Wednesday, Penn National Gaming, Inc. (PENN), an owner and operator of casino properties, reported a sharp decline in earnings for the third quarter, that reflected higher operating costs and the absence of prior-year's substantial gain on merger termination fees. The company also initiated a guidance for the fourth quarter and lowered its fiscal 2009 forecast.
Net income for the quarter plunged to $21.4 million or $0.20 per share from $147.5 million or $1.69 per share in the corresponding period last year.
Excluding items, net income declined to $0.33 per share from $0.52 per share in the same period last year, and also came below $0.35 per share projected earlier by the company.
The $0.13 per share in certain net special charges and expenses for the quarter included Ohio lobbying expenses of $0.10 per share. Prior-year period results included merger termination fees, net of related expenses, of $195.47 million or $1.36 per share.
On average, thirteen analysts polled by Thomson Reuters expected the company to report earnings of $0.35 per share for the quarter. Analysts' estimates typically exclude special items.
Net revenues for the quarter increased marginally to $620.4 million from $617.9 million in the same period last year. Ten Street analysts expected the company to report revenues of $642.03 million for the quarter.
Gaming revenues increased to $565.48 million from $558.42 million in the corresponding period last year. Food and beverage revenue declined to $87.4 million from $88.67 million in the same period last year.
Commenting on the results, Peter Carlino, chairman and chief executive officer of Penn National Gaming said, "The challenging economic environment, which has resulted in lower consumer spending at gaming facilities, continued to impact operating results for both the overall industry and Penn National in the third quarter, particularly during the month of August."
Total operating expenses for the quarter increased to $533 million from $522 million last year.
For the nine-month period, net income slid to $90.49 million or $0.85 per share from $225.25 million or $2.55 per share in the same period last year. Net revenues declined to $1.81 billion from $1.85 billion in the year-ago period.
Looking ahead, for the fourth quarter, the company expects net income to be $17.5 million or $0.16 per share on revenues of $577.2 million. Currently, analysts expect the company to earn $0.28 per share on revenues of $607.61 million.
For fiscal 2009, the company lowered its earnings forecast to $107.9 million or $1.01 per share from $135.7 million or $1.27 per share projected earlier. Revenue is presently expected to be $2.39 billion, down from $2.46 billion provided earlier. Analysts currently expect the company to report earnings of $1.38 per share on revenues $2.45 billion.
The company said the forecasts exclude expected gain from insurance proceeds related to Empress Casino Hotel fire, but includes Ohio lobbying expense. In addition, the forecasts assume depreciation and amortization charges in 2009 of $191.6 million, with $50.2 million projected to be incurred in the fourth quarter of 2009. Further more, the forecasts expect non-cash stock compensation expenses to be $29.2 million for 2009, with $7.3 million of the cost incurred in the fourth quarter of 2009 and a diluted share count of about 107.0 million shares.
PENN is currently up $1.24 or 4.53% and trades at $28.59.
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