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Double-digit growth boosts Penn National earnings

Feb 18, 2003 6:50 AM

Showing double-digit growth in its three major properties, Penn National Gaming Inc. (PENN) reported record earnings for the fiscal quarter ending on Dec. 31, 2002.

Net income totaled $7.6 million or $0.19 a share compared to last year’s $4.9 million or $0.15 a share.

The per share amount was adjusted to reflect a two-for-one stock split in June 2002.

"From management’s point of view we had a great year, just a spectacular year at Penn National," said CEO Peter M. Carlino. "We had great performance from virtually all of our properties," he said.

The company’s three largest properties ”” that is its racino Charles Town Racetrack in Charles Town, W. Va., the four-story riverboat Casino Rouge in Baton Rouge, La., and Casino Magic Bay St. Louis, Miss. ”” all enjoyed double-digit gains in earnings before taxes.

The gains offset a decline of 33% at the company’s racetrack operations in both Pennsylvania and New Jersey which were badly impacted by foul weather that caused the tracks to be closed for several days.

Still unresolved, the company said, was its proposed acquisition of Hollywood Casino Corporation (HWD) that operates casinos in Aurora, Ill., Tunica, Miss., and Shreveport, La. The company hoped to close on the $780 million acquisition in the current quarter.

Commenting on the acquisition, Carlino remarked, "Of course, we believe Penn National is very well positioned to continue generating strong earnings growth over the next several years, based on the integration of the Hollywood assets, our strong and growing regional presence and focus on slot revenues, and the potential for slots at our Pennsylvania racetracks."

The deal awaits approval from the Louisiana Gaming Control Board. Complicating the purchase is Hollywood’s lack of cash. The company failed to make a payment on its first mortgage notes on Feb. 3 on its Shreveport property. Pressure is being applied to have the gaming regulators insist that Penn National commit to buying back the bonds before the merger is approved.

As for the proposal that Pennsylvania lawmakers approve the installation of slot machines at the state’s racetracks, Gov. Ed Rendell reportedly has been discouraging groups looking to get in on the action by building new tracks. Penn National has two tracks that would qualify for the machines and the experience of running its racino in West Virginia.

Las Vegas Sands

Although the company that built the Venetian Casino Resort retains its former corporate name and is privately held, Las Vegas Sands Inc. publishes its financial experience because of its involvement with the bond market on Wall Street.

For the quarter ended on Dec. 31, 2002, the company reported a record profit of $6 million, reversing a loss of $6.5 million in the comparable period of 2001. However, for the year, the company reported a loss of $38.4 million. Last year, the loss was $24.2 million.

The company listed as 2002 highlights the following:

Record annual property EBITDAR of $215 million, up 30.4% from $164.9 million in 2001;

Annual net revenue of $571.4 million, up 9.1% from 2001;

Record Venetian Hotel occupancy of 95.6%;

Record Venetian Hotel average daily room rate of $196.

The company said it was resuming construction on the Venetian 1,000 hotel room and 150,000 square feet meeting room expansion with scheduled completion expected this June.

Isle of Capri

Net revenues were down a bit for the third quarter of the fiscal year but earnings topped last year by a penny, Isle of Capri Casinos Inc. reported last week.

For the quarter ended on Jan. 26, Isle of Capri had net income of $8.4 million or $0.28 a share compared to $8.1 million or $0.27 last year. However, net revenues this year reached $253.1 million while last year’s net revenues amounted to $262.1 million.

During this fiscal year’s first nine months, the company reported net income of $27.4 million or $0.90 a share. Last year, before extraordinary items, the company had net income of $24.4 million or $0.82 a share.

The company said it had reduced its total debt by an additional $7.2 million during the third quarter and $95.9 million in the past 12 months. Also, the company said construction work for the expansion of the Isle-Biloxi (Miss.) began during the quarter. The project includes an additional 400 hotel rooms, an Isle-branded Kitt’s Kitchen restaurant, a 12,000 square foot multi-purpose center, an expanded pool area and a 1,000 space parking facility.

Boyd Gaming

Boyd Gaming Inc. (BYD) reported adjusted earnings, excluding preopening expenses and certain non-recurring items, of $0.24 a share for the fourth quarter of 2002 compared to adjusted earnings of $0.15 a share last year.

For the full year, the adjusted earnings amounted to $1.06 a share or a 121% increase over the adjusted $0.48 per share earnings reported in 2001.

During the fourth quarter, the company said, all nine operating units reported property EBITDA (earnings before interest, taxes, depreciation and amortization) of $72.2 million versus $63 million in the fourth quarter of 2001, an increase of 14.6%. Of particular note, the company said, were the Las Vegas Downtown properties including the Hawaiian travel agency, which reported record revenues and EBITDA. Also showing an increase was the Boulder Highway property, Sam’s Town Hotel and Gambling Hall.

As for The Borgata, the $1.1 billion mega resort the company is building in partnership with MGM MIRAGE Inc. (MGG), Bill Boyd, company chairman and CEO said the property was on schedule for opening this summer, although the total project coast will be a bit higher than originally projected because of "certain scope changes."

Boyd added, "When we began developing Borgata, our expectations were high and I am very pleased that they are being met. The building looks great inside and out, and the people we’ve hired and the planning they’re doing have been exceptional. Finally, interest in employment at Borgata has been very strong, with job applications far exceeding our expectations."

Riviera Holdings

Despite an increase in income from operations, Riviera Holdings Corporation (RIV) reported an increase in its net loss for the fourth quarter ended on Dec. 31.

Income from operations was $2.9 million, up $712,000 or 32% from the fourth quarter of 2001. However, the net loss for the quarter was $3.9 million or $1.13 per share compared with a net loss of $3.2 million or $0.92 per share a year earlier. The company noted that last year the company recorded a tax benefit of $1.1 million in the fourth quarter while no such benefit was recorded in this last quarter.

The company said that occupancy at the Riviera Las Vegas during the fourth quarter was 82% compared to 78% last year, although the average daily rate decreased $2.89 to $61.11.

Still, company officials said they saw a positive trend of improving quarterly results beginning in the first quarter of 2002 and that it continued through the fourth quarter.

"The Las Vegas market continues to recover from the impacts of 9/11 and the soft economy," said Robert Vannucci, president. The November 2002 year-to-date Las Vegas Convention and Visitors Authority report indicates that visitor volumes were equal to 2001 levels.