Competition Leads to MTR Gaming Losses in Second Quarter

MTR Gaming Group realized a 40% increase in net revenues for the second quarter, according to financials released Aug. 9, but recorded a net loss of $502,000 as the company battled slots competition from neighboring Pennsylvania.

Total net revenues increased to $132.8 million, from $94.9 million in the same period of 2006. Much of the growth from a year ago could be attributed to the $43.9 million in gaming revenue realized from Presque Isle Downs, the Erie, Pa. racino that opened in February.

Net revenues at The Mountaineer Race Track & Gaming Resort were $68 million, compared to $74 million in the second quarter of 2006. Company executives attributed some of the revenue fall-off to competition from The Meadows Racetrack & Casino from Pennsylvania, which opened its slots parlor June 11.

“I think the Meadows (has) the benefit of a new facility and a very high population area,” said MTR Gaming Group president and CEO Ted Arneault during an Aug. 9 teleconference with analysts. “We have looked at the effects of The Meadows, and we have other alternatives we can offer to customers that I think will help us regain some of our market share even before we get table games.”

A local referendum allowing table games in Hancock County, W. Va., was passed by voters during the quarter. MTR Gaming plans to have more than 80 gaming tables operating at its Mountaineer facility by the fourth quarter, a news release from the company said.

The release said MTR Gaming spent $800,000 during the quarter to help generate support for the passage of the local referendum, further impacting the company’s flagship facility.

Arneault told analysts he was hopeful that future financial data would look more balanced as expansion initiatives develop. Presque Isle Downs will have its first live Thoroughbred racing meet in September with a 25-day session. Ground is also being broken on a new harness facility to be located about 30 miles north of Minneapolis.

“Obviously, the second quarter was one of tremendous transition as we bring Presque Isle on, we get table games passed … and we are in the construction phase in Minneapolis and are about to start a whole new racing phase in Erie,” Arneault said.

“We think we are starting to see all of our plans come to fruition, and as we do, I think you will see more of a normalization of profit margins, margins in general, and tax rates.”

MTR Gaming also announced $40 million in sale agreements on two Nevada casinos during the quarter. Arneault told analysts that the deals were “solid,” but added that due diligence issues such as licensing prevented him from predicting when the property closings would take place.