MTR Gaming Group, Inc.

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MTR Gaming Group, Inc.

State Route 2 South
Chester, West Virginia 26034
Telephone: (304) 387-5712
Toll Free: (800) 804-0468
Fax: (304) 387-2167
Web site:

Public Company
1988 as Secamur Corporation
Employees: 2,750
Sales: $315.2 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: MNTG
NAIC: 711212 Race Tracks; 551112 Offices of Other Holding Companies; 721110 Hotels (Except Casino Hotels) and Motels

MTR Gaming Group, Inc. owns and operates thoroughbred and harness racetracks, casinos, and properties called "racinos," which are racetracks offering forms of gambling other than pari-mutuel wagering. The company's flagship property is the Mountaineer Racetrack & Gaming Resort in Chester, West Virginia, 35 miles west of Pittsburgh. The Mountaineer property is a year-round thoroughbred racetrack with a 359-room hotel, golf course, theater and events center, convention center, and more than 3,000 slot machines. MTR also owns Scioto Downs, a harness racing facility in Columbus, Ohio; the Ramada Inn in Reno, Nevada; the Speedway Casino and Binion's Gambling Hall & Hotel in Las Vegas; and a license to build Presque Isle Downs, a thoroughbred racetrack in Erie, Pennsylvania. MTR holds a 50 percent interest in North Metro Harness Initiative, LLC, which has a license to construct a harness racetrack 30 miles north of Minneapolis. The company also has signed a definitive agreement to acquire a 90 percent stake in Jackson Trotting Association, which owns and operates Jackson Harness Raceway in Jackson, Michigan.


MTR struggled mightily during its first decade in business, trying in vain for years to find a business model that worked. The company operated under several different names and it delved into several different markets, floundering financially and strategically until its path crossed with a former tax accountant named Edson "Ted" Arneault.

The years before Arneault's arrival were pocked by the failings of a rudderless company. MTR was incorporated in March 1988 as Secamur Corporation, starting out as a wholly owned subsidiary of Buffalo Equities, Inc. until Buffalo Equities spun the company off to its shareholders in January 1989. Secamur was not on its own for long, gaining a new parent company six months later when Pacific International Industries, Inc. acquired it. Pacific International, only 11 months older than Secamur, was attempting to carve a niche for itself in Southern California's contract security guard market. Its name was changed to Excalibur Security Services, Inc., but the experiment soon failed. Excalibur Security filed a voluntary petition with the U.S. Bankruptcy Court for the Central District of California in December 1990, giving its management time to develop a new strategy. In May 1991, the company sold its moribund security guard business and decided to focus on the odd business mix of acquiring gambling and oil and gas properties. The bankruptcy court approved the plan in December 1991, an event marked by a name change to Excalibur Holding Corporation. It was while the newly named company was beginning its new corporate life as an acquirer of gambling and oil and gas properties that Arneault entered the scene. Within a few short years, the company's strategic scope was narrowed and Arneault emerged as the chief architect of its execution.

Arneault wore many hats during his professional career. Aside from his experience as a tax accountant, he ran an oil and gas company at one point and served as a partner in a jewelry chain, a knife company, and a steel processing plant. In 1992, a friend asked him to assist in the sale of a thoroughbred racetrack in Chester, West Virginia, named Mountaineer Park. Arneault agreed and served in the capacity of a consultant, helping to sell the property to an interested suitor, Excalibur Holding. After the sale, Arneault remained a consultant, offering advice on the installation of slot machines at the racetrack. Not long afterwards, Excalibur Holding's management decided to shelve plans to acquire any additional oil and gas properties and to focus exclusively on the gaming industry, a sharpening in strategic focus that prompted another name change. In August 1993, Excalibur Holding changed its name to Winners Entertainment, Inc., a change in identity that occurred at roughly the same time the company was engulfed in controversy that threatened its existence.

The deal that allowed the installation of slot machines at Mountaineer Park had been struck with the state lottery commission. It formed the basis of Winners Entertainment's new business strategy: add casino-style gambling to the racing venue to increase profits and revenue. Unfortunately for Winners Entertainment's management, the lottery director was convicted of insider trading and fraud several weeks after the acquisition of Mountaineer Park was completed. In the investigation into the director's malfeasance, it was discovered that the testing of slot machines at Mountaineer Park had no legal standing, which prompted the state supreme court to order for their removal, significantly lessening the value of the property to Winners Entertainment.

Arneault, still serving as a consultant, decided to fight for Winners Entertainment's cause. He dug in, renting a room in the state capital at the Charleston Marriott, and began lobbying for state approval of slot machines. He spent three months working out of his hotel room, first asking the court for a stay on the initial agreement before petitioning state representatives to legalize slot machines. He asked that slot machines be allowed at all four racetracks in West Virginia, arguing that establishment of slot machines would create new jobs and improve the local economy. As the October 29, 2001 issue of Forbes noted, "The odds could hardly have been worse: Get a Bible Belt state to support gaming legislation in the wake of a lottery scandal." Despite the negative publicity surrounding his lobbying efforts, Arneault prevailed in March 1994, when the state legislature passed the bill by a narrow margin.

Arneault Taking the Helm in 1995

Arneault's troubles did not end after he fought for the passage of gaming legislation. Winners Entertainment had hired a management firm, American Gaming, to oversee the operation of Mountaineer Park, but after American Gaming chewed through a $10 million loan with not much to show for the expenditure, Winners Entertainment cut its ties to the management firm. For a replacement, Winners Entertainment's management turned to Arneault, who accepted the titles of chairman and chief executive officer in April 1995. The company lost $5.3 million during Arneault's first year as a senior executive, but he had a plan for reversing the company's financial fortunes. Arneault wanted to build a casino near the racetrack to lure more serious gamblers, the first part of an overall plan to turn Mountaineer Park into a full-scale entertainment resort. Arneault's vision led to another name change in October 1996, when Winners Entertainment, Inc. became MTR Gaming Group, Inc.

Arneault succeeded in turning MTR into a profitable company soon after focusing its efforts on racing, gaming, and entertainment. In 1996, revenues increased 61 percent to $40 million, but the most impressive financial result was the $1.1 million the company recorded in net income, a figure that offered evidence Arneault was steering MTR in the right direction. Arneault was beginning the process of turning Mountaineer Park into the "Mountaineer Race Track & Gaming Resort," a project that entailed adding scores of new slot machines, the primary reason for the encouraging financial results in 1996, and a host of other attractions. The expansion project took years to complete, as Arneault built the company's signature property on 2,600 acres of land on the banks of the Ohio River, intending to lure customers from neighboring Ohio and Pennsylvania to MTR's gaming and entertainment complex in Chester. While the mammoth construction project was underway, Arneault began acquiring other properties for MTR, shaping the company into a geographically diversified company. First, he sold the last of the company's remaining oil and gas properties in 1998, the same year he established a presence in Nevada. Through two subsidiaries, Speakeasy Gaming of Las Vegas, Inc. and Speakeasy Gaming of Reno, Inc., MTR acquired the Cheyenne Hotel & Casino in Las Vegas for $5.5 million and the Reno Ramada in Reno for $8 million. The Cheyenne Hotel & Casino property included a 131-room hotel and casino that Arneault intended to expand and to design with a motor-racing theme to attract patrons from the Las Vegas Motor Speedway, located five miles away from the Cheyenne property. The Reno Ramada was a 262-room hotel with an adjoining casino earmarked for a $500,000 expansion project. After the expansion of the hotel and casino, the property was renamed the "Speakeasy Hotel & Casino."

Arneault's decision to establish a presence in Nevada yielded mixed results, but his efforts to turn the Mountaineer property into a full-fledged resort mitigated the difficulties experienced in Reno and Las Vegas. By 2001, the Mountaineer property had been developed into a sprawling complex with a 140,000-square-foot slots casino, seven bars, a 70,000-square-foot arena for live entertainment, and a 100-room hotel. In August 2001, a 28,000-square-foot convention center and a spa and fitness center opened, while the expansion of the hotel, expected to be completed in April 2002, was underway, adding 260 rooms. The property was driving the company's revenue growth, helping push revenues to $218 million by the end of 2001, nearly ten times the total recorded during Arneault's first year as the company's leader. "The scene is more NASCAR than diamond pinkie rings," an analyst remarked in a June 22, 2001 interview with Investor's Business Daily, offering his impression of the Mountaineer property. Arneault, in the same article, offered his description of MTR's signature property. "I like to consider us a middle-class outfit," he said. "We're not looking for the Las Vegas whales. Our whales would probably be keeper bass."

Company Perspectives:

We are optimistic about the prospects for our expansion opportunities, which leverage the Company's expertise in the gaming and racing markets and should provide additional long-term value for shareholders.

The resort in Chester stood as a remarkable success story for MTR, enabling the company to accomplish what it had been unable to accomplish in the pre-Arneault years: record significant revenue growth and post steady profits. The foray into Nevada had been made because of uncertainty about how the expansion effort in Chester would evolve, but during the first years of the new decade the operations in Nevada presented their own uncertainty. The company closed the casino in Reno in May 2001 after it and the hotel lost $1.4 million during the first half of the year, a blemish on its otherwise impressive earnings record. Aside from correcting the lackluster operations in Nevada, Arneault's greatest challenge was protecting Mountaineer Race Track & Gaming Resort from a new threat on the horizon. Both Pennsylvania and Ohio were discussing legislation to legalize gaming, the promulgation of which promised to take business away from the company's complex in Chester. "The biggest threat for this company," an analyst said in a February 8, 2002 interview with Investor's Business Daily, "is the potential for legalized gaming in Pennsylvania and Ohio." Arneault responded to the threat by preparing for entry into Pennsylvania and Ohio, one phase of an expansion strategy that saw MTR greatly broaden its geographic scope of operations during the first half of the decade.

Expansion in the 21st Century

By early 2002, Arneault was preparing to take MTR to far greater heights. He had filed an application with Pennsylvania's racing commission for approval to build a new thoroughbred racetrack. MTR received approval to build a racetrack in Erie, Pennsylvania, a facility it anticipated naming Presque Isle Downs, but the scope of the project increased after Pennsylvania passed a law legalizing slot machines in July 2004. Arneault filed to gain a gaming license from the Pennsylvania Gaming Control Board, holding off construction of Presque Isle Downs until he received a gaming license. Meanwhile, Arneault made a move into Ohio, purchasing Scioto Downs in Columbus in July 2003. A harness horse racing facility, Scioto Downs featured pari-mutuel wagering. Next, Arneault increased MTR's presence in Nevada, undaunted by the troubles experienced after the acquisition of the Cheyenne Hotel & Casino and Reno Ramada in 1998. In March 2004, MTR acquired Binion's Horseshoe, a hotel and casino located in downtown Las Vegas, for $20 million. One year later, the company began independently operating the property, renamed "Binion's Gambling Hall & Hotel," after concluding its joint operating agreement with an affiliate of Harrah's. Several months after making his initial investment in the Binion's property, Arneault added Minnesota to MTR's ever expanding geographic profile by acquiring a 50 percent interest in North Metro Harness Initiative in June 2004. In January 2005, the Minnesota Racing Commission awarded North Metro a license to build, pending judicial review, a harness racetrack in Anoka County, 30 miles north of Minneapolis. While plans were being developed to build a racetrack and card-room operations in Minnesota, Arneault expanded further, signing a definitive agreement to acquire a 90 percent stake in Jackson Trotting Association, LLC. Jackson Trotting operated the Jackson Harness Raceway in Jackson, Michigan, 70 miles away from Detroit.

After a decade of leading MTR, Arneault achieved much, inheriting a floundering company and giving it a precise strategic direction to pursue. The company's financial gains during his first decade of leadership were enormous, with annual revenues increasing from $25 million to $315 million. Profitability, once a perennial struggle for the company, was achieved with regularity, averaging roughly $15 million per year between 2000 and 2004. The second half of the decade promised to be a busy period for the company, with properties in Pennsylvania, Minnesota, and Michigan slated to debut. As Arneault worked toward adding these properties to MTR's fold, his success in Chester offered a blueprint for expansion in the years ahead.

Principal Subsidiaries

Mountaineer Park, Inc.; Speakeasy Gaming of Las Vegas, Inc.; Speakeasy Gaming of Freemont, Inc.; Speakeasy Freemont Street Experience Operating Company; Scioto Downs, Inc.; Presque Isle Downs, Inc.; MTRCHarness, Inc.; Jackson Racing, Inc.

Principal Competitors

Colonial Holdings, Inc.; Magna Entertainment Corp.; Penn National Gaming, Inc.

Key Dates:

MTR is incorporated as Secamur Corporation.
Edson "Ted" Arneault facilitates the sale of Mountaineer Park to Excalibur Holding Corp., a company that changes its name to MTR Gaming Group, Inc. four years later.
Arneault is named chairman and chief executive officer of the company.
Two properties are acquired in Nevada, one in Reno and the other in Las Vegas.
MTR acquires Scioto Downs in Columbus, Ohio.
MTR acquires Binion's Horseshoe, a hotel and casino in Las Vegas.
MTR acquires a 90 percent interest in the Jackson Harness Raceway in Jackson, Michigan.

Further Reading

Elliott, Alan R., "MTR Gaming Group Inc.; Chester, West Virginia; There's Gold in Them Thar Hills," Investor's Business Daily, February 8, 2002, p. A10.

Gallagher, Leigh, "On Track," Forbes, October 29, 2001, p. 146.

Guerriero, John, "Erie, Pa., Businessman Fails in Bid to Budge Convention Center from Bayfront," Erie Times-News, July 12, 2005, p. A1.

, "Penn National Gaming Sells Erie, Pa., Off-Track Betting Parlor," Erie Times-News, October 16, 2004, p. B1.

Jones, Chris, "MTR Gaming Group to Take Reins of Binion's Horseshoe Casino in Las Vegas," Las Vegas Review-Journal, November 9, 2004, p. B1.

Marcial, Gene G., "A Lagging MTR May Catch a Buyer's Eye," Business Week, September 30, 2002, p. 120.

Shinkle, Kirk, "MTR Gaming Group Inc.," Investor's Business Daily, June 22, 2001, p. A7.