
recorded as a reduction of the financing obligation on the balance
sheet and as interest expense attributable to the financing
obligation. As a result, rent payments made to GLPI for the Master
Lease are not recorded as an operating expense and are not
reflected in Consolidated Adjusted EBITDAR. The Meadows Lease
is accounted for as an operating lease. The Company records
rent expense related to this lease as an operating expense in its
unaudited Condensed Consolidated Statements of Operations.
Consolidated Adjusted EBITDAR is presented before the impact of
rent expense associated with the Meadows Lease.
(6) See the Glossary of Terms for a detailed description
of Lease Payments. The Company made payments to GLPI for the
Master Lease and Meadows Lease of $96.4 million and $6.4 million,
respectively, in the three months ended June 30, 2018 and
$190.8 million and $12.9 million, respectively, in the six months
ended June 30, 2018. The Company made payments to GLPI for the
Master Lease and Meadows Lease of $94.9 million and $6.4 million,
respectively, in the three months ended June 30, 2017 and $187.9
million and $12.7 million, respectively, in the six months ended
June 30, 2017.
(7) See the Glossary of Terms and discussion of Non-GAAP
Financial Measures above for a detailed description of Consolidated
Adjusted EBITDAR, Consolidated Adjusted EBITDAR margin and
Consolidated Adjusted EBITDA, net of Lease Payments.
Pinnacle Entertainment,
Inc.Condensed Consolidated Balance
Sheets(amounts in thousands)
|
June 30, 2018 |
|
December 31, 2017 |
|
(unaudited) |
|
|
ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
148,558 |
|
|
$ |
184,218 |
|
Land, buildings,
vessels and equipment, net |
2,567,506 |
|
|
2,629,013 |
|
Other assets, net |
1,142,955 |
|
|
1,136,997 |
|
Total
assets |
$ |
3,859,019 |
|
|
$ |
3,950,228 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
Liabilities, other than
long-term debt and long-term financing obligation |
$ |
296,975 |
|
|
$ |
345,346 |
|
Long-term debt,
including current portion (1) |
749,230 |
|
|
812,324 |
|
Long-term financing
obligation, including current portion (2) |
3,094,275 |
|
|
3,113,529 |
|
Total
liabilities |
4,140,480 |
|
|
4,271,199 |
|
Total stockholders'
deficit |
(281,461 |
) |
|
(320,971 |
) |
Total
liabilities and stockholders' deficit |
$ |
3,859,019 |
|
|
$ |
3,950,228 |
|
(1) Represents Conventional Debt related to the Company's
senior secured credit facilities and 5.625% Senior Notes due 2024,
net of unamortized discount and debt issuance costs. Total
unamortized discount and debt issuance costs were $8.4 million and
$9.4 million as of June 30, 2018 and December 31, 2017,
respectively.
(2) The Master Lease is accounted for as a financing
obligation. The financing obligation is calculated based upon the
present value of the future minimum lease payments made to GLPI for
the Master Lease over the remaining lease term, which includes all
renewal options since they were reasonably assured of being
exercised at the inception of the Master Lease. The
derivation of the present value of the future minimum lease
payments is calculated using an imputed borrowing rate of
10.5%.
Pinnacle Entertainment,
Inc.Supplemental
InformationPrincipal Balances of Conventional
Debt(amounts in thousands)
|
June 30, 2018 |
|
December 31, 2017 |
|
(unaudited) |
|
|
Revolving Credit
Facility (1) |
$ |
162,500 |
|
|
$ |
169,250 |
|
Term Loan A Facility
(1) |
95,000 |
|
|
152,437 |
|
Senior
Secured Credit Facilities |
257,500 |
|
|
321,687 |
|
5.625% Senior Notes
(2) |
500,000 |
|
|
500,000 |
|
Other |
65 |
|
|
69 |
|
Total
Conventional Debt |
$ |
757,565 |
|
|
$ |
821,756 |
|
(1) Represents the outstanding principal amount of
Conventional Debt from the Company's senior secured credit
facilities, which consists of a revolving credit facility and a
term loan A facility.
(2) Represents the outstanding principal amount of
Conventional Debt from the Company's 5.625% Senior Notes due
2024.
Pinnacle Entertainment,
Inc.Supplemental
InformationSelected Cash Flow
Data(amounts in thousands, unaudited)
|
For the three months ended June
30, |
|
For the six months ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Cash paid for interest
related to Conventional Debt (1) |
$ |
16,247 |
|
|
$ |
17,693 |
|
|
$ |
19,380 |
|
|
$ |
22,024 |
|
Cash paid for state and
federal income taxes |
$ |
1,353 |
|
|
$ |
706 |
|
|
$ |
1,946 |
|
|
$ |
2,677 |
|
Capital
expenditures |
$ |
21,323 |
|
|
$ |
21,827 |
|
|
$ |
39,553 |
|
|
$ |
38,684 |
|
(1) Represents cash paid for interest and fees
attributable to the Company's Conventional Debt, which was issued
at the closing of the transactions with GLPI on April 28, 2016. The
5.625% Senior Notes due 2024 pay interest semi-annually on May 1st
and November 1st of each year.
Pinnacle Entertainment,
Inc.Supplemental
InformationReconciliations of Net Income to
Consolidated Adjusted EBITDARand Consolidated
Adjusted EBITDA, net of Lease Paymentsand Net
Income Margin to Consolidated Adjusted EBITDAR
Margin(amounts in thousands, unaudited)
|
For the three months ended June
30, |
|
For the six months ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net
income |
$ |
21,766 |
|
|
$ |
8,426 |
|
|
$ |
43,560 |
|
|
$ |
25,634 |
|
Rent expense under the
Meadows Lease |
4,172 |
|
|
4,083 |
|
|
8,343 |
|
|
8,166 |
|
Depreciation and
amortization |
49,625 |
|
|
56,157 |
|
|
99,664 |
|
|
112,175 |
|
Pre-opening,
development and other costs |
705 |
|
|
1,795 |
|
|
2,525 |
|
|
2,594 |
|
Non-cash share-based
compensation expense |
4,855 |
|
|
4,291 |
|
|
8,750 |
|
|
6,711 |
|
Write-downs, reserves
and recoveries, net |
2,597 |
|
|
7,928 |
|
|
4,998 |
|
|
8,452 |
|
Interest expense,
net |
101,129 |
|
|
96,630 |
|
|
193,482 |
|
|
190,738 |
|
Loss from equity method
investment |
89 |
|
|
90 |
|
|
89 |
|
|
90 |
|
Income tax expense
(benefit) |
(3,035 |
) |
|
1,307 |
|
|
(1,845 |
) |
|
1,002 |
|
Consolidated
Adjusted EBITDAR (1,2) |
181,903 |
|
|
180,707 |
|
|
359,566 |
|
|
355,562 |
|
Lease Payments (3) |
(102,862 |
) |
|
(101,315 |
) |
|
203,691 |
|
|
200,632 |
|
Consolidated
Adjusted EBITDA, net of Lease Payments (1,2) |
$ |
79,041 |
|
|
$ |
79,392 |
|
|
$ |
155,875 |
|
|
$ |
154,930 |
|
Net income margin
% |
3.4 |
% |
|
1.3 |
% |
|
3.4 |
% |
|
2.0 |
% |
Consolidated Adjusted
EBITDAR margin % (2) |
28.1 |
% |
|
27.6 |
% |
|
28.2 |
% |
|
27.5 |
% |
(1) The Master Lease is accounted for as a financing
obligation. Payments made to GLPI for the Master Lease are
recorded as a reduction of the financing obligation on the balance
sheet and as interest expense attributable to the financing
obligation. As a result, rent payments made to GLPI for the Master
Lease are not recorded as an operating expense and are not
reflected in Consolidated Adjusted EBITDAR. The Meadows Lease
is accounted for as an operating lease. The Company records
rent expense related to this lease as an operating expense in its
unaudited Condensed Consolidated Statements of Operations.
Consolidated Adjusted EBITDAR is presented before the impact of
rent expense associated with the Meadows Lease.
(2) See the Glossary of Terms and discussion of Non-GAAP
Financial Measures above for a detailed description of Consolidated
Adjusted EBITDAR, Consolidated Adjusted EBITDAR margin and
Consolidated Adjusted EBITDA, net of Lease Payments.
(3) See the Glossary of Terms for a detailed description of
Lease Payments. The Company made payments to GLPI for the Master
Lease and Meadows Lease of $96.4 million and $6.4 million,
respectively, in the three months ended June 30, 2018 and
$190.8 million and $12.9 million, respectively, in the six months
ended June 30, 2018. The Company made payments to GLPI for the
Master Lease and Meadows Lease of $94.9 million and $6.4 million,
respectively, in the three months ended June 30, 2017 and $187.9
million and $12.7 million, respectively, in the six months ended
June 30, 2017.
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