UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 30, 2020
(Exact name of registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02. Results of Operations and Financial Condition.
On April 30, 2020, Gaming and Leisure Properties, Inc. issued a press release announcing its financial results for the three months ended March 31, 2020. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description | |||||||
| 99.1 | ||||||||
| 104 | The cover page from the Company's Current Report on Form 8-K, dated April 30, 2020, formatted in Inline XBRL. | |||||||
* * *
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: May 1, 2020 | GAMING AND LEISURE PROPERTIES, INC. | |||||||
| By: | /s/ Steven T. Snyder | |||||||
| Name: | Steven T. Snyder | |||||||
| Title: | Chief Financial Officer | |||||||
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Exhibit 99.1
GAMING AND LEISURE PROPERTIES, INC. REPORTS FIRST QUARTER 2020 RESULTS
Provides Update on Initiatives Undertaken to Address the Impact of the COVID-19 Outbreak
Declares 2020 Second Quarter Dividend of $0.60 per Common Share
WYOMISSING, PA — April 30, 2020 — Gaming and Leisure Properties, Inc. (NASDAQ: GLPI) (“GLPI” or the “Company”) today announced financial results for the quarter ended March 31, 2020.
As a result of COVID-19 all of GLPI's tenant's properties as well as the Company's Hollywood Casino Baton Rouge and Hollywood Casino Perryville (the taxable REIT subsidiaries, or "TRS Properties") were closed in mid-March and their re-openings are subject to factors outside of the Company's control. We have collected cash rent in full for the month of April from all of our tenants other than Casino Queen with whom we are currently negotiating a deferred rent agreement.
Peter Carlino, Chairman and Chief Executive Officer of GLPI, commented, "In the face of the COVID-19 outbreak, GLPI management quickly took several prudent measures to bolster our already strong balance sheet, enhance liquidity, and provide incremental financial flexibility. Although COVID-19 has had an unprecedented impact on our tenants’ operations and the national economy at large, the future performance of our national platform of regional gaming real estate remains a critical component of state budgets across the country given their significant generation of gaming and other tax revenues and source of employment. We are well prepared for when the properties in our portfolio re-open and start the process of returning to normalized operations and believe our geographically diversified regional portfolio will play an important role in the recovery process.”
Current Updates and Measures Taken to Mitigate Impact of COVID-19 Outbreak
On April 16, 2020, the Company and certain of its subsidiaries acquired the real property associated with the Tropicana Las Vegas ("Tropicana") from Penn National Gaming, Inc. (Nasdaq: PENN) in exchange for rent credits of $307.5 million, which is expected to be applied to rent due under the parties’ existing leases for the months of May, June, July, August, October and a portion of November 2020 assuming the completion of the Morgantown transaction described below. PENN will otherwise be obligated to continue making cash rent payments to GLPI, including cash rent in April (which was received in full), September, November and December 2020. For financial reporting and debt covenant purposes, the Company anticipates including amounts of non-cash rents as earned in net income, FFO, AFFO, and Adjusted EBITDA. Simultaneous with GLPI’s acquisition of the Tropicana, the Company entered into a lease with PENN for the Tropicana with nominal annual rent and PENN will continue to operate the property for two years (subject to three one-year extensions at GLPI’s option) or until the Tropicana is sold, whichever is earlier. The lease is a triple net lease relieving the Company from carrying and other costs at the property during the lease term.
Subject to receipt of required regulatory approval, we also expect to complete the acquisition, from PENN, of the land under its gaming facility under construction in Morgantown, Pennsylvania in exchange for $30.0 million in rent credits. GLPI and PENN also intend to enter into a lease for the Morgantown land which is expected to generate $3.0 million of initial annual cash rent for GLPI.
The Company granted PENN the exclusive right until December 31, 2020 to purchase the operations of the Company's Hollywood Casino Perryville, in Perryville, Maryland, for $31.1 million, with the closing of such purchase, provided PENN exercises its option and subject to regulatory approvals, expected to occur during calendar year 2021 on a date selected by PENN with reasonable prior notice to the Company unless otherwise agreed upon by both parties. Upon closing, the Company would lease the real estate of the Perryville facility to PENN pursuant to a lease providing for initial annual rent of $7.77 million, subject to escalation provisions.
In addition, PENN, plans to exercise the next scheduled five-year renewal options under each of its two master leases with the Company. Also, the terms of the master lease covering PENN’s Hollywood Casino at Penn National Racecourse, located in Grantville, Pennsylvania, is expected to be amended to provide the Company with protection from any adverse impact on the lease escalation provisions resulting from decreased net revenues from such facility upon the openings of PENN's Category 4
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facilities. Finally, the Company granted PENN the option to exercise an additional five-year renewal term at the end of the lease term for each of the two master leases subject to certain regulatory approvals.
The transactions with PENN are expected to generate incremental value both through the realization of the underlying value of the real estate in Las Vegas at a future date as well as the yield on the Morgantown lease. This series of transactions with PENN has provided GLPI with greater visibility on intermediate-term rental income through the application of non-cash rent credits while providing PENN significantly greater liquidity to transition back to normalized operations as the economy and the gaming sector re-open.
In light of the nationwide casino closures the Company does not expect any rent escalators for 2020. Our leases contain variable rent which is reset on varying schedules depending on the lease. In the aggregate, the portion of our cash rents that are variable represented approximately 16% of our 2019 full year cash rental income. Of that 16% variable rent, approximately 27% resets every five years which is associated with the PENN master lease and the Casino Queen Master Lease, 42% resets every two years and 31% resets monthly which is associated with the PENN master lease (of which approximately 47% is subject to a floor). Given the closure of all of our properties, the monthly percentage rent in the PENN Master Lease relating to our Columbus, Ohio property was immediately impacted.
The variable rent resets in the Boyd Gaming Corporation (Nasdaq: BYD) Master Lease and the Amended Pinnacle Master Lease are scheduled to reset for the two year period ended April 30, 2020. As a result, we now expect reductions of approximately $1.5 million and $5.0 million, respectively, in annual variable rent on these respective leases through April 30, 2022. In addition, the Eldorado Resorts, Inc. (Nasdaq: ERI) Master Lease and the Meadows Lease variable rent resets occur in October 2020. As such, the variable rent resets will be impacted by the duration of the casino closures as well as the properties’ post re-opening performance.
Given the uncertainty created by the nationwide spread of COVID-19 and the related efforts to contain the virus, GLPI’s focus remains on maintaining a strong balance sheet, liquidity, and financial flexibility through an indefinite period of property closures and an expected lengthy ramp up to normalized operations. As a precautionary measure, during the first quarter of 2020 we fully drew down our revolving credit facility, including borrowing just over $530.0 million to provide additional near-term liquidity despite the fact that the Company has no debt maturities until April 2021, and reflecting the Company’s March 2020 redemptions of all $215.2 million aggregate principal amount of the outstanding 4.875% Senior Notes due November 2020 and all $400.0 million aggregate principal amount of the outstanding 4.375% Senior Notes due April 2021 issued by two of the Company's wholly owned subsidiaries. Also, during the 2020 first quarter the Company reached an agreement with its credit facility lenders to allow non-cash rent to be included in its covenant calculations. GLPI comfortably met all of its debt covenant calculations at March 31, 2020. Additionally, based on continuing compliance by all of our tenants with the provisions of their leases, we do not anticipate the need for any additional covenant relief and expect to have ample liquidity.
Finally, between March 31 and April 6, 2020, the Company furloughed approximately 86% of its TRS Properties employees while continuing to fund benefits through May 31, 2020. These actions have reduced the monthly expenses in our TRS Properties to below $1 million per month.
Financial Highlights
| Three Months Ended March 31, | |||||||||||||||||
| (in millions, except per share data) | 2020 Actual | 2019 Actual | |||||||||||||||
| Total Revenue | $ | 283.5 | $ | 287.9 | |||||||||||||
| Income From Operations | $ | 186.4 | $ | 170.8 | |||||||||||||
| Net Income | $ | 96.9 | $ | 93.0 | |||||||||||||
FFO (1) | $ | 151.2 | $ | 148.7 | |||||||||||||
AFFO (2) | $ | 188.8 | $ | 183.0 | |||||||||||||
Adjusted EBITDA (3) | $ | 258.8 | $ | 258.4 | |||||||||||||
| Net income, per diluted common share | $ | 0.45 | $ | 0.43 | |||||||||||||
| FFO, per diluted common share | $ | 0.70 | $ | 0.69 | |||||||||||||
| AFFO, per diluted common share | $ | 0.88 | $ | 0.85 | |||||||||||||
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(1) FFO is net income, excluding (gains) or losses from sales of property and real estate depreciation as defined by NAREIT.
(2) AFFO is FFO, excluding stock based compensation expense, the amortization of debt issuance costs, bond premiums and original issuance discounts, other depreciation, amortization of land rights, straight-line rent adjustments, losses on debt extinguishment, retirement costs and goodwill and loan impairment charges, reduced by capital maintenance expenditures.
(3) Adjusted EBITDA is net income, excluding interest, taxes on income, depreciation, (gains) or losses from sales of property, stock based compensation expense, straight-line rent adjustments, amortization of land rights, losses on debt extinguishment, retirement costs and goodwill and loan impairment charges.
Guidance
Given the unprecedented impact of COVID-19 on the current operating environment, the need to have a clearer understanding of the interruption to property operations and the undetermined re-opening timeline, the Company withdrew its 2020 guidance on March 23, 2020.
Dividend
On February 20, 2020, the Company’s Board of Directors declared the first quarter 2020 dividend. Shareholders of record on March 6, 2020 received $0.70 per common share, which was paid on March 20, 2020.
On April 29, 2020, the Company's Board of Directors declared a second quarter dividend of $0.60 per share of the Company's common stock, consisting of a combination of cash and shares of the Company's common stock. The dividend will be paid on June 26, 2020, to shareholders of record on May 13, 2020. The cash component of the dividend (other than cash paid in lieu of fractional shares) will not exceed 20% in the aggregate, or $0.12 per share, with the balance, or $0.48 per share, payable in shares of the Company's common stock. The new quarterly dividend level reflects the impact of the COVID-19 closures on the Company's business and anticipates that the Company's major tenants will continue to fulfill payment of their financial obligations to the Company. Further, it is anticipated that the portion of dividends to be paid in shares will be limited to periods during which non-cash rents are realized by the Company.
The Company expects the dividend to be a taxable dividend to shareholders, regardless of whether a particular shareholder receives the dividend in the form of cash or shares. The Company reserves the right to pay future dividends entirely in cash, and the decision to issue a stock dividend will be made by the Board of Directors on a quarterly basis.
Shareholders will be asked to make an election to receive the dividend all in cash or all in shares. To the extent that more than 20% of cash is elected in the aggregate, the cash portion will be prorated. Shareholders who elect to receive the dividend in cash will receive a cash payment of at least $0.12 per share. Shareholders who do not make an election will receive 20% in cash and 80% in shares of common stock. The number of shares issued as a result of the dividend will be calculated based on the volume weighted average trading prices of the Company's common stock on the Nasdaq Stock Market prior to the dividend payment date.
An information letter and election form will be mailed to shareholders of record after the record date. Shareholders should review these documents and complete the election form in accordance with the instructions contained therein. Shareholders who hold their shares through a bank, broker or nominee, and have questions regarding the dividend election should contact such bank, broker or nominee, who will also be responsible for distributing to them the letter and election form and submitting the election form on their behalf.
Portfolio Update
GLPI's primary business consists of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements. As of March 31, 2020, GLPI's portfolio consisted of interests in 44 gaming and related facilities, including wholly-owned and operated Hollywood Casino Baton Rouge and Hollywood Casino Perryville, which are referred to as the "TRS Properties", the real property associated with 32 gaming and related facilities operated by PENN, the real property associated with 5 gaming and related facilities operated by ERI, the real property associated with 4 gaming and related facilities operated by BYD (including one mortgaged facility) and the real property associated with the Casino Queen in East St. Louis, Illinois. These facilities are geographically diversified across 16 states and contain approximately 22.1 million square feet.
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Conference Call Details
The Company will hold a conference call on May 1, 2020 at 9:00 a.m. (Eastern Time) to discuss its financial results, current business trends and market conditions.
To Participate in the Telephone Conference Call:
Dial in at least five minutes prior to start time.
Domestic: 1-877/407-0784
International: 1-201/689-8560
Conference Call Playback:
Domestic: 1-844/512-2921
International: 1-412/317-6671
Passcode: 13701955
The playback can be accessed through May 8, 2020.
Webcast
The conference call will be available in the Investor Relations section of the Company's website at www.glpropinc.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary software. A replay of the call will also be available for 90 days thereafter on the Company’s website.
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GAMING AND LEISURE PROPERTIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)
| Three Months Ended March 31, | ||||||||||||||
| 2020 | 2019 | |||||||||||||
| Revenues | ||||||||||||||
| Rental income | $ | 249,407 | $ | 247,678 | ||||||||||
| Interest income from real estate loans | 7,316 | 7,193 | ||||||||||||
| Total income from real estate | 256,723 | 254,871 | ||||||||||||
| Gaming, food, beverage and other | 26,759 | 32,993 | ||||||||||||
| Total revenues | 283,482 | 287,864 | ||||||||||||
| Operating expenses | ||||||||||||||
| Gaming, food, beverage and other | 16,503 | 19,022 | ||||||||||||
| Land rights and ground lease expense | 8,078 | 9,249 | ||||||||||||
| General and administrative | 15,988 | 17,240 | ||||||||||||
| Depreciation | 56,563 | 58,578 | ||||||||||||
| Loan impairment charges | — | 13,000 | ||||||||||||
| Total operating expenses | 97,132 | 117,089 | ||||||||||||
| Income from operations | 186,350 | 170,775 | ||||||||||||
| Other income (expenses) | ||||||||||||||
| Interest expense | (72,004) | (76,728) | ||||||||||||
| Interest income | 196 | 89 | ||||||||||||
| Losses on debt extinguishment | (17,329) | — | ||||||||||||
| Total other expenses | (89,137) | (76,639) | ||||||||||||
| — | — | |||||||||||||
| Income from operations before income taxes | 97,213 | 94,136 | ||||||||||||
| Income tax expense | 319 | 1,126 | ||||||||||||
| Net income | $ | 96,894 | $ | 93,010 | ||||||||||
| Earnings per common share: | ||||||||||||||
| Basic earnings per common share | $ | 0.45 | $ | 0.43 | ||||||||||
| Diluted earnings per common share | $ | 0.45 | $ | 0.43 | ||||||||||
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GAMING AND LEISURE PROPERTIES, INC. AND SUBSIDIARIES
Operations
(in thousands) (unaudited)
| TOTAL REVENUES | ADJUSTED EBITDA | ||||||||||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Real estate | $ | 256,723 | $ | 254,871 | $ | 253,859 | $ | 250,110 | |||||||||||||||
| GLP Holdings, LLC (TRS) | 26,759 | 32,993 | 4,954 | 8,309 | |||||||||||||||||||
| Total | $ | 283,482 | $ | 287,864 | $ | 258,813 | $ | 258,419 | |||||||||||||||
GAMING AND LEISURE PROPERTIES, INC. AND SUBSIDIARIES
Current Year Revenue Detail
(in thousands) (unaudited)
| Three Months Ended March 31. 2020 | PENN Master Lease | PENN Amended Pinnacle Master Lease | ERI Master Lease and Loan | BYD Master Lease and Mortgage | PENN - Meadows Lease | Casino Queen Lease | Total | |||||||||||||||||||||||||||||||||||||
| Building base rent | $ | 69,852 | $ | 56,800 | $ | 15,534 | $ | 18,911 | $ | 3,953 | $ | 2,275 | $ | 167,325 | ||||||||||||||||||||||||||||||
| Land base rent | 23,492 | 17,814 | 3,340 | 2,946 | — | — | 47,592 | |||||||||||||||||||||||||||||||||||||
| Percentage rent | 20,328 | 7,942 | 3,340 | 2,808 | 2,792 | 1,356 | 38,566 | |||||||||||||||||||||||||||||||||||||
| Total cash rental income | $ | 113,672 | $ | 82,556 | $ | 22,214 | $ | 24,665 | $ | 6,745 | $ | 3,631 | $ | 253,483 | ||||||||||||||||||||||||||||||
| Straight-line rent adjustments | 2,231 | (6,318) | (2,895) | (2,234) | 572 | — | (8,644) | |||||||||||||||||||||||||||||||||||||
| Ground rent in revenue | 740 | 1,607 | 1,723 | 421 | — | — | 4,491 | |||||||||||||||||||||||||||||||||||||
| Other rental revenue | — | — | — | — | 77 | — | 77 | |||||||||||||||||||||||||||||||||||||
| Total rental income | $ | 116,643 | $ | 77,845 | $ | 21,042 | $ | 22,852 | $ | 7,394 | $ | 3,631 | $ | 249,407 | ||||||||||||||||||||||||||||||
Interest income from real estate loans | — | — | 5,701 | 1,615 | — | — | 7,316 | |||||||||||||||||||||||||||||||||||||
| Total income from real estate | $ | 116,643 | $ | 77,845 | $ | 26,743 | $ | 24,467 | $ | 7,394 | $ | 3,631 | $ | 256,723 | ||||||||||||||||||||||||||||||
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GAMING AND LEISURE PROPERTIES, INC. AND SUBSIDIARIES
General and Administrative Expense
(in thousands) (unaudited)
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Real estate general and administrative expenses | $ | 10,685 | $ | 11,578 | |||||||
| GLP Holdings, LLC (TRS) general and administrative expenses | 5,303 | 5,662 | |||||||||
Total reported general and administrative expenses (1) | $ | 15,988 | $ | 17,240 | |||||||
(1) General and administrative expenses include payroll related expenses, insurance, utilities, professional fees and other administrative costs.
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Reconciliation of Net income (GAAP) to FFO, FFO to AFFO, and AFFO to Adjusted EBITDA
Gaming and Leisure Properties, Inc. and Subsidiaries
CONSOLIDATED
(in thousands, except per share and share data) (unaudited)
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Net income | $ | 96,894 | $ | 93,010 | |||||||
| Losses from dispositions of property | 1 | 7 | |||||||||
| Real estate depreciation | 54,279 | 55,675 | |||||||||
| Funds from operations | $ | 151,174 | $ | 148,692 | |||||||
| Straight-line rent adjustments | 8,644 | 8,644 | |||||||||
Other depreciation (1) | 2,284 | 2,903 | |||||||||
| Amortization of land rights | 3,020 | 3,090 | |||||||||
Amortization of debt issuance costs, bond premiums and original issuance discounts | 2,770 | 2,891 | |||||||||
| Stock based compensation | 4,235 | 4,325 | |||||||||
| Losses on debt extinguishment | 17,329 | — | |||||||||
| Loan impairment charges | — | 13,000 | |||||||||
Capital maintenance expenditures (2) | (646) | (530) | |||||||||
| Adjusted funds from operations | $ | 188,810 | $ | 183,015 | |||||||
| Interest, net | 71,808 | 76,639 | |||||||||
| Income tax expense | 319 | 1,126 | |||||||||
Capital maintenance expenditures (2) | 646 | 530 | |||||||||
Amortization of debt issuance costs, bond premiums and original issuance discounts | (2,770) | (2,891) | |||||||||
| Adjusted EBITDA | $ | 258,813 | $ | 258,419 | |||||||
| Net income, per diluted common share | $ | 0.45 | $ | 0.43 | |||||||
| FFO, per diluted common share | $ | 0.70 | $ | 0.69 | |||||||
| AFFO, per diluted common share | $ | 0.88 | $ | 0.85 | |||||||
| Weighted average number of common shares outstanding | |||||||||||
| Diluted | 215,449,426 | 215,287,995 | |||||||||
(1) Other depreciation includes both real estate and equipment depreciation from the Company's taxable REIT subsidiaries, as well as equipment depreciation from the REIT subsidiaries.
(2) Capital maintenance expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost effective to repair.
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Reconciliation of Net income (GAAP) to FFO, FFO to AFFO, AFFO to Adjusted EBITDA and
Adjusted EBITDA to Cash Net Operating Income
Gaming and Leisure Properties, Inc. and Subsidiaries
REAL ESTATE and CORPORATE (REIT)
(in thousands) (unaudited)
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Net income | $ | 96,521 | $ | 90,763 | |||||||
| Losses from dispositions of property | — | 7 | |||||||||
| Real estate depreciation | 54,279 | 55,675 | |||||||||
| Funds from operations | $ | 150,800 | $ | 146,445 | |||||||
| Straight-line rent adjustments | 8,644 | 8,644 | |||||||||
Other depreciation (1) | 497 | 500 | |||||||||
| Amortization of land rights | 3,020 | 3,090 | |||||||||
Amortization of debt issuance costs, bond premiums and original issuance discounts | 2,770 | 2,891 | |||||||||
| Stock based compensation | 4,235 | 4,325 | |||||||||
| Losses on debt extinguishment | 17,329 | — | |||||||||
| Loan impairment charges | — | 13,000 | |||||||||
Capital maintenance expenditures (2) | (88) | (2) | |||||||||
| Adjusted funds from operations | $ | 187,207 | $ | 178,893 | |||||||
Interest, net (3) | 69,207 | 74,038 | |||||||||
| Income tax expense | 127 | 68 | |||||||||
Capital maintenance expenditures (2) | 88 | 2 | |||||||||
Amortization of debt issuance costs, bond premiums and original issuance discounts | (2,770) | (2,891) | |||||||||
| Adjusted EBITDA | $ | 253,859 | $ | 250,110 | |||||||
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Adjusted EBITDA | $ | 253,859 | $ | 250,110 | |||||||
| Real estate general and administrative expenses | 10,685 | 11,578 | |||||||||
| Stock based compensation | (4,235) | (4,325) | |||||||||
| Losses from dispositions of property | — | (7) | |||||||||
Cash net operating income (4) | $ | 260,309 | $ | 257,356 | |||||||
(1) Other depreciation includes both real estate and equipment depreciation from the Company's taxable REIT subsidiaries, as well as equipment depreciation from the REIT subsidiaries.
(2) Capital maintenance expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost effective to repair.
(3) Interest, net is net of intercompany interest eliminations of $2.6 million for the three months ended March 31, 2020 and 2019, respectively.
(4) Cash net operating income is rental and other property income less cash property level expenses.
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Reconciliation of Net income (GAAP) to FFO, FFO to AFFO, and AFFO to Adjusted EBITDA
Gaming and Leisure Properties, Inc. and Subsidiaries
GLP HOLDINGS, LLC (TRS)
(in thousands) (unaudited)
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Net income | $ | 373 | $ | 2,247 | |||||||
| Losses from dispositions of property | 1 | — | |||||||||
| Real estate depreciation | — | — | |||||||||
| Funds from operations | $ | 374 | $ | 2,247 | |||||||
| Straight-line rent adjustments | — | — | |||||||||
Other depreciation (1) | 1,787 | 2,403 | |||||||||
Amortization of land rights | — | — | |||||||||
Amortization of debt issuance costs, bond premiums and original issuance discounts | — | — | |||||||||
| Stock based compensation | — | — | |||||||||
| Losses on debt extinguishment | — | — | |||||||||
| Loan impairment charges | — | — | |||||||||
Capital maintenance expenditures (2) | (558) | (528) | |||||||||
| Adjusted funds from operations | $ | 1,603 | $ | 4,122 | |||||||
| Interest, net | 2,601 | 2,601 | |||||||||
| Income tax expense | 192 | 1,058 | |||||||||
Capital maintenance expenditures (2) | 558 | 528 | |||||||||
Amortization of debt issuance costs, bond premiums and original issuance discounts | — | — | |||||||||
| Adjusted EBITDA | $ | 4,954 | $ | 8,309 | |||||||
(1) Other depreciation includes both real estate and equipment depreciation from the Company's taxable REIT subsidiaries, as well as equipment depreciation from the REIT subsidiaries.
(2) Capital maintenance expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost effective to repair.
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` `Gaming and Leisure Properties, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share data)
| March 31, 2020 | December 31, 2019 | |||||||||||||
| Assets | ||||||||||||||
| Real estate investments, net | $ | 7,046,276 | $ | 7,100,555 | ||||||||||
| Property and equipment, used in operations, net | 92,443 | 94,080 | ||||||||||||
| Real estate loans | 303,684 | 303,684 | ||||||||||||
| Right-of-use assets and land rights, net | 835,027 | 838,734 | ||||||||||||
| Cash and cash equivalents | 559,545 | 26,823 | ||||||||||||
| Prepaid expenses | 4,544 | 4,228 | ||||||||||||
| Goodwill | 16,067 | 16,067 | ||||||||||||
| Other intangible assets | 9,577 | 9,577 | ||||||||||||
| Deferred tax assets | 5,529 | 6,056 | ||||||||||||
| Other assets | 26,469 | 34,494 | ||||||||||||
| Total assets | $ | 8,899,161 | $ | 8,434,298 | ||||||||||
| Liabilities | ||||||||||||||
| Accounts payable | $ | 339 | $ | 1,006 | ||||||||||
| Accrued expenses | 5,998 | 6,239 | ||||||||||||
| Accrued interest | 77,564 | 60,695 | ||||||||||||
| Accrued salaries and wages | 3,154 | 13,821 | ||||||||||||
| Gaming, property, and other taxes | 810 | 944 | ||||||||||||
Lease liabilities | 183,298 | 183,971 | ||||||||||||
Long-term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts | 6,255,714 | 5,737,962 | ||||||||||||
| Deferred rental revenue | 337,129 | 328,485 | ||||||||||||
| Deferred tax liabilities | 332 | 279 | ||||||||||||
| Other liabilities | 22,518 | 26,651 | ||||||||||||
| Total liabilities | 6,886,856 | 6,360,053 | ||||||||||||
| Shareholders’ equity | ||||||||||||||
| Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued or outstanding at March 31, 2020 and December 31, 2019) | — | — | ||||||||||||
Common stock ($.01 par value, 500,000,000 shares authorized, 215,107,229 and 214,694,165 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively) | 2,151 | 2,147 | ||||||||||||
| Additional paid-in capital | 3,951,341 | 3,959,383 | ||||||||||||
| Accumulated deficit | (1,941,187) | (1,887,285) | ||||||||||||
| Total shareholders’ equity | 2,012,305 | 2,074,245 | ||||||||||||
| Total liabilities and shareholders’ equity | $ | 8,899,161 | $ | 8,434,298 | ||||||||||
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Debt Capitalization
The Company had $559.5 million of unrestricted cash and $6.3 billion in total debt at March 31, 2020. The Company’s debt structure as of March 31, 2020 was as follows:
As of March 31, 2020 | |||||||||||||||||
| Years to Maturity | Interest Rate | Balance | |||||||||||||||
| (in thousands) | |||||||||||||||||
Unsecured $1,175 Million Revolver Due May 2023 (1) | 3.1 | 2.436% | $ | 1,174,600 | |||||||||||||
Unsecured Term Loan A-1 Due April 2021 (1) | 1.1 | 3.015% | 449,000 | ||||||||||||||
| Senior Unsecured Notes Due November 2023 | 3.6 | 5.375% | 500,000 | ||||||||||||||
| Senior Unsecured Notes Due September 2024 | 4.4 | 3.350% | 400,000 | ||||||||||||||
| Senior Unsecured Notes Due June 2025 | 5.2 | 5.250% | 850,000 | ||||||||||||||
| Senior Unsecured Notes Due April 2026 | 6.0 | 5.375% | 975,000 | ||||||||||||||
| Senior Unsecured Notes Due June 2028 | 8.2 | 5.750% | 500,000 | ||||||||||||||
| Senior Unsecured Notes Due January 2029 | 8.8 | 5.300% | 750,000 | ||||||||||||||
| Senior Unsecured Notes Due January 2030 | 9.8 | 4.000% | 700,000 | ||||||||||||||
| Finance lease liability | 6.4 | 4.780% | 958 | ||||||||||||||
| Total long-term debt | $ | 6,299,558 | |||||||||||||||
Less: unamortized debt issuance costs, bond premiums and original issuance discounts | (43,844) | ||||||||||||||||
Total long-term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts | $ | 6,255,714 | |||||||||||||||
Weighted average | 5.6 | 4.381% | |||||||||||||||
(1) The rate on the term loan facility and revolver is LIBOR plus 1.50%.
(2) Total debt net of cash totaled $5.70 billion at March 31, 2020.
Rating Agency Update - Issue Rating
| Rating Agency | Rating | |||||||
| Standard & Poor's | BBB- | |||||||
| Fitch | BBB- | |||||||
| Moody's | Ba1 | |||||||
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Properties
| Description | Location | Date Acquired | Tenant/Operator | ||||||||
| PENN Master Lease (19 Properties) | |||||||||||
| Hollywood Casino Lawrenceburg | Lawrenceburg, IN | 11/1/2013 | PENN | ||||||||
| Hollywood Casino Aurora | Aurora, IL | 11/1/2013 | PENN | ||||||||
| Hollywood Casino Joliet | Joliet, IL | 11/1/2013 | PENN | ||||||||
| Argosy Casino Alton | Alton, IL | 11/1/2013 | PENN | ||||||||
| Hollywood Casino Toledo | Toledo, OH | 11/1/2013 | PENN | ||||||||
| Hollywood Casino Columbus | Columbus, OH | 11/1/2013 | PENN | ||||||||
| Hollywood Casino at Charles Town Races | Charles Town, WV | 11/1/2013 | PENN | ||||||||
| Hollywood Casino at Penn National Race Course | Grantville, PA | 11/1/2013 | PENN | ||||||||
| M Resort | Henderson, NV | 11/1/2013 | PENN | ||||||||
| Hollywood Casino Bangor | Bangor, ME | 11/1/2013 | PENN | ||||||||
| Zia Park Casino | Hobbs, NM | 11/1/2013 | PENN | ||||||||
| Hollywood Casino Gulf Coast | Bay St. Louis, MS | 11/1/2013 | PENN | ||||||||
| Argosy Casino Riverside | Riverside, MO | 11/1/2013 | PENN | ||||||||
| Hollywood Casino Tunica | Tunica, MS | 11/1/2013 | PENN | ||||||||
| Boomtown Biloxi | Biloxi, MS | 11/1/2013 | PENN | ||||||||
| Hollywood Casino St. Louis | Maryland Heights, MO | 11/1/2013 | PENN | ||||||||
| Hollywood Gaming Casino at Dayton Raceway | Dayton, OH | 11/1/2013 | PENN | ||||||||
| Hollywood Gaming Casino at Mahoning Valley Race Track | Youngstown, OH | 11/1/2013 | PENN | ||||||||
| 1st Jackpot Casino | Tunica, MS | 5/1/2017 | PENN | ||||||||
| Amended Pinnacle Master Lease (12 Properties) | |||||||||||
| Ameristar Black Hawk | Black Hawk, CO | 4/28/2016 | PENN | ||||||||
| Ameristar East Chicago | East Chicago, IN | 4/28/2016 | PENN | ||||||||
| Ameristar Council Bluffs | Council Bluffs, IA | 4/28/2016 | PENN | ||||||||
| L'Auberge Baton Rouge | Baton Rouge, LA | 4/28/2016 | PENN | ||||||||
| Boomtown Bossier City | Bossier City, LA | 4/28/2016 | PENN | ||||||||
| L'Auberge Lake Charles | Lake Charles, LA | 4/28/2016 | PENN | ||||||||
| Boomtown New Orleans | New Orleans, LA | 4/28/2016 | PENN | ||||||||
| Ameristar Vicksburg | Vicksburg, MS | 4/28/2016 | PENN | ||||||||
| River City Casino & Hotel | St. Louis, MO | 4/28/2016 | PENN | ||||||||
| Jackpot Properties (Cactus Petes and Horseshu) | Jackpot, NV | 4/28/2016 | PENN | ||||||||
| Plainridge Park Casino | Plainridge, MA | 10/15/2018 | PENN | ||||||||
| ERI Master Lease (5 Properties) | |||||||||||
| Tropicana Atlantic City | Atlantic City, NJ | 10/1/2018 | ERI | ||||||||
| Tropicana Evansville | Evansville, IN | 10/1/2018 | ERI | ||||||||
| Tropicana Laughlin | Laughlin, NV | 10/1/2018 | ERI | ||||||||
| Trop Casino Greenville | Greenville, MS | 10/1/2018 | ERI | ||||||||
| Belle of Baton Rouge | Baton Rouge, LA | 10/1/2018 | ERI | ||||||||
| BYD Master Lease (3 Properties) | |||||||||||
| Belterra Casino Resort | Florence, IN | 4/28/2016 | BYD | ||||||||
| Ameristar Kansas City | Kansas City, MO | 4/28/2016 | BYD | ||||||||
| Ameristar St. Charles | St. Charles, MO | 4/28/2016 | BYD | ||||||||
| Single Asset Leases | |||||||||||
| The Meadows Racetrack and Casino | Washington, PA | 9/9/2016 | PENN | ||||||||
| Casino Queen | East St. Louis, IL | 1/23/2014 | Casino Queen | ||||||||
| Financed Property | |||||||||||
| Belterra Park Gaming & Entertainment Center | Cincinnati, OH | N/A | BYD | ||||||||
| TRS Properties | |||||||||||
| Hollywood Casino Baton Rouge | Baton Rouge, LA | 11/1/2013 | GLPI | ||||||||
| Hollywood Casino Perryville | Perryville, MD | 11/1/2013 | GLPI | ||||||||
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Lease and Loan Information
| Master Leases | Single Asset Leases | ||||||||||||||||||||||
| PENN Master Lease | PENN Amended Pinnacle Master Lease | ERI Master Lease | BYD Master Lease | PENN-Meadows Lease | Casino Queen Lease | ||||||||||||||||||
| Property Count | 19 | 12 | 5 | 3 | 1 | 1 | |||||||||||||||||
| Number of States Represented | 10 | 8 | 5 | 2 | 1 | 1 | |||||||||||||||||
| Commencement Date | 11/1/2013 | 4/28/2016 | 10/1/2018 | 10/15/2018 | 9/9/2016 | 1/23/2014 | |||||||||||||||||
| Initial Term | 15 | 10 | 15 | 10 | 10 | 15 | |||||||||||||||||
| Renewal Terms | 20 (4x5 years) | 25 (5x5 years) | 20 (4x5 years) | 25 (5x5 years) | 19 (3x5years, 1x4 years) | 20 (4x5 years) | |||||||||||||||||
| Corporate Guarantee | Yes | Yes | Yes | No | Yes | No | |||||||||||||||||
| Master Lease with Cross Collateralization | Yes | Yes | Yes | Yes | No | No | |||||||||||||||||
| Technical Default Landlord Protection | Yes | Yes | Yes | Yes | Yes | Yes | |||||||||||||||||
| Default Adjusted Revenue to Rent Coverage | 1.1 | 1.2 | 1.2 | 1.4 | 1.2 | 1.4 | |||||||||||||||||
| Competitive Radius Landlord Protection | Yes | Yes | Yes | Yes | Yes | Yes | |||||||||||||||||
| Escalator Details | |||||||||||||||||||||||
| Yearly Base Rent Escalator Maximum | 2% | 2% | 2% | 2% | 5% (1) | 2% | |||||||||||||||||
Coverage as of Tenants' latest Earnings Report (2) | 1.93 | 1.77 | 1.96 | 1.94 | 1.97 | 1.28 | |||||||||||||||||
| Minimum Escalator Coverage Governor | 1.8 | 1.8 | 1.2 (3) | 1.8 | 2.0 | 1.8 | |||||||||||||||||
| Yearly Anniversary for Realization | November 2020 | May 2020 | October 2020 | May 2020 | October 2020 | February 2020 | |||||||||||||||||
| Percentage Rent Reset Details | |||||||||||||||||||||||
| Reset Frequency | 5 years | 2 years | 2 years | 2 years | 2 years | 5 years | |||||||||||||||||
| Next Reset | November 2023 | May 2020 | October 2020 | May 2020 | October 2020 | February 2024 | |||||||||||||||||
| Loans Receivable | ||||||||
BYD (Belterra) (4) | ERI (Lumière Place) (5) | |||||||
| Property Count | 1 | 1 | ||||||
| Commencement Date | 10/15/2018 | 10/1/2018 | ||||||
| Current Interest Rate | 11.20% | 9.27% | ||||||
| Credit Enhancement | Guarantee from Master Lease Entity | Corporate Guarantee | ||||||
(1) Meadows yearly escalator is 5% until a breakpoint when it resets to 2%.
(2) Information with respect to our tenants' rent coverage was provided by our tenants as of December 31, 2019. GLPI has not independently verified the accuracy of the tenants' information and therefore makes no representation as to the accuracy of such information.
(3) ERI escalator governor is 1.2x for the initial 5 years and then 1.8x in subsequent years.
(4) The Belterra Park mortgage is supported by the BYD Master Lease subsidiaries and its terms are consistent with the BYD Master Lease.
(5) The ERI loan bears interest at a rate equal to (i) 9.09% until October 1, 2019 and (ii) 9.27% until its maturity. On the one-year anniversary of the ERI loan, the mortgage evidenced by a deed of trust on the Lumière Place property terminated and the loan became unsecured and will remain unsecured until its final maturity on the two-year anniversary of the closing. The parties anticipate that the ERI loan will be fully repaid on or prior to maturity by way of substitution of one or more additional ERI properties acceptable to ERI and the Company, which will be transferred to the Company and added to the ERI Master Lease.
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Disclosure Regarding Non-GAAP Financial Measures
FFO, FFO per diluted common share, AFFO, AFFO per diluted common share, Adjusted EBITDA and Cash NOI, which are detailed in the reconciliation tables that accompany this release, are used by the Company as performance measures for benchmarking against the Company’s peers and as internal measures of business operating performance, which is used for a bonus metric. The Company believes FFO, FFO per diluted common share, AFFO, AFFO per diluted common share, Adjusted EBITDA and Cash NOI provide a meaningful perspective of the underlying operating performance of the Company’s current business. This is especially true since these measures exclude real estate depreciation and we believe that real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. Cash NOI is rental and other property income less cash property level expenses. Cash NOI excludes depreciation, the amortization of land rights, real estate general and administrative expenses, other non-routine costs and the impact of certain generally accepted accounting principles (“GAAP”) adjustments to rental revenue, such as straight-line rent adjustments and non-cash ground lease income and expense. It is management's view that Cash NOI is a performance measure used to evaluate the operating performance of the Company’s real estate operations and provides investors relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis.
FFO, FFO per diluted common share, AFFO, AFFO per diluted common share, Adjusted EBITDA and Cash NOI are non-GAAP financial measures, that are considered supplemental measures for the real estate industry and a supplement to GAAP measures. NAREIT defines FFO as net income (computed in accordance with GAAP), excluding (gains) or losses from sales of property and real estate depreciation. We have defined AFFO as FFO excluding stock based compensation expense, the amortization of debt issuance costs, bond premiums and original issuance discounts, other depreciation, the amortization of land rights, straight-line rent adjustments, losses on debt extinguishment, retirement costs and goodwill and loan impairment charges, reduced by capital maintenance expenditures. We have defined Adjusted EBITDA as net income excluding interest, taxes on income, depreciation, (gains) or losses from sales of property, stock based compensation expense, straight-line rent adjustments, the amortization of land rights, losses on debt extinguishment, retirement costs, and goodwill and loan impairment charges. Finally, we have defined Cash NOI as Adjusted EBITDA for the REIT excluding real estate general and administrative expenses and including stock based compensation expense and (gains) or losses from sales of property.
FFO, FFO per diluted common share, AFFO, AFFO per diluted common share, Adjusted EBITDA and Cash NOI are not recognized terms under GAAP. These non-GAAP financial measures: (i) do not represent cash flow from operations as defined by GAAP; (ii) should not be considered as an alternative to net income as a measure of operating performance or to cash flows from operating, investing and financing activities; and (iii) are not alternatives to cash flow as a measure of liquidity. In addition, these measures should not be viewed as an indication of our ability to fund all of our cash needs, including to make cash distributions to our shareholders, to fund capital improvements, or to make interest payments on our indebtedness. Investors are also cautioned that FFO, FFO per share, AFFO, AFFO per share, Adjusted EBITDA and Cash NOI, as presented, may not be comparable to similarly titled measures reported by other real estate companies, including REITs due to the fact that not all real estate companies use the same definitions. Our presentation of these measures does not replace the presentation of our financial results in accordance with GAAP.
About Gaming and Leisure Properties
GLPI is engaged in the business of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements, pursuant to which the tenant is responsible for all facility maintenance, insurance required in connection with the leased properties and the business conducted on the leased properties, taxes levied on or with respect to the leased properties and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, including our expectations regarding our receipt of rent payments in future periods, the impact of future transactions and expected 2020 dividend payments. Forward-looking statements can be identified by the use of forward-looking terminology such as “expects,” “believes,” “estimates,” “intends,” “may,” “will,” “should” or “anticipates” or the negative or other variation of these or similar words, or by discussions of future events, strategies or risks and uncertainties. Such forward looking statements are inherently subject to risks, uncertainties and assumptions about GLPI and its subsidiaries, including risks related to the following: the effect of pandemics such as COVID-19 on GLPI as a result of the impact of such pandemics on the business operations of GLPI’s tenants and their continued ability to pay rent in a timely manner or at all; GLPI’s ability to successfully consummate the announced transactions with PENN, including the ability of the parties to satisfy the various conditions to closing, including receipt of all required
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regulatory approvals, or other delays or impediments to completing the proposed transactions; the availability of and the ability to identify suitable and attractive acquisition and development opportunities and the ability to acquire and lease those properties on favorable terms; the ability to receive, or delays in obtaining, the regulatory approvals required to own and/or operate its properties, or other delays or impediments to completing acquisitions or projects; GLPI's ability to maintain its status as a REIT; our ability to access capital through debt and equity markets in amounts and at rates and costs acceptable to GLPI; the impact of our substantial indebtedness on our future operations; changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs or to the gaming or lodging industries; and other factors described in GLPI’s Annual Report on Form 10-K for the year ended December 31, 2019, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to GLPI or persons acting on GLPI’s behalf are expressly qualified in their entirety by the cautionary statements included in this press release. GLPI undertakes no obligation to publicly update or revise any forward-looking statements contained or incorporated by reference herein, whether as a result of new information, future events or otherwise, 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 as presented or at all.
Contact
| Investor Relations – Gaming and Leisure Properties, Inc. | ||||||||
| Steven T. Snyder | Joseph Jaffoni, Richard Land, James Leahy at JCIR | |||||||
| T: 610/378-8215 | T: 212/835-8500 | |||||||
| Email: investorinquiries@glpropinc.com | Email: glpi@jcir.com | |||||||
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