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PNGI Moving Forward, But With Caution

Company officials Jan. 31 discussed 2012 financials and projections for 2013.

Penn National Gaming Inc., which has a host of projects in the works, is taking a cautious approach to 2013 in the wake of a "soft" fourth quarter in 2012, company officials said Jan. 31 during an earnings teleconference.

Net income for the final three months of 2012 was $20.2 million, down from $44 million in the fourth quarter of 2011. Net income for all of 2012 was $212 million, down from $242.4 million for 2011, according to financial statements.

"It was a tough last quarter, much tougher than we would have liked," PNGI chairman and chief executive officer Peter Carlino said. "But at Penn we always like to take the long view, and the long view looks very good."

The company's projects include relocation of two Ohio racetracks to untapped gaming markets in Dayton and Youngstown. The next step is relocation approval by the Ohio State Racing Commission; there could be action in that regard in March or April.

Hollywood Slots at Mahoning Valley Race Course (currently Beulah Park near Columbus) and Hollywood Slots at Dayton Raceway (currently Raceway Park in Toledo) will each have 1,500 video lottery terminals at the outset, according to plans. The planned total budgets are $265 million for Mahoning Valley and $257 for Dayton, the company said.

The racetrack gaming facilities are scheduled to open in 2014. Based on its Ohio experience with full-scale casinos in Columbus and Toledo, PNGI president and chief operating officer Tim Wilmott said the company will "put a lot of thought into how much slots product we put on the floor initially" at the two racetracks.

Wilmott and Carlino said they expected better initial returns at the two full-scale casinos in Ohio but don't see the market as saturated. They said the plan now is to focus on "market penetration" in those two areas of the state.

PNGI lowered its guidance for 2013 based on 2012 results. The prior 2013 net income projection of $281.1 million is now $263.9 million.

Carlino said the company expects its properties to do well this year in relation to what he called "unsettled times" and a "general despondency" with higher taxes in the wake of the 2012 presidential election. He said PNGI, which now operates 29 facilities in 18 jurisdictions in North America, will proceed with caution and not respond to the "irrational exuberance" shown by other companies.

"We'll be competitive to the point where only a moron would go further," Carlino said.

The 2012 numbers reflect an expenditure of $45 million on a failed attempt to defeat an expanded gambling referendum in Maryland, where PNGI owns Hollywood Casino at Perryville and Rosecroft Raceway.