Penn National Gaming Reports Third Quarter Revenue of $714.4 Million and Adjusted EBITDA of $182.1 M
Penn National Gaming Reports Third Quarter Revenue of $714.4 Million and Adjusted EBITDA of $182.1 Million
WYOMISSING, Pa.--(BUSINESS WIRE)-- Penn National Gaming, Inc. (PENN: Nasdaq) ("Penn National Gaming" or the "Company") today reported third quarter operating results for the three months ended September 30, 2013, as summarized below:
Summary of Third Quarter Results
|(in millions, except per share data)||Three Months Ended|
|Adjusted EBITDA (1)||182.1||189.7||168.6|
Less: Impact of stock compensation, depreciation and amortization,
gain/loss on disposal of assets, interest expense - net, income taxes,
and other expenses
|Diluted earnings per common share||$||0.40||$||0.43||$||0.44|
|(1)||Adjusted EBITDA is income (loss) from operations, excluding the impact of stock compensation, impairment losses, 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 provided on July 23, 2013 for the three months ended September 30, 2013.|
Review of Third Quarter 2013 Results vs. Guidance and Third Quarter 2012 Results
|September 30, 2013|
|Income, per guidance (1)||$||72,273||$||44,087|
|Total segment variances||(1,846||)||(1,084||)|
|Termination charge associated with spin-off included in property results||(3,807||)||(2,439||)|
|Spin-off transaction costs recorded in corporate overhead||(5,075||)||(3,038||)|
|Other corporate items||3,056||1,829|
|Total EBITDA variances from guidance||(7,672||)||(4,732||)|
|Guidance miscalculation on sale of Bullwhackers||5,848||3,496|
|Unfavorable tax rate variance||-||(1,534||)|
|Income, as reported||$||70,449||$||41,317|
|Three Months Ended|
|2013||2013 Guidance (1)||2012|
|Diluted earnings per common share excluding items not included in guidance||$||0.43||$||0.44||$||0.57|
|Termination charge associated with spin-off included in property results||(0.02||)||-||-|
|Spin-off transaction costs recorded in corporate overhead||(0.03||)||-||-|
|Other corporate items||0.02||-||-|
|Guidance miscalculation on sale of Bullwhackers||-||(0.03||)||-|
|Unfavorable tax rate variance||-||0.02||-|
|Foreign currency translation gain and Other||-||-||(0.01||)|
|Maryland lobbying efforts||-||-||(0.18||)|
|Discrete tax benefits not anticipated in guidance||-||-||0.06|
|Diluted earnings per common share||$||0.40||$||0.43||$||0.44|
|(1)||The guidance figures in the tables above present the guidance Penn National provided on July 23, 2013 for the three months ended September 30, 2013.|
Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming, commented, "Third quarter operating results reflect a continuation of the soft regional gaming revenue trends that the industry has experienced throughout 2013. As a result, third quarter revenues were in line with guidance and adjusted property operating results were approximately $1.8 million less than contemplated in our guidance. The remaining $5.8 million adjusted EBITDA variance relative to guidance is primarily the result of expenses incurred as a result of the planned spin-off of Gaming and Leisure Properties, Inc. ("GLPI"). Property margins, excluding $3.8 million of termination charges related to the spin-off, were 29.7% which is consistent with the corresponding period in the prior year. Given the challenging soft regional trends we are relatively satisfied with our property results.
"We are temporarily suspending the practice of providing financial guidance and withdrawing the 2013 full year guidance provided on July 23, 2013, for Penn National Gaming and GLPI. Our general outlook for property results for the rest of the year is fundamentally unchanged. The decision to suspend guidance is a combination of the necessity to accelerate the timing of the earnings release to accommodate disseminating this information relative to the process of securing financing for the contemplated spin and uncertainty in predicting the exact magnitude of the items (including but not limited to, a partial quarter of rent expense related to the master lease, the expected contribution, beginning November 1, 2013, of Hollywood Casino Baton Rouge and Hollywood Casino Perryville to GLPI, lower levels of depreciation and interest expense, goodwill and intangible asset impairment charges and transaction costs related to the spin-off) that will flow through our income statement in the fourth quarter as a result of the transaction.
"The planned spin-off of GLPI has already unlocked significant value for our stockholders and we continue to believe it will add operational, strategic and financial flexibility for both Penn National and GLPI and create two well capitalized, uniquely positioned companies that are positioned for growth in the gaming and REIT sectors, respectively. As the first REIT to focus on gaming sector assets, GLPI will create a new capital funding source for the industry and simultaneously position itself to benefit from diversification into other real estate asset classes in the future while establishing a highly efficient vehicle to deliver consistent and growing income distributions to shareholders. In connection with the contemplated transaction, on October 11, 2013, we completed our previously disclosed exchange and repurchase transactions with an affiliate of Fortress Investment Group LLC ("Fortress") and certain affiliates of Centerbridge Capital Partners, L.P. ("Centerbridge"). In these transactions, we paid a total of $627.2 million to the affiliates of Fortress and Centerbridge and issued to the affiliate of Fortress 8,624 shares of non-voting Series C preferred stock in order to redeem at par all of the previously outstanding shares of Series B preferred stock. Each share of Series C preferred stock will automatically convert into 1,000 shares of common stock upon a sale to a third party not affiliated with Fortress, and holders of Series C preferred stock will participate in dividends paid to the holders of common stock on an as-converted basis. The redemption of our historical Preferred Shares has the impact of reducing our diluted share count by 13.1 million (based on the actual dilutive impact of the securities in our third quarter EPS calculation) and will increase our basic shares outstanding by approximately 8.6 million."
Timothy Wilmott, who is currently Penn National's Chief Operating Officer and who will serve as the Company's Chief Executive Officer after the spin-off added, "During the quarter, Penn National made continued progress on its post-split expansion and development projects and we continue to expect these projects will generate meaningful growth.
"First, we remain on schedule and on budget with the re-branding and facility upgrade of Hollywood Casino St. Louis, which will be completed in December 2013. We have been found suitable by the Maryland Lottery Commission and will make a presentation to the state's Video Lottery Facility Location Commission on October 21 on our proposed $700 million Hollywood Casino at Rosecroft Raceway in Prince George's County, Maryland. In addition, we continue to make meaningful progress with the National Indian Gaming Commission, as well as state and local officials, on the proposed Hollywood Casino-branded casino on the Jamul Indian Village's land in trust, approximately 20 miles east of downtown San Diego. Construction on our Dayton and Austintown integrated racing and gaming facilities continues on time and on budget and we expect both facilities to open in the second half of 2014. In addition, the construction of a 154 room hotel at Zia Park Casino is on schedule and is expected to open in the second half of 2014. In Pennsylvania, we have proposals being considered by the Pennsylvania Gaming Control Board for a new gaming and entertainment destination in Philadelphia (where we are one of six applicants) as well as for the development of an integrated racing and gaming facility in Mahoning Township, near Pittsburgh (the last of the Category 1 sites in Pennsylvania), with decisions on both proposals expected in early 2014. Finally, in Massachusetts, along with two other bidders, we recently submitted a formal application to the Massachusetts Gaming Commission for the state's sole Category 2 gaming license, with plans to develop a $225 million integrated racing VLT facility, Plainridge Park Casino, in the Greater Boston area."
Mr. Carlino concluded, "Penn National remains focused on its initiatives to build shareholder value. The spin-off of GLPI is expected to bring near- and long-term opportunities to return capital to shareholders while creating a new platform for sustainable growth. As a gaming facilities operator, manager and developer, Penn National Gaming will continue to seek to optimize operating efficiencies to generate appropriate property level margins while pursuing new growth opportunities that leverage the Company's proven development and management skills."
Development and Expansion Projects
The table below summarizes Penn National Gaming's current facility development projects:
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||$40.6||Ongoing through Fourth Quarter 2013|
Zia Park Casino (NM) - Addition of 154 room, five story hotel which will
include six suites, a breakfast room, a business center, meeting and
exercise rooms, as well as additional surface parking.
Mahoning Valley Race Track (OH) - Construction began in
May 2013 at Austintown's Centrepointe Business Park, with our new
Hollywood themed facility featuring a new racetrack and the ability to
hold up to 1,000 video lottery terminals, as well as various restaurants,
bars and other amenities.
|$18.9||Second Half 2014|
Dayton Raceway (OH) - Construction began in May 2013 at the site of an
abandoned Delphi Automotive plant, with our new Hollywood themed
facility featuring a new racetrack and the ability to hold up to 1,500 video
lottery terminals, as well as various restaurants, bars and other amenities.
|$17.3||Second Half 2014|
Includes a $75 million relocation fee in addition to a $50 million VLT license fee.
GLPI is responsible for construction related costs which we anticipate at the Spin-off will be approximately $25 million and subsequent to the Spin-off will total approximately $75 million.
GLPI is responsible for construction related costs which we anticipate at the Spin-off will be approximately $22 million and subsequent to the Spin-off will total approximately $66.8 million.
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Segment Information - Operations
(in thousands) (unaudited)
|NET REVENUES||ADJUSTED EBITDA|
|Three Months Ended September 30,||Three Months Ended September 30,|
|Southern Plains (3)||168,979||128,604||47,463||38,549|
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