Penn National Gaming Reports Second Quarter Revenue of $761.4 Million and Adjusted EBITDA of $211.4 Million

  Penn National Gaming Reports Second Quarter Revenue of $761.4 Million and
  Adjusted EBITDA of $211.4 Million

- Second Quarter Results Reflect $76.0 Million of Non-Cash Charges related to
                          Argosy Casino Sioux City -

- Establishes 2013 Third Quarter Guidance and Updates 2013 Full Year Guidance
                                      -

Business Wire

WYOMISSING, Pa. -- July 23, 2013

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

                  
Conference Call:   Today, July 23, 2013 at 10:00 a.m. ET
Dial-in number:      212/231-2932
Webcast:             www.pngaming.com
                     
Replay information provided below


Penn National Gaming, Inc. (PENN: Nasdaq) today reported second quarter
operating results for the three months ended June 30, 2013, as summarized
below:

                      Summary of Second Quarter Results

                               
(in millions, except per share   Three Months Ended
data)                          
                                 June 30,
                               2013 Actual  2013 Guidance (2)  2012 Actual
Net revenues                    $  761.4    $    793.2        $  712.6  
Adjusted EBITDA (1)               211.4        225.2          189.8  
Less: Impact of stock
compensation, impairment
losses, insurance recoveries
and deductible charges,
depreciation and amortization,    (223.6 )      (155.6   )      (123.1 )
gain/loss on disposal of
assets, interest expense -
net, income taxes, and other
expenses
Net (loss) income               $  (12.2  )  $    69.6         $  66.7   
                                                             
Diluted (loss) earnings per     $  (0.16  )  $    0.68         $  0.63   
common share (3)
                                                               

        Adjusted EBITDA is income (loss) from operations, excluding the impact
        of stock compensation, impairment losses, insurance recoveries and
        deductible charges, depreciation and amortization, and gain or loss on
        disposal of assets, and is inclusive of gain or loss from
(1)   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.
(2)     The figures in this column present the guidance Penn National provided
        on April 18, 2013 for the three months ended June 30, 2013.
        Since the Company reported a loss from operations for the three months
        ended June 30, 2013, it was required by GAAP to use basic
(3)     weighted-average common shares outstanding, rather than diluted
        weighted-average common shares outstanding, when calculating diluted
        loss per common share.
        

Review of Second Quarter 2013 Results vs. Guidance

                                                            
                                                Three Months
                                                   Ended
                                                   June 30, 2013
                                               Pre-tax       After-tax
                                               (in thousands)
Income, per guidance (1)                        $ 114,086    $ 69,592  
Midwest segment variance                         (10,629 )    (6,321  )
Sioux City goodwill and intangible asset         (76,036 )    (73,102 )
write-downs
Tornado insurance deductible charge at           (2,500  )    (1,497  )
Hollywood St. Louis
Spin-off transaction costs                       (3,437  )    (2,057  )
Gain on redemption of corporate debt             2,579       1,544   
securities and foreign currency
Tax rate differential                            -           (1,722  )
Other                                            2,324       1,383   
                                                            
Income (loss), as reported                      $ 26,387     $ (12,180 )

        The guidance figures in the tables above present the guidance Penn
(1)   National provided on April 18, 2013 for the three months ended June
        30, 2013.
        

Peter M. Carlino, Chairman and Chief Executive Officer of Penn National
Gaming, commented, “Second quarter operating results fell short of our
guidance due to several factors: In addition to soft industry-wide regional
gaming revenue trends, several properties in the Midwest and Southern Plains
segments endured extreme weather, including tornados, flooding and
construction disruption, which led to closures as well as insurance deductible
charges. Other facilities were negatively impacted by competitive pressures,
including marketing promotions that due to economic return considerations we
elected not to match. Partially offsetting these challenges, our second
quarter adjusted EBITDA includes $4.3 million of favorable tax settlements in
various jurisdictions.

“In Ohio, while first year gaming revenues for the Columbus market are in line
with other similarly sized markets, our facility has not yet achieved the
market share or margins we expected. At this juncture, we continue to grow our
player database and remain disciplined with respect to marketing and
promotional activities. With a population base of approximately 1.8 million
adults within a one hour drive of the Columbus facility, a reasonable tax rate
and anticipated upcoming relief from illegal internet café operations, we
remain confident that over time the property can improve its adjusted EBITDA
contribution to our consolidated results. Additionally, Hollywood Casino
Toledo’s top line results have met our expectations at this stage of the
property’s development, though its operating margin has also been lower than
we anticipated.

“Given the trends from the first two quarters, results thus far in July, and a
lack of visibility on factors that would improve national regional gaming
revenue trends, we are guarded in our outlook for the remainder of the year.
As such, we have adjusted our guidance and now expect full year 2013 adjusted
EBITDA of $805.1 million compared to our prior expectation of $875.8 million.
Reflecting the updated guidance, we now forecast that upon the proposed
separation of Penn National’s operating assets and real property assets, the
initial annual dividend of the planned Gaming and Leisure Properties (‘GLPI’)
real estate investment trust (‘REIT’) will be $2.32 per Penn National Gaming
common share versus our previous forecast of $2.44 per Penn National Gaming
common share. The change in the anticipated annual dividend payment reflects a
downward revision of approximately $16.6 million in our forecast of Penn
National Gaming’s initial annual rent payments to GLPI. We currently expect
that Penn National will pay approximately $420 million to GLPI in annual rent,
which would result in a rent coverage ratio of approximately 2.07 times
earnings before interest, taxes, depreciation, amortization, rent and
corporate overheard compared to 2.15 times coverage based on the prior
guidance.

“The calculation of the coverage ratio has been changed to exclude corporate
overhead and if calculated as we did previously, the rent coverage ratio based
on the new guidance would be 1.8 times compared to 1.9 times previously. In
any case, we believe that the structure and terms of the master lease
agreement provides attractive economics for GLPI at inception while leaving
Penn National with significant free cash flow and financial flexibility after
rent payments to pursue growth and expansion opportunities. Recognizing the
reduced 2013 guidance, we believe it is prudent to maintain the expected
leverage ratios for both Penn National and GLPI and as such we now expect the
cash portion of the one-time dividend for accumulated earnings and profits to
be paid by GLPI to be 28%, down from 40% previously.

“With respect to Penn National’s long-term post-split expansion, we are
actively pursuing a wide range of opportunities that can generate meaningful
growth relative to the Company’s after rent free cash flow. We have continued
to make progress on our Jamul Indian Village Project to develop a Hollywood
Casino branded casino and resort on the Tribe’s land in trust which is
approximately 20 miles east of downtown San Diego. During the second quarter
Penn National received approval from the Ohio Racing Commission for the
relocation of Beulah Park in Columbus to Austintown in Mahoning Valley and for
Raceway Park in Toledo to move to Dayton. Shortly thereafter, we broke ground
on both facilities, which are expected to open in the second half of 2014. We
also submitted a proposal, subject to selection processes and other
conditions, to the Maryland Video Lottery Facility Location Commission for a
casino resort project at the Company’s Rosecroft Raceway in Prince George’s
County, Maryland. In addition, we entered into a joint venture that submitted
a proposal to the Pennsylvania Gaming Control Board for the development of an
integrated racing and gaming facility in Mahoning Township, Pennsylvania. Both
of these proposed projects would leverage the Company’s excellent long-term
record of supporting the pari-mutuel industry with thoughtful developments
that drive strong economic and employment benefits while expanding our scale,
diversification and returns. In Philadelphia, where we have proposed a $480
million project in the Stadium District, we expect the selection process to
become more active this fall and anticipate a decision by the Pennsylvania
Gaming Control Board in early 2014.

“Elsewhere, we remain on schedule and on budget with the re-branding and
facility upgrade of Hollywood Casino St. Louis, which despite the tornado
disruption is expected to be completed late this year. In addition, the
construction of a 154 room hotel at Zia Park Casino is on schedule and is
expected to open in the second half of 2014. More recently, in Massachusetts
we are working with the Township of Tewksbury, approximately 25 miles
northwest of Boston, on an approximately $200 million proposed Category 2
slots machine facility project. Late last week, the Town Selectmen in
Tewksbury voted unanimously to support a Host Community Agreement with Penn
National and we have requested a September 21 town election for a ballot
question regarding our proposal. Finally, and notwithstanding the second
quarter impairment charge, we have instituted several legal actions in Iowa
following the decision in April from the Iowa Racing & Gaming Commission
(‘IRGC’) to award the Sioux City casino license to another operator. We firmly
believe that state law, the Company’s right to due process and other
procedural matters were violated, and that the non-profit organization that
holds the license for riverboat gaming in Woodbury County acted in a highly
improper and unethical manner prior to and at the time the IRGC awarded the
license. We intend to continue to vigorously defend our position on these
matters.

“As we look to the second half of 2013, we remain focused on completing the
separation of the Company’s operating assets from its real property assets and
the creation of GLPI, which will be a newly formed, publicly-traded REIT.
During the second quarter, we continued to make progress towards completing
the spin-off of GLPI to Penn National shareholders.”

GLPI has filed a preliminary registration statement (File No. 333-188608) for
the proposed transaction. Investors are encouraged to read the registration
statement because it contains more complete information about GLPI and its
separation from the Company including financial information and disclosures
regarding GLPI’s capital structure, senior management and relationship with
Penn National as well as a detailed description of the conditions that must be
satisfied in order to proceed with the proposed transaction, including,
without limitation, the continuing validity of the factual representations
underlying the private letter ruling, the completion of the financings needed
to fund each of the public companies and the successful completion of the
gaming and racing regulatory approval process.

Mr. Carlino continued, “Subject to satisfaction of the applicable conditions,
the Company is planning to consummate the separation in the fourth quarter of
2013 and expects that GLPI will pay the one-time taxable cash and stock
dividend, expected to total $11.92 per share, to its shareholders in January
2014, concurrent with the REIT election.

“The Company has notified each of the 27 regulatory agencies that have
jurisdiction over the Company’s gaming and racing operations of the proposed
separation and has made, and is continuing to make, all documentary filings
required or requested by the various agencies. The Company believes that no
further regulatory approvals will be required by 12 of the 27 agencies prior
to the consummation of the separation and distribution of shares of GLPI
common stock, and that further prior approvals will be required from the other
15 agencies. Both the Nevada Gaming Commission and the West Virginia Lottery
Commission are scheduled to consider certain matters relating to the proposed
separation on July 25, 2013, and the Company expects most of the remaining
agencies to consider these matters at their July or August meetings. However,
the Company does not expect all agencies to consider the matters related to
the proposed separation in August, and, in any event, no assurance can be
given on the timing of the remaining regulatory approvals or whether any of
the 27 regulatory agencies may require the Company or GLPI to provide
additional information or obtain additional approvals.

“In conclusion, Penn National remains on course with its strategies to build
shareholder value by optimizing the efficiencies of our existing operations to
generate appropriate property level margins, pursuing new development
opportunities, and completing the planned REIT conversion which is expected to
bring near- and long-term opportunities to return capital to shareholders.”

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     June 30,   Date

                                                      2013
                                       (in millions)        
                                                         
Hollywood Casino St. Louis
(MO) - Rebranding of former
Harrah's property to our                                         Ongoing
Hollywood theme. Integration            $61       $32.8     through
of new casino, hotel,                                            Fourth
financial and operating                                          Quarter 2013
systems and upgrades of slot
machine product.
                                                         
Zia Park Casino (NM) -
Addition of 154 room, five
story hotel which will
include six suites, a                   $26       $0.1      Late 2014
breakfast room, a business
center, meeting and exercise
rooms, as well as additional
surface parking,
                                                         
Mahoning Valley Race Track
(OH) - Construction began in
May 2013 at Austintown’s
Centrepointe Business Park,
with our new Hollywood                                           Second Half
themed facility featuring a   850        $261 (1)  $13.0     2014
new racetrack and the
ability to hold up to 1,000
video lottery terminals, as
well as various restaurants,
bars and other amenities.
                                                         
Dayton Raceway (OH) -
Construction began in May
2013 at the site of an
abandoned Delphi Automotive
plant, with our new
Hollywood themed facility     1,000      $254 (1)  $11.2     Second Half
featuring a new racetrack                                        2014
and the ability to hold up
to 1,500 video lottery
terminals, as well as
various restaurants, bars
and other amenities.
                                                         
(1) Includes a $75 million
relocation fee in addition
to a $50 million VLT license
fee.
                                                                 

Financial Guidance – Penn National Gaming, Inc. (“PENN”)

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

  *Due to general softness in the majority of the regional gaming markets
    where the Company has operations, particularly in the Midwest segment, and
    the slower than expected ramp-up at Hollywood Casino Columbus and to
    lesser extents Hollywood Casino Toledo and Hollywood Casino St. Louis, a
    reduction of $70.7 million in adjusted EBITDA for the full year;

       *The reduction is inclusive of previously unanticipated charges
         associated with severance accruals and legal fees for the Company’s
         Argosy Casino Sioux City facility;

  *Excludes cash and non-cash charges associated with the proposed tax-free
    spin-off transaction for the remainder of 2013 (including tender costs,
    consulting fees, professional fees, debt issuance costs write-offs and
    impairments of goodwill and other intangible assets). Transaction costs
    related to the planned separation of the Company’s real estate and
    operating assets totaled $5.8 million for the first half of 2013;
  *Corporate overhead expenses exclude the impact of future stock price
    changes on our cash settled stock based compensation awards;
  *A continuation of the Casino Rama management contract at least through the
    remainder of calendar 2013;
  *Depreciation and amortization charges in 2013 of $317.6 million, with
    $80.2 million projected to be incurred in the third quarter of 2013 which
    includes an increase associated with the amortization of the Argosy Casino
    Sioux City gaming license intangible asset;
  *Full year and third quarter guidance includes a loss on sale of $5 million
    relating to the sale of our Bullwhackers facility;
  *Estimated non-cash stock compensation expenses of $23.6 million for 2013,
    with $6.2 million of the cost incurred in the third quarter of 2013;
  *LIBOR is based on the forward yield curve;
  *An income tax rate of approximately 39% for the remainder of 2013;
  *A diluted share count of approximately 102.9 million shares for the full
    year 2013. This excludes the impact of any stock price changes on the
    diluted weighted average shares per the terms of the Preferred Stock or as
    a result of the exchange transaction with Fortress Investment Group 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
except per     September 30,            Full Year Ending December 31,
share data)
Penn National   2013         2012         2013          2013 Prior
Gaming, Inc.   Guidance    Actual      Revised      Guidance     2012 Actual
                                          Guidance      (2)
Net revenues   $ 714.1    $ 707.0    $ 2,982.8   $ 3,137.8   $ 2,899.5 
Adjusted        189.7     168.6     805.1      875.8      711.4   
EBITDA (1)
Less: Impact
of stock
compensation,
impairment
losses,
insurance
recoveries
and
deductible
charges,
depreciation    (145.6 )   (122.2 )   (663.8  )   (612.0  )   (499.4  )
and
amortization,
gain/loss on
disposal of
assets,
interest
expense -
net, income
taxes, and
other
expenses
Net income     $ 44.1     $ 46.4     $ 141.3     $ 263.8     $ 212.0   
                                                            
Diluted
earnings per   $ 0.43     $ 0.44     $ 1.37      $ 2.56      $ 2.04    
common share
                                                                

        Adjusted EBITDA is income (loss) from operations, excluding the impact
        of stock compensation, impairment losses, insurance recoveries and
(1)   deductible charges, depreciation and amortization, and gain or loss on
        disposal of assets, and is inclusive of gain or loss from
        unconsolidated affiliates.
(2)     These figures present the guidance Penn National provided on April 18,
        2013 for the full year ending December 31, 2013.
        

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

Reflecting the assumptions below and the cash flow projected in the 2013
financial guidance for Penn National Gaming, Inc. above, and if the spin-off
were to have occurred on January 1, 2013, GLPI would be expected to generate
adjusted EBITDA of $439.8 million and Adjusted Funds From Operations (“AFFO”)
of $271.5 million.

Significant changes in assumptions from the previous guidance issued on April
18, 2013 are as follows:

  *A reduction in adjusted EBITDA resulting from lower projected rent
    payments due to slower than anticipated initial results from Hollywood
    Casino Columbus as well as reduced expectations at other properties
    partially offset by higher taxable REIT subsidiary (TRS) adjusted EBITDA
    levels driven by the addition of table games at Hollywood Casino
    Perryville;
  *A decrease in the assumed employee option holder dividends that will be
    incurred by GLPI related to equity awards due to reduced dividend
    estimates and a decline in options outstanding;
  *A fully diluted share count of 92.6 million common shares 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);
  *An assumed total leverage ratio at the time of the spin-off of GLPI to
    Penn National shareholders of 5.6x EBITDA;
  *Conversion of some of Peter M. Carlino’s stock options and stock holdings
    to GLPI stock options and common stock to implement the non pro-rata
    distribution for the Carlino Family;
  *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) has been reduced to $294 million or
    approximately $3.33 per current Penn National Gaming common share;
  *A decrease in the overall E&P dividend, from $1.1 billion to $1.05 billion
    due to refined estimates of asset values and accumulated earnings and
    profits. The impact of the decrease in the cash component of the E&P
    distribution noted above has resulted in an increase of the share
    component of the E&P distribution to 0.35 additional GLPI shares, from the
    previously assumed 0.29 additional GLPI shares, per Penn National Gaming
    common share;
  *The ordinary dividend amount to GLPI shareholders is calculated as 80
    percent of AFFO less the PNG option holder dividends. It is anticipated
    that proceeds from option exercises will be applied to reduce GLPI debt.
    Additionally, the share count utilized in the per share dividend
    calculation excludes the dilutive impact of employee stock options; and,
  *A decrease in the annual dividend to $2.32 per Penn National Gaming common
    share from $2.44 due to the factors described above.


GLPI, Penn National’s Proposed REIT Entity
(in millions, except per share data)          Full Year Ending December 31,
                                              2013 Revised    2013 Prior
GLPI, Penn National's Proposed REIT Entity    Guidance        Guidance (3)
Net revenues                                  $    591.3     $  606.3   
Adjusted EBITDA (1)                               439.8       455.2   
Less: Interest expense and maintenance
CAPEX, employee stock
option holder payments and income tax             (168.3  )    (170.8  )
payments
AFFO (2)                                          271.5       284.4   
Less: Impact of stock compensation, real
estate depreciation
plus maintenance CAPEX                            (122.4  )    (122.8  )
Net income                                    $    149.1     $  161.6   
                                                            
Diluted earnings per common share             $    1.61      $  1.74    
                                                            
Dividend per outstanding share                $    2.32      $  2.44    
                                                                  

        Adjusted EBITDA is income (loss) from operations, excluding the impact
        of stock compensation, impairment losses, insurance recoveries and
(1)   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 real estate depreciation and stock compensation expense
        and subtracting maintenance capital expenditures.
(3)     These figures present the guidance Penn National provided on April 18,
        2013 for the full year ending December 31, 2013.
        

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 $351.4 million of adjusted EBITDA in 2013.

Significant changes in assumptions from the previous guidance issued on April
18, 2013 are as follows:

  *A fully diluted share count of 87.2 million common shares;
  *Conversion of some of Peter M. Carlino’s stock options and stock holdings
    to GLPI stock options and common stock to implement the non pro-rata
    distribution for the Carlino Family;
  *Excludes charges associated with GLPI options held by Penn National Gaming
    employees, which will be paid by PNG;
  *Excludes the Sioux City impairment charge and any earnings impact
    associated with the sale of the Bullwhackers property which occurred on
    July 1, 2013;
  *PNG’s rent expense is reduced by $16.6 million primarily due to a slower
    than anticipated revenue ramp-up at Hollywood Casino Columbus and general
    softness in regional gaming markets. The rent coverage ratio would be
    approximately 2.1x EBITDAR before corporate expenses 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 5.7x. The calculation of rent coverage was modified to
    exclude PNG corporate overhead; and,
  *Increased depreciation expense of $10 million as a result of amortization
    of the Argosy Casino Sioux City gaming license intangible asset.

Penn National Gaming (PNG, the Operating Entity Post the Proposed Spin-off)
                             
(in millions, except per      Full Year Ending December 31,
share data)
PNG, the Operating Entity     2013 Revised Guidance  2013 Prior Guidance (3)
Post the Proposed Spin-Off
Net revenues                  $     2,811.2         $     2,967.9     
Adjusted EBITDAR (2)               771.1                843.0       
Rent Expense                       (419.7     )          (436.3      )
Adjusted EBITDA (1)                351.4                406.7       
Less: Impact of stock
compensation, impairment
losses, insurance recoveries
and deductible charges,
depreciation and                   (299.7     )          (324.2      )
amortization, gain/loss on
disposal of assets, interest
expense - net, income taxes,
and other expenses
Net income                    $     51.7            $     82.5        
                                                   
Diluted earnings per common   $     0.59            $     0.94        
share
                                                    

        Adjusted EBITDA is income (loss) from operations, excluding the impact
        of stock compensation, impairment losses, insurance recoveries and
(1)   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.
(3)     These figures present the guidance Penn National provided on April 18,
        2013 for the full year ending December 31, 2013.
        


PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Segment Information – Operations
(in thousands) (unaudited)
                                             
                      NET REVENUES                    ADJUSTED EBITDA
                      Three Months Ended June 30,     Three Months Ended June 30,
                      2013          2012            2013          2012
Midwest               $ 258,178       $ 217,975       $ 85,881        $ 66,796
(1)
East/West               317,071         348,652         95,119          98,379
(2)
Southern
Plains                  175,897         137,405         55,669          46,691
(3)
Other (4)              10,225         8,519          (25,271 )      (22,068 )
Total                 $ 761,371       $ 712,551       $ 211,398      $ 189,798 
                                                                      
                                                                      
                      NET REVENUES                    ADJUSTED EBITDA
                      Six Months Ended June 30,       Six Months Ended June 30,
                      2013            2012            2013            2012
Midwest               $ 545,491       $ 423,086       $ 181,966       $ 129,835
(1)
East/West               634,119         719,281         187,657         204,391
(2)
Southern
Plains                  360,581         287,125         114,361         100,576
(3)
Other (4)              19,426         19,118         (51,838 )      (44,264 )
Total                 $ 1,559,617     $ 1,448,610     $ 432,146      $ 390,538 
                                                                                

        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.
(1)   It also includes our Casino Rama management service contract and the
        Mahoning Valley and Dayton Raceway projects which we anticipate
        completing in 2014. Results for the three and six months ended June
        30, 2012 included preopening charges of $8.0 million and $12.7
        million, respectively.
        
        Our East/West segment consists of the following properties: Hollywood
        Casino at Charles Town Races, Hollywood Casino Perryville, Hollywood
(2)     Casino Bangor, Hollywood Casino at Penn National Race Course, Zia Park
        Casino, and M Resort. Results for the six months ended June 30, 2013
        included preopening charges of $0.2 million, as compared to preopening
        charges of $0.3 million for the six months ended June 30, 2012.
        
        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
(3)     November 2, 2012, and our 50% joint venture interest in Kansas
        Entertainment, LLC (“Kansas Entertainment”), which owns Hollywood
        Casino at Kansas Speedway that opened February 3, 2012. Results for
        the six months ended June 30, 2012 included our share of the Kansas
        Entertainment joint venture’s preopening charges of $1.4 million.
        
        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. 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 (which was sold on July 1, 2013) and our corporate overhead
        operations. Results for the three and six months ended June 30, 2013
        included corporate overhead costs of $25.7 million and $52.9 million,
        respectively, as compared to corporate overhead costs of $21.3 million
(4)     and $43.4 million for the three and six months ended June 30, 2012,
        respectively. Corporate overhead costs for the three months ended June
        30, 2013 compared to the corresponding period in the prior year
        included higher spin-off transaction costs of $2.3 million as well as
        higher lobbying and developments costs of $2.5 million. Corporate
        overhead costs for the six months ended June 30, 2013 compared to the
        corresponding period in the prior year included higher lobbying and
        developments costs of $5.4 million, higher payroll costs (mainly for
        liability based stock compensation) of $2.2 million, and higher
        spin-off transaction costs of $2.2 million. Additionally, results for
        the three and six months ended June 30, 2012 included transaction
        costs of $0.8 million associated with the Harrah’s St. Louis
        acquisition.
        

                                               
Reconciliation of Adjusted EBITDA to Net (loss) income (GAAP)

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
(in thousands) (unaudited)
                                                     
                     Three Months Ended              Six Months Ended
                     June 30,                        June 30,
                     2013          2012            2013           2012
Adjusted             $ 211,398       $ 189,798       $ 432,146        $ 390,538
EBITDA
Gain from
unconsolidated         (3,821  )       (1,054  )       (5,542   )       (2,739   )
affiliates
Depreciation
and                    (80,615 )       (56,791 )       (157,686 )       (110,128 )
amortization
Charge for
stock                  (5,450  )       (7,396  )       (11,701  )       (15,307  )
compensation
Impairment             (71,846 )       -               (71,846  )       -
losses
Insurance
deductible             (2,500  )       3,366           (2,500   )       7,229
charges, net
of recoveries
(Loss) gain on
disposal of           (285    )      92            (2,675   )      1,037    
assets
Income from          $ 46,881        $ 128,015       $ 180,196        $ 270,630
operations
Interest               (27,060 )       (17,823 )       (54,984  )       (35,866  )
expense
Interest               343             246             605              465
income
Gain from
unconsolidated         3,821           1,054           5,542            2,739
affiliates
Other                  2,402           1,474           3,066            471
Taxes on              (38,567 )      (46,299 )      (81,334  )      (93,153  )
income
Net (loss)           $ (12,180 )     $ 66,667       $ 53,091        $ 145,286  
income
                                                                                 

                                                                      
Reconciliation of Income (loss) from operations (GAAP) to Adjusted EBITDA

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Segment Information
(in thousands) (unaudited)
                                                                                   
Three Months Ended June 30, 2013
                                                                                   
                       Midwest    East/West    Southern      Other         Total
                                                   Plains
Income (loss)
from                   $ 53,069     $ 75,955       $ (47,564 )     $ (34,579 )     $ 46,881
operations
Charge for
stock                    -            -              -               5,450           5,450
compensation
Impairment               -            -              71,846          -               71,846
losses
Insurance
deductible               -            -              2,500           -               2,500
charges
Depreciation
and                      32,573       19,292         24,655          4,095           80,615
amortization
Loss (gain) on
disposal of              239          (128   )       185             (11     )       285
assets
Gain (loss)
from                    -         -          4,047       (226    )    3,821
unconsolidated
affiliates (1)
Adjusted               $ 85,881   $ 95,119    $ 55,669     $ (25,271 )   $ 211,398
EBITDA

                                                                     
Three Months Ended June 30, 2012
                                                                                  
                       Midwest    East/West    Southern     Other         Total
                                                   Plains
Income (loss)
from                   $ 47,139     $ 76,732       $ 37,532       $ (33,388 )     $ 128,015
operations
Charge for
stock                    -            -              -              7,396           7,396
compensation
Insurance
recoveries,
net of                   -            -              (3,366 )       -               (3,366  )
deductible
charges
Depreciation
and                      19,645       21,784         11,212         4,150           56,791
amortization
Loss (gain) on
disposal of              12           (137   )       37             (4      )       (92     )
assets
Gain (loss)
from                    -         -          1,276      (222    )    1,054   
unconsolidated
affiliates (1)
Adjusted               $ 66,796   $ 98,379    $ 46,691    $ (22,068 )   $ 189,798 
EBITDA

                                                                      
Six Months Ended June 30, 2013
                                                                                   
                       Midwest     East/West   Southern      Other         Total
                                                   Plains
Income (loss)
from                   $ 116,865     $ 145,062     $ (10,555 )     $ (71,176 )     $ 180,196
operations
Charge for
stock                    -             -             -               11,701          11,701
compensation
Impairment               -             -             71,846          -               71,846
losses
Insurance
deductible               -             -             2,500           -               2,500
charges
Depreciation
and                      64,830        40,125        44,543          8,188           157,686
amortization
Loss (gain) on
disposal of              271           2,470         243             (309    )       2,675
assets
Gain (loss)
from                    -          -          5,784       (242    )    5,542
unconsolidated
affiliates (1)
Adjusted               $ 181,966   $ 187,657   $ 114,361    $ (51,838 )   $ 432,146
EBITDA

                                                                          
Six Months Ended June 30, 2012
                                                                                       
                       Midwest       East/West     Southern      Other         Total
                                                       Plains
Income (loss)
from                   $ 93,422        $ 160,622       $ 82,243        $ (65,657 )     $ 270,630
operations
Charge for
stock                    -               -               -               15,307          15,307
compensation
Insurance
recoveries,
net of                   -               -               (7,229  )       -               (7,229  )
deductible
charges
Depreciation
and                      37,197          44,026          22,600          6,305           110,128
amortization
(Gain) loss on
disposal of              (784    )       (257    )       8               (4      )       (1,037  )
assets
Gain (loss)
from                    -           -           2,954       (215    )    2,739   
unconsolidated
affiliates (1)
Adjusted               $ 129,835    $ 204,391    $ 100,576    $ (44,264 )   $ 390,538 
EBITDA
                                                                                       

1) 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 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 $5.7 million for the three and six months ended June 30,
2013, respectively, as compared to $2.8 million and $4.5 million for the three
and six months ended June 30, 2012, respectively. Results for the three-month
period ended June 30, 2013 included a $1.5 million favorable adjustment
related to a lower real estate property tax assessment.

                                                
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data) (unaudited)
                                                     
                     Three Months Ended June 30,     Six Months Ended June 30,
                     2013          2012            2013            2012
                                                                       
Revenues
Gaming               $ 679,829       $ 634,846       $ 1,397,754       $ 1,290,923
Food, beverage         121,044         109,955         242,904           222,863
and other
Management            3,667         3,614         6,714           7,057     
service fee
Revenues               804,540         748,415         1,647,372         1,520,843
Less promotional      (43,169 )      (35,864 )      (87,755   )      (72,233   )
allowances
Net revenues          761,371       712,551       1,559,617       1,448,610 
                                                                       
Operating
expenses
Gaming                 341,889         330,875         703,907           671,044
Food, beverage         88,910          84,985          179,175           172,789
and other
General and            128,730         115,251         264,307           231,248
administrative
Depreciation and       80,615          56,791          157,686           110,128
amortization
Impairment             71,846          -               71,846            -
losses
Insurance
deductible            2,500         (3,366  )      2,500           (7,229    )
charges, net of
recoveries
Total operating       714,490       584,536       1,379,421       1,177,980 
expenses
Income from           46,881        128,015       180,196         270,630   
operations
                                                                       
Other income
(expenses)
Interest expense       (27,060 )       (17,823 )       (54,984   )       (35,866   )
Interest income        343             246             605               465
Gain from
unconsolidated         3,821           1,054           5,542             2,739
affiliates
Other                 2,402         1,474         3,066           471       
Total other           (20,494 )      (15,049 )      (45,771   )      (32,191   )
expenses
                                                                       
Income from
operations             26,387          112,966         134,425           238,439
before income
taxes
Taxes on income       38,567        46,299        81,334          93,153    
Net (loss)           $ (12,180 )     $ 66,667       $ 53,091         $ 145,286   
income
                                                                       
(Loss) earnings
per common
share:
Basic (loss)
earnings per         $ (0.16   )     $ 0.70          $ 0.55            $ 1.54
common share
Diluted (loss)
earnings per         $ (0.16   )     $ 0.63          $ 0.51            $ 1.37
common share
                                                                       
Weighted-average
common shares
outstanding:
Basic                  78,306          76,257          77,932            76,126
Diluted                78,306          106,130         103,932           105,875
                                                                       

Diluted Share Count Methodology

Penn National Gaming is required to adjust its diluted weighted average
outstanding share count for the purposes of calculating diluted earnings per
share for its Series B Redeemable Preferred Stock (“Preferred Stock”), which
had 12,050 shares outstanding as of June 30, 2013, 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 26,777,778 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 $1.205 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 17,985,075 shares and
    26,777,778 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 17,985,075 shares (regardless of how much
    the stock price exceeds $67).

In connection with our proposed plan to separate our 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 9,750 shares of 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 an unaffiliated 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 6.1 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 shares 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 2,300 shares
of Preferred Stock at par in advance of the spin-off.

Reconciliation of Non-GAAP Measures to GAAP

Adjusted EBITDA, or earnings before interest, taxes, stock compensation,
impairment losses, 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
and, adding back real estate depreciation. Adjusted Funds From Operations
(“AFFO”) is defined as FFO plus stock based compensation reduced by
maintenance capital expenditures. A reconciliation of FFO and AFFO to net
income (loss) per GAAP is included in the accompanying financial schedules.

Notwithstanding the foregoing, GLPI’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 212/231-2932; 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-eight facilities in eighteen jurisdictions,
including 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 34,500 gaming machines,
850 table games, 2,900 hotel rooms and 1.6 million square feet of gaming floor
space.

On November 15, 2012, the Company announced its intent to pursue a plan to
separate its operating assets and real property assets into two publicly
traded companies – an operating entity, Penn National Gaming, and a newly
formed, publicly traded real estate investment trust (a “REIT”), Gaming and
Leisure Properties, Inc. (“GLPI”) – and that it had received a private letter
ruling from the Internal Revenue Service (“IRS”) related to the tax treatment
of the separation and the qualification of GLPI as a REIT. The private letter
ruling is subject to certain qualifications including the accuracy of the
representations and statements made by the Company to the IRS. The completion
of the proposed transaction is contingent on receipt of approvals from gaming
regulators in certain states where the Company has operations as well as other
conditions.

GLPI has filed a preliminary registration statement (File No. 333-188608 for
the proposed transaction. Investors are encouraged to read the registration
statement because it contains more complete information about GLPI and its
separation from the Company including financial information and disclosures
regarding GLPI’s capital structure, senior management and relationship with
Penn National as well as a detailed description of the conditions that must be
satisfied in order to proceed with the proposed transaction, including,
without limitation, the continuing validity of the factual representations
underlying the private letter ruling, the completion of the financings needed
to fund each of the public companies and the successful completion of the
gaming and racing regulatory approval process. Subject to satisfaction of the
applicable conditions, the Company is planning to consummate the separation in
the fourth quarter of 2013.

Based on Penn National Gaming’s current real estate portfolio, GLPI is
expected to initially own the real estate associated with 19 casino
facilities, which have a total of over 2,900 acres of land and 6.6 million
square feet of building space. GLPI would lease back to Penn National Gaming
17 of these casino facilities and own and operate two gaming facilities in
Baton Rouge, Louisiana and Perryville, Maryland.

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 GLPI 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 GLPI 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
raise the capital necessary to finance the spin-off, including the redemption
of our existing debt and preferred stock obligations, the anticipated cash
portion of GLPI’s special E&P dividend and transaction costs; 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 ongoing 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; with respect to the
proposed Jamul project, particular risks associated with securing financing,
local opposition, and building a complex project on a relatively small parcel;
with respect to the Tewksbury project, particular risks associated with local
opposition, gaming changes, surrounding community agreements and a local
ballot measure; 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 rapid emergence of
new competitors (traditional, internet based and sweepstakes 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, 2012, 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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