Penn National Gaming Reports First Quarter Revenue of $641.1 Million and Adjusted EBITDA of $70.4 Million, Inclusive of $104.3

  Penn National Gaming Reports First Quarter Revenue of $641.1 Million and
  Adjusted EBITDA of $70.4 Million, Inclusive of $104.3 Million of Rent
  Expense

    - Establishes 2014 Second Quarter Guidance and Modifies 2014 Full Year
                                  Guidance -

Business Wire

WYOMISSING, Pa. -- April 24, 2014

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

                  
Conference Call:   Today, April 24, 2014 at 10:00 a.m. ET
Dial-in number:      212/231-2920
Webcast:             www.pngaming.com
Replay information provided below
                     

Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National Gaming” or the
“Company”) today reported first quarter operating results for the three months
ended March 31, 2014, as summarized below.

On November 1, 2013, the Company completed the tax-free spin-off to its
shareholders of Gaming and Leisure Properties, Inc. (“GLPI”). As a result,
Penn National Gaming leases from GLPI the real estate associated with 19 Penn
National Gaming casino facilities and makes monthly rent payments to GLPI
pursuant to a master lease. In addition, two other gaming facilities which
were owned by Penn National Gaming prior to the spin-off, Hollywood Casino
Perryville and Hollywood Casino Baton Rouge, are now owned and operated
exclusively by subsidiaries of GLPI.

Summary of First Quarter Results

(in millions, except per         Three Months Ended
share data)                   
                                 March 31,
                              2014 Actual  2014 Guidance (3)  2013 Actual
Net revenues                   $  641.1    $    640.4        $  798.2  
Adjusted EBITDAR (1)             174.7        174.7          220.7  
Rental expense related to        (104.3 )      (103.2   )      -      
Master Lease
Adjusted EBITDA (2)              70.4         71.5           220.7  
Less: Impact of stock
compensation, insurance
recoveries and deductible
charges, depreciation and        (65.9  )      (67.2    )      (155.4 )
amortization, gain/loss on
disposal of assets, interest
expense - net, income taxes,
and other expenses
Net income                     $  4.5      $    4.3          $  65.3   
                                                            
Diluted earnings per common    $  0.05     $    0.05         $  0.63   
share

      Adjusted EBITDAR is adjusted EBITDA excluding rent expense associated
      with our Master Lease with GLPI. Results for the three months ended
(1)  March 31, 2013 included $10.4 million of adjusted EBITDAR related to
      Hollywood Casino Perryville and Hollywood Casino Baton Rouge that were
      contributed to GLPI on November 1, 2013 as part of the spin-off.
      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 unconsolidated
(2)   affiliates. A reconciliation of net income (loss) per accounting
      principles generally accepted in the United States of America (“GAAP”)
      to adjusted EBITDA and adjusted EBITDAR, as well as income (loss) from
      operations per GAAP to adjusted EBITDA and adjusted EBITDAR, is included
      in the accompanying financial schedules.
      The guidance figures in the table above present the guidance Penn
(3)   National Gaming provided on February 6, 2014 for the three months ended
      March 31, 2014.
      

Review of First Quarter 2014 Results vs. Guidance and First Quarter 2013
Results

                                                     Three Months
                                                       Ended
                                                       March 31, 2014
                                                       Pre-tax     After-tax
                                                       (in thousands)
Income, per guidance (1)                               $ 6,997     $ 4,268
                                                                    
EBITDA variances:
Total segment variance, mainly East/Midwest              (4,474 )     (2,090 )
Liability based stock compensation charges               3,597        2,170
variance
Rent expense variance, primarily due to Ohio             (1,104 )     (516   )
properties
Lower other corporate overhead costs                    890       537    
Total EBITDA variances from guidance                     (1,091 )     101
                                                                    
Depreciation and gain/loss on disposal variance          3,185        1,488
Foreign currency and other                               2,246        1,353
Tax variance, including additional FIN 48 reserves      -         (2,673 )
Income, as reported                                    $ 11,337   $ 4,537  
                                                                             

                                      Three Months Ended
                                        March 31,
                                        2014       2014 Guidance (1)  2013
Diluted earnings per common share       $ 0.05     $    0.05          $ 0.63
Liability based stock compensation        (0.03 )        -                0.02
charges
Rent expense variance                     0.01           -                -
Development costs                         -              -                0.01
Spin-off transaction costs                -              -                0.01
Depreciation and gain/loss on             -              0.02             -
disposal variance
Tax variance                              -              (0.03    )       -
Loss on disposals                         -              -                0.02
Foreign currency and other               (0.01 )      -             -
Total                                   $ 0.02    $    0.04         $ 0.69

      The guidance figures in the tables above present the guidance Penn
(1)  National Gaming provided on February 6, 2014 for the three months ended
      March 31, 2014.
      

Timothy J. Wilmott, President and Chief Executive Officer of Penn National
Gaming, commented, “Despite challenging operating conditions, first quarter
consolidated results were in line with our expectations, with revenue,
adjusted EBITDAR, adjusted EBITDA and diluted EPS at or near guidance. During
the quarter, we saw a significant increase in both the number and severity of
weather impacted days compared to the first quarter of 2013. While weather
presented a significant drag on earnings -- particularly to our newly defined
East/Midwest segment which includes our three largest properties -- our
property level management teams continue to be diligent in maintaining
margins.

“On non-weather affected days, first quarter customer visitation and spending
levels from our rated customers remained largely consistent with recent trends
and our forecasts, while these metrics for customers spending less than $100
per visit remain challenged. The Company continued to address weather-related
and non-rated customer trends by aggressively managing costs, including
rational marketing and promotional activity, and driving operating
efficiencies. Our success with these efforts is evident in our first quarter
property level EBITDAR margins, with the East/Midwest region achieving a 29.4%
margin (excluding pre-opening/development costs), the West region delivering a
30.5% margin and the Southern Plains region generating a 31.7% margin.
Notably, both the West and Southern Plains segments exceeded the property
level EBITDAR margin of the comparable 2013 period. We remain focused on
expanding the EBITDAR contribution across our property portfolio as we
actively manage operating costs, fine tune the slot floor and table game mix,
build customer databases at our newly opened facilities, refine marketing
efforts and adjust food, beverage and entertainment offerings.

“Adjusted EBITDA was also impacted by higher than budgeted rent expense due to
higher than projected revenue levels at our Ohio casinos. Conversely, first
quarter results did not include $3 million of expenses that had been
contemplated in our guidance related to dividend payments to Penn National
Gaming employees who hold vested GLPI stock options as a result of the
spin-off. Reflecting organization-wide cost management measures, we anticipate
corporate overhead expenses for 2014 to approximate $70.0 million, or 21%
lower than 2013 levels when excluding $25 million of spin-off costs incurred
in 2013.

“During the quarter, Penn National Gaming made notable progress advancing our
slate of expansion and development projects, as highlighted by the
Massachusetts Gaming Commission’s decision in late February to award us with
the Commonwealth’s sole Category 2 (slots) gaming license. As the largest
owner of both regional gaming and pari-mutuel racing facilities in the
country, we believe Penn National Gaming has an unrivalled record of
developing pari-mutuel facilities into successful racing and gaming
entertainment operations that benefit local horsemen, local communities and
all state residents through economic development which leads to the creation
of new jobs and new tax revenues. We are confident that our development in
Massachusetts will extend our record.

“Our $225 million Plainridge Park Casino in Plainville, Massachusetts, with a
planned opening in June 2015, is wholly-owned by Penn National Gaming, and we
believe the project will further diversify our operating base and generate
strong returns on invested capital. In March, we executed our purchase
agreement for the land and real estate for this project and also paid the $25
million gaming license fee. We expect the new facility to create 1,000
construction related jobs and employ over 500 people, of which 90% are being
hired from the local area and most of whom will be represented by local
unions. In mid-March, Penn National Gaming conducted a ground breaking event
at the site and hosted a construction vendor event focused on
Massachusetts-based minority-owned, women-owned, veteran-owned and locally
owned businesses interested in contracting with the Company in the development
of Plainridge Park Casino. Penn National Gaming has also entered into
cross-marketing agreements with nearly 50 area businesses to help the
community participate more fully in the benefits of this economic development
project. Conveniently located one exit west of the I-495 /I-95 interchange,
Plainridge Park Casino is within a 10 minute drive of four major entertainment
venues -- Gillette Stadium at Patriot Place, Wrentham Village Premium Outlets,
TPC Boston, and the Comcast Center in Mansfield. This facility will preserve
live harness racing, create jobs in the Commonwealth and generate attractive
returns as we anticipate it will be the first facility to open in the
Commonwealth. Overall, the project represents a significant opportunity for
the Commonwealth, its residents and Penn National Gaming.

“During the first quarter, we also commenced construction related to our
pending management contract for the $360 million Hollywood Casino-branded
facility on the Jamul Indian Village’s land in trust, which is located
approximately 7 miles east of the San Diego Beltway, directly off of State
Route 94. Hollywood Casino Jamul-San Diego, which is expected to open in early
2016, will be the closest casino to downtown San Diego and its population base
of over 700,000 adults. Current construction activity is focused on a parking
structure with over 1,900 spaces. When complete, the property will include a
three-story gaming and entertainment facility of approximately 200,000 square
feet, over 1,700 slot machines, 50 live table games including poker, multiple
restaurants, bars and lounges. As with all of our developments, the project
will create significant new construction and permanent jobs in the region and
will enable the Jamul Indian Village of California to become economically
self-sufficient. Penn National Gaming plans to participate in the success of
the project through management and branding fees, as well as interest
payments.

“Given our focus on prudently expanding and diversifying our operating base
with return focused projects, last week we announced a strategic alliance with
The Cordish Companies, developer and operator of the successful Maryland Live!
facility in Hanover, Maryland, to pursue the development of a world class
gaming facility and resort in New York’s Hudson Valley-Catskill region as well
as a potential facility in the state’s Capital Region. We believe our
alignment with Cordish brings together two of the industry’s most financially
sound companies with proven gaming facility development and operations skills
as well as unparalleled records of developing and operating highly successful
regional gaming facilities in competitive environments.

“In Orange County, our focus is on a 120 acre parcel of undeveloped land in
the Village of South Blooming Grove. With excellent access to both The New
York State Thruway/Interstate 87 and New York State Highway 17, this site is
ideally situated to maximize the revenue potential and job creation for the
Hudson Valley Catskill region and the entire State of New York. Our plan is to
build a $750 million world class casino and resort including a hotel, spa,
marquee restaurants, an entertainment venue and other amenities. Our proposed
investment in Orange County would deliver a wide range of benefits to the
region including significant and sustainable economic, employment and tourism
activity. Under the terms of an agreement being finalized between the
companies, a Catskill Region facility in Orange County will be owned and
managed by a 50/50 joint venture between Penn National Gaming and Cordish and
will feature Cordish’s Live! brand. On April 17, both the Village of South
Blooming Grove and the town of Blooming Grove approved a resolution in support
of the companies’ gaming resort application.

“In the Capital Region, Cordish and Penn National Gaming are evaluating the
feasibility of several potential sites in and around Albany. Applications for
New York’s four new gaming licenses are due June 30 and the State has
announced its intent to award licenses as soon as late 2014.

“Elsewhere, Hollywood Casino St. Louis, which experienced construction
disruptions throughout 2013 as we completed an extensive facility upgrade and
re-branding, performed well during the first quarter despite the impact of
weather and related costs for snow removal, repairs and heat.

“Construction on our Dayton and Austintown video lottery terminal facilities
in Ohio, which will feature 1,000 and 850 gaming devices, respectively,
continues on budget and, despite the harsh winter, both facilities are on
scheduled to open early this fall.

“Since the spin-off, the Company has announced several senior level management
appointments. Early in the second quarter, we promoted Ameet Patel, who has
been with Penn National Gaming since 2001, to Senior Vice President of
Regional Operations. Ameet has successfully led several of our largest and
most successful properties including new facilities and those undergoing major
expansions and upgrades. A key driver of our long-term growth has been our
ability to attract and retain premier, results-oriented management and Ameet’s
appointment further bolsters Penn National Gaming’s leadership depth both for
our current operations and new facility openings.

“Last week, the Iowa Racing and Gaming Commission ruled that the Argosy Casino
Sioux City must cease operations by July 1, 2014. We are extremely
disappointed with this decision and are exploring all available legal options
to change this outcome.

“In conclusion, the first quarter results highlight the commitment of our
corporate and property level management teams and employees to efficiently
operate our highly diversified portfolio of new and well-maintained regional
gaming facilities despite adverse conditions. With our pipeline of expansion
and development projects, which are expected to deliver strong returns on
invested capital, our solid balance sheet and liquidity, and the Company’s
proven management team, we believe we have a solid foundation on which to
create value for our 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      March 31,   Date

                                                      2014
                                     (Unaudited, in         
                                          millions)
                                                         
Zia Park Casino (NM) -
Addition of 154 room,
five story hotel which
will include six suites,                                          Fourth
a breakfast room, a                   $26        $7.3       quarter of
business center, meeting                                          2014
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                  $161 (1)
one-mile thoroughbred       850        (2)        $2.2       Fall 2014
racetrack and
simulcasting 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 featuring a new    1,000      $165 (1)   $2.2       Fall 2014
5/8 harness racetrack and                 (2)
simulcasting and the
ability to hold up to
1,500 video lottery
terminals, as well as
various restaurants, bars
and other amenities.
                                                         
Plainridge Park Casino
(MA) - Construction is
underway at the site of
the Plainridge Racecourse
for our new gaming
operation, which will be                                          Second
integrated with the         1,250      $225 (3)   $26.0      quarter 2015
existing live harness
racing and simulcasting,
featuring 1,250 slot
machines, as well as
various dining and
entertainment options.
                                                         
Jamul Indian Village
project (CA) -
Construction is underway
at the site for this new
Hollywood Casino branded
gaming operation which
Penn will manage. The       2,100      $360 (4)   $15.5      First
facility is anticipated                                           quarter 2016
to feature over 1,700
slot machines, 50 live
table games including
poker, multiple
restaurants, bars and
lounges.

(1) Includes a relocation fee of $75 million based on the present value of the
contractual obligation, which is $7.5 million upon opening, and 18 additional
semi-annual payments of $4.8 million beginning one year after opening. We
anticipate the license fee will be paid as follows: 1) $10 million in the
second quarter, 2) $15 million upon opening and 3) $25 million on the one year
anniversary of the commencement of gaming.
(2) GLPI is responsible for certain construction related real estate costs
associated with these projects that are not included in the budgeted figures
above.
(3) Includes a $25 million license fee, which was paid in March 2014 and
included in the amount expended to date.
(4) As more fully described above, this project will be accounted for as an
investment.


Financial Guidance

Given recent operating trends that have occurred since quarter-end, the table
below sets forth current guidance targets for financial results for the 2014
second quarter and full year, based on the following assumptions:

  *Horseshoe Baltimore opens in early September 2014, impacting Hollywood
    Casino at Charles Town Races;
  *A full year of Miami Valley Gaming in Lebanon, Ohio impacting Hollywood
    Casino Lawrenceburg and Hollywood Casino Columbus;
  *Belterra Park in Cincinnati opens in early May 2014, impacting Hollywood
    Casino Lawrenceburg;
  *Hollywood Gaming at Dayton Raceway opens in the fall of 2014, impacting
    Hollywood Casino Columbus;
  *Hollywood Gaming at Mahoning Valley Race Track opens in the fall of 2014;
  *Operations from the Company’s Argosy Casino Sioux City facility cease as
    of July 1, 2014;
  *A full year contribution from the Company’s management contract for Casino
    Rama;
  *Full year rent expense of $418.1 million, with $104.3 million in the
    second quarter of 2014;
  *Full year pre-opening expenses of $8.9 million, with $1.9 million in the
    second quarter of 2014;
  *Depreciation and amortization charges in 2014 of $170.8 million, with
    $46.5 million in the second quarter of 2014;
  *Estimated non-cash stock compensation expenses of $12.9 million for 2014,
    with $3.4 million in the second quarter of 2014;
  *LIBOR is based on the forward yield curve;
  *A blended GAAP basis income tax rate of approximately 63% for 2014;
  *A diluted share count of approximately 89.4 million shares for the full
    year 2014; and
  *There will be no material changes in applicable legislation, regulatory
    environment, world events, weather, recent consumer trends, economic
    conditions, competitive landscape (other than listed above) or other
    circumstances beyond our control that may adversely affect the Company’s
    results of operations.


(in millions,      Three Months Ending
except per       June 30,                 Full Year Ending December 31,
share data)
                                             2014          2014 Prior
                2014        2013        Revised                   2013 Actual
                   Guidance     Actual                     Guidance
                                             Guidance      (3)
Net revenues     $ 640.5    $ 761.4    $ 2,513.8   $ 2,625.4   $ 2,918.8  
Adjusted          180.2     211.4     674.3      701.9      764.5    
EBITDAR (1)
Rental expense
related to        (104.3 )   -         (418.1  )   (421.6  )   (69.5    )
Master Lease
Adjusted          75.9      211.4     256.2      280.3      695.0    
EBITDA (2)
Less: Impact
of stock
compensation,
impairment
losses,
insurance
recoveries and
deductible
charges,
depreciation
and               (70.4  )   (223.6 )   (245.8  )   (258.4  )   (1,489.3 )
amortization,
gain/loss on
disposal of
assets,
interest
expense - net,
income taxes,
loss on early
extinguishment
of debt, and
other expenses
Net income       $ 5.5      $ (12.2  )  $ 10.4      $ 21.9      $ (794.3   )
(loss)
                                                              
Diluted
earnings         $ 0.06     $ (0.16  )  $ 0.12      $ 0.24      $ (10.17   )
(loss) per
common share

(1)  Adjusted EBITDAR is adjusted EBITDA excluding rent expense associated
      with our Master Lease with GLPI.
      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
(2)   disposal of assets, and is inclusive of gain or loss from unconsolidated
      affiliates. A reconciliation of net income (loss) per GAAP to adjusted
      EBITDA and adjusted EBITDAR, as well as income (loss) from operations
      per GAAP to adjusted EBITDA and adjusted EBITDAR, is included in the
      accompanying financial schedules.
      The guidance figures in the table above present the guidance Penn
(3)   National Gaming provided on February 6, 2014 for the full year ended
      December 31, 2014.
      


PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information – Operations

(in thousands) (unaudited)

                   NET REVENUES                ADJUSTED EBITDAR
                     Three Months Ended March     Three Months Ended March 31,
                     31,
                     2014          2013          2014            2013
East/Midwest (1)     $  349,449     $  458,548    $  101,650       $ 147,546
West (2)                60,920         62,152        18,557          17,922
Southern Plains         223,757        268,344       71,020          81,847
(3)
Other (4)              6,954         9,202        (16,488  )     (26,567 )
Total                $  641,080     $  798,246    $  174,739      $ 220,748 
                                                                             

In January 2014, the Company named Jay Snowden as its Chief Operating Officer
and the Company decided in connection with this decision to re-align its
reporting structure. Starting in 2014, the Company’s reportable segments are:
(i)East/Midwest, (ii)West, and (iii)Southern Plains. The prior year amounts
were reclassified to conform to the Company’s new reporting structure.

      The East/Midwest reportable segment consists of the following
      properties: Hollywood Casino at Charles Town Races, Hollywood Casino
      Bangor, Hollywood Casino at Penn National Race Course, Hollywood Casino
      Lawrenceburg, Hollywood Casino Toledo and Hollywood Casino Columbus. It
      also includes the Company’s Casino Rama management service contract and
      the Mahoning Valley and Dayton Raceway projects in Ohio, which the
      Company anticipates completing in the second half of 2014, as well as
(1)  the Plainville project in Massachusetts, which the Company expects to
      open in the second quarter of 2015. Current year results do not include
      results for Hollywood Casino Perryville as it was contributed to GLPI on
      November 1, 2013. This property had net revenues of $21.7 million and
      adjusted EBITDAR of $3.5 million for the three months ended March 31,
      2013. Our East/Midwest segment results for the three months ended March
      31, 2014 included development costs of $0.8 million whereas results for
      the corresponding period in the prior year included preopening charges
      of $0.2 million.
      
      The West reportable segment consists of the following properties: Zia
(2)   Park Casino and the M Resort, as well as the Jamul development project,
      which the Company anticipates completing in early 2016.
      
      The Southern Plains reportable segment consists of the following
      properties: Hollywood Casino Aurora, Hollywood Casino Joliet, Argosy
      Casino Alton, Argosy Casino Riverside, Argosy Casino Sioux City,
      Hollywood Casino Tunica, Hollywood Casino Bay St. Louis, Boomtown
      Biloxi, and Hollywood Casino St. Louis, and includes the Company’s 50%
(3)   investment in Kansas Entertainment, LLC, which owns the Hollywood Casino
      at Kansas Speedway. Additionally, current year results do not include
      results for Hollywood Casino Baton Rouge as it was contributed to GLPI
      on November 1, 2013. This property had net revenues of $20.9 million and
      adjusted EBITDAR of $6.9 million for the three months ended March 31,
      2013.
      
      The Other category consists of the Company’s standalone racing
      operations, namely Beulah Park, Raceway Park, Rosecroft Raceway,
      Sanford-Orlando Kennel Club, and the Company’s joint venture interests
      in Sam Houston Race Park, Valley Race Park and Freehold Raceway. Results
      in the prior year also included the Company’s Bullwhackers property
      which was sold in July 2013. If the Company is successful in obtaining
      gaming operations at these locations, they would be assigned to one of
      the Company’s regional executives and reported in their respective
      reportable segment. The Other category also includes the Company’s
(4)   corporate overhead costs, which was $15.7 million for the three months
      ended March 31, 2014 compared to corporate overhead costs of $27.2
      million for the three months ended March 31, 2013. Corporate overhead
      costs decreased by $11.5 million for the three months ended March 31,
      2014, compared to the corresponding period in the prior year, primarily
      due to lower liability based stock compensation charges of $4.0 million,
      lower spin-off transaction costs and development costs of $3.5 million,
      a reduction in various other items of approximately $2.6 million due to
      cost containment measures and transition service fees received from GLPI
      of $0.8 million.
      


Reconciliation of Net income (GAAP) to Adjusted EBITDA and Adjusted EBITDAR



PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

(in thousands) (unaudited)

                                            Three Months Ended
                                              March 31,
                                              2014             2013
Net income                                    $  4,537          $ 65,271
Income tax provision                             6,800            42,767
Other                                            (1,631   )       (664    )
Income from unconsolidated affiliates            (2,483   )       (1,721  )
Interest income                                  (467     )       (262    )
Interest expense                                11,295         27,924  
Income from operations                        $  18,051         $ 133,315
(Gain) loss on disposal of assets                (49      )       2,390
Charge for stock compensation                    2,579            6,251
Depreciation and amortization                    47,366           77,071
Income from unconsolidated affiliates           2,483          1,721   
Adjusted EBITDA                               $  70,430         $ 220,748
Rental expense related to Master Lease          104,309        -       
Adjusted EBITDAR                              $  174,739       $ 220,748 
                                                                          


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



PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information

(in thousands) (unaudited)
               
Three Months Ended March 31, 2014
                                                                 
                   East/Midwest  West      Southern    Other        Total
                                             Plains
Income (loss)
from               $  9,602       $ 8,057    $ 21,227     $ (20,835 )   $ 18,051
operations
Charge for
stock                 -             -          -            2,579         2,579
compensation
Depreciation
and                   26,823        1,549      17,251       1,743         47,366
amortization
(Gain) loss on
disposal of           (87     )     66         (22    )     (6      )     (49     )
assets
Income from
unconsolidated       -          -        2,452     31         2,483   
affiliates (1)
Adjusted           $  36,338      $ 9,672    $ 40,908     $ (16,488 )   $ 70,430
EBITDA
Rental expense
related to           65,312     8,885    30,112    -          104,309 
Master Lease
Adjusted           $  101,650   $ 18,557  $ 71,020   $ (16,488 )  $ 174,739 
EBITDAR
                                                                        
                                                                        
Three Months Ended March 31, 2013
                                                                        
                   East/Midwest  West      Southern    Other        Total
                                             Plains
Income (loss)
from               $  105,827     $ 12,047   $ 52,038     $ (36,597 )   $ 133,315
operations
Charge for
stock                 -             -          -            6,251         6,251
compensation
Depreciation
and                   41,689        3,305      27,984       4,093         77,071
amortization
Loss (gain) on
disposal of           30            2,570      88           (298    )     2,390
assets
Income (loss)
from                 -          -        1,737     (16     )   1,721   
unconsolidated
affiliates (1)
Adjusted           $  147,546   $ 17,922  $ 81,847   $ (26,567 )  $ 220,748 
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 income from unconsolidated affiliates
(1)  line in the Southern Plains column which includes the impact of
      depreciation and amortization expense. Our 50% share of depreciation and
      amortization expense was $2.9 million for the three months ended March
      31, 2014 and 2013.
      


PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands, except per share data) (unaudited)

                                              Three Months Ended March 31,
                                                2014            2013
                                                                 
Revenues
Gaming                                          $  570,683       $ 717,925
Food, beverage and other                           104,870         121,860
Management service fee                            2,458         3,047   
Revenues                                           678,011         842,832
Less promotional allowances                       (36,931  )     (44,586 )
Net revenues                                      641,080       798,246 
                                                                 
Operating expenses
Gaming                                             286,077         362,018
Food, beverage and other                           77,538          90,265
General and administrative                         107,739         135,577
Rental expense related to Master Lease             104,309         -
Depreciation and amortization                     47,366        77,071  
Total operating expenses                          623,029       664,931 
Income from operations                            18,051        133,315 
                                                                 
Other income (expenses)
Interest expense                                   (11,295  )      (27,924 )
Interest income                                    467             262
Income from unconsolidated affiliates              2,483           1,721
Other                                             1,631         664     
Total other expenses                              (6,714   )     (25,277 )
                                                                 
Income from operations before income taxes         11,337          108,038
Income tax provision                              6,800         42,767  
Net income                                      $  4,537        $ 65,271  
                                                                 
Earnings per common share:
Basic earnings per common share                 $  0.05          $ 0.68
Diluted earnings per common share               $  0.05          $ 0.63
                                                                 
Weighted-average common shares outstanding:
Basic                                              77,917          77,553
Diluted                                            88,679          102,887
                                                                           


PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Supplemental information

(in thousands) (unaudited)
                             
                                March 31, 2014       December 31, 2013
                                                     
Cash and cash equivalents       $   287,695          $    292,995
                                                     
Bank Debt                       $   741,944          $    748,777
Notes                               300,000               300,000
Other long term obligations        20,491     (1)     2,015
Total Debt                      $   1,062,435        $    1,050,792
                                                          

      Other long term obligations include contingent purchase price
(1)  consideration measured at its estimated fair value that is payable over
      ten years to the previous owners of Plainridge Racecourse.
      

The schedule below presents selected results for the second, third and fourth
quarters of 2013 based on our new segment reporting structure. See page 8 of
this release for further details.

                                           Southern
               East/Midwest  West                 Other        Total
                                           Plains
Net revenues                                                    
Three months
ended June       $   430,944    $ 61,442   $ 258,760   $ 10,225      $ 761,371
30, 2013 
(1)
Three months
ended                403,899      57,463     246,444     6,629         714,435
September
30, 2013 (2)
Three months
ended                359,194      59,026     220,549     5,933         644,702
December 31,
2013 (3)
                                                                     
Adjusted
EBITDAR
Three months
ended June       $   138,395    $ 17,592   $ 80,682    $ (25,271 )   $ 211,398
30, 2013 (1)
Three months
ended                124,944      10,906     70,577      (24,357 )     182,070
September
30, 2013 (2)
Three months
ended                111,694      15,105     61,665      (38,183 )     150,281
December 31,
2013 (3)
                                                                       

      Hollywood Casino Perryville and Hollywood Casino Baton Rouge had net
(1)  revenues of $25.9 million and $20.2 million, respectively, and adjusted
      EBITDAR of $5.9 million and $6.8 million, respectively, for the three
      months ended June 30, 2013.
      Hollywood Casino Perryville and Hollywood Casino Baton Rouge had net
(2)   revenues of $22.7 million and $16.9 million, respectively, and adjusted
      EBITDAR of $4.6 million and $4.7 million, respectively, for the three
      months ended September 30, 2013.
      Hollywood Casino Perryville and Hollywood Casino Baton Rouge had net
(3)   revenues of $7.2 million and $5.4 million, respectively, and adjusted
      EBITDAR of $1.4 million and $1.6 million, respectively, for the three
      months ended December 31, 2013.
      

Diluted Share Count Methodology

In connection with the spin-off, Penn National Gaming completed its exchange
and repurchase transaction with an affiliate of Fortress Investment Group, LLC
(“Fortress”) on October 11, 2013, which resulted in the repurchase of $627
million of its Series B Preferred Stock and the issuance of 8,624 shares of
Series C Preferred Stock, which is equivalent to 8,624,000 common shares upon
sale by Fortress to a third party.

Reconciliation of GAAP to Non-GAAP Measures

Adjusted EBITDA and adjusted EBITDAR are 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 EBITDAR is adjusted EBITDA excluding rent expense
associated with our Master Lease agreement with GLPI. Adjusted EBITDA and
adjusted EBITDAR have economic substance because they are used by management
as a performance measure to analyze the performance of our business, and are
especially relevant in evaluating large, long-lived casino projects because
they provide 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 and adjusted
EBITDAR because they are 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. In addition, 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 and adjusted EBITDAR are 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. Management uses adjusted EBITDA and adjusted
EBITDAR as the primary measures of the operating performance of its segments,
including the evaluation of operating personnel. Adjusted EBITDA and adjusted
EBITDAR should not be construed as alternatives to operating income, as
indicators of the Company’s operating performance, as alternatives to cash
flows from operating activities, as measures of liquidity, or as any other
measures 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 and adjusted EBITDAR. 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 net income (loss) per GAAP to adjusted
EBITDA and adjusted EBITDAR, as well as the Company’s net income (loss) from
operations per GAAP to adjusted EBITDA and adjusted EBITDAR, is included
above. Additionally, a reconciliation of each segment’s income (loss) from
operations to adjusted EBITDA and adjusted EBITDAR is also included above. On
a segment level, income (loss) from operations per GAAP, rather than net
income (loss) per GAAP is reconciled to adjusted EBITDA and adjusted EBITDAR
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.

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 212-231-2920. 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. Please 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-seven facilities in eighteen jurisdictions,
including Florida, Illinois, Indiana, Iowa, Kansas, Maine, Massachusetts,
Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio,
Pennsylvania, Texas, West Virginia, and Ontario. At March 31, 2014, in
aggregate, Penn National Gaming’s operated facilities featured approximately
31,100 gaming machines, 790 table games and 2,900 hotel rooms.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements can be
identified by the use of forward looking terminology such as “expects,”
“believes,” “estimates,” “projects,” “intends,” “plans,” “seeks,” “may,”
“will,” “should” or “anticipates” or the negative or other variations of these
or similar words, or by discussions of future events, strategies or risks and
uncertainties, including future plans, strategies, performance, developments,
acquisitions, capital expenditures, and operating results. Actual results may
vary materially from expectations. Although the Company believes 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: 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 and litigation against the Ohio
Racing Commission concerning opposition to relocating the Company’s Toledo
racetrack to the Dayton area; our ability to secure federal, state and local
permits and approvals necessary for construction; construction factors,
including delays, unexpected remediation costs, local opposition, organized
labor, 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 near San Diego, California, particular risks
associated with financing a project of this type, sovereign immunity, local
opposition (including several pending lawsuits), 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 proposed Massachusetts project, the ultimate
location of the various other gaming facilities in the state and the ongoing
efforts to repeal the enabling legislation; with respect to proposed New York
projects, risks related to our ability to secure favorable sites and licensing
from the State and the extent/location of other applications; 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 and sweepstakes based and taverns);
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/municipalities
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, 2013, subsequent Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K as filed with the United
States Securities and Exchange Commission. The Company does not intend to
update publicly any forward-looking statements except as required by law. In
light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this press release may not occur.

Contact:

Penn National Gaming, Inc.
Saul V. Reibstein, 610-401-2049
Chief Financial Officer
or
JCIR
Joseph N. Jaffoni / Richard Land, 212-835-8500
penn@jcir.com
 
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