Penn National Gaming reports results

26 July 2007
WYOMISSING, Pennsylvania -- (PRESS RELEASE) -- Penn National Gaming, Inc. (PENN: Nasdaq) today reported second quarter operating results for the period ended June 30, 2007, as summarized below.
                  Summary of Second Quarter Results

----------------------------------------------------------------------
                                                Three Months Ended
    (in millions, except per share data)             June 30,
----------------------------------------------------------------------
                                                       2007
                                                      Guidance
                                              2007      (2)     2006
----------------------------------------------------------------------
Net revenues                                 $ 625.2  $ 626.0 $ 537.8
----------------------------------------------------------------------
EBITDA (1)                                     172.8    167.9   155.1
----------------------------------------------------------------------
Less depreciation and amortization, gain/loss
 on disposal of assets, interest expense -
 net, income taxes, charge for stock
 compensation and other expenses              (134.5)  (127.7) (112.4)
----------------------------------------------------------------------
Net income                                   $  38.3  $  40.2 $  42.7
----------------------------------------------------------------------

----------------------------------------------------------------------
Diluted earnings per share                   $  0.43  $  0.46 $  0.49
----------------------------------------------------------------------

(1) EBITDA is income from operations, excluding charges for stock compensation, depreciation and amortization, and gain or loss on disposal of assets, and is inclusive of earnings from joint venture. A reconciliation of net income per accounting principles generally accepted in the United States of America ("GAAP") to EBITDA, as well as income from operations per GAAP to EBITDA is included in the accompanying financial schedules.

(2) The figures in this column present the guidance Penn National Gaming provided on April 26, 2007 for the quarter ended June 30, 2007.

Review of Second Quarter 2007 Results vs. Guidance and Second Quarter
 2006 Results

----------------------------------------------------------------------
                                             Three Months Ended
                                                  June 30,
                                       -------------------------------
                                                    2007
                                                   Guidance
                                       2007 Actual   (1)   2006 Actual
----------------------------------------------------------------------
Diluted earnings per share              $     0.43 $   0.46 $     0.49
----------------------------------------------------------------------
Merger-related costs                          0.03        -          -
----------------------------------------------------------------------
Currency translation loss                     0.03        -          -
----------------------------------------------------------------------
Diluted earnings per share before
 merger-related costs and currency
 translation loss                       $     0.49 $   0.46 $     0.49
----------------------------------------------------------------------

(1) The figures in this column present the guidance Penn National Gaming provided on April 26, 2007 for the quarter ended June 30, 2007.

In the three months ended June 30, 2007, the Company recorded after-tax merger-related costs of $2.2 million or $0.03 per diluted share related to the previously announced merger with certain funds managed by affiliates of Fortress Investment Group LLC and Centerbridge Partners, L.P.

In the three months ended June 30, 2007, the Company recorded a non-cash pre-tax currency translation loss of $3.8 million ($2.4 million, net of taxes, or $0.03 per diluted share) related to Canadian currency fluctuations for FIN 48 estimated tax reserves.

Commenting on the results, Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming said, "Penn National's record second quarter EBITDA reflects positive operating trends at many of our existing properties -- some of which are benefiting from recent capital investments, contributions from our two Gulf Coast facilities, which were closed or provided minimal EBITDA a year ago, and a partial quarter's contribution from Zia Park Racetrack and its Black Gold Casino, which we acquired in mid-April. The overall strength of our portfolio of regionally diversified gaming properties offset competitive pressures in Joliet, which were amplified by the incremental Illinois tax on our Chicagoland facilities, negative year-over-year comparisons in Baton Rouge, as this market continues to experience post-hurricane stabilization, the impact of increased insurance costs, expenses related to our support of local referenda in Kansas and West Virginia and costs associated with the previously announced merger with certain funds managed by affiliates of Fortress Investment Group LLC and Centerbridge Partners, L.P.

"Early in the quarter, Argosy Casino Riverside opened its $58 million, nine-story, 258-room hotel and spa, which features expanded ballroom, function and meeting space and was completed below budget. The complex, located a few minutes from downtown Kansas City, is ramping up and attracting corporate business and private parties. In terms of occupancy rates, we expect to continue to see improvement, as occupancy has increased in the hotel every month since opening. In West Virginia, we opened our latest expansion at Charles Town in the second quarter, bringing the total slot count at the property to approximately 5,000 units. This has resulted in meaningful increases in our slot business over the weekend periods and during special events. We expect this trend to continue in the same manner that our previous expansions at the property have driven incremental revenue.

"In June, citizens in Jefferson County West Virginia, voted against approving table games at Charles Town Races and Slots. According to the West Virginia Lottery Racetrack Table Games Act, Charles Town will have to wait at least two years before it can propose another table game referendum vote. While we remain excited about the long-term growth prospects for the facility, and have continued construction of a 153-room hotel, the result of the referendum has caused us to re-evaluate our planned next phase of expansion at Charles Town and to postpone our plans for additional floor space to accommodate table games.

"In terms of new acquisitions for the Company, early in the second quarter, Penn National was delighted to add Zia Park Racetrack and its Black Gold Casino to its diverse portfolio of gaming and racing assets. This property, with 750 slot machines, represents the Company's fourth integrated racing and gaming facility and contributed approximately $6.5 million of EBITDA to our 2007 second quarter results. In addition, the Company recently announced the purchase of the Sanford-Orlando Kennel Club, which is situated on 26 acres in Orlando, Florida, and offers year-round greyhound racing. Sanford is a relatively small pari-mutuel operation, which we believe may have future opportunities for expanded gaming. Along with the purchase, we also secured a right of first refusal to acquire the Sarasota Kennel Club. Sarasota runs year-round greyhound meets and has a poker room. As structured, the economics of the transaction are attractive given the upside of the opportunity and the fact that Sanford-Orlando Kennel Club is cash flow positive. The purchase of Sanford-Orlando Kennel Club is expected to close in the 2007 fourth quarter and is subject to several conditions, including approval by Florida's Department of Business and Professional Regulation.

"We also continue to make progress with other new growth opportunities. Notably, during the second quarter, we moved forward with our plans to develop a hotel casino resort in Cherokee County in southeastern Kansas. In June, citizens there overwhelmingly approved a referendum to authorize gaming in the County. In July, we appeared before the Cherokee County Commissioners to provide details of our proposed $250 million destination resort, which would include an eleven story, 250-room hotel with 13 luxury suites, 1,200 slot machines, 40 table games, a spa, fitness center, convention space and other amenities. An endorsement of the County Commissioners is a prerequisite in submitting an application to the Kansas Lottery Commission for consideration as a Lottery Gaming Facility Manager. On July 23, the Cherokee County Commissioners voted unanimously in favor of an Exclusive Endorsement of Penn National's proposed project and, in a separate motion, voted unanimously to enter into a predevelopment agreement with the Company. Accordingly, we expect to submit our completed application to the Lottery Commission by the State-imposed deadline of September 6, 2007.

"Penn National continues to benefit from the diversification afforded by our portfolio of regional gaming properties, well-planned expansion projects and select, economically sound acquisitions. In 2008, we expect to complete three significant projects, including the Hollywood Casino racing and gaming facility at Penn National Race Course, the permanent Hollywood Slots at Bangor facility, which will be called the Hollywood Slots Hotel and Raceway, and much needed additional parking at Lawrenceburg. With the exception of the postponement of further gaming floor space expansion at Charles Town, all of the Company's development and expansion projects remain on track with our previously disclosed timetables and budgets.

"With the guidance and support of our Board of Directors, Penn National's management team has consistently demonstrated its commitment to generate value for our shareholders and, in June, the Company announced that it had entered into a definitive agreement to be acquired by certain funds managed by affiliates of Fortress Investment Group LLC (FIG: NYSE) and Centerbridge Partners LP whereby Penn National Gaming shareholders will receive $67.00 in cash for each outstanding Penn National share. The Board of Directors of Penn National Gaming has determined that the merger is fair to, and in the best interests of, Penn National and its shareholders, and recommends that Penn National Gaming shareholders approve the merger. The transaction is expected to be completed in approximately eleven to fifteen months, and is subject to shareholder and regulatory approvals, as well as satisfaction of certain customary conditions. Penn National Gaming will file a preliminary proxy statement with the Securities and Exchange Commission shortly that will provide additional information on the transaction. We look forward to working with Fortress and Centerbridge to ensure the ongoing competitiveness of our facilities and deliver new entertainment experiences to consumers in the markets where we have development projects, while adhering to our long-term strategies and business model."

Development and Expansion Projects
The table below outlines Penn National Gaming's current pipeline of
 new or expanded facilities:

----------------------------------------------------------------------
                                                  Amount
                                                  Expended
                                 New     Planned  through   Expected
                                Gaming    Total   June 30,  Opening
         Project/Scope         Positions  Budget    2007      Date
----------------------------------------------------------------------
                                           (in millions)
----------------------------------------------------------------------
Charles Town (WV) -
 Construction of 153-room                                  3rd Quarter
 hotel.                                - $     21 $      2     2008
----------------------------------------------------------------------

----------------------------------------------------------------------
Argosy Casino Lawrenceburg (IN)
 - New two-level 270,000 square
 foot gaming barge, an
 additional 1,500 space parking                             Parking
 garage and road and                                        facility -
 infrastructure improvements.                                  2nd
 The gaming barge will allow                                 Quarter
 4,000 positions on one level,                                 2008
 and another 400 positions will                              Gaming
 be added to the second level,                              facility -
 along with restaurants and                                    2nd
 other amenities on the gaming                               Quarter
 barge.                            1,600 $    310 $     81     2009
----------------------------------------------------------------------

----------------------------------------------------------------------
Hollywood Casino at Penn
 National Race Course (PA) -
 Building an integrated racing
 and gaming facility. Budget
 includes a $50 million license
fee and the purchase of an
 initial 2,000 slot machines
 (with the
building size sufficient to add
 1,000 additional machines), a
2,500 space parking garage and                             1st Quarter
 several restaurants.              2,000 $    310 $    148     2008
----------------------------------------------------------------------

----------------------------------------------------------------------
Hollywood Slots Hotel and
 Raceway (ME) - Building a
 permanent facility, which will
 include a 1,500 slot facility
 (1,000 slot machines at
 opening), a 152-room hotel,
 1,500 space parking garage and                            3rd Quarter
 several restaurants.                525 $    131 $     28     2008
----------------------------------------------------------------------

Financial Guidance

The following table sets forth current guidance targets for continuing operations for the 2007 third quarter and full year, based on the following assumptions:

  • Increased competition related to new facility openings in the St. Louis market in the fourth quarter of 2007;
  • Pre-opening costs at Hollywood Casino at Penn National Race Course of $2.5 million in the third quarter and $9.8 million for full year 2007;
  • There will be a reduction in property insurance and related costs, with an annualized benefit of $8.2 million beginning in August;
  • The 3% tax surcharge continues to be expensed and paid into escrow at Hollywood Casino Aurora and Empress Casino Joliet;
  • The Illinois "hold harmless" tax minimum guarantee is assumed to continue in the third and fourth quarter;
  • Penn National Gaming is currently required by the Illinois Gaming Board to reach a definitive sales agreement for the Empress Casino Hotel by June 30, 2008. However, the results of Empress Casino Hotel remain included in continuing operations as the Company assumes that the accounting standards for treating properties as "assets held for sale" will not be met in 2007; as such, the results from the property are included in our 2007 third quarter and full year guidance;
  • Sanford-Orlando Kennel Club will close in the fourth quarter of 2007, with no significant financial impact;
  • Depreciation and amortization are projected to increase in the third quarter by $6.1 million and the full year 2007 by $22.9 million over the comparable prior year periods;
  • Full year 2007 results will reflect a pre-tax non-cash charge for stock compensation of $26.1 million ($18.9 million, net of taxes, or $0.22 per diluted share);
  • The effective tax rate for federal, state and local income taxes for the third quarter and full year 2007 will be 45.0% and 45.5%, respectively, reflecting the impact of better operating results in jurisdictions with higher state income tax, material amounts of non-deductible lobbying expenses, non-deductible merger-related costs and FIN 48 costs;
  • The Company will have approximately 87.9 million diluted shares outstanding as of December 31, 2007; and,
  • There will be no material changes in economic conditions, applicable legislation or regulation, world events, weather, or other circumstances beyond our control that may adversely affect the Company's results of operations.
Financial Guidance (continued)

----------------------------------------------------------------------
(in millions, except
   per share data)   Three Months Ended         Full Year Ended
----------------------------------------------------------------------
                     September September   2007      2007
                      30, 2007  30, 2006  Revised    Prior     2006
                      Guidance   Actual   Guidance  Guidance  Actual
----------------------------------------------------------------------
Net revenues         $  640.6  $  586.1  $2,473.3  $2,478.0  $2,244.5
----------------------------------------------------------------------
EBITDA (1)              178.6     162.8     676.2     668.6     629.2
----------------------------------------------------------------------
Less depreciation
 and amortization,
 gain/loss on
 disposal of assets,
 interest expense -
 net, income taxes,
 charge for stock
 compensation and
 other expenses        (131.9)   (122.4)   (510.1)   (503.1)   (469.4)
----------------------------------------------------------------------
Net income from
 continuing
 operations before
 merger-related
 costs, charge for
 early
 extinguishment of
 debt, hurricane and
 goodwill impairment     46.7      40.4     166.1     165.5     159.8
----------------------------------------------------------------------
Merger-related costs        -         -      (2.2)        -         -
----------------------------------------------------------------------
Charge for early
 extinguishment of
 debt, net of tax           -         -         -         -      (6.5)
----------------------------------------------------------------------
Hurricane, net of
 tax                        -         -         -         -      81.8
----------------------------------------------------------------------
Goodwill impairment,
 net of tax                 -         -         -         -     (22.0)
----------------------------------------------------------------------
Net income from
 continuing
 operations GAAP     $   46.7  $   40.4  $  163.9  $  165.5  $  213.1
----------------------------------------------------------------------
Diluted earnings per
 share before
 merger-related
 costs, charge for
 early
 extinguishment of
 debt, hurricane and
 goodwill impairment $   0.53  $   0.47  $   1.89  $   1.89  $   1.84
----------------------------------------------------------------------
EPS impact of
 merger-related
 costs, charge for
 early
 extinguishment of
 debt, hurricane and
 goodwill impairment        -         -     (0.03)        -      0.62
----------------------------------------------------------------------
Diluted earnings per
 share from
 continuing
 operations          $   0.53  $   0.47  $   1.86  $   1.89  $   2.46
----------------------------------------------------------------------

(1) EBITDA is income from operations excluding charges for stock compensation, depreciation and amortization, gain or loss on disposal of assets, hurricane and goodwill impairment, and is inclusive of earnings from joint venture.

          2006 EBITDA to 2007 EBITDA Guidance Reconciliation

----------------------------------------------------------------------
                                  Three Months Ended  Full Year Ended
          (in millions)              September 30,      December 31,
----------------------------------------------------------------------

----------------------------------------------------------------------
2006 EBITDA Actual (1)            $          162.8    $        629.2
----------------------------------------------------------------------

----------------------------------------------------------------------
Existing Operations/Corporate                  9.2              52.1
----------------------------------------------------------------------
Zia Park                                       7.8              22.0
----------------------------------------------------------------------
Insurance Costs                                1.3             (10.7)
----------------------------------------------------------------------
Pre-Opening Expenses                          (2.5)             (9.8)
----------------------------------------------------------------------
Incremental Illinois 3% Tax                      -              (6.6)
----------------------------------------------------------------------

----------------------------------------------------------------------
2007 EBITDA Guidance (1)          $          178.6    $        676.2
----------------------------------------------------------------------

(1) EBITDA is income from operations excluding charges for stock compensation, depreciation and amortization, gain or loss on disposal of assets, hurricane and goodwill impairment, and is inclusive of earnings from joint venture.

             PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
                  Property Information - Operations
                      (in thousands) (unaudited)

                                  NET REVENUES         EBITDA (1)
                               Three Months Ended  Three Months Ended
                                     June 30,            June 30,
                                 2007      2006      2007      2006
                               --------- --------- --------- ---------
Charles Town Entertainment
 Complex                       $ 129,140 $ 122,452 $  37,767 $  35,405
Argosy Casino Lawrenceburg       121,236   114,994    40,820    37,982
Hollywood Casino Aurora           64,052    60,703    20,593    20,120
Empress Casino Hotel              58,493    59,736    14,132    17,263
Argosy Casino Riverside           43,117    37,607    14,072    12,443
Hollywood Casino Baton Rouge      34,041    35,447    14,347    15,533
Argosy Casino Alton               30,366    28,205     8,627     7,692
Hollywood Casino Tunica           26,375    26,899     6,217     6,974
Hollywood Casino Bay St. Louis
 (2)                              25,466      (22)     5,222         -
Argosy Casino Sioux City          13,835    13,196     4,671     4,251
Boomtown Biloxi (2)               22,671     1,010     7,265       262
Hollywood Slots at Bangor         11,985    10,104     3,622     2,784
Bullwhackers                       7,483     7,036       976       916
Zia Park (3)                      16,913         -     6,490         -
Casino Rama management service
 contract                          4,341     4,921     3,984     4,564
Pennsylvania Racing Operations    13,530    13,073        79       553
Raceway Park                       2,200     2,412     (195)      (87)
Earnings from Pennwood Racing,
 Inc.                                  -         -       325       574
Corporate overhead                     -         -  (16,256)  (12,095)
                               --------- --------- --------- ---------
Total                          $ 625,244 $ 537,773 $ 172,758 $ 155,134
                               ========= ========= ========= =========
                                 NET REVENUES          EBITDA (1)
                               Six Months Ended     Six Months Ended
                                    June 30,             June 30,
                                2007       2006      2007      2006
                             ---------- ---------- --------- ---------
Charles Town Entertainment
 Complex                     $  248,736 $  239,370 $  74,552 $  69,554
Argosy Casino Lawrenceburg      243,094    235,157    82,526    78,741
Hollywood Casino Aurora         128,552    122,453    41,264    41,519
Empress Casino Hotel            118,106    120,052    27,378    34,784
Argosy Casino Riverside          84,832     76,602    27,138    25,601
Hollywood Casino Baton Rouge     68,922     78,567    28,978    36,602
Argosy Casino Alton              61,229     57,724    17,417    15,875
Hollywood Casino Tunica          52,971     55,057    13,025    14,900
Hollywood Casino Bay St.
 Louis (2)                       48,950          -     9,648         -
Argosy Casino Sioux City         27,952     27,247     9,300     8,969
Boomtown Biloxi (2)              46,738      1,010    15,347       262
Hollywood Slots at Bangor        22,961     18,814     6,731     4,978
Bullwhackers                     14,614     13,622     1,761     1,542
Zia Park (3)                     16,913          -     6,490         -
Casino Rama management
 service contract                 7,815      9,308     7,172     8,632
Pennsylvania Racing
 Operations                      25,384     26,160     (349)     1,470
Raceway Park                      3,733      4,432     (373)      (66)
Earnings from Pennwood
 Racing, Inc.                         -          -       365       987
Corporate overhead                    -          -  (27,913)  (24,401)
                             ---------- ---------- --------- ---------
Total                        $1,221,502 $1,085,575 $ 340,457 $ 319,949
                             ========== ========== ========= =========

(1) EBITDA is income from operations excluding charges for stock compensation, depreciation and amortization, and gain or loss on disposal of assets, and is inclusive of earnings from joint venture. A reconciliation of net income per accounting principles generally accepted in the United States of America ("GAAP") to EBITDA, as well as income from operations per GAAP to EBITDA is included in the accompanying financial schedules.

(2) Hollywood Casino Bay St. Louis and Boomtown Biloxi were closed effective August 28, 2005 due to hurricane damage. Boomtown Biloxi reopened on June 29, 2006 and Hollywood Casino Bay St. Louis reopened on August 31, 2006.

(3) Reflects results since the April 16, 2007 acquisition effective date.

Reconciliation of EBITDA to Net Income (GAAP)

             PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
                      (in thousands) (unaudited)

                               Three Months Ended   Six Months Ended
                                    June 30,            June 30,
                                 2007      2006      2007      2006
                               --------- --------- --------- ---------
EBITDA                         $172,758  $155,134  $340,457  $319,949
Earnings from joint venture        (325)     (574)     (365)     (987)
Depreciation and amortization   (37,622)  (27,728)  (72,980)  (57,446)
Charge for stock compensation    (6,256)   (5,493)  (12,854)  (10,404)
Gain (loss) on disposals           (135)      498    (1,058)     (374)
                               --------- --------- --------- ---------
Income from operations         $128,420  $121,837  $253,200  $250,738
Interest expense                (51,302)  (47,766)  (99,649)  (96,195)
Interest income                   1,289       867     2,165     1,770
Earnings from joint venture         325       574       365       987
Other                            (5,476)      184    (5,704)       74
Charge for early extinguishment
 of debt                              -         -         -   (10,022)
Taxes on income                 (34,957)  (33,001)  (69,137)  (62,674)
                               --------- --------- --------- ---------
Net income                     $ 38,299  $ 42,695  $ 81,240  $ 84,678
                               ========= ========= ========= =========
Reconciliation of Income from Operations (GAAP) to EBITDA

             PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
          Property Information Including Corporate Overhead
                      (in thousands) (unaudited)

                   Three Months Ended June 30, 2007


                                  Income     Charge for   Depreciation
                                   from         stock         and
                                 operations  compensation amortization
                                 -------------------------------------
Charles Town Entertainment
 Complex                         $  31,295  $           - $      6,472
Argosy Casino Lawrenceburg          36,549              -        4,292
Hollywood Casino Aurora             18,409              -        2,184
Empress Casino Hotel                11,083              -        3,049
Argosy Casino Riverside             10,388              -        3,684
Hollywood Casino Baton Rouge        12,164              -        2,120
Argosy Casino Alton                  6,538              -        2,089
Hollywood Casino Tunica              4,363              -        1,868
Hollywood Casino Bay St. Louis
 (1)                                 2,024              -        3,198
Argosy Casino Sioux City             3,556              -        1,115
Boomtown Biloxi (1)                  4,570              -        2,722
Hollywood Slots at Bangor            2,556              -        1,066
Bullwhackers                           448              -          528
Zia Park (2)                         5,460              -        1,030
Casino Rama management service
 contract                            3,984              -            -
Pennsylvania Racing Operations        (357)             -          408
Raceway Park                          (274)             -           79
Earnings from Pennwood Racing,
 Inc.                                    -              -            -
Corporate overhead                 (24,336)         6,256        1,718
                                 -------------------------------------
Total                            $ 128,420  $       6,256 $     37,622
                                 =====================================


                                  (Gain)/loss  Earnings
                                  on disposal   from
                                      of        joint
                                    assets     venture      EBITDA
                                 -------------------------------------
Charles Town Entertainment
 Complex                          $        -  $        - $     37,767
Argosy Casino Lawrenceburg               (21)          -       40,820
Hollywood Casino Aurora                    -           -       20,593
Empress Casino Hotel                       -           -       14,132
Argosy Casino Riverside                    -           -       14,072
Hollywood Casino Baton Rouge              63           -       14,347
Argosy Casino Alton                        -           -        8,627
Hollywood Casino Tunica                  (14)          -        6,217
Hollywood Casino Bay St. Louis
 (1)                                       -           -        5,222
Argosy Casino Sioux City                   -           -        4,671
Boomtown Biloxi (1)                      (27)          -        7,265
Hollywood Slots at Bangor                  -           -        3,622
Bullwhackers                               -           -          976
Zia Park (2)                               -           -        6,490
Casino Rama management service
 contract                                  -           -        3,984
Pennsylvania Racing Operations            28           -           79
Raceway Park                               -           -         (195)
Earnings from Pennwood Racing,
 Inc.                                      -         325          325
Corporate overhead                       106           -      (16,256)
                                 -------------------------------------
Total                             $      135  $      325 $    172,758
                                 =====================================
                   Three Months Ended June 30, 2006


                                  Income     Charge for   Depreciation
                                   from         stock         and
                                 operations  compensation amortization
                                 -------------------------------------
Charles Town Entertainment
 Complex                         $  30,894  $           - $      4,871
Argosy Casino Lawrenceburg          33,724              -        4,256
Hollywood Casino Aurora             18,029              -        2,259
Empress Casino Hotel                14,478              -        2,794
Argosy Casino Riverside              9,686              -        2,759
Hollywood Casino Baton Rouge        13,455              -        2,067
Argosy Casino Alton                  5,464              -        2,228
Hollywood Casino Tunica              5,198              -        1,775
Hollywood Casino Bay St. Louis
 (1)                                  (218)             -          197
Argosy Casino Sioux City             3,161              -        1,090
Boomtown Biloxi (1)                    262              -            -
Hollywood Slots at Bangor            1,797              -          987
Bullwhackers                           386              -          524
Casino Rama management service
 contract                            4,564              -            -
Pennsylvania Racing Operations         204              -          349
Raceway Park                          (200)             -          113
Earnings from Pennwood Racing,
 Inc.                                    -              -            -
Corporate overhead                 (19,047)         5,493        1,459
                                 -------------------------------------
Total                            $ 121,837  $       5,493 $     27,728
                                 =====================================


                                                  Earnings
                                   (Gain)/loss     from
                                  on disposal of   joint
                                      assets      venture     EBITDA
                                 -------------------------------------
Charles Town Entertainment
 Complex                          $        (360) $        - $  35,405
Argosy Casino Lawrenceburg                    2           -    37,982
Hollywood Casino Aurora                    (168)          -    20,120
Empress Casino Hotel                         (9)          -    17,263
Argosy Casino Riverside                      (2)          -    12,443
Hollywood Casino Baton Rouge                 11           -    15,533
Argosy Casino Alton                           -           -     7,692
Hollywood Casino Tunica                       1           -     6,974
Hollywood Casino Bay St. Louis
 (1)                                         21           -         -
Argosy Casino Sioux City                      -           -     4,251
Boomtown Biloxi (1)                           -           -       262
Hollywood Slots at Bangor                     -           -     2,784
Bullwhackers                                  6           -       916
Casino Rama management service
 contract                                     -           -     4,564
Pennsylvania Racing Operations                -           -       553
Raceway Park                                  -           -       (87)
Earnings from Pennwood Racing,
 Inc.                                         -         574       574
Corporate overhead                            -           -   (12,095)
                                 -------------------------------------
Total                             $        (498) $      574 $ 155,134
                                 =====================================

(1) Income from operations and EBITDA for the three months ended June 30, 2006 reflects the closure of Hollywood Casino Bay St. Louis and Boomtown Biloxi, which incurred extensive hurricane damage in August 2005. Boomtown Biloxi reopened on June 29, 2006 and Hollywood Casino Bay St. Louis reopened on August 31, 2006.

(2) Reflects results since the April 16, 2007 acquisition effective date.

Reconciliation of Income from Operations (GAAP) to EBITDA

             PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
          Property Information Including Corporate Overhead
                      (in thousands) (unaudited)

                    Six Months Ended June 30, 2007


                                  Income
                                   from      Charge for   Depreciation
                                 continuing     stock         and
                                 operations  compensation amortization
                                 -------------------------------------
Charles Town Entertainment
 Complex                          $ 62,018        $     -      $12,534
Argosy Casino Lawrenceburg          73,963              -        8,584
Hollywood Casino Aurora             36,741              -        4,523
Empress Casino Hotel                21,684              -        6,081
Argosy Casino Riverside             20,395              -        6,817
Hollywood Casino Baton Rouge        24,751              -        4,176
Argosy Casino Alton                 13,294              -        4,122
Hollywood Casino Tunica              9,367              -        3,692
Hollywood Casino Bay St. Louis
 (1)                                 3,263              -        6,348
Argosy Casino Sioux City             7,078              -        2,222
Boomtown Biloxi (1)                 10,128              -        5,246
Hollywood Slots at Bangor            4,614              -        2,117
Bullwhackers                           584              -        1,159
Zia Park (2)                         5,460              -        1,030
Casino Rama management service
 contract                            7,172              -            -
Pennsylvania Racing Operations      (2,472)             -          775
Raceway Park                          (521)             -          150
Earnings from Pennwood Racing,
 Inc.                                    -              -            -
Corporate overhead                 (44,319)        12,854        3,404
                                 -------------------------------------
Total                             $253,200        $12,854      $72,980
                                 =====================================


                                                  Earnings
                                   (Gain)/loss     from
                                  on disposal of   joint
                                      assets      venture     EBITDA
                                 -------------------------------------
Charles Town Entertainment
 Complex                          $           -  $        - $  74,552
Argosy Casino Lawrenceburg                  (21)          -    82,526
Hollywood Casino Aurora                       -           -    41,264
Empress Casino Hotel                       (387)          -    27,378
Argosy Casino Riverside                     (74)          -    27,138
Hollywood Casino Baton Rouge                 51           -    28,978
Argosy Casino Alton                           1           -    17,417
Hollywood Casino Tunica                     (34)          -    13,025
Hollywood Casino Bay St. Louis
 (1)                                         37           -     9,648
Argosy Casino Sioux City                      -           -     9,300
Boomtown Biloxi (1)                         (27)          -    15,347
Hollywood Slots at Bangor                     -           -     6,731
Bullwhackers                                 18           -     1,761
Zia Park (2)                                  -           -     6,490
Casino Rama management service
 contract                                     -           -     7,172
Pennsylvania Racing Operations            1,348           -      (349)
Raceway Park                                 (2)          -      (373)
Earnings from Pennwood Racing,
 Inc.                                         -         365       365
Corporate overhead                          148           -   (27,913)
                                 -------------------------------------
Total                             $       1,058  $      365 $ 340,457
                                 =====================================
                    Six Months Ended June 30, 2006


                                  Income
                                   from      Charge for   Depreciation
                                 continuing     stock         and
                                 operations  compensation amortization
                                 -------------------------------------
Charles Town Entertainment
 Complex                         $  60,384  $           - $      9,528
Argosy Casino Lawrenceburg          69,870              -        8,891
Hollywood Casino Aurora             37,244              -        4,443
Empress Casino Hotel                27,877              -        6,907
Argosy Casino Riverside             19,920              -        5,646
Hollywood Casino Baton Rouge        31,572              -        4,177
Argosy Casino Alton                 10,905              -        4,970
Hollywood Casino Tunica             11,029              -        3,869
Hollywood Casino Bay St. Louis
 (1)                                  (374)             -          353
Argosy Casino Sioux City             6,988              -        1,978
Boomtown Biloxi (1)                    262              -            -
Hollywood Slots at Bangor            3,130              -        1,848
Bullwhackers                           492              -        1,044
Casino Rama management service
 contract                            8,632              -            -
Pennsylvania Racing Operations         849              -          621
Raceway Park                          (179)             -          113
Earnings from Pennwood Racing,
 Inc.                                    -              -            -
Corporate overhead                 (37,863)        10,404        3,058
                                 -------------------------------------
Total                            $ 250,738  $      10,404 $     57,446
                                 =====================================


                                                 Earnings
                                   (Gain)/loss     from
                                  on disposal of   joint
                                      assets      venture     EBITDA
                                 -------------------------------------
Charles Town Entertainment
 Complex                          $        (358) $        - $  69,554
Argosy Casino Lawrenceburg                  (20)          -    78,741
Hollywood Casino Aurora                    (168)          -    41,519
Empress Casino Hotel                          -           -    34,784
Argosy Casino Riverside                      35           -    25,601
Hollywood Casino Baton Rouge                853           -    36,602
Argosy Casino Alton                           -           -    15,875
Hollywood Casino Tunica                       2           -    14,900
Hollywood Casino Bay St. Louis
 (1)                                         21           -         -
Argosy Casino Sioux City                      3           -     8,969
Boomtown Biloxi (1)                           -           -       262
Hollywood Slots at Bangor                     -           -     4,978
Bullwhackers                                  6           -     1,542
Casino Rama management service
 contract                                     -           -     8,632
Pennsylvania Racing Operations                -           -     1,470
Raceway Park                                  -           -       (66)
Earnings from Pennwood Racing,
 Inc.                                         -         987       987
Corporate overhead                            -           -   (24,401)
                                 -------------------------------------
Total                             $         374  $      987 $ 319,949
                                 =====================================

(1) Income from operations and EBITDA for the six months ended June 30, 2006 reflects the closure of Hollywood Casino Bay St. Louis and Boomtown Biloxi, which incurred extensive hurricane damage in August 2005. Boomtown Biloxi reopened on June 29, 2006 and Hollywood Casino Bay St. Louis reopened on August 31, 2006.

(2) Reflects results since the April 16, 2007 acquisition effective date.

             PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
                  Consolidated Statements of Income
          (in thousands, except per share data) (unaudited)

                           Three Months Ended     Six Months Ended
                                 June 30,              June 30,
                             2007      2006       2007        2006
                           --------- --------- ----------- -----------

Revenues
  Gaming                   $570,281  $490,804  $1,119,374  $  994,254
  Management service fee      4,341     4,921       7,815       9,308
  Food, beverage and other   82,894    66,052     156,664     132,187
                           --------- --------- ----------- -----------
Gross revenues              657,516   561,777   1,283,853   1,135,749
  Less promotional
   allowances               (32,272)  (24,004)    (62,351)    (50,174)
                           --------- --------- ----------- -----------
Net revenues                625,244   537,773   1,221,502   1,085,575
                           --------- --------- ----------- -----------

Operating expenses
  Gaming                    297,086   254,638     581,377     510,223
  Food, beverage and other   63,123    54,980     121,453     108,652
  General and
   administrative            98,993    78,590     192,492     158,516
  Depreciation and
   amortization              37,622    27,728      72,980      57,446
                           --------- --------- ----------- -----------
Total operating expenses    496,824   415,936     968,302     834,837
                           --------- --------- ----------- -----------
Income from operations      128,420   121,837     253,200     250,738
                           --------- --------- ----------- -----------

Other income (expenses)
  Interest expense          (51,302)  (47,766)    (99,649)    (96,195)
  Interest income             1,289       867       2,165       1,770
  Earnings from joint
   venture                      325       574         365         987
  Other                      (5,476)      184      (5,704)         74
  Loss on early
   extinguishment of debt         -         -           -     (10,022)
                           --------- --------- ----------- -----------
Total other expenses        (55,164)  (46,141)   (102,823)   (103,386)
                           --------- --------- ----------- -----------

Income from operations
 before income taxes         73,256    75,696     150,377     147,352
Taxes on income              34,957    33,001      69,137      62,674
                           --------- --------- ----------- -----------
Net income                 $ 38,299  $ 42,695  $   81,240  $   84,678
                           ========= ========= =========== ===========

Basic earnings per share   $   0.45  $   0.51  $     0.96  $     1.01
Diluted earnings per share $   0.43  $   0.49  $     0.93  $     0.98

Weighted average shares
 outstanding

  Basic                      85,176    84,333      85,034      83,991
  Diluted                    88,069    86,729      87,784      86,435

Zia Park - Results for the Three and Six Months Ended June 30, 2007 and 2006

On April 16, 2007, pursuant to the Asset Purchase Agreement dated November 7, 2006 among Zia Partners, LLC ("Zia"), Zia Park LLC (the "Buyer"), one of Penn National Gaming's wholly-owned subsidiaries, and (solely with respect to specified sections thereof which relate to our guarantee of the Buyer's payment and performance) Penn National Gaming, the Buyer completed the acquisition of the Black Gold Casino and Zia Park Racetrack and all related assets of Zia ("Zia Park") for a purchase price of $200 million in cash, subject to a working capital adjustment and certain other adjustments, as well as the assumption of specified liabilities of Zia.

The tables below summarize the operating performance of Zia Park during the three and six month periods ended June 30, 2007 and 2006. Although Penn National Gaming did not own Zia Park during the entire three and six month periods ended June 30, 2007 and 2006, the Company believes that this data is useful to investors in considering the value this transaction brings to Penn National.

                   NET REVENUES (1)              EBITDA (1) (2)
                    (in thousands)               (in thousands)
             For the Period Three Months  For the Period Three Months
                April 16-       Ended        April 16-       Ended
             June 30, 2007  June 30, 2006 June 30, 2007  June 30, 2006
             -------------- ------------- -------------- -------------
Zia Park     $       16,913  $     16,776 $        6,490 $       6,351



                   NET REVENUES (1)              EBITDA (1) (2)
                    (in thousands)               (in thousands)
             For the Period  Six Months   For the Period  Six Months
                April 16-       Ended        April 16-       Ended
             June 30, 2007  June 30, 2006 June 30, 2007  June 30, 2006
             -------------- ------------- -------------- -------------
Zia Park     $       16,913  $     34,254 $        6,490 $      12,929

(1) 2007 net revenues and EBITDA reflects results since the April 16, 2007 acquisition effective date, while 2006 net revenues and EBITDA reflects results for the entire three and six month periods ended June 30, 2006.

(2) EBITDA is income from operations, excluding charges for stock compensation, depreciation and amortization, and gain or loss on disposal of assets, and is inclusive of earnings from joint venture. A reconciliation of net income per accounting principles generally accepted in the United States of America ("GAAP") to EBITDA, as well as income from operations per GAAP to EBITDA is included in the accompanying financial schedules.

                               ZIA PARK
                         Property Information
                      (in thousands) (unaudited)
                   Three Months Ended June 30, 2006

Reconciliation of Income from Operations (GAAP) to Adjusted EBITDA

                                     Income    Depreciation
                                      from         and
                                    operations amortization EBITDA (1)
----------------------------------------------------------------------
Zia Park                            $    5,535 $        816      6,351
----------------------------------------------------------------------

                               ZIA PARK
                         Property Information
                      (in thousands) (unaudited)
                    Six Months Ended June 30, 2006

Reconciliation of Income from Operations (GAAP) to Adjusted EBITDA

                                     Income    Depreciation
                                      from         and
                                    operations amortization EBITDA (1)
----------------------------------------------------------------------
Zia Park                            $   11,257 $      1,672     12,929
----------------------------------------------------------------------

(1) EBITDA is income from operations, excluding charges for stock compensation, depreciation and amortization, and gain or loss on disposal of assets, and is inclusive of earnings from joint venture. A reconciliation of net income per accounting principles generally accepted in the United States of America ("GAAP") to EBITDA, as well as income from operations per GAAP to EBITDA is included in the accompanying financial schedules.

Reconciliation of Non-GAAP Measures to GAAP

EBITDA, or earnings before interest, taxes, charges for stock compensation, depreciation and amortization, and gain or loss on disposal of assets, and inclusive of earnings from joint venture, is not a measure of performance or liquidity calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"). EBITDA information is presented as a supplemental disclosure, as management believes that it is a widely used measure of performance in the gaming industry. In addition, management uses EBITDA as the primary measure of the operating performance of its properties, including the evaluation of operating personnel. EBITDA should not be construed as an alternative to operating income, as an indicator of the Company's operating performance, as an alternative to cash flows from operating activities, as a measure of liquidity, or as any other measure of performance determined in accordance with GAAP. The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in EBITDA. It should also be noted that other gaming companies that report EBITDA information may calculate EBITDA in a different manner than the Company. Diluted earnings per share before merger-related costs and currency translation loss is presented solely as a supplemental disclosure, as management believes that it is a principal basis for the valuation of gaming companies, as this measure is considered by many to be a better indicator of the Company's operating results than diluted net income per share per GAAP. A reconciliation of the Company's EBITDA to net income per GAAP, as well as the Company's EBITDA to income from operations per GAAP, is included in the accompanying financial schedules.

A reconciliation of each property's EBITDA to income from operations is included in the financial schedules herein. On a property level, EBITDA is reconciled to income from operations per GAAP, rather than net income per GAAP due to, among other things, the impracticability of allocating interest expense, interest income, income taxes and certain other items to the Company's various properties on a property-by-property basis. Management believes that this presentation is more meaningful to investors in evaluating the performance of the Company's individual properties and is consistent with the reporting of other gaming companies.

About Penn National Gaming

Penn National Gaming owns and operates gaming and racing facilities with a focus on slot machine entertainment. The Company presently operates eighteen facilities in fourteen jurisdictions including Colorado, Illinois, Indiana, Iowa, Louisiana, Maine, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, West Virginia, and Ontario. In aggregate, Penn National's operated facilities feature nearly 23,000 slot machines, over 400 table games, approximately 1,731 hotel rooms and approximately 808,000 square feet of gaming floor space. Penn National Gaming recently announced plans to acquire the Sanford-Orlando Kennel Club in Longwood, Florida.

Penn National Gaming has elected to not conduct a conference call or webcast in connection with the release of its 2007 second quarter results. On June 15, 2007, the Company announced that it had entered into a definitive agreement to be acquired by certain funds managed by affiliates of

Fortress Investment Group LLC (FIG: NYSE) and Centerbridge Partners LP whereby Penn National Gaming shareholders will receive $67.00 in cash for each outstanding Penn National Gaming share. In connection with the proposed merger, Penn National Gaming expects to file a preliminary proxy statement with the Securities and Exchange Commission shortly that will provide additional information on the transaction.

About the Transaction

In connection with the proposed merger, Penn National Gaming will be filing documents including a proxy statement with the Securities and Exchange Commission (the "SEC"). INVESTORS AND SECURITY HOLDERS ARE STRONGLY ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of the proxy statement (when available) and other documents filed by Penn National Gaming, Inc. at the SEC's Web site at sec.gov. The proxy statement and such other documents may also be obtained for free by directing such request to Penn National Gaming, Inc. Investor Relations, 825 Berkshire Boulevard, Wyomissing, PA 19610 or on the Company's website at pngaming.com. Penn National Gaming and its directors, executive officers and certain other members of its management and employees may be deemed to be participants in the solicitation of proxies from its shareholders in connection with the proposed merger. Information regarding the interests Penn National Gaming's participants in the solicitation will be included in the proxy statement relating to the proposed merger when it becomes available.