THIS FILING IS MADE PURSUANT TO RULE 424(b)(2) UNDER THE SECURITIES ACT OF 1933
IN CONNECTION WITH REGISTRATION NO. 333-63780
PROSPECTUS SUPPLEMENT
- ----------------------------
(TO PROSPECTUS DATED JULY 30, 2001)
4,000,000 SHARES
[LOGO]
PENN NATIONAL GAMING, INC.
COMMON STOCK
-----------------
We are offering 2,750,000 shares of common stock, and the selling
shareholder is offering 1,250,000 shares of common stock. We will not receive
any proceeds from the shares of common stock sold by the selling shareholder.
Our common stock is quoted on the Nasdaq National Market under the symbol
"PENN." On February 13, 2002, the last sale price of our common stock as
reported on the Nasdaq National Market was $31.75 per share.
FOR A DISCUSSION OF RISKS YOU SHOULD CONSIDER IN DECIDING WHETHER TO BUY OUR
COMMON STOCK SEE "RISK FACTORS" BEGINNING ON PAGE S-8.
---------------------
PER SHARE TOTAL
--------- -----
Public offering price....................................... $30.50 $122,000,000
Underwriting discount....................................... $ 1.60 $ 6,400,000
Proceeds, before expenses, to Penn National................. $28.90 $ 79,475,000
Proceeds, before expenses, to the selling shareholder....... $28.90 $ 36,125,000
We have granted the underwriters a 30-day option from the date of this
prospectus supplement to purchase up to an additional 600,000 shares at the
public offering price, less the underwriting discount, to cover over-allotments.
None of the Securities and Exchange Commission or any state securities
commission, or the Louisiana Gaming Control Board, the Mississippi State Tax
Commission, the New Jersey Casino Control Commission, the New Jersey Racing
Commission, the Alcohol and Gaming Commission of Ontario, the Pennsylvania State
Horse Racing Commission, the Pennsylvania State Harness Racing Commission, the
West Virginia Racing Commission, the West Virginia Lottery Commission or any
other gaming authority, has passed upon the accuracy or adequacy of this
prospectus supplement or the accompanying prospectus or the investment merits of
the common stock offered hereby. Any representation to the contrary is a
criminal offense.
The underwriters are severally underwriting the common stock being offered.
The underwriters expect to deliver the common stock to purchasers on or about
February 20, 2002.
---------------------
JOINT BOOK-RUNNING MANAGERS
MERRILL LYNCH & CO. BEAR, STEARNS & CO. INC.
------------
CIBC WORLD MARKETS
DEUTSCHE BANC ALEX. BROWN
LEHMAN BROTHERS
---------------------
The date of this prospectus supplement is February 13, 2002.
[INSIDE FRONT COVER OF PRELIMINARY PROSPECTUS SUPPLEMENT]
[Photograph of Entrance to the Charles Town Entertainment Complex in Charles
Town, West Virginia.]
[Photograph of Exterior Entrance to Casino Magic in Bay St. Louis, Mississippi.]
[Photograph of Exterior of Boomtown in Biloxi, Mississippi.]
[Photograph of the Exterior of Casino Rouge in Baton Rouge, Louisiana.]
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
--------
About This Prospectus Supplement............................ S-i
Where You Can Find More Information......................... S-ii
Disclosure Regarding Forward-Looking Statements............. S-iii
Prospectus Supplement Summary............................... S-1
Risk Factors................................................ S-8
Use of Proceeds............................................. S-16
Market Price of Common Stock................................ S-16
Dividend Policy............................................. S-16
Capitalization.............................................. S-17
Unaudited Pro Forma Consolidated Statements of Operations... S-18
Selling Shareholder......................................... S-25
Underwriting................................................ S-26
Legal Matters............................................... S-29
Experts..................................................... S-29
PROSPECTUS
PAGE
--------
About This Prospectus....................................... i
Where You Can Find More Information......................... ii
Disclosure Regarding Forward-Looking Statements............. iii
The Company................................................. 1
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of Capital Stock................................ 4
Description of Debt Securities.............................. 10
Selling Shareholders........................................ 17
Plan of Distribution........................................ 18
Legal Matters............................................... 19
Experts..................................................... 19
-------------------
ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about the common stock in two separate
documents that offer varying levels of detail:
- the accompanying prospectus, which provides general information, some of
which may not apply to the common stock; and
- this prospectus supplement, which provides a summary of the terms of the
common stock.
This offering of common stock is being made under our existing shelf
registration statement that we filed with the Securities and Exchange
Commission. After the completion of this offering and excluding any exercise of
the underwriters' over-allotment option, we will have remaining under this shelf
registration statement $178 million available for sale, from time to time, in
one or more offerings of common stock, preferred stock or debt securities.
You should rely only upon the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference is accurate only as of
their respective dates. Our business, financial condition, results of operations
and prospects may have changed since that date.
-------------------
None of Penn National Gaming, Inc., the underwriters or any of their
respective representatives is making any representation to you regarding the
legality of an investment in the common stock by you under applicable law. You
should consult with your own advisors as to the legal, tax, business, financial
and related aspects of a purchase of the common stock.
S-i
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational reporting requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith we file reports
and other information. Such reports and other information may be inspected and
copied at the public reference rooms of the Securities and Exchange Commission
located at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material can be obtained from the Commission by mail at prescribed rates. Please
call the Commission at 1-800-SEC-0330 (1-800-732-0330) for further information
on the public reference rooms. In addition, the Commission maintains a website
(http://www.sec.gov) that contains such reports, proxy statements and other
information that we have filed. Information may be obtained from us at the
address specified below.
We have "incorporated by reference" into this prospectus supplement and the
accompanying prospectus certain information that we file with the Commission.
This means that we can disclose important business, financial and other
information in this prospectus by referring you to the documents containing this
information. All information incorporated by reference is part of this
prospectus supplement and the accompanying prospectus, unless and until that
information is updated and superseded by the information contained in this
prospectus supplement and the accompanying prospectus or any information filed
with the Commission and incorporated later. Any information that we subsequently
file with the Securities and Exchange Commission that is incorporated by
reference will automatically update and supersede any previous information that
is part of this prospectus supplement and the accompanying prospectus.
We incorporate by reference our documents listed below and any future
filings we make with the Securities and Exchange Commission under Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act until the time that we sell all
of the securities offered by this prospectus supplement and the accompanying
prospectus:
- Annual Report on Form 10-K/A for the fiscal year ended December 31, 2000;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001,
June 30, 2001 and September 30, 2001;
- Current Reports on Form 8-K filed on October 20, 2000, March 2, 2001,
May 7, 2001, June 8, 2001, August 23, 2001 and February 8, 2002;
- The description of our common stock included in our registration statement
on Form 8-A as filed on May 26, 1994; and
- The description of our preferred share purchase rights included in our
registration statement on Form 8-A as filed on March 16, 1999.
We will provide without charge to each person to whom a copy of this
prospectus supplement and the accompanying prospectus is delivered upon the
written or oral request of such person, a copy of any or all of the documents
incorporated by reference (other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference into the information that
this prospectus supplement and the accompanying prospectus incorporates).
Requests should be directed to:
Penn National Gaming, Inc.
825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Attention: Robert S. Ippolito
Telephone (610) 373-2400
S-ii
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, accompanying prospectus and the documents that
are incorporated by reference herein and therein, include "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Exchange Act, regarding, among other things, our
business strategy, our prospects and our financial position. These statements
can be identified by the use of forward-looking terminology such as "believes,"
"estimates," "expects," "intends," "may," "will," "should" or "anticipates" or
the negative or other variation of these or similar words, or by discussions of
strategy or risks and uncertainties. Specifically, forward-looking statements
may include, among others, statements concerning:
- our expectations of future results of operations or financial condition;
- our expectations for our properties and the facility that we manage in
Canada;
- the timing, cost and expected impact on our market share and results of
operations of our planned capital expenditures;
- the timing of completion of our acquisition of Bullwhackers casino;
- the impact of our regional diversification;
- our expectations with regard to further acquisitions and the integration
of any companies we may acquire;
- the outcome and financial impact of the litigation in which we are
involved;
- the actions of regulatory authorities with regard to our business and the
impact of any such actions;
- the expected effect of regulatory changes that we are pursuing; and
- expectations of the continued availability of capital resources.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, they are inherently subject to risks, uncertainties
and assumptions about us and our subsidiaries and, accordingly, we cannot assure
you that such expectations will prove to be correct. Important factors that
could cause actual results to differ materially from the forward-looking
statements include, without limitation, risks related to the following:
- capital projects at our gaming and pari-mutuel facilities;
- the activities of our competitors;
- the existence of attractive acquisition candidates;
- our ability to maintain regulatory approvals for our existing businesses
and to receive regulatory approvals for our new businesses;
- our dependence on key personnel;
- the maintenance of agreements with our horsemen and pari-mutuel clerks;
- the risk factors and other risks and uncertainties described from time to
time in our filings with the Securities and Exchange Commission, including
those documents incorporated by reference therein and herein; and
- other risks and uncertainties that have not been identified at this time.
All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements included in this document. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise, except as required by law. In
light of these risks, uncertainties and assumptions, the forward-looking events
discussed in this prospectus supplement, accompanying prospectus and the
documents incorporated by reference may not occur.
S-iii
PROSPECTUS SUPPLEMENT SUMMARY
EXCEPT WHERE OTHERWISE NOTED, THE WORDS "WE," "US," "OUR" AND SIMILAR TERMS
AS WELL AS REFERENCES TO "PENN NATIONAL" OR THE "COMPANY" REFER TO PENN NATIONAL
GAMING, INC. AND ALL OF ITS SUBSIDIARIES. THE FOLLOWING SUMMARY CONTAINS BASIC
INFORMATION ABOUT THIS OFFERING. IT LIKELY DOES NOT CONTAIN ALL THE INFORMATION
THAT IS IMPORTANT TO YOU. BEFORE MAKING AN INVESTMENT DECISION, YOU SHOULD READ
THIS ENTIRE PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS
TO WHICH WE HAVE REFERRED YOU.
THE COMPANY
We are a leading diversified, multi-jurisdictional owner and operator of
gaming properties, as well as horse racetracks and associated off-track wagering
facilities, which we refer to in this document as our pari-mutuel operations. We
own or operate five gaming properties located in West Virginia, Mississippi,
Louisiana and Ontario, Canada that are focused primarily on serving customers
within driving distance of our properties. We also own two racetracks and eleven
off-track wagering facilities in Pennsylvania. We believe our portfolio of
assets provides us with diversified cash flow. We intend to pursue the expansion
of our gaming operations through both the implementation of a disciplined
capital expenditure program at our existing properties and the continued pursuit
of strategic acquisitions of gaming properties in attractive regional markets.
In 1997, we began our transition from a pari-mutuel company to a diversified
gaming company with the introduction of video lottery terminals at our Charles
Town Entertainment Complex. In 1999, we expanded our offerings at Charles Town
with the introduction of reel-spinning, coin-in/coin-out machines. We continued
our transition through a series of strategic acquisitions in four different
regional markets. In August 2000, we acquired Casino Magic Bay St. Louis in Bay
St. Louis, Mississippi and Boomtown Biloxi in Biloxi, Mississippi for an
aggregate purchase price of approximately $200 million and, in April 2001, we
acquired Casino Rouge in Baton Rouge, Louisiana and the management contract for
Casino Rama in Orillia, Ontario, Canada for approximately $180 million. In
addition, we have signed an agreement to acquire the operations of Bullwhackers
Casino, the adjoining Bullpen Sports Casino and Silver Hawk Saloon and Casino in
Black Hawk, Colorado. We are also in the process of implementing significant
capital improvement plans at Charles Town and Bay St. Louis. These projects
include the construction of additional floor space and a parking facility at
Charles Town and the development of an additional hotel in Bay St. Louis. We
believe these projects will broaden the customer appeal of these properties.
On a pro forma basis reflecting our recent acquisitions, our revenues would
have been $537.0 million and $483.5 million for the twelve months ended
September 30, 2001 and 2000, respectively, and our EBITDA (as defined on page
S-7) would have been $119.4 million and $109.4 million for the twelve months
ended September 30, 2001 and 2000, respectively.
S-1
OUR PROPERTIES
The following table summarizes certain features of our owned or leased
properties and our managed facility as of January 31, 2002:
PRO FORMA
PROPERTY LEVEL
EBITDA(1) FOR
TWELVE
GAMING MONTHS ENDED
TYPE OF SQUARE GAMING TABLE SEPTEMBER 30,
PROPERTY LOCATION FACILITY FOOTAGE MACHINES GAMES 2001
-------- -------- -------- ------- -------- ----- --------------
OWNED OR LEASED: (IN THOUSANDS)
Charles Town Entertainment Charles Town, WV Land-based gaming/ 50,000 2,000 -- $ 47,971
Complex Thoroughbred racing
Casino Magic Bay St. Louis Bay St. Louis, MS Dockside gaming 39,500 1,158 37 18,565
Boomtown Biloxi Biloxi, MS Dockside gaming 33,600 1,152 27 12,739
Casino Rouge Baton Rouge, LA Dockside gaming 28,000 1,029 38 21,142
Penn National Race Course(2) Harrisburg, PA Thoroughbred racing -- -- -- 7,907
Pocono Downs(2) Wilkes-Barre, PA Harness racing -- -- -- 6,783
OPERATED:
Casino Rama Orillia, Ontario Land-based gaming 75,000 2,202 122 11,098
-------- ----- --- --------
Total 226,100 7,541 224 $126,205
======== ===== === ========
- ------------------------------
(1) Excludes corporate overhead expense of $9.2 million and earnings from
unconsolidated affiliates of $2.1 million.
(2) In addition to our racetracks, Penn National Race Course and Pocono Downs
operate six and five off-track wagering facilities, respectively, located
throughout Pennsylvania. Property level EBITDA at these properties includes
the results of associated OTWs.
CHARLES TOWN ENTERTAINMENT COMPLEX. The Charles Town Entertainment Complex
in Charles Town, West Virginia features 2,000 gaming machines, a thoroughbred
racetrack, simulcast wagering, entertainment and dining. The facility is located
within driving distance of Baltimore, Maryland and Washington, D.C. and is a
leading gaming property serving the area. There is a total population of
approximately 3.1 million and 10.0 million persons within a 50 and 100-mile
radius, respectively, of the property. We have experienced strong growth at the
facility and have increased the number of gaming machines from 400 in
September 1997 to their current levels. A change in law in March 2001 increased
the maximum per pull wagering limit on the machines from $2 to $5. We have
undertaken a number of initiatives to drive growth at this property. In November
2000, we expanded the gaming area to over 50,000 square feet and opened a
150-seat restaurant and bar. We also have begun construction of a 1,500-space
structured parking facility that is expected to open in the second quarter of
2002 and we are expanding the gaming floor space to accommodate additional
gaming machines and patrons. The first phase of our expansion will add 41,000
square feet of space and will enable us to install 500 additional gaming
machines. We expect to complete this phase of the expansion in July 2002.
Subject to regulatory approval, we expect to install 500 machines in 2002 and an
additional 1,000 machines in 2003, for a total of 3,500 machines.
CASINO MAGIC BAY ST. LOUIS. Casino Magic Bay St. Louis offers approximately
39,500 square feet of gaming space, with approximately 1,158 slot machines and
37 table games. The facility is located in the Gulf Coast gaming market and is
within driving distance of New Orleans, Louisiana, Mobile, Alabama and other
cities in the Southeast. The property includes a 201-room hotel with banquet and
meeting space, 1,800-seat arena, 18-hole Arnold Palmer-designed championship
golf course, steak and seafood restaurant, a buffet-style restaurant and a live
entertainment lounge. We are constructing a 300-room hotel with conference
facilities, which we expect to open in the late second quarter of 2002. The
hotel, which is attached to the casino, will be comprised of 236 deluxe rooms,
46 junior suites and 9 one-bedroom suites with attached parlors. We believe the
new hotel will enable us to enhance our status as a regional destination
property.
S-2
BOOMTOWN BILOXI. Boomtown Biloxi, also located in the Gulf Coast gaming
market, offers approximately 33,600 square feet of gaming space, with 1,152 slot
machines and 27 table games, as well as other gaming amenities including a full
service buffet/menu service restaurant, 120-seat deli-style restaurant,
full-service bakery, western dance hall/cabaret and 20,000-square foot family
entertainment center. We believe that the property offers a relaxed and friendly
environment and has a broad and loyal customer base. There is an adult
population of approximately 665,000 and 2.2 million persons within a 50 and
100-mile radius, respectively, of the Gulf Coast market.
CASINO ROUGE. Casino Rouge is one of two dockside riverboat gaming
facilities operating in Baton Rouge, Louisiana. The property features a
four-story, 47,000-square foot riverboat casino, replicating a nineteenth
century Mississippi River paddlewheel steamboat, and a two-story, 58,000-square
foot dockside embarkation building. The riverboat features approximately 28,000
square feet of gaming space, 1,029 gaming machines and 38 table games and has a
capacity of 1,800 customers. The dockside embarkation facility offers a variety
of amenities, including a steakhouse, a 268-seat buffet, food and bar service,
lounge areas, meeting and planning space and a gift shop. There is an adult
population of approximately 650,000 and 2.1 million persons within a 50 and
100-mile radius, respectively, of the Baton Rouge market.
CASINO RAMA. We operate Casino Rama, a full service gaming and
entertainment facility, on behalf of the Ontario Lottery and Gaming Corporation,
an agency of the Province of Ontario. Casino Rama, located on the lands of the
Mnjikaning First Nation, is approximately 90 miles north of Toronto, Canada, and
has approximately 75,000 square feet of gaming space, 2,202 gaming machines and
122 table games. A 5,000-seat entertainment facility opened in July 2001 and a
300-room hotel currently is under construction at the property and is expected
to open in the second quarter of 2002. We have not and are not required to
commit any of our capital to these projects. Under our operating agreement,
which expires in 2011, we are entitled to a base fee equal to two percent of
gross revenue of the casino and an incentive fee equal to five percent on the
casino's net operating profit.
PENN NATIONAL RACE COURSE, POCONO DOWNS AND OTHER PARI-MUTUEL ASSETS. In
addition to our gaming facilities, we own and operate Penn National Race Course,
located outside of Harrisburg, one of two thoroughbred racetracks in
Pennsylvania, and Pocono Downs, located outside of Wilkes-Barre, one of two
harness racetracks in Pennsylvania. There is a total population of approximately
2.2 million persons within a 50-mile radius of Penn National Race Course. There
is a total population of approximately 1.5 million persons within a 50-mile
radius of Pocono Downs. In addition to our racetracks, we operate eleven
off-track wagering facilities, or OTWs, in Pennsylvania and hold a 50% interest
in Pennwood Racing, Inc., a joint venture that owns and operates Freehold
Raceway in New Jersey.
In August 2001, we entered into a definitive agreement to acquire the
operations of Bullwhackers Casino in Black Hawk, Colorado for $6.5 million cash.
The Bullwhackers properties include 20,700 square feet of gaming space, 1,002
slot machines, 16 table games and a 475-car parking area. The properties are
located on leased land as well as 3.25 acres of land included in the
acquisition, much of which is utilized for parking. We expect to close the
acquisition in the second quarter of 2002.
BUSINESS STRATEGY AND STRENGTHS
We seek to provide our customers with high quality gaming, racing, lodging,
dining and entertainment offerings. Our strategy is to expand our gaming
operations through both internal growth and the selective acquisition of
strategic gaming properties in attractive gaming markets.
We believe that the following key competitive strengths will contribute to
the successful implementation of our strategy:
- LEADING PROPERTIES IN ESTABLISHED REGIONAL MARKETS. Each of our properties
is located in established regional markets and has a population of at
least two million people within a
S-3
100-mile radius. We believe that our properties occupy a niche position in
each market in which we operate. Charles Town, with $193.6 million in
revenue for the twelve months ended September 30, 2001, is positioned as
the dominant operator in its market. Bay St. Louis, with its current
expansion and existing golf course, is evolving into a complete overnight
destination resort with what we believe is the broadest offering of
amenities on the Gulf Coast. Boomtown is the leading locals property in
the Biloxi market. Casino Rouge, with a 55% market share of 2001 revenue,
has consistently been the top performing property in Baton Rouge. Through
the introduction of additional amenities, and the implementation of our
capital improvement plans, we believe we can further improve the relative
market share of each of our existing properties.
- HISTORICALLY STABLE CASH FLOWS FROM EXISTING PROPERTIES. Because each of
our properties caters predominantly to local customers who tend to visit
our properties on a regular basis, our properties historically have
generated relatively stable cash flows. Moreover, the majority of our
gross gaming revenues comes from either video lottery terminal or slot
machine play, which typically are more predictable and stable sources of
revenue than other forms of gaming revenues. Each of our owned properties
has been in operation for a minimum of seven years and each is an
established venue for entertainment in its respective market. We believe
the capital development plans we are implementing will help us improve the
cash flow generating capabilities of our properties in the future.
- DIVERSIFIED PROPERTY PORTFOLIO. In addition to our established properties
in West Virginia and Pennsylvania, during the last 18 months we have
acquired three gaming properties in three regional markets and the right
to operate a fourth property in another regional market, enabling us to
develop a diversified portfolio of gaming properties. We believe this
regional diversification helps insulate us from softness in any one
market, while providing us with an opportunity to build a diversified
database of gaming customers to whom we can cross-market and promote all
of the properties within our portfolio. We intend to broaden the
diversification of our property portfolio through the continued pursuit of
strategic acquisitions in attractive markets.
- SUCCESSFUL ACQUISITION TRACK RECORD. During the past five years, we have
successfully transformed ourselves from an operator of racetracks and
off-track wagering facilities, into an operator of diversified gaming
properties. In implementing this transformation, we have positioned our
properties to achieve meaningful operating synergies, while simultaneously
building an experienced casino management team. We believe we have a
strong operational platform from which to pursue the continued growth of
our gaming operations.
- WELL-POSITIONED TO PURSUE GROWTH OPPORTUNITIES. According to the National
Association of State Budget Officers, there currently are more than
thirty-five states in the United States with projected budget deficits.
Many states are considering legislation that would introduce or broaden
gaming activities to help address these budget deficit problems. With
casino gaming, VLT or racetrack and off-track wagering operations in six
regional markets in North America, we believe we are a leading
multi-jurisdictional operator of a diversified mix of gaming properties.
We believe that our Pennsylvania and New Jersey pari-mutuel businesses may
provide us with significant growth opportunities if certain initiatives
are implemented. Pennsylvania currently has five bills pending in the
state legislature that would authorize the operation of slot machines at
racetracks. New Jersey recently has approved the introduction of off-track
wagering and telephone-account wagering. Pending the negotiation of a
participation agreement between our joint venture and the New Jersey
Sports Authority, and the final adoption of applicable regulations, we
expect that our joint venture will open its first off-track wagering
facility in late 2003.
- EXPERIENCED MANAGEMENT TEAM. Our senior management team has an average
industry tenure of more than 20 years and an established record of
acquiring, integrating and operating gaming and pari-mutuel facilities.
S-4
RECENT DEVELOPMENTS
On February 4, 2002, we announced fourth quarter 2001 results. Revenues for
the quarter rose 48.1% to $136.0 million, compared to $91.8 million in the
fourth quarter of 2000. Fourth quarter 2001 EBITDA rose 72.6% to $28.7 million,
from $16.6 million in the fourth quarter of 2000. Net income in the fourth
quarter of 2001 rose 105.2% to $5.6 million, or $0.35 per diluted share,
compared to net income of $2.7 million, or $0.18 per diluted share, in the
fourth quarter of 2000.
For the full year 2001, revenues rose 78.0% to $519.4 million, compared to
$291.8 million in 2000. EBITDA in 2001 rose 90.4% to $113.3 million, from
$59.5 million in 2000. Income before extraordinary item in 2001 rose 31.2% to
$24.4 million, or $1.53 per diluted share, compared to income before
extraordinary item of $18.6 million, or $1.20 per diluted share, in 2000.
------------------------
We are the successor to several businesses that have operated the Penn
National Race Course since 1972. We were incorporated in Pennsylvania in 1982 as
PNRC Corp. and adopted our present name in 1994. Our principal executive offices
are located in the Wyomissing Professional Center, 825 Berkshire Boulevard,
Suite 200, Wyomissing, Pennsylvania 19610; our telephone number is
(610) 373-2400.
S-5
THE OFFERING
Common stock offered:
By Penn National......................................... 2,750,000 shares
By the selling shareholder............................... 1,250,000 shares
Total.................................................. 4,000,000 shares
Common stock to be outstanding after offering.............. 18,273,975 shares
Use of proceeds............................................ We intend to use the net proceeds from
this offering to repay a portion of the
outstanding balances under the Tranche A
and Tranche B term loans under our
existing credit facility and to pay
certain prepayment costs associated
therewith. We will not receive any
proceeds from the sale of the shares by
the selling shareholder. See "Use of
Proceeds."
Risk factors............................................... See "Risk Factors" beginning on page S-8
and other information included or
incorporated by reference in this
prospectus supplement and the
accompanying prospectus for a discussion
of factors you should consider carefully
before deciding to invest in shares of
our common stock.
Nasdaq National Market symbol.............................. "PENN"
The table set forth above is based on 15,523,975 shares of our common stock
outstanding as of January 31, 2002. This table excludes 600,000 shares of our
common stock to be sold by us if the underwriters' over-allotment option is
exercised in full. This table also excludes 1,719,250 shares issuable upon the
exercise of options outstanding, of which 988,959 are currently exercisable as
of January 31, 2002.
S-6
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA DATA
The following summary historical financial and operating data of Penn
National for the year ended December 31, 1999 and 2000, and Other data, are
derived from financial statements that have been audited by BDO Seidman, LLP,
independent certified public accountants. The summary consolidated financial and
Other data of Penn National for the nine months ended September 30, 2000 and
2001 have been prepared on the same basis as the historical information derived
from the audited financial statements and, in the opinion of management, contain
all adjustments, consisting only of normal recurring accruals, necessary for the
fair presentation of the results of operations for such periods.
The following summary unaudited consolidated pro forma data presented below
for the nine months ended September 30, 2000 and 2001 and the twelve months
ended September 30, 2000 and 2001 were prepared by consolidating our historical
results with the historical results of operations of Casino Magic Bay St. Louis,
Boomtown Biloxi, Casino Rouge and Casino Rama acquired for such periods. We
refer to Casino Magic Bay St. Louis and Boomtown Biloxi as the Mississippi
properties and Casino Rouge and Casino Rama as the CRC properties.
The following financial information is based on in part, and should be read
in conjunction with, the historical consolidated financial statements and
related notes of Penn National, Mardi Gras Casino Corp. (d/b/a Casino Magic Bay
St. Louis), Mississippi-I Gaming, L.P. (d/b/a Boomtown Biloxi) and CRC
Holdings, Inc.--Gaming Division and the unaudited pro forma consolidated
financial statements incorporated by reference in this prospectus supplement and
the accompanying prospectus. This pro forma information is presented for
illustrative purposes only and is not necessarily indicative of our operating
results that would have occurred if the Mississippi and CRC acquisitions had
occurred in an earlier period, nor is it necessarily indicative of our future
operating results.
HISTORICAL RESULTS PRO FORMA RESULTS
----------------------------------------- -----------------------------------------
FOR THE YEAR FOR THE NINE FOR THE NINE FOR THE TWELVE
ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------- ------------------- -------------------
1999 2000 2000 2001 2000 2001 2000 2001
-------- -------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Revenues................................ $170,360 $291,801 $200,017 $383,425 $376,724 $419,399 $483,515 $536,955
Income from operations.................. 16,719 43,565 32,149 57,533 58,789 66,302 68,458 79,225
Interest expense........................ 8,667 19,089 11,004 32,461 33,319 33,319 44,425 44,425
Income before extraordinary item........ 6,733 18,575 15,848 18,813 19,196 23,852 18,987 24,244
Net income.............................. 6,733 11,992 9,265 18,813 19,196 23,852 18,987 24,244
Diluted earnings per share before
extraordinary item.................... $ 0.44 $ 1.20 $ 1.03 $ 1.19 $ 1.25 $ 1.51 $ 1.23 $ 1.53
Diluted earnings per share.............. $ 0.44 $ 0.78 $ 0.60 $ 1.19 $ 1.25 $ 1.51 $ 1.23 $ 1.53
OTHER DATA:
EBITDA(1)............................... $ 26,496 $ 59,481 $ 42,850 $ 84,632 $ 89,589 $ 96,878 $109,357 $119,394
Capital expenditures.................... 13,243 27,295 17,348 22,967 25,692 25,868 40,515 37,014
AS OF
SEPTEMBER 30, 2001
-------------------
(UNAUDITED)
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................................................................ $ 36,401
Total assets............................................................................................. 670,268
Total long-term debt..................................................................................... 454,518
Shareholders' equity..................................................................................... 96,514
- ------------------------------
(1) EBITDA consists of income from operations plus depreciation and amortization
and earnings from joint venture. EBITDA is presented because we believe it
is frequently used by securities analysts, investors and other interested
parties in the evaluation of companies in our industry. However, other
companies in our industry may calculate EBITDA differently than we do.
EBITDA is not a measurement of financial performance under generally
accepted accounting principles and should not be considered as an
alternative to cash flow from operating activities or as a measure of
liquidity or an alternative to net income as an indicator of operating
performance or any other measure of performance derived in accordance with
generally accepted accounting principles.
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RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS AND OTHER INFORMATION IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE DECIDING TO
INVEST IN OUR COMMON STOCK.
RISKS RELATED TO OUR BUSINESS
A SUBSTANTIAL PORTION OF OUR REVENUES AND EBITDA IS DERIVED FROM OUR CHARLES
TOWN FACILITY.
Approximately 37.4% and 46.0% of our revenue and EBITDA, respectively, for
the nine months ended September 30, 2001 was derived from our Charles Town
operations. If, among other things, new competitors enter the market, economic
conditions in the region deteriorate or a business interruption occurs, our
operating revenues and cash flow could decline significantly.
WE MAY FACE DISRUPTION IN INTEGRATING AND MANAGING FACILITIES WE MAY ACQUIRE OR
EXPAND.
We expect to continue pursuing expansion and acquisition opportunities and
could face significant challenges in managing and integrating the expanded or
combined operations. For example, in August 2001, we signed a definitive
agreement to acquire all of the assets of the Bullwhackers casino operations in
Black Hawk, Colorado. We currently expect the acquisition will close in the
second quarter of 2002. Management of new properties, especially in new
geographic areas, may require that we increase our managerial resources. If we
fail to effectively manage any growth we may have, it could materially adversely
affect our operating results.
The integration of the Bullwhackers operations and any other properties we
may acquire will require the dedication of management resources that may
temporarily detract attention from our day-to-day business. The process of
integrating Bullwhackers, and potentially other properties, also may interrupt
the activities of those businesses, which could have a material adverse effect
on our business, financial condition and results of operations. We cannot assure
you that we will be able to manage the combined operations effectively or
realize any of the anticipated benefits of our acquisitions.
Our ability to achieve our objectives in connection with any acquisition we
may consummate may be highly dependent on, among other things, our ability to
retain the senior property level management teams of such acquisition
candidates. If, for any reason, we are unable to retain these management teams
following such acquisitions or if we fail to attract new capable executives, our
operations after consummation of such acquisitions could be materially adversely
affected.
WE FACE RISKS RELATED TO THE DEVELOPMENT AND EXPANSION OF OUR CURRENT
PROPERTIES.
We expect to use a portion of our cash on hand, cash flow from operations
and available borrowings under our revolving credit facility for capital
expenditures at the Charles Town Entertainment Complex and at Casino Magic Bay
St. Louis, including the construction of the new hotel at the latter facility.
The construction of the hotel at Casino Magic Bay St. Louis involves substantial
risks, including the possibility of construction cost over-runs and delays due
to various factors (including regulatory approvals, inclement weather and labor
or material shortages), market deterioration after construction has begun, and
the emergence of competition from unanticipated sources. The opening of the new
hotel at Bay St. Louis will be contingent upon, among other things, receipt of
all required licenses, permits and authorizations. The scope of the approvals
required for the new hotel at Bay St. Louis is extensive, including, without
limitation, state and local land-use permits, building and zoning permits and
health and safety permits. In addition, unexpected changes or concessions
required by local, regulatory and state authorities could involve significant
additional costs and could delay or prevent the completion of construction or
the opening of a new hotel. We cannot be sure that we will obtain the necessary
permits, licenses and approvals for the construction and operation of the new
hotels, or that we will obtain such permits, licenses and approvals within the
anticipated time frame.
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We also are implementing enhancements at the Charles Town Entertainment
Complex, including the expansion of the gaming floor and the construction of a
structured parking lot. These planned enhancements involve similar risks to
hotel construction risks including cost over-runs, delays, market deterioration
and receipt of required licenses, permits or authorizations, among others.
The opening of the new hotel at Bay St. Louis and the other proposed
enhancements also will require us to significantly increase the size of our
existing work force at the property. We cannot be certain that management will
be able to hire and retain a sufficient number of employees to operate these
facilities at their optimal levels. The failure to employ the necessary work
force could result in inadequate customer service which could ultimately harm
profitability.
PRIOR TO AUGUST 2000, OUR GAMING EXPERIENCE DID NOT INCLUDE CASINO OPERATIONS.
Our Charles Town Entertainment Complex has featured gaming machines since
1997, but does not include the full complement of casino, entertainment and
other amenities available at traditional casinos. Through acquisitions beginning
August 2000, however, we began operating and managing full-scale casinos in
Mississippi, Louisiana and Canada. We cannot be sure that we will be successful
in managing and operating our business in response to the challenges of
conducting full-scale casino operations in highly competitive gaming markets.
These challenges are made more difficult as a result of the ongoing expansion of
our Charles Town and Bay St. Louis properties. Our failure to meet these
challenges may have a material adverse effect on our business, financial
condition and results of operations.
WE FACE SIGNIFICANT COMPETITION.
GAMING OPERATIONS
The gaming industry is highly fragmented and characterized by a high degree
of competition among a large number of participants, many of which have
financial and other resources that are greater than our resources. Competitive
gaming activities include casinos, video lottery terminals and other forms of
legalized gaming in the United States and other jurisdictions.
Legalized gambling is currently permitted in various forms throughout the
United States and in several Canadian provinces. Other jurisdictions may
legalize gaming in the near future. In addition, established gaming
jurisdictions could award additional gaming licenses or permit the expansion of
existing gaming operations. New or expanded operations by other persons will
increase competition for our gaming operations and could have a material adverse
impact on us.
CHARLES TOWN, WEST VIRGINIA. Our gaming machine operations at the Charles
Town Entertainment Complex face competition from other gaming machine venues in
West Virginia and in neighboring states (including Dover Downs, Delaware Park
and Harrington Raceway in Delaware and the casinos in Atlantic City, New
Jersey). These venues offer significantly higher stakes for their gaming
machines than are permitted in West Virginia. Atlantic City, New Jersey does not
have a per-pull limit on its gaming machines, while Delaware has a $25 per-pull
limit. The per-pull limit in West Virginia is currently $5 per gaming machine.
In addition to existing competition, both Pennsylvania and Maryland have in the
past considered legislation to expand gaming in their respective states. The
failure to attract or retain gaming machine customers at the Charles Town
Entertainment Complex, whether arising from such competition or from other
factors, could have a material adverse effect on our business, financial
condition and results of operations.
MISSISSIPPI GULF COAST. Dockside gaming has grown rapidly on the
Mississippi Gulf Coast, increasing from no dockside casinos in March 1992 to 12
operating dockside casinos at December 31, 2001. Nine of these facilities are
located in Biloxi, two are located in Gulfport and one is located in Bay St.
Louis. Our Mississippi casino operations have numerous competitors, many of
which have
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greater name recognition and financial and marketing resources than we have.
Competition in the Mississippi gaming market is significantly more intense than
the competition our gaming operations face in West Virginia or our pari-mutuel
operations face in Pennsylvania and New Jersey. We cannot be sure that we will
succeed in the competitive Mississippi Gulf Coast gaming market. The failure to
do so would have a material adverse effect on our business, financial condition
and results of operations.
LOUISIANA. Our Casino Rouge riverboat faces competition from land-based and
riverboat casinos throughout Louisiana and on the Mississippi Gulf Coast,
casinos on Native American lands and from non-casino gaming opportunities within
Louisiana. The Louisiana Riverboat Economic Development and Gaming Control Act
limits the number of gaming casinos in Louisiana to fifteen riverboat casinos
statewide and one land-based casino in New Orleans. All fifteen riverboat
licenses are currently issued.
The principal competitor to Casino Rouge is the Belle of Baton Rouge, which
is the only other licensed riverboat casino in Baton Rouge. In February 2001, a
new 300-room Sheraton hotel opened at the Belle of Baton Rouge. We also face
competition from three major riverboat casinos and one land-based casino in the
New Orleans area, which is approximately 75 miles from Baton Rouge, and from
three Native American casinos in Louisiana. The two closest Native American
casinos are land-based facilities located approximately 45 miles southwest and
approximately 65 miles northwest of Baton Rouge. We also face competition from
several truck stop gaming facilities located in certain surrounding parishes,
each of which are authorized to operate up to 50 video poker machines.
ONTARIO. Our operation of Casino Rama through CHC Casinos Canada Limited
will face competition in Ontario from a number of casinos and racetracks with
gaming machine facilities. Currently, there are two other commercial casinos,
five charity casinos and at least fifteen racetracks with gaming machines in the
province of Ontario. All of the casinos and gaming machine facilities are
operated on behalf of the Ontario Lottery and Gaming Corporation, an agency of
the Province of Ontario. The Ontario Lottery and Gaming Corporation also
operates several province-wide lotteries.
Casino Rama is located near Orillia, Ontario, approximately 90 miles north
of Toronto. There is one charity casino and three racetracks with gaming machine
facilities that directly affect Casino Rama. The charity casino has 40 gaming
tables and 450 gaming machines. The number of gaming machines at the racetracks
range from 100 to 1,700 each.
There is an interim commercial casino located in Niagara Falls, Ontario, 80
miles southwest of Toronto with approximately 135 gaming tables and 2,000 gaming
machines. It is contemplated that Niagara Falls will have a permanent casino
with a similar number of gaming tables and gaming machines as the interim casino
that is scheduled to be completed by the spring of 2002. In addition, it has
been proposed in connection with the City of Toronto's waterfront revitalization
project that a casino be located in downtown Toronto. However, we are not aware
of any definitive plans for the development of such a casino.
RACING AND PARI-MUTUEL OPERATIONS
Our racing and pari-mutuel operations face significant competition for
wagering dollars from other racetracks and OTWs (some of which also offer other
forms of gaming), other gaming venues such as casinos and state-sponsored
lotteries, including the Pennsylvania, New Jersey, Delaware and West Virginia
lotteries. We also may face competition in the future from new OTWs or from new
racetracks. From time to time, states consider legislation to permit other forms
of gaming. If additional gaming opportunities become available near our racing
and pari-mutuel operations, such gaming opportunities could have a material
adverse effect on our business, financial condition and results of operations.
Our OTWs compete with the OTWs of other Pennsylvania racetracks, and new
OTWs may compete with our existing wagering facilities. Our competitors have a
number of OTW facilities that are near our OTWs. Although only two competing
OTWs remain authorized by law for future opening,
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the opening of a new OTW in close proximity to our existing or future OTWs could
have a material adverse effect on our business, financial condition and results
of operations.
WE ARE INVOLVED IN LEGAL PROCEEDINGS THAT, IF ADVERSELY ADJUDICATED OR SETTLED,
COULD IMPACT OUR FINANCIAL CONDITION.
On August 20, 2001, Showboat Development Company brought a lawsuit against
us and certain other parties related to the Charles Town Entertainment Complex.
The suit alleges, among other things, that our operation of coin-out video
lottery terminals at the Charles Town facility constitutes the operation of a
casino, thereby triggering Showboat's option to manage the casino. The suit also
alleges that our March 2000 acquisition of the 11% minority interest in Charles
Town Races from BDC Group, our former joint venture partner, was made in
violation of a right of first refusal that Showboat holds from BDC covering the
sale of any interest in any casino at Charles Town Races. We have filed in
federal district court in Nevada a motion to dismiss this action for lack of
personal jurisdiction and, in the alternative, a motion to transfer the case to
the state of West Virginia. On January 25, 2002, the district court granted our
motion to dismiss. The district court's decision is subject to appeal on or
before February 24, 2002. Nevertheless, we continue to believe that each of
Showboat's claims is without merit, and we intend to vigorously defend ourselves
against them. Even if there ultimately is a judgment against us in this case, we
do not believe that it will have a material adverse effect on our financial
condition or results of operations.
In July 2001, a lawsuit was filed against us by certain surveillance
employees at the Charles Town facility claiming that our surveillance of those
employees during working hours was improper. The lawsuit claims damages of
$7.0 million and punitive damages of $14.0 million. We currently are conducting
discovery in the case but, at this time, believe that all of the claims of the
employees are without merit. On February 12, 2002, we filed a motion for summary
judgment that is pending before the court. We intend to vigorously defend
ourselves against this action and do not believe that this action will have a
material adverse effect on our financial condition or results of operations.
In January 2002, an employee at our Charles Town facility initiated a suit
against us alleging invasion of privacy. The employee claims in the suit that
she was subjected to an involuntary strip search by other Charles Town employees
as part of a theft investigation and is seeking punitive damages. The lawsuit
claims damages of $0.5 million and punitive damages of $3.5 million. We believe
we have meritorious defenses and intend to vigorously defend ourselves against
this suit.
We also are parties to certain other litigation but do not believe it will
have a material adverse effect on our financial condition or results of
operations if any of these legal proceedings were adversely adjudicated or
settled. Furthermore, the nature of our business subjects us to the risk of
lawsuits filed by customers and others.
WE FACE EXTENSIVE REGULATION FROM GAMING AUTHORITIES.
LICENSING REQUIREMENTS. As owners and operators of gaming and pari-mutuel
betting facilities, we are subject to extensive state, local and, in Canada,
provincial regulation. State, local and provincial authorities require us and
our subsidiaries to demonstrate suitability to obtain and retain various
licenses and require that we have registrations, permits and approvals to
conduct gaming operations. Various regulatory authorities, including the
Louisiana Gaming Control Board, the Mississippi Gaming Commission, the New
Jersey Casino Control Commission, the New Jersey Racing Commission, the Alcohol
and Gaming Commission of Ontario, the Pennsylvania State Horse Racing
Commission, the Pennsylvania State Harness Racing Commission, the West Virginia
Racing Commission and the West Virginia Lottery Commission may, for any reason
set forth in the applicable legislation, limit, condition, suspend or revoke a
license or registration to conduct gaming operations or prevent us from owning
the securities of any of our gaming subsidiaries. Like all gaming operators in
the jurisdictions in which
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we operate, we must periodically apply to renew our gaming licenses or
registrations. We cannot assure you that we will be able to obtain such
renewals. Regulatory authorities may also levy substantial fines against or
seize the assets of our company, our subsidiaries or the people involved in
violating gaming laws or regulations. Any of these events could have a material
adverse effect on our business, financial condition and results of operations.
We have demonstrated suitability to obtain and have obtained all
governmental licenses, registrations, permits and approvals necessary for us to
operate our existing gaming facilities. We cannot assure you that we will be
able to retain them or demonstrate suitability to obtain any new licenses,
registrations, permits or approvals, including those required for us to
consummate the Bullwhackers acquisition. If we expand our gaming operations in
West Virginia, Mississippi, Louisiana, Pennsylvania, New Jersey, Canada or to
new areas, we will have to meet suitability requirements and obtain additional
licenses, registrations, permits and approvals from gaming authorities in these
jurisdictions. The approval process can be time-consuming and costly and we
cannot be sure that we will be successful.
Gaming authorities in the United States generally can require that any
beneficial owner of our securities, including holders of our common stock file
an application for a finding of suitability. If a gaming authority requires a
record or beneficial owner of our common stock to file a suitability
application, the owner must apply for a finding of suitability within 30 days or
at an earlier time prescribed by the gaming authority. The gaming authority has
the power to investigate an owner's suitability and the owner must pay all costs
of the investigation. If the owner is found unsuitable, then the owner may be
required by law to dispose of our common stock.
POTENTIAL CHANGES IN REGULATORY ENVIRONMENT. From time to time, legislators
and special interest groups have proposed legislation that would expand,
restrict or prevent gaming operations in the jurisdictions in which we operate.
Any expansion of gaming or restriction on or prohibition of our gaming
operations could have a material adverse effect on our operating results.
TAXATION. State and local authorities raise a significant amount of revenue
through taxes and fees on gaming activities. We believe that the prospect of
significant revenue is one of the primary reasons that jurisdictions permit
legalized gaming. As a result, gaming companies are typically subject to
significant taxes and fees in addition to normal federal, state, local and
provincial income taxes, and such taxes and fees are subject to increase at any
time. We pay substantial taxes and fees with respect to our operations. From
time to time, federal, state, local and provincial legislators and officials
have proposed changes in tax laws, or in the administration of such laws,
affecting the gaming industry. In addition, worsening economic conditions could
intensify the efforts of state and local governments to raise revenues through
increases in gaming taxes. It is not possible to determine with certainty the
likelihood of changes in tax laws or in the administration of such laws. Such
changes, if adopted, could have a material adverse effect on our business,
financial condition and results of operations.
COMPLIANCE WITH OTHER LAWS. We are also subject to a variety of other rules
and regulations, including zoning, environmental, construction and land-use laws
and regulations governing the serving of alcoholic beverages.
WE DEPEND ON OUR KEY PERSONNEL.
We are highly dependent on the services of Peter M. Carlino, our Chairman
and Chief Executive Officer, and other members of our senior management team. We
have entered into employment agreements with Mr. Carlino and certain other
officers. However, the loss of the services of any of these individuals could
have a material adverse effect on our business, financial condition and results
of operations.
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INCLEMENT WEATHER AND OTHER CONDITIONS COULD SERIOUSLY DISRUPT OUR OPERATIONS.
The operations of our facilities are subject to disruptions or reduced
patronage as a result of severe weather conditions. Our dockside facilities in
Mississippi and Louisiana are subject to risks in addition to those associated
with land-based casinos, including loss of service due to casualty, mechanical
failure, extended or extraordinary maintenance, flood, hurricane or other severe
weather conditions. Reduced patronage and the loss of a dockside casino or
riverboat from service for any period of time due to severe weather could
adversely affect our business, financial condition and results of operations.
WE DEPEND ON AGREEMENTS WITH OUR HORSEMEN AND PARI-MUTUEL CLERKS TO OPERATE OUR
BUSINESS.
The Federal Horseracing Act, the West Virginia Racing Act and the
Pennsylvania Racing Act require that, in order to simulcast races, we have
written agreements with the horse owners and trainers at our West Virginia and
Pennsylvania race tracks. In addition, in order to operate gaming machines in
West Virginia, we are required to enter into written agreements regarding the
proceeds of the gaming machines with a representative of a majority of the horse
owners and trainers, a representative of a majority of the pari-mutuel clerks
and a representative of a majority of the horse breeders. On March 23, 1999, we
signed a new horsemen agreement with the Pennsylvania Thoroughbred Horsemen at
Penn National Race Course with an initial term that expires on January 1, 2004.
Our agreement with the Pennsylvania Harness Horsemen was entered into in
November 1999 and expires on January 16, 2003. At the Charles Town Entertainment
Complex, we have an agreement with the Charles Town Horsemen that expires on
December 31, 2002. Our agreement with the pari-mutuel clerks at Charles Town
expires on December 31, 2004.
If we fail to maintain operative agreements with the horsemen at a track, we
will not be permitted to conduct live racing and export and import simulcasting
at that track, and, in West Virginia, we will not be permitted to operate our
gaming machines. In addition, our simulcasting agreements are subject to the
horsemen's approval. In February 1999, the Pennsylvania Thoroughbred Horsemen
stopped racing at Penn National Race Course and withdrew their permission for us
to import simulcast races from other racetracks, resulting in the closure of
Penn National Race Course and its six OTWs. As a result of this action, our
operations at Penn National Race Course and its OTWs were suspended for more
than five weeks, we lost 46 race days at Penn National Race Course, and it took
nearly six months from the beginning of the action before we returned to
pre-action levels of racing and operations. If we fail to renew or modify
existing agreements on satisfactory terms, this failure could have a material
adverse effect on our business, financial condition and results of operations.
In addition, pursuant to the New Jersey Simulcasting Racing Act, our New
Jersey joint venture, Pennwood Racing, Inc., must maintain written agreements
with the horsemen at Freehold Raceway in order to simulcast races to the
Atlantic City casinos. Horsemen agreements currently are in effect at both
facilities.
RISKS RELATED TO OUR CAPITAL STRUCTURE AND THIS OFFERING
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.
We have a significant amount of indebtedness. On a pro forma basis as of
September 30, 2001, after giving effect to the application of the net proceeds
from this offering, we would have had total indebtedness of approximately
$389.9 million (excluding unused commitments under the credit facility) and
total shareholders' equity of $173.1 million.
Our substantial indebtedness could have important consequences to our
financial health. For example, it could:
- increase our vulnerability to general adverse economic and industry
conditions;
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- require us to dedicate a substantial portion of our cash flow from
operations to debt service, thereby reducing the availability of our cash
flow to fund working capital, capital expenditures, and other general
corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
are not as highly leveraged; and
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
Any of the above-listed factors could have a material adverse effect on our
business, financial condition and results of operations. In addition, we may
incur substantial additional indebtedness in the future. The terms of the
existing indebtedness do not fully prohibit us from doing so. If new debt is
added to our current debt levels, the related risks that we now face could
intensify.
OUR STOCK PRICE IS VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR
ABOVE THE PRICE YOU PAID FOR THEM.
Between January 1, 2001 and February 13, 2002, the closing sale price of our
common stock has ranged from a high of $32.38 per share to a low of $9.56 per
share. The market price of our common stock could continue to fluctuate
substantially due to a variety of factors, including:
- quarterly fluctuations in results of operations;
- the construction of new gaming facilities by competitors near our existing
properties;
- legislative or regulatory developments adverse to our existing gaming
properties or the gaming industry in general;
- changes in or failure to meet earnings estimates by securities analysts;
- sales of our common stock by existing shareholders or the perception that
these sales may occur;
- adverse judgments or settlements obligating us to pay damages;
- negative publicity about us or the gaming industry in general;
- loss of key personnel; and
- the termination of a material contract with our horsemen and pari-mutuel
clerks.
In addition, overall volatility has often significantly affected the market
prices of securities for reasons unrelated to a company's operating performance.
In the past, securities class action litigation has often been commenced against
companies that have experienced periods of volatility in the price of their
stock. Securities litigation initiated against us could cause us to incur
substantial costs and could lead to the diversion of management's attention and
resources.
ANTI-TAKEOVER PROVISIONS MAY DETER A THIRD PARTY FROM ACQUIRING US, LIMITING OUR
SHAREHOLDERS' ABILITY TO PROFIT FROM SUCH A TRANSACTION.
Our Articles of Incorporation include provisions that may delay, deter or
prevent a takeover attempt that shareholders might consider desirable. For
example, our Articles of Incorporation provide that our directors are to be
divided into three classes and elected to serve staggered three-year terms. This
structure could impede or discourage an attempt to obtain control of us by
preventing shareholders from replacing our entire board in a single proxy
contest, making it more difficult for a third party to take control of us
without the consent of our board of directors. Our Articles of
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Incorporation further provide that our shareholders may not take any action in
writing without a meeting. This prohibition could impede or discourage an
attempt to obtain control of us by requiring that any actions required to be
taken by shareholders be taken at properly called shareholder meetings.
We also have adopted a shareholder rights plan that will dilute the stock
ownership of an acquirer of our common stock upon the occurrence of certain
events. The provisions in our Articles of Incorporation and our shareholder
rights plan may have the effect of deterring hostile takeovers, including
transactions in which shareholders might otherwise profit.
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK AFTER THIS
OFFERING COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DECLINE.
Our executive officers, directors and the selling shareholder, who
collectively beneficially own approximately 37.1% of our outstanding common
stock (approximately 25.3% of our outstanding common stock after completion of
this offering), have agreed to hold their shares until 90 days after this
offering, subject to certain exceptions. Sales, or the availability for sale, of
shares of our common stock by these or other shareholders could cause the market
price of our common stock to decline. In addition, approximately 984,667
additional shares of common stock issuable to our executive officers and
directors upon exercise of vested stock options are available for resale within
60 days of January 31, 2002.
OUR EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP OWN SUFFICIENT SHARES OF OUR
COMMON STOCK TO SIGNIFICANTLY AFFECT THE RESULTS OF ANY SHAREHOLDER VOTE.
As a result of the significant share ownership described above, our
executive officers and directors have the ability to significantly influence the
outcome of matters requiring a shareholder vote, including the election of our
board of directors, amendments to our organizational documents, or approval of
any merger, sale of assets or other major corporate transaction. The interests
of our executive officers and directors may differ from yours and our executive
officers and directors may be able to delay or prevent us from entering into
transactions that would result in a change in control, including transactions in
which our shareholders might otherwise receive a premium over the then current
market price for their shares.
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USE OF PROCEEDS
We plan to use the entire net proceeds from our sale of common stock,
approximately $79.1 million after underwriting discounts and commissions and
expenses, to repay a portion of the outstanding balances under the Tranche A and
Tranche B term loans under our existing credit facility and to pay certain
prepayment costs associated therewith. As of September 30, 2001, there was
approximately $262.2 million outstanding under the term loans. The Tranche A
Term Loan is payable in installments with a final maturity in 2005, and the
Tranche B Term Loan is payable in installments with a final maturity in 2006. At
September 30, 2001, the effective Tranche A and Tranche B term loan rates were
approximately 6.7% and 7.3%, respectively.
We will not receive any proceeds from the sale of the 1,250,000 shares of
common stock by the selling shareholder.
MARKET PRICE OF COMMON STOCK
Our common stock is quoted on The Nasdaq National Market under the symbol
"PENN." The following table sets forth for the periods indicated the high and
low sales prices per share of our common stock as reported on The Nasdaq
National Market.
HIGH LOW
---- ---
2000
First Quarter............................................. $11.25 $ 6.81
Second Quarter............................................ 15.75 10.38
Third Quarter............................................. 15.38 12.50
Fourth Quarter............................................ 18.38 8.00
2001
First Quarter............................................. $15.13 $ 9.25
Second Quarter............................................ 26.20 10.88
Third Quarter............................................. 27.98 12.95
Fourth Quarter............................................ 30.65 16.02
2002
First Quarter (through February 13, 2002)................. $32.99 $24.86
The closing sale price per share of common stock on The Nasdaq National
Market on February 13, 2002 was $31.75. There are approximately 600 holders of
record of our common stock.
DIVIDEND POLICY
Since our initial public offering of common stock in May 1994, we have not
paid any cash dividends on our common stock. We intend to retain all of our
earnings to fund our business, and thus, do not anticipate paying cash dividends
on our common stock for the foreseeable future. Payment of any cash dividends in
the future will be at the discretion of our Board of Directors and will depend
upon, among other things, our future earnings, operations and capital
requirements, our general financial condition and general business conditions.
Moreover, our existing credit facility prohibits us from authorizing, declaring
or paying any dividends until our commitments under the credit facility have
been terminated and all amounts outstanding thereunder have been repaid. In
addition, future financing arrangements may prohibit the payment of dividends
under certain conditions.
S-16
CAPITALIZATION
The following table sets forth our consolidated cash and cash equivalents
and capitalization (i) on an actual basis as of September 30, 2001, and (ii) on
an as adjusted basis to reflect the sale of the 2,750,000 shares of our common
stock at an offering price of $30.50 per share (less estimated underwriting
discounts, commissions and offering expenses), as if it occurred on
September 30, 2001. You should read this information in conjunction with the
consolidated financial statements and related notes and other financial
information incorporated by reference in this prospectus supplement.
AS OF SEPTEMBER 30, 2001
------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
Cash and cash equivalents................................... $ 36,401 $ 36,401
======== ========
Long-term debt, including current portion
Senior secured credit facility............................ $268,687 $189,888
Other debt................................................ 35 35
11 1/8% senior subordinated notes due 2008................ 200,000 200,000
-------- --------
Total long-term debt(1)................................. 468,722 389,923
-------- --------
Shareholders' equity
Preferred stock, $.01 par value, authorized 1,000,000
shares; no shares issued and outstanding................ -- --
Common stock, $.01 par value, authorized 200,000,000
shares; 15,901,300 shares issued, actual; 18,651,300
shares issued, as adjusted.............................. 159 187
Treasury stock, at cost, 427,700 shares................... (2,379) (2,379)
Additional paid-in capital................................ 44,348 123,395
Retained earnings......................................... 60,776 58,300
Other comprehensive income................................ (6,358) (6,358)
Cumulative translation adjustment......................... (32) (32)
-------- --------
Total shareholders' equity.............................. 96,514 173,113
-------- --------
Total capitalization........................................ $565,236 $563,036
======== ========
- ------------------------
(1) We have entered into a number of arrangements that impose financial
obligations on us, but do not appear as liabilities on our balance sheet.
They include:
- A $100 million, notional amount, interest rate swap agreement that
converts a portion of our floating rate interest obligation into a fixed
LIBOR of 5.835% plus an applicable margin up to 4% per annum. This
instrument matures in December 2003.
- A $36 million, notional amount, interest rate swap agreement that fixes
LIBOR at 4.8125% plus an applicable margin up to 4% per annum. This
instrument matures in June 2004.
- Four letters of credit totaling approximately $4.4 million.
- A guarantee of up to 50% of a term loan obligation of our New Jersey joint
venture. As of January 31, 2002, our obligation under our guaranty of the
term loan was limited to approximately $10.3 million.
S-17
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying unaudited pro forma consolidated statements of operations
for the nine months ended September 30, 2000 and 2001 and the twelve months
ended September 30, 2000 and 2001 were prepared giving effect to the acquisition
of the Mississippi properties and CRC as if each event occurred on October 1,
1999. In the pro forma consolidated statements of operations, we have
consolidated our historical results with the historical results of operations of
the Mississippi and CRC properties acquired for such periods.
You should read the following pro forma consolidated statements of
operations in conjunction with the historical consolidated financial statements
of Penn National, Mardi Gras Casino Corp. (d/b/a/ Casino Magic Bay St. Louis),
Mississippi-I Gaming, L.P. (d/b/a Boomtown Biloxi) and CRC Holdings,
Inc.--Gaming Division incorporated herein by reference. The unaudited pro forma
consolidated statements of operations are presented for illustrative purposes
only and are not necessarily indicative of the operating results that would have
occurred if all of the events as described above had occurred on the first day
of the respective periods presented, nor are they necessarily indicative of our
future operating results.
S-18
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
PRO FORMA
FOR
MISSISSIPPI
PROPERTIES
PENN MISSISSIPPI CRC PRO FORMA AND CRC
NATIONAL PROPERTIES ACQUISITION ADJUSTMENTS ACQUISITION
(1) (2) (3) (4) (5)
-------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues
Gaming.................................... $ 99,895 $ 84,840 $ 67,751 $ -- $252,486
Racing.................................... 87,913 -- -- -- 87,913
Management servicing fees................. -- -- 10,177 -- 10,177
Other..................................... 12,209 12,362 1,577 -- 26,148
-------- -------- -------- -------- --------
Total revenues.............................. 200,017 97,202 79,505 -- 376,724
-------- -------- -------- -------- --------
Operating expenses
Gaming.................................... 59,050 47,516 31,603 -- 138,169
Racing.................................... 59,065 -- -- -- 59,065
Other operating expenses.................. 11,980 9,078 908 (269)(c) 21,697
General and administrative................ 29,316 17,987 25,315 (2,170)(d) 70,448
Depreciation and amortization............. 8,457 5,070 3,833 11,196 (a) 28,556
-------- -------- -------- -------- --------
Total operating expenses.................... 167,868 79,651 61,659 8,757 317,935
-------- -------- -------- -------- --------
Income from operations...................... 32,149 17,551 17,846 (8,757) 58,789
Interest income............................. 1,334 3 1,237 -- 2,574
Interest expense............................ (11,004) (93) (5,486) (16,736)(b) (33,319)
Earnings income from joint venture.......... 2,244 -- -- -- 2,244
Other income (expense), net................. 1 (301) (364) -- (664)
-------- -------- -------- -------- --------
Income before income taxes, minority
interest and extraordinary item........... 24,724 17,160 13,233 (25,493) 29,624
Income tax expense.......................... 8,876 3,946 5,466 (7,860)(e) 10,428
-------- -------- -------- -------- --------
Income before minority interest and
extraordinary item........................ 15,848 13,214 7,767 (17,633) 19,196
Minority interest........................... -- -- (2,346) 2,346 (f) --
-------- -------- -------- -------- --------
Income before extraordinary item............ 15,848 13,214 5,421 (15,287) 19,196
Extraordinary item.......................... (6,583) -- -- 6,583 (g) --
-------- -------- -------- -------- --------
Net income.................................. $ 9,265 $ 13,214 $ 5,421 $ (8,704) $ 19,196
======== ======== ======== ======== ========
Diluted earnings per share
Income before extraordinary item.......... $ 1.03 $ 1.25
======== ========
Net income................................ $ 0.60 $ 1.25
======== ========
EBITDA...................................... $ 42,850 $ 89,589
======== ========
S-19
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2001
PRO
FORMA
FOR
PENN CRC PRO FORMA CRC
NATIONAL ACQUISITION ADJUSTMENTS ACQUISITION
(1) (3) (4) (5)
-------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues
Gaming.......................................... $267,264 $31,480 $ -- $298,744
Racing.......................................... 85,508 -- -- 85,508
Management servicing fees....................... 5,480 4,494 -- 9,974
Other........................................... 25,173 -- -- 25,173
-------- ------- ------- --------
Total revenues.................................... 383,425 35,974 419,399
-------- ------- ------- --------
Operating expenses
Gaming.......................................... 146,940 12,401 -- 159,341
Racing.......................................... 59,511 -- -- 59,511
Other operating expenses........................ 25,847 13,429 -- 39,276
General and administrative...................... 68,515 -- (2,102)(d) 66,413
Depreciation and amortization................... 25,079 1,756 1,721 (a) 28,556
-------- ------- ------- --------
Total operating expenses.......................... 325,892 27,586 (381) 353,097
-------- ------- ------- --------
Income from operations............................. 57,533 8,388 381 66,302
------- ------- ------ --------
Interest income.................................... 2,654 447 -- 3,101
Interest expense................................... (32,461) (2,138) 1,280 (b) (33,319)
Earnings from joint venture........................ 2,020 -- -- 2,020
Other (expense), net............................... (729) (565) -- (1,294)
------- ------- ------ --------
Income before income taxes, minority interest and
extraordinary item............................... 29,017 6,132 1,661 36,810
Income tax expense................................. 10,204 2,611 143 (e) 12,958
------- ------- ------ --------
Income before minority interest and extraordinary
item............................................. 18,813 3,521 1,518 23,852
Minority interest.................................. -- (1,323)(f) 1,323 (f) --
------- ------- ------ --------
Income before extraordinary item................... 18,813 2,198 2,841 23,852
------- ------- ------ --------
Extraordinary item............................... -- -- -- --
Net income......................................... $18,813 $ 2,198 $2,841 $ 23,852
======= ======= ====== ========
Diluted earnings per share
Income before extraordinary item................. $ 1.19 $ 1.51
======= ========
Net income....................................... $ 1.19 $ 1.51
======= ========
EBITDA............................................. $84,632 $ 96,878
======= ========
S-20
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED SEPTEMBER 30, 2000
PRO FORMA
FOR
MISSISSIPPI
PROPERTIES
PENN MISSISSIPPI CRC PRO FORMA AND CRC
NATIONAL PROPERTIES ACQUISITION ADJUSTMENTS ACQUISITION
(1) (2) (3) (4) (5)
-------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues
Gaming................................... $115,241 $117,288 $ 88,001 $ -- $320,530
Racing................................... 114,678 -- -- -- 114,678
Management servicing fees................ -- -- 14,173 -- 14,173
Other.................................... 15,234 16,741 2,159 -- 34,134
-------- -------- -------- -------- --------
Total revenues............................. 245,153 134,029 104,333 -- 483,515
-------- -------- -------- -------- --------
Operating expenses
Gaming................................... 68,800 66,028 41,401 -- 176,229
Racing................................... 77,090 -- -- -- 77,090
Other operating expenses................. 14,958 12,853 1,206 (269)(c) 28,748
General and administrative............... 38,466 25,057 33,843 (2,448)(d) 94,918
Depreciation and amortization............ 10,667 7,487 5,328 14,590 (a) 38,072
-------- -------- -------- -------- --------
Total operating expenses................... 209,981 111,425 81,778 11,873 415,057
-------- -------- -------- -------- --------
Income from operations..................... 35,172 22,604 22,555 (11,873) 68,458
Interest income............................ 1,727 113 1,726 -- 3,566
Interest expense........................... (13,163) (274) (7,415) (23,573)(b) (44,425)
Earnings from joint venture................ 2,827 -- -- -- 2,827
Other income (expense), net................ -- (210) (914) -- (1,124)
-------- -------- -------- -------- --------
Income before income taxes, minority
interest and extraordinary item.......... 26,563 22,233 15,952 (35,446) 29,302
Income tax expense......................... 9,382 4,534 6,836 (10,437)(e) 10,315
-------- -------- -------- -------- --------
Income before minority interest and
extraordinary item....................... 17,181 17,699 9,116 (25,009) 18,987
Minority interest.......................... -- -- (2,397) 2,397 (f) --
-------- -------- -------- -------- --------
Income before extraordinary item........... 17,181 17,699 6,719 (22,612) 18,987
Extraordinary item......................... (6,583) -- -- 6,583 (g) --
-------- -------- -------- -------- --------
Net income................................. $ 10,598 $ 17,699 $ 6,719 $(16,029) $ 18,987
======== ======== ======== ======== ========
Diluted earnings per share
Income before extraordinary item......... $ 1.12 $ 1.23
======== ========
Net income............................... $ 0.69 $ 1.23
======== ========
EBITDA..................................... $ 48,666 $109,357
======== ========
S-21
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED SEPTEMBER 30, 2001
PRO FORMA
PENN CRC PRO FORMA FOR CRC
NATIONAL ACQUISITION ADJUSTMENTS ACQUISITION
(1) (3) (4) (5)
-------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues
Gaming........................................ $326,958 $53,928 $ -- $380,886
Racing........................................ 110,826 -- -- 110,826
Management servicing fees..................... 5,480 7,815 -- 13,295
Other......................................... 31,948 -- -- 31,948
-------- ------- ------- --------
Total revenues.................................... 475,212 61,743 -- 536,955
-------- ------- ------- --------
Operating expenses
Gaming........................................ 181,977 30,991 -- 212,968
Racing........................................ 77,512 -- -- 77,512
Other operating expenses...................... 32,644 -- -- 32,644
General and administrative.................... 83,916 15,027 (2,409)(d) 96,534
Depreciation and amortization................. 30,216 2,964 4,892 (a) 38,072
-------- ------- ------- --------
Total operating expenses.......................... 406,265 48,982 2,483 457,730
-------- ------- ------- --------
Income from operations............................ 68,947 12,761 (2,483) 79,225
-------- ------- ------- --------
Interest income................................... 3,195 (1,296) -- 1,899
Interest expense.................................. (40,546) (1,359) (2,520)(b) (44,425)
Earnings from joint venture....................... 2,097 -- -- 2,097
Other (expense), net.............................. (691) (691) -- (1,382)
-------- ------- ------- --------
Income before income taxes, minority interest and
extraordinary item.............................. 33,002 9,415 (5,003) 37,414
Income tax expense................................ 11,465 4,058 (2,353)(e) 13,170
-------- ------- ------- --------
Income before minority interest and extraordinary
item............................................ 21,537 5,357 (2,650) 24,244
Minority interest................................. -- (2,062) 2,062 (f) --
-------- ------- ------- --------
Income before extraordinary item.................. 21,537 3,295 (588) 24,244
-------- ------- ------- --------
Extraordinary item.............................. -- -- -- --
Net income........................................ $ 21,537 $ 3,295 $ (588) $ 24,244
======== ======= ======= ========
Diluted earnings per share
Income before extraordinary item................ $ 1.36 $ 1.53
======== ========
Net income...................................... $ 1.36 $ 1.53
======== ========
EBITDA............................................ $101,260 $119,394
======== ========
S-22
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The following notes describe the column headings in the pro forma
consolidated statement of operations and the pro forma adjustments that have
been made to the unaudited pro forma consolidated statements of operations.
(1) Reflects the consolidated historical statements of operations of Penn
National Gaming, Inc. and subsidiaries.
(2) Represents the combined historical statements of operations for Casino
Magic and Boomtown Biloxi for each of the periods presented. We acquired
the Mississippi properties on August 8, 2000. As a result, the operating
results of the Mississippi properties for the period from August 8, 2000
through September 30, 2001 are included in our operating results.
(3) Represents the historical statements of operations of CRC Holdings, Inc.
- Gaming Division, and the minority interest in LCCI not owned by CRC
prior to our acquisition. We acquired CRC on April 27, 2001. As a result,
the operating results of CRC for the period from April 27, 2001 through
September 30, 2001 are included in our operating results for the nine
months ended and twelve months ended September 30, 2001. For the nine
months ended September 30, 2000, the operating results for CRC are for
the period from December 1, 1999 to August 31, 2000. For the twelve
months ended September 30, 2000, the operating results for CRC are for
the period September 1, 1999 to August 31, 2000.
(4) Reflects the following pro forma adjustments to the operating results:
(a) Adjustments to reflect the acquisitions of Mississippi properties and
CRC:
NINE NINE TWELVE TWELVE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 2001 2000 2001
-------------- ------------- ------------- -------------
(IN THOUSANDS)
Net increase in expense
resulting from the
depreciation of $86.4 million
and $116.9 million of
property related to
Mississippi properties and
CRC, respectively, using
lives ranging from 5 to 39
years........................ $ 4,854 $ 86 $ 8,248 $1,435
Net increase in amortization
expense of goodwill related
to Mississippi properties and
CRC of $78.3 million and
$59.1 million, respectively,
using a life of 40 years..... 2,852 664 2,852 1,652
Net increase in expense
resulting from the
amortization of $17.0 million
in deferred financing costs
over the term of the
Company's debt obligations... 1,042 203 1,042 425
Amortization of fair value of
management contract of $25.7
million over its 10 1/4-year
term......................... 2,448 768 2,448 1,380
------- ------- ------- ------
$11,196 $ 1,721 $14,590 $4,892
======= ======= ======= ======
S-23
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(b) Reflects net increase in interest expense resulting from the increase in
debt related to the Mississippi properties and CRC acquisitions.
(c) Adjustment to reflect elimination of legal fees and other expenses paid
by CRC in connection with the acquisition.
(d) Reflects pro forma adjustments relating to the CRC acquisition to
reflect the elimination of:
NINE MONTHS NINE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 2001 2000 2001
------------- ------------- ------------- -------------
(IN THOUSANDS)
Management fees.............. $ 455 $ 178 $ 574 $ 352
Royalty fees................. 515 172 674 305
Management bonus............. 1,000 1,452 1,000 1,452
Other charges................ 200 300 200 300
------ ------ ------ ------
$2,170 $2,102 $2,448 $2,409
====== ====== ====== ======
(e) Reflects the net income tax adjustments associated with the pro forma
adjustments described in (a), (b), (c), and (d) above.
(f) Adjustment to reflect elimination of minority interest in LCCI.
(g) Reflects elimination of extraordinary item per Penn National historical
financial statements.
(5) Reflects unaudited pro forma consolidated statement of operations of Penn
National as adjusted for Mississippi acquisitions and CRC acquisition.
S-24
SELLING SHAREHOLDER
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of January 31, 2002, and as adjusted to reflect
the sale of the shares offered hereby, by the selling shareholder. We believe
that the person named below has sole voting and investment power with respect to
all common stock shown as beneficially owned by such holder except as noted in
the footnote relating to such holder. The address of the selling shareholder is
care of Penn National at our principal executive office.
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR NUMBER OF OWNED AFTER
TO THIS OFFERING(1) SHARES THIS OFFERING(1)
---------------------- BEING ----------------------
BENEFICIAL OWNER NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ---------------- --------- ---------- --------- --------- ----------
The Carlino Family Trust(2)............ 4,300,326 27.7% 1,250,000 3,050,326 16.7%
- ------------------------
(1) Applicable percentage of ownership prior to this offering is based upon
15,523,975 shares of common stock outstanding as of January 31, 2002. For
ownership after completion of this offering, applicable percentage ownership
is based on 18,273,975 shares of common stock outstanding, assuming sale of
all 2,750,000 shares offered by us under this prospectus supplement and no
exercise of the underwriters' over-allotment option. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes shares with respect to which the person has voting
and investment power.
(2) Irrevocable trust among Peter D. Carlino and his eight children, as
settlors, and certain trustees, as to which Peter M. Carlino, our Chairman
and Chief Executive Officer, has sole voting power for the election of
directors and certain other matters, shared voting power with respect to
certain matters, and shared investment power. Peter M. Carlino has an
economic interest in approximately 11.7% of the total shares held by the
Carlino Family Trust and will receive economic benefit with respect to
approximately 11.7% of the total net proceeds received by the Trust from
this sale.
S-25
UNDERWRITING
Subject to the terms and conditions of a purchase agreement dated February
13, 2002, the underwriters named below, acting through their representatives,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co. Inc.,
CIBC World Markets Corp., Deutsche Banc Alex. Brown Inc. and Lehman Brothers
Inc., have severally agreed with us and the selling shareholder to purchase from
us and the selling shareholder the number of shares of common stock listed
opposite their names below.
NUMBER
OF SHARES
UNDERWRITER ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................... 1,332,000
Bear, Stearns & Co. Inc..................................... 1,332,000
CIBC World Markets Corp..................................... 378,000
Deutsche Banc Alex. Brown Inc............................... 378,000
Lehman Brothers Inc......................................... 378,000
Fahnestock & Co. Inc. ...................................... 132,000
Hibernia Southcoast Capital................................. 70,000
---------
Total............................................. 4,000,000
=========
The purchase agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
offered by this prospectus are subject to approval by their counsel of legal
matters and to other conditions set forth in the purchase agreement. The
underwriters are obligated to purchase and accept delivery of all the shares of
common stock offered hereby, other than those shares covered by the
over-allotment option described below, if any are purchased.
The representatives have advised us that the underwriters propose to offer
the shares of common stock at the public offering price set forth on the cover
page of this prospectus and to certain dealers at that price less a concession
of not in excess of $0.96 per share, of which $0.10 may be reallowed to other
dealers. After this offering, the public offering price, concession and
reallowance to dealers may be reduced by the representatives. No such reduction
shall change the amount of proceeds to be received by us as set forth on the
cover page of this prospectus. The common stock is offered by the underwriters
as stated herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. The underwriters do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
We have granted to the underwriters an option, exercisable within 30 days
after the date of this prospectus supplement to purchase from us up to an
aggregate of 600,000 shares of common stock to cover over-allotments, if any, at
the public offering price less underwriting discounts and commissions. If the
underwriters exercise their over-allotment option to purchase any of the
additional 600,000 shares of common stock, each underwriter, subject to certain
conditions, will become obligated to purchase its pro-rata portion of these
additional shares based on the underwriter's percentage underwriting commitment
in the offering as indicated in the preceding table. If purchased, these
additional shares will be sold by the underwriters on the same terms as those on
which the shares offered hereby are being sold. We will be obligated, pursuant
to the over-allotment option, to sell shares to the underwriters to the extent
the over-allotment option is exercised. The underwriters may exercise the
over-allotment option only to cover over-allotments made in connection with the
sale of the shares of common stock offered in this offering.
S-26
The following table shows the public offering price, underwriting discounts
and commissions and proceeds before expenses to us and the selling shareholder.
Such amounts are shown assuming both no exercise and full exercise of the
underwriters' over-allotment option to purchase additional shares.
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
Public offering price............................... $30.50 $122,000,000 $140,300,000
Underwriting discount............................... $ 1.60 $ 6,400,000 $ 7,360,000
Proceeds, before expenses, to us.................... $28.90 $ 79,475,000 $ 96,815,000
Proceeds, before expenses, to the selling
shareholder........................................... $28.90 $ 36,125,000 $ 36,125,000
We and the selling shareholder have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act,
liabilities arising from breaches of representations and warranties contained in
the Purchase Agreement, or to contribute to payments that the underwriters may
be required to make in respect of those liabilities.
Each of our executive officers and directors and the selling shareholder
have agreed for a period of 90 days after the date of this prospectus, subject
to specified exceptions, not to:
- offer to sell, contract to sell, or otherwise sell, dispose of, loan,
pledge or grant any rights with respect to any shares of common stock or
any options or warrants to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock
owned as of the date of this prospectus or thereafter acquired directly by
those holders or with respect to which they have the power of disposition;
or
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock (regardless of whether any of these transactions are to be settled
by the delivery of common stock, or such other securities, in cash or
otherwise).
Merrill Lynch, Pierce, Fenner & Smith Incorporated may, in its sole
discretion and at any time or from time to time before the termination of the
90-day period, without notice, release all or any portion of the securities
subject to lock-up agreements.
In addition, we have agreed that, subject to certain exceptions, during the
90-day lock-up period we will not, without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, consent to the disposition of any
shares held by shareholders subject to lock-up agreements prior to the
expiration of the lock-up period, or issue, sell, contract to sell, or otherwise
dispose of, any shares of common stock, any options or warrants to purchase any
shares of common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of our common stock upon the exercise of outstanding
options or warrants, and the issuance of options or shares of common stock under
existing stock option and incentive plans.
Other than in the United States, no action has been taken by us, the selling
shareholder or the underwriters that would permit a public offering of the
shares of common stock offered by this prospectus supplement in any jurisdiction
where action for that purpose is required. The shares of common stock offered by
this prospectus supplement may not be offered or sold, directly or indirectly,
nor may this prospectus or any other offering material or advertisements in
connection with the offer and sale of any such shares of common stock be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of that
jurisdiction. Persons into whose possession this prospectus supplement comes are
advised to inform themselves about and to observe any restrictions relating to
the offering and the distribution of this prospectus supplement. This prospectus
supplement does not constitute an offer to sell or a solicitation
S-27
of an offer to buy any shares of common stock offered by this prospectus
supplement in any jurisdiction in which such an offer or a solicitation is
unlawful.
Our common stock is traded on the Nasdaq National Market under the symbol
"PENN."
A prospectus supplement in electronic format may be made available on the
Internet sites or through other online services maintained by one or more of the
underwriters of this offering, or by their affiliates. In those cases,
prospective investors may view offering terms online and, depending upon the
particular underwriter, prospective investors may be allowed to place orders
online. The underwriters may agree with us to allocate a specific number of
shares for sale to online brokerage account holders. Any such allocation for
online distributions will be made by the representatives on the same basis as
other allocations. Other than the prospectus supplement in electronic format,
the information on any underwriter's web site and any information contained in
any other web site maintained by an underwriter is not part of the prospectus
supplement or the registration statement of which this prospectus supplement
forms a part, has not been approved and/or endorsed by us or any underwriter in
its capacity as underwriter and should not be relied upon by investors.
The representatives have advised us that, pursuant to Regulation M under the
Securities Exchange Act, some participants in the offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the shares of common stock at a level above that
which might otherwise prevail in the open market. A "stabilizing bid" is a bid
for or the purchase of shares of common stock on behalf of the underwriters for
the purpose of fixing or maintaining the price of the common stock. A "syndicate
covering transaction" is the bid for or purchase of common stock on behalf of
the underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with this offering if the common
stock originally sold by such underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by such underwriter or syndicate member. The
representatives have advised us that such transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
In connection with this offering and before the commencement of offers or
sales of the common stock, certain underwriters who are qualified market makers
on the Nasdaq National Market may engage in passive market making transactions
in the common stock on the Nasdaq National Market in accordance with Rule 103 of
Regulation M under the Securities Exchange Act, during the business day prior to
the pricing of the offering. Passive market makers must comply with applicable
volume and price limitations and must be identified as such. In general, a
passive market maker must display its bid at a price not in excess of the
highest independent bid for such security; if all independent bids are lowered
below the passive market maker's bid, however, such bid must then be lowered
when certain purchase limits are exceeded.
The underwriters and their affiliates have from time to time performed
investment banking and other financial services for us and our affiliates for
which they have received advisory or transaction fees, as applicable, plus
out-of-pocket expenses, of the nature and in amounts customary in the industry
for these financial services.
S-28
LEGAL MATTERS
Certain legal matters in connection with the common stock offered hereby by
us will be passed upon by Morgan, Lewis & Bockius LLP, Philadelphia,
Pennsylvania. Schnader Harrison Segal & Lewis LLP will pass upon certain legal
matters for the selling shareholder. Certain legal matters in connection with
this offering will be passed upon for the underwriters by Cahill Gordon &
Reindel, New York, New York.
EXPERTS
The financial statements for Penn National Gaming, Inc. and subsidiaries as
of December 31, 2000 and 1999, and for each of the three years in the period
ended December 31, 2000, incorporated by reference into this prospectus
supplement and the accompanying prospectus, have been audited by BDO Seidman,
LLP, independent public accountants, as indicated in their report appearing
therein, given on the authority of said firm as experts in accounting and
auditing.
The financial statements for Mardi Gras Casino Corp. as of December 31, 1999
and 1998, for each of the three years in the period ended December 31, 1999,
incorporated by reference into this prospectus supplement and the accompanying
prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report appearing therein, given on the
authority of said firm as experts in accounting and auditing.
The financial statements for Mississippi-I Gaming, L.P. as of December 31,
1999 and 1998, for each of the three years in the period ended December 31,
1999, incorporated by reference into this prospectus supplement and the
accompanying prospectus, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report appearing therein, given on the
authority of said firm as experts in accounting and auditing.
The financial statements of CRC Holdings, Inc.--Gaming Division as of
November 30, 1999 and 2000, and for each of the three years in the period ended
November 30, 2000 incorporated by reference into this prospectus supplement and
the accompanying prospectus, have been audited by PricewaterhouseCoopers LLP,
independent accountants, as stated in their report appearing therein, given on
the authority of said firm as experts in accounting and auditing.
S-29
PROSPECTUS
$300,000,000
[PENN NATIONAL GAMING LOGO]
PENN NATIONAL GAMING, INC.
COMMON STOCK, PREFERRED STOCK AND
DEBT SECURITIES
------------------------
We may use this prospectus to offer and sell securities from time to time.
The types of securities we may sell include:
- common stock;
- preferred stock; and
- debt securities.
Certain of our shareholders also may offer and sell common stock under this
prospectus.
We will provide the specific terms of these securities in supplements to
this prospectus prepared in connection with each offering. The securities
offered will contain other significant terms and conditions. Any debt securities
we offer and sell may be guaranteed by our subsidiaries. Please read this
prospectus and the applicable prospectus supplement carefully before you invest.
Our common stock trades on The Nasdaq National Market under the symbol
"PENN." We have not yet determined whether any of the other securities offered
hereby will be listed on any exchange or over-the-counter market. If we decide
to seek listing of any such securities, a prospectus supplement relating thereto
will disclose such exchange or market.
INVESTING IN THESE SECURITIES INVOLVES RISKS. YOU SHOULD CAREFULLY REVIEW
THE INFORMATION THAT WILL BE CONTAINED IN THE PROSPECTUS SUPPLEMENT UNDER THE
HEADING "RISK FACTORS."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY, NOR HAVE
THEY DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 30, 2001.
TABLE OF CONTENTS
PAGE
--------
About This Prospectus....................................... i
Where You Can Find More Information......................... ii
Disclosure Regarding Forward-Looking Statements............. iii
The Company................................................. 1
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of Capital Stock................................ 4
Description of Debt Securities.............................. 10
Selling Shareholders........................................ 17
Plan of Distribution........................................ 18
Legal Matters............................................... 19
Experts..................................................... 19
------------------------
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may, from time to time, sell any combination of the
securities described in this prospectus in one or more offerings up to a total
dollar amount of $300,000,000. This prospectus provides you with a general
description of the securities we may offer. Each time we sell securities, we
will provide a prospectus supplement that will contain specific information
about the terms of that offering. The prospectus supplement also may add, update
or change information contained in this prospectus. You should read this
prospectus and the applicable prospectus supplement together with the additional
information described below under the heading "Where You Can Find More
Information."
The registration statement that contains this prospectus (including the
exhibits) contains additional information about us and the securities offered by
this prospectus. Specifically, we have filed certain legal documents that
control the terms of the securities offered by this prospectus as exhibits to
the registration statement. We will file certain other legal documents that
control the terms of the securities offered by this prospectus as exhibits to
reports we file with the SEC. That registration statement and the other reports
can be read at the SEC web site or at the SEC offices mentioned under the
heading "Where You Can Find More Information."
You should rely only upon the information contained in, or incorporated
into, this document. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should assume the information appearing in this document is accurate only as of
the date on the front cover of this document. Our business, financial condition,
results of operations and prospects may have changed since that date.
i
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational reporting requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith we file reports
and other information. Such reports and other information may be inspected and
copied at the public reference rooms of the Securities and Exchange Commission
located at 450 Fifth Street, N.W., Washington, D.C. 20549 and regional offices
in New York, New York and Chicago, Illinois. Copies of such material can be
obtained from the Commission by mail at prescribed rates. Please call the
Commission at 1-800-SEC-0330 (1-800-732-0330) for further information on the
public reference rooms. In addition, the Commission maintains a website
(http://www.sec.gov) that contains such reports, proxy statements and other
information that we have filed. Information may be obtained from us at the
address specified below.
We have "incorporated by reference" into this prospectus certain information
that we file with the Commission. This means that we can disclose important
business, financial and other information in this prospectus by referring you to
the documents containing this information. All information incorporated by
reference is part of this prospectus, unless and until that information is
updated and superseded by the information contained in this prospectus or any
information filed with the Commission and incorporated later. Any information
that we subsequently file with the Securities and Exchange Commission that is
incorporated by reference will automatically update and supersede any previous
information that is part of this prospectus.
We incorporate by reference our documents listed below and any future
filings we make with the Securities and Exchange Commission under Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act until the time that we sell all
of the securities offered by this prospectus:
- Annual Report on Form 10-K/A for the fiscal year ended December 31, 2000;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
- Current Reports on Form 8-K, as amended, filed on October 20, 2000,
March 2, 2001, May 7, 2001 and June 8, 2001;
- The description of our common stock included in our registration statement
on Form 8-A as filed on May 26, 1994; and
- The description of our preferred share purchase rights included in our
registration statement on Form 8-A as filed on March 16, 1999.
We will provide without charge to each person to whom a copy of this
prospectus is delivered upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into the information that this prospectus incorporates). Requests should be
directed to:
Penn National Gaming, Inc.
828 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Attention: Robert S. Ippolito
Telephone (610) 373-2400
ii
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents that are incorporated by reference herein,
include "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Exchange Act,
regarding, among other things, our business strategy, our prospects and our
financial position. These statements can be identified by the use of
forward-looking terminology such as "believes," "estimates," "expects,"
"intends," "may," "will," "should," or "anticipates" or the negative or other
variation of these or similar words, or by discussions of strategy or risks and
uncertainties. Specifically, forward-looking statements may include, among
others, statements concerning:
- projections of future results of operations or financial condition;
- our expectations for our properties and the facility that we manage in
Canada;
- the timing, cost and expected impact on our results of operations of our
planned capital expenditures;
- the expected effect of regulatory changes that we are pursuing; and
- expectations of the continued availability of capital resources.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, they are inherently subject to risks, uncertainties
and assumptions about us and our subsidiaries and, accordingly, we cannot assure
you that such expectations will prove to be correct. Important factors that
could cause actual results to differ materially from the forward-looking
statements include, without limitation, risks related to the following:
- our ability to fully integrate the full-scale casino operations of the
Mississippi and Louisiana properties and the managed Canadian facility
into our business;
- capital expansions at our gaming and pari-mutuel facilities;
- the activities of our competitors;
- our ability to maintain regulatory approvals for our existing businesses
and to receive regulatory approvals for our new businesses;
- our dependence on key personnel;
- the maintenance of agreements with our horsemen and pari-mutuel clerks;
- other risks and uncertainties described from time to time in our filings
with the Securities and Exchange Commission;
- the risk factors or uncertainties listed herein or listed from time to
time in prospectus supplements or any document incorporated by reference
herein or therein; and
- other risks and uncertainties that have not been identified at this time.
All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements included in this document. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
document may not occur.
iii
THE COMPANY
We are a diversified gaming and pari-mutuel wagering company with operations
in West Virginia, Mississippi, Louisiana, Pennsylvania and Ontario, Canada. On a
pro forma basis reflecting our Mississippi and CRC acquisitions completed in
2000 and 2001, respectively, our revenues and adjusted EBITDA would have been
$496.1 million and $112.9 million, respectively, for the year ended
December 31, 2000, and $133.3 million and $31.2 million, respectively, for the
three months ended March 31, 2001.
The following table sets forth certain features of our owned or leased
properties and our managed facility:
GAMING
SQUARE GAMING TABLE
PROPERTY LOCATION TYPE OF FACILITY FOOTAGE MACHINES GAMES
- -------- ------------------ --------------------------- -------- -------- --------
OWNED OR LEASED:
Charles Town Entertainment Charles Town, WV Land-based gaming/ 58,000 1,974 --
Complex Thoroughbred racing
Casino Magic Bay St. Louis Bay St. Louis, MS Dockside gaming 39,500 1,158 38
Boomtown Biloxi Biloxi, MS Dockside gaming 33,600 1,060 27
Casino Rouge Baton Rouge, LA Cruising riverboat 28,000 980 42
Penn National Race Course Harrisburg, PA(1) Thoroughbred racing -- -- --
Pocono Downs Wilkes-Barre, Harness racing -- -- --
PA(1)
------- ----- ---
TOTALS 159,100 5,172 107
======= ===== ===
OPERATED:
Casino Rama Orillia, Ontario Land-based gaming 75,000 2,202 122
- --------------------------
(1) In addition to our racetracks, Penn National Race Course and Pocono Downs
have six and five off-track wagering facilities, respectively, located
throughout Pennsylvania.
Our Charles Town Entertainment Complex in Charles Town, West Virginia
features 1,974 gaming machines, a thoroughbred racetrack, simulcast wagering,
entertainment and dining. The facility is located within easy driving distance
of Baltimore, Maryland and Washington, D.C. and is the leading gaming property
serving those areas. There is a total population of approximately 3.1 million
persons within a 50-mile radius, and approximately 10.0 million persons within a
100-mile radius of the Charles Town Entertainment Complex, of which
approximately 7.2 million persons are over the age of 20. We have experienced
strong growth at the facility and have increased the number of gaming machines
from 400 machines in September 1997 to 1,974 machines as of December 31, 2000.
We recently expanded the gaming area to nearly 60,000 square feet and opened a
150-seat restaurant and bar. In addition, since receiving regulatory approval
permitting the operation of reel-spinning, coin-out machines in April 1999, we
have increased the number of reel-spinning machines relative to the number of
paper ticket video lottery terminals, or VLTs. As a result of these initiatives,
our monthly gaming revenues at Charles Town have grown from approximately
$9.4 million in May 2000 to approximately $13.3 million in May 2001.
Our business strategy is focused on exploiting the higher margins and more
stable cash flows associated with gaming operations compared to pari-mutuel
operations. As part of this strategy, on August 8, 2000, we completed our
acquisition of the Casino Magic Bay St. Louis casino and the
1
Boomtown Biloxi casino from Pinnacle Entertainment, Inc. for an aggregate
purchase price of approximately $201.3 million. Both properties operate in the
Gulf Coast gaming market and are within easy driving distance of New Orleans,
Louisiana, Mobile, Alabama and other points in the Southeast. Casino Magic Bay
St. Louis in Bay St. Louis, Mississippi offers approximately 39,500 square feet
of gaming space, with approximately 1,158 slot machines and 38 table games, a
201-room hotel, an 1,800 seat arena, a recreational vehicle park and an 18-hole
Arnold Palmer-designed championship golf course. Boomtown Biloxi in Biloxi,
Mississippi, offers approximately 33,600 square feet of gaming space, with 1,060
slot machines, 27 table games and other gaming amenities including restaurants
and a 20,000 square foot entertainment center.
On April 27, 2001, we completed the acquisition by merger of CRC
Holdings, Inc., and the minority interest in Louisiana Casino Cruises, Inc.,
which we refer to as LCCI, not owned by CRC prior to our acquisition, for
approximately $181.3 million, including amounts required to repay existing debt.
Immediately prior to the closing, CRC divested itself of all of its non-gaming
assets. LCCI is the owner of Casino Rouge, the leading riverboat gaming facility
in Baton Rouge, Louisiana. Casino Rouge features a four-story riverboat casino
with approximately 28,000 square feet of gaming space, 980 gaming machines and
42 table games. In addition to the Casino Rouge property, a wholly owned
subsidiary of CRC operates Casino Rama, located on the lands of the Mnjikaning,
on behalf of the Ontario Lottery and Gaming Corporation, an agency of the
Province of Ontario. Casino Rama is a casino and full-service entertainment
facility located approximately 90 miles north of Toronto, Canada, with
approximately 75,000 square feet of gaming space, 2,202 gaming machines and 122
table games.
In addition to our gaming facilities, we own and operate Penn National Race
Course, located outside of Harrisburg, one of two thoroughbred racetracks in
Pennsylvania, and Pocono Downs, located outside of Wilkes-Barre, one of two
harness racetracks in Pennsylvania. We also operate eleven off-track wagering
facilities, or OTWs, in Pennsylvania and hold a 50% interest in Pennwood
Racing, Inc., a joint venture that owns and operates Freehold Raceway and
operated Garden State Park in New Jersey until May 2001.
------------------------
We are the successor to several businesses that have operated the Penn
National Race Course since 1972. We were incorporated in Pennsylvania in 1982 as
PNRC Corp. and adopted our present name in 1994. Our principal executive offices
are located in the Wyomissing Professional Center, 825 Berkshire Boulevard,
Suite 200, Wyomissing, Pennsylvania 19610; our telephone number is
(610) 373-2400.
2
USE OF PROCEEDS
Unless otherwise set forth in a prospectus supplement, we intend to use the
net proceeds of any securities sold for general corporate purposes, which may
include financing of capital expenditures, additions to working capital,
reductions of our indebtedness, potential acquisitions and the repurchase of our
common stock. Funds not immediately required for such purposes may be invested
in short-term investment grade securities.
We will not receive any proceeds from the sale of common stock by any
selling shareholders.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets for our ratio of earnings to fixed charges for the
periods indicated:
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -----------------------
2000 1999 1998 1997 1996 2001 2000
-------- -------- -------- -------- -------- ---- ----
Ratio of earnings to fixed
charges(1)........................... 2.1 1.8 2.3 2.2 11.7 1.7 2.3
- ------------------------
(1) In computing the ratio of earnings to fixed charges: (i) earnings were
calculated as the sum of income from continuing operations, before income
taxes and fixed charges, less capitalized interest; and (ii) fixed charges
were computed as the sum of interest expense, amortization of capitalized
debt costs and premium on debt, capitalized interest and the estimated
interest included in rental expense.
We completed our acquisitions of the Casino Magic Bay St. Louis and Boomtown
Biloxi casinos in August 2000 and the Casino Rouge casino and management
contract for the Casino Rama casino in April 2001. On a pro forma basis assuming
the completion of these acquisitions as of January 1, 2000, our ratio of
earnings to fixed charges would have been 1.6 and 1.7 for the year ended
December 31, 2000 and the three months ended March 31, 2001, respectively.
3
DESCRIPTION OF CAPITAL STOCK
The total number of shares of all classes of capital stock that we currently
have authority to issue is 201,000,000, consisting of 200,000,000 shares of
common stock, par value $.01 per share, and 1,000,000 shares of preferred stock,
par value $.01 per share.
As of May 31, 2001, there were approximately 15.5 million shares of common
stock outstanding held of record by 599 persons. Approximately 2.6 million
shares of common stock are reserved for issuance upon the exercise of
outstanding stock options. We have authorized and reserved for issuance 400,000
shares of preferred stock in connection with the preferred share purchase rights
plan described below.
In the discussion that follows, we have summarized selected provisions of
our articles of incorporation and our bylaws relating to our capital stock. You
should read our articles of incorporation and bylaws as currently in effect for
more details regarding the provisions we describe below and for other provisions
that may be important to you. We have filed copies of those documents with the
Commission, and they are filed with or incorporated by reference as exhibits to
this registration statement. Please read "Where You Can Find More Information."
COMMON STOCK
The holders of our common stock are entitled to one vote for each share held
of record on each matter submitted to a vote of shareholders and do not have
cumulative voting rights. Holders of common stock are entitled to receive
ratably those dividends, if any, as may be declared from time to time by the
Board of Directors, in its discretion, out of funds legally available therefor,
subject to any preferential dividend rights of outstanding preferred stock. In
the event of a liquidation, dissolution or winding up of Penn National, the
holders of our common stock are entitled to share ratably in all assets
remaining after the payment of all of our liabilities and subject to the
liquidation preferences of any outstanding preferred stock. Our common stock
does not carry preemptive rights, is not redeemable, does not have any
conversion rights, is not subject to further calls and is not subject to any
sinking fund provisions. The outstanding shares of common stock are and the
shares offered by us in this offering will be, when issued and paid for, fully
paid and nonassessable. Except in certain circumstances as discussed below under
"--Possible Antitakeover Effect of Certain Charter, Bylaw and Other Provisions,"
our common stock is not subject to discriminatory provisions based on ownership
thresholds.
The rights, preferences and privileges of holders of our common stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of the Series A Preferred Stock, if issued, and any series of preferred
stock that we may designate and issue in the future. See "--Preferred Stock."
PREFERRED STOCK
Our articles of incorporation authorize the issuance of up to 1,000,000
shares of preferred stock. The Board of Directors is authorized, subject to any
limitations prescribed by law, to issue such shares of preferred stock in one or
more series, with such rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be established by the Board of
Directors at the time of issuance. The Board of Directors has designated 400,000
shares of preferred stock as Series A Preferred Stock, par value $.01 per share,
for issuance in connection with the Preferred Share Purchase Rights Plan
described below.
The prospectus supplement relating to any series of preferred stock we may
offer will include specific terms relating to the offering. The description of
the terms of the preferred stock to be set forth in an applicable prospectus
supplement will not be complete and will be subject to and qualified by the
statement with respect to shares of the applicable series of preferred stock.
You should read that
4
document for provisions that may be important to you. We will include that
document as an exhibit to a filing with the Commission in connection with the
offering of preferred stock.
The authorized shares of preferred stock, as well as shares of common stock,
are available for issuance without further action by our shareholders, unless
shareholder action is required by the rules of any stock exchange or
over-the-counter market on which our securities are listed or traded. If the
approval of our shareholders is not required for the issuance of shares of
preferred stock or common stock, the Board of Directors may determine not to
seek shareholders approval.
The issuance of preferred stock by the Board of Directors could adversely
affect the rights of holders of common stock. For example, the issuance of
shares of preferred stock could result in securities outstanding that would have
preference over the common stock with respect to dividends and in liquidation
and that could (upon conversion or otherwise) enjoy all of the rights of the
common stock.
The authority possessed by the Board of Directors to issue preferred stock
could potentially be used to discourage attempts by third persons to obtain
control of the Company through merger, tender offer, proxy or consent
solicitation or otherwise, by making such attempts more difficult to achieve or
more costly. The Board of Directors may issue preferred stock with voting rights
that could adversely affect the voting power of holders of our common stock. See
"--Possible Antitakeover Effect of Certain Charter, Bylaw and Other Provisions."
PREFERRED SHARE PURCHASE RIGHTS
Our preferred share purchase rights plan is currently associated with each
outstanding share of our common stock. Each of these rights entitles the
registered holder to purchase from us one-hundredth of a share of our Series A
preferred stock or a combination of securities and assets of equivalent value,
at a purchase price of $40.00 per one-hundredth of a share, subject to
adjustment.
These rights are exercisable only upon the first to occur of the following
events:
- the close of business on the third business day following a public
announcement that a person or group has acquired or obtained 15% or more
of our outstanding common stock;
- the close of business on the tenth business day following the commencement
of a tender offer that would result in a person or group owning 20% or
more of our outstanding common stock; or
- the close of business on the tenth business day after a determination by
at least a majority of members of our Board of Directors whom have been
members prior to May 2, 1999 (referred to herein as Continuing Directors)
that any person or group, alone or together with its affiliates, has
become the holder of a substantial amount of our common stock:
(i) and such ownership is intended to cause Penn National to repurchase
the common stock owned by such person or group or to cause pressure
on Penn National to take action or enter into a transaction or
series of transactions intended to provide such person or group with
short-term financial gain under circumstances where at least a
majority of the Continuing Directors determines that the best
long-term interests of Penn National and our shareholders would not
be served by taking such action or entering into such transaction or
series of transactions at that time, or
(ii) and such ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment
of relationships with customers or impairment of our ability to
maintain our competitive position) on our business or prospects.
5
Upon the first to occur of the above events, the preferred purchase rights
will separate and be distributed to each registered holder of our common stock.
The rights will expire on March 18, 2009, unless earlier redeemed or exchanged
as provided in the preferred share purchase rights plan.
Based on the approximately 15.5 million shares of common stock outstanding
as of May 31, 2001, the outstanding rights could be exercisable for up to
approximately 155,000 shares of preferred stock. Our articles of incorporation
authorize the issuance of 1,000,000 shares of preferred stock. Based on the
200,000,000 shares of common stock that we are authorized to issue, we could
issue up to 100,000,000 shares of common stock and still reserve sufficient
preferred stock to cover the exercise of outstanding rights. However, any shares
of preferred stock issued in transactions registered under this shelf
registration statement or otherwise would reduce the number of preferred stock
shares available for issuance under the preferred share purchase rights plan.
Fewer available preferred stock shares would reduce the maximum number of common
stock shares that we could issue while still reserving the shares of preferred
stock necessary under the preferred share purchase rights plan.
The rights will have anti-takeover effects. The rights could cause
substantial dilution to a person or group that attempts to acquire us and effect
a change in the composition of our Board of Directors on terms not approved by
the Board of Directors, including by means of a tender offer at a premium to the
market price. The rights should not interfere with any merger or business
combination approved by the Board of Directors because we may redeem the rights
at the redemption price prior to the time that person has become an acquiring
person.
POSSIBLE ANTITAKEOVER EFFECT OF CERTAIN CHARTER, BYLAW AND OTHER PROVISIONS
Our articles of incorporation, as amended, and bylaws provide that the Board
of Directors is to consist of three classes of directors, each comprised as
nearly as practicable of one-third of the Board, and that one-third of the Board
is to be elected each year. At each annual meeting, only directors of the class
whose term is expiring are voted upon, and upon election each such director
serves a three-year term. Our articles of incorporation provide that a director
may be removed with or without cause only by the affirmative vote of the holders
of 75% of the voting power of all shares of our capital stock entitled to vote
generally in the election of directors, voting as a single class; our bylaws
provide that a director may only be removed without cause by written consent of
the shareholders and not at a meeting.
Our articles of incorporation provide that shareholder-proposed nominations
for election of directors and shareholder-proposed business at meetings of
shareholders is subject to the advance notice requirements contained in the
bylaws, which may be amended by the directors.
The provisions of our articles of incorporation with respect to
classification of the Board of Directors and shareholder approval of the removal
of directors with or without cause may not be altered, amended or repealed
without the affirmative vote of the holders of at least 75% of the voting power
of all shares of our capital stock entitled to vote generally in the election of
directors, voting as a single class.
The Pennsylvania Business Corporation Law, or BCL, contains a number of
interrelated provisions that are designed to support the validity of actions
taken by the Board of Directors in response to takeover bids, including
specifically the Board's authority to "accept, reject or take no action" with
respect to a takeover bid, and permitting the unfavorable disparate treatment of
a takeover bidder. One provision requires that mergers with or sales of assets
to an "interested shareholder" (which includes a shareholder who is a party to
the proposed transaction) be approved by a majority of voting shares
outstanding, other than those held by the interested shareholder, unless, prior
to the date on which the interested shareholder became an interested
shareholder, the transaction has been approved by a majority of the
corporation's directors who are not affiliated with the interested shareholder,
or the transaction results in the payment to all other shareholders of an amount
not less than the highest amount paid for shares by the interested shareholder.
Another provision of the BCL gives the directors
6
broad discretion in considering the best interests of the corporation, including
a provision that permits the Board, in taking any action, to consider various
corporate interests, including employees, suppliers, clients and communities in
which the corporation is located, the short and long-term interests of the
corporation, and the resources, intent and conduct of any person seeking to
acquire control of the corporation. Another provision prohibits, subject to
certain exceptions, a "business combination" with a shareholder or group of
shareholders beneficially owning more than 20% of the voting power of a public
corporation (excluding certain shares) for a five-year period following the date
on which the holder became an interested shareholder.
The effect of the BCL's antitakeover provisions may be to deter unsolicited
takeover attempts or other attempts to accumulate our stock. This may promote
stability in our business, management and control, and in the price of our
capital stock. However, by discouraging open market accumulation of our capital
stock and non-solicited, non-negotiated takeover attempts, shareholders may be
disadvantaged by foregoing the opportunity to participate in such transactions,
which may be in excess of the prevailing market price for our capital stock. In
addition, while the antitakeover provisions may encourage a party considering
accumulating stock in or acquiring Penn National to negotiate with the Board,
and place the Board in a better position to defend against actions it believes
not to be in the best interests of Penn National and its shareholders, the
provisions may also make it more difficult to accomplish a transaction requiring
shareholder approval if the Board disapproves (even if the shareholders may be
in favor of such a transaction).
The restrictions imposed by gaming and regulatory authorities to which we
are subject on share ownership and transfer may also discourage or make it more
difficult for a party to accumulate stock in or acquire us, as many of these
entities have broad discretion in approving our activities and approving our
shareholders. See "--Certain Restrictions on Share Ownership and Transfer."
POSSIBLE ANTITAKEOVER EFFECTS STEMMING FROM CONCENTRATED SHAREHOLDER BASE
Peter M. Carlino, our Chairman of the Board and Chief Executive Officer, by
virtue of his ability to vote the shares of common stock held by him and the
Carlino Family Trust, may be able significantly to influence the election of
directors and our business and affairs. The trustees of the Carlino Family
Trust, by virtue of their ability to vote the shares of common stock held in the
Carlino Family Trust in certain circumstances, may be able to significantly
influence the approval or disapproval of the sale of all or substantially all of
our assets or a merger, consolidation or liquidation. In addition, in the event
the Carlino Family Trust proposes to sell common stock representing more than 3%
of our outstanding common stock, Peter M. Carlino and other Carlino siblings
have the right to acquire such common stock on the price and terms proposed.
Peter M. Carlino's control position and certain other provisions of the Carlino
Family Trust could deter unsolicited takeover attempts to the same or greater
extent than any provisions of the BCL or applicable gaming and racing
regulations.
CERTAIN RESTRICTIONS ON OWNERSHIP AND TRANSFER OF OUR SECURITIES
We are subject to federal, state and local regulations that relate to our
current live racing, pari-mutuel, gaming machine and casino operations, and that
impose certain restrictions on the ownership and transfer of our securities. The
following description of the regulatory environment regarding restrictions on
ownership and transfer of our securities is only a summary and not a complete
recitation of all applicable regulatory laws. Moreover, ownership and transfer
of our securities could be subjected at any time to additional or more
restrictive regulations, including regulation in applicable jurisdictions where
there are no current restrictions on the ownership and transfer of our
securities.
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WEST VIRGINIA
The West Virginia Racetrack Video Lottery Act provides that the transfer of
more than 5% of the voting stock of a corporation that holds a gaming machine
license, or that controls another entity that holds such a license, or the
transfer of the assets of a license holder may only be to persons who have met
the licensing requirements of the West Virginia Racetrack Video Lottery Act or
which transfer has been pre-approved by the West Virginia Lottery Commission.
Any transfer that does not comply with this requirement voids the license. If
the number of shares that we intend to issue pursuant to a particular offering
under this registration statement exceeds 5% of our outstanding voting stock at
the time of such offering, we may be required to seek approval by the West
Virginia Lottery Commission and the West Virginia Racing Commission. The
issuance of preferred stock and debt securities pursuant to this prospectus and
any prospectus supplement also may be subject to the approval of the West
Virginia Lottery Commission and the West Virginia Racing Commission.
MISSISSIPPI
Mississippi statutes and regulations give the Mississippi Gaming Commission
the discretion to require a suitability finding with respect to anyone who
acquires any of our securities, regardless of the percentage of ownership. The
current policy of the Mississippi Gaming Commission is to require anyone
acquiring 5% or more of any voting securities of a public company with a
licensed subsidiary or private company licensee to be found suitable. However,
the Mississippi Gaming Commission generally permits certain "institutional"
investors to beneficially own up to 15% of the voting securities of a registered
public company without a finding of suitability. If the owner of voting
securities who is required to be found suitable is a corporation, partnership or
trust, it must submit detailed business and financial information including a
list of beneficial owners. The applicant is required to pay all costs of
investigation.
Any owner of voting securities found unsuitable and who holds, directly or
indirectly, any beneficial ownership of our equity interests beyond such period
of time as may be prescribed by the Mississippi Gaming Commission may be guilty
of a misdemeanor. Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days of being ordered to do so by the
Mississippi Gaming Commission may be found unsuitable. We are subject to
disciplinary action if we, after receiving notice that a person is unsuitable to
be an owner of or to have any other relationship with us, (1) pay the unsuitable
person any dividends or interest upon any of our securities or any payments or
distribution of any kind whatsoever, (2) recognize the exercise, directly or
indirectly, of any voting rights of our securities by the unsuitable person, or
(3) pay the unsuitable person any remuneration in any form for services rendered
or otherwise, except in certain limited and specific circumstances. In addition,
if the Mississippi Gaming Commission finds any owner of voting securities
unsuitable, such owner must immediately surrender all securities to us, and we
must purchase the securities so offered for cash at fair market value within
10 days.
We will be required to maintain current ownership ledgers in the State of
Mississippi that may be examined by the Mississippi Gaming Commission at any
time. If any securities are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the beneficial owner
to the Mississippi Gaming Commission. A failure to make such disclosure may be
grounds for finding the record holder unsuitable. We are also required to render
maximum assistance in determining the identity of the beneficial owner. We may
be required to disclose to the Mississippi Gaming Commission, upon request, the
identities of the holders of certain of our indebtedness. In addition, the
Mississippi Gaming Commission under the Mississippi Act may, in its discretion,
(1) require holders of debt securities, including the debt securities that may
be issued under this prospectus and any prospectus supplement, to file
applications, (2) investigate such holders, and (3) require such holders to be
found suitable to own such debt securities. Although the Mississippi Gaming
Commission generally does not require the individual holders of obligations to
be investigated
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and found suitable, the Mississippi Gaming Commission retains the discretion to
do so for any reason, including but not limited to a default, or where the
holder of the debt instrument exercises a material influence over the gaming
operations of the entity in question. Any holder of the debt securities required
to apply for a finding of suitability must pay all investigative fees and costs
of the Mississippi Gaming Commission in connection with such an investigation.
The regulations provide that we may not engage in any transaction that would
result in a change of our control without the prior approval of the Mississippi
Gaming Commission. Mississippi law prohibits us from making a public offering or
private placement of our securities without the approval of or waiver of
approval by the Mississippi Gaming Commission if any part of the proceeds of the
offering is to be used to finance the construction, acquisition or operation of
gaming facilities in Mississippi, or to retire or extend obligations incurred
for one or more of such purposes. The Mississippi Gaming Commission has the
authority to grant a continuous approval of securities offerings and has granted
us such approval, subject to an annual renewal.
Regulations of the Mississippi Gaming Commission prohibit certain
repurchases of securities of publicly traded corporations registered with the
Mississippi Gaming Commission without prior approval of the Mississippi Gaming
Commission. Transactions covered by these regulations are generally aimed at
discouraging repurchases of securities at a premium over market price from
certain holders of greater than 3% of the outstanding securities of the
registered publicly traded corporation. The regulations of the Mississippi
Gaming Commission also require prior approval for a "plan of recapitalization"
as defined in such regulations.
The Mississippi Act requires that certificates representing our securities
bear a legend to the general effect that the securities are subject to the
Mississippi Act and regulations of the Mississippi Gaming Commission. The
Mississippi Gaming Commission through the power to regulate licensees, has the
power to impose additional restrictions on the holders of our securities at any
time.
LOUISIANA
We are subject to regulation by the State of Louisiana as a result of our
ownership of LCCI, the operator of the Casino Rouge riverboat. Certain
regulations imposed by the Louisiana Riverboat Economic Development and Gaming
Control Act or rules adopted pursuant thereto require that owners holding
greater than a 5% interest in LCCI must be found suitable by the Louisiana
Gaming Control Board.
PENNSYLVANIA
Our horse racing operations at Penn National Race Course and Pocono Downs
are subject to extensive regulation under the Pennsylvania Racing Act. The
Pennsylvania Racing Act requires that any shareholder proposing to transfer
beneficial ownership of 5% or more of our shares file an affidavit with us
setting forth certain information about the proposed transfer and transferee, a
copy of which we are required to furnish to the Pennsylvania Racing Commissions.
The certificates representing our shares owned by 5% beneficial shareholders are
required to bear certain legends prescribed by the Pennsylvania Racing Act. In
addition, under the Pennsylvania Racing Act, the Pennsylvania Racing Commissions
have the authority to order a 5% beneficial shareholder of a company to dispose
of his common stock of such company if it determines that continued ownership
would be inconsistent with the public interest, convenience or necessity or the
best interest of racing generally.
9
DESCRIPTION OF DEBT SECURITIES
The following provides a general description of the terms of the debt
securities that we may issue. The particular terms of any debt securities
offered by any prospectus supplement and the extent, if any, to which the
general provisions set forth below may not apply will be described in the
prospectus supplement relating to those debt securities.
We filed a form of indenture as an exhibit to the registration statement of
which this prospectus is a part. The debt securities will be issued under one or
more indentures, each dated as of a date on or before the issuance of the debt
securities to which it relates and in the form filed, subject to any amendments
or supplements as we may adopt from time to time. Each indenture will be entered
into between us, as obligor, a trustee chosen by us and qualified to act as a
trustee under the Trust Indenture Act of 1939, and any of our subsidiaries which
guarantee our obligations under the indenture. You should read the indenture
because it, and not this description, will control your rights as a holder of
debt securities. The terms of the indenture are also governed by the Trust
Indenture Act.
GENERAL
The debt securities will be our direct obligations, which will be unsecured,
rank subordinate to our credit facilities, of which approximately
$308.9 million was outstanding on March 31, 2001 and may rank subordinate to,
equally with or senior to our other indebtedness, including our senior
subordinated notes due 2008, of which $200 million was outstanding on March 31,
2000. The indenture provides that unsecured subordinated debt securities may be
issued without limit as to aggregate principal amount, in one or more series, in
each case as established from time to time in or pursuant to authority granted
by a resolution from our board of directors or as established in one or more
indentures supplemental to the indenture. All debt securities of one series do
not need to be issued at the same time. Additionally, unless otherwise provided,
a series may be reopened, without the consent of the holders of the debt
securities of such series, for issuances of additional debt securities of such
series.
TERMS OF THE DEBT SECURITIES
You should refer to the prospectus supplement for some or all of the
following terms of each series of the debt securities in respect of which this
prospectus is being delivered:
- the designation, aggregate principal amount and authorized denominations
of the series;
- the issue price as a percentage of the principal amount at which the
series will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity or upon redemption thereof and the rate or
rates at which original issue discount will accrue;
- the date or dates on which the series will mature;
- the rate or rates per annum, if any, at which the series will bear
interest;
- the times from which any interest will accrue, be payable and the record
dates pertaining thereto;
- the place or places where the principal and interest, if any, on the
series will be payable;
- any redemption or other special terms;
- the events of default and covenants relating to the debt securities which
are in addition to, modify or delete those described herein;
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- whether the debt securities will be issued in certificated or book-entry
form, and the denominations thereof;
- if applicable, the terms of any right to convert debt securities into
shares of our common stock or other securities or property;
- provisions, if any, for the defeasance or discharge of certain of our
obligations with respect to such debt securities, which provisions may be
in addition to, in substitution for, or in modification of (or any
combination of the foregoing), the provisions of the indenture;
- the manner in which the amounts of payment of principal of, premium, if
any, or any interest on such debt securities will be determined, if such
amounts may be determined by reference to an index based on a currency or
currencies other than that in which such debt securities are denominated
or designated to be payable or by reference to a commodity, commodity
index, stock exchange index or financial index;
- a discussion of any material and/or special United States federal income
tax considerations applicable to such debt securities;
- any depositaries, trustees, interest rate calculation agents, exchange
rate calculation agents or other agents with respect to the debt
securities other than those originally appointed;
- whether such debt securities will be issued in the form of one or more
global securities and whether such global securities are to be issuable in
a temporary global form or permanent global form;
- the terms, if any, on which such debt securities will be subordinate to
other debt;
- any listing or intended listing of the debt securities on a securities
exchange;
- the provisions, if any, relating to any guarantees of the debt securities;
and
- any other terms of the debt securities, which will not be inconsistent
with the provisions of the indenture.
Our debt securities may be sold at a discount below their principal amount.
Even if our debt securities are not issued at a discount below their principal
amount, these securities may, for United States federal income tax purposes, be
deemed to have been issued with original issue discount because of certain
interest payment or other characteristics. Special United States federal income
tax considerations applicable to debt securities issued with original issue
discount will be described in more detail in any applicable prospectus
supplement. In addition, special United States federal tax considerations or
other restrictions or terms applicable to any debt securities offered
exclusively to foreigners or denominated in a currency other than United States
dollars will also be set forth in the prospectus supplement, if applicable.
INFORMATION ABOUT THE TRUSTEE
Our indenture provides that there may be more than one trustee, each with
respect to one or more series of debt securities. Any trustee under our
indenture may resign at any time or be removed with respect to one or more
series of debt securities, and a successor trustee may be appointed to act with
respect to such series. If two or more persons are acting as trustees with
respect to different series of debt securities, each trust shall be separate and
apart from the trust administered by any other trustee. Except as indicated in
this prospectus or any prospectus supplement, any action to be taken by the
trustee may be taken only with respect to the one or more series of debt
securities for which it is trustee under the indenture.
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MERGER, CONSOLIDATION OR SALE OF ASSETS
Our indenture does not allow us to consolidate or merge with or into, or
sell, assign, convey, transfer or lease our properties and assets, substantially
in their entirety, as computed on a consolidated basis, to another corporation,
person or entity unless:
- either we are the surviving person, in the case of a merger or
consolidation, or the successor or transferee is a corporation organized
under the laws of the United States, or any state thereof or the District
of Columbia and the successor or transferee corporation expressly assumes,
by supplemental indenture, all of our obligations under the debt
securities and the indenture; and
- no default or event of default exists immediately after such transaction.
DENOMINATIONS
Unless we specify in the prospectus supplement, the debt securities of any
series will be issuable only as debt securities in denominations of $1,000, and
any integral multiples thereof, and will be payable only in U.S. dollars. The
indenture also provides that debt securities of a series may be issuable in
global form. See "Global Securities" below.
REGISTRATION AND TRANSFER
If you surrender for transfer your registered debt securities at the office
or agency we maintain for such purpose, we will deliver, in the name you have
designated as transferee, one or more new debt securities of the same series of
like aggregate principal amount in such denominations as are authorized for debt
securities of such series and of a like maturity and with like terms and
conditions. You will not incur a service charge for any transfer or exchange of
debt securities, but we may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection with the transfer or
exchange.
We will not be required to:
- register, transfer or exchange debt securities of any series during a
period beginning with the opening of business 15 days before the day of
the transmission of a notice of redemption of debt securities of such
series selected for redemption, and ending at the close of business on the
day of the transmission; or
- register, transfer or exchange any debt security so selected for
redemption in whole or in part, except the unredeemed portion of any debt
security being redeemed in part.
EVENTS OF DEFAULT
Unless we inform you otherwise in the prospectus supplement, events of
default means any of the following:
- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of such default
for a period of 30 days;
- default in the payment of principal of or premium, if any, on any debt
security of that series when due;
- if applicable, default in the deposit of any sinking fund payment, when
and as due in respect of any debt security of that series;
- default in the performance, or breach, of any covenants or warranties in
the indenture if the default continues uncured for a period of 60 days
after written notice to us by the applicable trustee or to us and the
applicable trustee by the holders of at least 25% in principal amount of
the outstanding debt securities of that series as provided in the
indenture; and
- certain events of bankruptcy, insolvency or reorganization.
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If an event of default for any series of debt securities, which are at that
time outstanding, occurs and continues, then the applicable trustee or the
holders of not less than 25% in principal amount of the outstanding debt
securities of that series may, by a notice in writing to us, and to the
applicable trustee if given by the holders, declare to be due and payable
immediately the principal, or, if the debt securities of that series are
discount securities, such portion of the principal amount as may be specified in
the terms of that series and premium, if any, of all debt securities of that
series.
At any time after a declaration of acceleration with respect to debt
securities of any series has been made, but before a judgment or decree for
payment of the money due has been obtained by the applicable trustee, the
holders of a majority in principal amount of the outstanding debt securities of
that series may, subject to our having paid or deposited with the trustee a sum
sufficient to pay overdue interest and principal which has become due other than
by acceleration and certain other conditions, rescind and annul such
acceleration if all events of default, other than the non-payment of accelerated
principal and premium, if any, with respect to debt securities of that series,
have been cured or waived as provided in the indenture. For information as to
waiver of defaults see the discussion set forth below under "Modification and
Waiver."
You should refer to our prospectus supplement with regard to any series of
debt securities that are discount securities for the particular provisions
relating to acceleration of a portion of the principal amount of such discount
securities upon the occurrence and continuation of an event of default.
The indenture provides that the trustee is not obligated to exercise any of
its rights or powers under the indenture at the request of any holder of
outstanding debt securities, unless the trustee receives indemnity satisfactory
to it against any loss, liability or expense. Subject to certain rights of the
trustee, the holders of a majority in principal amount of the outstanding debt
securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred on the trustee with respect to the debt
securities of that series.
No holder of any debt security of any series will have any right to
institute any proceeding, judicial or otherwise with respect to the indenture or
for the appointment of a receiver or trustee, or for any remedy under the
indenture, unless such holder shall have previously given to the applicable
trustee written notice of a continuing event of default with respect to debt
securities of that series and the holders of at least 25% in principal amount of
the outstanding debt securities of that series shall have made written request,
and offered reasonable indemnity, to such trustee to institute such proceeding
as trustee, and the trustee shall not have received from the holders of a
majority in principal amount of the outstanding debt securities of that series
direction inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, the holder of any debt security will have an
absolute and unconditional right to receive payment of the principal of,
premium, if any, and any interest on such debt security on or after the due
dates expressed in such debt security and to institute suit for the enforcement
of any such payment.
We are required by the indenture, within 120 days after the end of each
fiscal year, to furnish to the trustee a statement as to compliance with the
indenture. The indenture provides that the trustee with respect to any series of
debt securities may withhold notice to the holders of debt securities of such
series of any default or event of default (except a default in payment on any
debt securities of such series) with respect to debt securities of such series
if and so long as a committee of its trust officers, in good faith, determines
that withholding such notice is in the interest of the holders of debt
securities of such series.
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MODIFICATION AND WAIVER
We and the applicable trustee, at any time and from time to time, may modify
the indenture without prior notice to or consent of any holder of any series of
debt securities for any of the following purposes:
- to permit a successor corporation to assume our covenants and obligations
under the indenture and in such series of debt securities in accordance
with the terms of the indenture;
- to add to our covenants for the benefit of the holders of any series of
debt securities (and if the covenants are to be for the benefit of less
than all the series, we shall state that the covenants are expressly being
included solely for the benefit of the applicable series);
- to surrender any of our rights or powers conferred in the indenture;
- to add any additional events of default (and if the events of default are
to be applicable to less than all series, we shall state that the events
of default are expressly being included solely for the benefit of the
applicable series);
- to add to, change or eliminate any of the provisions of the indenture in a
manner that will become effective only when there is no outstanding debt
security which is entitled to the benefit of the provision and as to which
the modification would apply;
- to secure a series of debt securities or to provide that our obligations
under a series of debt securities or the indenture will be guaranteed and
the terms and conditions for the release or substitution of the security
or guarantee;
- to supplement any of the provisions of the indenture to the extent needed
to permit or facilitate the defeasance and discharge of a series of debt
securities in a manner that will not adversely affect the interests of the
holders of debt securities of that series or any other series of debt
securities issued under the indenture in any material respect;
- to establish the form or terms of debt securities as permitted by the
indenture;
- to provide for the acceptance of appointment by a successor trustee
regarding one or more series of debt securities and to add to or change
any of the provisions of the indenture as is necessary to provide for the
administration of the trusts by more than one trustee;
- to comply with the requirements of the Securities and Exchange Commission
in connection with qualification of the indenture under the Trust
Indenture Act;
- to cure any ambiguity;
- to correct or supplement any provision in the indenture which may be
defective or inconsistent with any other provision in the indenture;
- to eliminate any conflict between the terms of the indenture and the debt
securities and the Trust Indenture Act; or
- to make any other provisions with respect to matters or questions arising
under the indenture which will not be inconsistent with any provision of
the indenture as long as the new provisions do not adversely affect in any
material respect the interests of the holders of any outstanding debt
securities of any series created prior to the modification.
We may also modify the indenture for any other purpose if we receive the
written consent of the holders of not less than a majority in principal amount
of the outstanding debt securities of each series affected by such modification
voting separately. However, we may not, without the consent of the holder of
each outstanding debt security of each series affected:
- change the stated maturity or reduce the principal amount or the rate of
interest, or extend the time for payment of interest of any debt security
or any premium payable upon the redemption of any debt security, or change
the stated maturity of, or reduce the amount of the principal of a
14
discount security that would be due and payable upon a declaration of
acceleration of the maturity of a discount security or impair the right to
institute suit for the enforcement of any payment on or after the due date
thereof (including, in the case of redemption, on or after the redemption
date), or alter any redemption provisions in a manner adverse to the
holders of such series of debt securities;
- reduce the percentage in principal amount of the outstanding debt
securities of a series where the consent of the holder is required for any
such amendment, supplemental indenture or waiver which is provided for in
the indenture;
- if applicable, adversely affect the right of a holder to convert any debt
security;
- modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the indenture
cannot be modified or waived without the consent of the holder of each
outstanding debt security which would be affected; or
- modify any provision described in the prospectus supplement as requiring
the consent of each affected holder of debt securities.
A modification that changes or eliminates any covenant or other provision of
the indenture with respect to one or more particular series of debt securities,
or that modifies the rights of the holders of debt securities of a series with
respect to such covenant or other provision, shall be deemed not to affect the
rights under the indenture of the holders of debt securities of any other
series.
The indenture provides that the holders of not less than a majority in
aggregate principal amount of the then outstanding debt securities of any
series, by notice to the relevant trustee, may on behalf of the holders of the
debt securities of such series waive any default and its consequences under the
indenture, except (1) a continuing default in the payment of interest on,
premium, if any, or the principal of, any such debt security held by a
nonconsenting holder or (2) a default in respect of a covenant or provision
hereof which cannot be modified or amended without the consent of the holder of
each outstanding debt security of each series affected.
DEFEASANCE OF DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
DEFEASANCE AND DISCHARGE. The indenture provides that we may be discharged
from any and all obligations under any debt securities other than:
- certain obligations to pay additional amounts, if any, upon the occurrence
of certain tax, assessment or governmental charge events regarding
payments on debt securities;
- to register the transfer or exchange of debt securities;
- to replace stolen, lost or mutilated debt securities; or
- to maintain paying agencies and to hold money for payment in trust.
We may only defease and discharge all of our obligations under the debt
securities of any series if:
- we irrevocably deposit with the trustee, in trust, the amount, as
certified by an officers' certificate, of money and/or U.S. government
obligations that, through the payment of interest and principal in respect
thereof in accordance with their terms, will be sufficient to pay and
discharge each installment of principal and premium, if any and any
interest on, and any mandatory sinking fund payments in respect of, the
debt securities of such series on the dates such payments are due; and
- we deliver to the trustee an opinion of counsel or a ruling from the
United States Internal Revenue Service, in either case to the effect that
holders of the debt securities of such series will not recognize income,
gain or loss for United States federal income tax purposes as a result of
such deposit, defeasance and discharge.
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DEFEASANCE OF CERTAIN COVENANTS. Upon compliance with certain conditions,
we may omit to comply with certain restrictive covenants contained in the
indenture or in the applicable prospectus supplement or any other restrictive
covenant relating to any series of debt securities provided for in a board
resolution or supplemental indenture which by its terms may be defeased pursuant
to the terms of such series of debt securities. Any omission to comply with our
obligations or covenants shall not constitute a default or event of default with
respect to any debt securities. In that event, you would lose the protection of
these covenants, but would gain the protection of having money and/or U.S.
government obligations set aside in trust to repay the series of debt
securities. We may only defease any covenants if, among other requirements:
- we deposit with the trustee money and/or U.S. government obligations that,
through the payment of interest and principal in respect to such
obligations, in accordance with their terms, will provide money in an
amount, as certified by an officers' certificate, sufficient to pay
principal, premium, if any, and any interest on and any mandatory sinking
fund payments in respect of the debt securities of such series on the
dates such payments are due; and
- we deliver to the trustee an opinion of counsel or a ruling from the
United States Internal Revenue Service to the effect that the holders of
the debt securities of such series will not recognize income, gain or
loss, for United States federal income tax purposes, as a result of the
covenant defeasance.
LIMITED LIABILITY OF CERTAIN PERSONS
The indenture provides that none of our past, present or future
stockholders, incorporators, employees, officers or directors, or of any
successor corporation or any of our affiliates shall have any personal liability
in respect of our obligations under the indenture or the debt securities by
reason of his, her or its status as such stockholder, incorporator, employee,
officer or director.
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
The indenture provides that each holder and beneficial owner, by accepting
any of the debt securities subject thereto, shall be deemed to have agreed that
if the gaming authority of any jurisdiction of which we or any of our
subsidiaries conducts or proposes to conduct gaming, requires that a person who
is a holder or the beneficial owner of the debt securities be licensed,
qualified or found suitable under applicable gaming laws, such holder or
beneficial owner, as the case may be, shall apply for a license, qualification
or a finding of suitability within the required time period. If such person
fails to apply or become licensed or qualified or is found unsuitable, we shall
have the right, at our option:
- to require such person to dispose of its debt securities or beneficial
interest therein within 30 days of receipt of notice of our election or
such earlier date as may be requested or prescribed by such gaming
authority; or
- to redeem such debt securities at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
earlier of the redemption date or the date of the finding of
unsuitability, which may be less than 30 days following the notice of
redemption if so requested or prescribed by the applicable gaming
authority or such lesser amount as may be required by applicable law or by
order of any gaming authority.
We shall notify the trustee in writing of any such redemption as soon as
practicable. We shall not be responsible for any costs or expenses any such
holder may incur in connection with its application for a license, qualification
or a finding of suitability.
16
CONVERSION RIGHTS
The terms and conditions, if any, upon which the debt securities are
convertible into common stock or other securities or property will be set forth
in the applicable prospectus supplement. Such terms will include the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at our option or at the option of the holders, the
events requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such debt securities.
GUARANTEE
The indenture provides that one or more of our subsidiaries may be a
guarantor and may "guarantee" the performance and punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all of our
obligations under the debt securities of any series and the indenture. The
liability of the guarantors will be independent of and not in consideration of
or contingent upon our liability or any other party obligated under the debt
securities or the indenture. A separate action or actions may be brought or
prosecuted against us or any other party obligated under the debt securities or
the indenture whether or not we or any other party obligated under the debt
securities or the indenture are joined in any such action or actions. However,
any guarantee will be limited to an amount not to exceed the maximum amount that
can be guaranteed by the guarantor without rendering the guarantee, as it
relates to such guarantor, original issue discountable under Section 548 of the
Federal Bankruptcy Code or any applicable provision of comparable state law.
This guarantee will be a continuing guarantee and will remain in full force and
effect until payment in full of all of the guaranteed obligations.
PAYMENT AND PAYING AGENTS
We covenant and agree, for the benefit of each series of debt securities,
that we will duly and punctually pay the principal of, premium, if any, and any
interest on the debt securities in accordance with the terms of the debt
securities and the indenture. We will maintain an office or agency where debt
securities of that series may be presented or surrendered for payment, where
debt securities of that series may be surrendered for registration of transfer
or exchange and where notices and demands to or upon us in respect of the debt
securities of that series and the indenture may be served.
GLOBAL SECURITIES
The debt securities of any series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a depositary identified in the applicable prospectus supplement relating to
such series. Global securities will be in registered form and may be issued in
either temporary or permanent form. The specific terms of the depositary
arrangement regarding a series of debt securities will be described in the
applicable prospectus supplement relating to such series.
SELLING SHAREHOLDERS
Certain of our shareholders may offer and sell shares of common stock
pursuant to this prospectus. We will identify any selling shareholders in a
prospectus supplement, along with other information about their ownership
holdings both before and after such sale.
17
PLAN OF DISTRIBUTION
We and, with respect to a portion of the common stock offered hereby, the
selling shareholders may sell the offered securities as follows:
- directly to one or more purchasers;
- through agents;
- to and through one or more dealers;
- to and through one or more underwriters; or
- through a combination of any such methods of sale.
The distribution of the offered securities pursuant to any applicable
prospectus supplement may be effected from time to time in one or more
transactions either:
- at a fixed price or prices which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to such prevailing market prices; or
- at negotiated prices.
Offers to purchase the offered securities may be solicited directly by us.
Offers to purchase may also be solicited by agents designated by us from time to
time. Any such agent, who may be deemed to be an "underwriter" as that term is
defined in the Securities Act, involved in the offer or sale of the offered
securities in respect of which this prospectus is delivered will be named, and
any commissions which shall be payable by us to such agent will be set forth, in
the applicable prospectus supplement.
If a dealer is utilized in the sale of the offered securities, we will sell
the securities to the dealer, as principal. The dealer, who may be deemed to be
an "underwriter" as that term is defined in the Securities Act, may then resell
the securities to the public at varying prices to be determined by such dealer
at the time of resale.
If an underwriter is, or underwriters are, utilized in the sale of the
offered securities, we will execute an underwriting agreement with such
underwriters at the time of such sale to them and the names of the underwriters
will be set forth in the applicable prospectus supplement, which will be used by
the underwriters to make resales of the offered securities. In connection with
the sale of offered securities, such underwriters may be deemed to have received
compensation from us in the form of underwriting discounts or commissions and
may also receive commissions from purchasers of debt securities and common stock
for whom they may act as agents. Underwriters may sell offered securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. Any underwriting
compensation paid by us to underwriters in connection with the offering of
securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the applicable
prospectus supplement.
Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with us, to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which they may be required to make in
respect thereof. Underwriters and agents may also engage in transactions with,
or perform services for us in the ordinary course of business.
If so indicated in the applicable prospectus supplement, we will authorize
underwriters, dealers or other persons to solicit offers by certain institutions
to purchase offered securities from us pursuant to contracts providing for
payment and delivery on a future date or dates set forth in the applicable
18
prospectus supplement. Institutions with which such contracts may be made may
include, but are not limited to, commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others. The obligations of any purchaser under any such
contract will not be subject to any conditions except that the purchase of
offered securities shall not at the time of delivery be prohibited under the
laws of the jurisdiction to which such purchaser is subject, and if the offered
securities are also being sold to underwriters, we shall have sold to such
underwriters the offered securities not sold for delayed delivery. The
underwriters, dealers and such other persons will not have any responsibility in
respect to the validity or performance of such contracts. The prospectus
supplement relating to such contracts will set forth the price to be paid for
offered securities pursuant to such contracts, the commissions payable for
solicitation of such contracts and the date or dates in the future for delivery
of offered securities pursuant to such contracts.
The anticipated date of delivery of offered securities will be set forth in
the applicable prospectus supplement relating to each offer.
LEGAL MATTERS
Certain matters with respect to the securities offered hereby will be passed
upon for us by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
EXPERTS
The financial statements for Penn National Gaming, Inc. and subsidiaries as
of December 31, 2000 and 1999, and for each of the three years in the period
ended December 31, 2000, incorporated by reference into this prospectus, have
been audited by BDO Seidman, LLP, independent public accountants, as indicated
in their report appearing therein.
The financial statements for Mardi Gras Casino Corp. as of December 31, 1999
and 1998, for each of the three years in the period ended December 31, 1999,
incorporated by reference into this prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
appearing therein.
The financial statements for Mississippi-I Gaming, L.P. as of December 31,
1999 and 1998, for each of the three years in the period ended December 31,
1999, incorporated by reference into this prospectus, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report appearing therein.
The financial statements of CRC Holdings, Inc.--Gaming Division as of
November 30, 1999 and 2000, and for each of the three years in the period ended
November 30, 2000 incorporated by reference into this prospectus, have been so
incorporated by reference in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
19
[INSIDE BACK COVER OF PROSPECTUS SUPPLEMENT]
[Photograph of Exterior Entrance of Casino Rama in Ontario, Canada.]
[Picture of Eastern-Half of the United States and Canada Showing Location of
Penn National Facilities.]
[Photograph of Exterior Entrance to Penn National Race Track in Grantville,
Pennsylvania.]
[Photograph of the Grand Stand at Pocono Downs in Wilkes-Barre, Pennsylvania.]
[Photograph of the Exterior Entrance to The Downs OTW in Carbondale,
Pennsylvania.]
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4,000,000 SHARES
[LOGO]
PENN NATIONAL GAMING, INC.
COMMON STOCK
---------------------------------
PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
CIBC WORLD MARKETS
DEUTSCHE BANC ALEX. BROWN
LEHMAN BROTHERS
FEBRUARY 13, 2002
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