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Penn National Gaming Reports Third Quarter Revenue of $714.4 Million and Adjusted EBITDA of $182.1 Million

  Penn National Gaming Reports Third Quarter Revenue of $714.4 Million and
  Adjusted EBITDA of $182.1 Million

Business Wire

WYOMISSING, Pa. -- October 17, 2013

Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National Gaming” or the
“Company”) today reported third quarter operating results for the three months
ended September 30, 2013, as summarized below:

                             
Summary of Third Quarter Results
                                 
(in millions, except per         Three Months Ended
share data)                  
                                 September 30,
                                                 2013 Guidance
                             2013 Actual                   2012 Actual
                                                 (2)
Net revenues                  $  714.4     $  714.1       $  707.0  
Adjusted EBITDA (1)             182.1       189.7         168.6  
Less: Impact of stock
compensation, depreciation
and amortization,

gain/loss on disposal of        (140.8 )     (145.6  )      (122.2 )
assets, interest expense -
net, income taxes,

and other expenses
Net income                    $  41.3      $  44.1        $  46.4   
                                                         
Diluted earnings per          $  0.40      $  0.43        $  0.44   
common share
                                                              

      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
(1)  disposal of assets, 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 this column present the guidance Penn
(2)   National provided on July 23, 2013 for the three months
      ended September 30, 2013.
                                                                


Review of Third Quarter 2013 Results vs. Guidance and Third Quarter 2012
Results
                                                               
                                Three Months
                                Ended
                                September 30, 2013
                                Pre-tax      After-tax
                                (in thousands)
Income, per guidance (1)        $ 72,273       $    44,087
                                                                     
EBITDA variances
Total segment variances           (1,846 )          (1,084   )
Termination charge
associated with spin-off          (3,807 )          (2,439   )
included in property
results
Spin-off transaction
costs recorded in                 (5,075 )          (3,038   )
corporate overhead
Other corporate items            3,056         1,829    
Total EBITDA variances            (7,672 )          (4,732   )
from guidance
                                                                     
Guidance miscalculation           5,848             3,496
on sale of Bullwhackers
Unfavorable tax rate             -             (1,534   )
variance
Income, as reported             $ 70,449    $    41,317   
                                                                     
                                                                     
                                Three Months Ended
                                September 30,
                                  2013         2013 Guidance (1)       2012
Diluted earnings per
common share excluding          $ 0.43         $    0.44             $ 0.57
items not included in
guidance
Termination charge
associated with spin-off          (0.02  )          -                  -
included in property
results
Spin-off transaction
costs recorded in                 (0.03  )          -                  -
corporate overhead
Other corporate items             0.02              -                  -
Guidance miscalculation           -                 (0.03    )         -
on sale of Bullwhackers
Unfavorable tax rate              -                 0.02               -
variance
Foreign currency
translation gain and              -                 -                  (0.01 )
Other
Maryland lobbying efforts         -                 -                  (0.18 )
Discrete tax benefits not         -                 -                  0.06
anticipated in guidance
                                                               
Diluted earnings per            $ 0.40      $    0.43          $ 0.44  
common share
                                                                             

      The guidance figures in the tables above present the guidance Penn
(1)  National provided on July 23, 2013 for the three months ended September
      30, 2013.
      

Peter M. Carlino, Chairman and Chief Executive Officer of Penn National
Gaming, commented, “Third quarter operating results reflect a continuation of
the soft regional gaming revenue trends that the industry has experienced
throughout 2013. As a result, third quarter revenues were in line with
guidance and adjusted property operating results were approximately $1.8
million less than contemplated in our guidance. The remaining $5.8 million
adjusted EBITDA variance relative to guidance is primarily the result of
expenses incurred as a result of the planned spin-off of Gaming and Leisure
Properties, Inc. (“GLPI”). Property margins, excluding $3.8 million of
termination charges related to the spin-off, were 29.7% which is consistent
with the corresponding period in the prior year. Given the challenging soft
regional trends we are relatively satisfied with our property results.

“We are temporarily suspending the practice of providing financial guidance
and withdrawing the 2013 full year guidance provided on July 23, 2013, for
Penn National Gaming and GLPI. Our general outlook for property results for
the rest of the year is fundamentally unchanged. The decision to suspend
guidance is a combination of the necessity to accelerate the timing of the
earnings release to accommodate disseminating this information relative to the
process of securing financing for the contemplated spin and uncertainty in
predicting the exact magnitude of the items (including but not limited to, a
partial quarter of rent expense related to the master lease, the expected
contribution, beginning November 1, 2013, of Hollywood Casino Baton Rouge and
Hollywood Casino Perryville to GLPI, lower levels of depreciation and interest
expense, goodwill and intangible asset impairment charges and transaction
costs related to the spin-off) that will flow through our income statement in
the fourth quarter as a result of the transaction.

“The planned spin-off of GLPI has already unlocked significant value for our
stockholders and we continue to believe it will add operational, strategic and
financial flexibility for both Penn National and GLPI and create two well
capitalized, uniquely positioned companies that are positioned for growth in
the gaming and REIT sectors, respectively. As the first REIT to focus on
gaming sector assets, GLPI will create a new capital funding source for the
industry and simultaneously position itself to benefit from diversification
into other real estate asset classes in the future while establishing a highly
efficient vehicle to deliver consistent and growing income distributions to
shareholders. In connection with the contemplated transaction, on October 11,
2013, we completed our previously disclosed exchange and repurchase
transactions with an affiliate of Fortress Investment Group LLC (“Fortress”)
and certain affiliates of Centerbridge Capital Partners, L.P.
(“Centerbridge”). In these transactions, we paid a total of $627.2 million to
the affiliates of Fortress and Centerbridge and issued to the affiliate of
Fortress 8,624 shares of non-voting Series C preferred stock in order to
redeem at par all of the previously outstanding shares of Series B preferred
stock. Each share of Series C preferred stock will automatically convert into
1,000 shares of common stock upon a sale to a third party not affiliated with
Fortress, and holders of Series C preferred stock will participate in
dividends paid to the holders of common stock on an as-converted basis. The
redemption of our historical Preferred Shares has the impact of reducing our
diluted share count by 13.1 million (based on the actual dilutive impact of
the securities in our third quarter EPS calculation) and will increase our
basic shares outstanding by approximately 8.6 million."

Timothy Wilmott, who is currently Penn National’s Chief Operating Officer and
who will serve as the Company’s Chief Executive Officer after the spin-off
added, “During the quarter, Penn National made continued progress on its
post-split expansion and development projects and we continue to expect these
projects will generate meaningful growth.

“First, we remain on schedule and on budget with the re-branding and facility
upgrade of Hollywood Casino St. Louis, which will be completed in December
2013. We have been found suitable by the Maryland Lottery Commission and will
make a presentation to the state’s Video Lottery Facility Location Commission
on October 21 on our proposed $700 million Hollywood Casino at Rosecroft
Raceway in Prince George’s County, Maryland. In addition, we continue to make
meaningful progress with the National Indian Gaming Commission, as well as
state and local officials, on the proposed Hollywood Casino-branded casino on
the Jamul Indian Village’s land in trust, approximately 20 miles east of
downtown San Diego. Construction on our Dayton and Austintown integrated
racing and gaming facilities continues on time and on budget and we expect
both facilities to open in the second half of 2014. 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. In Pennsylvania, we have
proposals being considered by the Pennsylvania Gaming Control Board for a new
gaming and entertainment destination in Philadelphia (where we are one of six
applicants) as well as for the development of an integrated racing and gaming
facility in Mahoning Township, near Pittsburgh (the last of the Category 1
sites in Pennsylvania), with decisions on both proposals expected in early
2014. Finally, in Massachusetts, along with two other bidders, we recently
submitted a formal application to the Massachusetts Gaming Commission for the
state’s sole Category 2 gaming license, with plans to develop a $225 million
integrated racing VLT facility, Plainridge Park Casino, in the Greater Boston
area.”

Mr. Carlino concluded, “Penn National remains focused on its initiatives to
build shareholder value. The spin-off of GLPI is expected to bring near- and
long-term opportunities to return capital to shareholders while creating a new
platform for sustainable growth. As a gaming facilities operator, manager and
developer, Penn National Gaming will continue to seek to optimize operating
efficiencies to generate appropriate property level margins while pursuing new
growth opportunities that leverage the Company’s proven development and
management skills.”

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       September     Date
                                                    30,

                                                    2013
                        (in millions)                          
                                                        
Hollywood Casino St. Louis (MO) -
Rebranding of former Harrah's
                                                                  Ongoing
property to our Hollywood theme.                                  through
Integration of new casino, hotel,    $61        $40.6       Fourth
                                                                  Quarter 2013
financial and operating systems
and upgrades of slot machine
product.
                                                        
Zia Park Casino (NM) - Addition of
154 room, five story hotel which
will

include six suites, a breakfast      $26        $1.0        Late 2014
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 themed
facility featuring a new 1,000       $261       $18.9       Second Half
racetrack and the                      (1)(2)                     2014
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
                         1,000       $254       $17.3       Second Half
facility featuring a new               (1)(3)                     2014
racetrack 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.
      GLPI is responsible for construction related costs which we anticipate
(2)   at the Spin-off will be approximately $25 million and subsequent to the
      Spin-off will total approximately $75 million.
      GLPI is responsible for construction related costs which we anticipate
(3)   at the Spin-off will be approximately $22 million and subsequent to the
      Spin-off will total approximately $66.8 million.
      


PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information – Operations

(in thousands) (unaudited)
                                            
                 NET REVENUES                     ADJUSTED EBITDA
                 Three Months Ended September     Three Months Ended September
                 30,                              30,
                    2013         2012            2013          2012
Midwest          $   244,011     $  247,287       $  80,735       $  79,851
(1)
East/West            294,816        324,603          78,229          90,370
(2)
Southern             168,979        128,604          47,463          38,549
Plains (3)
Other (4)           6,629         6,550           (24,357)       (40,179)
Total            $   714,435     $  707,044       $  182,070      $  168,591
                                                                  

                                                
                 NET REVENUES                          ADJUSTED EBITDA
                 Nine Months Ended September 30,       Nine Months Ended
                                                       September 30,
                   2013           2012               2013       2012
Midwest          $  789,502       $  670,373           $ 262,702    $ 209,686
(1)
East/West           928,934          1,043,884           265,886      294,760
(2)
Southern            529,560          415,729             161,824      139,125
Plains (3)
Other (4)          26,056          25,668             (76,195)    (84,442)
Total            $  2,274,052     $  2,155,654         $ 614,217    $ 559,129
                                                                    

      Our Midwest segment results for the three and nine months ended
(1)  September 30, 2012 included preopening charges of $7.1 million and $19.8
      million, respectively.
      
      Our East/West segment results for the nine months ended September 30,
      2013 included preopening charges of $0.2 million, as compared to
      preopening charges of $0.3 million for the nine months ended September
(2)   30, 2012. Additionally, results for the three months ended September 30,
      2013 included spin-off transaction costs of $3.8 million. Current year
      results have been negatively impacted by the June 2012 opening of a
      casino in Anne Arundel, Maryland.
      
      Our Southern Plains segment results for the nine months ended September
      30, 2012 included our share of the Kansas Entertainment joint venture’s
(3)   preopening charges of $1.4 million. Additionally, beginning in the third
      quarter of 2012, transaction costs associated with the Harrah’s St.
      Louis acquisition which totaled $1.5 million for the three and nine
      months ended September 30, 2012 were reported in this segment.
      
      Our Other segment results for the three and nine months ended September
      30, 2013 included corporate overhead costs of $24.4 million and $77.3
      million, respectively, as compared to corporate overhead costs of $39.2
      million and $82.6 million for the three and nine months ended September
      30, 2012, respectively. Corporate overhead costs decreased by $14.8
      million for the three months ended September 30, 2013, as compared to
      the corresponding period in the prior year, primarily due to lower
      lobbying expenses of $19.8 million as well as a favorable franchise tax
      resolution for $1.1 million, both of which were partially offset by
(4)   higher spin-off transaction costs and development costs of $4.0 million
      and $2.9 million, respectively. In the third quarter of 2012, our
      results included $19.2 million of lobbying costs related to our
      opposition to the November 2012 gaming referendum in Maryland. Corporate
      overhead costs decreased by $5.3 million for the nine months ended
      September 30, 2013, as compared to the corresponding period in the prior
      year, primarily due to lower lobbying expenses of $18.2 million as well
      as a favorable franchise tax resolution for $1.1 million, both of which
      were partially offset by higher spin-off transaction costs and
      development costs of $6.2 million and $7.5 million, respectively.
      


Reconciliation of Adjusted EBITDA to Net income (GAAP)



PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

(in thousands) (unaudited)
                                                  
                         Three Months Ended                Nine Months Ended
                         September 30,                     September 30,
                          2013         2012            2013          2012
Adjusted                 $ 182,070        $ 168,591        $ 614,217         $ 559,129
EBITDA
Gain from
unconsolidated             (2,296)          (807)            (7,838)           (3,546)
affiliates
Depreciation
and                        (79,968)         (62,399)         (237,654)         (172,527)
amortization
Charge for
stock                      (6,369)          (6,888)          (18,070)          (22,195)
compensation
Impairment                 -                -                (71,846)          -
losses
Insurance
deductible                 -                -                (2,500)           7,229
charges, net
of recoveries
(Loss) gain on
disposal of               (157)           169             (2,833)          1,206
assets
Income from              $ 93,280         $ 98,666         $ 273,476         $ 369,296
operations
Interest                   (25,060)         (19,953)         (80,044)          (55,819)
expense
Interest                   369              218              974               683
income
Gain from
unconsolidated             2,296            807              7,838             3,546
affiliates
Other                      (436)            (1,954)          2,630             (1,483)
Taxes on                  (29,132)        (31,338)        (110,466)        (124,491)
income
Net income               $ 41,317         $ 46,446         $ 94,408          $ 191,732
                                                                             

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



PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information

(in thousands) (unaudited)

Three Months Ended September 30, 2013
                                                                                    
                    Midwest     East/West    Southern    Other         Total
                                                    Plains
Income (loss)
from                 $ 48,349       $  59,416       $ 19,975       $ (34,460)       $ 93,280
operations
Charge for
stock                  -               -              -              6,369            6,369
compensation
Depreciation
and                    32,352          18,813         24,760         4,043            79,968
amortization
Loss (gain) on
disposal of            34              -              129            (6)              157
assets
Gain (loss)
from                  -           -          2,599      (303)        2,296
unconsolidated
affiliates (1)
Adjusted             $ 80,735    $  78,229    $ 47,463    $ (24,357)    $ 182,070
EBITDA
                                                                                    

Three Months Ended September 30, 2012
                                                                    
                     Midwest     East/West    Southern    Other (2)     Total
                                                    Plains
Income (loss)
from                 $ 55,088       $  68,078       $ 26,496       $ (50,996)       $ 98,666
operations
Charge for
stock                  -               -              -              6,888            6,888
compensation
Depreciation
and                    24,791          22,430         11,028         4,150            62,399
amortization
(Gain) loss on
disposal of            (28)            (138)          (11)           8                (169)
assets
Gain (loss)
from                  -           -          1,036      (229)        807
unconsolidated
affiliates (1)
Adjusted             $ 79,851    $  90,370    $ 38,549    $ (40,179)    $ 168,591
EBITDA
                                                                                    

Nine Months Ended September 30, 2013
                                                                       
                     Midwest      East/West    Southern     Other          Total
                                                     Plains
Income (loss)
from                 $ 165,214       $ 204,478       $ 9,419         $ (105,635)       $ 273,476
operations
Charge for
stock                  -               -               -               18,070            18,070
compensation
Impairment             -               -               71,846          -                 71,846
losses
Insurance
deductible             -               -               2,500           -                 2,500
charges
Depreciation
and                    97,182          58,938          69,304          12,230            237,654
amortization
Loss (gain) on
disposal of            306             2,470           372             (315)             2,833
assets
Gain (loss)
from                  -           -           8,383       (545)         7,838
unconsolidated
affiliates (1)
Adjusted             $ 262,702    $ 265,886    $ 161,824    $ (76,195)     $ 614,217
EBITDA
                                                                                       

                                                                       
Nine Months Ended September 30, 2012
                                                                                       
                     Midwest      East/West    Southern     Other (2)      Total
                                                     Plains
Income (loss)
from                 $ 148,509       $ 228,700       $ 108,739       $ (116,652)       $ 369,296
operations
Charge for
stock                  -               -               -               22,195            22,195
compensation
Insurance
recoveries,
net of                 -               -               (7,229)         -                 (7,229)
deductible
charges
Depreciation
and                    61,989          66,455          33,627          10,456            172,527
amortization
(Gain) loss on
disposal of            (812)           (395)           (3)             4                 (1,206)
assets
Gain (loss)
from                  -           -           3,991       (445)         3,546
unconsolidated
affiliates (1)
Adjusted             $ 209,686    $ 294,760    $ 139,125    $ (84,442)     $ 559,129
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
     in the Southern Plains column which includes the impact of depreciation
     and amortization expense. Our 50% share of depreciation and amortization
1)   expense was $2.9 million and $8.6 million for the three and nine months
     ended September 30, 2013, respectively, as compared to $2.6 million and
     $7.1 million for the three and nine months ended September 30, 2012,
     respectively. Results for the nine months ended September 30, 2013
     included a $1.5 million favorable adjustment related to a lower real
     estate property tax assessment.
     
     The Other category included lobbying costs of $19.2 million for the three
2)   and nine months ended September 30, 2012 related to our opposition of the
     November 2012 referendum to expand gaming in the state of Maryland.
                                           


PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands, except per share data) (unaudited)
                                                
                  Three Months Ended September     Nine Months Ended September
                  30,                              30,
                    2013          2012            2013         2012
                                                                   
Revenues
Gaming            $  641,777      $  633,836       $  2,039,531    $ 1,924,759
Food, beverage       112,687         103,735          355,591        326,598
and other
Management          3,685          4,347           10,399        11,404
service fee
Revenues             758,149         741,918          2,405,521      2,262,761
Less promotional    (43,714)       (34,874)        (131,469)     (107,107)
allowances
Net revenues        714,435        707,044         2,274,052     2,155,654
                                                                   
Operating
expenses
Gaming               325,576         327,489          1,029,483      998,533
Food, beverage       84,471          80,875           263,646        253,664
and other
General and          131,140         137,615          395,447        368,863
administrative
Depreciation and     79,968          62,399           237,654        172,527
amortization
Impairment losses    -               -                71,846         -
Insurance
deductible          -              -               2,500         (7,229)
charges, net of
recoveries
Total operating     621,155        608,378         2,000,576     1,786,358
expenses
Income from         93,280         98,666          273,476       369,296
operations
                                                                   
Other income
(expenses)
Interest expense     (25,060)        (19,953)         (80,044)       (55,819)
Interest income      369             218              974            683
Gain from
unconsolidated       2,296           807              7,838          3,546
affiliates
Other               (436)          (1,954)         2,630         (1,483)
Total other         (22,831)       (20,882)        (68,602)      (53,073)
expenses
                                                                   
Income from
operations before    70,449          77,784           204,874        316,223
income taxes
Taxes on income     29,132         31,338          110,466       124,491
Net income        $  41,317       $  46,446        $  94,408       $ 191,732
                                                                   
Earnings per
common share:
Basic earnings    $  0.43         $  0.49          $  0.98         $ 2.03
per common share
Diluted earnings  $  0.40         $  0.44          $  0.92         $ 1.81
per common share
                                                                   
Weighted-average
common shares
outstanding:
Basic                78,635          76,336           78,169         76,196
Diluted              103,442         105,841          103,107        105,874
                                                                   

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Other items

(in thousands) (unaudited)
                                             
                   Three Months Ended              Nine Months Ended September
                   September 30,                   30,
                    2013         2012           2013         2012
                                                                   
                                                                   
Project
Capital            $ 26,196        $ 96,677        $ 96,967        $ 298,625
Expenditures
Maintenance
Capital              16,260          14,097          62,106          66,327
Expenditures
                                                                   
                                                                   
                   September       June 30,        March 31,       December
                   30, 2013        2013            2013            31, 2012
                                                                   
Cash               $ 267,871       $ 235,135       $ 247,702       $ 260,467
                                                                   
Bank Debt          $ 2,062,362     $ 2,137,922     $ 2,276,608     $ 2,393,459
Subordinated         325,000         325,000         325,000         325,000
Notes
Other long
term                13,255         13,278         12,076         12,111
obligations
Total Debt         $ 2,400,617     $ 2,476,200     $ 2,613,684     $ 2,730,570
                                                                   

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 (“Series B Preferred
Stock”), which had 12,050 shares outstanding as of September 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 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, Penn repurchased its Series
B Preferred Stock on October 11, 2013 for $627 million and issued to Fortress
8,624 shares of Series C Preferred Stock, which is equivalent to approximately
8,624,000 non-voting common shares.

Reconciliation of Non-GAAP Measures to GAAP

Adjusted EBITDA is used by management as the primary measure of the Company’s
operating performance. We define adjusted EBITDA as earnings before interest,
taxes, stock compensation, debt extinguishment charges, impairment charges,
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. Adjusted EBITDA has
economic substance because it is used by management as a performance measure
to analyze the performance of our business, and is especially relevant in
evaluating large, long-lived casino projects because it provides a perspective
on the current effects of operating decisions separated from the substantial
non-operational depreciation charges and financing costs of such projects. We
also present adjusted EBITDA because it is used by some investors and
creditors as an indicator of the strength and performance of ongoing business
operations, including our ability to service debt, fund capital expenditures,
acquisitions and operations. These calculations are commonly used as a basis
for investors, analysts and credit rating agencies to evaluate and compare
operating performance and value companies within our industry. Gaming
companies have historically reported adjusted EBITDA as a supplement to
financial measures in accordance with GAAP. In order to view the operations of
their casinos on a more stand-alone basis, gaming companies, including us,
have historically excluded from their adjusted EBITDA calculations certain
corporate expenses that do not relate to the management of specific casino
properties. However, adjusted EBITDA 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, is the principal
basis for the valuation of gaming companies, and that it is considered by many
to be a better indicator of the Company’s operating results than net income
(loss) per GAAP. 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 and
therefore, comparability may be limited. 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.

This press release 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. At September 30, 2013, in
aggregate, Penn National's operated facilities featured approximately 33,000
gaming machines, 800 table games, 2,900 hotel rooms and 9.0 million of
property square footage.

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 entity intending to become a real estate investment
trust (a “REIT”), GLPI. On September 26, 2013, the Company announced that its
Board of Directors had approved, subject to certain terms and conditions, the
tax-free spin-off to its shareholders of substantially all of the Company’s
real property assets through the distribution of the shares of common stock of
GLPI. Each Penn National Gaming shareholder will receive one share of common
stock of GLPI for every share of Penn National Gaming common stock held by
such shareholder at the close of business on October 16, 2013, the record date
for the spin-off. The distribution is expected to be made on November 1, 2013.
Following the spin-off, the Company will continue to be listed on the NASDAQ
Stock Market under the symbol “PENN,” and GLPI expects to list its common
stock on the NASDAQ Stock Market under the symbol “GLPI.”

GLPI filed with the SEC on October 10, 2013 a prospectus on Form 424B3
relating to the proposed transaction (the “Prospectus”). Investors are
encouraged to read the Prospectus 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 Gaming as well as a
detailed description of the conditions that must be satisfied in order to
proceed with the proposed transaction. The remaining conditions that must be
satisfied in order to proceed with the proposed transaction, include, without
limitation, the completion of the financings needed to fund each of the public
companies and the continuing validity of the factual representations
underlying the private letter ruling from the Internal Revenue Service
received by the Company, which are described in further detail in the
Prospectus.

Based on Penn National Gaming’s current real estate portfolio, GLPI is
expected to own and lease immediately after the separation the real estate
associated with 21 casino facilities, which have a total of over 3,220 acres
of land and 6.6 million square feet of building space, including two
facilities currently under development in Dayton and Youngstown, Ohio. GLPI
would lease back to Penn National Gaming 19 of these casino facilities and own
and operate, through taxable REIT subsidiaries, 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, 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 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 federal, 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 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;
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); with respect to our
Massachusetts project, the ability to execute surrounding community agreements
and the ultimate location of the various facilities in the state; 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 or penn@jcir.com
 
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