Penn National's 3Q profit jumps after settlement

WYOMISSING, Pa. - Penn National Gaming Inc. said Monday that third-quarter earnings surged as the casino operator booked a hefty settlement payment after its proposed acquisition by two investment firms was scrapped.

Earnings for the quarter ended Sept. 30 jumped to $147.5 million, or $1.69 per share, from $46.6 million, or 52 cents per share, in the prior year.

In July, Fortress Investment Group LLC and Centerbridge Partners LP pulled the plug on a $5.82 billion deal to acquire Penn National after the company's stock price tumbled. Penn National was promised $225 million in cash as a termination fee, plus $1.25 billion in what amounts to no-cost capital until 2015. The merger termination settlement payment was reflected in a third-quarter earnings gain of $1.36 per share.

Quarterly revenue dipped 2 percent to $617.9 million from $629.5 million in the third quarter of 2007.

Analysts surveyed by Thomson Reuters, who typically exclude one-time items, forecast third-quarter earnings of 34 cents per share on revenue of $618.5 million.

"Third quarter operating results were impacted by a confluence of factors including the economy, smoking bans, lobbying costs, personnel separation payments and disruption related to hurricanes," said Chief Executive Peter M. Carlino in a statement.

Penn National noted that it will receive $775 million currently held in escrow, which is tied to preferred shares the company agreed to sell to the private equity firms after its buyout deal collapsed.

Penn National said it plans to place some of the funds in an unrestricted subsidiary to allow the company to acquire its own equity or debt or those of other gambling companies. Penn National said it also plans to hold discussions with its lenders to give the company flexibility to use the funds.

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