Terrific quarter.  Margin improvement continues.


“Our first quarter revenue, adjusted EBITDA (inclusive of $6.4 million of pre-opening expenses), net income and diluted EPS significantly exceeded guidance primarily due to the robust growth of the East/West segment relative to our projections, which we believe was attributable to a combination of the mild East Coast winter, healthier consumer spending, and excellent operating performance by our property teams. In addition our consolidated first quarter revenue and reported adjusted EBITDA growth ... benefited from the February 3 opening of Hollywood Casino at Kansas Speedway and a lower than forecasted impact to Argosy Casino Riverside following the opening, a healthy contribution from M Resort, and ongoing progress across the organization in enhancing operating efficiencies and maintaining a disciplined approach to marketing." 


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




  • Clearly, good weather had an impact but feeling pretty good about the consumer.
  • Strength in VIP customers (+$400); continue to improve margins in lower rated customers.
  • Saw improvement in spend per visit
  • Marketing activities continue to move away from being rated to unrated. So that has an overall effect of improving the quality of rated play on a per trip basis. 
  • Rational promotional environment
  • Recovery will continue to be slow, which is reflected in 2012 guidance
  • Changes in FY 2012 guidance: Picked up an extra Q of mgmt fees from Casino Rama; moved up Columbus opening by a month; delayed Toledo opening by a month; Maryland Live opening earlier than anticipated.
  • Cannibalization proceeding better than originally thought.
  • KC property performing exactly to formula: New property starts strong for 2 months, then a slowdown for a couple of months, and then 4-6 months to climb back up to opening months performance.
  • FY 2012 guidance still has room to move up 
  • There may be a special session for MD's 6th casino license.  PENN still hopeful on Rosecroft bid.
  • Better Margins in Midwest:
    • Lawrenceburg: Downsized marine operation staff
    • Reducing marketing expenses to lower rated players
  • Increase in pre-opening expense guidance mostly due to Toledo delay
  • M Resorts: have been reducing FTEs; off to decent start but more to come
  • Baton Rouge: the market is saturated; will have significant cannibalization; prepared for lower business volumes at their property
  • Toledo will fight with the Detroit casinos and sees NE Indiana market as an opportunity. 
  • Ohio Roundtable litigation decision should happen by Memorial Day; if approved, Ohio VLTs could happen in 2014
  • Total Ohio fees: $125MM (license + relocation)
  • Debt: $2.03 billion
  • Cash: $214MM
  • Capex: $119.7MM (21.5MM maintenance capex)--doesn't includes KS JV ($19.5MM share)
  • Did not make any share purchases in 1Q
  • Certain slot manufacturers were aggressive in machine pricing i.e. Konami; given them some ship share and win/slot have done well


  • "While the most significant year-over-year growth was driven by the Company’s East/West segment, adjusted EBITDA improvements were achieved at eleven of the sixteen gaming properties we operated during the first quarter of both 2012 and 2011 and twelve of these properties improved their adjusted EBITDA margins year over year. Notably, despite new competition from the operations of the tenth license in Illinois, adjusted EBITDA margins in the Midwest segment rose on a year-over-year basis after excluding the impact of pre-opening costs."
  • Guidance:
    • Net revenue: 2Q12: $711MM (vs Street at $732MM) and FY2012: $2,873MM (vs. Street at $2,906MM) up from prior guidance of $2,786MM
    • Adjust EBITDA: 2Q12: $188MM ($195.5MM excluding pre-opening expenses) (vs Street at $195MM) and FY2012: $762MM (vs. Street at $731MM) up from prior guidance of $721MM
    • EPS:  2Q12: $0.64 (vs Street at $0.62) and FY2012: $2.48 (vs. Street at $2.27) up from prior guidance of $2.22
    • Key assumptions:
      • Pre-opening: 2012: $22MM;  2Q12: $7.6MM
      • Depreciation and amortization: 2012: $235.8MM; 2Q12: $55.6MM
      • Non-cash stock compensation: 2012: $29.4MM; 2Q12: $7.2MM
      • 2012 tax rate: 38.5%;
      • Diluted share count: 105.3 million shares for the full year
  • Hollywood Casino at Kansas Speedway: "Results during the first two months of operations exceeded our expectations and we now anticipate that our share of the construction costs will be $10 million less than the initial $155 million budget." 
  • Ohio updates: 
    • “Based on the determination of the Ohio Casino Control Commission, the $320 million Toledo facility is scheduled to open on May 29, about a month later than anticipated in our initial financial guidance for 2012. Conversely, and subject to regulatory approval, given construction progress, the $400 million Columbus property will likely open slightly earlier in the fourth quarter than initially anticipated"
    • “We recently entered into a non-binding memorandum of understanding with the State of Ohio that establishes a framework for relocating our existing racetracks in Toledo and Grove City to Dayton and Austintown (located in the Mahoning Valley), respectively, where we intend to develop new integrated racing and gaming facilities, each budgeted at approximately $275 million inclusive of license and relocation fees. Pursuant to this arrangement we would pay the state a $75 million relocation fee per facility and The Ohio Lottery Commission would retain 33.5% of VLT revenues. We remain in negotiations with the thoroughbred and harness horsemen’s organizations to determine the level of their participation in the revenue streams from our significant investments in these two new first-class racing and gaming facilities and are optimistic we will reach a resolution equitable to both parties. In addition, the memorandum of understanding restricts any other gaming facility from being located within 50 miles of our Columbus and Toledo casinos, as well as our relocated tracks, with certain exceptions"
  • "We are pursuing new gaming opportunities in Western Massachusetts, for our jointly owned racetracks in Texas, and in Maryland where we’re seeking legislative approval for slots at our Rosecroft Racetrack in Prince George’s County. The Maryland Legislature recently adjourned without taking action on a proposed gaming expansion bill, the latest version of which excluded Rosecroft as an eligible slots location. We anticipate there will be a Special Session called by Governor Martin O’Malley, during which we’ll continue to highlight the benefits to the racing industry, employment, and new tax revenue to be derived from the inclusion of Rosecroft as a potential sixth gaming location in the state." 

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