Investments in and Advances to Unconsolidated Affiliates

12 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investments in and Advances to Unconsolidated Affiliates

Note 6—Investments in and Advances to Unconsolidated Affiliates

As of December 31, 2019 and 2018, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 50% interest in Kansas Entertainment, which is a JV with International Speedway that owns Hollywood Casino at Kansas Speedway, its JV with MAXXAM, Inc. (“MAXXAM”), and its JV with Greenwood Limited Jersey, Inc. (“Greenwood”).

Kansas Joint Venture 

As of December 31, 2019 and 2018, our investment in Kansas Entertainment was $90.8 million and $89.4 million, respectively. During the years ended December 31, 2019, 2018 and 2017, the Company received distributions from Kansas Entertainment totaling $29.0 million, $27.0 million and $26.0 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. 

As of the years ended December 31, 2019 and 2018, we determined that Kansas Entertainment does not qualify as a VIE. Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the JV as of and for the years ended December 31, 2019 and 2018, primarily as it did not have the ability to direct the activities of the JV that most significantly impacted the JV’s economic performance without the input of International Speedway. Therefore, the Company did not consolidate its investment in the JV as of and for the years ended December 31, 2019 and 2018.

For the year ended December 31, 2019, our investment in Kansas Entertainment met the requirements to provide summarized balance sheet and income statement information for the comparative periods that are included within our Consolidated Financial Statements:

	December 31,
(in millions)	2019		2018
Current assets	$	21.5	$	18.3
Long-term assets	$	159.2	$	161.0
Current liabilities	$	13.5	$	15.1

	For the year ended December 31,
(in millions)	2019		2018		2017
Revenues	$	162.3	$	159.0	$	155.7
Operating expenses	101.3		110.4		114.7
Operating income	61.0		48.6		41.0
Net income	$	61.0	$	48.6	$	41.0
Net income attributable to Penn National	$	30.5	$	24.3	$	20.5

 

In addition, for the year ended December 31, 2019, we determined that it was required to provide audited financial statements of Kansas Entertainment. The audited financial statements of Kansas Entertainment for the years ended June 30, 2019, 2018 and 2017 are provided as exhibits to this Annual Report on Form 10-K for the year ended December 31, 2019.

Texas and New Jersey Joint Ventures 

The Company has a 50% interest in a JV 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. In addition, through a separate arrangement, the Company has a 50% interest in a JV with Greenwood, which owns and operates Freehold Raceway, in Freehold, New Jersey. The property features a half-mile standardbred racetrack and a grandstand. 

As of December 31, 2019 and 2018, we determined that neither our Texas JV nor our New Jersey JV qualify as a VIE. Using the guidance for entities that are not VIEs, in both cases, the Company determined that it did not have a controlling financial interest in either of the JVs as of and for the years ended December 31, 2019 and 2018, primarily as it did not have the ability to direct the activities of either of the JVs that most significantly impacted the JVs’ economic performance without the input of MAXXAM or Greenwood, respectively. Therefore, the Company did not consolidate either of its investment in the JVs as of and for the years ended December 31, 2019 and 2018.