The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, the unaudited Consolidated Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . EXECUTIVE OVERVIEW Our BusinessPenn National Gaming, Inc. , together with its subsidiaries ("Penn," the "Company," "we," "our," or "us"), isNorth America's leading provider of integrated entertainment, sports content, and casino gaming experiences. A member of the S&P 500, Penn operates 44 properties in 20 states, online sports betting in 13 jurisdictions and iCasino in five, under a portfolio of well-recognized brands including Hollywood Casino® , L'Auberge® , Barstool Sportsbook® and theScore Bet® . Penn's highly differentiated strategy, which is focused on organic cross-sell opportunities, is reinforced by its investments in owned technology, including a state-of-the-art media and betting platform and an in-house iCasino content studio. The Company's portfolio is further bolstered by its industry-leading mychoice® customer loyalty program (the "mychoice program"), which offers its over 25 million members a unique set of rewards and experiences across business channels. The majority of the real estate assets (i.e., land and buildings) used in our operations are subject to triple net master leases; the most significant of which are the Penn Master Lease and the PinnacleMaster Lease (as such terms are defined in "Liquidity and Capital Resources" and collectively referred to as the "Master Leases"), with Gaming and Leisure Properties, Inc. (Nasdaq: GLPI) ("GLPI"), a real estate investment trust ("REIT").
Recent Acquisitions, Development Projects and Other
OnApril 16, 2020 , we sold the real estate assets associated with the operations ofTropicana Las Vegas Hotel and Casino, Inc. ("Tropicana") to GLPI in exchange for rent credits of$307.5 million , and utilized the rent credits to pay rent under our existing Master Leases and the Meadows Racetrack andCasino Lease , beginning inMay 2020 . Contemporaneous with the sale, the Company entered into the Tropicana Lease, (as defined and discussed in Note 9, "Leases" to our unaudited Consolidated Financial Statements). OnJanuary 11, 2022 , Penn entered into a definitive purchase agreement to sell its outstanding equity interest in Tropicana, which has the gaming license and operates the Tropicana, toBally's Corporation ("Bally's"). This transaction is expected to close within the second half of 2022, subject to Penn, GLPI, andBally's entering into definitive agreements and obtaining regulatory approval. OnMay 11, 2021 , we acquired 100% of the outstanding equity ofHitPoint Inc. andLucky Point Inc. (collectively, "Hitpoint"). The purchase price totaled$12.7 million , consisting of$6.2 million in cash,$3.5 million of the Company's common equity, and a$3.0 million contingent liability. OnJuly 1, 2021 , we completed the acquisition of the operations ofHollywood Casino Perryville ("Perryville"), from GLPI for a purchase price of$39.4 million , including working capital adjustments. Simultaneous with the closing, we entered into a lease with GLPI for the real estate assets associated withHollywood Casino Perryville for initial annual rent of$7.8 million per year subject to escalation. OnAugust 1, 2021 , we completed the acquisition of the remaining 50% ownership interest in theSam Houston Race Park inHouston, Texas , theValley Race Park inHarlingen, Texas , and a license to operate a racetrack inAustin, Texas (collectively, "Sam Houston"), fromPM Texas Holdings, LLC for a purchase price of$57.8 million , comprised of$42.0 million in cash and$15.8 million of the Company's common equity. OnOctober 19, 2021 , we acquired 100% ofScore Media and Gaming, Inc. ("theScore") for a purchase price of approximately$2.1 billion . Under the terms of the agreement, 1317774B.C. Ltd. (the "Purchaser"), an indirectly wholly owned subsidiary of Penn, acquired each of the issued and outstanding theScore shares (other than those held by Penn and its subsidiaries) forUS$17.00 per share in cash consideration, totaling$0.9 billion , and either 0.2398 of a share of common stock, par value$0.01 of Penn Common Stock or, if validly elected, 0.2398 of an exchangeable share in the capital of the Purchaser (each whole share, an "Exchangeable Share"), totaling 12,319,340 shares of Penn Common Stock and 697,539 Exchangeable Shares for approximately$1.0 billion . Each Exchangeable Share will be exchangeable into one share of Penn Common Stock at the option of the holder, subject to certain adjustments. In addition, Purchaser may redeem all outstanding Exchangeable Shares in exchange for shares of Penn Common Stock at any time following the fifth anniversary of the closing, or earlier under certain 36 -------------------------------------------------------------------------------- Table of Contents circumstances. The acquisition provides us with the technology, resources and audience reach to accelerate our media and sports betting strategy acrossNorth America . We believe that our portfolio of assets provides us with the benefit of geographically-diversified cash flow from operations. We expect to continue to expand our gaming operations through the implementation and execution of a disciplined capital expenditure program at our existing properties, the pursuit of strategic acquisitions and investments, and the development of new gaming properties. In addition, the partnership withBarstool Sports, Inc. ("Barstool Sports ") and the acquisition of theScore reflect our strategy to continue evolving from the nation's largest regional gaming operator to a best-in-class omni-channel provider of retail and online gaming and sports betting entertainment.
Operating and Competitive Environment
Most of our properties operate in mature, competitive markets. We expect that the majority of our future growth will come from new business lines or distribution channels, such as retail and online gaming and sports betting; entrance into new jurisdictions; expansions of gaming in existing jurisdictions; and, to a lesser extent, improvements/expansions of our existing properties and strategic acquisitions of gaming properties. Our portfolio is comprised largely of well-maintained regional gaming facilities, which has allowed us to develop what we believe to be a solid base for future growth opportunities. As the COVID-19 pandemic evolves, we continue to adjust operations and cost structures at our properties to reflect the changing economic and health and safety conditions. We also continue to focus on revenue and cost synergies from recent acquisitions, technology investments, and offering our customers additional gaming experiences through our omni-channel distribution strategy. We seek to continue to expand our customer database by partnering with third-party operators such as Choice Hotels International, Inc. to expand our loyalty program, as well as through accretive investments or acquisitions, such asBarstool Sports and theScore, capitalize on organic growth opportunities from the development of new properties or the expansion of recently-developed business lines, and develop partnerships that allow us to enter new jurisdictions for iCasino and sports betting. The gaming industry is characterized by an increasingly high degree of competition among a large number of participants, including riverboat casinos; dockside casinos; land-based casinos; video lottery; "iGaming" (which includes online sports betting and online social casino, bingo, and iCasino products); online and retail sports betting; sports media companies; gaming at taverns; gaming at truck stop establishments; sweepstakes and poker machines not located in casinos; the potential for increased fantasy sports; significant growth of Native American gaming tribes, historic racing or state-sponsored i-lottery products in or adjacent to states we operate in; and other forms of gaming in the U.S. See the "Segment comparison of the three months ended March 31, 2022 and 2021" section below for discussions of the impact of competition on our results of operations by reportable segment.
Key Performance Indicators
In our business, revenue is driven by discretionary consumer spending. We have no certain mechanism for determining why consumers choose to spend more or less money at our properties from period-to-period; therefore, we are unable to quantify a dollar amount for each factor that impacts our customers' spending behaviors. However, based on our experience, we can generally offer some insight into the factors that we believe are likely to account for such changes and which factors may have a greater impact than others. For example, decreases in discretionary consumer spending have historically been brought about by weakened general economic conditions, such as lackluster recoveries from recessions, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, high fuel or other transportation costs, and the effects of the COVID-19 pandemic. In addition, visitation and the volume of play have historically been negatively impacted by significant construction surrounding our properties, adverse regional weather conditions and natural disasters. In all instances, such insights are based solely on our judgment and professional experience, and no assurance can be given as to the accuracy of our judgments. The vast majority of our revenues is gaming revenue, which is highly dependent upon the volume and spending levels of customers at our properties. Our gaming revenue is derived primarily from slot machines (which represented approximately 81% and 85% of our gaming revenue for the three months endedMarch 31, 2022 and 2021) and, to a lesser extent, table games and sports betting. Aside from gaming revenue, our revenues are primarily derived from our hotel, dining, retail, commissions, program sales, admissions, concessions and certain other ancillary activities, and our racing operations. Key performance indicators related to gaming revenue are slot handle and table game drop, which are volume indicators, and "win" or "hold" percentage. Our typical property slot win percentage is in the range of approximately 7% to 11% of slot handle, and our typical table game hold percentage is in the range of approximately 15% to 27% of table game drop. 37 -------------------------------------------------------------------------------- Table of Contents Slot handle is the gross amount wagered during a given period. The win or hold percentage is the net amount of gaming wins and losses, with liabilities recognized for accruals related to the anticipated payout of progressive jackpots. Given the stability in our slot hold percentages on a historical basis, we have not experienced significant impacts to net income from changes in these percentages. For table games, customers usually purchase chips at the gaming tables. The cash and markers (extensions of credit granted to certain credit-worthy customers) are deposited in the gaming table's drop box. Table game hold is the amount of drop that is retained and recorded as gaming revenue, with liabilities recognized for funds deposited by customers before gaming play occurs and for unredeemed gaming chips. As we are primarily focused on regional gaming markets, our table game hold percentages are fairly stable as the majority of these markets do not regularly experience high-end play, which can lead to volatility in hold percentages. Therefore, changes in table game hold percentages do not typically have a material impact to our results of operations and cash flows. Under normal operating conditions, our properties generate significant operating cash flow since most of our revenue is cash-based from slot machines, table games, and pari-mutuel wagering. Our business is capital intensive, and we rely on cash flow from our properties to generate sufficient cash to satisfy our obligations under the Triple Net Leases (as defined in "Liquidity and Capital Resources" ), repay debt, fund maintenance capital expenditures, fund new capital projects at existing properties and provide excess cash for future development and acquisitions. Additional information regarding our capital projects is discussed in "Liquidity and Capital Resources" below.
Reportable Segments
We have aggregated our operating segments into five reportable segments. Retail operating segments are based on the similar characteristics within the regions in which they operate: Northeast, South, West, and Midwest. Our Interactive segment includes the operating results of our wholly-owned interactive division,Penn Interactive Ventures, LLC ("Penn Interactive"), theScore, and the Company's proportionate share of earnings attributable to its equity method investment inBarstool Sports . We view each of our gaming and racing properties as an operating segment with the exception of our two properties inJackpot, Nevada , which we view as one operating segment. We consider our combinedVideo Gaming Terminal ("VGT") operations, by state, to be separate operating segments. For a listing of our gaming properties and VGT operations included in each reportable segment, see Note 2, "Significant Accounting Policies," in the notes to our unaudited Consolidated Financial Statements. 38
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Table of Contents
RESULTS OF OPERATIONS The following table highlights our revenues, net income, and Adjusted EBITDA, on a consolidated basis, as well as our revenues and Adjusted EBITDAR by reportable segment. Such segment reporting is on a basis consistent with how we measure our business and allocate resources internally. We consider net income to be the most directly comparable financial measure calculated in accordance with generally accepted accounting principles inthe United States ("GAAP") to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures. Refer to "Non-GAAP Financial Measures" below for the definitions of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDAR, and Adjusted EBITDAR margin; as well as a reconciliation of net income to Adjusted EBITDA and Adjusted EBITDAR and related margins. For
the three months ended March
31, (dollars in millions) 2022 2021 Revenues: Northeast segment$ 658.5 $ 570.9 South segment 341.4 295.9 West segment 140.9 96.6 Midwest segment 282.9 234.7 Interactive segment 141.5 86.3 Other (1) 7.3 1.6 Intersegment eliminations (2) (8.3) (11.1) Total$ 1,564.2 $ 1,274.9 Net income $ 51.6 $ 90.9 Adjusted EBITDAR: Northeast segment$ 205.2 $ 193.2 South segment 146.5 133.9 West segment 51.2 35.2 Midwest segment 125.5 106.0 Interactive segment (10.0) 1.3 Other (1) (23.7) (22.6) Total (3) 494.7 447.0 Rent expense associated with triple net operating leases (4) (60.1) (110.4) Adjusted EBITDA$ 434.6 $ 336.6 Net income margin 3.3 % 7.1 % Adjusted EBITDAR margin 31.6 % 35.1 % Adjusted EBITDA margin 27.8 % 26.4 % (1)The Other category consists of the Company's stand-alone racing operations, namelySanford-Orlando Kennel Club , andSam Houston and ValleyRace Parks (the remaining 50% was acquired by Penn onAugust 1, 2021 ), the Company's joint venture interests inFreehold Raceway , and our management contract for RetamaPark Racetrack . Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property. The Other category also includes corporate overhead costs, which consist of certain expenses, such as: payroll, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have not otherwise been allocated to a property.
(2)Primarily represents the elimination of intersegment revenues associated with our internally-branded retail sportsbooks, which are operated by Penn Interactive.
(3)The total is a mathematical calculation derived from the sum of reportable segments (as well as the Other category). As noted within "Non-GAAP Financial Measures" below, Adjusted EBITDAR, and the related margin, is presented on a consolidated basis outside the financial statements solely as a valuation metric. (4)Solely comprised of rent expense associated with the operating lease components contained within our triple net master lease datedNovember 1, 2013 with GLPI and the triple net master lease assumed in connection with our acquisition ofPinnacle Entertainment, Inc. , our individual triple net leases with GLPI for the real estate assets used in the operation ofTropicana Las Vegas Hotel and Casino, Inc. andHollywood Casino at Meadows Racetrack, and our individual triple net leases with VICI Properties Inc. (NYSE: VICI) ("VICI") for the real estate assets used in the operations of 39 -------------------------------------------------------------------------------- Table of ContentsMargaritaville Casino Resort and Greektown Casino-Hotel (of which the Tropicana Lease, Meadows Lease, Margaritaville Lease and the Greektown Lease are defined in "Liquidity and Capital Resources" ) and are referred to collectively as our "triple net operating leases".
As a result of the Lease Modification defined in Note 9, "Leases "
to
our unaudited Consolidated Financial Statements, only the land and building components associated with the operations of Hollywood Gaming atDayton Raceway and Hollywood Gaming at Mahoning ValleyRace Course are classified as operating leases which is recorded to rent expense, as compared to prior to the Lease Modification, whereby the land components of substantially all of the Master Lease properties were classified as operating leases and recorded to rent expense. Subsequent to the Lease Modification, the land components associated with the properties are primarily classified as finance leases.
Consolidated comparison of the three months ended
Revenues
The following table presents our consolidated revenues:
For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Revenues Gaming$ 1,291.2 $ 1,082.0 $ 209.2 19.3 % Food, beverage, hotel and other 273.0 192.9 80.1 41.5 % Total revenues$ 1,564.2 $ 1,274.9 $ 289.3 22.7 % Gaming revenues for the three months endedMarch 31, 2022 increased$209.2 million , compared to the prior year period primarily due to easing of restrictions, strong visitation levels among all age groups, increased length of play, increased spend per guest, continued growth in our online, and sports betting revenues and the inclusion of the operating results of three new properties:Hollywood Casino Perryville , which was acquired onJuly 1, 2021 ;Hollywood Casino York , which openedAugust 12, 2021 ; andHollywood Casino Morgantown , which openedDecember 22, 2021 .
During the prior year period, gaming revenues were negatively impacted by restrictions on gaming patron capacity in place across all of our properties within the quarter.
Food, beverage, hotel and other revenues for the three months endedMarch 31, 2022 increased$80.1 million compared to the prior year period, primarily due to easing of restrictions, strong visitation levels among all age groups, and increased offerings and hours of operations, as well as the inclusion of the operating results from our three new properties discussed above.
During the prior year period, food, beverage, hotel and other revenues were negatively impacted as our properties operated within locally-restricted gaming capacity and limited food and beverage, hotel capacity, and other amenity offerings.
See "Segment comparison of the three months ended
Operating expenses
The following table presents our consolidated operating expenses:
For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Operating expenses Gaming$ 686.6 $ 527.8 $ 158.8 30.1 % Food, beverage, hotel and other 171.9 123.1 48.8 39.6 % General and administrative 295.5 326.2 (30.7) (9.4) % Depreciation and amortization 118.2 81.3 36.9 45.4 % Total operating expenses$ 1,272.2 $ 1,058.4 $ 213.8 20.2 %
Gaming expenses consist primarily of payroll expenses associated with our gaming
operations and gaming taxes. Gaming expenses for the three months ended
40 -------------------------------------------------------------------------------- Table of Contents to an increase in gaming taxes resulting from the increase in gaming revenues, as discussed above, as well as increases in payroll and marketing and promotional expenses due to increased volumes, while still remaining below pre-pandemic levels. During the three months endedMarch 31, 2021 , all of our properties operated under restricted gaming patron capacity with lower gaming activity, resulting in lower gaming expenses. Food, beverage, hotel and other expenses consist primarily of payroll expenses and costs of goods sold associated with our food, beverage, hotel, retail, racing, and interactive operations. Food, beverage, hotel and other expenses for the three months endedMarch 31, 2022 increased$48.8 million compared to the prior year period, primarily due to increased offerings and hours of operations which resulted in increases in payroll expenses and cost of sales. The prior year quarter was impacted by reduced hotel capacity and limited food and beverage options. General and administrative expenses include items such as compliance, facility maintenance, utilities, property and liability insurance, surveillance and security, lobbying expenses, and certain housekeeping services, as well as all expenses for administrative departments such as accounting, purchasing, human resources, legal and internal audit. General and administrative expenses also include stock-based compensation expense; pre-opening expenses; acquisition and transaction costs; gains and losses on disposal of assets; insurance recoveries, net of deductible charges; changes in the fair value of our contingent purchase price obligations; expense associated with cash-settled stock-based awards (including changes in fair value thereto); and rent expense associated with our triple net operating leases. For the three months endedMarch 31, 2022 , general and administrative expenses decreased by$30.7 million period over period primarily due to a decrease in the rent costs associated with our Master Leases of$50.3 million , representing changes in lease classifications from operating to finance as a result of the Lease Modification as described in Note 9, " Leases " to our unaudited Consolidated Financial Statements. In addition, general and administrative expenses decreased by$24.4 million due to a reduction in the Company's cash-settled stock-based awards expense which is primarily driven by the Company's stock price, and an$8.8 million gain representing insurance proceeds received in excess of the receivable due to Hurricane Laura in 2020. Offsetting these decreases are increased payroll costs of$19.7 million , increased stock compensation costs of$12.8 million , and legal and other professional costs associated with acquisitions of$6.7 million , primarily related to the acquisition of theScore.
Depreciation and amortization for the three months ended
Other income (expenses)
The following table presents our consolidated other income (expenses):
For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Other income (expenses) Interest expense, net$ (160.8) $ (135.7) $ (25.1) 18.5 % Income from unconsolidated affiliates$ 8.7 $ 9.6 $ (0.9) (9.4) % Other$ (40.7) $ 21.1 $ (61.8) N/M Income tax expense$ (47.6) $ (20.6) $ (27.0) 131.1 % N/M - Not meaningful Interest expense, net increased for the three months endedMarch 31, 2022 as compared to the prior year period, primarily due to a net$22.8 million increase inMaster Lease interest costs due to changes in lease classifications as a result of the Lease Modification as described in Note 9, "Leases" to our unaudited Consolidated Financial Statements. Income from unconsolidated affiliates relates principally to our investment inBarstool Sports , and ourKansas Entertainment andFreehold Raceway joint ventures. The decrease for the three months endedMarch 31, 2022 , compared to the prior year period, was due to lower income earned from our investments in unconsolidated affiliates. We record our proportionate share ofBarstool Sports' net income or loss one quarter in arrears. Other includes miscellaneous income and expense items and primarily relates to realized and unrealized gains and losses on equity securities (including warrants), held by Penn Interactive and unrealized gains and losses related to certainBarstool Sports shares. Equity securities were provided to the Company in conjunction with entering into multi-year agreements with 41 -------------------------------------------------------------------------------- Table of Contents sports betting operators for online sports betting and related iCasino market access across our portfolio. For the three months endedMarch 31, 2022 , other income primarily consisted of an unrealized holding loss of$38.7 million , compared to an unrealized holding gain of$26.1 million for the three months endedMarch 31, 2021 . Income tax expense was a$47.6 million and$20.6 million expense for the three months endedMarch 31, 2022 and 2021, respectively. Our effective tax rate (income taxes as a percentage of income from operations before income taxes) including discrete items was 48.0% and 18.5% for the three months endedMarch 31, 2022 and 2021, respectively. The change in the effective rate for the three months endedMarch 31, 2022 as compared to the prior year period was primarily due to an increase in the valuation allowance attributed to the Lease Modification during the period endedMarch 31, 2022 . Our effective income tax rate can vary each reporting period depending on, among other factors, the geographic and business mix of our earnings, changes to our valuation allowance, and the level of our tax credits. Certain of these and other factors, including our history and projections of pre-tax earnings, are considered in assessing our ability to realize our net deferred tax assets.
Segment comparison of the three months ended
Northeast Segment For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Revenues Gaming$ 599.1 $ 527.0 $ 72.1 13.7 % Food, beverage, hotel and other 59.4 43.9 15.5 35.3 % Total revenues$ 658.5 $ 570.9 $ 87.6 15.3 % Adjusted EBITDAR$ 205.2 $ 193.2 $ 12.0 6.2 % Adjusted EBITDAR margin 31.2 % 33.8 % -260 bps The Northeast segment's revenues for the three months endedMarch 31, 2022 increased by$87.6 million over the prior year period, primarily due to easing of restrictions, strong visitation levels among all age groups, increased length of play, and increased spend per guest. In addition, the Northeast segment includes operating results from our three new properties:Hollywood Casino Perryville ,Hollywood Casino York , andHollywood Casino Morgantown . During the three months endedMarch 31, 2021 , our Northeast segment's operating results were negatively impacted as our properties operated within locally-restricted gaming capacity and limited food and beverage and other amenity offerings. Additionally, ourPennsylvania properties were temporarily closed for three days inJanuary 2021 , due to COVID-19 restrictions. For the three months endedMarch 31, 2022 , the Northeast segment's Adjusted EBITDAR increased$12.0 million primarily due to an increase in gaming and non-gaming revenues, as discussed above. Adjusted EBITDAR margin decreased by 260 basis points to 31.2% due to increased gaming and non-gaming activity as operating restrictions eased, which resulted in increased payroll cost, cost of sales, and marketing expenses. 42 --------------------------------------------------------------------------------
Table of Contents South Segment For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Revenues Gaming$ 278.6 $ 245.4 $ 33.2 13.5 % Food, beverage, hotel and other 62.8 50.5 12.3 24.4 % Total revenues$ 341.4 $ 295.9 $ 45.5 15.4 % Adjusted EBITDAR$ 146.5 $ 133.9 $ 12.6 9.4 % Adjusted EBITDAR margin 42.9 % 45.3 % -240 bps The South segment's revenues for the three months endedMarch 31, 2022 increased by$45.5 million over the prior year period, primarily due to strong visitation levels among all age groups, increased length of play, and increased spend per guest. During the three months endedMarch 31, 2021 , our South segment's operating results were impacted as our properties operated within locally-restricted gaming capacity and limited food and beverage and other amenity offerings. For the three months endedMarch 31, 2022 , the South segment's Adjusted EBITDAR increased$12.6 million primarily due to the increases in gaming and non gaming revenues. Adjusted EBITDAR margin decreased by 240 basis points to 42.9% due to increased gaming and non-gaming activity, which resulted in increased payroll cost, cost of sales, and marketing expenses. West Segment For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Revenues Gaming$ 94.1 $ 69.1 $ 25.0 36.2 % Food, beverage, hotel and other 46.8 27.5 19.3 70.2 % Total revenues$ 140.9 $ 96.6 $ 44.3 45.9 % Adjusted EBITDAR$ 51.2 $ 35.2 $ 16.0 45.5 % Adjusted EBITDAR margin 36.3 % 36.4 % -10 bps The West segment's revenues for the three months endedMarch 31, 2022 increased by$44.3 million over the prior year period, primarily due to easing of restrictions, strong visitation levels among all age groups, increased length of play, and increased spend per guest. During the three months endedMarch 31, 2021 , our West segment's operating results were negatively impacted by the temporary closure of ourZia Park property due to the COVID-19 pandemic, which remained closed untilMarch 5, 2021 . Additionally, during the three months endedMarch 31, 2021 , our other properties in the West segment operated within locally restricted gaming and hotel capacity and limited food and beverage and other amenities offerings.
For the three months ended
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Table of Contents Midwest Segment For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Revenues Gaming$ 256.5 $ 216.9 $ 39.6 18.3 % Food, beverage, hotel and other 26.4 17.8 8.6 48.3 % Total revenues$ 282.9 $ 234.7 $ 48.2 20.5 % Adjusted EBITDAR$ 125.5 $ 106.0 $ 19.5 18.4 % Adjusted EBITDAR margin 44.4 % 45.2 % -80 bps The Midwest segment's revenues for the three months endedMarch 31, 2022 increased by$48.2 million over the prior year period, primarily due to easing of restrictions, strong visitation levels among all age groups, increased length of play and increased spend per guest. During the three months endedMarch 31, 2021 , our Midwest segment's operating results were negatively impacted as our properties operated within locally-restricted gaming capacity and limited food and beverage and other amenity offerings. Additionally, ourIllinois properties were temporarily closed for periods between fifteen and twenty-two days inJanuary 2021 , due to COVID-19 restrictions. For the three months endedMarch 31, 2022 , the Midwest segment's Adjusted EBITDAR increased$19.5 million primarily due to increases in gaming and non gaming revenues. Adjusted EBITDAR margin decreased by 80 basis points to 44.4% primarily due to an increase in gaming and non gaming activity which resulted in increased payroll cost, cost of sales, and marketing expenses. Interactive Segment For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Revenues Gaming$ 62.9 $ 23.6 $ 39.3 166.5 % Food, beverage, hotel and other 78.6 62.7 15.9 25.4 % Total revenues$ 141.5 $ 86.3 $ 55.2 64.0 % Adjusted EBITDAR$ (10.0) $ 1.3 $ (11.3) N/M Adjusted EBITDAR margin (7.1) % 1.5 % N/M N/M - Not meaningful The Interactive segment, which was previously reported within Other, includes the operating results of Penn Interactive, theScore, and the Company's proportionate share of earnings attributable to its equity method investment inBarstool Sports . The Interactive segment's revenues for the three months endedMarch 31, 2022 increased by$55.2 million over the prior year period, primarily due to the expansion of Barstool Sportsbook and Casino app as well as the inclusion of revenues from theScore, which was acquired onOctober 19, 2021 . Additionally, revenues are inclusive of a tax gross-up of$50.3 million and$39.4 million for the three months endedMarch 31, 2022 and 2021, respectively. For the three months endedMarch 31, 2022 , the Interactive segment's Adjusted EBITDAR and Adjusted EBITDAR margin decreased primarily due increased expenses related to ramping and launching the Penn Interactive online sportsbook and casino operations in new states, and the inclusion of theScore financial results, as indicated above. 44 --------------------------------------------------------------------------------
Table of Contents Other For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Revenues Food, beverage, and other$ 7.3 $ 1.6 $ 5.7 356.3 % Total revenues$ 7.3 $ 1.6 $ 5.7 356.3 % Adjusted EBITDAR$ (23.7) $ (22.6) $ (1.1) 4.9 % Other consists of the Company's stand-alone racing operations, as well as corporate overhead costs, which primarily includes certain expenses such as payroll, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have not otherwise been allocated to a property. Revenues for the three months endedMarch 31, 2022 , have increased as compared to the prior year period, primarily due to the acquisition ofSam Houston , the remaining 50% of which was acquired onAugust 1, 2021 . Adjusted EBITDAR decreased by$1.1 million for the three months endedMarch 31, 2022 , as compared to the prior year period, primarily due to increased corporate overhead costs that are reflective of the current operating environment. Non-GAAP Financial Measures Use and Definitions In addition to GAAP financial measures, management uses Adjusted EBITDA, Adjusted EBITDAR, Adjusted EBITDA margin, and Adjusted EBITDAR margin as non-GAAP financial measures. These non-GAAP financial measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP. Each of these non-GAAP financial measures is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure of comparing performance among different companies. We define Adjusted EBITDA as earnings before interest expense, net; income taxes; depreciation and amortization; stock-based compensation; debt extinguishment and financing charges; impairment losses; insurance recoveries, net of deductible charges; changes in the estimated fair value of our contingent purchase price obligations; gain or loss on disposal of assets; the difference between budget and actual expense for cash-settled stock-based awards; pre-opening expenses; and other. Adjusted EBITDA is inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (such as interest expense, net; income taxes; depreciation and amortization; and stock-based compensation expense) added back forBarstool Sports and ourKansas Entertainment, LLC joint venture. Adjusted EBITDA is inclusive of rent expense associated with our triple net operating leases (the operating lease components contained within our triple net master lease datedNovember 1, 2013 with Gaming and Leisure Properties, Inc. (Nasdaq: GLPI) ("GLPI") and the triple net master lease assumed in connection with our acquisition ofPinnacle Entertainment, Inc. , our individual triple net leases with GLPI for the real estate assets used in the operation ofTropicana Las Vegas Hotel and Casino, Inc. andHollywood Casino at Meadows Racetrack, and our individual triple net leases with VICI Properties Inc. (NYSE: VICI) ("VICI") for the real estate assets used in the operations ofMargaritaville Casino Resort and Greektown Casino-Hotel). Although Adjusted EBITDA includes rent expense associated with our triple net operating leases, we believe Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our consolidated results of operations. We define Adjusted EBITDA margin as Adjusted EBITDA divided by consolidated revenues. Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business, and is especially relevant in evaluating large, long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the substantial non-operational depreciation charges and financing costs of such projects. We present Adjusted EBITDA because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry. In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their Adjusted EBITDA calculations of certain corporate expenses that do not relate to the management of specific casino properties. However, Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP. Adjusted EBITDA information is presented as a supplemental disclosure, as management believes that it is a commonly used 45 -------------------------------------------------------------------------------- Table of Contents measure of performance in the gaming industry and that it is considered by many to be a key indicator of the Company's operating results. We define Adjusted EBITDAR as Adjusted EBITDA (as defined above) plus rent expense associated with triple net operating leases (which is a normal, recurring cash operating expense necessary to operate our business). Adjusted EBITDAR is presented on a consolidated basis outside the financial statements solely as a valuation metric. Management believes that Adjusted EBITDAR is an additional metric traditionally used by analysts in valuing gaming companies subject to triple net leases since it eliminates the effects of variability in leasing methods and capital structures. This metric is included as supplemental disclosure because (i) we believe Adjusted EBITDAR is traditionally used by gaming operator analysts and investors to determine the equity value of gaming operators and (ii) Adjusted EBITDAR is one of the metrics used by other financial analysts in valuing our business. We believe Adjusted EBITDAR is useful for equity valuation purposes because (i) its calculation isolates the effects of financing real estate; and (ii) using a multiple of Adjusted EBITDAR to calculate enterprise value allows for an adjustment to the balance sheet to recognize estimated liabilities arising from operating leases related to real estate. However, Adjusted EBITDAR when presented on a consolidated basis is not a financial measure in accordance with GAAP, and should not be viewed as a measure of overall operating performance or considered in isolation or as an alternative to net income because it excludes the rent expense associated with our triple net operating leases and is provided for the limited purposes referenced herein. Adjusted EBITDAR margin is defined as Adjusted EBITDAR on a consolidated basis divided by revenues on a consolidated basis. Adjusted EBITDAR margin is presented on a consolidated basis outside the financial statements solely as a valuation metric. We further define Adjusted EBITDAR margin by reportable segment as Adjusted EBITDAR for each segment divided by segment revenues. 46 -------------------------------------------------------------------------------- Table of Contents Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
The following table includes a reconciliation of net income, which is determined in accordance with GAAP, to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures, as well as related margins:
For the three months ended March 31, (dollars in millions) 2022 2021 Net income$ 51.6 $ 90.9 Income tax expense 47.6 20.6 Income from unconsolidated affiliates (8.7) (9.6) Interest expense, net 160.8 135.7 Other (income) expenses 40.7 (21.1) Operating income 292.0 216.5 Stock-based compensation (1) 17.0 4.2 Cash-settled stock-based award variance (1)(2) (2.9) 21.5 Gain on disposal of assets (1) (0.1) (0.1) Contingent purchase price (1) (0.1) 0.1 Pre-opening expenses (1)(3) 1.5 1.6 Depreciation and amortization 118.2 81.3 Insurance recoveries, net of deductible charges (1) (8.8) - Income from unconsolidated affiliates 8.7 9.6 Non-operating items of equity method investments (4) 1.8 1.6 Other expenses (1)(3)(5) 7.3 0.3 Adjusted EBITDA 434.6 336.6 Rent expense associated with triple net operating leases (1) 60.1 110.4 Adjusted EBITDAR$ 494.7 $ 447.0 Net income margin 3.3 % 7.1 % Adjusted EBITDA margin 27.8 % 26.4 % Adjusted EBITDAR margin 31.6 % 35.1 %
(1) These items are included in "General and administrative" within the Company's unaudited Consolidated Statements of Operations.
(2) Our cash-settled stock-based awards are adjusted to fair value each reporting period based primarily on the price of the Company's common stock. As such, significant fluctuations in the price of the Company's common stock during any reporting period could cause significant variances to budget on cash-settled stock-based awards. (3) During the first quarter of 2021, acquisition costs were included within pre-opening and acquisition costs. Beginning with the quarter endedJune 30, 2021 , acquisition costs are presented as part of other expenses. (4) Consists principally of interest expense, net; income taxes; depreciation and amortization; and stock-based compensation expense associated withBarstool Sports and ourKansas Entertainment joint venture. We record our portion ofBarstool Sports, Inc.'s net income or loss, including adjustments to arrive at Adjusted EBITDAR, one quarter in arrears. (5) Consists of non-recurring acquisition and transaction costs, and finance transformation costs associated with the implementation of our new EnterpriseResource Management system. LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity and capital resources have been and are expected to be cash flow from operations, borrowings from banks, and proceeds from the issuance of debt and equity securities. Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, acquisitions or investments, funding of construction for development projects, and our compliance with covenants contained under our debt agreements. 47
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Table of Contents For the three months ended March 31, Change (dollars in millions) 2022 2021 $ % Net cash provided by operating activities$ 224.9 $ 180.5 $ 44.4 24.6% Net cash used in investing activities$ (39.6) $ (27.3) $ (12.3) 45.1% Net cash (used in) provided by financing activities$ (239.2) $ 60.1 $ (299.3) N/M N/M - Not meaningful Operating Cash Flow Net cash provided by operating activities increased by$44.4 million for the three months endedMarch 31, 2022 , primarily due to increased gaming and non gaming revenues as operations at our properties benefited from strong visitation levels among all age groups and increased length of play.
Investing Cash Flow
Cash used in investing activities for the three months endedMarch 31, 2022 of$39.6 million is primarily due to capital expenditures of$65.6 million , offset by insurance proceeds received for losses incurred due to Hurricane Laura in 2020. For the three months endedMarch 31, 2021 , cash used in investing activities of$27.3 million was primarily due to capital expenditures.
Capital Expenditures
Capital expenditures are accounted for as either project capital (new facilities or expansions) or maintenance (replacement) capital expenditures. Cash provided by operating activities as well as cash available under our Revolving Facility was available to fund our capital expenditures for three months endedMarch 31, 2022 and 2021. Capital expenditures for the three months endedMarch 31, 2022 and 2021 were$65.6 million and$25.7 million , respectively. Capital expenditures related to ourYork and Morgantown development project were$11.0 million and$10.9 million for the three months endedMarch 31, 2022 and 2021, respectively. For the year endingDecember 31, 2022 , our anticipated capital expenditures are approximately$300 million , which includes capital expenditures required under our Triple Net Leases, which require us to spend a specified percentage of net revenues.
Financing Cash Flow
For the three months endedMarch 31, 2022 , net cash used in financing activities totaled$239.2 million , primarily due to$175.1 million of repurchases of our common stock. During the three months endedMarch 31, 2021 , cash provided by financing activities of$60.1 million was primarily due to net cash proceeds of$72.5 million from other long-term obligations.
Borrowings and Repayments of Long-term Debt
OnMay 3, 2022 , the Company entered into a Second Amended and Restated Credit Agreement with its various lenders (the "Second Amended and Restated Credit Agreement"). The Second Amended and Restated Credit Agreement provides for a$1.0 billion revolving credit facility, undrawn at close, (the "Revolving Credit Facility"), a five-year$550.0 million term loan A facility (the "Term Loan A") and a seven-year$1.0 billion term loan B facility (the "Term Loan B") facilities (together, the "Credit Facilities"). The proceeds from the Credit Facilities were used to repay the existing Term Loan A Facility and Term Loan B-1 Facility balances. The Credit Facilities contain customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and certain of its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, pay dividends and make other restricted payments and prepay certain indebtedness that is subordinated in right of payment to the obligations under the Credit Facilities. The Credit Facilities contain two financial covenants: a maximum total net leverage ratio of 4.50 to 1.00, which is subject to a step up to 5.00 to 1.00 in the case of certain significant acquisitions, and a minimum interest coverage ratio of 2.00 to 1.00. The Credit Facilities also contain certain customary affirmative covenants and events of default, including the occurrence of a change of control (as defined in the documents governing the Credit Facilities), termination and certain defaults under the Penn Master Lease and the Pinnacle Master Lease (both of which are defined in Note 9, "Leases" ). 48 -------------------------------------------------------------------------------- Table of Contents AtMarch 31, 2022 , we had$2.8 billion in aggregate principal amount of indebtedness, including$1.5 billion outstanding under our Senior Secured Credit Facilities,$400.0 million outstanding under our 5.625% senior unsecured notes,$400.0 million outstanding under our 4.125% senior unsecured notes,$330.5 million outstanding under our Convertible Notes, and$151.9 million outstanding in other long-term obligations. No amounts were drawn on our Revolving Facility. After the refinancing of our Senior Secured Credit Facilities discussed above, we have no debt maturing prior to 2026. As ofMarch 31, 2022 we had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating to$25.7 million resulting in$674.3 million available borrowing capacity under our Revolving Facility. Covenants Our Senior Secured Credit Facilities, 5.625% Notes and 4.125% Notes require us, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests. In addition, our Senior Secured Credit Facilities, 5.625% Notes and 4.125% Notes, restrict, among other things, our ability to incur additional indebtedness, incur guarantee obligations, amend debt instruments, pay dividends, create liens on assets, make investments, engage in mergers or consolidations, and otherwise restrict corporate activities. Our debt agreements also contain customary events of default, including cross-default provisions that require us to meet certain requirements under the Penn Master Lease and the Pinnacle Master Lease (both of which are defined in Note 9, "Leases" to our unaudited Consolidated Financial Statements), each with GLPI. If we are unable to meet our financial covenants or in the event of a cross-default, it could trigger an acceleration of payment terms. As ofMarch 31, 2022 , the Company was in compliance with all required financial covenants. The Company believes that it will remain in compliance with all of its required financial covenants for at least the next twelve months following the date of filing this Quarterly Report on Form 10-Q with theSEC . See Note 8, "Long-term Debt," in the notes to our unaudited Consolidated Financial Statements for additional information of the Company's debt and other long-term obligations.
Share Repurchase Authorization
OnFebruary 1, 2022 , the Board of Directors of Penn approved a$750.0 million share repurchase authorization. The three-year authorization expires onJanuary 31, 2025 . Repurchases by the Company will be subject to available liquidity, general market and economic conditions, alternate uses for the capital and other factors. Share repurchases may be made from time to time through a 10b5-1 trading plan, open market transactions, block trades or in private transactions in accordance with applicable securities laws and regulations and other legal requirements. There is no minimum number of shares that the Company is required to repurchase and the repurchase authorization may be suspended or discontinued at any time without prior notice. During the three months endedMarch 31, 2022 , the Company repurchased 3,802,408 shares of its common stock in open market transactions for$175.1 million at an average price of$46.04 per share. The cost of all repurchased shares is recorded as "Treasury stock" within our unaudited Consolidated Balance Sheets. The remaining availability under our$750.0 million share repurchase authorization was$574.9 million as ofMay 5, 2022 .
Triple Net Leases
The majority of the real estate assets used in the Company's operations are subject to triple net master leases; the most significant of which are the Penn Master Lease and the PinnacleMaster Lease . In addition, six of the gaming facilities used in our operations are subject to individual triple net leases. We refer to the Penn Master Lease, the PinnacleMaster Lease , the Perryville Lease, the Meadows Lease, the Margaritaville Lease, the Greektown Lease, the Tropicana Lease and the Morgantown Lease, collectively, as our Triple Net Leases.The Company's Triple Net Leases are accounted for as either operating leases, finance leases, or financing obligations. Under our Triple Net Leases, in addition to lease payments for the real estate assets, we are required to pay the following, among other things: (i) all facility maintenance; (ii) all insurance required in connection with the leased properties and the business conducted on the leased properties; (iii) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (iv) all tenant capital improvements; and (v) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties. Additionally, our Triple Net Leases are subject to annual escalators and periodic percentage rent resets, as applicable. See Note 9, "Leases," in the notes to our unaudited Consolidated Financial Statements for further discussion and disclosure related to the Company's leases. 49
-------------------------------------------------------------------------------- Table of Contents Payments to our REIT Landlords under Triple Net Leases
Total payments made to our REIT Landlords, GLPI and VICI, were as follows:
For the three months ended March 31, (in millions) 2022 2021 Penn Master Lease $ 119.2$ 117.9 Pinnacle Master Lease 82.5 81.3 Perryville Lease 1.9 - Meadows Lease 6.2 6.2 Margaritaville Lease 5.9 5.9 Greektown Lease 12.8 13.9 Morgantown Lease 0.8 0.8 Total (1) $ 229.3$ 226.0
(1)Rent payable under the Tropicana Lease is nominal. Therefore, this lease has been excluded from the table above.
Outlook
Based on our current level of operations, we believe that cash generated from operations and cash on hand, together with amounts available under our Senior Secured Credit Facilities, will be adequate to meet our anticipated obligations under our Triple Net Leases, debt service requirements, capital expenditures and working capital needs for the foreseeable future. However, our ability to generate sufficient cash flow from operations will depend on a range of economic, competitive and business factors, many of which are outside our control. We cannot be certain: (i) of the impact of global supply chain disruptions and price inflation on theU.S. economy and the ability of our business to maintain its recovery from the impacts of the COVID-19 pandemic; (ii) that our anticipated earnings projections will be realized; (iii) that we will achieve the expected synergies from our acquisitions; and (iv) that future borrowings will be available under our Senior Secured Credit Facilities or otherwise will be available in the credit markets to enable us to service our indebtedness or to make anticipated capital expenditures. We caution you that the trends seen at our properties, such as strong visitation and increased length of play, may not continue. In addition, while we anticipated that a significant amount of our future growth would come through the pursuit of opportunities within other distribution channels, such as retail and online sports betting, social gaming, retail gaming, and iGaming; from acquisitions of gaming properties at reasonable valuations; greenfield projects; and jurisdictional expansions and property expansion in under-penetrated markets; there can be no assurance that this will be the case given the uncertainty arising from the COVID-19 pandemic. If we consummate significant acquisitions in the future or undertake any significant property expansions, our cash requirements may increase significantly and we may need to make additional borrowings or complete equity or debt financings to meet these requirements. See Part I, Item 1A. "Risk Factors" of the Company's Form 10-K for the year endedDecember 31, 2021 for a discussion of additional risks related to the Company's capital structure. We have historically maintained a capital structure comprised of a mix of equity and debt financing. We vary our leverage to pursue opportunities in the marketplace in an effort to maximize our enterprise value for our shareholders. We expect to meet our debt obligations as they come due through internally-generated funds from operations and/or refinancing them through the debt or equity markets prior to their maturity. CRITICAL ACCOUNTING ESTIMATES A complete discussion of our critical accounting estimates is included in our Form 10-K for the year endedDecember 31, 2021 . There have been no significant changes in our critical accounting estimates during the three months endedMarch 31, 2022 . RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For information with respect to new accounting pronouncements and the impact of these pronouncements on our unaudited Consolidated Financial Statements, see
Note 3, "New Accounting Pronouncements," in the notes to our unaudited Consolidated Financial Statements.
50 -------------------------------------------------------------------------------- IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS This Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "expects," "believes," "estimates," "projects," "intends," "plans," "goal," "seeks," "may," "will," "should," or "anticipates" or the negative or other variations of these or similar words, or by discussions of future events, strategies or risks and uncertainties. Specifically, forward-looking statements include, but are not limited to, statements regarding: the Company's expectations of, and guidance regarding, future results of operations and financial condition, the assumptions provided regarding the guidance, including the scale and timing of the Company's product and technology investments; the Company's anticipated share repurchases; the Company's expectations with regard to results, and the impact of competition, in online sports betting, iGaming and retail/mobile sportsbooks, including the expected results of theScore Bet inOntario ; the Company's launch of its Interactive segment's products in new jurisdictions and enhancements to existing Interactive segment products, including the transition to theScore's proprietary risk and trading platform inOntario , the integration of the Barstool Sportsbook into theScore mobile app in theU.S. , and the migration of the Barstool Sportsbook to theScore's player account management trading platforms; the Company's expectations with regard to its future investments inBarstool Sports and the future success of its products; the Company's expectations with respect to the integration and synergies related to the Company's integration of theScore andBarstool Sports ; the Company's expectations with respect to the ongoing introduction and the potential benefits of the cashless, cardless and contactless ("3Cs") technology; the Company's development projects; and the timing, cost and expected impact of planned capital expenditures on the Company's results of operations. Such statements are all subject to risks, uncertainties and changes in circumstances that could significantly affect the Company's future financial results and business. Accordingly, the Company cautions that the forward-looking statements contained herein are qualified by important factors that could cause actual results to differ materially from those reflected by such statements. Such factors include: the effects of economic conditions and market conditions in the markets in which the Company operates; competition with other entertainment, sports content, and casino gaming experiences; the timing, cost and expected impact of product and technology investments; risks relating to international operations, permits, licenses, financings, approvals and other contingencies in connection with growth in new or existing jurisdictions; and additional risks and uncertainties described in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2021 , subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with theU.S. Securities and Exchange Commission . The Company does not intend to update publicly any forward-looking statements except as required by law. Considering these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-Q may not occur.
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