Penn National reports record 4Q revenue, earnings loss

WYOMISSING, Pa. - Effects from the December 2017 enactment of the Tax Cut and Jobs Act continue to impact American companies.

For Berks County-based Penn National Gaming, it resulted in significant free cash flow benefits as well as a fourth-quarter 2017 non-cash deferred tax asset write-off of $257 million. The latter accounted for a reported net loss of $3.40 per share for the quarter, but the company reported record fourth-quarter 2017 revenue of $769.036 million, up 3.5 percent from the year ago quarter, and full year revenue of $3.148 billion.

"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," said Timothy J. Wilmott, the company's chief executive officer.

In the fourth quarter of 2017, Penn National, headquartered in Wyomissing, announced an agreement to acquire Pinnacle Entertainment in a cash and stock transaction valued at approximately $2.8 billion. The company expects the transaction to close in the second half of 2018. Once completed, the company anticipates it will enjoy significantly greater operational scale and geographic diversity from a combined 41 properties in 20 jurisdictions, including 15 of the top 30 metro areas in the United States.

Penn National expects the transaction to be immediately accretive to free cash flow per share, and that it will increase annual revenue and adjusted EBITDA by more than 60 percent, following the planned sale of four casinos to Boyd Gaming Corporation and the realization of approximately $100 million in synergies.

"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," Wilmott continued.

The company did say the deal will result in a "modest near-term" increase in net leverage, but it plans to use the increased free cash flow to reduce the debt.

Last month, Penn National secured the first license to operate a Category 4 satellite casino in Pennsylvania pursuant to the state's gaming expansion law passed last October. The license allows Penn National to operate a new casino in York County. The company views the move as a strategic play to protect its existing investment at Hollywood Casino at Penn National Race Course near Harrisburg, and to provide incremental revenue.

Fourth-quarter 2017 net revenues of $769.0 million exceeded guidance by $12.4 million, as all three of the company's operating segments generated net revenue growth during the period.

For full year 2017, diluted earnings per share were $5.39 per share compared to $1.19 per share the previous year. Fourth-quarter 2017 loss per share was $3.40 compared to the previous year's diluted earnings of $0.05.

For 2018, the company projects net revenues of $3.2 billion, and adjusted EBITDA after master lease payments of $454.7 million. Diluted earnings per share are projected at $1.53.

Penn National Gaming (PENN: NASDAQ), through its subsidiaries, owns, operates or has ownership interests in gaming and racing facilities with a focus on slot machine entertainment. The company presently operates 26 facilities in 17 jurisdictions, including Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario. In aggregate, Penn National's operated facilities feature approximately 31,000 gaming machines, 800 table games and 3,000 hotel rooms.

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