PNGI 'Not Enthused' About Maryland Slots

After absorbing a $378.6-million loss in 2008's fourth quarter alone, Penn National Gaming Inc. posted an annual loss of $153.3 million for the year, and said while it isn't "enthused" about developing a potential new slots facility in Maryland, it will pursue those plans.

Penn National Gaming, which is based in Wyomissing, Pa., said it took the fourth-quarter hit in 2008 due to a “decline in the company’s share price, an overall reduction in industry valuations, and property operating performance in the current economic environment,” according to a press release. Quarterly results included a $392.6-million impairment charge and $24.9 million in lobbying costs.

But PNGI chairman and chief executive officer Peter M. Carlino said the company will stick to its plans for future development, despite what he considers to be negative media attention toward various company developments.

“Despite what you might read about us out in the newspapers and so forth, our real focus, and our real concentration day to day here, is running the business,” he told analysts and investors in a Feb. 5 conference call. “Our entire group is focused on tightening, polishing, doing things ever better.”

Carlino had much to say about the company’s plans to pursue a slot-machine facility in Maryland. On Feb. 2, the state unsealed bids from six companies asking to build facilities in five designated locations. PNGI was the only bidder for Cecil County, and initially plans to put 500 machines at the location, with an option to expand to 1,500.

“We are not obviously enthused about Maryland,” Carlino said. “I don’t mind saying that publicly.”

Carlino criticized what he considers to be an excessive tax rate mandated by the state, but said the company is compelled to have a presence in Maryland. “We tried early to make the case, which a lot of politicians have yet to figure out, that if you tax something more, you get less,” he said. “Maryland has gone over that curve, of course, and with a 67% tax rate, there is nothing useful you can do.

”And by the way, we are there simply because we gotta be. It’s right next door (to Pennsylvania); we need to be anywhere where there is a reasonable gaming opportunity. The emphasis is always on return.”

Carlino said it would take an “extraordinary, disciplined” effort to build an “attractive” facility under the guidelines the state has mandated. Company officials say Maryland is requiring an outlay of $28 million in capital expenditure and application fees for each 500 machines proposed.

“Maryland is a challenge,” Carlino said. “I think we’ll get there. And we are going to meet our performance targets. But it isn’t going to be fun. It isn’t going to be easy.”

Reuters reported the company forecast 2009 revenue higher than analysts have projected, which prompted a strong rise in share price Feb. 5. PNGI shares soared by nearly 22% to $21.28 on heavy volume by mid-afternoon trading Feb. 5.

PNGI operates 19 properties in 15 states. Included in the mix are three Thoroughbred racinos: Hollywood Casino at Penn National in Grantville, Pa.; Charles Town Races & Slots in Charles Town, W.Va.; and Black Gold Casino at Zia Park in Hobbs, N.M.

The company reported annual revenue for Hollywood Casino at Penn National were $224.9 million, reflecting a whopping 363.7% increase over 2007. PNGI opened the racino in February 2008. Charles Town annual revenue was $477 million, down 10.7%; while Zia Park's was $90.3 million, an increase of 54.1%.

A breakdown on horse racing handle was not provided by the company.
 

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