WYOMISSING, Pennsylvania -- (PRESS RELEASE) -- Penn National Gaming, Inc. (PENN: Nasdaq) today reported second
quarter operating results for the period ended June 30, 2007, as
summarized below.
Summary of Second Quarter Results
----------------------------------------------------------------------
Three Months Ended
(in millions, except per share data) June 30,
----------------------------------------------------------------------
2007
Guidance
2007 (2) 2006
----------------------------------------------------------------------
Net revenues $ 625.2 $ 626.0 $ 537.8
----------------------------------------------------------------------
EBITDA (1) 172.8 167.9 155.1
----------------------------------------------------------------------
Less depreciation and amortization, gain/loss
on disposal of assets, interest expense -
net, income taxes, charge for stock
compensation and other expenses (134.5) (127.7) (112.4)
----------------------------------------------------------------------
Net income $ 38.3 $ 40.2 $ 42.7
----------------------------------------------------------------------
----------------------------------------------------------------------
Diluted earnings per share $ 0.43 $ 0.46 $ 0.49
----------------------------------------------------------------------
(1) EBITDA is income from operations, excluding charges for stock
compensation, depreciation and amortization, and gain or loss on
disposal of assets, and is inclusive of earnings from joint venture. A
reconciliation of net income per accounting principles generally
accepted in the United States of America ("GAAP") to EBITDA, as well
as income from operations per GAAP to EBITDA is included in the
accompanying financial schedules.
(2) The figures in this column present the guidance Penn National
Gaming provided on April 26, 2007 for the quarter ended June 30, 2007.
Review of Second Quarter 2007 Results vs. Guidance and Second Quarter
2006 Results
----------------------------------------------------------------------
Three Months Ended
June 30,
-------------------------------
2007
Guidance
2007 Actual (1) 2006 Actual
----------------------------------------------------------------------
Diluted earnings per share $ 0.43 $ 0.46 $ 0.49
----------------------------------------------------------------------
Merger-related costs 0.03 - -
----------------------------------------------------------------------
Currency translation loss 0.03 - -
----------------------------------------------------------------------
Diluted earnings per share before
merger-related costs and currency
translation loss $ 0.49 $ 0.46 $ 0.49
----------------------------------------------------------------------
(1) The figures in this column present the guidance Penn National
Gaming provided on April 26, 2007 for the quarter ended June 30, 2007.
In the three months ended June 30, 2007, the Company recorded
after-tax merger-related costs of $2.2 million or $0.03 per diluted
share related to the previously announced merger with certain funds
managed by affiliates of Fortress Investment Group LLC and
Centerbridge Partners, L.P.
In the three months ended June 30, 2007, the Company recorded a
non-cash pre-tax currency translation loss of $3.8 million ($2.4
million, net of taxes, or $0.03 per diluted share) related to Canadian
currency fluctuations for FIN 48 estimated tax reserves.
Commenting on the results, Peter M. Carlino, Chairman and Chief
Executive Officer of Penn National Gaming said, "Penn National's
record second quarter EBITDA reflects positive operating trends at
many of our existing properties -- some of which are benefiting from
recent capital investments, contributions from our two Gulf Coast
facilities, which were closed or provided minimal EBITDA a year ago,
and a partial quarter's contribution from Zia Park Racetrack and its
Black Gold Casino, which we acquired in mid-April. The overall
strength of our portfolio of regionally diversified gaming properties
offset competitive pressures in Joliet, which were amplified by the
incremental Illinois tax on our Chicagoland facilities, negative
year-over-year comparisons in Baton Rouge, as this market continues to
experience post-hurricane stabilization, the impact of increased
insurance costs, expenses related to our support of local referenda in
Kansas and West Virginia and costs associated with the previously
announced merger with certain funds managed by affiliates of Fortress
Investment Group LLC and Centerbridge Partners, L.P.
"Early in the quarter, Argosy Casino Riverside opened its $58
million, nine-story, 258-room hotel and spa, which features expanded
ballroom, function and meeting space and was completed below budget.
The complex, located a few minutes from downtown Kansas City, is
ramping up and attracting corporate business and private parties. In
terms of occupancy rates, we expect to continue to see improvement, as
occupancy has increased in the hotel every month since opening. In
West Virginia, we opened our latest expansion at Charles Town in the
second quarter, bringing the total slot count at the property to
approximately 5,000 units. This has resulted in meaningful increases
in our slot business over the weekend periods and during special
events. We expect this trend to continue in the same manner that our
previous expansions at the property have driven incremental revenue.
"In June, citizens in Jefferson County West Virginia, voted
against approving table games at Charles Town Races and Slots.
According to the West Virginia Lottery Racetrack Table Games Act,
Charles Town will have to wait at least two years before it can
propose another table game referendum vote. While we remain excited
about the long-term growth prospects for the facility, and have
continued construction of a 153-room hotel, the result of the
referendum has caused us to re-evaluate our planned next phase of
expansion at Charles Town and to postpone our plans for additional
floor space to accommodate table games.
"In terms of new acquisitions for the Company, early in the second
quarter, Penn National was delighted to add Zia Park Racetrack and its
Black Gold Casino to its diverse portfolio of gaming and racing
assets. This property, with 750 slot machines, represents the
Company's fourth integrated racing and gaming facility and contributed
approximately $6.5 million of EBITDA to our 2007 second quarter
results. In addition, the Company recently announced the purchase of
the Sanford-Orlando Kennel Club, which is situated on 26 acres in
Orlando, Florida, and offers year-round greyhound racing. Sanford is a
relatively small pari-mutuel operation, which we believe may have
future opportunities for expanded gaming. Along with the purchase, we
also secured a right of first refusal to acquire the Sarasota Kennel
Club. Sarasota runs year-round greyhound meets and has a poker room.
As structured, the economics of the transaction are attractive given
the upside of the opportunity and the fact that Sanford-Orlando Kennel
Club is cash flow positive. The purchase of Sanford-Orlando Kennel
Club is expected to close in the 2007 fourth quarter and is subject to
several conditions, including approval by Florida's Department of
Business and Professional Regulation.
"We also continue to make progress with other new growth
opportunities. Notably, during the second quarter, we moved forward
with our plans to develop a hotel casino resort in Cherokee County in
southeastern Kansas. In June, citizens there overwhelmingly approved a
referendum to authorize gaming in the County. In July, we appeared
before the Cherokee County Commissioners to provide details of our
proposed $250 million destination resort, which would include an
eleven story, 250-room hotel with 13 luxury suites, 1,200 slot
machines, 40 table games, a spa, fitness center, convention space and
other amenities. An endorsement of the County Commissioners is a
prerequisite in submitting an application to the Kansas Lottery
Commission for consideration as a Lottery Gaming Facility Manager. On
July 23, the Cherokee County Commissioners voted unanimously in favor
of an Exclusive Endorsement of Penn National's proposed project and,
in a separate motion, voted unanimously to enter into a predevelopment
agreement with the Company. Accordingly, we expect to submit our
completed application to the Lottery Commission by the State-imposed
deadline of September 6, 2007.
"Penn National continues to benefit from the diversification
afforded by our portfolio of regional gaming properties, well-planned
expansion projects and select, economically sound acquisitions. In
2008, we expect to complete three significant projects, including the
Hollywood Casino racing and gaming facility at Penn National Race
Course, the permanent Hollywood Slots at Bangor facility, which will
be called the Hollywood Slots Hotel and Raceway, and much needed
additional parking at Lawrenceburg. With the exception of the
postponement of further gaming floor space expansion at Charles Town,
all of the Company's development and expansion projects remain on
track with our previously disclosed timetables and budgets.
"With the guidance and support of our Board of Directors, Penn
National's management team has consistently demonstrated its
commitment to generate value for our shareholders and, in June, the
Company announced that it had entered into a definitive agreement to
be acquired by certain funds managed by affiliates of Fortress
Investment Group LLC (FIG: NYSE) and Centerbridge Partners LP whereby
Penn National Gaming shareholders will receive $67.00 in cash for each
outstanding Penn National share. The Board of Directors of Penn
National Gaming has determined that the merger is fair to, and in the
best interests of, Penn National and its shareholders, and recommends
that Penn National Gaming shareholders approve the merger. The
transaction is expected to be completed in approximately eleven to
fifteen months, and is subject to shareholder and regulatory
approvals, as well as satisfaction of certain customary conditions.
Penn National Gaming will file a preliminary proxy statement with the
Securities and Exchange Commission shortly that will provide
additional information on the transaction. We look forward to working
with Fortress and Centerbridge to ensure the ongoing competitiveness
of our facilities and deliver new entertainment experiences to
consumers in the markets where we have development projects, while
adhering to our long-term strategies and business model."
Development and Expansion Projects
The table below outlines Penn National Gaming's current pipeline of
new or expanded facilities:
----------------------------------------------------------------------
Amount
Expended
New Planned through Expected
Gaming Total June 30, Opening
Project/Scope Positions Budget 2007 Date
----------------------------------------------------------------------
(in millions)
----------------------------------------------------------------------
Charles Town (WV) -
Construction of 153-room 3rd Quarter
hotel. - $ 21 $ 2 2008
----------------------------------------------------------------------
----------------------------------------------------------------------
Argosy Casino Lawrenceburg (IN)
- New two-level 270,000 square
foot gaming barge, an
additional 1,500 space parking Parking
garage and road and facility -
infrastructure improvements. 2nd
The gaming barge will allow Quarter
4,000 positions on one level, 2008
and another 400 positions will Gaming
be added to the second level, facility -
along with restaurants and 2nd
other amenities on the gaming Quarter
barge. 1,600 $ 310 $ 81 2009
----------------------------------------------------------------------
----------------------------------------------------------------------
Hollywood Casino at Penn
National Race Course (PA) -
Building an integrated racing
and gaming facility. Budget
includes a $50 million license
fee and the purchase of an
initial 2,000 slot machines
(with the
building size sufficient to add
1,000 additional machines), a
2,500 space parking garage and 1st Quarter
several restaurants. 2,000 $ 310 $ 148 2008
----------------------------------------------------------------------
----------------------------------------------------------------------
Hollywood Slots Hotel and
Raceway (ME) - Building a
permanent facility, which will
include a 1,500 slot facility
(1,000 slot machines at
opening), a 152-room hotel,
1,500 space parking garage and 3rd Quarter
several restaurants. 525 $ 131 $ 28 2008
----------------------------------------------------------------------
Financial Guidance
The following table sets forth current guidance targets for
continuing operations for the 2007 third quarter and full year, based
on the following assumptions:
- Increased competition related to new facility openings in the
St. Louis market in the fourth quarter of 2007;
- Pre-opening costs at Hollywood Casino at Penn National Race
Course of $2.5 million in the third quarter and $9.8 million
for full year 2007;
- There will be a reduction in property insurance and related
costs, with an annualized benefit of $8.2 million beginning in
August;
- The 3% tax surcharge continues to be expensed and paid into
escrow at Hollywood Casino Aurora and Empress Casino Joliet;
- The Illinois "hold harmless" tax minimum guarantee is assumed
to continue in the third and fourth quarter;
- Penn National Gaming is currently required by the Illinois
Gaming Board to reach a definitive sales agreement for the
Empress Casino Hotel by June 30, 2008. However, the results of
Empress Casino Hotel remain included in continuing operations
as the Company assumes that the accounting standards for
treating properties as "assets held for sale" will not be met
in 2007; as such, the results from the property are included
in our 2007 third quarter and full year guidance;
- Sanford-Orlando Kennel Club will close in the fourth quarter
of 2007, with no significant financial impact;
- Depreciation and amortization are projected to increase in the
third quarter by $6.1 million and the full year 2007 by $22.9
million over the comparable prior year periods;
- Full year 2007 results will reflect a pre-tax non-cash charge
for stock compensation of $26.1 million ($18.9 million, net of
taxes, or $0.22 per diluted share);
- The effective tax rate for federal, state and local income
taxes for the third quarter and full year 2007 will be 45.0%
and 45.5%, respectively, reflecting the impact of better
operating results in jurisdictions with higher state income
tax, material amounts of non-deductible lobbying expenses,
non-deductible merger-related costs and FIN 48 costs;
- The Company will have approximately 87.9 million diluted
shares outstanding as of December 31, 2007; and,
- There will be no material changes in economic conditions,
applicable legislation or regulation, world events, weather,
or other circumstances beyond our control that may adversely
affect the Company's results of operations.
Financial Guidance (continued)
----------------------------------------------------------------------
(in millions, except
per share data) Three Months Ended Full Year Ended
----------------------------------------------------------------------
September September 2007 2007
30, 2007 30, 2006 Revised Prior 2006
Guidance Actual Guidance Guidance Actual
----------------------------------------------------------------------
Net revenues $ 640.6 $ 586.1 $2,473.3 $2,478.0 $2,244.5
----------------------------------------------------------------------
EBITDA (1) 178.6 162.8 676.2 668.6 629.2
----------------------------------------------------------------------
Less depreciation
and amortization,
gain/loss on
disposal of assets,
interest expense -
net, income taxes,
charge for stock
compensation and
other expenses (131.9) (122.4) (510.1) (503.1) (469.4)
----------------------------------------------------------------------
Net income from
continuing
operations before
merger-related
costs, charge for
early
extinguishment of
debt, hurricane and
goodwill impairment 46.7 40.4 166.1 165.5 159.8
----------------------------------------------------------------------
Merger-related costs - - (2.2) - -
----------------------------------------------------------------------
Charge for early
extinguishment of
debt, net of tax - - - - (6.5)
----------------------------------------------------------------------
Hurricane, net of
tax - - - - 81.8
----------------------------------------------------------------------
Goodwill impairment,
net of tax - - - - (22.0)
----------------------------------------------------------------------
Net income from
continuing
operations GAAP $ 46.7 $ 40.4 $ 163.9 $ 165.5 $ 213.1
----------------------------------------------------------------------
Diluted earnings per
share before
merger-related
costs, charge for
early
extinguishment of
debt, hurricane and
goodwill impairment $ 0.53 $ 0.47 $ 1.89 $ 1.89 $ 1.84
----------------------------------------------------------------------
EPS impact of
merger-related
costs, charge for
early
extinguishment of
debt, hurricane and
goodwill impairment - - (0.03) - 0.62
----------------------------------------------------------------------
Diluted earnings per
share from
continuing
operations $ 0.53 $ 0.47 $ 1.86 $ 1.89 $ 2.46
----------------------------------------------------------------------
(1) EBITDA is income from operations excluding charges for stock
compensation, depreciation and amortization, gain or loss on disposal
of assets, hurricane and goodwill impairment, and is inclusive of
earnings from joint venture.
2006 EBITDA to 2007 EBITDA Guidance Reconciliation
----------------------------------------------------------------------
Three Months Ended Full Year Ended
(in millions) September 30, December 31,
----------------------------------------------------------------------
----------------------------------------------------------------------
2006 EBITDA Actual (1) $ 162.8 $ 629.2
----------------------------------------------------------------------
----------------------------------------------------------------------
Existing Operations/Corporate 9.2 52.1
----------------------------------------------------------------------
Zia Park 7.8 22.0
----------------------------------------------------------------------
Insurance Costs 1.3 (10.7)
----------------------------------------------------------------------
Pre-Opening Expenses (2.5) (9.8)
----------------------------------------------------------------------
Incremental Illinois 3% Tax - (6.6)
----------------------------------------------------------------------
----------------------------------------------------------------------
2007 EBITDA Guidance (1) $ 178.6 $ 676.2
----------------------------------------------------------------------
(1) EBITDA is income from operations excluding charges for stock
compensation, depreciation and amortization, gain or loss on disposal
of assets, hurricane and goodwill impairment, and is inclusive of
earnings from joint venture.
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Property Information - Operations
(in thousands) (unaudited)
NET REVENUES EBITDA (1)
Three Months Ended Three Months Ended
June 30, June 30,
2007 2006 2007 2006
--------- --------- --------- ---------
Charles Town Entertainment
Complex $ 129,140 $ 122,452 $ 37,767 $ 35,405
Argosy Casino Lawrenceburg 121,236 114,994 40,820 37,982
Hollywood Casino Aurora 64,052 60,703 20,593 20,120
Empress Casino Hotel 58,493 59,736 14,132 17,263
Argosy Casino Riverside 43,117 37,607 14,072 12,443
Hollywood Casino Baton Rouge 34,041 35,447 14,347 15,533
Argosy Casino Alton 30,366 28,205 8,627 7,692
Hollywood Casino Tunica 26,375 26,899 6,217 6,974
Hollywood Casino Bay St. Louis
(2) 25,466 (22) 5,222 -
Argosy Casino Sioux City 13,835 13,196 4,671 4,251
Boomtown Biloxi (2) 22,671 1,010 7,265 262
Hollywood Slots at Bangor 11,985 10,104 3,622 2,784
Bullwhackers 7,483 7,036 976 916
Zia Park (3) 16,913 - 6,490 -
Casino Rama management service
contract 4,341 4,921 3,984 4,564
Pennsylvania Racing Operations 13,530 13,073 79 553
Raceway Park 2,200 2,412 (195) (87)
Earnings from Pennwood Racing,
Inc. - - 325 574
Corporate overhead - - (16,256) (12,095)
--------- --------- --------- ---------
Total $ 625,244 $ 537,773 $ 172,758 $ 155,134
========= ========= ========= =========
NET REVENUES EBITDA (1)
Six Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
---------- ---------- --------- ---------
Charles Town Entertainment
Complex $ 248,736 $ 239,370 $ 74,552 $ 69,554
Argosy Casino Lawrenceburg 243,094 235,157 82,526 78,741
Hollywood Casino Aurora 128,552 122,453 41,264 41,519
Empress Casino Hotel 118,106 120,052 27,378 34,784
Argosy Casino Riverside 84,832 76,602 27,138 25,601
Hollywood Casino Baton Rouge 68,922 78,567 28,978 36,602
Argosy Casino Alton 61,229 57,724 17,417 15,875
Hollywood Casino Tunica 52,971 55,057 13,025 14,900
Hollywood Casino Bay St.
Louis (2) 48,950 - 9,648 -
Argosy Casino Sioux City 27,952 27,247 9,300 8,969
Boomtown Biloxi (2) 46,738 1,010 15,347 262
Hollywood Slots at Bangor 22,961 18,814 6,731 4,978
Bullwhackers 14,614 13,622 1,761 1,542
Zia Park (3) 16,913 - 6,490 -
Casino Rama management
service contract 7,815 9,308 7,172 8,632
Pennsylvania Racing
Operations 25,384 26,160 (349) 1,470
Raceway Park 3,733 4,432 (373) (66)
Earnings from Pennwood
Racing, Inc. - - 365 987
Corporate overhead - - (27,913) (24,401)
---------- ---------- --------- ---------
Total $1,221,502 $1,085,575 $ 340,457 $ 319,949
========== ========== ========= =========
(1) EBITDA is income from operations excluding charges for stock
compensation, depreciation and amortization, and gain or loss on
disposal of assets, and is inclusive of earnings from joint venture. A
reconciliation of net income per accounting principles generally
accepted in the United States of America ("GAAP") to EBITDA, as well
as income from operations per GAAP to EBITDA is included in the
accompanying financial schedules.
(2) Hollywood Casino Bay St. Louis and Boomtown Biloxi were closed
effective August 28, 2005 due to hurricane damage. Boomtown Biloxi
reopened on June 29, 2006 and Hollywood Casino Bay St. Louis reopened
on August 31, 2006.
(3) Reflects results since the April 16, 2007 acquisition
effective date.
Reconciliation of EBITDA to Net Income (GAAP)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
(in thousands) (unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
--------- --------- --------- ---------
EBITDA $172,758 $155,134 $340,457 $319,949
Earnings from joint venture (325) (574) (365) (987)
Depreciation and amortization (37,622) (27,728) (72,980) (57,446)
Charge for stock compensation (6,256) (5,493) (12,854) (10,404)
Gain (loss) on disposals (135) 498 (1,058) (374)
--------- --------- --------- ---------
Income from operations $128,420 $121,837 $253,200 $250,738
Interest expense (51,302) (47,766) (99,649) (96,195)
Interest income 1,289 867 2,165 1,770
Earnings from joint venture 325 574 365 987
Other (5,476) 184 (5,704) 74
Charge for early extinguishment
of debt - - - (10,022)
Taxes on income (34,957) (33,001) (69,137) (62,674)
--------- --------- --------- ---------
Net income $ 38,299 $ 42,695 $ 81,240 $ 84,678
========= ========= ========= =========
Reconciliation of Income from Operations (GAAP) to EBITDA
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Property Information Including Corporate Overhead
(in thousands) (unaudited)
Three Months Ended June 30, 2007
Income Charge for Depreciation
from stock and
operations compensation amortization
-------------------------------------
Charles Town Entertainment
Complex $ 31,295 $ - $ 6,472
Argosy Casino Lawrenceburg 36,549 - 4,292
Hollywood Casino Aurora 18,409 - 2,184
Empress Casino Hotel 11,083 - 3,049
Argosy Casino Riverside 10,388 - 3,684
Hollywood Casino Baton Rouge 12,164 - 2,120
Argosy Casino Alton 6,538 - 2,089
Hollywood Casino Tunica 4,363 - 1,868
Hollywood Casino Bay St. Louis
(1) 2,024 - 3,198
Argosy Casino Sioux City 3,556 - 1,115
Boomtown Biloxi (1) 4,570 - 2,722
Hollywood Slots at Bangor 2,556 - 1,066
Bullwhackers 448 - 528
Zia Park (2) 5,460 - 1,030
Casino Rama management service
contract 3,984 - -
Pennsylvania Racing Operations (357) - 408
Raceway Park (274) - 79
Earnings from Pennwood Racing,
Inc. - - -
Corporate overhead (24,336) 6,256 1,718
-------------------------------------
Total $ 128,420 $ 6,256 $ 37,622
=====================================
(Gain)/loss Earnings
on disposal from
of joint
assets venture EBITDA
-------------------------------------
Charles Town Entertainment
Complex $ - $ - $ 37,767
Argosy Casino Lawrenceburg (21) - 40,820
Hollywood Casino Aurora - - 20,593
Empress Casino Hotel - - 14,132
Argosy Casino Riverside - - 14,072
Hollywood Casino Baton Rouge 63 - 14,347
Argosy Casino Alton - - 8,627
Hollywood Casino Tunica (14) - 6,217
Hollywood Casino Bay St. Louis
(1) - - 5,222
Argosy Casino Sioux City - - 4,671
Boomtown Biloxi (1) (27) - 7,265
Hollywood Slots at Bangor - - 3,622
Bullwhackers - - 976
Zia Park (2) - - 6,490
Casino Rama management service
contract - - 3,984
Pennsylvania Racing Operations 28 - 79
Raceway Park - - (195)
Earnings from Pennwood Racing,
Inc. - 325 325
Corporate overhead 106 - (16,256)
-------------------------------------
Total $ 135 $ 325 $ 172,758
=====================================
Three Months Ended June 30, 2006
Income Charge for Depreciation
from stock and
operations compensation amortization
-------------------------------------
Charles Town Entertainment
Complex $ 30,894 $ - $ 4,871
Argosy Casino Lawrenceburg 33,724 - 4,256
Hollywood Casino Aurora 18,029 - 2,259
Empress Casino Hotel 14,478 - 2,794
Argosy Casino Riverside 9,686 - 2,759
Hollywood Casino Baton Rouge 13,455 - 2,067
Argosy Casino Alton 5,464 - 2,228
Hollywood Casino Tunica 5,198 - 1,775
Hollywood Casino Bay St. Louis
(1) (218) - 197
Argosy Casino Sioux City 3,161 - 1,090
Boomtown Biloxi (1) 262 - -
Hollywood Slots at Bangor 1,797 - 987
Bullwhackers 386 - 524
Casino Rama management service
contract 4,564 - -
Pennsylvania Racing Operations 204 - 349
Raceway Park (200) - 113
Earnings from Pennwood Racing,
Inc. - - -
Corporate overhead (19,047) 5,493 1,459
-------------------------------------
Total $ 121,837 $ 5,493 $ 27,728
=====================================
Earnings
(Gain)/loss from
on disposal of joint
assets venture EBITDA
-------------------------------------
Charles Town Entertainment
Complex $ (360) $ - $ 35,405
Argosy Casino Lawrenceburg 2 - 37,982
Hollywood Casino Aurora (168) - 20,120
Empress Casino Hotel (9) - 17,263
Argosy Casino Riverside (2) - 12,443
Hollywood Casino Baton Rouge 11 - 15,533
Argosy Casino Alton - - 7,692
Hollywood Casino Tunica 1 - 6,974
Hollywood Casino Bay St. Louis
(1) 21 - -
Argosy Casino Sioux City - - 4,251
Boomtown Biloxi (1) - - 262
Hollywood Slots at Bangor - - 2,784
Bullwhackers 6 - 916
Casino Rama management service
contract - - 4,564
Pennsylvania Racing Operations - - 553
Raceway Park - - (87)
Earnings from Pennwood Racing,
Inc. - 574 574
Corporate overhead - - (12,095)
-------------------------------------
Total $ (498) $ 574 $ 155,134
=====================================
(1) Income from operations and EBITDA for the three months ended
June 30, 2006 reflects the closure of Hollywood Casino Bay St. Louis
and Boomtown Biloxi, which incurred extensive hurricane damage in
August 2005. Boomtown Biloxi reopened on June 29, 2006 and Hollywood
Casino Bay St. Louis reopened on August 31, 2006.
(2) Reflects results since the April 16, 2007 acquisition
effective date.
Reconciliation of Income from Operations (GAAP) to EBITDA
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Property Information Including Corporate Overhead
(in thousands) (unaudited)
Six Months Ended June 30, 2007
Income
from Charge for Depreciation
continuing stock and
operations compensation amortization
-------------------------------------
Charles Town Entertainment
Complex $ 62,018 $ - $12,534
Argosy Casino Lawrenceburg 73,963 - 8,584
Hollywood Casino Aurora 36,741 - 4,523
Empress Casino Hotel 21,684 - 6,081
Argosy Casino Riverside 20,395 - 6,817
Hollywood Casino Baton Rouge 24,751 - 4,176
Argosy Casino Alton 13,294 - 4,122
Hollywood Casino Tunica 9,367 - 3,692
Hollywood Casino Bay St. Louis
(1) 3,263 - 6,348
Argosy Casino Sioux City 7,078 - 2,222
Boomtown Biloxi (1) 10,128 - 5,246
Hollywood Slots at Bangor 4,614 - 2,117
Bullwhackers 584 - 1,159
Zia Park (2) 5,460 - 1,030
Casino Rama management service
contract 7,172 - -
Pennsylvania Racing Operations (2,472) - 775
Raceway Park (521) - 150
Earnings from Pennwood Racing,
Inc. - - -
Corporate overhead (44,319) 12,854 3,404
-------------------------------------
Total $253,200 $12,854 $72,980
=====================================
Earnings
(Gain)/loss from
on disposal of joint
assets venture EBITDA
-------------------------------------
Charles Town Entertainment
Complex $ - $ - $ 74,552
Argosy Casino Lawrenceburg (21) - 82,526
Hollywood Casino Aurora - - 41,264
Empress Casino Hotel (387) - 27,378
Argosy Casino Riverside (74) - 27,138
Hollywood Casino Baton Rouge 51 - 28,978
Argosy Casino Alton 1 - 17,417
Hollywood Casino Tunica (34) - 13,025
Hollywood Casino Bay St. Louis
(1) 37 - 9,648
Argosy Casino Sioux City - - 9,300
Boomtown Biloxi (1) (27) - 15,347
Hollywood Slots at Bangor - - 6,731
Bullwhackers 18 - 1,761
Zia Park (2) - - 6,490
Casino Rama management service
contract - - 7,172
Pennsylvania Racing Operations 1,348 - (349)
Raceway Park (2) - (373)
Earnings from Pennwood Racing,
Inc. - 365 365
Corporate overhead 148 - (27,913)
-------------------------------------
Total $ 1,058 $ 365 $ 340,457
=====================================
Six Months Ended June 30, 2006
Income
from Charge for Depreciation
continuing stock and
operations compensation amortization
-------------------------------------
Charles Town Entertainment
Complex $ 60,384 $ - $ 9,528
Argosy Casino Lawrenceburg 69,870 - 8,891
Hollywood Casino Aurora 37,244 - 4,443
Empress Casino Hotel 27,877 - 6,907
Argosy Casino Riverside 19,920 - 5,646
Hollywood Casino Baton Rouge 31,572 - 4,177
Argosy Casino Alton 10,905 - 4,970
Hollywood Casino Tunica 11,029 - 3,869
Hollywood Casino Bay St. Louis
(1) (374) - 353
Argosy Casino Sioux City 6,988 - 1,978
Boomtown Biloxi (1) 262 - -
Hollywood Slots at Bangor 3,130 - 1,848
Bullwhackers 492 - 1,044
Casino Rama management service
contract 8,632 - -
Pennsylvania Racing Operations 849 - 621
Raceway Park (179) - 113
Earnings from Pennwood Racing,
Inc. - - -
Corporate overhead (37,863) 10,404 3,058
-------------------------------------
Total $ 250,738 $ 10,404 $ 57,446
=====================================
Earnings
(Gain)/loss from
on disposal of joint
assets venture EBITDA
-------------------------------------
Charles Town Entertainment
Complex $ (358) $ - $ 69,554
Argosy Casino Lawrenceburg (20) - 78,741
Hollywood Casino Aurora (168) - 41,519
Empress Casino Hotel - - 34,784
Argosy Casino Riverside 35 - 25,601
Hollywood Casino Baton Rouge 853 - 36,602
Argosy Casino Alton - - 15,875
Hollywood Casino Tunica 2 - 14,900
Hollywood Casino Bay St. Louis
(1) 21 - -
Argosy Casino Sioux City 3 - 8,969
Boomtown Biloxi (1) - - 262
Hollywood Slots at Bangor - - 4,978
Bullwhackers 6 - 1,542
Casino Rama management service
contract - - 8,632
Pennsylvania Racing Operations - - 1,470
Raceway Park - - (66)
Earnings from Pennwood Racing,
Inc. - 987 987
Corporate overhead - - (24,401)
-------------------------------------
Total $ 374 $ 987 $ 319,949
=====================================
(1) Income from operations and EBITDA for the six months ended
June 30, 2006 reflects the closure of Hollywood Casino Bay St. Louis
and Boomtown Biloxi, which incurred extensive hurricane damage in
August 2005. Boomtown Biloxi reopened on June 29, 2006 and Hollywood
Casino Bay St. Louis reopened on August 31, 2006.
(2) Reflects results since the April 16, 2007 acquisition
effective date.
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data) (unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
--------- --------- ----------- -----------
Revenues
Gaming $570,281 $490,804 $1,119,374 $ 994,254
Management service fee 4,341 4,921 7,815 9,308
Food, beverage and other 82,894 66,052 156,664 132,187
--------- --------- ----------- -----------
Gross revenues 657,516 561,777 1,283,853 1,135,749
Less promotional
allowances (32,272) (24,004) (62,351) (50,174)
--------- --------- ----------- -----------
Net revenues 625,244 537,773 1,221,502 1,085,575
--------- --------- ----------- -----------
Operating expenses
Gaming 297,086 254,638 581,377 510,223
Food, beverage and other 63,123 54,980 121,453 108,652
General and
administrative 98,993 78,590 192,492 158,516
Depreciation and
amortization 37,622 27,728 72,980 57,446
--------- --------- ----------- -----------
Total operating expenses 496,824 415,936 968,302 834,837
--------- --------- ----------- -----------
Income from operations 128,420 121,837 253,200 250,738
--------- --------- ----------- -----------
Other income (expenses)
Interest expense (51,302) (47,766) (99,649) (96,195)
Interest income 1,289 867 2,165 1,770
Earnings from joint
venture 325 574 365 987
Other (5,476) 184 (5,704) 74
Loss on early
extinguishment of debt - - - (10,022)
--------- --------- ----------- -----------
Total other expenses (55,164) (46,141) (102,823) (103,386)
--------- --------- ----------- -----------
Income from operations
before income taxes 73,256 75,696 150,377 147,352
Taxes on income 34,957 33,001 69,137 62,674
--------- --------- ----------- -----------
Net income $ 38,299 $ 42,695 $ 81,240 $ 84,678
========= ========= =========== ===========
Basic earnings per share $ 0.45 $ 0.51 $ 0.96 $ 1.01
Diluted earnings per share $ 0.43 $ 0.49 $ 0.93 $ 0.98
Weighted average shares
outstanding
Basic 85,176 84,333 85,034 83,991
Diluted 88,069 86,729 87,784 86,435
Zia Park - Results for the Three and Six Months Ended June 30,
2007 and 2006
On April 16, 2007, pursuant to the Asset Purchase Agreement dated
November 7, 2006 among Zia Partners, LLC ("Zia"), Zia Park LLC (the
"Buyer"), one of Penn National Gaming's wholly-owned subsidiaries, and
(solely with respect to specified sections thereof which relate to our
guarantee of the Buyer's payment and performance) Penn National
Gaming, the Buyer completed the acquisition of the Black Gold Casino
and Zia Park Racetrack and all related assets of Zia ("Zia Park") for
a purchase price of $200 million in cash, subject to a working capital
adjustment and certain other adjustments, as well as the assumption of
specified liabilities of Zia.
The tables below summarize the operating performance of Zia Park
during the three and six month periods ended June 30, 2007 and 2006.
Although Penn National Gaming did not own Zia Park during the entire
three and six month periods ended June 30, 2007 and 2006, the Company
believes that this data is useful to investors in considering the
value this transaction brings to Penn National.
NET REVENUES (1) EBITDA (1) (2)
(in thousands) (in thousands)
For the Period Three Months For the Period Three Months
April 16- Ended April 16- Ended
June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006
-------------- ------------- -------------- -------------
Zia Park $ 16,913 $ 16,776 $ 6,490 $ 6,351
NET REVENUES (1) EBITDA (1) (2)
(in thousands) (in thousands)
For the Period Six Months For the Period Six Months
April 16- Ended April 16- Ended
June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006
-------------- ------------- -------------- -------------
Zia Park $ 16,913 $ 34,254 $ 6,490 $ 12,929
(1) 2007 net revenues and EBITDA reflects results since the April
16, 2007 acquisition effective date, while 2006 net revenues and
EBITDA reflects results for the entire three and six month periods
ended June 30, 2006.
(2) EBITDA is income from operations, excluding charges for stock
compensation, depreciation and amortization, and gain or loss on
disposal of assets, and is inclusive of earnings from joint venture. A
reconciliation of net income per accounting principles generally
accepted in the United States of America ("GAAP") to EBITDA, as well
as income from operations per GAAP to EBITDA is included in the
accompanying financial schedules.
ZIA PARK
Property Information
(in thousands) (unaudited)
Three Months Ended June 30, 2006
Reconciliation of Income from Operations (GAAP) to Adjusted EBITDA
Income Depreciation
from and
operations amortization EBITDA (1)
----------------------------------------------------------------------
Zia Park $ 5,535 $ 816 6,351
----------------------------------------------------------------------
ZIA PARK
Property Information
(in thousands) (unaudited)
Six Months Ended June 30, 2006
Reconciliation of Income from Operations (GAAP) to Adjusted EBITDA
Income Depreciation
from and
operations amortization EBITDA (1)
----------------------------------------------------------------------
Zia Park $ 11,257 $ 1,672 12,929
----------------------------------------------------------------------
(1) EBITDA is income from operations, excluding charges for stock
compensation, depreciation and amortization, and gain or loss on
disposal of assets, and is inclusive of earnings from joint venture. A
reconciliation of net income per accounting principles generally
accepted in the United States of America ("GAAP") to EBITDA, as well
as income from operations per GAAP to EBITDA is included in the
accompanying financial schedules.
Reconciliation of Non-GAAP Measures to GAAP
EBITDA, or earnings before interest, taxes, charges for stock
compensation, depreciation and amortization, and gain or loss on
disposal of assets, and inclusive of earnings from joint venture, is
not a measure of performance or liquidity calculated in accordance
with accounting principles generally accepted in the United States of
America ("GAAP"). EBITDA information is presented as a supplemental
disclosure, as management believes that it is a widely used measure of
performance in the gaming industry. In addition, management uses
EBITDA as the primary measure of the operating performance of its
properties, including the evaluation of operating personnel. EBITDA
should not be construed as an alternative to operating income, as an
indicator of the Company's operating performance, as an alternative to
cash flows from operating activities, as a measure of liquidity, or as
any other measure of performance determined in accordance with GAAP.
The Company has significant uses of cash flows, including capital
expenditures, interest payments, taxes and debt principal repayments,
which are not reflected in EBITDA. It should also be noted that other
gaming companies that report EBITDA information may calculate EBITDA
in a different manner than the Company. Diluted earnings per share
before merger-related costs and currency translation loss is presented
solely as a supplemental disclosure, as management believes that it is
a principal basis for the valuation of gaming companies, as this
measure is considered by many to be a better indicator of the
Company's operating results than diluted net income per share per
GAAP. A reconciliation of the Company's EBITDA to net income per GAAP,
as well as the Company's EBITDA to income from operations per GAAP, is
included in the accompanying financial schedules.
A reconciliation of each property's EBITDA to income from
operations is included in the financial schedules herein. On a
property level, EBITDA is reconciled to income from operations per
GAAP, rather than net income per GAAP due to, among other things, the
impracticability of allocating interest expense, interest income,
income taxes and certain other items to the Company's various
properties on a property-by-property basis. Management believes that
this presentation is more meaningful to investors in evaluating the
performance of the Company's individual properties and is consistent
with the reporting of other gaming companies.
About Penn National Gaming
Penn National Gaming owns and operates gaming and racing
facilities with a focus on slot machine entertainment. The Company
presently operates eighteen facilities in fourteen jurisdictions
including Colorado, Illinois, Indiana, Iowa, Louisiana, Maine,
Mississippi, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania,
West Virginia, and Ontario. In aggregate, Penn National's operated
facilities feature nearly 23,000 slot machines, over 400 table games,
approximately 1,731 hotel rooms and approximately 808,000 square feet
of gaming floor space. Penn National Gaming recently announced plans
to acquire the Sanford-Orlando Kennel Club in Longwood, Florida.
Penn National Gaming has elected to not conduct a conference call
or webcast in connection with the release of its 2007 second quarter
results. On June 15, 2007, the Company announced that it had entered
into a definitive agreement to be acquired by certain funds managed by
affiliates of
Fortress Investment Group LLC (FIG: NYSE) and Centerbridge
Partners LP whereby Penn National Gaming shareholders will receive
$67.00 in cash for each outstanding Penn National Gaming share. In
connection with the proposed merger, Penn National Gaming expects to
file a preliminary proxy statement with the Securities and Exchange
Commission shortly that will provide additional information on the
transaction.
About the Transaction
In connection with the proposed merger, Penn National Gaming will
be filing documents including a proxy statement with the Securities
and Exchange Commission (the "SEC"). INVESTORS AND SECURITY HOLDERS
ARE STRONGLY ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES
AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors
and security holders may obtain a free copy of the proxy statement
(when available) and other documents filed by Penn National Gaming,
Inc. at the SEC's Web site at sec.gov. The proxy statement
and such other documents may also be obtained for free by directing
such request to Penn National Gaming, Inc. Investor Relations, 825
Berkshire Boulevard, Wyomissing, PA 19610 or on the Company's website
at pngaming.com. Penn National Gaming and its directors, executive
officers and certain other members of its management and employees may
be deemed to be participants in the solicitation of proxies from its
shareholders in connection with the proposed merger. Information
regarding the interests Penn National Gaming's participants in the
solicitation will be included in the proxy statement relating to the
proposed merger when it becomes available.
