Penn National Gaming reports 4Q revenue of USD 734.0M

2015 Fourth Quarter Adjusted EBITDA Includes $7.9 Million Positive Operating Segment Variance and $16.8 Million Favorable Property Tax Adjustments Relative to Guidance

Timothy J. Wilmott, President and Chief Executive Officer of Penn National Gaming, commented, “Penn National’s strong fourth quarter financial results exceeded guidance and wrap up an active and productive 2015, in which we achieved positive operating results for the second straight year following the separation of the Company’s operating and real estate assets. Our progress throughout the year in enhancing operations, profitably growing market share in several key markets, maximizing operating efficiencies, and the continued success of our expansion initiatives position us for further financial growth in fiscal 2016.

“The fourth quarter results reflect year-over-year improvements in regional gaming trends, the ongoing success of our operating teams in driving improved adjusted EBITDA margins, and continued growth at our Ohio properties, including those recently opened in Mahoning Valley and Dayton, as well as in Toledo and Columbus. Results also benefited from our 2015 expansion initiatives, including contributions from Plainridge Park Casino, Tropicana Las Vegas and Prairie State Gaming (“PSG”) all of which have significant prospects for continued revenue, margin and adjusted EBITDA growth going forward.

“Overall, fourth quarter adjusted EBITDA exceeded guidance by $24.6 million, inclusive of a $7.9 million positive operating segment variance. Reflecting Penn’s strong operating leverage and flow through, the 1.6% revenue outperformance drove a 4.3% increase in adjusted EBITDA relative to guidance when excluding the favorable property tax settlements.

“While our West segment margin declined as a result of the inclusion of Tropicana Las Vegas, we saw fourth quarter adjusted EBITDA margin improvements in our East/Midwest and Southern Plains operating segments. Overall, Penn National’s ongoing execution of strategies to improve operating efficiencies drove consolidated fourth quarter 2015 adjusted EBITDA margin growth of approximately 43 basis points on a year-over-year basis to 26.8%, excluding the favorable property tax settlements and the acquisitions of Tropicana Las Vegas and PSG.

“In Massachusetts, throughout the fourth quarter we continued to refine Plainridge Park’s gaming floor offerings based on customer preferences while further adjusting promotions and advertising, and expanding our Marquee Rewards database to better compete with gaming facilities in neighboring states. Plainridge Park’s database now exceeds 160,000 customers and the property continues to generate the highest average win per machine across our 22 casino properties.

“In Las Vegas, we are making good progress toward positioning the Tropicana Las Vegas to benefit from the improving Las Vegas economic environment, new attractions and activity on the south end of the Strip, and ultimately our database of nearly three million active regional gaming customers, a significant percentage of which regularly visit Las Vegas. Consistent with our operations in other markets, we are updating the slot floor, altering game placement and refining the table game mix in preparation for the introduction of the Marquee Rewards customer loyalty program in the second quarter of 2016, while simultaneously executing on opportunities to improve hotel yield and margins at the property. Looking forward, we plan to complement our initial operational improvements with enhanced food and beverage offerings before the end of 2016. With these changes and the property’s strong room product, which were part of approximately $200 million in improvements completed by the former owners, we believe Tropicana Las Vegas will create shareholder value as we attract new and more profitable customer segments and leverage our Marquee Rewards database. Longer-term, we will evaluate other potential enhancements at the Tropicana Las Vegas, with the scope, budget and timing of any such improvements to be based upon our operation of the property as well as customer demand for additional amenities.

“Our acquisition of PSG, a leading Illinois video gaming terminal (“VGT”) operator, in the third quarter of 2015 is meeting our return on invested capital expectations and provides a platform for future growth. As one of Illinois’ largest and most respected VGT route operators, PSG’s operations include more than 1,100 terminals across a network of 270 bars and retail gaming establishments across the state. During the fourth quarter, we entered into an agreement with Bally Gaming whereby PSG will place popular, next generation VGT product and exclusive new premium game content across its network of bars and retail gaming establishments. We believe PSG offers Penn National a solid platform for growth in the Illinois VGT market and a foundation for expansion in other states where this form of gaming is now being evaluated and could be authorized in the future.

“Finally, our anticipated mid-2016 opening of the $390 million Hollywood Casino Jamul-San Diego, for which we are acting as developer, manager and lender, is approaching. The three-story gaming and entertainment facility, with the region’s most convenient access to the local population, will include more than 1,700 slot machines, 43 live table games, an upscale lounge featuring national and regional entertainment, a beer garden, a four-venue food court, and an eight-story partially subterranean parking garage with over 1,800 parking spaces. We recently announced a broad range of dining amenities for the property including the first ever Tony Gwynn's Sports Pub. While we continue to explore the refinancing of the Jamul Indian Village note, we remain confident in the overall economics of this project, which will allow tribal members to become financially self-sufficient while improving their education, healthcare and housing.

“Penn National’s solid 2015 results and future prospects, as well as our disciplined operating approach, position us well for continued adjusted EBITDA growth in 2016 and beyond.”