Chairman likes M Resort publicity in GSA scandal

The chairman of Penn National Gaming has one regret about the controversy surrounding the General Services Administration's taxpayer-funded $823,000 junket to Las Vegas that was held at his company's M Resort.

The free-spending government employees won't return anytime soon.

"Look, the GSA thing, as a taxpayer of course it is (an) outrageous situation," Penn National Chairman and CEO Peter Carlino said during the regional casino operator's first quarter earnings conference call with analysts and investors Thursday.

"As a business owner, on the other hand, I'm really depressed those guys won't be back next year," Carlino said.

Ironically, Wyomissing, Pa.,-based Penn National didn't own M Resort when the GSA held its five-day training meeting that featured a $7,000 sushi dinner, expensive outings, outrageous videos and other extravagant add-ons.

The uncovering of the October 2010 meeting has cost government officials their jobs and is the subject of two congressional investigations.

Toward the end of Penn National's conference call, Carlino was asked by Larry Haverty of Gamco Asset Management about the "raft of unplanned advertising" M Resort received in the past week.

Although Haverty didn't mention the GSA by name, it was clear he was asking about the event. He wondered if it was "a problem or an opportunity."

Carlino tried to laugh off the attention on M Resort.

Recently, photos surfaced of conference organizer and the GSA's Pacific regional administrator, Jeffrey Neely, sitting shirtless in a bathtub in one of M Resort's $1,179 per night loft suites, holding a champagne flute.

"Well, (it) looks like they were having fun," Carlino said. "(I'm) glad our folks provided them what they were looking for, a first-class experience. I'll leave to others to determine whether taxpayers should be paying for that though."

Penn National acquired M Resort in June after purchasing the debt covering the 390-room Henderson hotel-casino at a nearly 75 percent discount.

Penn National said February's opening of a new casino in Kansas and positive results from M Resort helped the company increase profits and revenues during the first quarter.

The regional casino operator said net income in the quarter that ended March 31 increased 53 percent to $78.6 million, compared with $59.5 million in the same quarter in 2011. The profits translated to 74 cents per share, up from 56 cents per share in the same quarter last year.

Penn National's first quarter revenues increased 10.3 percent to $736.1 million, compared with $682.8 million in 2011.

Carlino said the company benefited from the Feb. 3 opening of the Hollywood Casino at the Kansas Speedway and "a healthy contribution from M Resort."

Financial figures from M Resort are included under the company's east-west division, which includes seven casinos and racetracks. During the quarter, the division reported revenues of $370.6 million, compared with $288.4 million in the same quarter of 2011.

Penn National Chief Operating Officer Tim Wilmott said the company is still early in its ownership of M Resort, which opened in March 2009. He said Penn has scaled back restaurant hours and adjusted operations in other nongaming areas of the property in order to cut costs.

"It's going to continue to take a couple of more quarters going forward into this year and into next year for this to completely take hold," Wilmott said. "We're off to a decent start this year, but there's more to come."

Also Thursday, Penn National unveiled some of the company's plans in Ohio. It is opening the $320 million Hollywood Casino Toledo on May 29 and is planning to open the $400 million Hollywood Casino Columbus by the end of the year. The company also will spend $275 million a piece to relocate two Ohio racetracks so they won't compete with the company's casinos.

Carlino said Penn National continues to have an interest in expanding to the Strip. A few years ago, it was speculated that Penn wanted to buy The Mirage from MGM Resorts International.

"If you can point out the right property in the Strip, we remain ready, willing and able" Carlino said. "Getting the right property on the Strip ... may be one for which a lot of patience is required."

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.