Record Fourth Quarter Revenue for Penn National Gaming

Casino and racetrack owner Penn National Gaming reported record fourth quarter revenue that exceeded guidance. 

For the three months that ended Dec. 31, 2017, PNGI net revenues of $769 million, which was more than $12 million above guidance and up more than $26 million compared with the fourth quarter of 2016. Adjusted earnings for the quarter of $183.3 million fell short of guidance ($206.1 million) and the fourth quarter of 2016 ($195.9 million).

PNGI CEO Timothy Wilmott was encouraged by the revenue growth in the quarter.

"The fourth quarter concluded a successful and active year for Penn National, and it marked another period of consolidated positive revenue growth that exceeded both guidance and consensus estimates," Willmott said. "In addition, adjusted EBITDA after master lease payments of $68.8 million exceeded guidance by $2.0 million, before the impact of several largely non-operational items, principally the impact of higher cash-settled stock award expense, which rose significantly due to the increase in our stock price."

The company called the $2.8 billion purchase of Pinnacle Entertainment, which owns 16 gaming properties, including both the racino Belterra Park in Ohio and racetrack Retama Park in Texas a "transformative transaction." As part of the deal, Belterra Park and a few other former Pinnacle properties will be sold to racetrack and casino owner Boyd Gaming in a $575 million cash deal.

"The fourth quarter of 2017 will likely be best remembered for the Dec. 18, 2017 announcement of our agreement to acquire Pinnacle Entertainment, Inc. (Pinnacle Entertainment) in a cash and stock transaction valued at approximately $2.8 billion. Following the closing of this transaction, which is expected to occur in the second half of 2018, Penn National will enjoy significantly greater operational scale and geographic diversity from a combined 41 properties in 20 jurisdictions, including 15 of the top 30 Metropolitan Statistical Areas in America," Willmott said.

"Financially, we expect the transaction to be immediately accretive to free cash flow per share, and that it will increase our annual revenue and adjusted EBITDA by over 60%, following the planned divestitures of four casinos to Boyd Gaming Corporation and the realization of approximately $100 million in synergies," he continued. "Following our initial integration discussions and recent visits to Pinnacle's properties and their Las Vegas Service Center, we came away very impressed by their talented team members and are excited about combining the companies. The visits also reinforced our confidence in achieving our revenue and cost synergy objectives. 

"As a result of our ability to strategically fund the purchase consideration with a combination of equity, debt, and asset sale proceeds, the transaction will result in only a modest near-term increase in our traditional net leverage ratio. Importantly, the combined entity will generate significant free cash flow, which we initially intend to allocate to deleveraging and other initiatives that we believe will enhance long-term shareholder value. Based upon preliminary discussions with regulators, we remain on schedule to close the transaction in the second half of 2018."