Monday, Penn National Gaming Inc. (PENN) reported a rise in third-quarter profit, on account of receipt of merger termination fees from equity investors Fortress Investment Group LLC (FIG) and Centerbridge Partners, L.P. The casino operator issued guidance for the fourth quarter and also revised its full-year outlook.
Third quarter net income jumped to $147.49 million, or $1.69 per share, from $46.59 million, or $0.52 per share, in the year-ago period. Earnings, excluding lobbying expenses, separation payments, merger termination settlement fees, currency translation loss and stock buyback, declined to $0.50 per share from $0.54 per share in the previous year.
The consensus of 13 analysts polled by First Call/Thomson Financial was for earnings of $0.34 per share for the latest quarter.
During the third quarter, the company recorded merger termination fees, net of related expenses, of $195.47 million. On July 7, Penn National disclosed the termination of the $67.00 per share merger agreement by Fortress Investment Group and Centerbridge Partners. The deal break-up enabled Penn National to be the recipient of $1.475 billion in settlement fees, consisting of $225 million in cash and $1.25 billion in Penn National's redeemable preferred equity due 2015, to be bought by affiliates of Fortress, affiliates of Centerbridge, affiliates of Wachovia, and affiliates of Deutsche Bank.
Quarterly revenues declined to $617.89 million from $629.45 million in the prior-year quarter, and came below analysts' expectations for $618.52 million.
Income from operations fell to $96.38 million from $133.88 million last year.
Commenting on the results, Peter Carlino, the chairman and chief executive officer of Penn National Gaming stated, "Third quarter operating results were impacted by a confluence of factors including the economy, smoking bans, lobbying costs, personnel separation payments and disruption related to hurricanes."
Net income for the nine-month period rose to $225.25 million or $2.55 per share from $127.83 million or $1.45 per share in the comparable year-ago period. Nine-month revenues increased slightly to $1.852 billion from $1.851 billion in the same period last year.
Looking ahead, the company ascertained that the economic environment was "unpredictable", but stated that it was taking appropriate steps in the management of its properties, evaluation of growth opportunities, risk management and prudent deployment of its balance sheet to deliver returns to its shareholders.
Assuming that economic conditions would not further deteriorate, Penn National expects a fourth-quarter net income of $29.9 million or $0.28 per share, on revenues of $570.4 million. The company's anticipated results are below analysts' estimate of earnings of $0.31 a share, on revenues of $597.19 million.
The company raised its full-year earnings expectations to $255.1 million or $2.75 per share, up from prior guidance of $172.8 million or $1.81 per share. Penn National however, expects revenues of $2.422 billion, down from the previously anticipated $2.537 billion. Analysts expect earnings of $1.53 a share, on revenues of $2.45 billion for the full year.
Other players in the field are yet to post their latest quarter results, but the gambling sector on a whole is expected to decline in view of the current economic environment setting off a slowdown in customer spending.
PENN is currently trading up $1.42 or 11.13% at $14.18.
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