WYOMISSING, Pennsylvania -- (PRESS RELEASE) -- Penn National Gaming, Inc. (Nasdaq:PENN) today reported fourth quarter operating results for the period ended December 31, 2005 as summarized below:
Summary of Q4 and Full Year Results
In millions, Three Months Ended Twelve Months Ended
(except per-share data) December 31, December 31,
----------------------- ------------------------- -------------------
2005
Guidance
2005 (3) 2004 2005 2004
---------------------- -------------------------- -------------------
Net revenues $524.4 $522.2 $276.5 $1,412.5 $1,139.9
---------------------- -------------------------- -------------------
EBITDA (1) $143.9 $140.4 $67.1 $373.3 $283.0
---------------------- -------------------------- -------------------
Less depreciation and amortization,
gain/loss on disposal of assets,
interest expense -
net, income taxes,
and other expenses $(107.7) $(104.7) $(48.3) $(286.1) $(195.7)
---------------------- -------------------------- -------------------
Net income from
continuing operations $36.2 $35.7 $18.8 $87.2 $87.3
---------------------- -------------------------- -------------------
Income (loss) from
discontinued
operations $1.4 N/A $(1.9) $(4.1) $(15.9)
---------------------- -------------------------- -------------------
Gain from sale of
discontinued
operations $- N/A $- $37.9 $-
---------------------- -------------------------- -------------------
Net income $37.6 N/A $16.9 $120.9 $71.5
---------------------- -------------------------- -------------------
Per share data (2)
---------------------- -------------------------- -------------------
Diluted earnings per
share from continuing
operations $0.42 $0.41 $0.22 $1.02 $1.05
---------------------- -------------------------- -------------------
Diluted earnings
(loss) per share
from discontinued
operations $0.02 N/A $(0.02) $0.39 $(0.19)
---------------------- -------------------------- -------------------
Diluted earnings per
share $0.44 N/A $0.20 $1.41 $0.86
---------------------- -------------------------- -------------------
(1) EBITDA is income from operations excluding charges for
depreciation and amortization, hurricane expenses,
settlement charges, and gain/loss on disposals of assets,
and is inclusive of earnings from joint venture. A
reconciliation of net income (GAAP) to EBITDA as well as
income from operations (GAAP) to EBITDA, is included in
the financial schedules accompanying this release.
(2) All per share results have been adjusted to reflect the
March 2005 two-for-one stock split.
(3) The figures in this column present the guidance Penn
National Gaming provided on October 27, 2005 for the
fourth quarter ended December 31, 2005.
In the period ended December 31, 2005 Penn National Gaming
recorded several items that reduced both diluted earnings per share
from continuing operations and diluted earnings per share by $0.03 in
the fourth quarter and $0.53 in the fiscal year. The tables below
summarize these items:
Three Months Ended
(In millions, except per-share data) December 31, 2005
----------------------------------------------------------------------
Actual Guidance
----------------------------------------------------------------------
Diluted earnings per share from continuing
operations $0.42 $0.41
----------------------------------------------------------------------
Charge for early extinguishment of debt related to
termination of senior credit facility $0.01 $0.01
----------------------------------------------------------------------
Hurricane Katrina expense $0.02 -
----------------------------------------------------------------------
Diluted earnings per share before charge for early
extinguishment of debt and hurricane expenses $0.45 $0.42
----------------------------------------------------------------------
(In millions, except per-share data) Twelve Months Twelve Months
Ended Ended
December 31, December 31,
2005 2004
----------------------------------- ---------------- ----------------
After After
Pre-tax tax Pre-tax tax
amount diluted amount diluted
of EPS of EPS
item effect item effect
----------------------------------- ------- -------- ------- --------
Hurricane Katrina expense $(21.1) $(0.16) - -
----------------------------------- ------- -------- ------- --------
Settlement of litigation - Casino
Rouge $(28.2) $(0.20) - -
----------------------------------- ------- -------- ------- --------
Charge for early extinguishment of
debt related to termination of
senior credit facility $(18.0) $(0.14) $(3.8) $(0.03)
----------------------------------- ------- -------- ------- --------
Impairment charge for Penn National
grandstand $(4.3) $(0.03) - -
----------------------------------- ------- -------- ------- --------
Total effect on results from
continuing operations $(71.6) $(0.53) $(3.8) $(0.03)
----------------------------------- ------- -------- ------- --------
Commenting on the results, Peter M. Carlino, Chief Executive
Officer of Penn National said, "Penn National's significant fourth
quarter 2005 gains in EBITDA, net income and other financial metrics
are noteworthy for several reasons. First, the fourth quarter
represents the first full quarter of results inclusive of the Argosy
Casino properties, which contributed approximately 50% of our total
fourth quarter EBITDA. Second, the Company's diluted earnings per
share from continuing operations of $0.42 in the fourth quarter 2005
exceeded our guidance of $0.41 primarily as a result of the
significant year-over-year gains being achieved at Casino Rouge in
Baton Rouge which offset $2 million of hurricane related items that
were not considered in our guidance. Without the impact of charges for
early extinguishment of debt and hurricane expenses, diluted earnings
per share were $0.45 versus our guidance of $0.42.
"In addition to Penn National's extensive pipeline of expansion
opportunities, we are working aggressively on planning the re-birth of
both Casino Magic - Bay St. Louis and Boomtown Biloxi. We are in
regular dialogue with insurance adjusters to determine the full amount
of insurance proceeds due Penn National and we believe that the
insurance proceeds will be sufficient to fund returning the properties
to operation. At Casino Magic, we intend to open an approximate 30,000
square foot temporary casino in the former hotel lobby during the
fourth quarter of 2006, which will be replaced with a permanent
land-based casino to be completed in the future. We will also rebuild
the damaged areas of the existing hotel tower that in aggregate
includes 290 total rooms. The Boomtown Biloxi barge was extensively
damaged in the storm and the barge is currently in route to dry dock
for repairs, with the goal of returning it to operation during the
fourth quarter of 2006. We are anxious to move forward with these
re-development projects and inviting our displaced employees to return
to work at these facilities upon completion.
"Our continued focus on delivering long-term financial growth
through the development of regionally diverse gaming properties
remains on track. In early November, we opened the Hollywood
Slots-Bangor temporary facility and recorded pre-opening costs of
$758,000 in the fourth quarter. Patronage and play of the
approximately 475 slot machines has been consistent with our
expectations and the facility generated EBITDA of approximately
$287,000 in December, its first full month of operation. We plan to
soon announce details of the permanent facility that will initially
include approximately 1,000 slots with capacity for 1,500.
"The Argosy acquisition brought to Penn National several expansion
and development projects, including expanded parking at the Riverside
property which was also completed in November and added approximately
650 incremental spaces. Argosy-Riverside is also adding a 258-room
hotel that will open mid-2007. Argosy-Lawrenceburg is moving forward
with its project that will put all gaming positions on one level and
expand the nation's highest revenue generating riverboat to
accommodate up to 4,000 positions from the current 2,800.
Environmental and archeological studies are currently being conducted
at the site and we continue to expect the parking facility to open in
mid-2007, about a year ahead of the expanded casino floor.
"During the fourth quarter of 2005, we filed our Category 1
license application with the Pennsylvania Gaming Control Board related
to our planned Hollywood Casino® integrated racing and gaming
facility at the Penn National Race Course. The Hollywood Casino at
Penn National Race Course will be a 365,000 square foot facility and
will be sized for 3,000 slot machines with 2,000 positions planned at
opening. The initial phase of the project will include a food court
with three restaurants, a fine dining restaurant, a sports bar, track
side dining and various concessions to serve the racing area,
entertainment, bar and lounge areas on the gaming level, and a
five-story parking garage and valet service parking. We have budgeted
$262 million for this project inclusive of $212 million for
construction, purchase of an initial 2,000 gaming devices, and the $50
million license fee. The timing of issuing Category 1 licenses remains
subject to the resolution of several remaining issues in the
implementation of the slot law. During the fourth quarter, we incurred
a $2.8 million after tax charge for the grandstand impairment related
to the planned demolition. At present, the expectation is that Penn
National will be licensed in the second half of this year and we
intend to raze the existing racing facilities at Penn National Race
Course in the second quarter and commence construction of the new
integrated racing and gaming facility immediately upon obtaining our
slots license with the opening coming approximately 13 months
thereafter.
"Through phased expansions, we continue to build and develop
Charles Town Races. Fourth quarter 2005 results reflect the temporary
removal of about 300 slot machines to accommodate the current
expansion of the property which includes a 400-seat buffet and a
doubling of the parking garage to 5,000 spaces, both of which are on
schedule for completion in the third quarter this year and the first
quarter of 2007, respectively. We will commence, later this year, with
the 65,000 square foot expansion of the gaming floor, which will
enable us to initially add 800 more slots with capacity for an
additional 1,000 positions thereafter. The expanded gaming floor is
expected to be completed next year at this time.
"Included in our fourth quarter results were revenue of $90.0
million, EBITDA of $21.1 million and EPS of $0.06, in aggregate, from
Argosy Casino-Alton and the Empress Casino Joliet. Yesterday, we asked
the Illinois Gaming Board to consider our request to extend from
December 31, 2006 until December 31, 2008, the time limit by which
Penn National is required to reach definitive sales agreements for
Argosy Casino-Alton and the Empress Casino Joliet. Based on the
comments of the Illinois Gaming Board members at the February 14
hearing, we anticipate a response to our request for an extension at
the March 6, 2006 hearing.
"Consistent with our careful management of our capital structure,
this week we called for the redemption of the $175 million of Penn
National's outstanding 8 -7/8% Senior Subordinated Notes. We intend to
fund the note redemption from available cash and borrowings under our
revolving credit facility, which we expect to result in lower levels
of debt service going forward.
"With the benefit of the recently integrated Argosy Gaming
properties, a broad slate of multi-year, multi-jurisdictional growth
opportunities, proven local property management focused on delivering
quality entertainment to customers and generating EBITDA for
shareholders, a capital structure well suited to fund expansion
projects while providing the flexibility to allow for interim debt
reduction, and plans to rebuild our gulf coast properties with
insurance proceeds, Penn National's future prospects are the strongest
in the Company's history."
Development and Expansion Projects
The table below outlines Penn National's current pipeline of new
or expanded facilities:
($ in millions)
----------------------------------------- ----------------- ----------
Amount
Expended
Planned through Expected
New Gaming Total 12/31/05 Opening
Project/Scope Positions Budget (1) Date
----------------------------------------- ------- --------- ----------
Hollywood Casino Grantville
(PA) - building an integrated
racing/slots facility. Budget
includes a $50 million license
fee and the purchase of an
initial 2,000 slots. The 13 months
initial facility is sized for after
3,000 slots. 2,000 $262 $8 licensing
----------------------------------------- ------- --------- ----------
----------------------------------------------------------------------
Hollywood Slots - Bangor (ME) -
building a permanent facility.
Inclusive of the initial $51
million purchase price, $68
million was already expended
for the 475-slot temporary
facility that opened 11/05.
The permanent facility will
accommodate 1,500 slots. 525 $71 $1 2Q '08
----------------------------------------- ------- --------- ----------
----------------------------------------------------------------------
Charles Town (WV) - Casino
expansion, buffet with seating
for 400 and 2,500 parking
spaces. The expansion is Buffet and
sized for 1,500 additional parking
slots. Expansion after 2006 3Q '06;
includes hotel, 31,000 sq. ft. slots 1Q
casino fit out and 750 slots. 700 $127 $7 '07
----------------------------------------- ------- --------- ----------
----------------------------------------------------------------------
Argosy Casino-Riverside (MO) -
Construction of 258 room
hotel/improved casino
amenities. In addition, $20
million was already expended
for 650 parking spaces that Hotel
were added 11/05. - $66 $9 2Q '07
----------------------------------------- ------- --------- ----------
----------------------------------------------------------------------
Argosy Casino-Lawrenceburg (IN) Parking
- New 250,000 square foot 2Q '07;
barge, with 1,500 parking casino
spaces. 1,200 $266 $33 2Q '08
----------------------------------------- ------- --------- ----------
(1) Amount Expended through 12/31/05 includes all amounts for
the project whether spent by Argosy or Penn National. Penn
National spent approximately $3.0 million for Riverside
and $10.0 million for Lawrenceburg.
Financial Guidance
The following table sets forth current guidance targets for
continuing operations for the first quarter and full year 2006 based
on the following:
- Guidance excludes the gain on the sale of Pocono Downs which
was completed in 2005. No gain will be recorded until all
conditions of the sale agreement have been satisfied;
- Casino Magic - Bay St. Louis and Boomtown Biloxi will re-open
during the fourth quarter of 2006, although there is no EBITDA
contributions from these properties included in our guidance;
- Although Penn National Gaming expects to receive business
interruption insurance proceeds resulting from the hurricane
damage incurred at Casino Magic - Bay St. Louis and Boomtown
Biloxi, the Company can not presently determine the amount or
the timing of such payments and as such these proceeds are
excluded from guidance;
- The repair of Casino Magic - Bay St. Louis and Boomtown Biloxi
are assumed to be completely funded through insurance
recoveries;
- The results of Argosy Casino-Alton and the Empress Casino
Joliet are included in continuing operations as the accounting
standards for treating properties as "assets held for sale"
will not be met in the first quarter of 2006 and as such are
included in our full year guidance. We expect these properties
in aggregate to contribute $93.9 million in revenue, $23.7
million in EBITDA and $0.07 in EPS during the first quarter
and $378 million in revenue, $97.9 million in EBITDA and $0.32
in EPS for the full year;
- Casino Rouge results have improved significantly as a result
of the after effects of Hurricane Katrina and although we can
project first quarter 2006 results based on current
information and trends, the remaining quarters in 2006 are
less predictable given the planned opening of other properties
in nearby markets. As such, our guidance assumes results for
the full year of 2006 will approximate those of 2005 (which
benefited in the third and fourth quarters from the increase
in population in Baton Rouge following the hurricane);
- Anticipated 2006 results include the Company's adoption of
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," (Revised 2004)
("SFAS 123R") beginning January 1, 2006. The estimated after
tax impact is a charge of $3.2 million, or $0.04 per share, in
the first quarter of 2006 and $12.1 million, or $0.14, for the
full year;
- The Company will have approximately 88 million diluted shares
outstanding as of December 31, 2006;
- The effective tax rate for federal, state and local income
taxes for the full year 2006 will be 39.5%; and,
- There will be no material changes in economic conditions,
applicable legislation or regulation, world events or other
circumstances beyond our control that may adversely affect the
Company's results of operations.
