Penn National Gaming Reports Fourth Quarter Revenue of $743.8 Million and Adjusted EBITDA of $152.3

Penn National Gaming Reports Fourth Quarter Revenue of $743.8 Million and Adjusted EBITDA of $152.3 Million, Inclusive of $14.5 Million of Corporate Overhead

Expenses Not Included in Guidance

Establishes 2013 First Quarter Guidance and Updates 2013 Full Year Guidance

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

Penn National Gaming, Inc. (PENN: Nasdaq) today reported fourth quarter and full year 2012 operating results, as summarized below:

Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming, commented, "Fourth quarter operating results fell short of our guidance targets as our newer facilities have taken longer than expected to ramp up and industry-wide regional gaming revenue trends softened during the period. Consolidated results reflect a number of factors, including lobbying expenses, development costs associated with new greenfield opportunities, transaction costs associated with our proposed REIT transaction, and litigation accruals.

"In retrospect, while full year 2012 regional market revenue trends and customer visitation levels proved to be largely stable, quarterly visibility and performance was impacted by volatility that did not follow historic trends. Due to this volatility as well as the still challenging economic environment, we are approaching 2013 with caution as consumers continue to adjust to lower discretionary income levels related to higher taxes and other factors. In this environment, we continue to vigilantly address operating efficiencies while maintaining a disciplined approach to marketing spend and promotional activities. This focus is evidenced in the fourth quarter property level EBITDA margins for our Midwest, East/West and Southern Plains regions, which rose to 29.0% from 27.3% in the comparable 2011 period despite revenue trends on a same facility basis. We remain focused on expanding the EBITDA contributions from all facilities as we rationalize operating costs, fine tune the slot floor and table game mix, build our customer databases at newly opened facilities, improve player marketing efforts and adjust food, beverage and entertainment offerings.

"We believe 2012 will be remembered as a transitional year for Penn National. We successfully completed multiple significant strategic objectives, including opening three first class casinos in metropolitan markets on time, and on budget; completed an accretive acquisition of the facility formerly known as Harrah's St. Louis (which is being re-branded Hollywood Casino St. Louis); advanced our plans for two new VLT facilities in Ohio; submitted a thoughtful, comprehensive proposal to the City of Springfield, Massachusetts for the re-development of the City's North End; submitted a proposal to the Pennsylvania Gaming Control Board for a new gaming and entertainment destination in Philadelphia; and submitted two proposals to the Iowa Racing and Gaming Commission for a new gaming and entertainment destination in Woodbury County. In January, we reached an agreement with the City of Sioux City to extend our current land lease for our riverboat casino for twelve months with an option to extend the lease for an additional eighteen months. Additionally, with our Zia Park Casino benefiting from a healthy economy in its feeder markets, we anticipate commencing construction of a hotel at the facility in the second half of 2013, which would feature 150 rooms with six suites, a board/meeting room, exercise/fitness facilities and a breakfast venue. The new hotel, budgeted at $26.2 million, will allow the property to become more of a destination location enabling us to build relationships with key customers from eastern New Mexico and western Texas as the new integrated hotel, casino, and racing facility will far surpass any of the limited options currently in the market.

"On a corporate level, during the fourth quarter we expanded the Company's senior secured credit facility by $1 billion at an attractive cost of capital. Perhaps most notably, in November, we announced that we are pursuing a plan to separate the Company's gaming operating assets from our real property assets by creating a newly formed, publicly traded real estate investment trust ("REIT") through a tax free spin off which we expect will result in a one-time taxable cash and stock dividend to shareholders equivalent to approximately $1.4 billion, or $16.00 per current Penn National Gaming common share.

"Following significant consideration and analysis, we expect the proposed REIT structure will bring additional meaningful benefits to all Penn National stakeholders as we unlock the value of the Company's real estate assets, create a vehicle for efficiently returning capital to shareholders, gain access to capital at lower blended costs and create two well capitalized platforms for sustained long-term growth in distinct industries led by disciplined, market tested management teams. The operating entity, PNG, will retain its existing growth pipeline while pursuing additional near- and long-term domestic and international growth opportunities that can be highly impactful for its shareholders. In addition, the new structure will allow PNG to operate additional facilities in certain gaming jurisdictions that have ownership limitations. PropCo will initially own substantially all of Penn National's real property assets and will lease back most of those assets to the gaming operating entity for use by its subsidiaries under a triple net, 35-year master lease agreement (including renewal options). Under the master lease agreement, it is expected that PNG would initially pay approximately $442 million in annual rent, which would result in a rent coverage ratio of approximately 1.9 times earnings before interest, taxes, depreciation, amortization and rent ("EBITDAR"), thereby retaining ample capital at the operating entity for growth, debt service and shareholder value enhancing initiatives. We received a Private Letter Ruling from the IRS relating to the tax treatment of the separation and the qualification of PropCo as a REIT, which is subject to certain qualifications and based on certain representations and statements made by Penn National Gaming, Inc. PropCo is expected to distribute at least 90% of its annual taxable income to shareholders as dividends and is expected to declare ordinary dividends of $2.43 per share based on 2013 guidance.

"Over the past two months, Penn National has had constructive dialogue with gaming regulators focused on the fact that our plan will not detract from the Company's operations, thereby ensuring the continued gaming tax revenue, employment, and other benefits associated with our operations. Additionally, earlier this month, we finalized our previously non-binding agreement with an affiliate of Fortress Investment Group related to its Series B Redeemable Preferred Stock exchange, as disclosed in our January 18, 2013 Form 8-K. This agreement ensures that Fortress will realign its investment in advance of the spin-off to ensure compliance with REIT tax rules. In addition, the Company has signed an agreement with Centerbridge Capital Partners, LP, pursuant to which the Company will repurchase their preferred shares at par in advance of the spin-off. We expect to repurchase the Series B Redeemable Preferred Stock of the remaining preferred shareholder at, or slightly below, par."