PNGI Poised to Capitalize on Ohio Gaming

Penn National Gaming Inc. officials see upside to an expansion of gambling in Ohio, but said they have no idea how it will shake out.

PNGI is one of the backers of a November referendum on casinos in Ohio’s four major cities, and also owns Raceway Park, a Toledo harness track in line for 2,500 video lottery terminals under Democratic Gov. Ted Strickland’s directive to expand the Ohio Lottery. PNGI also has an option to purchase Beulah Park, the Columbus-area track that would get 2,500 VLTs.

PNGI operates Hollywood Casino in Lawrenceburg, Ind., not far from the Ohio and Kentucky borders. The facility is the company’s second-largest revenue-producing property.

“There is no bad news for us in Ohio,” PNGI chief executive officer Peter Carlino said July 29 during a teleconference on the company’s second-quarter earnings. “If it doesn’t occur, we can move on. But we do believe Ohio gaming is a positive for us.”

Legal challenges are expected for expanded gambling in Ohio. Currently, there is no set plan for launch of racetrack VLTs, and the results of the casino vote won’t be known for months.

“The bottom line is it’s a crapshoot,” Carlino said. “The truth is I don’t think we have a clue where it’s going to play out.”

Still, the company is poised to attack the market, and there’s a lot going on behind the scenes.

Ohio law permits one company to own two racetracks in the state. Sources have said the PNGI option on Beulah Park is valued at about $200 million.

Beulah Park is located only 20 minutes from Scioto Downs, a harness track that also would get 2,500 VLTs. Also, if the casino referendum passes, Columbus would get a full casino.

Scioto Downs is owned by MTR Gaming Group, which opposes the casino referendum being pushed by PNGI. MTR Gaming owns Mountaineer Casino, Racetrack & Resort, the West Virginia facility that draws heavily from Ohio.

Jeffrey Jacobs, owner of Colonial Downs in Virginia, is chairman of the MTR Gaming. His name has surfaced as being interested in purchasing Magna Entertainment Corp.-owed Thistledown, the Cleveland-area Thoroughbred track that would get VLTs.

Meanwhile, Ohio’s Thoroughbred tracks and the Ohio Horsemen’s Benevolent and Protective Association are negotiating VLT revenue splits for purses and breed development. Strickland’s directive made no mention of money for purses, and in fact, there is no requirement for horsemen’s compensation.

PNGI reported net income of $28.5 million in the second quarter, down from $37 million for the second quarter of 2008. Net revenue was $580.8 million for the April-June 2009 period, down from $620.6 million for the same three months of 2008.

As usual, the company’s Charles Town Races & Slots led the way with $121.4 million in revenue for the second quarter, down slightly from $122 million in 2008. Hollywood Casino in Indiana was second with $95.3 million in revenue, followed by Hollywood Casino at Penn National Race Course in Pennsylvania at $77.1 million in revenue for the quarter.

“While the current economic environment continues to impact the overall gaming industry, regional market revenue trends remain largely stable,” Carlino said.

PNGI operates 19 facilities in 15 jurisdictions. The company has horse or dog racing operations in Florida, Maine, New Mexico, Ohio, Pennsylvania, and West Virginia.

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