Penn National Gaming, Inc. Q2 2010 Earnings Call Transcript

Penn National Gaming, Inc. Q2 2010 Earnings Call Transcript
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Penn National Gaming, Inc. (PENN)

Q2 2010 Earnings Conference Call

July 22, 2010 10:00 AM


Joe Jaffoni – IR

Peter Carlino – Chairman and CEO

Tim Wilmott – President and COO

Bill Clifford – CFO

Eric Schippers – VP, Public Affairs

Steve Snyder – SVP, Corporate Development


Joe Greff – JPMorgan

Felicia Hendrix – Barclays Capital

Larry Klatzkin (ph) – Chapdelaine

Mark Strong – Morgan Stanley

Chris Woronka – Deutsche Bank

Dennis Forst – Keybanc

Larry Havarti (ph) – Damco

Ryan Worst – Brean Murray

David Hargrave – Sterne, Agee

Anthony Powell – Barclays Capital

Neil Courtis – Goldman Sachs

John Maxwell – Jefferies & Co.



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Ladies and gentlemen, thank you for standing by. Welcome to the Penn National Gaming Second Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session.

(Operator Instructions)

I would now like to turn the conference over to Mr. Joe Jaffoni, Investor Relations. Please go ahead, sir.

Joe Jaffoni

Thank you, Nelson, and good morning to everyone, and thank you for joining Penn National Gaming's 2010 Second Quarter Conference Call. We'll get to management's presentation and comments momentarily, as well as your questions and answers, but first I'll review the Safe Harbor disclosure.

In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance, as such actual results may vary materially from expectations.

The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and 10-Q. Penn National assumes no obligations to publicly update or revise any forward-looking statements.

Today's call and webcast may also include non-GAAP financial measures within the meaning of the SEC Regulation G and, when required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's news press release, as well as on the company's website.

With that, I'll turn the call over to Peter Carlino, the company's Chairman and CEO. Peter?

Peter Carlino

Thank you, Joe, and good morning, everyone. Sorry for the delay, a terrific number of people dialing in this morning. I can tell you that we are happy to report a solid quarter in what is still tough economic time. I guess, I could characterize our business as, well, not wonderful but it's stable, and there are some bright spots that we will highlight all through our presentation.

Here at corporate, we have our usual team, all of our corporate planners are here to answer your questions. And to talk about some of the terrific growth opportunities that we have at hand, but probably a very interesting time for us. But on one hand, we are frustrated, as I suspect all of you are with the absence of clear and strong rebound in the market. On the other hand, I don't know that Penn has ever had as many fabulous opportunities at hand in our history, a lot of good stuff happening and we keep our eyes on the horizon.

So with that, I will turn this over to questions and answers, and I have confidence we will have everything here you want to know.

Question-and-Answer Session

(Operator Instructions) Our first question comes from the line of Joe Greff with JPMorgan. Please proceed.

Joe Greff – JPMorgan

I have three questions. First question, I know it's early days but can you just discuss the impact of table games in Pennsylvania. If you can give us any kind of representation volumes, statistics, or table play levels or the impact on slots and maybe the impact on expenses. That's the first question. And my second question is within your guidance, you've included Beulah Park and Maryland Jockey Club, can you talk about what that EBITDA impact is? I'm presuming those are going to be losses, if you can clarify that and give us a sense of that impact, that'd be helpful. And then the third point, maybe for Bill or Peter, for all of you, I see you've been buying back some stock and is that a function of where the stock price evaluation is? Or is that, that plus a combination of maybe you're not really seeing anything in the way of meaningful acquisitions, perhaps in Las Vegas or what not, but if you can talk about that as well?

Peter Carlino

Well, those are three good questions. Why don't we ask Tim to start with the first, and maybe Bill, two and three, and maybe there are a couple of others could chime in.

Tim Wilmott

Joe, as you know, Penn National just opened up table games July 13. So we're a little over a week into it. We have seen a very strong reception to the operating table games. We have 40 table games and 12 poker right now in the operation. We have seen some lift in slots, it's still very, very early given the newness of the offering. We've seen very strong demand for poker, very strong demand for table games. The other competitors on the eastern part of the state of Pennsylvania just opened up on Sunday, so we haven't had a full weekend yet to see what that effect's going to be, if any. But the early results are encouraging. I might as well move to Charles Town as well. We opened up table games in Charles Town on July 2. It's been a ramp up. We are not yet at full capacity. We're still waiting for employees to get license by the state there. We're operating around 60 table games and about 14 poker table player. Like in Pennsylvania, we have seen a lift in overall trough volumes as well. It is still very early. We have been encouraged by the amount of Asian play. We're seeing out of the Washington DC market as well, which has been very encouraging. So both are good stories for us, still way too early to give you any kind of conclusive remarks about what the overall impact is and what the expenses are associated with it as we continue to stabilize both openings.

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