6.Investment In and Advances to Unconsolidated Affiliates

As of December 31, 2017, investment in and advances to unconsolidated affiliates primarily included the Company’s 50% investment in Kansas Entertainment, which is a joint venture with International Speedway Corporation (“International Speedway”), its 50% interest in Freehold Raceway, and its 50% joint venture with MAXXAM, Inc. (“MAXXAM”) that owns and operates racetracks in Texas. These investments are more fully described below.

Kansas Joint Venture

The Company has a 50% investment in Kansas Entertainment, which owns the Hollywood Casino at Kansas Speedway. Hollywood Casino at Kansas Speedway is a Hollywood-themed facility, which features 244,791 of property square footage with 2,000 slot machines, 41 table games and 12 poker tables, a 1,253 space parking structure, as well as a variety of dining and entertainment facilities. As of December 31, 2017 and 2016, the Company’s investment balance was $88.3 million and $93.8 million, respectively. During the years ended December 31, 2017, 2016, and 2015, the Company received distributions from Kansas Entertainment totaling $26.0 million, $25.8 million and $27.2 million, respectively, which the Company deemed to be returns on its investment based on the source of those cash flows from the normal business operations of Kansas Entertainment.

The Company determined that Kansas Entertainment qualified as a VIE at December 31, 2017 and 2016. The Company did not consolidate its investment in Kansas Entertainment as the Company determined that it did not qualify as the primary beneficiary of Kansas Entertainment at, and for the years ended December 31, 2017 and 2016, primarily as it did not have the ability to direct the activities of Kansas Entertainment that most significantly impacted Kansas Entertainment’s economic performance without the approval of International Speedway. In addition, the Company determined that International Speedway had substantive participating rights in Kansas Entertainment at, and for the years ended, December 31, 2017 and 2016.

For the year ended December 31, 2017, the Company’s investment in Kansas Entertainment met the requirements of S-X Rule 4-08(g) to provide summarized financial information. The following table provides summary income statement information for Kansas Entertainment as required under S-X Rule 1-02(bb) for the comparative periods in the Company’s consolidated balance sheets and consolidated statements of operations (in thousands):


	As of December 31,
	2017		2016		2015
Current assets	$	18,452	$	16,638	$	16,550
Noncurrent assets	$	165,801	$	176,050	$	195,010
Current liabilities	$	17,861	$	15,351	$	14,544


	For the twelve months ended December 31,
	2017		2016		2015
Net revenues	$	155,636	$	152,926	$	153,407
Operating expenses		114,681		121,006		122,828
Income from operations		40,955		31,920		30,579
Net income	$	40,955	$	31,920	$	30,579

Net income attributable to Penn	$	20,478	$	15,960	$	15,290

In addition to the assessment performed by the Company of its investment in Kansas Entertainment under the requirements of S-X Rule 4-08(g), the Company also assessed its investment in Kansas Entertainment under the requirements of S-X Rule 3-09(b) for the year ended December 31, 2017, and determined it was required to provide the audited financial statements of Kansas Entertainment. The consolidated financial statements of Kansas Entertainment for the years ended June 30, 2017, 2016 and 2015 are provided as exhibits to this document to comply with this rule.

Texas Joint Venture

The Company has a 50% interest in a joint venture with MAXXAM, which owns and operates the Sam Houston Race Park in Houston, Texas and the Valley Race Park in Harlingen, Texas, and holds a license for a racetrack in Austin, Texas. Sam Houston Race Park hosts thoroughbred and quarter horse racing and offers daily simulcast operations, and Valley Race Park features dog racing and simulcasting.

The Company determined that the Texas joint venture did not qualify as a VIE at December 31, 2017 and 2016. Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the joint venture at, and for the years ended December 31, 2017 and 2016, primarily as it did not have the ability to direct the activities of the joint venture that most significantly impacted the joint venture’s economic performance without the input of MAXXAM. Therefore, the Company did not consolidate its investment in the joint venture at, and for the years ended, December 31, 2017 and 2016.

New Jersey Joint Venture

Through its joint venture with Greenwood Limited Jersey, Inc. (“Greenwood”), the Company owns 50% of Freehold Raceway, located in Freehold, New Jersey. The property features a half-mile standardbred race track and a grandstand.

The Company determined that the New Jersey joint venture did not qualify as a VIE at December 31, 2017 and 2016. Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the joint venture at, and for the years ended December 31, 2017 and 2016, primarily as it did not have the ability to direct the activities of the joint venture that most significantly impacted the joint venture’s economic performance without the input of Greenwood. Therefore, the Company did not consolidate its investment in the joint venture at, and for the years ended December 31, 2017 and 2016.