This gaming company is no one-trick pony. Penn National Gaming owns, operates, and has ownership interests in almost 30 horseracing and casino gaming facilities (including several riverboats) throughout the US and in Ontario, Canada. Its casinos operate mainly under the Hollywood and Argosy names. It race track facilities include Raceway Park in Toledo, Ohio; Hollywood Casino at Charles Town Races in West Virginia; and Hollywood Casino at Penn National Race Course outside of Harrisburg, Pennsylvania. The company also owns the M Resort near the Las Vegas Strip. In 2012 Penn National announced plans to separate its gaming operating assets and its real estate assets into two publicly traded companies.
In 2011 the company operates 28 facilities in 19 jurisdictions, including Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario.
Penn National has three main reportable segments based on geographic location of properties: Midwest, East/West, and Southern Plains.
Its gaming locations compete locally with casinos owned by such companies as President Casinos and gaming giant Caesars Entertainment. In 2011 Penn National's operated facilities featured about 34,700 gaming machines, 800 table games, 2,400 hotel rooms, and 1.5 million sq. ft. of gaming floor space.
Penn National generates most of its revenues from gaming activities, primarily from slot machines. The rest comes from management service fees and racing operations.
In 2011 the company reported revenue growth of 12% due to an increase in gaming revenues for its East/West segment thanks to the opening of the Hollywood Casino Perryville in 2010 and the acquisition of the M Resort in 2011. In addition, gaming revenues also increased for its East/West segment due to the introduction of table games in 2010 at Hollywood Casino at Charles Town and Hollywood Casino at Penn National Race Course partially offset by a reduction in slot machine revenues caused by lower levels of electronic table game sales and generally weaker economic conditions. Penn National's 2011 gains were also offset by a decrease in gaming revenues for its Southern Plains segment and Midwest segment. Food, beverage and other revenues increased in 2011 due to the acquisition of the M Resort that year, and increased food, beverage and other revenues at its Hollywood Casino at Charles Town Races thanks to additional attendance levels as a result of the introduction of table games in 2010, and an increase in promotional allowances for its East/West segment.
Penn National posted a major increase in net income in 2011 of 508%, thanks to higher revenues, a decrease in gaming expense for its Midwest segment due to a decline in gaming taxes at the Hollywood Casino Aurora resulting from lower taxable gaming revenues, and a decrease in gaming expenses for its Southern Plains segment, due to closure of Hollywood Casino Tunica from May 1, 2011 to May 25, 2011 because tof flooding. The company also recorded a gain from unconsolidated affiliates of $7.4 million in 2011, primarily due to a gain of $20.2 million on the sale of its interest in the Maryland Jockey Club in 2011.
Penn National in 2012 announced plans to separate its gaming operations from its property assets into two publicly traded companies: an operating entity called Penn National Gaming (PNG) and through a tax-free spinoff a newly formed, publicly traded real estate investment trust (REIT). The proposed transaction would create two well capitalized companies with strong cash flow that are each positioned for growth in the gaming and real estate sectors. The spinoff is expected to occur in the second half of 2013.
With a business that is capital intensive, Penn National's strategy is to acquire and develop new properties in attractive regional US markets, such as Ohio and Maryland. It relies on cash flow from its properties, mainly cash from slot machines and race wagering, to repay debt that it has incurred from making significant acquisitions over the years and to fund capital projects and maintenance at new and existing properties.
Penn National has also been forming joint ventures to further expand its operations in several markets. In 2011 it formed a joint venture with Sam Houston Race Park to own and operate three Texas racing facilities: the Sam Houston Race Park in Houston, the Valley Race Park in Harlingen, Texas, and a planned racetrack in Laredo, Texas. It also has a 50% interest in Kansas Entertainment, a joint venture with International Speedway Corporation (ISC), which opened the Hollywood Casino at Kansas Speedway in 2012.
Mergers and Acquisitions
Significant acquisitions made by Penn National include its 2012 purchase of the Harrah's St. Louis gaming and lodging facility from Caesars Entertainment for about $610 million. In 2011 Penn National acquired M Resort in Henderson, Nevada in exchange for its debt. The M Resort deal gave Penn National entry into the Las Vegas gaming market.
In 2010 the company purchased Beulah Park in Grove City, Ohio, the state's oldest thoroughbred racing facility (founded in 1923). This acquisition was enabled by the state's approval of "Ohio Jobs and Growth Plan," a ballot proposal that authorized casinos in the state's four largest cities (Cincinnati, Cleveland, Columbus, and Toledo).
Chairman and CEO Peter Carlino owns about 15% of Penn National; Bain Capital, 10%.