Penn National Gaming reports profits down in third quarter

Penn National Gaming, which is spinning off its casino holdings into a separate publicly traded company, said quarterly profits declined due to soft gaming results in several markets.

The casino operator, which owns M Resort, said its net income for the third quarter that ended Sept. 30 was $41.3 million or 40 cents per share. A year ago the company reported net income of $46.4 million or 46 cents per share.

Analysts polled by Thomson Financial Network expected Penn National to report earnings of 46 cents per share.

In a statement, Penn National Chairman Peter Carlino said expenses incurred by the spin-off of Gaming and Leisure Properties, Inc., played a part in the earnings miss.

Carlino added “third-quarter operating results reflect a continuation of the soft regional gaming revenue trends that the industry has experienced throughout 2013.”

In the company’s east-west division, which includes M Resort, Penn National said revenues were $294.8 million, a decline of 9.2 percent. Penn National does not break out results by property.

Penn National is separating 21 of the company’s 29 casinos and racetracks into the real estate investment trust, often referred to as a REIT. M Resort will be part of the spin-off. The REIT also will take ownership of two under-construction racetrack casinos in Ohio.

Penn National would continue to operate the casinos.

REITs, by law, don’t pay federal income taxes. With real estate the primary source of income, REITs are required to distribute at least 90 percent of their taxable earnings to shareholders.

On Nov. 1, Penn National shareholders as of the close of trading Wednesday will receive one share of common stock in the real estate investment trust equal to each share of common stock held in the casino operator. Penn National will continue to be listed on Nasdaq under the symbol PENN. The real estate company, Gaming and Leisure Properties Inc., will be traded on the Nasdaq under the symbol GLPI.

Penn National announced plans for the real estate investment trust last year. The company has been gaining approvals from state regulatory agencies for the concept much of this year. Nevada gaming authorities signed off on the idea in July.

Penn National Chief Operating Officer Tim Wilmott said the company continued to “make progress” on its post-split development projects.

Penn National is renovating a casino it St. Louis is purchased last year from Caesars Entertainment Corp. and is bidding on casino licenses in Maryland, Massachusetts, and Pennsylvania. The company also is seeking approval to build a casino near San Diego in partnership with an Indian tribe.

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