Penn National Gaming Reports Third Quarter Revenue of $707.0 Million and Adjusted EBITDA of $168.6 M

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Penn National Gaming Reports Third Quarter Revenue of $707.0 Million and Adjusted EBITDA of $168.6 Million Inclusive of $19.2 Million of Lobbying Expense

- Establishes 2012 Fourth Quarter Guidance and Updates 2012 Full Year Guidance -


WYOMISSING, Pa.--(BUSINESS WIRE)-- Penn National Gaming, Inc. (NAS: PENN) :

 

Conference Call:

 

Today, October 18, 2012 at 10:00 a.m. ET

Dial-in number:

212/271-4651

Webcast:

www.pngaming.com

 

Replay information provided below

 

Penn National Gaming, Inc. (NAS: PENN) today reported third quarter operating results for the three months ended September 30, 2012, as summarized below:

Summary of Third Quarter Results

(in millions, except per share data) 

Three Months Ended
September 30,

  2012 Actual 

2012 Guidance
(2)

 2011 Actual
Net revenues $707.0  $699.3  $710.9 
Adjusted EBITDA (1)  168.6   184.0   206.1 

Less: Impact of stock compensation, insurance recoveries and
deductible charges, depreciation and amortization, gain/loss on
disposal of assets, interest expense - net, income taxes, loss on
early extinguishment of debt, and other expenses

  (122.2)  (125.5)  (135.3)
Net income $46.4  $58.5  $70.8 
       
Diluted earnings per common share $0.44  $0.55  $0.66 
(1)Adjusted EBITDA is income (loss) from operations, excluding the impact of stock compensation, insurance recoveries and deductible charges, depreciation and amortization, and gain or loss on disposal of assets, and is inclusive of gain or loss from unconsolidated affiliates. A reconciliation of net income (loss) per accounting principles generally accepted in the United States of America ("GAAP") to adjusted EBITDA, as well as income (loss) from operations per GAAP to adjusted EBITDA, is included in the accompanying financial schedules.
(2)The figures in this column present the guidance Penn National Gaming provided on July 24, 2012 for the three months ended September 30, 2012.

Review of Third Quarter 2012 Results vs. Guidance and Third Quarter 2011 Results

  
 

Three Months Ended
September 30, 2012

  Pre-tax After-tax
  (in thousands)
Income, per guidance (1) $95,875  $58,483 
Property and unconsolidated affiliates results  3,713   2,260 
Maryland lobbying efforts  (19,151)  (19,151)
Foreign currency translation loss and other  (2,653)  (1,661)
Discrete tax benefits not anticipated in guidance  -   6,515 
     
Income, as reported $77,784  $46,446 
 
 

Three Months Ended
September 30,

  2012 

2012 Guidance
(1)

 2011
Diluted earnings per common share $0.44  $0.55  $0.66 
Maryland lobbying efforts  0.18   -   - 
Foreign currency translation (loss) gain and other  0.01   -   (0.02)
Gain on sale of Maryland Jockey Club  -   -   (0.12)
Loss on early extinguishment of debt  -   -   0.11 
Discrete tax benefits not anticipated in guidance  (0.06)  -   - 
Tax rate variance from restructuring  -   -   (0.03)
       
Diluted earnings per common share excluding items not included in guidance $0.57  $0.55  $0.60 
(1)The guidance figures in the tables above present the guidance Penn National Gaming provided on July 24, 2012 for the three months ended September 30, 2012.

Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming, commented, "Despite the still challenging economic environment, regional market revenue trends and customer visitation levels remain largely stable and Penn National's third quarter revenue and adjusted EBITDA exceeded guidance when excluding lobbying expenses. Our results again highlight the benefits of expanding and diversifying our gaming operations as well as the dedication and focus of our corporate and property management teams who continue to enhance operating efficiencies and maintain a disciplined approach to marketing and promotional activities.

"Despite new competition affecting certain facilities, third quarter 2012 property level EBITDA margins rose 61 basis points in our Midwest segment -- inclusive of $7.1 million of pre-opening costs for Hollywood Casino Columbus -- and by 106 basis points in our East/West segment, while weather-related facility closings and new competition adversely impacted margins in the Southern Plains segment, our smallest regional operating segment, by 191 basis points. Excluding the impact of lobbying costs, the prior year gain on the sale of our interests in the Maryland Jockey Club in last year's third quarter, and preopening costs, the Company's consolidated third quarter 2012 adjusted EBITDA margins improved.

"In addition to the focus on margins, Penn National Gaming's third quarter results reflect our long-term strategy to diversify our asset base and grow our portfolio through both yield-focused investments in new facilities and accretive acquisitions. In this regard, third quarter 2012 results benefited from the opening Hollywood Casino Toledo in the second quarter of 2012 and last summer's acquisition of M Resort. We are focused on expanding the EBITDA contributions from these facilities as we rationalize operating costs, and fine tune the slot floor mix and player marketing efforts, as well as the food and beverage and entertainment offerings.

"Earlier this month, Hollywood Casino Columbus celebrated its grand opening with approximately 25,000 guests in attendance and to date the facility is generating strong reviews, patronage and revenue. The $400 million entertainment destination employs 2,000 full- and part-time team members, in addition to the 3,500 construction jobs created during its development. The new facility features more than 3,000 slot machines and 78 live tables, a range of dining, retail and entertainment options and the only event center in the market that offers gaming entertainment and can accommodate up to 1,000 guests. With our successful openings in Toledo and Columbus over the past six months, Penn National is fulfilling its commitments to the voters of Ohio with respect to new employment, significant new tax revenues and other economic benefits.

"Elsewhere in Ohio, we are making continued progress towards the construction of the new $150 million integrated racing and VLT facilities in Austintown and Dayton. We anticipate both facilities will open sometime in 2014. Like our other initiatives in Ohio, these new developments are expected to generate additional tax revenues for the state and local communities while driving significant new employment opportunities, with each facility expected to create approximately 1,000 permanent direct and indirect jobs, and approximately 2,000 combined construction jobs.

"With respect to our opposition efforts to Question 7 in Maryland, we intend to continue to aggressively inform Maryland voters on what we believe to be a flawed process that handicaps competition for a potential sixth casino license in Prince George's County for National Harbor. We've sought a fair and balanced approach to this issue, but to date, the local process in Maryland continues to jeopardize the long-term viability of Rosecroft Raceway.

"In Massachusetts, we recently announced the submission of our proposal to the City of Springfield and the Springfield Redevelopment Authority for an approximately $807 million, single-phase, comprehensive economic development and revitalization project, including a Hollywood-branded destination casino resort in the north end of Springfield. We will also offer the community a new downtown hotel and meeting space to attract new events and commercial interest and activity to the area. Our unique and innovative proposal includes a seamless integration of Hollywood Casino Springfield into the downtown area, along with a planned mixed-use development along Springfield's waterfront. We plan to leverage our industry leading balance sheet strength as well as our track record of new urban gaming facility development which is unmatched in the industry. Our proposed destination casino resort and expansive development in Springfield would serve as the centerpiece of the City's revitalization while bringing thousands of new jobs and millions of tax dollars to the region.

"In early November we expect to close on the acquisition of Harrah's St. Louis in an accretive transaction. Harrah's St. Louis will further expand Penn National's regional operating platform with a facility that is well-positioned in another large, stable metropolitan market. Upon closing, we will re-brand Harrah's St. Louis with the Company's Hollywood brand, which is now deployed at thirteen of our properties across the country. We estimate the budget for re-branding the facility, refreshing areas of the gaming floor and aligning our IT and reporting functions to be $61 million. By prudently managing our capital structure, we were able to act on the St. Louis opportunity and further expand our property portfolio, and we intend to remain opportunistic with respect to other potential transactions."

Development and Expansion Projects

The table below summarizes Penn National Gaming's current facility development projects:

 
Project/Scope 

New
Gaming
Positions

 

Planned
Total
Budget

 

Penn National's
Share of Planned
Total
Budget

 

Amount
Expended
through
September 30,
2012

 

Expected
Opening
Date

  

 

 

(in millions)

  
           

Hollywood Casino Toledo (OH) - The casino opened on May 29, 2012
and features 2,000 slot machines, 60 table games and 20 poker tables,
structured and surface parking, plus food and beverage outlets and
entertainment lounge.

 2,620 $320 (1) $320 $310.2 

Opened May 29, 2012

           

Hollywood Casino Columbus (OH) - The casino opened on October 8,
2012 and features approximately 3,000 slot machines, 78 table games
and 30 poker tables, structured and surface parking, plus food and
beverage outlets and entertainment lounge.

 3,790 $400 (1) $400 $320.8 Opened October 8, 2012
           

Mahoning Valley Race Track (OH) - Full details and design of the
project at Austintown's Centrepointe Business Park are in the
development stage, with a new Hollywood themed facility featuring a
new racetrack and up to 1,500 video lottery terminals, as well as
various restaurants, bars and other amenities.

 1,500 $275 (2) $250 $6.1 2014
           

Dayton Raceway (OH) - Full details and design of the project at the site
of an abandoned Delphi Automotive plant are in the development stage,
with our new Hollywood themed facility featuring a new racetrack and
up to 1,500 video lottery terminals, as well as various restaurants, bars
and other amenities.

 1,500 $275 (2) $250 $4.1 2014
           

Hollywood Casino St. Louis (MO) - Rebranding of former Harrah's
property to our Hollywood Theme. Integration of new casino, hotel,
financial and operating systems and upgrades of slot machine product.

   $61 $61 $2.2 

Ongoing through Fourth Quarter 2013

(1)Includes a $50 million license fee.
(2)Includes a $75 million relocation fee in addition to a $50 million VLT license fee.

Financial Guidance

The table below sets forth current guidance targets for financial results for the 2012 fourth quarter and full year, based on the following assumptions:

  • Assumes an early November 2012 closing of the Harrah's St. Louis acquisition;
  • Horseshoe Cincinnati does not open during 2012 (and thus, no impact is expected to Hollywood Casino Lawrenceburg);
  • No disruptions to Penn National's Argosy Casino Sioux City operations arising from the ongoing negotiations with the City of Sioux City or the facility's charitable sponsor or any related litigation or regulatory proceedings;
  • Anticipates incremental credit facility of $1 billion in late October 2012 at terms similar to our existing facility;
  • Excludes Maryland lobbying costs in the fourth quarter; October 2012 spending to date amounts to $11.0 million;
  • A total of $25.3 million in 2012 for preopening expenses, with $3.6 million projected to be incurred in the fourth quarter of 2012;
  • Depreciation and amortization charges in 2012 of $250.0 million, with $77.4 million projected to be incurred in the fourth quarter of 2012;
  • Estimated non-cash stock compensation expenses of $29.4 million for 2012, with $7.2 million of the cost incurred in the fourth quarter of 2012;
  • LIBOR is based on the forward curve;
  • A blended 2012 income tax rate of 39%;
  • Does not assume a reduction of the fully diluted weighted average shares related to the terms of the Series B Redeemable Preferred Stock if Penn National Gaming's stock price exceeds $45;
  • A diluted share count of approximately 105.9 million shares for the full year; and,
  • There will be no material changes in applicable legislation, regulatory environment, world events, weather, recent consumer trends, economic conditions, or other circumstances beyond our control that may adversely affect the Company's results of operations.
 
(in millions, except per share data) 

Three Months Ending December 31,

 

Full Year Ending December 31,

  

2012 Guidance

 2011 Actual 

2012 Revised
Guidance

 

2012 Prior
Guidance (2)

 2011 Actual
Net revenues $782.4  $676.5  $2,938.1  $2,874.1  $2,742.3 
Adjusted EBITDA (1)  206.2   156.5   765.3   769.0   730.2 

Less: Impact of stock compensation, insurance recoveries and
deductible charges, depreciation and amortization, gain/loss on
disposal of assets, interest expense - net, income taxes, loss on
early extinguishment of debt, and other expenses

  (147.1)  (112.5)  (514.5)  (508.0)  (487.8)
Net income $59.1  $44.0  $250.8  $261.0  $242.4 
           
Diluted earnings per common share $0.56  $0.41  $2.37  $2.46  $2.26 
(1)Adjusted EBITDA is income (loss) from operations, excluding the impact of stock compensation, insurance recoveries and deductible charges, depreciation and amortization, and gain or loss on disposal of assets, and is inclusive of gain or loss from unconsolidated affiliates.
(2)These figures present the guidance Penn National provided on July 24, 2012 for the full year ending December 31, 2012.
    

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Segment Information - Operations
(in thousands) (unaudited)

 

NET REVENUES
Three Months Ended September 30,

ADJUSTED EBITDA
Three Months Ended September 30,

 2012  2011  2012   2011 
Midwest (1)

$

247,287

 

$

205,333

 

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