Penn National Gaming Reports Third Quarter Revenue of $638.3 Million and Adjusted EBITDA of $162.0 Million

WYOMISSING, Pa.--(BUSINESS WIRE)-- Penn National Gaming, Inc. (Nasdaq: PENN):

- Third Quarter Diluted Earnings Per Share Attributable to Shareholders of $0.46 Inclusive of $0.10 of Per Share Benefit from Gain on Legal Settlement and Fire Insurance Proceeds -

- Establishes 2010 Fourth Quarter Guidance and Updates 2010 Full Year Guidance -

Conference Call:			Today, October 21, 2010 at 10:00 a.m. ET
Dial-in number:			212/271-4651
Webcast:			www.pngaming.com
Replay information provided below

Penn National Gaming, Inc. (PENN: Nasdaq) today reported third quarter operating results for the three months ended September 30, 2010, as summarized below:

Review of Third Quarter 2010 Results vs. Guidance and Third Quarter 2009 Results

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Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming commented, “Penn National was active and productive during the third quarter as we continued to build property level EBITDA margins, drove increased visitation and revenue at Hollywood Casino at Charles Town Races and Hollywood Casino at Penn National Race Course through the addition of table games, opened Hollywood Casino Perryville ahead of schedule, and advanced our existing development pipeline while expanding Penn National’s potential to participate in gaming in several new jurisdictions, including Las Vegas.

“Third quarter revenue, EBITDA, net income and EPS surpassed guidance and reflect the combination of higher than anticipated contributions from new gaming offerings at two properties and our commitment to achieving operating efficiencies, and undertaking rational marketing programs and spending throughout the organization. Our properties’ third quarter EBITDA exceeded guidance by $12.0 million pre-tax, or $6.9 million after-tax, amounting to $0.06 per diluted share upside relative to our guidance. Notably, third quarter 2010 property level EBITDA margins, excluding pre-opening costs of $2.8 million at Hollywood Casino Perryville, rose to 28.5% compared with 27.8% in the same period in 2009 and 27.0% in the 2010 second quarter. The significant margin increase is attributable to the further rationalization of our marketing and promotional offers to customers as well as the benefit of operating leverage related to the incremental revenue being generated at Hollywood Casino at Charles Town Races and Hollywood Casino at Penn National Race Course following the placement of table games at these properties during the quarter.

“On September 27, we opened Hollywood Casino Perryville in Cecil County, Maryland to strong patronage and play levels. Hollywood Casino Perryville extends both our Hollywood Casino® brand and our East Coast presence. The facility features 1,500 slots and was developed at a cost of $98 million inclusive of licensing. Hollywood Casino Perryville is located less than a half-mile from I-95 and 31 miles north of the Baltimore beltway and the location is expected to provide a more convenient gaming option for those Maryland players currently playing in Delaware.

“During the third quarter, Penn National also furthered its long-term strategy to diversify the Company’s pari-mutuel operations and grow its presence in key markets by acquiring or investing in assets that would benefit from the placement of gaming devices. Last month, we established a joint venture that will own and operate in Texas the Sam Houston Race Park in Houston, the Valley Race Park in Harlingen and a planned racetrack in Laredo, subject to regulatory approval and certain other closing conditions. Similar to the recent acquisition of our second track in Ohio and our role as a joint venture partner in the Maryland Jockey Club, the Sam Houston JV includes ownership of significant real estate in addition to the potential for gaming in the future. We look forward to working with community and state leaders to advance efforts to bring gaming to Texas.

“Elsewhere, we broke ground in August on Hollywood Casino Toledo, are proceeding with design, planning and environmental remediation activities related to Hollywood Casino Columbus ahead of a planned groundbreaking early next year, and have commenced construction of Hollywood Casino Kansas City.

“Early in the current quarter, Penn National purchased all the outstanding debt of M Resort from Bank of Scotland for $230.5 million. The debt purchase creates a path for Penn National to own an upscale locals and destination-oriented casino resort which is renowned for its gaming, dining and lodging experiences. Since announcing the debt purchase, we have been in a constructive dialog with the property’s equity holders regarding ownership and future operations.

“The Company repurchased 1,117,610 Penn National common shares at an average price of $23.21 during the third quarter. This follows the repurchase of 408,790 shares common stock in the second quarter at an average price of $24.25.

“We are pleased with the progress of our existing portfolio of properties in light of the current economic environment. Additionally, we are excited about our pipeline of future projects under construction and longer term projects which are dependent on potential future enabling legislation.”

Development and Expansion Projects

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

Financial Guidance

The table below sets forth current guidance targets for financial results for the 2010 fourth quarter and full year, based on the following assumptions:

• Includes the results for Beulah Park and a 49% equity interest in the Maryland Jockey Club racing operations for the remainder of 2010;
• Excludes any results relating to the pending acquisition of a joint venture interest in Sam Houston Race Park;
• Excludes any earnings impact resulting from the M Resort transaction;
• Includes a total of $10.5 million of pre-opening expenses for Hollywood Casino at Charles Town Races table games, Hollywood Casino Perryville, Hollywood Casino at Penn National Race Course table games, the development of two gaming facilities in Ohio, and Empress Casino Hotel for the 2010 full year, with approximately $1.8 million to be incurred in the fourth quarter of 2010;
• Excludes any additional gain from insurance proceeds related to Empress Casino Hotel fire which destroyed the casino’s land side entertainment pavilion;
• Depreciation and amortization charges in 2010 of $213.8 million, with $56.2 million projected to be incurred in the fourth quarter of 2010;
• Estimated non-cash stock compensation expenses of $26.5 million for 2010, with $6.8 million of the cost incurred in the fourth quarter of 2010;
• LIBOR is based on the forward curve;
• Blended income tax rate of 43.0% for 2010, with a 45.0% rate for the remainder of 2010;
• A diluted share count of approximately 106.2 million shares for the full year; and,
• There will be no material changes in applicable legislation or regulation, world events, weather, economic conditions, or other circumstances beyond our control that may adversely affect the Company’s results of operations.

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Reconciliation of Adjusted EBITDA to Net income attributable to the shareholders of Penn National Gaming, Inc. and subsidiaries (GAAP)

Reconciliation of Income from operations (GAAP) to Adjusted EBITDA

Reconciliation of Income from operations (GAAP) to Adjusted EBITDA

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