XML 21 R10.htm IDEA: XBRL DOCUMENT
v3.19.2

New Accounting Pronouncements | 6 Months Ended
--- | ---
Jun. 30, 2019
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] |
New Accounting Pronouncements | New Accounting Pronouncements Accounting Pronouncements Implemented in 2019 On January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, “Leases” (“ASC 842”), and all the related amendments (the “new lease standard”) using the modified retrospective method with an effective date of January 1, 2019 (the “adoption date”) and a cumulative effect adjustment to equity. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. As part of the adoption, the Company elected to utilize the package of practical expedients included in this guidance, which permitted the Company to not reassess (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) the initial direct costs for existing leases. In conjunction with the adoption of the new lease standard, the Company elected the following policies: (i) to account for lease and non-lease components as a single component for all classes of underlying assets and (ii) to not recognize short-term leases (i.e., a lease that is less than 12 months and does not contain a purchase option) within the unaudited Condensed Consolidated Balance Sheets, with the expense related to these short-term leases recorded in total operating expenses within the unaudited Condensed Consolidated Statements of Operations. Penn Master Lease and Pinnacle Master Lease The most significant impact of the adoption of the new lease standard relates to the accounting for our Master Leases with GLPI. Under previous GAAP, as contained within ASC Topic 840, “Leases” (“ASC 840”), the Company concluded that (i) the Penn Master Lease and (ii) the Pinnacle Master Lease to each be a failed sale-leaseback transaction resulting in (a) the land and building assets associated with the Master Leases to be recognized in “Property and equipment, net” within the unaudited Condensed Consolidated Balance Sheets, (b) the recognition of a financing obligation, with the associated interest recorded to “Interest expense” within the unaudited Condensed Consolidated Statements of Operations, and (c) the contingent rentals to be recorded as additional interest expense. Under the provisions of the new lease standard, the Company was required to evaluate its existing sale-leaseback transactions with GLPI to determine whether a sale had occurred, and if a sale had occurred, to determine the classification (operating or finance) of each component contained within each of the Master Leases. Lease components contained within each of the Master Leases that were determined to be operating leases (consisting primarily of the land components) at the adoption date resulted in (i) the derecognition of the existing financing obligation and the carrying amount of the property and equipment with an adjustment to the opening balance of retained earnings and (ii) the recognition of an operating lease liability and an operating lease right-of-use (“ROU”) asset. Operating lease expenses are recorded as rent expense, as opposed to interest expense and depreciation and amortization expense, within the unaudited Condensed Consolidated Statements of Operations and recorded as operating cash outflows within the unaudited Condensed Consolidated Statements of Cash Flows. Lease components contained within each of the Master Leases that were determined to continue to be financing obligations (consisting primarily of the building components) at the adoption date resulted in (i) the continued recognition of the leased assets in “Property and equipment, net” within our unaudited Condensed Consolidated Balance Sheets and (ii) the continued recognition of the financing obligation utilizing assumptions as determined (a) at the lease commencement date with respect to the Penn Master Lease or (b) at the acquisition date with respect to the Pinnacle Master Lease. Our Hollywood Casino at Dayton Raceway and Hollywood Casino at Mahoning Valley Race Course (“Dayton and Mahoning Valley”) properties included within the Penn Master Lease were previously accounted for under build-to-suit guidance pursuant to ASC 840. The Company was required to evaluate the components contained within the build-to-suit arrangements and determine the classification (operating or finance) under the provisions of the new lease standard at the adoption date. The Dayton and Mahoning Valley lease components were determined to be finance leases, which resulted in (i) the recognition of a finance lease ROU asset (recorded to depreciation and amortization expense over the lease term), (ii) a corresponding finance lease liability (recorded to interest expense over the lease term), and (iii) a write-off of the previous (a) carrying amount of the property and equipment and (b) financing obligation recorded with an adjustment to the opening balance of retained earnings at the adoption date. Principal payments associated with finance leases are recorded as financing cash outflows and interest payments associated with finance leases are recorded as operating cash outflows within our unaudited Condensed Consolidated Statements of Cash Flows. Operating Leases, inclusive of the Meadows Lease with GLPI The adoption of the new lease standard required us to recognize ROU assets and lease liabilities that had not previously been recorded within the unaudited Condensed Consolidated Balance Sheets. The lease liability for operating leases is based on the present value of future lease payments. The ROU asset for operating leases is based on the lease liability adjusted for the reclassification of certain balance sheet amounts, such as deferred rent. Deferred and prepaid rent are no longer presented separately. Leases that are short-term in nature are not recognized as ROU assets within the unaudited Condensed Consolidated Balance Sheets, but are recognized as an expense (recorded within total operating expenses) within the unaudited Condensed Consolidated Statements of Operations. The impact of the adoption of the new lease standard on our unaudited Condensed Consolidated Balance Sheets at January 1, 2019 was as follows (only financial statement line items impacted are presented):
|  |  | Impacts of: |  |  |  |
(in thousands) | As Reported as of December 31, 2018 |  | Financing Obligations - Master Leases (1) |  | Finance Leases - Dayton and Mahoning Valley |  | Operating Leases - Master Leases (2) |  | Operating Lease - Meadows (3) |  | Other Operating Leases - Non-Master Leases |  | As Adjusted for ASC 842 |  | Increase/(Decrease)
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prepaid expenses | $ | 62,971 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (977 | ) |  | $ | 61,994 |  |  | $ | (977 | )
Total current assets | $ | 677,658 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (977 | ) |  | $ | 676,681 |  |  | $ | (977 | )
Property and equipment, net (4) | $ | 6,868,768 |  |  | $ | — |  |  | $ | (164,314 | ) |  | $ | (1,407,357 | ) |  | $ | — |  |  | $ | — |  |  | $ | 5,297,097 |  |  | $ | (1,571,671 | )
Goodwill | $ | 1,228,422 |  |  | $ | 5,517 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,233,939 |  |  | $ | 5,517 |
Operating lease right-of-use assets (5) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,541,144 |  |  | $ | 112,804 |  |  | $ | 152,519 |  |  | $ | 3,806,467 |  |  | $ | 3,806,467 |
Finance lease right-of-use assets (6) | $ | — |  |  | $ | — |  |  | $ | 224,482 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 224,482 |  |  | $ | 224,482 |
Total assets | $ | 10,961,012 |  |  | $ | 5,517 |  |  | $ | 60,168 |  |  | $ | 2,133,787 |  |  | $ | 112,804 |  |  | $ | 151,542 |  |  | $ | 13,424,830 |  |  | $ | 2,463,818 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current portion of financing obligations (7) | $ | 67,777 |  |  | $ | — |  |  | $ | (1,534 | ) |  | $ | (16,157 | ) |  | $ | — |  |  | $ | — |  |  | $ | 50,086 |  |  | $ | (17,691 | )
Current portion of operating lease liabilities (5) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 72,894 |  |  | $ | 20,515 |  |  | $ | 8,913 |  |  | $ | 102,322 |  |  | $ | 102,322 |
Current portion of finance lease liabilities (6) | $ | — |  |  | $ | — |  |  | $ | 5,752 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5,752 |  |  | $ | 5,752 |
Accrued expenses and other current liabilities | $ | 577,968 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (434 | ) |  | $ | 577,534 |  |  | $ | (434 | )
Total current liabilities | $ | 738,436 |  |  | $ | — |  |  | $ | 4,218 |  |  | $ | 56,737 |  |  | $ | 20,515 |  |  | $ | 8,479 |  |  | $ | 828,385 |  |  | $ | 89,949 |
Long-term portion of financing obligations (7) | $ | 7,080,638 |  |  | $ | 5,517 |  |  | $ | (181,262 | ) |  | $ | (2,760,587 | ) |  | $ | — |  |  | $ | — |  |  | $ | 4,144,306 |  |  | $ | (2,936,332 | )
Long-term portion of operating lease liabilities (5) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,467,057 |  |  | $ | 92,289 |  |  | $ | 144,988 |  |  | $ | 3,704,334 |  |  | $ | 3,704,334 |
Long-term portion of finance lease liabilities (6) | $ | — |  |  | $ | — |  |  | $ | 218,329 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 218,329 |  |  | $ | 218,329 |
Deferred income taxes (8) | $ | — |  |  | $ | — |  |  | $ | 4,288 |  |  | $ | 299,523 |  |  | $ | — |  |  | $ | — |  |  | $ | 303,811 |  |  | $ | 303,811 |
Other noncurrent liabilities | $ | 60,629 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1,925 | ) |  | $ | 58,704 |  |  | $ | (1,925 | )
Total liabilities | $ | 10,229,791 |  |  | $ | 5,517 |  |  | $ | 45,573 |  |  | $ | 1,062,730 |  |  | $ | 112,804 |  |  | $ | 151,542 |  |  | $ | 11,607,957 |  |  | $ | 1,378,166 |
Stockholders’ equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retained earnings (accumulated deficit) | $ | (967,949 | ) |  | $ | — |  |  | $ | 14,595 |  |  | $ | 1,071,057 |  |  | $ | — |  |  | $ | — |  |  | $ | 117,703 |  |  | $ | 1,085,652 |
Total Penn National Gaming, Inc. stockholders’ equity | $ | 731,226 |  |  | $ | — |  |  | $ | 14,595 |  |  | $ | 1,071,057 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,816,878 |  |  | $ | 1,085,652 |
Total stockholders’ equity | $ | 731,221 |  |  | $ | — |  |  | $ | 14,595 |  |  | $ | 1,071,057 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,816,873 |  |  | $ | 1,085,652 |
Total liabilities and stockholders’ equity | $ | 10,961,012 |  |  | $ | 5,517 |  |  | $ | 60,168 |  |  | $ | 2,133,787 |  |  | $ | 112,804 |  |  | $ | 151,542 |  |  | $ | 13,424,830 |  |  | $ | 2,463,818 |
(1) | During the first quarter of 2019, the Company identified an adjustment to the purchase price allocation associated with its October 2018 acquisition of Pinnacle Entertainment, Inc. (“Pinnacle”). The purchase price adjustment increased the financing obligation upon the adoption of the new lease standard, resulting in an increase to goodwill (see Note 5, “Acquisitions”).
(2) | Represents components contained within each of the Master Leases determined to be operating leases (primarily land).
(3) | Represents the triple net lease with GLPI for the real estate assets used in the operations of Meadows Racetrack and Casino (the “Meadows Lease”).
(4) | Represents the (i) derecognition of the carrying amount of the property and equipment, net, associated with land components contained within our Master Leases determined to be operating leases upon the adoption of the new lease standard; and (ii) derecognition of the carrying amount of the property and equipment, net, associated with land and building components associated with Dayton and Mahoning Valley determined to be finance leases upon the adoption of the new lease standard.
(5) | Operating lease ROU assets represent (i) the land components contained within the Master Leases determined to be operating leases upon the adoption of the new lease standard; and (ii) with respect to other Operating Leases, represent (a) the Meadows Lease, which was acquired by the Company in conjunction with the acquisition of Pinnacle; (b) ground and levee leases with landlords, which were not assumed by GLPI and remain an obligation of the Company; and (c) buildings and equipment not associated with our Master Leases. For leases where the rate implicit in the lease was not readily determinable, we used our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. We utilized the incremental borrowing rate on the adoption date for operating leases that commenced prior to that date. The operating lease liability is based on the net present value of future lease payments.
(6) | Amounts primarily represent finance leases associated with Dayton and Mahoning Valley, which are included in the Penn Master Lease, that under ASC 840 utilized specific build-to-suit guidance. The adoption of the new lease standard required the Company to evaluate the components under current guidance contained within the new lease standard, which resulted in all components being classified as finance leases. Finance leases result in (i) the recognition of a finance lease ROU asset amortized over the lease term and (ii) a corresponding finance lease liability (recorded to interest expense over the lease term). We utilized our incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments. The finance lease liability is based on the net present value of future lease payments.
(7) | Represents components associated with our Master Leases that remain financing obligations (primarily buildings). The financing obligation at the adoption date was calculated utilizing previous assumptions as determined (a) at the lease commencement date with respect to the Penn Master Lease and (b) at the acquisition date with respect to the Pinnacle Master Lease.
(8) | Represents the tax impacts related to the adoption of the new lease standard. See Note 11, “Income Taxes.”
Accounting Pronouncements to be Implemented in 2020 In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments” (“ASU 2016-13”), which sets forth a “current expected credit loss” (referred to as “CECL”) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and must be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently assessing the impact of the adoption of ASU 2016-13 on its unaudited Condensed Consolidated Financial Statements.

X
- References No definition available. + Details
Name: | us-gaap_NewAccountingPronouncementsAndChangesInAccountingPrinciplesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
Name: | us-gaap_NewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration