Penn National Gaming Inc. (NASDAQ:PENN) Q1 2018 Earnings Conference Call - Final Transcript

Apr 26, 2018 • 09:00 am ET

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Penn National Gaming Inc. (NASDAQ:PENN) Q1 2018 Earnings Conference Call - Final Transcript

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Presentation
Executive
Timothy J. Wilmott

is going to provide some more details on in his commentary.

Next, I wanted to give a brief update on where we are with the Pinnacle acquisition, and what happened in the first quarter. And on March 29, Penn and Pinnacle shareholders overwhelmingly approved the combination of our two companies. We have received approvals to-date from a number of states and we're working very hard with our legal and compliance folks to try to get scheduled all of the remaining states to get approval on this transaction. And we still are saying the second half of 2018, because we don't have everyone counted yet, but I can assure by the second quarter call, we'll have that timeframe narrowed considerably as we get everything scheduled with the various jurisdictions that we're required to seek their approvals on. We are making good progress with the FTC and, today, see no issues on that front.

And I just want to remind our investors that we are today more confident than ever of the $100 million of cost synergies. We've spent a lot of time in the first quarter meeting with the Las Vegas Service Center of Pinnacle and all of their properties and got through a lot more detail. And we still believe that of the $100 million of synergies, 50% will be in year one and 50% will be in year two.

I'd like to also provide an update on our development activity in the State of Pennsylvania in the first quarter. As many of you are aware, we were able to acquire two Cat 4 licenses in the bidding process and each license, to remind everyone, can have up to 750 slot machines and up to 40 table games. We have selected locations in York and in Lancaster, Berks County for a total license fee for the two of approximately $58 million. Five of the 10 Category 4 licenses have been awarded. The state is still going to accept bids for the remaining five licenses that have yet to be awarded. We continue to work on determining the final locations of these two licenses and the scopes. That work is still in progress. And as you can understand, we'd like to see if there's going to be more competition from these additional five licenses to be awarded before we make final conclusions on our locations in these two areas.

But, again, I can assure you as we have looked at these opportunities and the potential minimal cannibalizing effect on Penn National Race Course that our capital allocated toward these two licenses will deliver attractive returns in both cases, even when you consider the impact on Penn National with these Category 4 licenses. The last update I want to share with you is, where we are with our management contract in Jamul, in San Diego County and remind everyone that we are working with the tribe and their consultants for an orderly transition, and we will be exiting the management of that