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Penn National Gaming Reports Fourth Quarter Revenue of $743.8 Million and Adjusted EBITDA of $152.3 Million, Inclusive of $14.5



  Penn National Gaming Reports Fourth Quarter Revenue of $743.8 Million and
  Adjusted EBITDA of $152.3 Million, Inclusive of $14.5 Million of Corporate
  Overhead

                      Expenses Not Included in Guidance

 Establishes 2013 First Quarter Guidance and Updates 2013 Full Year Guidance

Business Wire

WYOMISSING, Penn. -- January 31, 2013

Penn National Gaming, Inc. (Nasdaq:PENN):

 
Conference Call:     Today, January 31, 2013 at 10:00 a.m. ET
Dial-in number:      212/231-2906
Webcast:             www.pngaming.com
                    
Replay information provided below
                    

Penn National Gaming, Inc. (PENN: Nasdaq) today reported fourth quarter and
full year 2012 operating results, as summarized below:

Summary of Fourth Quarter and Full Year Results
                                                             
(in millions,      Three Months Ended                       Twelve Months Ended
except per                                                 
share data)        December 31,                             December 31,
                   2012         2012         2011                         2012
                   Actual       Guidance     Actual         2012 Actual   Guidance      2011 Actual
                                (2)                                       (2)
Net revenues       $ 743.8      $ 782.4      $ 676.5        $ 2,899.5     $ 2,938.1     $ 2,742.3  
Adjusted             152.3        182.4        156.5          711.4         741.5         730.2    
EBITDA (1)
Less: Impact
of stock
compensation,
insurance
recoveries and
deductible
charges,
depreciation
and
amortization,
gain/loss on         (132.1 )     (147.2 )     (112.5 )       (499.4  )     (514.6  )     (487.8  )
disposal of
assets,
interest
expense - net,
income taxes,
loss on
early
extinguishment
of debt, and
other expenses
Net income         $ 20.2       $ 35.2       $ 44.0         $ 212.0       $ 226.9       $ 242.4    
                                                                                         
Diluted
earnings per       $ 0.19       $ 0.33       $ 0.41         $ 2.04        $ 2.15        $ 2.26     
common share

     
      Adjusted EBITDA is income (loss) from operations, excluding the impact
      of stock compensation, insurance recoveries and deductible charges,
      depreciation and amortization, and gain or loss on disposal of assets,
(1)   and is inclusive of gain or loss from unconsolidated affiliates. A
      reconciliation of net income (loss) per accounting principles generally
      accepted in the United States of America (“GAAP”) to adjusted EBITDA, as
      well as income (loss) from operations per GAAP to adjusted EBITDA, is
      included in the accompanying financial schedules.
       
      The figures in these columns present the guidance Penn National provided
(2)   on November 15, 2012 when it announced that it is pursuing a plan to
      split its businesses into two separately traded companies, a gaming
      focused REIT and a gaming operator.

                                                                              
Review of Fourth Quarter 2012 Results vs. Guidance and Fourth Quarter 2011
Results
                                                                 
                              Three Months
                              Ended
                              December 31, 2012
                              Pre-tax       After-tax
                              (in thousands)
Income, per guidance          $ 73,001      $    35,248    
(1)
Midwest segment                 (10,587 )        (6,143   )
variance
Southern Plains segment         (3,552  )        (2,061   )
variance
Other segment variances         (1,523  )        (883     )
Cherokee County                 (6,420  )        (4,036   )
litigation accrual
Maryland lobbying               (2,170  )        (2,170   )
efforts
Development costs               (3,883  )        (2,441   )
Other                           (1,179  )        (781     )
Depreciation and                4,616            2,678     
amortization variance
Tax rate variance from          -                828       
guidance
                                             
Income, as reported           $ 48,303      $    20,239    
                                           
 
                              Three Months Ended
                              December 31,
                              2012          2012 Guidance (1)     2011
Diluted earnings per          $ 0.19        $    0.33             $     0.41
common share
Cherokee County                 0.04             -                      -
litigation accrual
Maryland lobbying               0.02             -                      -
efforts
Development costs               0.02             -                      -
Other                           0.01             -                      0.01
Depreciation and                -                0.03                   -
amortization variance
Tax rate variance from          -                0.01                   0.02
guidance
Unconsolidated                  -                -                      0.04
affiliate impairment
                                                                   
Diluted earnings per
common share excluding        $ 0.28        $    0.37             $     0.48
items not included in
guidance

     
      The guidance figures in the tables above present the guidance Penn
      National provided on November 15, 2012 (which included $23.8 million of
(1)   Maryland lobbying costs) when it announced that it is pursuing a plan to
      split its businesses into two separately traded companies, a gaming
      focused REIT and a gaming operator.
       

Peter M. Carlino, Chairman and Chief Executive Officer of Penn National
Gaming, commented, “Fourth quarter operating results fell short of our
guidance targets as our newer facilities have taken longer than expected to
ramp up and industry-wide regional gaming revenue trends softened during the
period. Consolidated results reflect a number of factors, including lobbying
expenses, development costs associated with new greenfield opportunities,
transaction costs associated with our proposed REIT transaction, and
litigation accruals.

“In retrospect, while full year 2012 regional market revenue trends and
customer visitation levels proved to be largely stable, quarterly visibility
and performance was impacted by volatility that did not follow historic
trends. Due to this volatility as well as the still challenging economic
environment, we are approaching 2013 with caution as consumers continue to
adjust to lower discretionary income levels related to higher taxes and other
factors. In this environment, we continue to vigilantly address operating
efficiencies while maintaining a disciplined approach to marketing spend and
promotional activities. This focus is evidenced in the fourth quarter property
level EBITDA margins for our Midwest, East/West and Southern Plains regions,
which rose to 29.0% from 27.3% in the comparable 2011 period despite revenue
trends on a same facility basis. We remain focused on expanding the EBITDA
contributions from all facilities as we rationalize operating costs, fine tune
the slot floor and table game mix, build our customer databases at newly
opened facilities, improve player marketing efforts and adjust food, beverage
and entertainment offerings.

“We believe 2012 will be remembered as a transitional year for Penn National.
We successfully completed multiple significant strategic objectives, including
opening three first class casinos in metropolitan markets on time, and on
budget; completed an accretive acquisition of the facility formerly known as
Harrah’s St. Louis (which is being re-branded Hollywood Casino St. Louis);
advanced our plans for two new VLT facilities in Ohio; submitted a thoughtful,
comprehensive proposal to the City of Springfield, Massachusetts for the
re-development of the City’s North End; submitted a proposal to the
Pennsylvania Gaming Control Board for a new gaming and entertainment
destination in Philadelphia; and submitted two proposals to the Iowa Racing
and Gaming Commission for a new gaming and entertainment destination in
Woodbury County. In January, we reached an agreement with the City of Sioux
City to extend our current land lease for our riverboat casino for twelve
months with an option to extend the lease for an additional eighteen months.
Additionally, with our Zia Park Casino benefiting from a healthy economy in
its feeder markets, we anticipate commencing construction of a hotel at the
facility in the second half of 2013, which would feature 150 rooms with six
suites, a board/meeting room, exercise/fitness facilities and a breakfast
venue. The new hotel, budgeted at $26.2 million, will allow the property to
become more of a destination location enabling us to build relationships with
key customers from eastern New Mexico and western Texas as the new integrated
hotel, casino, and racing facility will far surpass any of the limited options
currently in the market.

“On a corporate level, during the fourth quarter we expanded the Company’s
senior secured credit facility by $1 billion at an attractive cost of capital.
Perhaps most notably, in November, we announced that we are pursuing a plan to
separate the Company’s gaming operating assets from our real property assets
by creating a newly formed, publicly traded real estate investment trust
(“REIT”) through a tax free spin off which we expect will result in a one-time
taxable cash and stock dividend to shareholders equivalent to approximately
$1.4 billion, or $16.00 per current Penn National Gaming common share.

“Following significant consideration and analysis, we expect the proposed REIT
structure will bring additional meaningful benefits to all Penn National
stakeholders as we unlock the value of the Company’s real estate assets,
create a vehicle for efficiently returning capital to shareholders, gain
access to capital at lower blended costs and create two well capitalized
platforms for sustained long-term growth in distinct industries led by
disciplined, market tested management teams. The operating entity, PNG, will
retain its existing growth pipeline while pursuing additional near- and
long-term domestic and international growth opportunities that can be highly
impactful for its shareholders. In addition, the new structure will allow PNG
to operate additional facilities in certain gaming jurisdictions that have
ownership limitations. PropCo will initially own substantially all of Penn
National’s real property assets and will lease back most of those assets to
the gaming operating entity for use by its subsidiaries under a triple net,
35-year master lease agreement (including renewal options). Under the master
lease agreement, it is expected that PNG would initially pay approximately
$442 million in annual rent, which would result in a rent coverage ratio of
approximately 1.9 times earnings before interest, taxes, depreciation,
amortization and rent (“EBITDAR”), thereby retaining ample capital at the
operating entity for growth, debt service and shareholder value enhancing
initiatives. We received a Private Letter Ruling from the IRS relating to the
tax treatment of the separation and the qualification of PropCo as a REIT,
which is subject to certain qualifications and based on certain
representations and statements made by Penn National Gaming, Inc. PropCo is
expected to distribute at least 90% of its annual taxable income to
shareholders as dividends and is expected to declare ordinary dividends of
$2.43 per share based on 2013 guidance.

“Over the past two months, Penn National has had constructive dialogue with
gaming regulators focused on the fact that our plan will not detract from the
Company’s operations, thereby ensuring the continued gaming tax revenue,
employment, and other benefits associated with our operations. Additionally,
earlier this month, we finalized our previously non-binding agreement with an
affiliate of Fortress Investment Group related to its Series B Redeemable
Preferred Stock exchange, as disclosed in our January 18, 2013 Form 8-K. This
agreement ensures that Fortress will realign its investment in advance of the
spin-off to ensure compliance with REIT tax rules. In addition, the Company
has signed an agreement with Centerbridge Capital Partners, LP, pursuant to
which the Company will repurchase their preferred shares at par in advance of
the spin-off. We expect to repurchase the Series B Redeemable Preferred Stock
of the remaining preferred shareholder at, or slightly below, par.”

                                                                             
Development and Expansion Projects

The table below summarizes Penn National Gaming’s current facility
development projects:
 
                                                     Amount

                        New             Planned      Expended     Expected

Project/Scope           Gaming          Total        through      Opening

                        Positions       Budget       December     Date
                                                     31,

                                                     2012
                                        (in millions)              
                                                                   
Hollywood Casino
Columbus (OH) - The
casino opened on
October 8, 2012 and
features
approximately 3,000
slot machines, 78                                                 Opened
table games and 30      3,790           $400 (1)     $388.6       October
poker tables,                                                     8, 2012
structured and
surface parking,
plus food and
beverage outlets
and entertainment
lounge.
                                                                   
Mahoning Valley
Race Track (OH) -
Full details and
design of the
project at
Austintown’s
Centrepointe
Business Park are
in the development
stage, with a new       1,500           $265 (2)     $7.2         2014
Hollywood themed
facility featuring
a new racetrack and
up to 1,500 video
lottery terminals,
as well as various
restaurants, bars
and other
amenities.
                                                                   
Dayton Raceway (OH)
- Full details and
design of the
project at the site
of an abandoned
Delphi Automotive
plant are in the
development stage,
with our new            1,500           $257 (2)     $5.0         2014
Hollywood themed
facility featuring
a new racetrack and
up to 1,500 video
lottery terminals,
as well as various
restaurants, bars
and other
amenities.
                                                                   
Hollywood Casino
St. Louis (MO) -
Rebranding of
former Harrah's
property to our                                                   Ongoing
Hollywood Theme.                                                  through
Integration of new                      $61          $11.0        Fourth
casino, hotel,                                                    Quarter
financial and                                                     2013
operating systems
and upgrades of
slot machine
product.

(1) Includes a $50 million license fee.
(2) Includes a $75 million relocation fee in addition to a $50 million VLT
license fee.
 

Financial Guidance – Penn National Gaming, Inc.

The table below sets forth current guidance targets for financial results for
the 2013 first quarter and full year, based on the following assumptions:

  * Excludes cash and non-cash charges associated with the proposed tax-free
    spin-off transaction (including tender costs, consulting fees,
    professional fees, debt issuance cost write-offs and impairments of
    goodwill and other intangible assets);
  * A competitor’s property, Horseshoe Cincinnati, opens in the first quarter
    of 2013;
  * Operators in Maryland begin offering table games in April of 2013;
  * No disruptions to Penn National’s Argosy Casino Sioux City facility
    arising from the ongoing litigation or regulatory proceedings;
  * A full year of the Casino Rama management contract;
  * Depreciation and amortization charges in 2013 of $314.0 million, with
    $77.9 million projected to be incurred in the first quarter of 2013. The
    increase in 2013 depreciation expense is due to Hollywood Casino St. Louis
    partially offset by lower depreciation at Hollywood Casino Columbus;
  * Estimated non-cash stock compensation expenses of $25.7 million for 2013,
    with $7.1 million of the cost incurred in the first quarter of 2013;
  * LIBOR is based on the forward curve;
  * A blended 2013 income tax rate of 39%;
  * A diluted share count of approximately 106.7 million shares for the full
    year 2013, which excludes any reduction of the fully diluted weighted
    average shares per the terms of the Preferred Stock resulting from Penn
    National Gaming’s stock price exceeding $45 or as a result of the exchange
    transaction with Fortress and our anticipated repurchase of the remaining
    preferred shares; and,
  * There will be no material changes in applicable legislation, regulatory
    environment, world events, weather, recent consumer trends, economic
    conditions, or other circumstances beyond our control that may adversely
    affect the Company’s results of operations.

 
(in millions,       Three Months Ending March
except per          31,                           Full Year Ending December 31,
share data)
                                                  2013            2013 Prior
                    2013           2012           Revised                         2012 Actual
                    Guidance       Actual                         Guidance
                                                  Guidance        (2)
Net revenues        $ 799.2        $ 736.1        $ 3,151.5       $ 3,201.6       $ 2,899.5  
Adjusted              224.2          200.7          881.2           905.1           711.4    
EBITDA (1)
Less: Impact
of stock
compensation,
insurance
recoveries
and
deductible
charges,
depreciation
and                   (155.9 )       (122.1 )       (617.3  )       (624.0  )       (499.4  )
amortization,
gain/loss on
disposal of
assets,
interest
expense -
net, income
taxes, and
other
expenses
Net income          $ 68.3         $ 78.6         $ 263.9         $ 281.1         $ 212.0    
                                                                                   
Diluted
earnings per        $ 0.64         $ 0.74         $ 2.47          $ 2.62          $ 2.04     
common share

      Adjusted EBITDA is income (loss) from operations, excluding the impact
(1)   of stock compensation, insurance recoveries and deductible charges,
      depreciation and amortization, and gain or loss on disposal of assets,
      and is inclusive of gain or loss from unconsolidated affiliates.
      These figures present the guidance Penn National provided on November
(2)   15, 2012 for the full year ending December 31, 2013 when it announced it
      is pursuing a plan to split its businesses into two separately traded
      companies, a gaming focused REIT and a gaming operator.
       

Pro Forma 2013 Financial Guidance for PropCo, Penn National’s Proposed REIT
Entity

Reflecting the assumptions below and the cash flow from the 2013 financial
guidance for Penn National Gaming, Inc. above, and if the spin-off were to
have occurred on January 1, 2013, PropCo would be expected to generate
adjusted EBITDA of $456.5 million and Adjusted Funds From Operations (“AFFO”)
of $289.6 million.

Significant changes in assumptions from the previous guidance issued November
15, 2012 are as follows:

  * Previous guidance was based on Penn National Gaming’s expected debt levels
    and free cash flow through December 31, 2012, while the revised guidance
    factors in expected 2013 free cash flow and debt levels at December 31,
    2013.
  * A reduction in adjusted EBITDA resulting from lower projected rent
    payments due to slower than anticipated initial results at Hollywood
    Casino Columbus and Toledo partially offset by higher taxable REIT
    subsidiary (TRS) adjusted EBITDA levels driven by the addition of table
    games at Hollywood Casino Perryville;
  * An increase in AFFO due to a reduction in the assumed Penn National Gaming
    (PNG, the operating entity post the proposed spin-off) employee option
    holder dividends that will be incurred by PropCo as the remainder will be
    incurred by PNG. This was partially offset by higher income taxes
    resulting from increased TRS earnings;
  * Increased depreciation expense due to Hollywood Casino St. Louis partially
    offset by lower depreciation at Hollywood Casino Columbus;
  * A reduction in the fully diluted share count from 95.9 million common
    shares to 93.4 million common shares outstanding for 2013 (which excludes
    the impact of the pro rata share distribution associated with the one-time
    dividend to shareholders of accumulated earnings and profits) due to the
    assumption that the Series B Redeemable Preferred Stock held by
    Centerbridge Partners LP and Wells Fargo Securities, LLC are redeemed at
    par for $252.5 million and an increase in the Fortress buy down amount of
    $31.5 million to $449 million. This decrease was offset by the adjustment
    required to reflect that there is no tax benefit of PropCo options;
  * A reduction in the cash component of the E&P distribution (accumulated
    earnings and profits attributable to any pre-REIT years to comply with
    certain REIT qualification requirements) from $487 million, or
    approximately $5.35 per current Penn National Gaming common share to
    approximately $437 million or approximately $5.00 per current Penn
    National Gaming common share resulting from the payments required to
    execute the Preferred Stock restructuring;
  * An increase in the share component of the E&P distribution to 0.48
    additional PropCo shares, from the previously assumed 0.38, per Penn
    National Gaming common share;
  * The ordinary dividend amount is calculated as 80 percent of AFFO less the
    PNG option holder dividends. The PNG option holders’ dividends are modeled
    to pay down PropCo debt, additionally, the share count utilized in the per
    share dividend calculation excludes the dilutive impact of employee stock
    options; and,
  * An increase in the annual dividend to $2.43 per Penn National Gaming, Inc.
    common share from $2.36 due to the factors described above.

                                                                              
PropCo, Penn National’s Proposed REIT Entity
                                                
(in millions, except per share data)           Full Year Ending December 31,
                                               2013 Revised     2013 Prior
                                                               
                                               Guidance         Guidance (3)
Net revenues                                   $  608.3         $  608.3    
Adjusted EBITDA (1)                               456.5            459.1    
Less: Interest expense and maintenance
CAPEX, employee stock                             (166.9  )        (189.9  )
option holder payments and income tax
payments
AFFO (2)                                          289.6            269.2    
Less: Impact of stock compensation,
depreciation and amortization                     (161.0  )        (157.0  )
plus maintenance CAPEX
Net income                                     $  128.6         $  112.2    
                                                                 
Diluted earnings per common share              $  1.38          $  1.17     
                                                                 
Dividend per outstanding share                 $  2.43          $  2.36     

     
      Adjusted EBITDA is income (loss) from operations, excluding the impact
(1)   of stock compensation, insurance recoveries and deductible charges,
      depreciation and amortization, and gain or loss on disposal of assets,
      and is inclusive of gain or loss from unconsolidated affiliates.
      AFFO is net income, excluding gains or losses from sales of property,
(2)   adding back depreciation and stock compensation expense and subtracting
      maintenance capex.
      These figures present the guidance Penn National provided on November
(3)   15, 2012 for the full year ending December 31, 2013 when it announced
      that it is pursuing a plan to split its businesses into two separately
      traded companies, a gaming focused REIT and a gaming operator.
       

Pro Forma 2013 Financial Guidance for Penn National Gaming (PNG, the Operating
Entity Post the Proposed Spin-off)

Reflecting the assumptions below and the 2013 financial guidance for PENN
above, and assuming the spin-off occurred on January 1, 2013,  PNG would
generate approximately $410.8 million of adjusted EBITDA in 2013.

Significant changes in assumptions from the previous guidance issued November
15, 2012 are as follows:

  * A reduction in net revenues and earnings resulting from a slower than
    anticipated ramp up at Hollywood Casino Columbus and Toledo;
  * A reduction in the fully diluted share count from 89 million common shares
    to 84 million common shares outstanding for 2013, due to the assumption
    that Centerbridge Partners LP and Wells Fargo Securities, LLC will redeem
    their Series B Redeemable Preferred Stock holdings at par for $252.5
    million and a $31.5 million increase in the Fortress buy down amount to
    $449 million to ensure that Fortress’ ownership in PNG is less than 10%;
  * Excludes charges associated with PropCo options held by Penn National
    Gaming employees which will be paid by PNG. The anticipated cash required
    for these dividend payments has been pre-funded in PNG; and,
  * PNG’s rent expense is reduced by $7.8 million primarily due to a slower
    than anticipated revenue ramp at Hollywood Casino Columbus and Toledo. The
    rent coverage ratio would decline to approximately 1.9x EBITDAR from 2.0x
    EBITDAR with actual total leverage (total debt to adjusted EBITDA) of
    approximately 3.0x and implied total adjusted debt leverage (inclusive of
    PNG’s obligation under the Master Lease) of 5.6x.

                                                                              
Penn National Gaming (PNG, the Operating Entity Post the Proposed Spin-off)
                                
(in millions, except per       Full Year Ending December 31,
share data)
                               2013 Revised Guidance     2013 Prior Guidance
                                                         (3)
Net revenues                   $     2,984.7             $    3,042.6     
Adjusted EBITDAR (2)                 852.3                    881.4       
Rent Expense                         (441.5     )             (449.3     )
Adjusted EBITDA (1)                  410.8                    432.1       
Less: Impact of stock
compensation, insurance
recoveries and

deductible charges,
depreciation and
amortization, gain/loss              (307.2     )             (316.5     )
on

disposal of assets,
interest expense - net,
income taxes, and

other expenses
Net income                     $     103.6               $    115.6       
                                                          
Diluted earnings per           $     1.24                $    1.29        
common share

      Adjusted EBITDA is income (loss) from operations, excluding the impact
(1)   of stock compensation, insurance recoveries and deductible charges,
      depreciation and amortization, and gain or loss on disposal of assets,
      and is inclusive of gain or loss from unconsolidated affiliates.
(2)   Adjusted EBITDAR is adjusted EBITDA less rent.
      The guidance figures in the table above present the guidance Penn
(3)   National Gaming provided on November 15, 2012 when it announced that it
      is pursuing a plan to split its businesses into two separately traded
      companies, a gaming focused REIT and a gaming operator.
       

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information – Operations

(in thousands) (unaudited)
                                               
                 NET REVENUES                   ADJUSTED EBITDA
                 Three Months Ended             Three Months Ended December
                 December 31,                   31,
                 2012           2011            2012              2011
Midwest          $  279,091     $  192,889      $  88,987         $ 55,578
(1)
East/West           301,737        333,457         84,408           84,500
(2)
Southern            155,517        140,387         40,354           42,166
Plains (3)
Other (4)           7,466          9,717           (61,446  )       (25,771 )
Total            $  743,811     $  676,450      $  152,303        $ 156,473  

                                                 
                 NET REVENUES                     ADJUSTED EBITDA
                 Twelve Months Ended December     Twelve Months Ended
                 31,                              December 31,
                 2012             2011            2012            2011
Midwest          $  949,464       $  826,436      $  298,673      $ 255,648
(1)
East/West           1,345,621        1,290,732       379,168        349,200
(2)
Southern            571,246          590,709         179,479        192,036
Plains (3)
Other (4)           33,134           34,380          (145,889 )     (66,648 )
Total            $  2,899,465     $  2,742,257    $  711,431      $ 730,236  

     
      Our Midwest segment consists of the following properties: Hollywood
      Casino Lawrenceburg, Hollywood Casino Aurora, Hollywood Casino Joliet,
      Argosy Casino Alton, Hollywood Casino Toledo, which opened on May 29,
      2012, and Hollywood Casino Columbus, which opened on October 8, 2012. It
      also includes our Casino Rama management service contract and the
(1)   Mahoning Valley and Dayton Raceway projects which we anticipate
      completing in 2014. Results for the three and twelve months ended
      December 31, 2012 included preopening charges of $0.4 million and $20.2
      million, respectively, as compared to preopening charges of $2.8 million
      and $4.8 million for the three and twelve months ended December 31,
      2011, respectively.
       
      Our East/West segment consists of the following properties: Hollywood
      Casino at Charles Town Races, Hollywood Casino Perryville, Hollywood
      Casino Bangor, Hollywood Casino at Penn National Race Course, Zia Park
(2)   Casino, and M Resort which was acquired on June 1, 2011. Results for the
      twelve months ended December 31, 2012 included preopening charges of
      $0.3 million. Results for the twelve months ended December 31, 2011
      included acquisition related transaction costs associated with the M
      Resort of $1.3 million.
       
      Our Southern Plains segment consists of the following properties: Argosy
      Casino Riverside, Argosy Casino Sioux City, Hollywood Casino Baton
      Rouge, Hollywood Casino Tunica, Hollywood Casino Bay St. Louis, Boomtown
      Biloxi, Hollywood Casino St. Louis, which we acquired on November 2,
      2012, and our 50% joint venture interest in Kansas Entertainment, LLC
      (“Kansas Entertainment”), which owns Hollywood Casino at Kansas Speedway
(3)   that opened February 3, 2012. Costs associated with the St. Louis
      acquisition totaled $1.8 million and $3.3 million for the three and
      twelve months ended December 31, 2012, respectively. In addition,
      results for the twelve months ended December 31, 2012 included our share
      of the Kansas Entertainment joint venture’s preopening charges of $1.4
      million, as compared to preopening charges of $2.0 million and $5.1
      million for the three and twelve months ended December 31, 2011,
      respectively.
       
      Our Other segment consists of our standalone racing operations, namely
      Beulah Park, Raceway Park, Rosecroft Raceway, Sanford Orlando Kennel
      Club, and our joint venture interests in Sam Houston Race Park, Valley
      Race Park and Freehold Raceway. It also included our joint venture
      interest in the Maryland Jockey Club which was sold in July 2011. If the
      Company is successful in obtaining gaming operations at these locations,
      they would be assigned to one of our regional executives and reported in
      their respective reportable segment. The Other segment also includes our
      Bullwhackers property and our corporate overhead operations. Results for
      the three and twelve months ended December 31, 2012 included corporate
      overhead costs of $59.1 million and $141.7 million, respectively, as
(4)   compared to corporate overhead costs of $17.8 million and $75.0 million
      for the three and twelve months ended December 31, 2011, respectively.
      Results for the three and twelve months ended December 31, 2012 included
      $26.0 million and $45.1 million, respectively, of lobbying costs related
      to our opposition to the November 2012 gaming referendum in Maryland and
      a $6.4 million legal accrual for our Cherokee County, Kansas litigation,
      whereas the twelve months in the prior year included a gain of $20.2
      million related to the sale of our interests in the Maryland Jockey Club
      partially offset by a $5.9 million charge for our share of a goodwill
      impairment at our New Jersey joint venture in the fourth quarter of
      2011. Results for the twelve months ended December 31, 2011 included
      transaction costs of $0.3 million associated with the Rosecroft Raceway
      acquisition.

                                                                                
Reconciliation of Adjusted EBITDA to Net income (GAAP)
                                                                                
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

(in thousands) (unaudited)
                                                  
                     Three Months Ended            Twelve Months Ended
                     December 31,                  December 31,
                     2012          2011            2012           2011
Adjusted             $ 152,303     $ 156,473       $ 711,431      $ 730,236
EBITDA
(Gain) loss
from                   (258    )     8,006           (3,804   )     (7,364   )
unconsolidated
affiliates
Depreciation
and                    (72,821 )     (51,893 )       (245,348 )     (211,476 )
amortization
Charge for
stock                  (6,415  )     (6,276  )       (28,609  )     (24,732  )
compensation
Insurance
recoveries,
net of                 -             38              7,229          13,257
deductible
charges
Gain (loss) on
disposal of            484           (429    )       1,690          (340     )
assets
Income from          $ 73,293      $ 105,919       $ 442,589      $ 499,581
operations
Interest               (25,621 )     (20,915 )       (81,440  )     (99,564  )
expense
Interest               265           206             948            423
income
Gain (loss)
from                   258           (8,006  )       3,804          7,364
unconsolidated
affiliates
Loss on early
extinguishment         -             -               -              (17,838  )
of debt
Other                  108           (1,127  )       (1,375   )     (734     )
Taxes on               (28,064 )     (32,046 )       (152,555 )     (146,881 )
income
Net income           $ 20,239      $ 44,031        $ 211,971      $ 242,351   

                                                                                     
                                                                                     
Reconciliation of Income (loss) from operations (GAAP) to Adjusted EBITDA
                                                                                     
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information

(in thousands) (unaudited)
                                                                                     
Three Months Ended December 31, 2012
                                                                       
                     Midwest    East/West    Southern     Other         Total
                                             Plains
Income (loss)
from                 $ 57,953   $ 62,927     $ 23,414     $ (71,001 )   $ 73,293
operations
Charge for
stock                  -          -            -            6,415         6,415
compensation
Depreciation
and                    30,700     22,233       15,780       4,108         72,821
amortization
Loss (gain) on
disposal of            334        (752   )     (60    )     (6      )     (484    )
assets
Gain (loss)
from                   -          -            1,220        (962    )     258      
unconsolidated
affiliates (1)
Adjusted             $ 88,987   $ 84,408     $ 40,354     $ (61,446 )   $ 152,303  
EBITDA

                                                                                  
Three Months Ended December 31, 2011
                                                                    
                   Midwest    East/West   Southern     Other         Total
                                          Plains
Income (loss)
from               $ 39,705   $  61,923   $ 32,183     $ (27,892 )   $ 105,919
operations
Charge for
stock                -           -          -            6,276         6,276
compensation
Insurance
deductible           1           -          (39    )     -             (38     )
charges, net
of recoveries
Depreciation
and                  15,861      22,485     11,524       2,023         51,893
amortization
Loss on
disposal of          11          92         234          92            429
assets
Loss from
unconsolidated       -           -          (1,736 )     (6,270  )     (8,006  )
affiliates
Adjusted           $ 55,578   $  84,500   $ 42,166     $ (25,771 )   $ 156,473  
EBITDA

                                                                                       
Twelve Months Ended December 31, 2012
                                                                         
                 Midwest       East/West     Southern      Other          Total
                                             Plains
Income (loss)
from             $ 206,462     $ 291,627     $ 132,153     $ (187,653 )   $ 442,589
operations
Charge for
stock              -             -             -             28,609         28,609
compensation
Insurance
recoveries,
net of             -             -             (7,229  )     -              (7,229  )
deductible
charges
Depreciation
and                92,689        88,688        49,408        14,563         245,348
amortization
Gain on
disposal of        (478    )     (1,147  )     (63     )     (2       )     (1,690  )
assets
Gain (loss)
from               -             -             5,210         (1,406   )     3,804    
unconsolidated
affiliates (1)
Adjusted         $ 298,673     $ 379,168     $ 179,479     $ (145,889 )   $ 711,431  
EBITDA

                                                                                     
Twelve Months Ended December 31, 2011
                                                                       
                 Midwest       East/West   Southern      Other          Total
                                           Plains
Income (loss)
from             $ 211,356     $ 263,423   $ 137,580     $ (112,778 )   $ 499,581
operations
Charge for
stock              -             -           -             24,732         24,732
compensation
Insurance
recoveries,
net of             (18,535 )     -           5,278         -              (13,257 )
deductible
charges
Depreciation
and                62,844        85,723      53,764        9,145          211,476
amortization
(Gain) loss on
disposal of        (17     )     54          248           55             340
assets
(Loss) gain
from               -             -           (4,834  )     12,198         7,364    
unconsolidated
affiliates
Adjusted         $ 255,648     $ 349,200   $ 192,036     $ (66,648  )   $ 730,236  
EBITDA
                                                                                     

     On February 3, 2012, our joint venture in Kansas Entertainment commenced
     operations of Hollywood Casino at Kansas Speedway. We record 50% of the
     joint venture’s earnings in our gain from unconsolidated affiliates line
1)   in the Southern Plains column which includes the impact of depreciation
     and amortization expense. Our 50% share of depreciation and amortization
     expense was $2.8 million and $9.9 million for the three and twelve months
     ended December 31, 2012, respectively.

                                                                                    
                                                                                    
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands, except per share data) (unaudited
                                                    
                       Three Months Ended            Twelve Months Ended December
                       December 31,                  31,
                       2012          2011            2012            2011
                                                                                    
Revenues
Gaming                 $ 665,774     $ 600,257       $ 2,590,533     $ 2,468,630
Food, beverage           112,239       110,897         438,837         400,258
and other
Management               3,431         3,355           14,835          15,185     
service fee
Revenues                 781,444       714,509         3,044,205       2,884,073
Less promotional         (37,633 )     (38,059 )       (144,740  )     (141,816  )
allowances
Net revenues             743,811       676,450         2,899,465       2,742,257  
                                                                                    
Operating
expenses
Gaming                   344,372       319,653         1,342,905       1,298,938
Food, beverage           89,947        90,000          343,611         321,801
and other
General and              163,378       109,023         532,241         423,718
administrative
Depreciation and         72,821        51,893          245,348         211,476
amortization
Insurance
recoveries, net          -             (38     )       (7,229    )     (13,257   )
of deductible
charges
Total operating          670,518       570,531         2,456,876       2,242,676  
expenses
Income from              73,293        105,919         442,589         499,581    
operations
                                                                                    
Other income
(expenses)
Interest expense         (25,621 )     (20,915 )       (81,440   )     (99,564   )
Interest income          265           206             948             423
Gain (loss) from
unconsolidated           258           (8,006  )       3,804           7,364
affiliates
Loss on early
extinguishment           -             -               -               (17,838   )
of debt
Other                    108           (1,127  )       (1,375    )     (734      )
Total other              (24,990 )     (29,842 )       (78,063   )     (110,349  )
expenses
                                                                                    
Income from
operations               48,303        76,077          364,526         389,232
before income
taxes
Taxes on income          28,064        32,046          152,555         146,881    
Net income             $ 20,239      $ 44,031        $ 211,971       $ 242,351    
                                                                                    
Earnings per
common share:
Basic earnings         $ 0.21        $ 0.46          $ 2.24          $ 2.52
per common share
Diluted earnings       $ 0.19        $ 0.41          $ 2.04          $ 2.26
per common share
                                                                                    
Weighted-average
common shares
outstanding:
Basic                    76,787        77,180          76,345          77,991
Diluted                  104,470       106,195         103,804         107,051
                                                                                    
                                                                                    

Diluted Share Count Methodology

Reflecting the issuance of 12,500 shares on October 30, 2008 of the $1.25
billion, zero coupon, Series B Redeemable Preferred Stock (“Preferred Stock”)
and the repurchase of 225 shares in the first quarter of 2010, Penn National
Gaming is required to adjust its diluted weighted average outstanding share
count for the purposes of calculating diluted earnings per share as follows:

  * When the price of Penn National Gaming’s common stock at the end of
    reporting period is less than $45, the diluted weighted average
    outstanding share count is increased by 27,277,778 shares (regardless of
    how much the stock price is below $45);
  * When the price of Penn National Gaming’s common stock at the end of the
    reporting period is between $45 and $67, the diluted weighted average
    outstanding share count will be increased by an amount which can be
    calculated by dividing the $1.23 billion (face value) by the current price
    per share. This will result in an increase in the diluted weighted average
    outstanding share count of between 18,320,896 shares and 27,277,778 shares
    depending on the current share price; and,
  * When the price of Penn National Gaming’s common stock at the end of the
    reporting period is above $67, the diluted weighted average outstanding
    share count will be increased by 18,320,896 shares (regardless of how much
    the stock price exceeds $67).

In connection with our proposed plan to separate our gaming operating assets
and real property assets into two publicly traded companies through a tax-free
spin-off of our real estate assets to holders of our common stock, an
affiliate of Fortress Investment Group, owners of approximately $975 million
or 79.4% of the Preferred Stock, has entered into an agreement to exchange
their Preferred Stock for non-voting common stock or equivalents at a price of
$67 per share or 14.6 million non-voting common shares or equivalents. The
non-voting common shares or equivalents would convert to Penn National
Gaming’s voting common shares upon sale to a third party. Fortress may
exchange its Preferred Stock for non-voting common shares or equivalents at
any time, but if Fortress does not fully exercise its exchange right prior to
the spin-off, any remaining Preferred Stock will automatically be converted
into non-voting common shares or equivalents. In addition, Fortress may either
divest 6.7 million of its 14.6 million non-voting Penn National Gaming common
shares or equivalents prior to the spin-off, or, if it does not, Penn National
Gaming has the right to repurchase the undisposed share for $67 per share.

In addition, the Company has signed an agreement with Centerbridge Capital
Partners, LP, pursuant to which the Company will repurchase their Preferred
Stock at par in advance of the spin-off. The Company also expects to
repurchase the Preferred Stock of the remaining preferred shareholder at, or
slightly below, par.

Reconciliation of Non-GAAP Measures to GAAP

Adjusted EBITDA, or earnings before interest, taxes, stock compensation,
insurance recoveries and deductible charges, depreciation and amortization,
gain or loss on disposal of assets, and other income or expenses, and
inclusive of gain or loss from unconsolidated affiliates, is not a measure of
performance or liquidity calculated in accordance with GAAP. Adjusted EBITDA
information is presented as a supplemental disclosure, as management believes
that it is a widely used measure of performance in the gaming industry. In
addition, management uses adjusted EBITDA as the primary measure of the
operating performance of its segments, including the evaluation of operating
personnel. Adjusted EBITDA should not be construed as an alternative to
operating income, as an indicator of the Company's operating performance, as
an alternative to cash flows from operating activities, as a measure of
liquidity, or as any other measure of performance determined in accordance
with GAAP. The Company has significant uses of cash flows, including capital
expenditures, interest payments, taxes and debt principal repayments, which
are not reflected in adjusted EBITDA. It should also be noted that other
gaming companies that report adjusted EBITDA information may calculate
adjusted EBITDA in a different manner than the Company. Adjusted EBITDA is
presented as a supplemental disclosure, as management believes that it is a
principal basis for the valuation of gaming companies, as this measure is
considered by many to be a better indicator of the Company’s operating results
than diluted net income (loss) per GAAP. A reconciliation of the Company’s
adjusted EBITDA to net income (loss) per GAAP, as well as the Company’s
adjusted EBITDA to income (loss) from operations per GAAP, is included in the
accompanying financial schedules.

A reconciliation of each segment’s adjusted EBITDA to income (loss) from
operations is included in the financial schedules herein. On a segment level,
adjusted EBITDA is reconciled to income (loss) from operations per GAAP,
rather than net income (loss) per GAAP due to, among other things, the
impracticability of allocating interest expense, interest income, income taxes
and certain other items to the Company’s segments on a segment-by-segment
basis. Management believes that this presentation is more meaningful to
investors in evaluating the performance of the Company’s segments and is
consistent with the reporting of other gaming companies.

Adjusted EBITDAR is adjusted EBITDA less rent expense.

Funds From Operations (“FFO”), is defined by NAREIT (the National Association
of Real Estate Investment Trusts, the trade organization for REITs) as “the
most commonly accepted and reported measure of REIT operating performance.”
FFO is equal to net income, excluding gains or losses from sales of property,
adding back depreciation and stock compensation expense. Adjusted Funds From
Operations (“AFFO”) is defined as FFO less maintenance capex. A reconciliation
of FFO and AFFO to net income (loss) per GAAP is included in the accompanying
financial schedules.

Notwithstanding the foregoing, PropCo’s and/or PNG’s measures of adjusted
EBITDA, adjusted EBITDAR, FFO and AFFO may not be comparable to similarly
titled measures used by other companies.

Conference Call, Webcast and Replay Details

Penn National Gaming is hosting a conference call and simultaneous webcast at
10:00 am ET today, both of which are open to the general public. The
conference call number is 212/231-2906; please call five minutes in advance to
ensure that you are connected prior to the presentation. Questions will be
reserved for call-in analysts and investors. Interested parties may also
access the live call on the Internet at www.pngaming.com; allow 15 minutes to
register and download and install any necessary software. A replay of the call
can be accessed for thirty days on the Internet at www.pngaming.com.

This press release, which includes financial information to be discussed by
management during the conference call and disclosure and reconciliation of
non-GAAP financial measures, is available on the Company’s web site,
www.pngaming.com in the “Investors” section (select link for “Press
Releases”).

About Penn National Gaming

Penn National Gaming owns, operates or has ownership interests in gaming and
racing facilities with a focus on slot machine entertainment. The Company
presently operates twenty-nine facilities in nineteen jurisdictions, including
Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine,
Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio,
Pennsylvania, Texas, West Virginia, and Ontario. In aggregate, Penn National's
operated facilities currently feature approximately 35,600 gaming machines,
approximately 830 table games, 2,900 hotel rooms and approximately 1.6 million
square feet of gaming floor space.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Actual results may vary
materially from expectations. Although Penn National Gaming, Inc. and its
subsidiaries (collectively, the “Company” or “PENN”) believe that our
expectations are based on reasonable assumptions within the bounds of our
knowledge of our business and operations, there can be no assurance that
actual results will not differ materially from our expectations. Meaningful
factors that could cause actual results to differ from expectations include,
but are not limited to, risks related to the following: the proposed
separation of PropCo from PENN, including our ability to timely receive all
necessary consents and approvals, the anticipated timing of the proposed
separation, the expected tax treatment of the proposed transaction, the
ability of each of the post spin Company and PropCo to conduct and expand
their respective businesses following the proposed spin-off, and the diversion
of management’s attention from traditional business concerns; our ability to
obtain timely regulatory approvals required to own, develop and/or operate our
facilities, or other delays or impediments to completing our planned
acquisitions or projects, including favorable resolution of any related
litigation, including the appeal by the Ohio Roundtable addressing the
legality of video lottery terminals in Ohio; our ability to secure state and
local permits and approvals necessary for construction; construction factors,
including delays, unexpected remediation costs, local opposition and increased
cost of labor and materials; our ability to successfully integrate Harrah’s
St. Louis into our existing business; our ability to reach agreements with the
thoroughbred and harness horseman in Ohio in connection with the proposed
relocations and to otherwise maintain agreements with our horseman,
pari-mutuel clerks and other organized labor groups; the passage of state,
federal or local legislation (including referenda) that would expand,
restrict, further tax, prevent or negatively impact operations in or adjacent
to the jurisdictions in which we do or seek to do business (such as a smoking
ban at any of our facilities); the effects of local and national economic,
credit, capital market, housing, and energy conditions on the economy in
general and on the gaming and lodging industries in particular; the activities
of our competitors and the emergence of new competitors (traditional and
internet based); increases in the effective rate of taxation at any of our
properties or at the corporate level; our ability to identify attractive
acquisition and development opportunities and to agree to terms with partners
for such transactions; the costs and risks involved in the pursuit of such
opportunities and our ability to complete the acquisition or development of,
and achieve the expected returns from, such opportunities; our expectations
for the continued availability and cost of capital; the outcome of pending
legal proceedings; changes in accounting standards; our dependence on key
personnel; the impact of terrorism and other international hostilities; the
impact of weather; and other factors as discussed in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2011, subsequent Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC.
The Company does not intend to update publicly any forward-looking statements
except as required by law.

Contact:

Penn National Gaming, Inc.
William J. Clifford, 610-373-2400
Chief Financial Officer
or
JCIR
Joseph N. Jaffoni / Richard Land, 212-835-8500
penn@jcir.com
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