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Penn National grows quarterly revenues, but profits decline

M Resort owner Penn National Gaming said Thursday it grew revenues more than 8 percent in the first quarter, but saw year-over-year declines in net income and earnings per share.

The regional casino giant, which announced plans recently to build an Indian casino near San Diego, said its overall revenues for the quarter that ended March 31 were $798.2 million, an increase of 8.4 percent compared with the first quarter of 2012.

However, net income was $65.3 million, down from $78.6 million from a year ago. Penn National’s earnings per share were 63 cents, down from 74 cents per share in the 2012 first quarter.

“Despite the first-quarter challenges, operating results at Penn National’s East/West and Southern Plains segments exceeded the results contemplated in our guidance. While the Midwest segment results met our expectations,” company Chairman Peter Carlino said in a statement.

Revenues from the East/West segment, which included results from M Resort in Henderson, declined 14.5 percent to $317 million.

Wyomissing, Pa.-based Penn National operates 29 casinos — and racetrack casinos in 19 states and provinces. Analysts said Penn National continues to look at expansion opportunities, such as a $360 million hotel-casino project with the Jamul Indian Village of San Diego on tribal land roughly 20 miles east of downtown San Diego.

“We believe Penn continues to kick the tires on transactions and other growth opportunities,” Credit Suisse gaming analyst Joel Simkins told investors. “The recently announced tribal gaming management contract provides evidence of this effort.”

During a conference call with analysts and investors, Penn National President Tim Wilmott said the San Diego Indian gaming project fits the company’s profile, and the casino operator would look at similar opportunities.

“The pickings around American Indian tribal management are very slim, and this was a unique opportunity in a unique market,” Wilmott said. “If there are other like deals out there, we’ll continue to talk with certain parties about this.”

Penn National said it was in talks with the Ohio State Racing Commission to reduce seating capacity at its two slot machinelike video lottery terminal casinos that are under construction with two racetracks the company is building in the state.

Carlino said the company was prepared to halt the projects if Ohio racing officials require “extraneous expenditures on portions of the facility that detract from this objective.”

Penn National opened two of Ohio’s four full-scale casinos last year. Analysts said the company’s initial results from the Hollywood Toledo and Holly­wood Columbus had not met expectations.

“We view Penn’s new disclosure that it is in active dialogue with the Ohio State Racing commission to review scope and timing of the two video lottery terminal projects there as prudent given a lower than expected ramp in overall Ohio slot machine gross gaming revenue and a means to achieve a more satisfactory (cash flow) on its investment there,” JP Morgan gaming analyst Joe Greff told investors.

Shares of Penn Gaming gained $1.22, or 2.15 percent, to close on Thursday at $57.92 on the Nasdaq. Volume was 1.29 million shares, about twice the normal volume.

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

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