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Hard to bet against this management team. We were above the Street and they beat us. 



"We are very pleased with fourth quarter casino operating results which compare favorably to the prior year. Ten of Penn National's fifteen gaming properties grew net revenue, twelve of fifteen properties generated year-over-year improvements in Adjusted EBITDA and eleven properties successfully increased Adjusted EBITDA margins... While we are encouraged by our fourth quarter performance and early indications for an overall improvement in the economy, our current outlook and guidance for 2011 contemplates a continuation of the trends we saw in 2010 until we gain more visibility of a meaningful recovery."

- Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming


  • "$14.4 million impairment charge and lobbying costs incurred in the fourth quarter at Maryland Jockey Club which are not expected to recur."
  • "The fourth quarter and full year GAAP net loss reflects fourth quarter pre-tax impairment charges of $193.2 million, as a portion of the goodwill and other intangible assets associated with the Company's original purchase of the Aurora and Joliet facilities was deemed to be impaired based on the planned 2011 opening of Illinois' tenth gaming facility and the continued challenging operating environment in the state."
  • "During the quarter we repaid $85 million of the $145 million that was drawn on our revolving credit facility to partially fund the October 2010 acquisition of all of the outstanding debt of The M Resort LLC."
  • Development updates:
    • M Resort: "In early January, we began sending offers to stay at The M to some of our highest value players and while it is still early, the response has been encouraging. We believe we are close to completing negotiations with the property's equity holders regarding ownership and future operations and are simultaneously working with Nevada gaming regulators to secure necessary approvals for the transaction."
    • Hollywood Casino Harvey: "We are currently seeking Louisiana's fifteenth gaming license and in December provided details of our proposal to bring a first class gaming vessel to the Harvey Canal in Jefferson Parish. The project's nearly $150 million first phase investment would bring capacity for up to 1,500 slots machines, 44 table games, a parking facility and an upscale buffet and steakhouse, as well as other food and beverage offerings and a multipurpose room. As part of the proposed $155 million second phase investment, Penn National would add a 250-room hotel, an additional parking garage, a dedicated entertainment showroom and a pedestrian skywalk that would connect these amenities to the riverboat...We are prepared to fund a significant escrow account to demonstrate our unmatched financial liquidity and our genuine commitment to the project, Jefferson Parish and the State of Louisiana...The Jefferson Parish Council recently passed a resolution allowing Parish citizens to vote on whether they support the development of the proposed riverboat gaming facility if Penn National Gaming is awarded the provisional gaming license, which is expected to be granted by the Louisiana Gaming Control Board this spring."
    • Laurel Park and Pimlico: "Late in the fourth quarter, The Maryland Jockey Club reached an agreement with local horsemen to run 146 live racing days at Laurel Park and Pimlico and preserve the Preakness Stakes... Pursuant to the agreement, these tracks, which have recently generated significant losses, are expected to receive financial subsidies from the state and horsemen, saving jobs and significantly reducing future operating losses. Longer-term, we continue to believe that bringing a video lottery terminal (VLT) operation to Laurel Park would guarantee the preservation of Maryland's rich racing heritage and the existing jobs and other economic benefits associated with the racing industry."
  • Guidance:
    • Net revenues: $2,688.3MM in 2011 and $657.1MM in 1Q
    • Adjusted EBITDA: $662.9MM in 2011 and $169.6MM in 1Q11
    • EPS: $1.48 in 2011 and $0.40 in 1Q11
    • Assumes M Resort purchase closes in early 3Q2011
    • "Excludes the impact of the announced fourth quarter opening of the Anne Arundel, Maryland slots facility pending additional clarity of the exact opening date"
    • "September opening of the tenth gaming facility in Illinois"
    • "December opening for a competing facility in the Baton Rouge, Louisiana market"
    • "Expiration of the Casino Rama Management agreement and related amortization in July of 2011, although we are in negotiations for an extension"
    • "Full year of results for Beulah Park"
    • "$7.0 million of pre-opening expenses"
    • "Excludes any additional gain from insurance proceeds related to Empress Casino Hotel fire"
    • D&A: $242.2MM in 2011 and $55MM in 1Q11
    • Non cash stock comp: $25.2MM in 2011 and $6.3MM in 1Q11
    • Tax rate: 45%
    • Diluted share count: 108MM


  • January 2011 is off to a rocky start due to weather
  • Seeing a stabilization in their business.  Seeing flat spending behaviors still. Forecast for 2011 is more of the same of what they saw in 2010.


  • Why is EBITDA above consensus and EPS below for 2011 guidance?
    • Not sure.  103.2MM of interest expense and stock comp is in-line with last year.
  • M Resort - need to sign a purchase agreement with the current owners and get through regulatory approvals;
  • Moving their tracks in Ohio? Governor is new and they aren't sure what he's thinking. Given the budget issues they have PENN believes that they may be inclined to generating more revenues from their tracks by relocating to more optimal locations. Already expect competition for Lawrenceburg in late 2012 and 2013.  Land-based casino in Cincinnati will be more a competitive threat than River Downs.
  • Perryville - Feel like they are running within expectations. They are working on building their database. Expect to see continued growth in 1Q unless weather continues to impact them.
  • Promotional and marketing environment? Seems very stable and rational.
  • Weather impact? They have factored the impact into the guidance but they aren't going to elaborate in the exact impact. When weather is good, the business has been good.
  • Cash: $246.4MM ($78MM in unrestricted sub)
  • Debt: $71Mm on R/C; $1,589MM of total bank debt. Total debt $2,171MM
  • Cap interest: $1.1MM
  • Capex timing: $77.7mm (18.2MM of maintenance) in the Q. 1Q: 70.2MM of new and 26.9MM in 1Q
  • Capex 2011: $289MMM in new  and $88.5MM in maintenance, plus Kansas Speedway capex for a total of 449.2MM
  • $7MM of pre-opening is for Toledo and Columbus mostly Toledo. There are also some $2MM of Kansas speedway pre-opening but its in JVs.
  • Expenses: still room for improvement
  • Maryland status quo not sustainable for long-term
  • 2011 corp expense is roughly 78MM
  • Slot spending: 60% of maintenance capital; still refreshing 1/7th of the floor annually; nothing changed in outlook
  • Feb 9: LA gaming board meets; Feb 17: final decision on 15th license
  • In general, states are considering gaming expansion plans more than raising taxes as a solution to the budget deficits
  • Doesn't see Harrisburg winning in Category 3 license but Foxwoods license may go there. No time frame for Cat 3 license.
  • Vegas outlook: Vegas has a future but way too much capacity. Waiting for another opportunity
  • Atlantic City outlook: gloomy; Revel will cannibalize the market; couple of more years of contraction
  • More racino acquisitions? More focused on location rather than the property itself
  • M Resorts: has positive operating income