Penn National Gaming, Inc. (PENN)

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Penn National Gaming (PENN)

Q4 2010 Earnings Call

February 03, 2011 10:00 am ET


Eric Schippers - Senior Vice President of Public Affairs

Jordan Savitch - Senior Vice President and General Counsel

Steve Ducharme - Chairman of Compliance Committee

William Clifford - Chief Financial Officer and Senior Vice President of Finance

Peter Carlino - Chairman of the Board and Chief Executive Officer

Joseph Jaffoni - Investor Relations, Jaffoni & Collins Incorporated

Timothy Wilmott - President and Chief Operating Officer


Shaun Kelley - BofA Merrill Lynch

Carlo Santarelli - Wells Fargo Securities, LLC

Joel Simkins - Crédit Suisse AG

David Katz - Jefferies & Company, Inc.

Lawrence Klatzkin - Jeffries & Co.

Felicia Hendrix - Barclays Capital

Mark Strawn - Morgan Stanley

Chris Woronka - Deutsche Bank AG

Joseph Greff - JP Morgan Chase & Co

Steven Ruggiero - CRT Capital Group LLC

Steven Wieczynski - Stifel, Nicolaus & Co., Inc.



Ladies and gentlemen, thank you for standing by. Welcome to the Penn National Gaming Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Joe Jaffoni. Please go ahead.

Joseph Jaffoni

Thanks, Kameka, and good morning, everyone, and thank you for joining Penn National Gaming's 2010 Fourth Quarter Conference Call. We'll get to management's presentation and comments momentarily as well as your questions and answers. But first, we'll go through the Safe Harbor disclosure as we typically do.

In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance. As such, actual results can vary materially from expectations.

The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the SEC, including the company's reports on Form 10-K and Form 10-Q. Penn National assumes no obligation to publicly update or revise any forward-looking statements.

Today's call and webcast may also include non-GAAP financial measures within the meaning of SEC Regulation G. And when required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are found in today's news announcement as well as on the company's website.

With that, I'm happy to turn the call over to Peter Carlino, the company's Chairman and CEO, who will start the call. Peter?

Peter Carlino

Thanks, Joe, and good morning, everyone. We're happy to report a good fourth quarter and the wind up, I think, of a solid year in 2010. You'll recall that we entered last year with a great deal of caution, and I think justifiably so, we didn't feel we had any visibility, frankly, on where the year is going go. And happily, it turned out to be a pretty reasonable year for us.

Though January 2011 is off to kind of a rocky start because of weather, we're actually pretty optimistic about this year and expect it to be another strong one for us company-wide.

Here today, of course, as is always the case, our entire management team, so that we can expose you to as many different thoughts as possible. And I know Tim you'd like to make some comments with the offset.

Timothy Wilmott

Yes. Thank you, Peter. We certainly saw the continued benefit of adding table games in our fourth quarter numbers at West Virginia and in Pennsylvania. And we continue to see the properties doing a very good job of managing their margins as we've seen throughout 2010.

I think I just want to speak about what we're seeing with the consumer and their behaviors. Clearly, we're seeing a stabilization across our businesses. We're seeing flat year-over-year kind of spending behaviors across most of our businesses and our outlook for 2011 is more of the same. We are not seeing any downward trends that we saw maybe a year ago, that has stabilized. But we're not seeing any strength and any rebound in the consumer to any note. So we're flat. We continue to expect it to be along those lines until we see the fundamentals of the macroeconomic conditions improve, which we haven't seen yet. And that's how we're thinking about 2011.

Peter Carlino

Very good. Thanks, Jim. Well then, why don't we get right away to the questions, if you folks have. And operator, can you open the floor?

Question-and-Answer Session


[Operator Instructions] Our first question will come from Felicia Hendrix with Barclays Capital.

Felicia Hendrix - Barclays Capital

So can I just start out with just one quick housekeeping question and then I have some bigger picture questions. Just on your EBITDA guidance for 2011. The EBITDA was above consensus, the EPS was below. So it seems to us that it had something to do with depreciation, but I was wondering what was in that number that might not be evident?

Peter Carlino

It's a little hard to say since I don't have the benefit of how you got your numbers. I'll say depreciation, we've got roughly at $242 million. We've got $103.4 million of interest expense, stock comps, very much in line with last year. So I'm not exactly sure where the difference is, candidly.

Felicia Hendrix - Barclays Capital

On M Resort, just wondering if you could walk us through the mechanics of what needs to happen from here and then your plans for the resort once the entire transaction is approved?

Peter Carlino

Jordan, why don't you take that? Jordan and Tim will comment on that.

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