Racecourse Owners Postpone After Casino Opens

The owner of Penn National Racecourse in Grantville delayed the expected opening of a slot machine casino on the track from the spring of 2007 through the third quarter of that year.

The delay is the result of an ongoing political dispute within the Pennsylvania Gaming Commission over the distribution of game consoles. Central to the dispute is whether machine distribution rights should be established on a regional basis or statewide basis. The PGCB has not been able to resolve the issue, and no agreement was reached last week.

"We'll just wait for it," Penn National CEO Peter Kalino said on a conference call Thursday to discuss the company's third-quarter financial results. "It's going to be resolved, but it's going to be uncertain times."

The company had expected the casino to open by spring 2007. The company once thought it would be open in the second half of 2006 after a gaming bill was approved last year.

Penn National plans to build a casino with 2,000 slot machines at Grantville racetrack. It said construction would take 12 to 14 months, so work should begin next spring to reach the expected opening in the third quarter of 2007.


The company has pledged that construction will not begin until it receives the license. At this point, PGCB will not be in a position to evaluate and license the license until the end of April next year, after addressing the distribution rights issue.

Carrino said the 25,000-square-foot temporary facility must be completed by December at the Grantville track to handle horse racing and simultaneous casting activities. Penn National can then remove existing grandstands to make way for the casino.

Penn National now expects to spend $262 million on casinos, up from its previous forecast of $240 million. The estimated cost includes a $50 million gambling license.

"We're ready to roll," Carino said. "We're just going to have to let this unfold."

Penn National reported net income of $55.4 million, or 64 cents per share, for the third quarter. Revenue included nearly $38 million in profits from the sale of its Los Angeles Shreveport casino.

The quarterly results also include the financial impact of Hurricane Katrina destroying two casinos at Penn National located along the Gulf Coast. The company spent $4.1 million to continue providing salaries and benefits to nearly 2,000 employees affected by the two closures, along with $19.1 million in pre-tax expenses for insurance deductions.

CFO Bill Clifford said the company's insurance would be "above the right level" to pay for the reopening of casinos in Biloxi and Bay St Louis.

Excluding Katrina Cost and Shreveport sales, third-quarter earnings came in at 37 cents per share. Penn National shares closed up 4.4% at $27.45 per share on Thursday.

In another situation, Carlino said a temporary gaming facility in Bangor, Maine will open on Nov. 4.

This facility has 475 slot machines.

Carrino said the company hopes to begin construction of the permanent facility in the second quarter of next year.

President and Chief Operating Officer Kevin DeSantis said Penn National's casino in Baton Rouge, L.A., has been in solid business in the aftermath of Katrina.

"We think things are going very well right now," he said, but warned, "We don't know how long this will last."


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