PNGI Has Solid Quarter, Likes Its Chances

Penn National Gaming Inc. reported a 33% increase in earnings in the second quarter.

Penn National Gaming Inc. reported solid numbers for the second quarter of 2011 and said it expects good things from existing and potential properties despite increased competition.

The Pennsylvania-based racing and gaming company said earnings before interest, taxes, depreciation, and amortization increased 33%, from $142.2 million for the second quarter of 2010 to $189.6 million for the same period in 2011. Net revenue increased 15%, from $598.3 million to $687.9 million.

Hollywood Casino at Charles Town Races led the way with $148.7 million in second-quarter revenue and EBITDA of $49.2 million, according to the PNGI earnings statement. The strategically located West Virginia facility recently underwent a $40 million expansion and renovation project.

“Charles Town is one of the great gaming properties in America,” PNGI president and chief executive officer Peter Carlino said during a July 21 conference call on the earnings report. “We’re happy campers. We think we’re in a position for Charles Town to be a powerhouse that will be very hard for Maryland to compete with. The Charles Town experience will never be matched in Maryland.”

The PNGI chief made the comments in response to questions about the eventual opening of a large slot machine casino in Anne Arundel County, Md. He noted Charles Town has table games, which currently aren’t permitted at Maryland slots parlors, and offers other amenities.

PNGI owns the Hollywood Casino Perryville in northeastern Maryland and this year purchased Rosecroft Raceway, a shuttered harness track in southern Maryland. The company said it is “currently in the process of developing a financially viable plan for operating the track.”

The Maryland Racing Commission has licensed Rosecroft but with financial conditions that could delay reopening. PNGI also must have in place a deal with the Thoroughbred industry to resume full-card simulcasts of Thoroughbred races.

The PNGI financial report also notes an expected EBITDA gain of “approximately $20 million” from termination of the company’s joint venture in the Maryland Jockey Club. The anticipated closing date for that transaction is Aug. 1.

PNGI officials said they expect movement in September in Ohio, where the company is building two full-scale casinos and is in line to get video lottery terminals at two racetracks it hopes to relocate. The VLT provision in an overall gaming bill recently signed into law allows for the Ohio State Racing Commission to approve track relocations.

PNGI wants to move Beulah Park near Columbus to Dayton and Raceway Park in Toledo to the Youngstown market.

“We made our point that we need to do what Pennsylvania did—look around the map and put things where they will have the biggest impact (on state revenue),” Carlino said of Ohio. “In the end I think the state will do whatever the right thing turns out to be.”

Required capital expenditures, VLT licenses, and potential relocation fees put total investment per track at well over $200 million. The state tax rate on racetrack VLTs, however, is the same as full-scale casinos: 33.5%, among the lowest in the country.

In Illinois, where PNGI operates riverboat casinos, the situation is up in the air, said Eric Schippers, vice president of public affairs for the company. The state legislature this year passed a comprehensive gaming expansion, but the measure hasn’t yet gone to Gov. Pat Quinn for fear of a veto.

“The governor has been playing things close to the vest,” Schippers said. “Our sense is there will be ongoing dialogue to see what kind of new package might be able to be put together (on gaming).”

The legislation includes provisions for racetrack slots at five tracks, one that serves as an off-track wagering parlor only, and the Illinois State Fair. It remains to be seen if that language will remain in the measure.

Schippers noted a 10th casino has opened in Des Plaines, Ill., and 15% of gaming revenue there will go to the horse racing industry in the state.

“That relieves some of the pressure on the slots-at-tracks piece (of the legislation),” Schippers said. “A lot of variables are coming into play.”

PNGI officials speculated they don’t expect the Illinois legislation to be signed into law in its current form.