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WYOMISSING, PA-Penn National Gaming Inc. reported a drop in earnings, but a rise in revenue for the quarter ended June 30. The locally based casino and racetrack owner released its financial report before the Nasdaq opened on July 26, but elected not to host a conference call, citing its agreement to be acquired by affiliates of Fortress Investment Group LLC and Centerbridge Partners LP.
Earnings for the quarter fell to $38.3 million, down from $42.7 million for the same quarter a year ago. Revenues, however, rose 16% from $537.8 million to a little more than $625.9 million. The company incurred costs of $2.2 million related to the pending merger.
In light of second-quarter performance, management now predicts fiscal 2007 earnings from continuing operations to reach $163.9 million, versus a previous estimate of $165.5 million. Anticipated revenue of nearly $2.5 billion remains unchanged.
Competitive pressures in Joliet, IL, "amplified by the incremental tax on our Chicagoland facilities," were cited by Peter Carlino, chairman and CEO, in a statement, along with "negative year-over-year comparisons in Baton Rouge, as this market continues to experience post-hurricane stabilization." He credited positive operating trends "at many of our existing properties" and the portfolio's regional diversity with offsetting those drawbacks.
During second quarter, the company opened its expansion at Charles Town, WV, which takes the total slot count to 5,000. However, citizens in the county voted against approval of table games at this facility, and Carlino says Penn National cannot propose another referendum on table games for at least two years.
Early in the quarter, it also added Zia Park Racetrack and its Black Gold Casino in Hobbs, NM to the portfolio, which adds 750 slot machines plus racing revenue. Plans progress, he says, for development of a $250-million resort in Cherokee County, KS, which will have a 250-room hotel, 1,200 slot machines and 40 table games.
In the statement, Carlino reiterated the board's determination that the $67-a-share offer by the Fortress/Centerbridge partnership is in the best interest of shareholders. The transaction is valued at $8.9 billion, including $2.8 billion in assumed debt, and is expected to close within the next 12 to 15 months.
By midday following release of second-quarter results--a day in which all major exchanges were experiencing a major sell-off--shares of Penn were trading on the Nasdaq at $55.80. The 52-week trading ranges from a low of $29.48 a share to $63.68 a share.
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