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Howard Stutz

Penn National sees decline in fourth-quarter earnings

2 February 2013

Penn National Gaming experienced a decline in fourth-quarter earnings as results from the company's two new casinos in Ohio fell short and costs associated with a failed political activity in Maryland cut into the bottom line.

Analysts, however, were more focused on the company's impending spin-off of its casino holdings into a separate publicly traded real estate investment trust. The transaction is expected to be completed in 2014.

Penn National told investors its net income for the quarter than ended Dec. 31 was $20.2 million, down from $44 million in the same quarter a year ago. The figure resulted in a decline in earnings per share to 28 cents, compared with 41 cents in the fourth quarter of 2011.

Various costs, including $23.8 million for lobbying efforts in Maryland, were charged to the company during the quarter.

"The fourth quarter was a little softer than we and you all would have liked," Penn National Chairman Peter Carlino told investors.

The bulk of the costs were associated with the Question 7 referendum in Maryland, which failed to sway voters to oppose gaming expansion.

"I think (there is) a general despondency on the part of a lot of folks and a few of us, following the results of that election," Carlino said.

Overall, Penn National reported revenues of $743.8 million in the quarter, up from $676.4 million in the fourth quarter of 2011. The company's east/west division, which includes the M Resort in Henderson, saw revenues decline to $301.7 million, compared with $333.4 million a year ago. The company did not break out M Resort's individual results.

Penn National opened two casinos in Ohio in 2012; the Hollywood Toledo in May and the Hollywood Columbus in October. The company also acquired Harrah's St. Louis in November.

Penn National President Tim Wilmott said the company experienced reduced slot machine spending more than initially expected in Ohio. But Penn has pushed forward with stronger marketing efforts.

"On balance, at Penn, we always take the long view and the long view, in my mind, looks very good," Carlino said.
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