With Close of Argosy Deal, Penn National Addresses ‘Uncertainties'

WYOMISSING, PA-Following a month of turmoil, caused by natural and political conditions beyond its control, Penn National Gaming reported third-quarter net revenues of $294.6 million, up from $288.6 million in the same quarter a year ago. The acquisition of Argosy Gaming closed on the first day of the fourth quarter, “finally,” said Peter M. Carlino, CEO, in a conference call.

Acknowledging “uncertainly on a number of issues,” he said the goal of the call was to “remove uncertainty” in three areas: Katrina; the terms of the Argosy acquisition; and ongoing operations in Maine and Pennsylvania. Of the company’s three Gulf Coast facilities that remain closed due to hurricane damage, the Bay St. Louis one suffered the most significant damage. It will be razed and take the longest to replace. No time frame is set. Reopening of Casino Magic could take from nine months to a year or longer, while Boomtown Biloxi is cleaned up and will open “as soon as practical.”

Penn National expects insurance to cover all costs of reconstruction and business interruption. Meanwhile, its Baton Rouge, LA property, which reopened within days of Katrina, is experiencing a significant increase in revenues. Carlino cautioned analysts to temper enthusiasm, however, “It’s difficult to project that the increase will continue into fourth quarter or next year.”

Regarding two Illinois facilities Penn National offered to sell in order to obtain the approval of the Illinois Gaming Board, Carlino said, “we did what we had to do to get to closing [of the Argosy acquisition]. It’s something we did not want to do.” He suggested a belief that it may not have been required, and said “there may be options, we won’t go into on this call, but which we’re looking at closely and we hope to work with the board.”

Of legislation, introduced in the Illinois legislature to “oust gaming,” Carlino said, “it’s preposterous. It will go nowhere,” he predicted, but also called it “discouraging to our industry. We’re a pawn in a larger political process.”

A temporary 475-machine slot facility is expected to open at the company’s Bangor, ME property on Nov. 4. Plans call for groundbreaking on a permanent facility during second quarter 2006.

As for a slots license in Pennsylvania, Carlino said, “we’re disappointed that the legislation sits in place. We could be well on our way.” Although its license has not been granted, Penn National will complete a 25,000-sf temporary facility at Penn National Racetrack by this December. “It’s going to happen,” he said of the new planned, permanent, integrated gaming facility and racetrack, “but the timing is beyond our control. We’ll just take a huge breath and wait.”