SEC Filing | PENN Entertainment

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penn-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 0-24206

PENN Entertainment, Inc.

(Exact name of registrant as specified in its charter)


Pennsylvania			23-2234473
(State or other jurisdiction of incorporation or organization)			(I.R.S. employer identification no.)
825 Berkshire Blvd., Suite 200	Wyomissing,	Pennsylvania	19610
(Address of principal executive offices)			(Zip code)

(610) 373-2400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	PENN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of July 29, 2022, the number of shares of the registrant’s common stock outstanding was 158,562,535.

PENN ENTERTAINMENT, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			1
Consolidated Balance Sheets - June 30, 2022 and December 31, 2021			1
Consolidated Statements of Operations - for the Three and Six Months Ended June 30, 2022 and 2021			2
Consolidated Statements of Comprehensive Income (Loss) - for the Three and Six Months Ended June 30, 2022 and 2021			3
Consolidated Statements of Changes in Stockholders’ Equity - for the Three and Six Months Ended June 30, 2022 and 2021			4
Consolidated Statements of Cash Flows - for the Six Months Ended June 30, 2022 and 2021			6
Notes to the Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			38
Item 3. Quantitative and Qualitative Disclosure About Market Risk			53
Item 4. Controls and Procedures			54
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			54
Item 1A. Risk Factors			54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			55
Item 6. Exhibits			56
Signatures			58

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PENN ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in millions, except share and per share data)	June 30, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	1,708.3	$	1,863.9
Accounts receivable, net	169.4		195.0
Prepaid expenses	132.8		132.3
Other current assets	48.4		32.4
Total current assets	2,058.9		2,223.6
Property and equipment, net	4,539.7		4,582.2
Investment in and advances to unconsolidated affiliates	250.3		255.1
Goodwill	2,799.6		2,822.5
Other intangible assets, net	1,842.1		1,872.6

Lease right-of-use assets	6,181.3		4,853.0
Other assets	208.9		263.1
Total assets	$	17,880.8	$	16,872.1

Liabilities
Current liabilities
Accounts payable	$	38.9	$	53.3
Current maturities of long-term debt	55.8		99.5
Current portion of financing obligations	63.8		39.0
Current portion of lease liabilities	189.7		142.9
Accrued expenses and other current liabilities	737.7		798.5
Total current liabilities	1,085.9		1,133.2
Long-term debt, net of current maturities, debt discount and debt issuance costs	2,730.4		2,637.3
Long-term portion of financing obligations	4,001.3		4,057.8
Long-term portion of lease liabilities	5,941.7		4,628.6
Deferred income taxes	227.9		189.1
Other long-term liabilities	127.6		129.0
Total liabilities	14,114.8		12,775.0
Commitments and contingencies (Note 12)
Stockholders’ equity
Series B Preferred stock ($0.01 par value, 1,000,000 shares authorized, no shares issued and outstanding)	—		—
Series C Preferred stock ($0.01 par value, 18,500 shares authorized, no shares issued and outstanding)	—		—
Series D Preferred stock ($0.01 par value, 5,000 shares authorized, 969 shares issued in both periods, and 581 and 775 shares outstanding)	19.4		25.8
Common stock ($0.01 par value, 400,000,000 shares authorized in both periods, 172,234,701 and 171,729,276 shares issued, and 160,725,723 and 169,561,883 shares outstanding)	1.7		1.7
Exchangeable shares ($0.01 par value, 697,539 shares authorized and issued in both periods, 624,658 and 653,059 shares outstanding)	—		—
Treasury stock, at cost, (11,508,978 and 2,167,393 shares)	(370.5)		(28.4)
Additional paid-in capital	4,187.3		4,239.6
Retained earnings (accumulated deficit)	10.2		(86.5)
Accumulated other comprehensive loss	(81.3)		(54.4)
Total PENN Entertainment stockholders’ equity	3,766.8		4,097.8
Non-controlling interest	(0.8)		(0.7)
Total stockholders’ equity	3,766.0		4,097.1
Total liabilities and stockholders’ equity	$	17,880.8	$	16,872.1

See accompanying notes to the unaudited Consolidated Financial Statements.

Table of Contents

PENN ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the three months ended June 30,				For the six months ended June 30,
(in millions, except per share data)	2022		2021		2022		2021
Revenues
Gaming	$	1,325.6	$	1,305.5	$	2,616.8	$	2,387.5
Food, beverage, hotel and other	301.3		240.3		574.3		433.2
Total revenues	1,626.9		1,545.8		3,191.1		2,820.7
Operating expenses
Gaming	713.6		620.9		1,400.2		1,148.7
Food, beverage, hotel and other	186.8		148.6		358.7		271.7
General and administrative	273.8		316.5		569.3		642.7
Depreciation and amortization	150.3		81.9		268.5		163.2

Total operating expenses	1,324.5		1,167.9		2,596.7		2,226.3
Operating income	302.4		377.9		594.4		594.4
Other income (expenses)
Interest expense, net	(193.6)		(138.0)		(354.4)		(273.7)
Income from unconsolidated affiliates	1.8		9.1		10.5		18.7

Other	(28.2)		2.8		(68.9)		23.9
Total other expenses	(220.0)		(126.1)		(412.8)		(231.1)
Income before income taxes	82.4		251.8		181.6		363.3
Income tax expense	(56.3)		(53.1)		(103.9)		(73.7)
Net income	26.1		198.7		77.7		289.6
Less: Net loss attributable to non-controlling interest	—		—		0.1		0.1
Net income attributable to PENN Entertainment	$	26.1	$	198.7	$	77.8	$	289.7

Earnings per share:
Basic earnings per share	$	0.16	$	1.27	$	0.47	$	1.85
Diluted earnings per share	$	0.15	$	1.17	$	0.45	$	1.72

Weighted-average common shares outstanding—basic	164.8		156.0		166.5		155.8
Weighted-average common shares outstanding—diluted	180.2		172.7		182.3		172.8

See accompanying notes to the unaudited Consolidated Financial Statements.

Table of Contents

PENN ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	For the three months ended June 30,				For the six months ended June 30,
(in millions)	2022		2021		2022		2021
Net income	$	26.1	$	198.7	$	77.7	$	289.6
Other comprehensive loss:
Foreign currency translation adjustment during the period	(62.7)		—		(26.9)		—
Other comprehensive loss	(62.7)		—		(26.9)		—
Total comprehensive income (loss)	(36.6)		198.7		50.8		289.6
Less: Comprehensive loss attributable to non-controlling interest	—		—		0.1		0.1
Comprehensive income (loss) attributable to PENN Entertainment	$	(36.6)	$	198.7	$	50.9	$	289.7

See accompanying notes to the unaudited Consolidated Financial Statements.

Table of Contents

PENN ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)


	Three Months Ended June 30, 2022 and 2021
	Preferred Stock			Common Stock						Treasury Stock		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Total PENN Stockholders’ Equity		Non-Controlling Interest		Total Stockholders’ Equity
(in millions, except share data)	Shares	Amount		PENN Entertainment Shares	Amount		Exchangeable Shares	Amount
Balance as of April 1, 2022	581	$	19.4	166,161,818	$	1.7	633,189	$	—	$	(203.5)	$	4,170.4	$	(15.9)	$	(18.6)	$	3,953.5	$	(0.8)	$	3,952.7
Share-based compensation arrangements	—	—		30,551	—		—	—		—		14.5		—		—		14.5		—		14.5
Share repurchases (Note 13)	—	—		(5,539,177)	—		—	—		(167.0)		—		—		—		(167.0)		—		(167.0)

Common stock issuance (Note 13)	—	—		64,000	—		—	—		—		2.0		—		—		2.0		—		2.0
Exchangeable shares conversions (Note 13)	—	—		8,531	—		(8,531)	—		—		—		—		—		—		—		—
Currency translation adjustment	—	—		—	—		—	—		—		—		—		(62.7)		(62.7)		—		(62.7)

Net income	—	—		—	—		—	—		—		—		26.1		—		26.1		—		26.1
Other	—	—		—	—		—	—		—		0.4		—		—		0.4		—		0.4
Balance as of June 30, 2022	581	$	19.4	160,725,723	$	1.7	624,658	$	—	$	(370.5)	$	4,187.3	$	10.2	$	(81.3)	$	3,766.8	$	(0.8)	$	3,766.0

Balance as of April 1, 2021	775	$	24.2	156,330,141	$	1.6	—	$	—	$	(28.4)	$	3,175.2	$	(416.3)	$	—	$	2,756.3	$	(0.5)	$	2,755.8
Share-based compensation arrangements	—	—		413,048	—		—	—		—		9.4		—		—		9.4		—		9.4
Share issuance (Note 13)	—	—		43,684	—		—	—		—		3.5		—		—		3.5		—		3.5
Net income	—	—		—	—		—	—		—		—		198.7		—		198.7		—		198.7
Other	—	—		—	—		—	—		—		(9.6)		—		—		(9.6)		—		(9.6)
Balance as of June 30, 2021	775	$	24.2	156,786,873	$	1.6	—	$	—	$	(28.4)	$	3,178.5	$	(217.6)	$	—	$	2,958.3	$	(0.5)	$	2,957.8

See accompanying notes to the unaudited Consolidated Financial Statements.

Table of Contents


	Six Months Ended June 30, 2022 and 2021
	Preferred Stock			Common Stock						Treasury Stock		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Total PENN Stockholders’ Equity		Non-Controlling Interest		Total Stockholders’ Equity
(in millions, except share data)	Shares	Amount		PENN Entertainment Shares	Amount		Exchangeable Shares	Amount
Balance as of January 1, 2022	775	$	25.8	169,561,883	$	1.7	653,059	$	—	$	(28.4)	$	4,239.6	$	(86.5)	$	(54.4)	$	4,097.8	$	(0.7)	$	4,097.1
Share-based compensation arrangements	—	—		218,824	—		—	—		—		31.5		—		—		31.5		—		31.5
Share repurchases (Note 13)	—	—		(9,341,585)	—		—	—		(342.1)		—		—		—		(342.1)		—		(342.1)
Preferred stock conversions (Note 13)	(194)	(6.4)		194,200	—		—	—		—		6.4		—		—		—		—		—
Common stock issuance (Note 13)	—	—		64,000	—		—	—		—		2.0		—		—		2.0		—		2.0
Exchangeable shares conversions (Note 13)	—	—		28,401	—		(28,401)	—		—		—		—		—		—		—		—
Currency translation adjustment	—	—		—	—		—	—		—		—		—		(26.9)		(26.9)		—		(26.9)
Cumulative-effect adjustment upon adoption of ASU 2020-06	—	—		—	—		—	—		—		(88.2)		18.9		—		(69.3)		—		(69.3)
Net income (loss)	—	—		—	—		—	—		—		—		77.8		—		77.8		(0.1)		77.7
Other	—	—		—	—		—	—		—		(4.0)		—		—		(4.0)		—		(4.0)
Balance as of June 30, 2022	581	$	19.4	160,725,723	$	1.7	624,658	$	—	$	(370.5)	$	4,187.3	$	10.2	$	(81.3)	$	3,766.8	$	(0.8)	$	3,766.0

Balance as of January 1, 2021	883	$	23.1	155,700,834	$	1.6	—	$	—	$	(28.4)	$	3,167.2	$	(507.3)	$	—	$	2,656.2	$	(0.4)	$	2,655.8
Share-based compensation arrangements	—	—		891,155	—		—	—		—		13.4		—		—		13.4		—		13.4
Share issuance (Note 13)	43	5.1		43,684	—		—	—		—		3.5		—		—		8.6		—		8.6
Preferred stock conversion (Note 13)	(151)	(4.0)		151,200	—		—	—		—		4.0		—		—		—		—		—
Net income (loss)	—	—		—	—		—	—		—		—		289.7		—		289.7		(0.1)		289.6
Other	—	—		—	—		—	—		—		(9.6)		—		—		(9.6)		—		(9.6)
Balance as of June 30, 2021	775	$	24.2	156,786,873	$	1.6	—	$	—	$	(28.4)	$	3,178.5	$	(217.6)	$