National HBPA Forum “Life After Slots” Thursday, July 2, 2009 Panelist - Joe Santanna

The Perspective 2009 Projected Purses for PN & PID Penn National Penn National Slots$28,200,000 Slots$28,200,000 Pari-Mutuel11,050,000 Pari-Mutuel11,050,000 Total $39,250,000 Total $39,250,000 Presque Isle Downs Presque Isle Downs Slots$20,085,000 Slots$20,085,000 Pari-Mutuel 1,325,000 Pari-Mutuel 1,325,000 Total$21,410,000 Total$21,410,000

The “Latest” PA Table Games Legislation Racino moves from: Racino moves from: Slots and Racetrack to Slots and Racetrack to Full Casino and Racetrack Full Casino and Racetrack Horse racing Industry is not included in initial legislation Horse racing Industry is not included in initial legislation Substantial “tax” rate shift proposed: Substantial “tax” rate shift proposed: From 55% From 55% To 12% or 21% (2 bills) To 12% or 21% (2 bills)

The Proposal PA Table Games Impact Technical Memo PA Table Games Impact Technical Memo April 2009, Innovation Group April 2009, Innovation Group Slot Revenue will increase by 3.5% Slot Revenue will increase by 3.5% 55% = $ 61,122,541 55% = $ 61,122,541 Table Game Revenue Table Game Revenue 12% = $103,736,171 12% = $103,736,171 Total Additional Revenue $164,858,711 Total Additional Revenue $164,858,711

The Actual The ACTUAL effect at MTR in 2008 The ACTUAL effect at MTR in 2008 Revenue from Poker $ 7,300,000 Revenue from Poker $ 7,300,000 Revenue from Tables 41,500,000 Revenue from Tables 41,500,000 Total (40 Poker,55 Table)$ 48,800,000 Total (40 Poker,55 Table)$ 48,800,000 Decrease in Slots -22,200,000 Decrease in Slots -22,200,000 Net Increase $ 26,600,000 Net Increase $ 26,600,000 How do Table Games increase slot play if this is actual data from MTR 2008 SEC 10k filing? How do Table Games increase slot play if this is actual data from MTR 2008 SEC 10k filing?

The Tax Race Swap Purses – Breeders – H & P Slot Play Decrease $ 22,200,000 Slot Play Decrease $ 22,200,000 Percentage to Horse RacingX 9% Percentage to Horse RacingX 9% Loss to Purses/Breeders $ 1,998,000 Loss to Purses/Breeders $ 1,998,000 Number of Locations in PA 12 Number of Locations in PA 12 Total Exposure $ 23,976,000 Total Exposure $ 23,976,000 Hold Harmless Percentage Needed 4.1% Hold Harmless Percentage Needed 4.1%

Position on Possible Decrease If gaming revenues are decreasing for all If gaming revenues are decreasing for all No problem – misery loves company! No problem – misery loves company! If gaming revenue is increasing from table games but decreasing from slots If gaming revenue is increasing from table games but decreasing from slots Decreases can be attributable to: Decreases can be attributable to: Increased competition within and outside of state Increased competition within and outside of state Declining economic forces Declining economic forces Introduction of table games to site Introduction of table games to site A decrease is a decrease is a decrease!! A decrease is a decrease is a decrease!!

The Tax Rate Swap State Slot Play Decrease $ 22,200,000 Slot Play Decrease $ 22,200,000 Percentage to StateX 34% Percentage to StateX 34% Loss to State $ 7,548,000 Loss to State $ 7,548,000 Number of Locations in PA 12 Number of Locations in PA 12 Total Exposure $ 90,576,000 Total Exposure $ 90,576,000 Hold Harmless Percentage Needed 15.5% Hold Harmless Percentage Needed 15.5%

The Tax Rate Swap The Casino Operator Keep by Operator on Table Games 88% Keep by Operator on Table Games 88% Keep by Operator on Slots (Max) 48% Keep by Operator on Slots (Max) 48% The Swap 40% The Swap 40% On 40% = $ 8,880,000 On 40% = $ 8,880,000 At 12 locationsX 12 At 12 locationsX 12 The Swap$106,560,000 The Swap$106,560,000

Other Info From MTR 2008 SEC 10k Report Operating margin increased to 12.1% from 11% in 2007 Operating margin increased to 12.1% from 11% in 2007 Increase in Gross Profit from Gaming, food, beverage, and lodging Increase in Gross Profit from Gaming, food, beverage, and lodging Average Daily (net) Win per slot machine decreased to $175 from $194 during 2007 Average Daily (net) Win per slot machine decreased to $175 from $194 during total “Poker Rake” was $7.3 million with an average daily poker rake per table of $ total “Poker Rake” was $7.3 million with an average daily poker rake per table of $ Table Game net win amounted to $41.5 million with a “Table Drop” of $225.1 million resulting in a “hold percentage” of 18.4% 2008 Table Game net win amounted to $41.5 million with a “Table Drop” of $225.1 million resulting in a “hold percentage” of 18.4% Slots keep in PA in 2008 was 9.12% Slots keep in PA in 2008 was 9.12% Average daily net win per table was $2,104 Average daily net win per table was $2,104

Primarily resulting from increased “Patron Traffic” from opening of Table Games Gaming compensation and benefit costs increased by $11.9 million during 2008 Gaming compensation and benefit costs increased by $11.9 million during 2008 Addition of poker tables Addition of poker tables Expanded 24/7 operations Expanded 24/7 operations Almost offset by below increases in profits Almost offset by below increases in profits Increase in food, beverage, and lodging Increase in food, beverage, and lodging $4.6 million or 22.2% $4.6 million or 22.2% Gross profit increased $1.9 million or 34.9% Gross profit increased $1.9 million or 34.9% Room rates increased 26.4% Room rates increased 26.4% Other Revenue increased $1.9 million or 30.7% Other Revenue increased $1.9 million or 30.7%

Conclusions Table Games decrease Slot Play Table Games decrease Slot Play Capital investment in Table Games is much less than Slot Machines Capital investment in Table Games is much less than Slot Machines Only the Operator profits from the ancillary operations that prosper from Table Games Only the Operator profits from the ancillary operations that prosper from Table Games If Table games add revenue then everyone else, AT A MINIMUM, should be held harmless if they cannibalize slot revenues If Table games add revenue then everyone else, AT A MINIMUM, should be held harmless if they cannibalize slot revenues

More Conclusions Build a correct model that protects everyone’s interests Build a correct model that protects everyone’s interests If not attractive to operators, expand slot to state approved maximums If not attractive to operators, expand slot to state approved maximums Major Policy decision based upon one study funded by three of the current casino operators Major Policy decision based upon one study funded by three of the current casino operators Protect the demonstrable increase in quality of racing in PA as a result of Act 71 Protect the demonstrable increase in quality of racing in PA as a result of Act 71

Final Thoughts Table Games Decrease Slot Play Table Games Decrease Slot Play Slot Play Increases when Live Racing is being conducted Slot Play Increases when Live Racing is being conducted Slot Play Increases on “Big Day” racing Slot Play Increases on “Big Day” racing Pari-mutuel handle decreases as slot machines increase Pari-mutuel handle decreases as slot machines increase Pari-mutuel handle decreases as table games are opened Pari-mutuel handle decreases as table games are opened