UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report July 24, 2012
(Date of earliest event reported)
PENN NATIONAL GAMING, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania |
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0-24206 |
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23-2234473 |
(State or other jurisdiction of |
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(Commission File Number) |
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(IRS Employer |
825 Berkshire Blvd., Suite 200, Wyomissing, PA |
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19610 |
(Address of principal executive offices) |
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(Zip Code) |
(610) 373-2400
(Registrants telephone number, including area code)
Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 to Form 8-K):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On July 24, 2012, Penn National Gaming, Inc. (the Company) issued a press release announcing its financial results for the three months ended June 30, 2012. The full text of the press release is attached as Exhibit 99.1 and incorporated herein by reference.
The information in Item 2.02 of this Form 8-K and Exhibit 99.1 attached hereto shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. |
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Description |
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99.1 |
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Press release, dated July 24, 2012, issued by Penn National Gaming, Inc. announcing its financial results for the three months ended June 30, 2012. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: July 25, 2012 |
PENN NATIONAL GAMING, INC. | |
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| |
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| |
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By: |
/s/ Robert S. Ippolito |
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Robert S. Ippolito |
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Vice President, Secretary and Treasurer |
Exhibit 99.1
NEWS ANNOUNCEMENT |
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Conference Call: |
Today, July 24, 2012 at 10:00 a.m. ET | |
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Dial-in number: |
212/231-2933 | |
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Webcast: |
www.pngaming.com | |
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Replay information provided below | |
CONTACT: |
|
William J. Clifford |
Joseph N. Jaffoni, Richard Land |
Chief Financial Officer |
Jaffoni & Collins Incorporated |
610/373-2400 |
212/835-8500 or penn@jcir.com |
FOR IMMEDIATE RELEASE
PENN NATIONAL GAMING REPORTS SECOND QUARTER REVENUE AND ADJUSTED EBITDA OF $712.6 MILLION AND $189.8 MILLION, RESPECTIVELY
- Establishes 2012 Third Quarter Guidance and Updates 2012 Full Year Guidance -
Wyomissing, Penn., (July 24, 2012) Penn National Gaming, Inc. (PENN: Nasdaq) today reported second quarter operating results for the three months ended June 30, 2012, as summarized below:
Summary of Second Quarter Results
|
|
Three Months Ended |
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(in millions, except per share data) |
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2012 Actual |
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2012 Guidance |
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2011 Actual |
| |||
Net revenues |
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$ |
712.6 |
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$ |
711.0 |
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$ |
687.9 |
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Adjusted EBITDA (1) |
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189.8 |
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187.9 |
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189.6 |
| |||
Less: Impact of stock compensation, insurance recoveries and deductible charges, depreciation and amortization, gain/loss on disposal of assets, interest expense - net, income taxes, and other expenses |
|
(123.1 |
) |
(120.5 |
) |
(113.6 |
) | |||
Net income |
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$ |
66.7 |
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$ |
67.4 |
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$ |
76.0 |
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|
|
|
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|
|
|
| |||
Diluted earnings per common share |
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$ |
0.63 |
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$ |
0.64 |
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$ |
0.71 |
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(1) Adjusted EBITDA is income (loss) from operations, excluding the impact of stock compensation, insurance recoveries and deductible charges, depreciation and amortization, and gain or loss on disposal of assets, and is inclusive of gain or loss from unconsolidated affiliates. A reconciliation of net income (loss) per accounting principles generally accepted in the United States of America (GAAP) to adjusted EBITDA, as well as income (loss) from operations per GAAP to adjusted EBITDA, is included in the accompanying financial schedules.
(2) The figures in this column present the guidance Penn National Gaming provided on April 19, 2012 for the three months ended June 30, 2012.
-more-
Review of Second Quarter 2012 Results vs. Guidance and Second Quarter 2011 Results
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Three Months |
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Ended |
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June 30, 2012 |
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Pre-tax |
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After-tax |
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(in thousands) |
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Income, per guidance (1) |
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$ |
110,496 |
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$ |
67,402 |
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Property and unconsolidated affiliates results |
|
2,632 |
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1,553 |
| ||
Deal costs for Harrahs St. Louis transaction |
|
(751 |
) |
(473 |
) | ||
Foreign currency translation gain |
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1,154 |
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726 |
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Other |
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(565 |
) |
(333 |
) | ||
Income tax rate variance from guidance |
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|
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(2,208 |
) | ||
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|
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Income, as reported |
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$ |
112,966 |
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$ |
66,667 |
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Three Months Ended |
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June 30, |
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2012 |
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2012 Guidance (1) |
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2011 |
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Diluted earnings per common share |
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$ |
0.63 |
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$ |
0.64 |
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$ |
0.71 |
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Deal costs for Harrahs St. Louis transaction and other |
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0.01 |
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Foreign currency translation gain |
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(0.01 |
) |
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Insurance deductible charges for Hollywood Casino Tunica flood |
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0.03 |
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Final insurance settlement for Hollywood Casino Joilet fire |
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(0.10 |
) | |||
M Resort transaction costs |
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0.01 |
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Income tax rate variance from guidance (2) |
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(0.02 |
) |
(0.10 |
) | |||
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Diluted earnings per common share excluding items not included in guidance |
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$ |
0.63 |
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$ |
0.62 |
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$ |
0.55 |
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(1) The guidance figures in the tables above present the guidance Penn National Gaming provided on April 19, 2012 for the three months ended June 30, 2012.
(2) The variance from guidance for the three months ended June 30, 2011 related primarily to a FIN 48 reserve reversal.
Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming commented, While second quarter regional gaming market revenues generally softened from the pace of the first quarter, six of the sixteen properties that Penn National Gaming operated for both periods recorded year-over-year revenue increases. More significantly, eight of these sixteen properties generated adjusted EBITDA gains in the second quarter relative to the comparable year-ago period. Reflecting these results, our second quarter revenue and adjusted EBITDA both exceeded guidance. Reported adjusted EBITDA of $189.8 million reflects $2.6 million of property operating results that exceeded the expectations in our guidance and was inclusive of $8.0 million of total pre-opening expenses. In addition, reported adjusted EBITDA was impacted by $0.8 million of costs not anticipated in the guidance related to our agreement during the second quarter to acquire Harrahs St. Louis, which we anticipate will close in the fourth quarter. The Companys second quarter 2012 adjusted EBITDA margins declined compared to the prior year due to a $6.6 million increase in preopening and acquisition related transaction costs. However, adjusted EBITDA margins are consistent for both periods once these costs are excluded.
Overall, were pleased with our solid second quarter operating results, which were consistent with our guidance, including our assessment of the impact of new competition in some of our markets. On a consolidated basis, second quarter results benefited from a full quarters contribution from M Resort which we owned for just one month during last years second quarter, as well as a full quarters contribution from our joint venture at Hollywood Casino at Kansas Speedway which
opened February 3. In addition, we benefited from approximately one month of results from Hollywood Casino Toledo which, to date, has performed very well. Finally, we have seen continued positive results across the organization in terms of enhancing operating efficiencies and maintaining a disciplined approach to marketing and promotional activities.
We were pleased to announce during the quarter that we further expanded the Companys strong growth pipeline through our agreement to acquire Harrahs St. Louis in an accretive transaction. Harrahs St. Louis will further expand Penn Nationals regional operating platform with a facility that is well-positioned in a large metropolitan market. The $610 million transaction price represents a multiple of 7.75 times the propertys trailing twelve month EBITDA, which effectively declines to 6.75 times due to the amortization of goodwill for tax purposes. The acquisition will be funded through an add-on to our existing Senior Secured Credit Facility, which will result in a short-term increase in our total debt to adjusted EBITDA leverage ratio to 3.32 times from 2.79 times at June 30, 2012.
We currently expect the Harrahs St. Louis transaction to close in the fourth quarter of 2012, at which time we will re-brand Harrahs St. Louis with the Companys Hollywood-themed brand, which is now successfully deployed at twelve of our properties across the country. We are currently establishing the budget for re-branding the facility, refreshing areas of the gaming floor and aligning our IT and reporting functions. The St. Louis transaction represents yet another way for Penn National to sensibly leverage its strong balance sheet to further expand our property portfolio through return-focused investments.
Near the end of the second quarter, the $320 million Hollywood Casino Toledo facility opened with more than 2,000 slot machines and 60 live tables, making it the first facility in Ohio to offer Las Vegas-style gaming and amenities on a single floor. With more than 1,300 new full and part time positions 90 percent of which have been hired locally -- Hollywood Casino Toledo is fulfilling its commitments to the voters of Ohio with respect to new employment, significant new tax revenues and other economic benefits. We look forward to the successful launch of the $400 million Hollywood Casino Columbus early in the fourth quarter which will further Penn Nationals positive economic impact on the State of Ohio.
Elsewhere in Ohio, with the late June filing of our Video Lottery Terminal (VLT) license applications, as well as our formal request to relocate our Beulah Park racetrack in Columbus to the Mahoning Valley and Raceway Park in Toledo to Dayton, we are making measurable progress towards our planned construction of two new $150 million integrated racing and VLT facilities. Like our other initiatives in Ohio, these new developments are expected to drive significant new employment opportunities, with each expected to create approximately 1,000 direct and indirect jobs and generate approximately 2,000 construction jobs combined. As such, we view our Ohio investments as a win-win situation for the state, the host communities and Penn National. The state will receive $125 million per facility in licensing and relocation fees, as well as a new recurring tax base, while the Company believes the facilities will deliver attractive returns on invested capital.
We continue to evaluate other domestic regional gaming opportunities where we can leverage our strong balance sheet, proven development and operating disciplines and the value we bring to local communities. In this regard, we are pursuing new gaming opportunities in Western Massachusetts; for our jointly owned racetracks in Texas; and in Maryland where we are advocating for legislative approval for slots at our Rosecroft Racetrack in Prince Georges County to help provide a long term solution for the states struggling horse racing industry. Whether Governor OMalley will call a Special Session of the Legislature to consider gaming expansion remains to be seen, but Penn National will continue to aggressively push for the inclusion of Rosecroft as a potential sixth gaming location in the state at the current gaming tax levels.
We are disappointed with the Iowa Racing and Gaming Commissions recent decision to not approve an extension of our operating agreement with our qualified sponsorship organization through March 2015 as well as their decision to request applications for a new land based facility in Sioux City. We have filed a lawsuit to protect our interests and continue to explore our options related to this matter.
Our revised 2012 guidance assumes, among other things, a continuation of recent consumer trends, the current expected opening date for our Columbus facility, and the impact to operating results in several markets related to new competition as outlined in the assumptions which precede the guidance later in this release. We are confident that Penn Nationals operation of new and existing facilities will offset the new competition and we project growth in free cash flow over the record levels expected to be generated in 2012.
Development and Expansion Projects
The table below summarizes Penn National Gamings current facility development projects:
Project/Scope |
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New |
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Planned |
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Penn Nationals |
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Amount |
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Expected |
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(in millions) |
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Kansas Speedway (KS) - Hollywood Casino at Kansas Speedway (KS) opened on February 3, 2012 and features a 95,000 square foot casino with 2,000 slot machines and 52 table games, parking to accommodate 3,000 vehicles (including a 1,253 space parking structure), and a range of fine and casual dining concepts. |
|
2,375 |
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$ |
391 |
(1) |
$ |
145 |
|
$ |
135.6 |
|
Opened February 3, 2012 |
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|
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|
|
|
|
|
|
|
|
| |||
Hollywood Casino Toledo (OH) - The casino opened on May 29, 2012 and features 2,000 slot machines, 60 table games and 20 poker tables, structured and surface parking, plus food and beverage outlets and entertainment lounge. |
|
2,620 |
|
$ |
320 |
|
$ |
320 |
|
$ |
294.2 |
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Opened May 29, 2012 |
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|
|
|
|
|
|
|
|
|
|
|
| |||
Hollywood Casino Columbus (OH) - Construction began with the April 25, 2011 groundbreaking for the Columbus Delphi site with a planned casino offering up to 3,000 slot machines, 70 table games and 30 poker tables, structured and surface parking, plus food and beverage outlets and entertainment lounge. |
|
3,790 |
|
$ |
400 |
|
$ |
400 |
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$ |
195.3 |
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Early Fourth Quarter 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Mahoning Valley Race Track (OH) - Full details and design of the project at Austintowns Centrepointe Business Park are in the development stage, with a new Hollywood themed facility featuring a new racetrack and up to 1,500 video lottery terminals, as well as various restaurants, bars and other amenities. |
|
1,500 |
|
$ |
275 |
(2) |
$ |
250 |
|
$ |
4.9 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Dayton Raceway (OH) - Full details and design of the project at the site of an abandoned Delphi Automotive plant are in the development stage, with our new Hollywood themed facility featuring a new racetrack and up to 1,500 video lottery terminals, as well as various restaurants, bars and other amenities. |
|
1,500 |
|
$ |
275 |
(2) |
$ |
250 |
|
$ |
3.6 |
|
2014 |
|
(1) During the first quarter of 2012, the original planned budget of $411 million was reduced by $20 million.
(2) Includes a $75 million relocation fee in addition to a $50 million VLT license fee.
Financial Guidance
The table below sets forth current guidance targets for financial results for the 2012 third quarter and full year, based on the following assumptions:
· Excludes the operating earnings and related financing costs, but includes preopening costs associated with the anticipated fourth quarter closing of the Harrahs St. Louis acquisition;
· Hollywood Casino Columbus opens early in the fourth quarter of 2012, with an impact on Hollywood Casino Lawrenceburg;
· A continued impact from Scioto Downs on Hollywood Casino Lawrenceburg;
· Maryland Live! has a significant increase in slot capacity in the fourth quarter with an expected impact to our Hollywood Casino at Charles Town Races, Hollywood Casino at Penn National Race Course and Hollywood Casino Perryville properties;
· LAuberge Baton Rouge opens in September 2012 with an impact to the Companys Hollywood Casino Baton Rouge property;
· Horseshoe Cincinnati does not open during 2012 (and thus, no impact is expected to Hollywood Casino Lawrenceburg);
· No disruptions to Penn Nationals Argosy Casino Sioux City facility arising from the ongoing negotiations with the City of Sioux City or the facilitys charitable sponsor or any related litigation or regulatory proceedings;
· A total of $24.3 million in 2012 for preopening expenses, with $8.5 million projected to be incurred in the third quarter of 2012;
· Depreciation and amortization charges in 2012 of $243.0 million, with $61.2 million projected to be incurred in the third quarter of 2012;
· Estimated non-cash stock compensation expenses of $29.7 million for 2012, with $7.2 million of the cost incurred in the third quarter of 2012;
· LIBOR is based on the forward curve;
· A blended 2012 income tax rate of 39%;
· Does not assume a reduction of the fully diluted weighted average shares related to the terms of the Series B Redeemable Preferred Stock if Penn National Gamings stock price exceeds $45;
· A diluted share count of approximately 105.9 million shares for the full year; and,
· There will be no material changes in applicable legislation, regulatory environment, world events, weather, recent consumer trends, economic conditions, or other circumstances beyond our control that may adversely affect the Companys results of operations.
|
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Three Months Ending September 30, |
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Full Year Ending December 31, |
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(in millions, except per share data) |
|
2012 Guidance |
|
2011 Actual |
|
2012 Revised |
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2012 Prior |
|
2011 Actual |
| |||||
Net revenues |
|
$ |
699.3 |
|
$ |
710.9 |
|
$ |
2,874.1 |
|
$ |
2,872.5 |
|
$ |
2,742.3 |
|
Adjusted EBITDA (1) |
|
184.0 |
|
206.1 |
|
769.0 |
|
762.2 |
|
730.2 |
| |||||
Less: Impact of stock compensation, insurance recoveries and deductible charges, depreciation and amortization, gain/loss on disposal of assets, interest expense - net, income taxes, loss on early extinguishment of debt, and other expenses |
|
(125.5 |
) |
(135.3 |
) |
(508.0 |
) |
(500.8 |
) |
(487.8 |
) | |||||
Net income |
|
$ |
58.5 |
|
$ |
70.8 |
|
$ |
261.0 |
|
$ |
261.4 |
|
$ |
242.4 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted earnings per common share |
|
$ |
0.55 |
|
$ |
0.66 |
|
$ |
2.46 |
|
$ |
2.48 |
|
$ |
2.26 |
|
(1) Adjusted EBITDA is income (loss) from operations, excluding the impact of stock compensation, insurance recoveries and deductible charges, depreciation and amortization, and gain or loss on disposal of assets, and is inclusive of gain or loss from unconsolidated affiliates.
(2) These figures present the guidance Penn National provided on April 19, 2012 for the full year ending December 31, 2012.
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Segment Information Operations
(in thousands) (unaudited)
|
|
NET REVENUES |
|
ADJUSTED EBITDA |
| ||||||||
|
|
Three Months Ended June 30, |
|
Three Months Ended June 30, |
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|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
Midwest (1) |
|
$ |
217,975 |
|
$ |
214,403 |
|
$ |
66,796 |
|
$ |
68,445 |
|
East/West (2) |
|
348,652 |
|
318,614 |
|
98,379 |
|
90,598 |
| ||||
Southern Plains (3) |
|
137,405 |
|
146,509 |
|
46,691 |
|
48,591 |
| ||||
Other (4) |
|
8,519 |
|
8,353 |
|
(22,068 |
) |
(18,011 |
) | ||||
Total |
|
$ |
712,551 |
|
$ |
687,879 |
|
$ |
189,798 |
|
$ |
189,623 |
|
|
|
NET REVENUES |
|
ADJUSTED EBITDA |
| ||||||||
|
|
Six Months Ended June 30, |
|
Six Months Ended June 30, |
| ||||||||
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
Midwest (1) |
|
$ |
423,086 |
|
$ |
428,214 |
|
$ |
129,835 |
|
$ |
135,011 |
|
East/West (2) |
|
719,281 |
|
606,997 |
|
204,391 |
|
170,902 |
| ||||
Southern Plains (3) |
|
287,125 |
|
301,600 |
|
100,576 |
|
102,455 |
| ||||
Other (4) |
|
19,118 |
|
18,091 |
|
(44,264 |
) |
(40,710 |
) | ||||
Total |
|
$ |
1,448,610 |
|
$ |
1,354,902 |
|
$ |
390,538 |
|
$ |
367,658 |
|
(1) Our Midwest segment consists of the following properties: Hollywood Casino Lawrenceburg, Hollywood Casino Aurora, Hollywood Casino Joliet, Argosy Casino Alton, and Hollywood Casino Toledo, which opened on May 29, 2012. It also includes our Casino Rama management service contract, as well as Hollywood Casino Columbus, which is currently under construction and scheduled to open early in the fourth quarter of 2012. Results for the three and six months ended June 30, 2012 included preopening charges of $8.0 million and $12.7 million, respectively, as compared to preopening charges of $0.4 million and $0.8 million for the three and six months ended June 30, 2011, respectively.
(2) Our East/West segment consists of the following properties: Hollywood Casino at Charles Town Races, Hollywood Casino Perryville, Hollywood Casino Bangor, Hollywood Casino at Penn National Race Course, Zia Park Casino, and M Resort which was acquired on June 1, 2011. Results for the six months ended June 30, 2012 included preopening charges of $0.3 million. Results for the three month and six month period ended June 30, 2011 included acquisition related transaction costs associated with the M Resort of $1.0 million and $1.3 million, respectively.
(3) Our Southern Plains segment consists of the following properties: Argosy Casino Riverside, Argosy Casino Sioux City, Hollywood Casino Baton Rouge, Hollywood Casino Tunica, Hollywood Casino Bay St. Louis, Boomtown Biloxi, and our 50% joint venture interest in Kansas Entertainment, LLC (Kansas Entertainment), which owns Hollywood Casino at Kansas Speedway that opened February 3, 2012. Results for the six months ended June 30, 2012 included our share of the joint ventures preopening charges of $1.4 million, as compared to preopening charges of $0.8 million and $1.0 million for the three and six months ended June 30, 2011, respectively.
(4) Our Other segment consists of our standalone racing operations, namely Beulah Park, Raceway Park, Rosecroft Raceway, Sanford Orlando Kennel Club, and our joint venture interests in Freehold Raceway, Maryland Jockey Club (which was sold in July 2011), Sam Houston Race Park and Valley Race Park. If the Company is successful in obtaining gaming operations at these locations, they would be assigned to one of our regional executives and reported in their respective reportable segment. The Other segment also includes our Bullwhackers property and our corporate overhead operations. Results for the three and six months ended June 30, 2012 included corporate overhead costs of $21.3 million and $43.4 million, respectively, as compared to corporate overhead costs of $18.5 million and $38.4 million for the three and six months ended June 30, 2011, respectively. Additionally, results for the three and six month period ended June 30, 2012 includes transaction costs of $0.8 million associated with the Harrahs St. Louis acquisition whereas the results for the six month period ended June 30, 2011 included transaction costs of $0.3 million associated with the Rosecroft Raceway acquisition.
Reconciliation of Adjusted EBITDA to Net income (GAAP)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
(in thousands) (unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
|
|
June 30, |
|
June 30, |
| ||||||||
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
Adjusted EBITDA |
|
$ |
189,798 |
|
$ |
189,623 |
|
$ |
390,538 |
|
$ |
367,658 |
|
(Gain) loss from unconsolidated affiliates |
|
(1,054 |
) |
(431 |
) |
(2,739 |
) |
1,923 |
| ||||
Depreciation and amortization |
|
(56,791 |
) |
(54,230 |
) |
(110,128 |
) |
(107,388 |
) | ||||
Charge for stock compensation |
|
(7,396 |
) |
(6,124 |
) |
(15,307 |
) |
(12,349 |
) | ||||
Insurance recoveries, net of deductible charges |
|
3,366 |
|
11,555 |
|
7,229 |
|
13,249 |
| ||||
Gain on disposal of assets |
|
92 |
|
199 |
|
1,037 |
|
234 |
| ||||
Income from operations |
|
$ |
128,015 |
|
$ |
140,592 |
|
$ |
270,630 |
|
$ |
263,327 |
|
Interest expense |
|
(17,823 |
) |
(26,109 |
) |
(35,866 |
) |
(55,135 |
) | ||||
Interest income |
|
246 |
|
96 |
|
465 |
|
149 |
| ||||
Gain (loss) from unconsolidated affiliates |
|
1,054 |
|
431 |
|
2,739 |
|
(1,923 |
) | ||||
Other |
|
1,474 |
|
(701 |
) |
471 |
|
(2,344 |
) | ||||
Taxes on income |
|
(46,299 |
) |
(38,320 |
) |
(93,153 |
) |
(76,557 |
) | ||||
Net income |
|
$ |
66,667 |
|
$ |
75,989 |
|
$ |
145,286 |
|
$ |
127,517 |
|
Reconciliation of Income (loss) from operations (GAAP) to Adjusted EBITDA
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Segment Information
(in thousands) (unaudited)
Three Months Ended June 30, 2012
|
|
Midwest |
|
East/West |
|
Southern Plains |
|
Other |
|
Total |
| |||||
Income (loss) from operations |
|
$ |
47,139 |
|
$ |
76,732 |
|
$ |
37,532 |
|
$ |
(33,388 |
) |
$ |
128,015 |
|
Charge for stock compensation |
|
|
|
|
|
|
|
7,396 |
|
7,396 |
| |||||
Insurance recoveries, net of deductible charges |
|
|
|
|
|
(3,366 |
) |
|
|
(3,366 |
) | |||||
Depreciation and amortization |
|
19,645 |
|
21,784 |
|
11,212 |
|
4,150 |
|
56,791 |
| |||||
Loss (gain) on disposal of assets |
|
12 |
|
(137 |
) |
37 |
|
(4 |
) |
(92 |
) | |||||
Gain (loss) from unconsolidated affiliates (1) |
|
|
|
|
|
1,276 |
|
(222 |
) |
1,054 |
| |||||
Adjusted EBITDA |
|
$ |
66,796 |
|
$ |
98,379 |
|
$ |
46,691 |
|
$ |
(22,068 |
) |
$ |
189,798 |
|
Three Months Ended June 30, 2011
|
|
Midwest |
|
East/West |
|
Southern Plains |
|
Other |
|
Total |
| |||||
Income (loss) from operations |
|
$ |
69,809 |
|
$ |
69,485 |
|
$ |
29,284 |
|
$ |
(27,986 |
) |
$ |
140,592 |
|
Charge for stock compensation |
|
|
|
|
|
|
|
6,124 |
|
6,124 |
| |||||
Insurance recoveries, net of deductible charges |
|
(16,844 |
) |
|
|
5,289 |
|
|
|
(11,555 |
) | |||||
Depreciation and amortization |
|
15,609 |
|
21,116 |
|
14,841 |
|
2,664 |
|
54,230 |
| |||||
Gain on disposal of assets |
|
(129 |
) |
(3 |
) |
(19 |
) |
(48 |
) |
(199 |
) | |||||
(Loss) gain from unconsolidated affiliates |
|
|
|
|
|
(804 |
) |
1,235 |
|
431 |
| |||||
Adjusted EBITDA |
|
$ |
68,445 |
|
$ |
90,598 |
|
$ |
48,591 |
|
$ |
(18,011 |
) |
$ |
189,623 |
|
Six Months Ended June 30, 2012
|
|
Midwest |
|
East/West |
|
Southern Plains |
|
Other |
|
Total |
| |||||
Income (loss) from operations |
|
$ |
93,422 |
|
$ |
160,622 |
|
$ |
82,243 |
|
$ |
(65,657 |
) |
$ |
270,630 |
|
Charge for stock compensation |
|
|
|
|
|
|
|
15,307 |
|
15,307 |
| |||||
Insurance recoveries, net of deductible charges |
|
|
|
|
|
(7,229 |
) |
|
|
(7,229 |
) | |||||
Depreciation and amortization |
|
37,197 |
|
44,026 |
|
22,600 |
|
6,305 |
|
110,128 |
| |||||
(Gain) loss on disposal of assets |
|
(784 |
) |
(257 |
) |
8 |
|
(4 |
) |
(1,037 |
) | |||||
Gain (loss) from unconsolidated affiliates (1) |
|
|
|
|
|
2,954 |
|
(215 |
) |
2,739 |
| |||||
Adjusted EBITDA |
|
$ |
129,835 |
|
$ |
204,391 |
|
$ |
100,576 |
|
$ |
(44,264 |
) |
$ |
390,538 |
|
Six Months Ended June 30, 2011
|
|
Midwest |
|
East/West |
|
Southern Plains |
|
Other |
|
Total |
| |||||
Income (loss) from operations |
|
$ |
122,484 |
|
$ |
129,223 |
|
$ |
68,793 |
|
$ |
(57,173 |
) |
$ |
263,327 |
|
Charge for stock compensation |
|
|
|
|
|
|
|
12,349 |
|
12,349 |
| |||||
Insurance recoveries, net of deductible charges |
|
(18,538 |
) |
|
|
5,289 |
|
|
|
(13,249 |
) | |||||
Depreciation and amortization |
|
31,252 |
|
41,683 |
|
29,505 |
|
4,948 |
|
107,388 |
| |||||
Gain on disposal of assets |
|
(187 |
) |
(4 |
) |
(6 |
) |
(37 |
) |
(234 |
) | |||||
Loss from unconsolidated affiliates |
|
|
|
|
|
(1,126 |
) |
(797 |
) |
(1,923 |
) | |||||
Adjusted EBITDA |
|
$ |
135,011 |
|
$ |
170,902 |
|
$ |
102,455 |
|
$ |
(40,710 |
) |
$ |
367,658 |
|
(1) On February 3, 2012, our joint venture in Kansas Entertainment commenced operations of Hollywood Casino at Kansas Speedway. We record 50% of the joint ventures earnings in our gain from unconsolidated affiliates line which includes the impact of depreciation and amortization expense. Our 50% share of depreciation and amortization expense was $2.8 million and $4.5 million for the three and six months ended June 30, 2012, respectively.
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data) (unaudited)
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| ||||||||
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues |
|
|
|
|
|
|
|
|
| ||||
Gaming |
|
$ |
634,846 |
|
$ |
622,873 |
|
$ |
1,290,923 |
|
$ |
1,231,984 |
|
Food, beverage and other |
|
109,955 |
|
94,391 |
|
222,863 |
|
179,680 |
| ||||
Management service fee |
|
3,614 |
|
4,037 |
|
7,057 |
|
7,354 |
| ||||
Revenues |
|
748,415 |
|
721,301 |
|
1,520,843 |
|
1,419,018 |
| ||||
Less promotional allowances |
|
(35,864 |
) |
(33,422 |
) |
(72,233 |
) |
(64,116 |
) | ||||
Net revenues |
|
712,551 |
|
687,879 |
|
1,448,610 |
|
1,354,902 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses |
|
|
|
|
|
|
|
|
| ||||
Gaming |
|
330,875 |
|
327,033 |
|
671,044 |
|
647,789 |
| ||||
Food, beverage and other |
|
84,985 |
|
75,257 |
|
172,789 |
|
143,849 |
| ||||
General and administrative |
|
115,251 |
|
102,322 |
|
231,248 |
|
205,798 |
| ||||
Depreciation and amortization |
|
56,791 |
|
54,230 |
|
110,128 |
|
107,388 |
| ||||
Insurance recoveries, net of deductible charges |
|
(3,366 |
) |
(11,555 |
) |
(7,229 |
) |
(13,249 |
) | ||||
Total operating expenses |
|
584,536 |
|
547,287 |
|
1,177,980 |
|
1,091,575 |
| ||||
Income from operations |
|
128,015 |
|
140,592 |
|
270,630 |
|
263,327 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expenses) |
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
(17,823 |
) |
(26,109 |
) |
(35,866 |
) |
(55,135 |
) | ||||
Interest income |
|
246 |
|
96 |
|
465 |
|
149 |
| ||||
Gain (loss) from unconsolidated affiliates |
|
1,054 |
|
431 |
|
2,739 |
|
(1,923 |
) | ||||
Other |
|
1,474 |
|
(701 |
) |
471 |
|
(2,344 |
) | ||||
Total other expenses |
|
(15,049 |
) |
(26,283 |
) |
(32,191 |
) |
(59,253 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income from operations before income taxes |
|
112,966 |
|
114,309 |
|
238,439 |
|
204,074 |
| ||||
Taxes on income |
|
46,299 |
|
38,320 |
|
93,153 |
|
76,557 |
| ||||
Net income |
|
$ |
66,667 |
|
$ |
75,989 |
|
$ |
145,286 |
|
$ |
127,517 |
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings per common share: |
|
|
|
|
|
|
|
|
| ||||
Basic earnings per common share |
|
$ |
0.70 |
|
$ |
0.79 |
|
$ |
1.54 |
|
$ |
1.32 |
|
Diluted earnings per common share |
|
$ |
0.63 |
|
$ |
0.71 |
|
$ |
1.37 |
|
$ |
1.19 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
76,257 |
|
78,387 |
|
76,126 |
|
78,275 |
| ||||
Diluted |
|
106,130 |
|
107,523 |
|
105,875 |
|
107,247 |
|
Diluted Share Count Methodology
Reflecting the issuance of 12,500 shares on October 30, 2008 of the $1.25 billion, zero coupon, Series B Redeemable Preferred Stock and the repurchase of 225 shares in the first quarter of 2010, Penn National Gaming is required to adjust its diluted weighted average outstanding share count for the purposes of calculating diluted earnings per share as follows:
· When the price of Penn National Gamings common stock is less than $45, the diluted weighted average outstanding share count is increased by 27,277,778 shares (regardless of how much the stock price is below $45);
· When the price of Penn National Gamings common stock is between $45 and $67, the diluted weighted average outstanding share count will be increased by an amount which can be calculated by dividing the $1.23 billion (face value) by the current price per share. This will result in an increase in the diluted weighted average outstanding share count of between 18,320,896 shares and 27,277,778 shares depending on the current share price; and,
· When the price of Penn National Gamings common stock is above $67, the diluted weighted average outstanding share count will be increased by 18,320,896 shares (regardless of how much the stock price exceeds $67).
Reconciliation of Non-GAAP Measures to GAAP
Adjusted EBITDA, or earnings before interest, taxes, stock compensation, insurance recoveries and deductible charges, depreciation and amortization, gain or loss on disposal of assets, and other income or expenses, and inclusive of gain or loss from unconsolidated affiliates, is not a measure of performance or liquidity calculated in accordance with GAAP. Adjusted EBITDA information is presented as a supplemental disclosure, as management believes that it is a widely used measure of performance in the gaming industry. In addition, management uses adjusted EBITDA as the primary measure of the operating performance of its segments, including the evaluation of operating personnel. Adjusted EBITDA should not be construed as an alternative to operating income, as an indicator of the Companys operating performance, as an alternative to cash flows from operating activities, as a measure of liquidity, or as any other measure of performance determined in accordance with GAAP. The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in adjusted EBITDA. It should also be noted that other gaming companies that report adjusted EBITDA information may calculate adjusted EBITDA in a different manner than the Company. Adjusted EBITDA is presented as a supplemental disclosure, as management believes that it is a principal basis for the valuation of gaming companies, as this measure is considered by many to be a better indicator of the Companys operating results than diluted net income (loss) per GAAP. A reconciliation of the Companys adjusted EBITDA to net income (loss) per GAAP, as well as the Companys adjusted EBITDA to income (loss) from operations per GAAP, is included in the accompanying financial schedules.
A reconciliation of each segments adjusted EBITDA to income (loss) from operations is included in the financial schedules herein. On a segment level, adjusted EBITDA is reconciled to income (loss) from operations per GAAP, rather than net income (loss) per GAAP due to, among other things, the impracticability of allocating interest expense, interest income, income taxes and certain other items to the Companys segments on a segment-by-segment basis. Management believes that this presentation is more meaningful to investors in evaluating the performance of the Companys segments and is consistent with the reporting of other gaming companies.
Conference Call, Webcast and Replay Details
Penn National Gaming is hosting a conference call and simultaneous webcast at 10:00 am ET today, both of which are open to the general public. The conference call number is 212/231-2933; please call five minutes in advance to ensure that you are connected prior to the presentation. Questions will be reserved for call-in analysts and investors. Interested parties may also access the live call on the Internet at www.pngaming.com; allow 15 minutes to register and download and install any necessary software. A replay of the call can be accessed for thirty days on the Internet at www.pngaming.com.
This press release, which includes financial information to be discussed by management during the conference call and disclosure and reconciliation of non-GAAP financial measures, is available on the Companys web site, www.pngaming.com in the Investors section (select link for Press Releases).
About Penn National Gaming
Penn National Gaming, through its subsidiaries, owns, operates or has ownership interests in gaming and racing facilities with a focus on slot machine entertainment. The Company presently operates twenty-seven facilities in nineteen jurisdictions, including Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario. In aggregate, Penn Nationals operated facilities feature approximately 31,700 gaming machines, 725 table games, 2,400 hotel rooms and 1.35 million square feet of gaming floor space. Penn National is currently developing a casino in Columbus, Ohio targeted to open in early in the fourth quarter of 2012, and has agreed to acquire Harrahs St. Louis gaming and lodging facility from Caesars Entertainment with the transaction expected to close in the fourth quarter of 2012.
Forward-looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from expectations. Although Penn National Gaming, Inc. and its subsidiaries (collectively, the Company) believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially from our expectations. Meaningful factors that could cause actual results to differ from expectations include, but are not limited to, risks related to the following: our ability to receive and maintain, or delays in obtaining, the regulatory approvals required to own, develop and/or operate our facilities, or other delays or impediments to completing our planned acquisitions or projects, including favorable resolution of any related litigation, including the recent appeal by the Ohio Roundtable addressing the legality of video lottery terminals in Ohio and the lawsuit to protect our interests in Iowa; our ability to secure state and local permits and approvals necessary for construction; construction factors, including delays, unexpected remediation costs, local opposition and increased cost of labor and materials; our ability to receive timely regulatory approval for and to otherwise complete our planned acquisition of Harrahs St. Louis (failure to do so could, among other things, result in the loss of certain deposits); our ability to successfully integrate Harrahs St. Louis into our existing business; our ability to reach agreements with the thoroughbred and harness horseman in Ohio and to otherwise maintain agreements with our horseman, pari-mutuel clerks and other organized labor groups; the passage of state, federal or local legislation (including referenda) that would expand, restrict, further tax, prevent or negatively impact operations in or adjacent to the jurisdictions in which we do or seek to do business (such as a smoking ban at any of our facilities); the effects of local and national economic, credit, capital market, housing, and energy conditions on the economy in general and on the gaming and lodging industries in particular; the activities of our competitors and the emergence of new competitors (traditional and internet based); increases in the effective rate of taxation at any of our properties or at the corporate level; our ability to identify attractive acquisition and development opportunities and to agree to terms with partners for such transactions; the costs and risks involved in the pursuit of such opportunities and our ability to complete the acquisition or development of, and achieve the expected returns from, such opportunities; our expectations for the continued availability and cost of capital; the outcome of pending legal proceedings; changes in accounting standards; our dependence on key personnel; the impact of terrorism and other international hostilities; the impact of weather; and other factors as discussed in the Companys Annual Report on Form 10-K for the year ended December 31, 2011, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC. The Company does not intend to update publicly any forward-looking statements except as required by law.
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