New Accounting Pronouncements (Tables)

3 Months Ended

Mar. 31, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Schedule of impact of adoption of ASU-2014-09

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	)
Other assets
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 other assets	$	3,414,586		$	5,517	$	224,482		$	3,541,144		$	112,804	$	152,519		$	7,451,052	$	4,036,466
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	$	28,269		$	—	$	—		$	—		$	—	$	(1,925	)	$	26,344	$	(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 consists of land components).


(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 in 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 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 previous GAAP 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 building components). 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.