Penn National Gaming Reports Second Quarter Revenue of $652.1 Million and Adjusted EBITDA of $82.1 Million, Inclusive of $104.6

  Penn National Gaming Reports Second Quarter Revenue of $652.1 Million and
  Adjusted EBITDA of $82.1 Million, Inclusive of $104.6 Million of Rent
  Expense

- Establishes 2014 Third Quarter Guidance and Updates 2014 Full Year Guidance
                                      -

Business Wire

WYOMISSING, Pa. -- July 24, 2014

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

                  
  Conference Call:  Today, July 24, 2014 at 10:00 a.m. ET
  Dial-in number:    212/231-2907
  Webcast:           www.pngaming.com
  Replay information provided below
                                                           

Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National Gaming”, “Penn” or
the “Company”) today reported second quarter operating results for the three
months ended June 30, 2014, as summarized below.

Summary of Second Quarter Results

(in millions, except        Three Months Ended
per share data)          
                            June 30,
                         2014 Actual   2014 Guidance (3)   2013 Actual
Net revenues (1)          $  652.1     $    640.5         $  761.4  
Adjusted EBITDAR (1)        186.7         183.2           214.3  
Rental expense related      (104.6 )       (104.3   )       -      
to Master Lease
Adjusted EBITDA (2)         82.1          78.9            214.3  
Less: Impact of stock
compensation,
impairment losses,
insurance recoveries
and deductible charges,
depreciation and            (79.3  )       (73.4    )       (226.5 )
amortization, gain/loss
on disposal of assets,
interest expense - net,
income taxes and other
expenses
Net income (loss)         $  2.8       $    5.5           $  (12.2  )
                                                         
Diluted earnings (loss)   $  0.03      $    0.06          $  (0.16  )
per common share (4)

    
      Adjusted EBITDAR is adjusted EBITDA excluding rent expense associated
      with our Master Lease with Gaming and Leisure Properties, Inc. (“GLPI”).
(1)   Results for the three months ended June 30, 2013 included net revenues
      of $46.1 million and adjusted EBITDAR of $12.7 million 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. Adjusted EBITDA is also inclusive of income or loss
      from unconsolidated affiliates, with our share of the non-operating
(2)   items added back for our joint venture in Kansas Entertainment, LLC
      (“Kansas Entertainment”). 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 April 24, 2014 for the three months ended
      June 30, 2014, adjusted to add back our share of the impact of
      non-operating items for our joint venture in Kansas Entertainment.
      Since the Company reported a loss from operations for the three months
      ended June 30, 2013, it was required by GAAP to use basic
(4)   weighted-average common shares outstanding, rather than diluted
      weighted-average common shares outstanding, when calculating diluted
      loss per common share.

                                                                             
Review of Second Quarter 2014 Results vs. Guidance
                                            Three Months
                                              Ended
                                              June 30, 2014
                                              Pre-tax     After-tax
                                              (in thousands)
Income, per guidance (1)                      $ 14,854    $    5,494
                                                                             
EBITDA variances:
Positive operating segment variance             2,184           1,028
excluding Argosy Casino Sioux City
Argosy Casino Sioux City negative               (1,438 )        (891     )
variance
Positive corporate overhead due to lower       2,507        1,512    
liability based stock compensation
Total EBITDA variances from guidance            3,253           1,649
                                                                             
Impairment charge for Lawrenceburg vessel       (4,560 )        (2,830   )
Other                                           (617   )        (373     )
Tax variance                                   -            (1,160   )
Income, as reported                           $ 12,930   $    2,780    
                                                                             
                                              Three Months Ended
                                              June 30,
                                              2014        2014 Guidance (1)
Diluted earnings per common share             $ 0.03       $    0.06
Argosy Casino Sioux City shortfall              0.01            -
Liability based stock compensation              (0.02  )        -
Impairment charge for Lawrenceburg vessel       0.03            -
Tax variance                                   -            (0.02    )
Total                                         $ 0.05     $    0.04     

    
      The guidance figures in the tables above present the guidance Penn
(1)   National Gaming provided on April 24, 2014 for the three months ended
      June 30, 2014.
      

Timothy J. Wilmott, President and Chief Executive Officer of Penn National
Gaming, commented, “Second quarter consolidated revenue, adjusted EBITDAR and
adjusted EBITDA exceeded guidance as our property-level operating results
benefited from a somewhat more stable operating environment and continued
strong margins.

“Our Southern Plains and West segments generated slight year-over-year
improvements in adjusted EBITDAR margins despite weaker than expected results
at Argosy Casino Sioux City. Adjusted EBITDAR margin for our East/Midwest
segment declined by approximately 100 basis points year-over-year as Hollywood
Casino at Charles Town Races and Hollywood Casino Lawrenceburg continued to
experience competitive pressures. We remain highly focused on growing
property-level adjusted EBITDAR as we actively manage property level expenses,
fine tune our gaming mix, continue to build up customer databases at recently
opened facilities, refine marketing efforts and adjust food, beverage and
entertainment offerings. Reflecting these strategies to improve operating
efficiencies, consolidated second quarter 2014 adjusted EBITDAR margin rose to
28.62%, representing a 47 basis point year-over-year improvement.

“Excluding the operations of Argosy Casino Sioux City, Penn National Gaming’s
second quarter adjusted EBITDA from its operating segments exceeded guidance
by approximately $2.2 million. Net income and diluted earnings per common
share were impacted by a higher tax rate and a one-time pre-tax charge of
approximately $4.6 million which was not contemplated in guidance, related to
our decision to divest the former Hollywood Casino Lawrenceburg riverboat.
Once the vessel is sold, our annual carrying costs of approximately $350,000
will be eliminated. In addition, with the implementation of several new cost
management measures, we are on track to realize full year corporate overhead
expense reductions of approximately 21% after excluding $25 million of
spin-off costs incurred last year.

“Throughout the quarter we aggressively pursued our rights through the Iowa
courts to prevent the loss of jobs associated with the near-term closure of
Argosy Casino Sioux City. While we are very disappointed by the decisions in
Iowa to date, Argosy Casino Sioux City was one of the Company’s smallest
facilities in terms of its annual adjusted EBITDA contribution. In addition,
our previous guidance did not include any earnings contribution from this
facility for the second half of 2014 and the closure will result in a $6.2
million reduction in our annual rent pursuant to the Master Lease with GLPI.

“Penn National Gaming is making continued progress on its expansion and
development pipeline, which we anticipate will generate solid returns on
invested capital while further diversifying our broad-based property
portfolio. Construction is nearing completion on our Dayton and Austintown
video lottery terminal facilities in Ohio, which will feature 1,000 and 850
gaming devices, respectively. Pending final regulatory approval, we have
scheduled the grand opening of Hollywood Gaming at Dayton Raceway for August
28 and expect to begin harness racing on the new all-weather racetrack on
October 3. Located in North Dayton and convenient to both I-75 and I-70,
Hollywood Gaming at Dayton Raceway will offer guests a range of entertainment,
dining and pari-mutuel experiences in an exciting, high energy setting, as
well as a grandstand that includes more than 1,000 enclosed seats and a
simulcast theater.

“We are proud of the significant economic opportunities that we are creating
in Dayton and Austintown. With nearly 500 permanent team members, Hollywood
Gaming at Dayton Raceway will be a significant regional employer and we
believe the facility can serve as a catalyst for additional economic
development in the area. In Austintown, we recently held a highly successful
job fair and continue to anticipate completing staffing and announcing a
September 2014 grand opening date shortly.

“In addition to the Dayton opening, on August 28, we also plan to open our
new, $26 million, 154 room hotel at Zia Park Casino. We believe the addition
of lodging at this facility will deliver attractive returns on invested
capital as it will offer an amenity that will allow us to further build
relationships with key customers from eastern New Mexico and western Texas and
extended stays.

“In Massachusetts, construction is proceeding on our $225 million Plainridge
Park Casino. During the quarter, the Massachusetts Supreme Judicial Court
issued a decision permitting a referendum on the November statewide ballot
that would repeal the 2011 gaming legislation. Current public opinion polls
indicate that Massachusetts voters recognize the importance of the gaming act
and that residents understand and appreciate the substantial economic and
employment benefits that gaming will bring to the state. We intend to actively
engage in a broad-based coalition effort to support the gaming act and are
continuing as planned with the construction of our facility, which will
generate 1,000 construction related jobs and employ over 500 people, of which
90% are planned to be hired from the local area. We estimate that, by the time
of the referendum, Penn National will have invested approximately $104 million
in the project, inclusive of the $42 million purchase price and $25 million
license fee. Overall, the project represents a significant opportunity for
Massachusetts, its residents and our shareholders and we look forward to an
anticipated June 2015 opening of this facility.

“Construction is also underway on the $360 million Hollywood Casino-branded
facility on the Jamul Indian Village’s land in trust, which is located
approximately twenty miles east of downtown San Diego, directly off of State
Route 94. Hollywood Casino Jamul-San Diego is expected to open in mid-2016 and
would be the closest casino to downtown San Diego. 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, multiple
restaurants, bars and lounges and 1,900 parking spaces. As with all of our
developments, the project is expected to 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
expects to participate in the success of the project through management and
branding fees, as well as interest payments on funds advanced to develop the
project.

“As previously announced, during the second quarter we formed a strategic
alliance with The Cordish Companies, developer and operator of the highly
successful Maryland Live!, to pursue the development of ‘Live! Hotel & Casino
New York,’ a world-class gaming facility and resort proposed for Orange
County, New York with a budget in excess of $750 million. Our plans are
expected to include an upscale boutique hotel with over 300 rooms and luxury
suites; a destination spa and fitness center; over 3,000 slot machines and
more than 250 live table games; several marquee restaurants including Bobby
Flay Steak, Smorgasburg, The Cheesecake Factory, Fornino, and Bobby’s Burger
Palace; as well as a live entertainment venue and a spacious conference
center. The proposed facility will be owned and managed by a 50/50 joint
venture which brings together two of the industry’s most financially sound
companies with proven gaming facility development and operations skills as
well as unrivalled records of developing and operating highly successful
regional gaming facilities in competitive environments. Our proposal is one of
17 applications for up to four casino licenses in three separate regions of
New York State and licenses are expected to be awarded later this year.

“Overall, second quarter results reflect our continued success in efficiently
operating our broadly diversified portfolio of new and well-maintained
regional gaming facilities. We believe our proven management team, development
pipeline and recently completed new facility developments and property
upgrades provide Penn National Gaming with growth opportunities differentiated
from our peer group and we look forward to the near-term expansion of our
property portfolio with the opening of our newest facilities in Dayton and
Austintown this quarter.”

                                                                             
Development and Expansion Projects
The table below summarizes Penn National Gaming’s current facility
development projects:
                                                        
                                                       Amount

                             New           Planned     Expended   Expected

Project/Scope              Gaming      Total      through   Opening

                             Positions     Budget      June 30,   Date

                                                       2014
                                     (Unaudited, in        
                                           millions)
                                                        
Zia Park Casino (NM) -
Addition of 154 room,
five story hotel which
will include six suites,                                          Opening
a breakfast room, a        -           $26        $15.3     August 28,
business center, meeting                                          2014
and exercise rooms, as
well as additional
surface parking.
                                                        
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                                          Opening
5/8 mile harness           1,000       $165 (1)   $15.9     August 28,
racetrack and                              (2)                    2014
simulcasting and the
ability to hold up to
1,500 video lottery
terminals, as well as
various restaurants,
bars and other
amenities.
                                                        
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)               September
one-mile thoroughbred      850         (2)        $15.9     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.
                                                        
Plainridge Park Casino
(MA) - Construction is
underway at the site of
the Plainridge
Racecourse for our new
gaming operation, which
will be integrated with    1,250       $225 (3)   $69.3     June 2015
the 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)   $24.1     Mid-2016
facility is anticipated
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. For the license fee, we paid $10 million in the second quarter of
2014, which is included in the amount expended to date, and anticipate
paying the remaining license fee as follows: 1) $15 million upon opening and
2) $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 $42
million purchase price, both of which are included in the amount expended to
date.
(4) As disclosed previously, this project will be accounted for as a loan.
                                                                             

Financial Guidance

Reflecting current operating trends, the table below sets forth 2014 third
quarter and full year guidance targets for financial results, based on the
following assumptions:

  *Horseshoe Baltimore opens in early September 2014, impacting Hollywood
    Casino at Charles Town Races;
  *Miami Valley Gaming in Lebanon, Ohio, opened in December 2013 and
    continues to impact Hollywood Casino Lawrenceburg and Hollywood Casino
    Columbus;
  *Belterra Park in Cincinnati, opened in May 2014, impacts Hollywood Casino
    Lawrenceburg;
  *Hollywood Gaming at Dayton Raceway opens on August 28, 2014, impacting
    Hollywood Casino Columbus;
  *Hollywood Gaming at Mahoning Valley Race Track opens in September 2014;
  *Operations at Argosy Casino Sioux City cease in the near term;
  *A full year contribution from the Company’s management contract for Casino
    Rama;
  *Full year 2014 rent expense of $419.3 million, with $104.0 million in the
    third quarter of 2014 which contemplates additional rent related to the
    planned openings of Hollywood Gaming at Dayton Raceway and Hollywood
    Gaming at Mahoning Valley Race Track and the closure of Argosy Casino
    Sioux City;
  *Full year 2014 pre-opening expenses of $8.2 million, with $5.4 million in
    the third quarter of 2014;
  *Excludes costs that will be incurred related to the November Massachusetts
    referendum;
  *Depreciation and amortization charges in 2014 of $178.7 million, with
    $39.0 million in the third quarter of 2014;
  *Estimated non-cash stock compensation expenses of $10.4 million for 2014,
    with $2.7 million in the third quarter of 2014;
  *LIBOR is based on the forward yield curve;
  *A diluted share count of approximately 89.1 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      September 30,            Full Year Ending December 31,
share data)
                                           2014          2014 Prior
               2014        2013        Updated                   2013 Actual
                 Guidance     Actual                     Guidance
                                           Guidance      (1)
Net revenues    $ 633.5    $ 714.4    $ 2,547.8   $ 2,513.8   $ 2,918.8  
Adjusted         164.4     185.0     690.9      686.2      776.1    
EBITDAR
Rental expense
related to       (104.0 )   -         (419.3  )   (418.1  )   (69.5    )
Master Lease
Adjusted         60.4      185.0     271.6      268.1      706.6    
EBITDA
Less: Impact
of stock
compensation,
impairment
losses,
insurance
recoveries and
deductible
charges,
depreciation
and              (55.1  )   (143.7 )   (269.6  )   (257.7  )   (1,500.9 )
amortization,
gain/loss on
disposal of
assets,
interest
expense - net,
income taxes,
loss on early
extinguishment
of debt and
other expenses
Net income      $ 5.3      $ 41.3     $ 2.0       $ 10.4      $ (794.3   )
(loss)
                                                             
Diluted
earnings        $ 0.06     $ 0.40     $ 0.02      $ 0.12      $ (10.17   )
(loss) per
common share

(1) The guidance figures in the table above present the guidance Penn National
Gaming provided on April 24, 2014 for the full year ended December 31, 2014,
adjusted to add back our share of the impact of non-operating items for our
joint venture in Kansas Entertainment.




PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information – Operations

(in thousands) (unaudited)
                                              
                     NET REVENUES                  ADJUSTED EBITDAR
                     Three Months Ended June 30,   Three Months Ended June 30,
                     2014           2013          2014           2013
East/Midwest         $  361,357      $ 430,943     $  112,309      $ 138,394
(1)
West (2)                59,033         61,442         17,000         17,591
Southern                224,726        258,761        73,008         83,606
Plains (3)
Other (4)              7,030         10,225        (15,647  )    (25,271 )
Total                $  652,146      $ 761,371     $  186,670     $ 214,320 
                                                                   
                                                                   
                     NET REVENUES                  ADJUSTED EBITDAR
                     Six Months Ended June 30,     Six Months Ended June 30,
                     2014            2013          2014            2013
East/Midwest         $  710,805      $ 889,492     $  213,959      $ 285,939
(1)
West (2)                119,953        123,594        35,556         35,514
Southern                448,483        527,105        146,949        168,312
Plains (3)
Other (4)              13,985        19,426        (32,135  )    (51,838 )
Total                $  1,293,226    $ 1,559,617   $  364,329     $ 437,927 
                                                                             

      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 third quarter of 2014, as well as
      the Plainville project in Massachusetts, which the Company expects to
(1)  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 $25.9 million and
      $47.6 million and adjusted EBITDAR of $5.9 million and $9.3 million for
      the three and six months ended June 30, 2013, respectively. Our
      East/Midwest segment results for the three and six months ended June 30,
      2014 included development costs of $1.6 million and $2.8 million,
      respectively, whereas results for the six months ended June 30, 2013
      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 mid-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%
      investment in Kansas Entertainment, which owns the Hollywood Casino at
      Kansas Speedway. Starting with the second quarter of 2014, adjusted
(3)   EBITDA and adjusted EBITDAR from our joint venture in Kansas
      Entertainment exclude our share of the impact of non-operating items
      (such as depreciation and amortization expense). The prior year amounts
      were restated to conform to this new presentation. 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 $20.2 million and $41.1 million and adjusted EBITDAR of $6.8
      million and $13.7 million for the three and six months ended June 30,
      2013, respectively.
      
      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, as
      well as the Company’s 50% joint venture with the Cordish Companies in
      New York. 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 corporate overhead costs, which was $14.4 million and
      $30.1 million for the three and six months ended June 30, 2014,
      respectively, as compared to corporate overhead costs of $25.7 million
      and $52.9 million for the three and six months ended June 30, 2013,
(4)   respectively. Corporate overhead costs decreased by $11.3 million and
      $22.8 million for the three and six months ended June 30, 2014,
      respectively, as compared to the corresponding period in the prior year,
      primarily due to lower payroll costs of $4.0 million and $8.9 million
      primarily attributed to lower liability based stock compensation charges
      of $1.9 million and $5.9 million, as well as decreased compensation
      costs due to the fact that certain members of Penn’s executive
      management team transferred their employment to GLPI as part of the
      spin-off, lower spin-off transaction costs and development costs of $4.3
      million and $7.8 million, lower lobbying costs of $1.3 million and $1.8
      million, transition service fees received from GLPI of $0.4 million and
      $1.2 million, and a reduction in various other items due to cost
      containment measures. Additionally, the Other category includes $0.9
      million for the three and six months ended June 30, 2014 in costs from
      our New York joint venture.



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

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

(in thousands) (unaudited)
                                                 
                         Three Months Ended          Six Months Ended
                         June 30,                    June 30,
                         2014         2013          2014         2013
Net income (loss)        $ 2,780       $ (12,180 )   $ 7,317       $ 53,091
Income tax provision       10,150        38,567        16,950        81,334
Other                      1,823         (2,402  )     192           (3,066  )
Income from
unconsolidated             (1,473  )     (3,821  )     (3,956  )     (5,542  )
affiliates
Interest income            (790    )     (343    )     (1,257  )     (605    )
Interest expense          10,892      27,060      22,187      54,984  
Income from              $ 23,382      $ 46,881      $ 41,433      $ 180,196
operations
Loss (gain) on             3             285           (47     )     2,675
disposal of assets
Insurance deductible       -             2,500         -             2,500
charges
Impairment losses          4,560         71,846        4,560         71,846
Charge for stock           2,517         5,450         5,096         11,701
compensation
Depreciation and           47,183        80,615        94,549        157,686
amortization
Income from
unconsolidated             1,473         3,821         3,956         5,542
affiliates
Non-operating items       2,939       2,922       5,860       5,781   
for Kansas JV
Adjusted EBITDA          $ 82,057      $ 214,320     $ 155,407     $ 437,927
Rental expense
related to Master         104,613     -           208,922     -       
Lease
Adjusted EBITDAR         $ 186,670    $ 214,320    $ 364,329    $ 437,927 



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 June 30, 2014
                 East/Midwest  West      Southern  Other        Total     
                                             Plains
Income (loss)
from              $  17,003     $ 7,426   $ 17,970  $ (19,017 )  $ 23,382
operations
Charge for
stock                 -             -          -          2,517         2,517
compensation
Impairment            4,560         -          -          -             4,560
losses
Depreciation
and                   25,911        1,692      17,573     2,007         47,183
amortization
(Gain) loss on
disposal of           (30     )     -          39         (6      )     3
assets
Income (loss)
from                  -             -          2,621      (1,148  )     1,473
unconsolidated
affiliates
Non-operating
items for           -          -        2,939    -          2,939   
Kansas JV (1)
Adjusted           $  47,444      $ 9,118    $ 41,142   $ (15,647 )   $ 82,057
EBITDA
Rental expense
related to          64,865     7,882    31,866   -          104,613 
Master Lease
Adjusted          $  112,309   $ 17,000  $ 73,008  $ (15,647 )  $ 186,670 
EBITDAR

                                                                                   
Three Months Ended June 30, 2013
                 East/Midwest  West      Southern     Other        Total     
                                             Plains
Income (loss)
from              $   97,819    $ 14,260  $ (30,619 )  $ (34,579 )  $ 46,881
operations
Charge for
stock                  -            -          -             5,450         5,450
compensation
Impairment             -            -          71,846        -             71,846
losses
Insurance
deductible             -            -          2,500         -             2,500
charges
Depreciation
and                    40,469       3,321      32,730        4,095         80,615
amortization
Loss (gain) on
disposal of            106          10         180           (11     )     285
assets
Income (loss)
from                   -            -          4,047         (226    )     3,821
unconsolidated
affiliates
Non-operating
items for            -          -        2,922      -          2,922   
Kansas JV (1)
Adjusted          $   138,394   $ 17,591  $ 83,606    $ (25,271 )  $ 214,320 
EBITDA

                                                                                   
Six Months Ended June 30, 2014
                 East/Midwest  West      Southern   Other        Total       
                                             Plains
Income (loss)
from              $  26,605     $ 15,482  $ 39,197   $ (39,851 )  $ 41,433
operations
Charge for
stock                 -             -          -           5,096         5,096
compensation
Impairment            4,560         -          -           -             4,560
losses
Depreciation
and                   52,734        3,241      34,824      3,750         94,549
amortization
(Gain) loss on
disposal of           (117    )     65         17          (12     )     (47     )
assets
Income (loss)
from                  -             -          5,074       (1,118  )     3,956
unconsolidated
affiliates
Non-operating
items for           -          -        5,860     -          5,860    
Kansas JV (1)
Adjusted              83,782        18,788     84,972      (32,135 )     155,407
EBITDA
Rental expense
related to          130,177    16,768   61,977    -          208,922  
Master Lease
Adjusted          $  213,959   $ 35,556  $ 146,949  $ (32,135 )  $ 364,329  
EBITDA

                                                                                 
Six Months Ended June 30, 2013
                 East/Midwest  West      Southern   Other        Total     
                                             Plains
Income (loss)
from              $   203,646   $ 26,307  $ 21,419   $ (71,176 )  $ 180,196
operations
Charge for
stock                  -            -          -           11,701        11,701
compensation
Impairment             -            -          71,846      -             71,846
losses
Insurance
deductible             -            -          2,500       -             2,500
charges
Depreciation
and                    82,157       6,627      60,714      8,188         157,686
amortization
Loss (gain) on
disposal of            136          2,580      268         (309    )     2,675
assets
Income (loss)
from                   -            -          5,784       (242    )     5,542
unconsolidated
affiliates
Non-operating
items for            -          -        5,781     -          5,781   
Kansas JV (1)
Adjusted          $   285,939   $ 35,514  $ 168,312  $ (51,838 )  $ 437,927 
EBITDA

   
     Starting with the second quarter of 2014, adjusted EBITDA and adjusted
     EBITDAR from our joint venture in Kansas Entertainment exclude our share
1)   of the impact of non-operating items (such as depreciation and
     amortization expense). Prior periods were restated to conform to this new
     presentation.

                                                                               
                                                                               
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data) (unaudited)
                                             
                     Three Months Ended June     Six Months Ended June 30,
                     30,
                     2014         2013          2014           2013
                                                                               
Revenues
Gaming               $ 576,158     $ 679,829     $ 1,146,841     $ 1,397,754
Food, beverage         110,574       121,044       215,444         242,904
and other
Management            3,105       3,667       5,563         6,714     
service fee
Revenues               689,837       804,540       1,367,848       1,647,372
Less promotional      (37,691 )    (43,169 )    (74,622   )    (87,755   )
allowances
Net revenues          652,146     761,371     1,293,226     1,559,617 
                                                                               
Operating
expenses
Gaming                 284,107       341,889       570,184         703,907
Food, beverage         80,403        88,910        157,941         179,175
and other
General and            107,898       128,730       215,637         264,307
administrative
Rental expense
related to             104,613       -             208,922         -
Master Lease
Depreciation and       47,183        80,615        94,549          157,686
amortization
Impairment             4,560         71,846        4,560           71,846
losses
Insurance
deductible            -           2,500       -             2,500     
charges
Total operating       628,764     714,490     1,251,793     1,379,421 
expenses
Income from           23,382      46,881      41,433        180,196   
operations
                                                                               
Other income
(expenses)
Interest expense       (10,892 )     (27,060 )     (22,187   )     (54,984   )
Interest income        790           343           1,257           605
Income from
unconsolidated         1,473         3,821         3,956           5,542
affiliates
Other                 (1,823  )    2,402       (192      )    3,066     
Total other           (10,452 )    (20,494 )    (17,166   )    (45,771   )
expenses
                                                                               
Income from
operations             12,930        26,387        24,267          134,425
before income
taxes
Income tax            10,150      38,567      16,950        81,334    
provision
Net income           $ 2,780      $ (12,180 )   $ 7,317        $ 53,091    
(loss)
                                                                               
Earnings (loss)
per common
share:
Basic earnings
(loss) per           $ 0.03        $ (0.16   )   $ 0.08          $ 0.55
common share
Diluted earnings
(loss) per           $ 0.03        $ (0.16   )   $ 0.08          $ 0.51
common share
                                                                               
Weighted-average
common shares
outstanding:
Basic                  78,458        78,306        78,189          77,932
Diluted                88,936        78,306        88,813          103,932

   
        
        PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

        Supplemental information

        (in thousands) (unaudited)
                                                       
                                       June 30, 2014         December 31, 2013
                                                             
        Cash and cash                  $  251,299            $    292,995
        equivalents
                                                             
        Bank Debt                      $  735,110            $    748,777
        Notes                             300,000                 300,000
        Other long term                  20,689       (1)       2,015
        obligations
        Total Debt (2)                 $  1,055,799          $    1,050,792

   
     Other long term obligations include contingent purchase price
1)   consideration measured at its estimated fair value of $18.5 million that
     is payable over ten years to the previous owners of Plainridge
     Racecourse.
     Although our joint venture in Kansas Entertainment is accounted for as an
2)   equity method investment and is not consolidated, this joint venture had
     no debt outstanding at June 30, 2014 or December 31, 2013.
     

During the second quarter of 2014, Penn refined its definition of adjusted
EBITDA and adjusted EBITDAR to add back our share of the impact of
non-operating items (such as depreciation and amortization) at our joint
ventures which have gaming operations. At this time, Kansas Entertainment, the
operator of Hollywood Casino at Kansas Speedway, is Penn’s only joint venture
that meets this definition. Kansas Entertainment does not currently have, nor
has it ever had, any indebtedness. Attached below is a quarterly summary of
the Company’s historical and revised adjusted EBITDA that Penn reported over
the past five quarters.

                 Three months ended
                   March 31,   December  September  June 30,   March 31,
                   2014         31, 2013   30, 2013    2013        2013
                                                                             
Adjusted
EBITDA as          $  70,429    $ 80,779   $ 182,070   $ 211,398   $ 220,748
historically
reported
                                                                             
Non-operating
items for             2,921       2,913      2,902       2,922       2,859
Kansas JV
                                                               
Adjusted
EBTIDA as          $  73,350    $ 83,692   $ 184,972   $ 214,320   $ 223,607
revised
                                                                             

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. Adjusted EBITDA is also inclusive of income or loss from
unconsolidated affiliates, with our share of non-operating items (such as
depreciation and amortization) added back for our joint venture in Kansas
Entertainment. 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
and adjusted EBITDAR 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 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 212/231-2907. 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. At June 30,
2014, the Company operated 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 June 30, 2014, in
aggregate, Penn National Gaming’s operated facilities featured approximately
30,900 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, 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 our construction projects; construction factors, including delays,
unexpected remediation costs, local opposition, organized labor, and increased
cost of labor and materials; our ability to maintain agreements with our
horsemen, 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 Massachusetts project, the ultimate location
of the other gaming facilities in the state and, more significantly, the
outcome of the referendum to repeal the gaming legislation in Massachusetts
which could result in substantial litigation as well as a significant loss to
our investment in the state; with respect to our joint venture project in New
York, risks related to our ability to secure local support for our site,
licensing from the state and the extent and location of other applications and
competition; 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, each 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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