Penn National Gaming Reports Record Results

27 Jul 2004

WYOMISSING, Pennsylvania -- (PRESS RELEASE) -- Penn National Gaming, Inc.

-Diluted Net Income Per Share Rises 26.3% Year-over-Year to $0.48 and Exceeds Guidance of $0.44

-Diluted Net Income Per Share from Continuing Operations Rises 25.0% Year-over-Year to $0.60 and Exceeds Guidance of $0.53

-Income from Continuing Operations Rises 11.6% Year-over-Year to $57.9 Million and Exceeds Guidance of $54.7 Million

-Raises 2004 Full Year EPS Guidance from Continuing Operations to $2.09 from $1.90

Penn National Gaming, Inc. (PENN: Nasdaq) today reported record second quarter results for the period ended June 30, 2004.

      Summary of Q2 Results (In millions, except per-share data)
                                            Three Months Ended June 30
                                                2004         2003
                                               ------       ------
Net revenues                                   $301.5       $291.2
EBITDA (1)                                     $ 75.7       $ 68.4
Income from continuing operations              $ 57.9       $ 51.9
Net income from continuing operations          $ 24.9       $ 19.3
(Loss) from discontinued operations (3)        $ (5.2)      $ (3.8)
Net income                                     $ 19.7       $ 15.5
Diluted earnings per share from continuing
 operations (2)                                $ 0.60       $ 0.48
Diluted (Loss) per share from discontinued
 operations (3)                                $(0.12)      $(0.10)
Diluted earnings per share                     $ 0.48       $ 0.38

Commenting on the results, Peter M. Carlino, Chief Executive Officer of Penn National said, "During the second quarter, Penn National Gaming celebrated its tenth year as a public company. In this time, we have expanded dramatically and successfully through a series of initiatives including acquisitions, property development and expansion, diversification and the appointment of quality management at our regional gaming entertainment centers. Our focus in expanding the company over this period has been on financial growth and the enhancement of shareholder value and we have succeeded on both fronts. The record 2004 second quarter results again highlight the economic value of our strong regional gaming assets.

"Our second quarter significantly exceeded our most recent financial guidance and reflects the first full quarter of year-over-year comparisons for all of the properties we currently operate, including the Hollywood Casino® properties which we acquired in March 2003. The over 11% increase in income from continuing operations and 25% increase in second quarter diluted net income per share from continuing operations highlight continued 'same facility' year-over-year improvements at Charles Town, Casino Rouge, Casino Magic - Bay St. Louis, Bullwhackers, Hollywood Casino-Tunica and our Casino Rama management contract. In addition, we have elected not to participate in the bidding process for the sale of Hollywood Casino - Shreveport and it appears this matter is well on its way to an ultimate resolution.

"Earlier this month, Pennsylvania Governor Edward G. Rendell signed into law new slots legislation that should enable us to reverse the declining financial trends at our Pennsylvania racing facilities. With two existing racetracks in Pennsylvania we have already developed plans to revitalize these properties and we have access to the financing to quickly expand and re-configure these sites. However, the Pennsylvania bill includes a provision that allows for 100% ownership in a first licensed operation and no more than 33% ownership in a second operation. Considering the more than 1,000 employees at our two racetracks and 11 off-track wagering facilities in Pennsylvania, as well as the interests of our shareholders and other constituents, we have been carefully and thoroughly evaluating the new law and weighing our options and potential opportunities. In the meantime, there are a host of licensing, regulatory and other issues that need to be finalized, providing us ample time to develop an appropriate resolution while still targeting the opening of a facility as early as the first quarter of 2006.

"Given the ownership restrictions in the Pennsylvania legislation, our current plan is to develop a slots facility at our Penn National Race Course near Harrisburg, with an expected capital expenditure budget of approximately $125 million to $150 million, inclusive of the $50 million gaming license fee and the purchase of 2,000 slots. Under this plan, we expect to open in a permanent facility with 2,000 slot machines in early 2006 and expand up to 5,000 games based on demand. Assuming an anticipated win-per-day per device of approximately $220, the Harrisburg facility would generate approximately $160 million in gaming revenue and should achieve operating margins of 25% in the first full year of operation. As the property matures and is fully built out, we anticipate it could generate approximately $310 million in annual gaming revenue.

"Our experience at Charles Town Races will prove invaluable in creating an exciting entertainment destination for our patrons at Penn National Race Course and excellent returns for our shareholders. Locally, we expect to create significant new employment opportunities and meaningful economic development.

"At Charles Town, we continue to reinvest in the facility and just completed the installation of 300 more slot machines, bringing the total base of slot machines installed to 3,800 units. We also recently completed the construction of 1,000 additional covered parking spaces. Construction is now underway to accommodate an additional 700 slot machines that have already been approved by the State, which will bring the machine count to 4,500 units.

"With our acquisition of Bangor Historic Track, Inc., which operates harness racing at the city-owned Bass Park in Bangor, Maine, we own the only location in Maine eligible to operate slots. As previously disclosed, we are awaiting licensing approval and final regulatory provisions. Under the current law, we would be permitted to operate up to 1,500 slot machines at this facility. While slot machine operator licensing, as required by statute, could be completed as early as September 30, 2004, we anticipate the required licensing of machine manufacturers and distributors, and finalization of rules necessary for slots to become operational, to be completed next year. We will, contingent on regulatory approval, proceed with development plans at that time. Our budget for this project is approximately $125 million, inclusive of a $51 million purchase price.

"Penn National's balance sheet provides significant financial flexibility for future growth through additional property expansions, acquisitions and new gaming legislation. We maintain a very aggressive yet disciplined approach to analyzing growth opportunities and their potential benefit to Penn National based on several criteria including return on investment, further revenue, geographic and earnings diversification and, most importantly, the potential to enhance shareholder value. Our increased 2004 guidance is based solely on our existing operating assets and does not assume any contributions from these new opportunities."

Financial Guidance

The following table sets forth current guidance targets for continuing operations (as a result of Penn National's decision not to participate in the bidding process for the sale of Hollywood Casino - Shreveport, the Company is now accounting for this facility as a discontinued operation) for the third quarter and full year 2004 and assumes that:

-Slot operations in Maine and Pennsylvania do not commence in 2004;

-There will be no financial contributions or material expenditures related to acquisition prospects during the period;

-There will be no debt restructuring costs in 2004;

-The effective tax rate for federal, state and local income taxes for 2004 will be 38%; and,

-There will be no material changes in economic conditions, applicable legislation or regulation, world events or other circumstances beyond our control that may adversely affect our results of operations.

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	Penn National Gaming Reports Record Results 27 Jul 2004 <a href='https://ad.casinocity.com/adclick.php?n=a21efcd1'><img src='https://ad.casinocity.com/adview.php?what=-site:vendors/width:250/RON&n=a21efcd1' border='0' alt='' /></a> WYOMISSING, Pennsylvania -- (PRESS RELEASE) -- Penn National Gaming, Inc. -Diluted Net Income Per Share Rises 26.3% Year-over-Year to $0.48 and Exceeds Guidance of $0.44 -Diluted Net Income Per Share from Continuing Operations Rises 25.0% Year-over-Year to $0.60 and Exceeds Guidance of $0.53 -Income from Continuing Operations Rises 11.6% Year-over-Year to $57.9 Million and Exceeds Guidance of $54.7 Million -Raises 2004 Full Year EPS Guidance from Continuing Operations to $2.09 from $1.90 Penn National Gaming, Inc. (PENN: Nasdaq) today reported record second quarter results for the period ended June 30, 2004. Summary of Q2 Results (In millions, except per-share data) Three Months Ended June 30 2004 2003 ------ ------ Net revenues $301.5 $291.2 EBITDA (1) $ 75.7 $ 68.4 Income from continuing operations $ 57.9 $ 51.9 Net income from continuing operations $ 24.9 $ 19.3 (Loss) from discontinued operations (3) $ (5.2) $ (3.8) Net income $ 19.7 $ 15.5 Diluted earnings per share from continuing operations (2) $ 0.60 $ 0.48 Diluted (Loss) per share from discontinued operations (3) $(0.12) $(0.10) Diluted earnings per share $ 0.48 $ 0.38 Commenting on the results, Peter M. Carlino, Chief Executive Officer of Penn National said, "During the second quarter, Penn National Gaming celebrated its tenth year as a public company. In this time, we have expanded dramatically and successfully through a series of initiatives including acquisitions, property development and expansion, diversification and the appointment of quality management at our regional gaming entertainment centers. Our focus in expanding the company over this period has been on financial growth and the enhancement of shareholder value and we have succeeded on both fronts. The record 2004 second quarter results again highlight the economic value of our strong regional gaming assets. "Our second quarter significantly exceeded our most recent financial guidance and reflects the first full quarter of year-over-year comparisons for all of the properties we currently operate, including the Hollywood Casino® properties which we acquired in March 2003. The over 11% increase in income from continuing operations and 25% increase in second quarter diluted net income per share from continuing operations highlight continued 'same facility' year-over-year improvements at Charles Town, Casino Rouge, Casino Magic - Bay St. Louis, Bullwhackers, Hollywood Casino-Tunica and our Casino Rama management contract. In addition, we have elected not to participate in the bidding process for the sale of Hollywood Casino - Shreveport and it appears this matter is well on its way to an ultimate resolution. "Earlier this month, Pennsylvania Governor Edward G. Rendell signed into law new slots legislation that should enable us to reverse the declining financial trends at our Pennsylvania racing facilities. With two existing racetracks in Pennsylvania we have already developed plans to revitalize these properties and we have access to the financing to quickly expand and re-configure these sites. However, the Pennsylvania bill includes a provision that allows for 100% ownership in a first licensed operation and no more than 33% ownership in a second operation. Considering the more than 1,000 employees at our two racetracks and 11 off-track wagering facilities in Pennsylvania, as well as the interests of our shareholders and other constituents, we have been carefully and thoroughly evaluating the new law and weighing our options and potential opportunities. In the meantime, there are a host of licensing, regulatory and other issues that need to be finalized, providing us ample time to develop an appropriate resolution while still targeting the opening of a facility as early as the first quarter of 2006. "Given the ownership restrictions in the Pennsylvania legislation, our current plan is to develop a slots facility at our Penn National Race Course near Harrisburg, with an expected capital expenditure budget of approximately $125 million to $150 million, inclusive of the $50 million gaming license fee and the purchase of 2,000 slots. Under this plan, we expect to open in a permanent facility with 2,000 slot machines in early 2006 and expand up to 5,000 games based on demand. Assuming an anticipated win-per-day per device of approximately $220, the Harrisburg facility would generate approximately $160 million in gaming revenue and should achieve operating margins of 25% in the first full year of operation. As the property matures and is fully built out, we anticipate it could generate approximately $310 million in annual gaming revenue. "Our experience at Charles Town Races will prove invaluable in creating an exciting entertainment destination for our patrons at Penn National Race Course and excellent returns for our shareholders. Locally, we expect to create significant new employment opportunities and meaningful economic development. "At Charles Town, we continue to reinvest in the facility and just completed the installation of 300 more slot machines, bringing the total base of slot machines installed to 3,800 units. We also recently completed the construction of 1,000 additional covered parking spaces. Construction is now underway to accommodate an additional 700 slot machines that have already been approved by the State, which will bring the machine count to 4,500 units. "With our acquisition of Bangor Historic Track, Inc., which operates harness racing at the city-owned Bass Park in Bangor, Maine, we own the only location in Maine eligible to operate slots. As previously disclosed, we are awaiting licensing approval and final regulatory provisions. Under the current law, we would be permitted to operate up to 1,500 slot machines at this facility. While slot machine operator licensing, as required by statute, could be completed as early as September 30, 2004, we anticipate the required licensing of machine manufacturers and distributors, and finalization of rules necessary for slots to become operational, to be completed next year. We will, contingent on regulatory approval, proceed with development plans at that time. Our budget for this project is approximately $125 million, inclusive of a $51 million purchase price. "Penn National's balance sheet provides significant financial flexibility for future growth through additional property expansions, acquisitions and new gaming legislation. We maintain a very aggressive yet disciplined approach to analyzing growth opportunities and their potential benefit to Penn National based on several criteria including return on investment, further revenue, geographic and earnings diversification and, most importantly, the potential to enhance shareholder value. Our increased 2004 guidance is based solely on our existing operating assets and does not assume any contributions from these new opportunities." Financial Guidance The following table sets forth current guidance targets for continuing operations (as a result of Penn National's decision not to participate in the bidding process for the sale of Hollywood Casino - Shreveport, the Company is now accounting for this facility as a discontinued operation) for the third quarter and full year 2004 and assumes that: -Slot operations in Maine and Pennsylvania do not commence in 2004; -There will be no financial contributions or material expenditures related to acquisition prospects during the period; -There will be no debt restructuring costs in 2004; -The effective tax rate for federal, state and local income taxes for 2004 will be 38%; and, -There will be no material changes in economic conditions, applicable legislation or regulation, world events or other circumstances beyond our control that may adversely affect our results of operations.