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Penn National Gaming Reports First Quarter Revenue Of $641.1 Million And Adjusted EBITDA Of $70.4 Million, Inclusive Of $104.3 Million Of Rent Expense

Stocks in this article: PENN

Penn National Gaming, Inc. (PENN: Nasdaq):


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Today, April 24, 2014 at 10:00 a.m. ET

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Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National Gaming” or the “Company”) today reported first quarter operating results for the three months ended March 31, 2014, as summarized below.

On November 1, 2013, the Company completed the tax-free spin-off to its shareholders of Gaming and Leisure Properties, Inc. (“GLPI”). As a result, Penn National Gaming leases from GLPI the real estate associated with 19 Penn National Gaming casino facilities and makes monthly rent payments to GLPI pursuant to a master lease. In addition, two other gaming facilities which were owned by Penn National Gaming prior to the spin-off, Hollywood Casino Perryville and Hollywood Casino Baton Rouge, are now owned and operated exclusively by subsidiaries of GLPI.

Summary of First Quarter Results

(in millions, except per share data)    

Three Months Ended

March 31,

      2014 Actual   2014 Guidance (3)   2013 Actual
Net revenues     $ 641.1     $ 640.4     $ 798.2  
Adjusted EBITDAR (1)       174.7       174.7       220.7  
Rental expense related to Master Lease       (104.3 )     (103.2 )     -  
Adjusted EBITDA (2)       70.4       71.5       220.7  
Less: Impact of stock compensation, insurance recoveries and deductible charges, depreciation and amortization, gain/loss on disposal of assets, interest expense - net, income taxes, and other expenses       (65.9 )     (67.2 )     (155.4 )
Net income     $ 4.5     $ 4.3     $ 65.3  
Diluted earnings per common share     $ 0.05     $ 0.05     $ 0.63  



Adjusted EBITDAR is adjusted EBITDA excluding rent expense associated with our Master Lease with GLPI. Results for the three months ended March 31, 2013 included $10.4 million of adjusted EBITDAR related to Hollywood Casino Perryville and Hollywood Casino Baton Rouge that were contributed to GLPI on November 1, 2013 as part of the spin-off.


Adjusted EBITDA is income (loss) from operations, excluding the impact of stock compensation, impairment losses, insurance recoveries and deductible charges, depreciation and amortization, and gain or loss on disposal of assets, and is inclusive of gain or loss from unconsolidated affiliates. A reconciliation of net income (loss) per accounting principles generally accepted in the United States of America (“GAAP”) to adjusted EBITDA and adjusted EBITDAR, as well as income (loss) from operations per GAAP to adjusted EBITDA and adjusted EBITDAR, is included in the accompanying financial schedules.


The guidance figures in the table above present the guidance Penn National Gaming provided on February 6, 2014 for the three months ended March 31, 2014.


Review of First Quarter 2014 Results vs. Guidance and First Quarter 2013 Results

    Three Months

March 31, 2014

Pre-tax   After-tax
(in thousands)
Income, per guidance (1) $ 6,997   $ 4,268
EBITDA variances:
Total segment variance, mainly East/Midwest (4,474 ) (2,090 )
Liability based stock compensation charges variance 3,597 2,170
Rent expense variance, primarily due to Ohio properties (1,104 ) (516 )
Lower other corporate overhead costs   890       537  
Total EBITDA variances from guidance (1,091 ) 101
Depreciation and gain/loss on disposal variance 3,185 1,488
Foreign currency and other 2,246 1,353
Tax variance, including additional FIN 48 reserves   -       (2,673 )
Income, as reported $ 11,337     $ 4,537  
    Three Months Ended
March 31,
2014   2014 Guidance (1)   2013
Diluted earnings per common share $ 0.05   $ 0.05   $ 0.63
Liability based stock compensation charges (0.03 ) - 0.02
Rent expense variance 0.01 - -
Development costs - - 0.01
Spin-off transaction costs - - 0.01
Depreciation and gain/loss on disposal variance - 0.02 -
Tax variance - (0.03 ) -
Loss on disposals - - 0.02
Foreign currency and other   (0.01 )     -       -
Total $ 0.02     $ 0.04     $ 0.69


  The guidance figures in the tables above present the guidance Penn National Gaming provided on February 6, 2014 for the three months ended March 31, 2014.

Timothy J. Wilmott, President and Chief Executive Officer of Penn National Gaming, commented, “Despite challenging operating conditions, first quarter consolidated results were in line with our expectations, with revenue, adjusted EBITDAR, adjusted EBITDA and diluted EPS at or near guidance. During the quarter, we saw a significant increase in both the number and severity of weather impacted days compared to the first quarter of 2013. While weather presented a significant drag on earnings -- particularly to our newly defined East/Midwest segment which includes our three largest properties -- our property level management teams continue to be diligent in maintaining margins.

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