Penn National Gaming Reports Fourth Quarter Revenue of $555.8 Million

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

- Fourth Quarter Net Loss Attributable to Shareholders of $355.4 Million, Reflecting Non-Cash Impairment Charge of $520.6 Million -

- Fourth Quarter EBITDA of $120.9 Million -

- Establishes 2010 First Quarter and Full Year Guidance -

Penn National Gaming, Inc. (Nasdaq: PENN) today reported fourth quarter operating results for the three and twelve months ended December 31, 2009, as summarized below:

Reconciliation of Fourth Quarter 2009 Results to Guidance

Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming commented, "While we are disappointed with fourth quarter net revenue and EBITDA levels which continue to reflect the impact of the economy, we believe the fourth quarter of 2009 could be the Company’s most successful quarter ever from a future development and expansion perspective. We had positive election outcomes in Ohio and West Virginia, our joint venture with International Speedway Corporation was selected by the Kansas Lottery Gaming Facility Review Board to develop and operate a casino at Kansas Speedway, and we were selected by the Maryland Video Lottery Location Commission to develop and manage a video lottery terminal facility in Cecil County, Maryland. In addition, in early 2010, the Pennsylvania Legislature approved table games. It is evident from our fourth quarter progress that we have well-developed strategies to create new long-term value for shareholders by deploying Penn National’s strong balance sheet and facility development skills to operate in new jurisdictions. New facilities in Maryland, Ohio and Kansas -- all of which will be opened within the next two to three years -- will further diversify our geographical reach, expand our current base of slot machines by approximately 20% and position the Company to be less susceptible to cannibalization from future gaming expansion.

"Unfortunately, we have limited control over how consumers are continuing to respond to economic pressures and as a result, the gaming industry experienced revenue compression again in the fourth quarter. Penn National’s fourth quarter operating results reflect reductions in consumer spending in almost every market and while customer visit levels are off only modestly, we’re continuing to see less spend per visit. We have undertaken extensive analysis of gaming trends, which indicate that regional gaming spending declines are slowing. However, at this time, these trends generally do not support expectations of 2010 revenues exceeding 2009 levels and these expectations are reflected in our guidance.

"Fourth quarter and full year GAAP net loss reflects a fourth quarter pre-tax impairment charge of $520.5 million, as a portion of the value of the goodwill and other intangible assets associated with the original purchase of the Lawrenceburg facility was determined to be impaired as a result of the anticipated impact of gaming expansion in Ohio. GAAP requires that this evaluation be performed on each individual property and, therefore, even though we believe the November election outcome in Ohio will, on a net basis, eventually add significant incremental shareholder value for Penn National, the accounting rules do not provide for evaluating goodwill and intangible impairments against the Company’s entire portfolio and development pipeline.”

Growth Pipeline Update

Mr. Carlino continued, "In Maryland, following approval by the Maryland Video Lottery Location Commission, we have commenced construction on one of the state’s first gaming operations, a $97.5 million Hollywood-themed facility with 75,000 square feet of gaming space, 1,500 video lottery terminals, food and beverage offerings and parking for over 1,600 vehicles. Based on construction progress to date, the facility is expected to open to the public in late 2010, which will likely result in historically high returns on capital before other facilities in the state come on line.

"In a statewide election last November, Ohio voters approved the Issue 3 constitutional ballot initiative authorizing casino gaming at specified sites in Cincinnati, Cleveland, Columbus and Toledo. As a result, Penn National has begun to develop the Toledo and Columbus facilities, with planned investments of approximately $300 million and $400 million, respectively, and targeted opening dates in late 2012. We have already completed the acquisition of the 44-acre Toledo site and approximately 24 acres in the Columbus Arena District. In addition, as announced last month, we are also working closely with Columbus community leaders on the parallel pursuit of an alternative Columbus site. We recently entered into an option to purchase the 123-acre site of the former Delphi Automotive plant on Columbus’ West Side as an alternate location for our planned development of Hollywood Casino Columbus. Our selection of the Delphi site is based on support from the community and ease of customer access. In addition, its status as a brownfield site fits well with our original vision of urban revitalization. On January 27, 2010, the Ohio Legislature approved the language for a Constitutional amendment changing the designated casino location in Columbus to the Delphi site. The issue is now scheduled to appear on the statewide ballot in May 2010. Given the uncertain outcome in the legislature and at the ballot, we are pursuing development at both Columbus sites simultaneously.

"During the fourth quarter, Penn National and its partner, International Speedway Corporation were selected by the Kansas Lottery Gaming Facility Review Board to develop and operate a Hollywood-themed entertainment destination facility overlooking Turn 2 at Kansas Speedway in Kansas City. Subject to background investigations and licensing by the Kansas Racing and Gaming Commission, which are expected to be completed in early 2010, the Penn National/ISC joint venture will begin construction in the second half of this year with a planned opening in early 2012. With an overall budget of approximately $410 million inclusive of land and licensing, this facility will feature a 100,000-square-foot casino floor with capacity for 2,300 slot machines and 86 table games, a high-energy lounge and a variety of dining and entertainment options. We estimate that Penn National Gaming’s share of the future cash expenditures will be approximately $155 million.

"While we are intent on deploying our strong capital base for return focused growth opportunities, we will continue to exercise extreme diligence and discipline in capital allocation decisions. Accordingly, while we had a well developed plan to create value from the bankrupt Las Vegas Fontainebleau project, and in November submitted a proposal to become the stalking horse bidder in the auction process, another bidder emerged who was willing to pay, on a relative basis, more than what we believe the unfinished asset is worth given the cost to complete the project.

"While it is difficult to gauge the pace of an economic recovery, we are confident that the Company’s facility development skills, strong liquidity position and capital structure, committed management and personnel, prudent management of our property base and exercising appropriate risk management disciplines will generate long-term shareholder value and that Penn National will be well-positioned to benefit from healthier levels of consumer spending as they occur.”

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 first quarter and full year, based on the following assumptions:

• Economic conditions do not deteriorate any further;
• Six months of West Virginia table game results;
• Excludes any results for Pennsylvania table games;
• Excludes any results for Hollywood Casino Perryville;
• Includes $8.8 million of preopening expenses for West Virginia table games, Hollywood Casino Perryville, Pennsylvania table games, Ohio (excluding expenses recaptured from non-controlling interests), and Empress Casino Hotel;
• Excludes expected 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 $207.4 million, with $51.7 million projected to be incurred in the first quarter of 2010;
• Loss on disposal of assets of $1.7 million for 2010, with $0.4 million of the loss projected to be incurred in the first quarter of 2010;
• Estimated non-cash stock compensation expenses of $26.7 million for 2010, with $6.8 million of the cost incurred in the first quarter of 2010;
• LIBOR is based on the forward curve;
• Blended income tax rate of 45.0%;
• No further impairment charges;
• A diluted share count of approximately 108.0 million shares; 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.

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

Reconciliation of Loss from Operations (GAAP) to EBITDA

Reconciliation of Loss from Operations (GAAP) to EBITDA

Diluted Share Count Methodology

Reflecting the issuance on October 30, 2008 of the $1.25 billion, zero coupon, Series B Redeemable Preferred Stock, Penn National Gaming is required to adjust its diluted weighted average outstanding share count for the purposes of calculating diluted earnings per share as follows:

• When the price of Penn National Gaming’s common stock is less than $45, the diluted weighted average outstanding share count is increased by 27,777,778 shares (regardless of how much the stock price is below $45);
• When the price of Penn National Gaming’s common stock is between $45 and $67, the diluted weighted average outstanding share count will be increased by an amount which can be calculated by dividing $1.25 billion by the current price per share. This will result in an increase in the diluted weighted average outstanding share count of between 18,656,716 shares and 27,777,778 shares depending on the current share price; and,
• When the price of Penn National Gaming’s common stock is above $67, the diluted weighted average outstanding share count will be increased by 18,656,716 shares (regardless of how much the stock price exceeds $67).

Since the Company reported a loss from operations for the three and twelve months ended December 31, 2009 and 2008, it was required by GAAP to use basic weighted-average common shares outstanding, rather than diluted weighted-average common shares outstanding, when calculating diluted loss per common share attributable to the shareholders of Penn National Gaming, Inc. and subsidiaries.

Reconciliation of Non-GAAP Measures to GAAP

EBITDA, or earnings before interest, taxes, charges for stock compensation, impairment losses, Empress Casino Hotel fire, depreciation and amortization, gain or loss on disposal of assets, and other expenses, and inclusive of loss from joint venture, is not a measure of performance or liquidity calculated in accordance with 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. EBITDA is presented 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 (loss) attributable to the shareholders of Penn National Gaming, Inc. and subsidiaries per GAAP. A reconciliation of the Company’s EBITDA to net income (loss) attributable to the shareholders of Penn National Gaming, Inc. and subsidiaries per GAAP, as well as the Company’s EBITDA to income (loss) from operations per GAAP, is included in the accompanying financial schedules.

A reconciliation of each property’s EBITDA to income (loss) from operations is included in the financial schedules herein. On a property level, EBITDA is reconciled to income (loss) from operations per GAAP, rather than net income (loss) attributable to the shareholders of Penn National Gaming, Inc. and subsidiaries 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.

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 212/231-2909; 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; allow 15 minutes to register and download and install any necessary software.

Following its completion, a replay of the call can be accessed until March 6, 2010 by dialing 800/633-8284 or 402/977-9140 (international callers). The access code for the replay is 21456575. A replay of the call can also 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 "News” section (select link for "Press Releases”).

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 nineteen facilities in fifteen jurisdictions, including Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Maine, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, West Virginia, and Ontario. In aggregate, Penn National Gaming’s operated facilities feature over 26,300 gaming machines, approximately 400 table games, over 2,000 hotel rooms and over 959,000 square feet of gaming floor space.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from expectations. Although Penn National Gaming, Inc. and its subsidiaries (collectively, the "Company”) believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, 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 maintain regulatory approvals for our existing businesses and to receive regulatory approvals for our new businesses; the passage of state, federal or local legislation (including referenda) that would expand, restrict, further tax, prevent or negatively impact operations in the jurisdictions in which we do business (such as a smoking ban at any of our facilities) or in jurisdictions where we seek to do business; the activities of our competitors and the emergence of new competitors; increases in the effective rate of taxation at any of our properties or at the corporate level; delays or changes to, or cancellations of, planned capital projects at our gaming and pari-mutuel facilities or an inability to achieve the expected returns from such projects; construction factors, including delays, unexpected remediation costs, local opposition and increased cost of labor and materials; the ability to recover proceeds on significant insurance claims; our ability to identify attractive acquisition and development opportunities and to agree to terms with partners 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; the availability and cost of financing; the maintenance of agreements with our horsemen, pari-mutuel clerks and other organized labor groups; the outcome of pending legal proceedings; the effects of local and national economic, credit, capital market, housing, energy conditions on the economy in general and on the gaming and lodging industries in particular; changes in accounting standards; third-party relations and approvals; 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, 2008, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC. The Company does not intend to update publicly any forward-looking statements except as required by law.