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When expenses rise and traffic slows, companies have trouble making money. That is what happened with Penn National Gaming Inc. (PENN) during the third fiscal quarter.

The company reported revenues of $707 million, down from last year’s $710.9 million. Earnings for the period that ended on Sept. 30 were $46.4 million or $0.44 per share compared to last year’s $70.8 million or $0.66 per share.

The average expectations of analysts were $0.55 per share. It was noted that last year’s earnings also included $17.3 million the company gained in the sale of its stake in the Maryland Jockey Club.

Operating expenses for this year jumped to $608.4 million. In 2011, it was $580.6 million.

The company operates 28 gaming facilities, including M Resort in Las Vegas.

With the addition of a new property in Ohio, the company expects total 2012 revenue to reach $2.94 billion. However, it also cut its net earnings outlook to $2.37 per share, down from the previous $2.46.

Peter Carlino, company chairman and CEO, said the economic environment continued to be “challenging.”

“Despite new competition affecting certain facilities,” he said, “third quarter 2012 property level EBITDA margins rose 61 basis points in our Midwest segment – inclusive of $7.1 million of pre-opening costs for Hollywood Casino Columbus – and by 106 basis points in our East/West segment, while weather-related facility closings and new competition adversely impacted margins in the Southern Plains segment, our smallest regional operating segment, by 191 basis points.”

Coming up is an extremely important vote in Maryland where the Question 7 referendum would permit expansion of gaming in that state by adding another casino. It is a foregone conclusion that should the measure pass, MGM Resorts International will build an $800 million Las Vegas-style casino at National Harbor in Prince George’s County.

Such a facility would impact some of Penn National’s existing operations. In opposing the measure, the company has spent in excess of $26 million attempting to influence voters.

Also permitted by the referendum would be the addition of table games at the current slots facilities.

During the conference call, Carlino suggested table games remain possible even if Question 7 is defeated.

“I don’t’ think the issue is dead by any means,” he said, adding, “There will be table games in Maryland.”

Ray Poirier is the longtime executive editor at


Contact Ray at

[email protected].

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