VIP & VIP+
Exclusive Content   Join Now

Penn National floats in cash

Oct 28, 2008 4:05 PM

Earnings by Ray Poirier | Everyone knew that the termination of a buyout bid resulted in a financial bonanza for Penn National Gaming Inc. (PENN) but investors were more concerned with the company’s success or lack thereof during the slumping economy.

The answer came on Monday when the company reported earnings for the third fiscal quarter of $147.5 million or $1.69 per share compared to last year’s $46.6 million or $0.52 per share.

Included in the earnings, however, were a merger termination settlement of $1.36 and a $0.02 loss per share from currency conversions. Without those items, the company would have earned $0.36 per share or a penny more than the $0.35 analysts estimated.

For nearly a year, investors waited for the investment firms of Fortress Investment Group LLC and Centerbridge Partners LP to fulfill their promise to acquire Penn National for $5.82 billion. With the struggling economy and an accompanying credit crunch, it was obvious the deal would not be consummated.

In July, the company announced it had accepted a termination settlement of $225 million in cash plus $1.25 billion to be used by the company until 2015.

Quarterly operational revenues fell two percent to $617.9 million, slightly below the expected $618.5 million.

Peter Carlino, chairman and CEO, remarked that the quarter was impacted by such factors as the economy, disruptions related to Hurricane Ike, lobbying costs in areas where competition is growing and smoking bans.

It was noted, however, that the company will receive $775 million currently held in escrow, which is tied to preferred shares the company agreed to sell to the private equity firms after the buyout was terminated. This cash position has been noted by analysts as putting the company in a strong position to make an acquisition during a period when most gaming company shares have fallen dramatically.

For the fourth quarter, the company said it expected earnings to be about $0.28 per share on revenue of $570.4 million.