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twitterPenn National sees profit slide, discusses Fontainebleau
Published Wednesday, Oct. 21, 2009 | 7:31 a.m.
Updated Wednesday, Oct. 21, 2009 | 8:39 a.m.
Penn National Gaming Financial Information
| 3Q 2009 | 3Q 2008 | % Change | 2Q 2009 | |
|---|---|---|---|---|
| Revenue | $620.4 million | $617.9 million | .5% | $580.8 million |
| Net income | $21.4 million | $147.5 million | -85.5% | $28.5 million |
| Net income per share | 20 cents | $1.69 | -88.2% | 27 cents |
Penn National Gaming said this morning that while its revenue held steady in the third quarter, its profit tumbled.
The casino operator reported net income of $21.4 million during the third quarter, or 20 cents per share, compared to $147.5 million, or $1.69 per share, during the same period of 2008.
“The challenging economic environment, which has resulted in lower consumer spending at gaming facilities, continued to impact operating results for both the overall industry and Penn National in the third quarter, particularly during the month of August,” said Peter Carlino, chairman and chief executive officer of Penn National.
Net revenue increased slightly from $617.9 million in the third quarter of 2008 to $620.4 million in 2009. Gaming revenue increased to $565.5 million in the third quarter of 2009 from $558.4 million in the same period of 2008.
Carlino noted Penn National Gaming’s interest in purchasing the bankrupt, unfinished Fontainebleau Las Vegas. He said during a conference call this morning that the company is in talks with a partner “who could bring something besides money to the table.”
“We’ve had boots on the ground for months that our evaluating costs, the status of the building, what it’s going to take to finish it. With all that in hand, its fate ultimately will be decided by the courts and a judge how it will be disposed of,” Carlino said.
Carlino said that while the bankruptcy process of Fontainebleau Las Vegas is a complicated one, he believes the process is going to be resolved fairly quickly.
Fontainebleau said last week that it continues to work with Penn National Gaming on a deal in which Penn National would be the stalking horse bidder with an undisclosed bid -- a bid it said would be substantially less than the previously reported $300 million.
Carlino would not discuss a price or budget for the project during the conference call.
“Our view is that despite impressive scale, its value is little to nothing because the cost to complete is at the edge of value in our judgment,” Carlino said. “Around that, we have a very disciplined sense of what we will accept and what we will not. It goes our way or it doesn’t go. We chase nothing, we’ll stretch for nothing.
“We think we could bring a lot to the Fontainebleau project … that no one in the U.S. could bring,” he said.
Penn National Gaming operates 19 casinos and racetracks in Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Maine, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, West Virginia and Canada.
Discussion: 19 comments so far…
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I could be wrong, but if somebody else spent + - 1.9 Billion on FB already, and it will require another 1.5 Billion to 2.0 Billion to finish it, aren't they basically saying we want the building for nothing? And then they'll finish it? What a deal...
Bdover, that is not only what they are saying, but it may be the best offer on the table. And it wouldn't even be a spectacular deal for them given the completion costs. This isn't a property they can flip and make money on. They have to put up that 1.5 billion or so, so they are assuming substantial risk. The errors that occurred occurred under the prior management.
We don't need another casino at this time! Smarter people as Wynn has not bid because of the oversupply. I guess it's their money and they can do as they please!
Chazbean - So what are they to do? Leave it the way it is??? Wynn's not playing because of oversupply, he's not playing because of the cost of completion.
At this point and time I agree with chazbean Vegas does not need another casino,but on the other hand Vegas needs jobs drastically.Construction would probably take another year to finish which would supply construction jobs to the community and gernerate spending in the local side of the town,trickle down effect.Then the opening of the resort could result in more jobs,again this town needs.
I would suggest that if Penn goes through with this deal that their commitment would be to hire local Las Vegans.If Penn would reach out and open its arms to the community it would get the support of the community.Keep their prices affordable bring in volumns of guest allow the volumn/quanity over seed margin in the long run but are their pockets that deep to with stand the long haul.
MGM/City center has smoked screened this town into beleaving that they are hiring Locals in which I see that they are not.
Penn needs to dedicate itself to this town change to a more family oriented resort and they will see the benifits of doing so and their profits gain at a better pace than its competitors.
Try an angle that has not been in the play books since the mid 90's and gamble that it still works.They need to think outside the box as Wynn first did when he came to Vegas.I wish them well and all the luck in the world for the sake of Las Vegas.
As for Phil Ruffin bring back the old Treasure Island and revamp the Siren show it is trully boring and needs to go back to its original theme
I repeat....
Zowee!
I have some acquaintances who want to buy the Fontainebleau, too! with some gold coins from the 1700's they've had stuffed under their mattress since then.
The way things are going, those coins outta be worth 'bout $375 MILLION BUCKS veeerryy soooon....
(Anyone need a wheelbarrow *to carry around their paper-money*..?)
rodtig As I said before we do not need another casino! Enough already with more construction jobs and hospitality jobs! We need to diversify ! We need more manufacturing,computer, health related jobs( DRS, nurses,technicians,research) we have great tax structure and weather and real estate incentives to attract companies from California, Arizona, and New york with their high taxes.Let's take advantage and also improve our education and pay the teachers more and less for the administrators.
Let the good old times roll!!!! Even the Plaza once was the greatest casino in town. There are some signs of that left over. For instance, the big hallway with the big chandellier on the 2nd floor where the front desk used to be, remembering the great old times. Now the front desk has been removed, just next to the McDonald's food court stuff. What a shame. If people get to Vegas, especially to the old casinos, they should take notice of such things.
I wished they would stop building more and more super expensive places but instead try to keep the classy places alive. Even the Riviera in fact is a great hotel, but the company is just a notch from being bust. It's sad what's going on there. Even the new-to-open casinos are bankrupt, some even before they get to Grand Opening. Don't they learn the lesson yet?
From Switzerland
If it is such a good deal, makes you wonder why there are no Vegas casino companies looking at this deal (Boyd, MGM, Harrahs, etc). Penn National currently doesn't have a presence in Vegas. Seems like they are biting off more then they can chew with this deal. Their total market cap is only $2.2B and they plan to buy an all-in cost $3B+ casino. This has disaster written all over it, no?
Or maybe, I guess, a company that owns a bunch of racetracks and second-tier casinos can do well operating a four-star, 4,000 room, 25-acre, Vegas mega-resort with no prior experience....
Let's get back to to good old days.
1) Let the mob buy in. They have lots of $$$ Call the NY & Chicago families
2) Rename it the new Stardust
3) That way, you would not have to have a mob museum.
Everyone is happy!!!!!
Wait, there is no such thing as the mob....Sorry
THE FONTAINEBLEAU LOCATION IS NOT A PRIME LOCATION & DOES NOT WARRANT AN ADDITIONAL INVESTMENT OF 1.5 TO 2 BILLION DOLLARS TO MAKE THE PROPERTY SUCCESSFUL - PLUS THE 3800 ROOMS ARE TOO SMALL TO JUSTIFY A LUXURY RESORT --- THE PUBLIC IS TO SMART TO BUY IN TO A SHAM & THE ORIGINAL DEVELOPERS UNDER ESTIMATED THE PUBLICS INTELLIGENCE !! YOU MUST DELIVER A QUALITY PRODUCT WITH CREATIVE MARKETING IMAGINATION WHICH THEY OBVIOUSLY DID NOT HAVE & THAT IS WHY THEY FAILED -- LAS VEGAS IS THE BIG LEAUGES & THERE IS NO ROOM FOR WANNA BE AMETUERS ---
PENN NATIONAL & THERE WOULD BE PARTNER WILL BE THROWING GOOD MONEY AFTER BAD & THE PENN NATIONAL STOCK WILL EVENTUALLY REFLECT THAT OVER THE NEXT YEAR - IF THEY MOVE FORWARD WITH THIS ILL DESIGNED PROJECT !!!-- VEGAS WILL COME BACK SLOWLY OVER THE NEXT FIVE YEARS & ONLY THE COMPETENT WILL SURVIVE & PEOPLE WITH JUST MONEY BEHIND THEM WILL HAVE A RUDE AWAKENING !!! -- THE NEXT FIVE YEARS WILL SEPERATE THE MEN FROM THE BOYS & THE PREVIOUSLY LUCKY FROM THE REAL
INNOVATIVE - CREATIVE MARKETING BUSINESS MEN WHO UNDERSTAND WHAT THE UPSCAL MARKET REALLY WANTS & DEMANDS !!! - INVESTORS WITH VISION & REAL CREATIVE MARKETING GENIUS WILL BE ABLE TO BUY UNDERVALUED PROPERTIES NOW & COMPLETE THEM IN FIVE YEARS - FOR THE PROPER TIMING TO LAUNCH A NEW PALTIAL MEGA STRUCTURE !!!
Don't expect any company in Las Vegas to take over the Foutainebleau. They are saddled with too much debt. Read this article.....makes sense to me. No new resorts will be built for 10 years.....interesting.
http://online.wsj.com/article/SB12547012...
Vegas is way over supplied already. Penn National will probably go BK if they buy this property. Best thing is to tear it down now.
I like Chazbean's idea!!
With the lowball offers being made to powerful and financially strong contractors owed money on the project, Penn will be forced out by companies with substantially more money that Penn has available to them and ones who don't need to settle for lesser amounts.
Holcim Industries is the parent company of Aggregate Industries, Aggregate Industries owns Southern Nevada Paving, Frehner, Bardon Materials, and Southern Nevada Ready-Mix here, MDU Resources owns Knife River owns Bombard Mechanical and Bombard Electric, and a few other creditors who are owed money have deep pockets. The combined assets and available liquidity of these two alone is in the billions upon billions so Penn has no choice but to step up and pay what it owed and pay contractors to finish otherwise they'll be outta here. Penn has 1 billion, this doesn't compare to a few contractors who are owed and they alone won't settle for less than owed.
They can lowball others, they won't lowball contractors who have the resources and cash behind them to buy the place themselves and receive full payments for services provided.
"Our view is that despite impressive scale, its value is little to nothing because the cost to complete is at the edge of value in our judgment," Carlino said. "Around that, we have a very disciplined sense of what we will accept and what we will not. It goes our way or it doesn't go. We chase nothing, we'll stretch for nothing"
They hit the nail in the head with the above statement. The cost to complete if they're also unearthing the property where the old Wet N Wild is buried then their cost to complete will be $3o million more just to remove, haul and dispose of the existing facilities that were buried to keep the costs down on the main site.
This fountainbleau disaster is so corrupt it's not funny! look here what we have billions of dollars spent millions owed, and a giant structure which sits and is eye pollution, environmental disaster in the making! this thing has got to be completed, and turned into office space/park or something. The state should put some of the recovery funds into this thing to create jobs, and a viable structure whatever it is used for. Then they should go after the white collar criminal element which created this disaster!!
Tear it down! We do not need another resort now. Plus it will cost more to finish that thing than it will ever be worth.