Ladies and gentlemen thank you very much for standing by and welcome to the Penn National Gaming Fourth Quarter 2008 Conference Call. During this presentation all participants are in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions). As a reminder this conference is being recorded on Thursday, February 05, 2009. I would now have the pleasure turning the conference over to Joe Jaffoni, Investor Relations. Please go ahead sir.

Thank you operator. Good morning and thank you for joining Penn National Gaming's 2008 fourth quarter conference call. We'll get to management's presentation and comments momentarily, as well as your questions and answers. But first I'll review the Safe Harbor language. In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs that are not guarantees of future performance. As such actual results may vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission including the company's reports on Form 10-K and 10-Q. Penn National assumes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast may also include non-GAAP financial measures within the meaning of SEC Regulation G. When required a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, can be found in today's news announcement as well as on the company's website. With that I will turn the call over to Peter Carlino, the company's Chairman and CEO. Peter.

Thanks John. We will say what you said. That story or that script reminds me of the story most of us know about the guy in prison that tells his jokes so often, they don't bother with the way, they just say number six and everybody laughs. I mean, I might suggest that we should designate that number six and you say number six applied and we get going in future but it's painful. Well listen, welcome everybody to our fourth quarter earnings call. We I suppose are happy to report another less than lustrous quarter but one that is in line with our expectations and one in line with the dents elsewhere in the industry. I suppose all in all it is not too bad. I should tell you at the outset that January looks like its moving along okay and in line again with our expectations. At the outset let me make a comment about our vision team quarterly release. As you might guess it was both painful to write and I suspect equally painful to read. You may have some questions and I'm sure we will be delighted to answer some of the accounting mumbo jumbo that our accountants have forced us to deal with this quarter. And also if they have any material impact on the company obviously but we're happy to entertain any questions that you might have. In the mean time despite what you might read about us out in the news papers and so forth we are focused and our real concentration day-to-day here is on running the business. Tim and by the way our entire management team as usual is here today to answer your questions and our entire group here and at the properties are utterly focused on kind of tightening policy, doing the job ever better. So that frankly I think we are doing a pretty good job of making the best of the lemons that we have got as we look forward to 2009. So we start this year with kind of a hopeful look to the future. We like you are not anymore enlightened about where it's going to be; making estimates about future earnings that is tough in this environment. I think you know that, but sitting here as a company that has done just a spectacular job, if I must say so of predicting earnings performance over great many years. I think we have some credibility but as you might imagine its tough and Bill and his team worked very, very hard to be as accurate as we possibly can. So with that I am going to open the floor to questions and we will get to where you folks would like to be. Operator, would you please do so.

Absolutely sir. (Operator Instructions). And our first question comes from the line of Felicia Hendrix of Barclays Capital. Please go ahead.

Hi, good morning guys.

Hi Felicia.

Hi. Peter you just kind of touched on a point that was my first question which is the economy and your guidance is assuming that economic conditions don't deteriorate further? And I am just wondering if you could touch on that because clearly it is impossible to determine what the economy is going to do but that assumption does seem a bit optimistic to me?

Well, I mean that's a very good question of course the crux of the matter. I would underscore the answer. We are not economists and make no pretence to be. So our knowledge about where the future is going to be is probably less enlightened than many on this call. And I mean that quite sincerely. But we have got to make some presumption and the presumption is that things are gone about the same. But we will get to some of the assumptions is our thinking.

Yes, I mean -- what I guess the better way of putting that is what we have assumed and what we are seeing relative to our internal term lines and internal business volumes and expectations of what we are seeing from customers isn't going to radically change. I think I would really will put it that there is no catastrophic event that would cause a significant shift to an even greater despair by the consumer. If the consumer stays at the current level that is there and unhappy then I think, we think these are pretty good estimates of where it is going to happen. I guess there is another way, assuming we don't have another Lehman situation which causes panic, we feel pretty good with these numbers. If, you know, assuming that everything just kind of moves along as it has been for the last several months basically that reflects what we have tried to estimate in our guidance.

Yes, its very hard you know and then maybe Tim wants to add a word or two about this, the operating pulse is the sense of what one gets from the numbers and in talking to management around the country. Its awfully hard to tell. We had a lot of bad weather this winter. I mean we never as you know those of you who followed us for years, we never do is crying about it, we love to hear about other conference calls where people are moaning about the weather. If the weather is good, it is bad, its up to them. But some years are better or worse than others to be sure. But as an illustration we just had for example at Penn National last weekend is the spectacular Saturday night extremely strong. Saturday was extremely strong, I don't know what that tells us but it does tell me at least that, not everybody has packed up and gone home and we actually have customers that are showing up and in some cases in bigger numbers and it might be again. I can't tell you what to make of that except to say there is life out there but I think people feel much the way all we do. They don't know kind of where they are and where it's all going. So there is a kind of tentativeness to all of this that, as I said its sticking without elegy of taking a pulse that the patient is still alive. Tim, do you want to add anything to that?

No, the only thing I can add to that Peter is what we saw in the fourth quarter and I think we are pretty active with our guidance there. For the first month of 2009, we are seeing similar kind of results and we are satisfied with our January results and as Bill has said unless something catastrophic triggers this again in a downward way it's the best guess we have for 2009. And customers are still coming, they're still gambling. Market-by-market you got to look at it differently but spend from it is generally down slightly and in certain segments we're seeing less overall trip frequency. But it's very similar to the second half of 2008 post Lehman that we're seeing in the volumes in our business.

That's a good answer if I must say so, again thanks.

Felicia does that help?

Yes, its really, really helpful. Tim, what we have here, I was wondering if you could just kind of walk us through what you're seeing in Illinois so far with the anniversary of this smoking ban. I mean, everyone is expecting that's anniversary actually to provide easy (inaudible). Are you seeing that?

Well, we're still seeing some erosion in the business. Now Illinois in January had a very tough weather month.

But you do not talk about weather?

Right, we probably should. The impact of smoking now is fully understood by the customers now. I don't think it was fully understood when it went into effect in January of 2008. So, I still think there'll be some effect in the first quarter. The other thing going on Illinois right now that certainly had a slight impact on our operations is the introduction of all of that capital of course you haven't which slightly hurts more and more so than it does, so the effort is still having some impact. So we are watching generally the improving conditions in Illinois but I don't think that you are going to see it immediately effect, immediately flatten out in the first quarter of 2009.

And then regarding Missouri performance both on each side of the border?

Well we certainly are seeing in Kansas City the positive effect of the loss limit especially on the table game side of the business. We are seeing very nice lift in table games volumes. And the net-net in Riverside has been positive for us. However, on the St. Louis side you realize all were slower operation. We are seeing some dilutive effect with the St. Louis-Missouri operators now taking the advantage of that, negatively affecting our business and all.

Okay, then -- and then just finally I am wondering if you've made any further corporate bond purchases since your Q?

No corporate bond, no we haven't.

Okay thank you.

Thank you for question. Continuing on our next question comes from the line of Larry Klatzkin from Jefferies. Please go ahead sir, your line is open. Lawrence Klatzkin - Jefferies & Co: Hey guys. So how many high yield bonds do you have invested right now?

It's basically unchanged from where we were last time representing about 50 million. Lawrence Klatzkin - Jefferies & Co: All right, all right. The 3% surcharge in Illinois does that given how it was put on, Peter any chance that goes away?

A difficult question Larry. Look Illinois has been a very difficult state for us as you know. It should be one of the best states in the United States. It's a great place to do business. It just has been an incredibly awful political place to do business and the 3% is probably the most outrageous piece of legislation I think any of us has ever seen. I can say it's plainly and clearly. I mean the situation as you know where they targeted one industry to support another and there are no other cases. Clearly in our judgment on constitutional, the lower courts in Illinois set it right. The Supreme Court unfortunately found a way to say it wasn't but the truth of it is they decided that the racing industry that's hurting, so lets take some money from the casino companies and by the way, let's not take it tomorrow then because of the few guys down state and folks that we need. Let's be honest that it has all come out publicly that would suggest we just won't get the casinos down state, we'll just get the guys around Chicago area. I mean it's a concern. We now know that the Governor was looking for money and that significant money went in his direction and we'll let the courts and others look at that. So, look we were appealing this thing the first time around. We had fought it literally tooth and nail. We've... we're taking this if its accepted to the U.S. Supreme Court. I might let Eric or Jordan take a second to talk about that. I'm sorry Tim. (Multiple Speakers) Well Tim says we've got the new news about that. And of course that was the first case. In the second instance of course it was reapplied, Governor signed it even after he has been arrested which is to show the audacity of this guy. So it is a very bad piece of news, we intend to see. Well, why don't I just go through it. Jordan you know something I don't know yet?

On the legal front, we are just continuing to fight to pursue both of these cases. The first case was the one Peter had alluded to. We had gone to the U.S. Supreme Court and we are waiting to get their decision on whether they will hear it. And with regard to the second case we filed a complaint similar to our first in January and its back to the AG and the one trapped that has been in there to file an answer. So both of those matters will continue but there will still be some time before we get a decision in either case.

The encouraging news Larry, we just heard that a Bill was introduced in the Illinois House to amend this legislation and remove the 3% tax. And given all of the Federal allegations about how this legislation came down, we think Illinois can take the right step and do the right thing and clean up this corrupt legislation.

Yes, that is I hadn't heard that yet Tim, thanks for sharing that. Well that's what they ought to do. This is just a bad, bad piece of legislation and we all know now kind how it happens, not that we didn't before, we just couldn't prove it. So may be there's some hope that thing will get rolled back. There may be hope in the first case because that money is still in Escrow with the U.S. Supreme Court. You know all how difficult it is to get heard by the U.S. Supreme Court but we think this is significant constitutional issue here and also now one involving corruption. So may be we will be appealing enough. Lawrence Klatzkin - Jefferies & Co: Okay, well great. Is there any -- and as far as regulation goes, some talk of reversing the tax, I mean smoking issue in Illinois. I know there's another thing you're trying to do Maine. The Governor of Randall proposed some kind of video slots at bars in Pennsylvania and also talked of the table games and your issued table games in West Virginia. Can you talk about some of the regulatory issues?

My God, that's four questions right now. I haven't heard anything about a smoking ban appeal in Illinois. The situation in Maine, the Governor has made it very plain. Look, there's always going to be something coming out of the woodwork but the Governor stays pretty plain. He does not support it, won't support it, that's very, very clear. Lets see West Virginia, we remain well engaged on that process. I don't know how much we're going to say about that, probably not a lot.

Still in education, Larry. Lawrence Klatzkin - Jefferies & Co: Yes.

Still meeting with community leaders and listening and educating on the impacts that Maryland is going to ring to West Virginia and ongoing expansion in other jurisdictions.

The issue about that, and I said look, I dare say we have a fairly sophisticated political team here that does its best to represent the company as well as we possibly can in each of the states where we do business. Here the sensitivity is about what's the right time to do it. Turn out is a huge factor of the kinds of people who turn out at various elections, obviously a huge difference between a presidential election, general election, and a primary where just anybody shows up. So, we have to be careful first to sell the message that we are and then pick the right time and the optimal time frankly to take it to a vote and we're very focused on that and as you might guess, I dare say that every week that I see reports coming from Eric Schippers and his group. There is comment about what they're doing down in West Virginia. And the fourth question was... Lawrence Klatzkin - Jefferies & Co: Randall...

Oh Randall, well what can I say. With the marriage you have been on the political horizon for at least 25 years that I can point to, I think it has the very slim possibility of occurring. Obviously there is a lot that has happened already, so we would love to have a piece of that. I don't think it's in the public interest to do that. I mean, the argument has long been that, you should be able to get your car and drive to the facility as a matter of choice. And I would be surprised as, I know what the Governor is trying to do. I think it's with revenue of course and it does help out a lot of his constituents but my sense is that legislature probably doesn't have an appetite for that. Lawrence Klatzkin - Jefferies & Co: Alright and then can I just ask so many question, just house keeping capitalized interest, CapEx fourth quarter, and total debt at the other quarter?

Sure, capitalized interest in the fourth quarter was 2,450,000 roughly. The cash position we had $746 million in cash. On a debt level, total debt at 12/31 was 2.430 billion comprised of a 123.7 million on the revolver, 200 roughly 240 on the A, and 1.596 billion on B. And we had some other capitalized leases and announced that we still have Pocono Downs or the reasons for the sale of Pocono Downs at price adjustment those two net out to roughly 20.3 million. And we have the two bonds for 250 million and 200 million gives the total debt at the end of the quarter of 2.430 billion. On a CapEx perspective we've spent 71.9 million in the quarter. That represents roughly 50.2 million on projects and roughly 21.6 million on maintenance CapEx. Project CapEx primarily was spent at the three facilities of Lawrenceburg, Penn national, and Bangor. Relative to guidance in the first quarter, CapEx we're looking at total CapEx of 120.6 million and that represents 85.5 million in new projects plus 13.2 million for Joliet and then maintenance CapEx of roughly 21.9 million.

Learning adjectives we're talking about capital, I should probably recall my days in the military when the warning was always never volunteer ever for anything. But let me volunteer that Lawrenceburg is actually progressing very, very well and is on target to meet those fixed budget and its scheduled opening late spring or early summer I guess. And Joliet also is well on its way. We wanted to prove the final plans, we like what we are going to be doing there, and think that that property will benefit considerably from a very, very attractive investment of capital. Its been a long, long time since that property has seen even a dollar.

And Peter we are under construction in Joliet, started January 4th so the project is underway.

So that's terrific and those if you recall now are the remaining capital commitments that this company has made, there is nothing beyond that of any magnitude on that horizon. So we're anxious to put that capital in place. We're hoping to see the kind of return that we expect, and then we will begin the happy process of I trust reaping the rewards of our investments there and elsewhere. Lawrence Klatzkin - Jefferies & Co: Okay. And I know Peter you are really upset about the new Governor coming in Illinois?

Well quite a few years ago on one of these calls I described the Governor as being politically as the Robert Mugabe of American politics and I'm not sure many understood who Mugabe was at that time. But he is a guy who descended on a perfectly fertile and wonderful land to raid and pillage and leave it in tatters. Well that's what this guy was doing at the time and clearly time has proved that, that's what he has done. So I came in late and I talked to -- you are looking at a guy who is completely deranged, but we've passed all that and lets just move on. Lawrence Klatzkin - Jefferies & Co: You're right about it.

Thanks.

And thank you for your question sir. Continuing on our next question comes from the line of Joe Greff of J.P. Morgan. Please go ahead sir, your line is open.

Good morning guys. I have a quick question for Bill and then I go to a big picture question for you Peter. Bill for the 2009 full year EBITDA guidance, how much have you contemplated for pre-opening expenses related to launch for Joliet?

Pre opening, it's only the minimum for Lawrenceburg and also for Joliet because of the fact that we're going from an existing full scale operation. So, we are not going to have a lot of extra pay roll or any of those types of things you normally associate with pre-opening. We are going to be closed, we're expecting to be closed for a couple of days, mid-week so the transition over and those are reflected in our number. Who knows how much that will be exactly but obviously we will be trying to minimize the impact of that as much as possible.

As you have a cookie some construction disruption at Joliet which is open, as you probably recall at Lawrenceburg it's a brand new set of facilities adjacent to our existing operations. So one of those happy opportunities that turn out the lights on one side and turn them on the other, so we expect and hope to accomplish that with minimum disruptions.

Okay. And then both for Peter and for Bill. After months of looking at maybe certain assets to buy in various gaming markets, not that I'm believing all the news paper articles that I read, maybe can you give us a view on maybe what you've earned at markets that are more or increasingly less favorable and can you maybe just talk about sort of asking prices, are they coming down in any meaningful way. And just kind of any broad comments on that would be helpful in terms of how you are thinking about acquiring cash flowing assets and maybe look at it versus buying back your equity or debt? Thank you.

Yeah, I think that's a tricky question. Right now our cash is just kind of sitting quietly and so it shall remain. I think as we've watched New Jersey sadly that's the market that at the moment is significantly less appealing to us and that shouldn't be a surprise because there is much more bad news coming as you can guess with the opening of the (inaudible) up in Bethlehem and eventually I suspect you will see one or two of the Philadelphia properties open and we'll get there. And that's nothing but bad, bad, bad news for Atlantic City. On top of more slot machines that creates track in New York State.

Yes.

And to top it all we want sell all and on and on and on. So it's going to be a while and it maybe a long while before the picture changes in Atlantic City, it's not a pretty picture. Well they just have the issues that you know of and we've not been actively pushing anything. Although I haven't sensed this broadly that anybody made much adjustment in prices. And I'm the expert in the so called distress yard. Everybody I know is running around looking for the strips of opportunity. They are as you all know better than we billions of dollars out there looking. I didn't find anybody that could find much because these assets are not yet being pushed out to the market for a whole host of reasons, maybe in another time banks would be much more vigorous if I can use that term in trying to get this paper off your books. But right now my sense is that nobody is in the hurry to do that. And the banks who would normally be forcing these lenders we are kind of are looking up at the sky kind of hoping that they don't have to because obviously they won't have to write this stuff down any sooner than they have to. So I mean we're in a kind of space just right now. So that might be very unprofessional read at that but the way I sense it so I don't think it's going to get better anytime soon. And we're just going continue running that business. So I have nothing profound honestly to tell you beyond that. Joe pay any attention to what you read in the papers, I haven't read anything that's had a shred of truth to it so. When something good happens or if something interesting happens you all will be the first to know.

Okay, great. And then Bill the tax rate for the full year for '09.

We expect to be 45.

Great, thanks guys.

Thank you for your question Mr. Greff. Continuing on, our next question comes from the line David Katz of Oppenheimer. Please go ahead sir, you line is open. David Katz - Oppenheimer & Co.: Hi, good morning all.

Good morning.

Hi David. David Katz - Oppenheimer & Co.: I just wanted to follow up on a couple of the other questions looking out across the portfolio as to what you are contemplating on a few things that in your guidance and Peter you made some general comments about Lawrenceburg and we're really I guess getting that in the back half of the year. But you know, what are you presuming lets say there and Bangor that's in your guidance, any color you can help us with there would be good.

I think listen, I think what we've got is we've clearly have some expectations that once the property opens in Lawrenceburg then we're going to, the product is going to be very favorably received and that we're going to expect an uptake in business. Obviously at this point in time it's difficult to say how successful that'll be. I'd say our guidance does not assume the same level of consensus others experience with their property in Chicago but from that perspective, I would say the guidance is conservative. However, we're also seeing a little bit cost up there and I think that we do have some reasonable expectations. Relative to Bangor we're assuming we're going to get -- for guidance we are assuming we're going to get the cost under control and the residual will grow sufficiently especially as we get into the better month up there which is the summer month that we should we able to overcome the expenses. But tentatively our expectation is that the property will be roughly in line with what it is in '08 on either level.

Yes, I think clearly the economy has had an impact and maybe a disproportionate impact in Maine. And maybe we are seeing even as last to last year at least the timing effect of that in Charleston. And if you look at properties where people have to drive a long way, it is my again unscientific view that there probably is some impact, people making fewer trips perhaps in an effort to economize. I think you have generally seen that we're seeing people at our properties but the spend is a little less.

Yes, that's generally what we are seeing across the portfolio of businesses and we have seen even with the Indiana we seen those open. We are seeing weekend periods in Lawrenceburg David that are very solid through the month of January that certainly we expect when we add almost 1,200 incremental gaming positions in a much more consumer friendly environment when that capital does come online. As Bill said, we have conservative, we believe conservative expectations for that in our guidance but we certainly are encouraged with what we're seeing in the business right now even post Indiana we are seeing those during the weekend period. David Katz - Oppenheimer & Co.: Perfect. And one more quick one I guess which is for Bill. In talking to the number the operators around and they've indicated a little bit of a softer stance from banks with respect to amendments and maturities, etc and as that, if you could make a broad comment about what your view is on the bank market and the credit markets, as something that's kind of an important element if you do happen upon something that you would like to buy and having a function and credit market as we've all talked about and the functioning bank market is kind of necessary, what are you seeing in the last 30, 45 days in that respect?

Well, I think you have to break it down into two categories one is, what we're seeing is, clearly the banks that are dealing with the companies are not pushing as aggressively as we might like them to be pushing towards an ultimate resolution of their amendments as well some of their other issues. So, -- but that is included we're seeing signs that they are trying to work with those companies and they are being fully extending a friendly hand and not pushing as aggressively as they might. And that's okay. But that will eventually at some point as long as you are dealing with technical default rather than what I call the big default which is the payment default, I think the bank will continue to be reasonably friendly with those companies. Relative to what might be happening in the credit markets or normal credit seeking companies who maybe just looking to borrow, we are seeing -- starting to see with the banks reporting back to us that we're starting to see some reasonable activity in the sub-debt market for credits that are similar to our levels. There is always -- there has previously been borrowing that investment grade level and that's starting to comedown into the double-digit credits which is where we find ourselves. But its not cheap. We're finding those borrowings are happening in the 12% range generally speaking, maybe 10 to 12. But its encouraging that at least some credit is getting issued to people who needs the credit. So to the extent that we were able to find the compelling opportunities that I think everybody could get on board. I'm getting the sense that we might very well be able to tap the credit markets than they could happen on the subject. Its going to have to work, also we try to hold capital a little more than we're accustomed to but at least there is credit available. But referring to available. I wouldn't say its massive, it's slightly available but at least it's falling a bit. David Katz - Oppenheimer & Co.: 10 to 12 is better than 15 to 18. And then one last quick one, if there is any sort of comment you can make on any efforts going on in Ohio, any updates there, any strategies in place?

We know a lot about what's going on in Ohio but we can't tell you. I love it. David Katz - Oppenheimer & Co.: Okay, thanks.

There is nothing we can share, we have decided to look. We wish to be a player any place, any time that there is a significant gaming opportunity. So you can always assume that we're somewhere there. And we are very much immersed in what's going on in Ohio. Our objection as you well know to what occurred last year, was that it was a crummy bell not just for the state, certainly not good for the rest of us at the race track if you will or anybody else. Its just a self serving deal and all that. But for the state of the economy would never have had a chance of going anywhere and just correlate that it was kind of working for him for a while. The reality is that it's probably too soon to go back to this again. However, they are just kind of people who want to go there. So again our job is to sort of stay at the dance and kind of figure out who's got the best steps, and stay in tune with those people. I mean I'm being vague of course but you get the picture. So we're orderly engaged in Ohio now and we'll always be until we get an outcome that is positive for us. So how's that? David Katz - Oppenheimer & Co.: That's great. Thank you very much.

Thank you Mr. Katz, for your question. Continuing on our next question comes from Betsy Gorton, from Goldman Sachs. Please go ahead your line is open.

Good morning. Could you guys describe the process in Maryland from here forward, when do you think you could hear back, and what's your kind of rough estimate on when you could have a property open by?

Hey Steve, why don't you...

As you know it's pretty prudent to us at this point in time. They only received this on Monday at 2 and quite frankly they are still trying to figure out what they got. So at this point in time, we have outlined a timeframe they have suggested to us that they would like to award the license by the fall of this year which I think is more realistic in the fourth quarter of this year. They have provisions in statutes that require the buildings to be constructed within 18 months after the award of that license with the potential for up two, six month extensions. Given how others states have operated in introducing this industry, given how every state seems to be smarter than the last in rolling these things out, I'd expect that you're not going to see any facility online in Maryland until early 2011, at the earliest. There is no rule making. All of the stuff that has to done and in the news space, they really kind of don't know yet but they will know.

Okay and then in Kansas. Are there any changes there, anything that they could do to make you interested in that market again?

In the entire state or which region?

Developing the NASA in one of the available locations in Kansas.

Well I think the -- market remains attractive to sell, Central Kansas market remains attractive even in light of the current legislation. That has a new deadline set for April 1st and we're considering on that.

Great, thank you.

But I should say there are some reasons I think that Kansas may not be as appealing as, well you have seen the results. Nobody's actually signed up to go forward. So there are some problems there and again that's another one where we are completely engaged. We'll go forward to see the right opportunity, if not we're just not going to do it.

Okay, thanks.

Thank you for your question. Continuing on, our next question comes from the line of Celeste Brown from Morgan Stanley. Please go ahead, your line is open.

Hey guys, good morning.

Good morning.

I was pretty impressed with your margins in the fourth quarter, it seems like where you've mature properties you are really able to step down on the cost. How much additional room do you have to do that if things worsen, I guess time back to Felicia's question and how much additional flexibility do you have, thanks?

Celeste, obviously we have adjusted our cost structure quarterly with our business volumes. If things get worse, we certainly have more room to adjust our labor expense and other discretionary spending in the marketing areas. We feel right now, we've made a number of further adjustments in the fourth quarter to our expense structure to make it consistent with the business volumes in a post Lehman environment and we feel we're in a good position right now from a margin standpoint. If things get worse we do have some more flexibility to react.

With the full benefit of the changes you made in the fourth quarter apparent and the numbers where you see more in the first quarter?

I think you probably will see a little bit more in the first quarter. We had a fairly large reduction enforced in Lawrenceburg for example that just really occurred in the latter part of the fourth quarter that will have a positive effect in the first quarter.

Thank you.

Thank you for your question. Continuing on, our next question comes from Ryan Worst from Brean Murray. Please go ahead, your line is open. Ryan Worst - Brean Murray, Carret & Co: Thanks, good morning guys.

Good morning. Ryan Worst - Brean Murray, Carret & Co: I think Tim just might have answered one of my questions and that was in Lawrenceburg, could you talk about the fourth quarter trends and is anything like severance may have impacted the margins here in the fourth quarter?

Well we did have a fairly large severance expense in Lawrenceburg in the fourth quarter, it's almost a $1 million. That was taken up and that certainly will provide us an annualized cost savings well in excess of the severance expense. Which you will see running through the P&L in Lawrenceburg for all of 2009. So that was there and as I said before, Lawrenceburg continues your year-over-year to fulfill the affects of the Indiana racinos but in the first quarter if the weather has been good on weekends we are seeing some very strong business volumes on Fridays and Saturdays there, it's very encouraging to all of us to talk about this.

Yes, I mean we had a period this past weekend, the weather was good and we had lines in our casino in Lawrenceburg that lasted for three to four hours on Saturday with our parking capacity maxed out. So that was very encouraging. We hadn't seen that happen in a long time in the Lawrenceburg business. So, again as we get into February and March if the weather is good on weekends we're encouraged by what we saw in late January. Ryan Worst - Brean Murray, Carret & Co: Okay, any idea on what caused the change or do you think it was just some pent up demand because of the weather. And then how much in annual savings did you cut in Lawrenceburg. And then my final question is probably for Peter, it looks like you guys are pretty excited about Maryland, so I was just wondering what you saw in that environment that provides you with confidence that you could generate a good return given the tax rate there?

Let me answer the Lawrenceburg question, I'll turn it over to Peter for Maryland. Certainly Ryan we did believe there was some pent up demand for the weekend given the fact that mid-week we -- last week we got almost a foot of snow in the Lawrenceburg Southern Ohio market. And we've also have some new management in place in Lawrenceburg just thinking about marketing differently than we had in the past which is also producing some encouraging results. And to answer your other question about the annualized cost savings of the actions we took in the fourth quarter, its going to be some where between $3.5 million and $4 million of annualized cost savings. Ryan Worst - Brean Murray, Carret & Co: Okay, great, thanks.

Thank you.

Maryland is up, it is a trickier question. Look, we are not happily enthused about Maryland. I should say that and I don't mind saying this publicly because we've made an effort and Steve has spent a lot of time in Maryland. He tried early to make the case with a lot of politicians, it's not figured out. If you packed something more, you get less. And clearly there's a line along the curve where that occurs. We have seen states for example where you've got limited license presence with relatively high taxes but Pennsylvania might be an illustration where at least the operators can make a decent investment and make an adequate return. Maryland has gone over that course and at a 57% tax rate, there is nothing useful you can do. So to make it work there and by the way we are there simply because we got to be, its right next door. We need to be any place that there's a reasonable gaming opportunity and a reasonable opportunity for us to get a good return and the emphasis is always on returns. But I can tell you its going to take an extraordinary discipline to spend the absolute minimum amount of dollars you may set some new record. How low we go in expenditure there consistent with the law, to build an attractive facility. I mean, look you know what we're about but believe me, its going to be very, very, very tough to do that. We've all seen tons of operators get carried away with capital spends. That's not our style and Maryland is going to take that challenge to a new level. So how do you make it attractive, you are still in the customer service business, and yet get the kind of returns that you know we want. So, actually Maryland is a challenge. I think we're going to get there, I think we are doing a very nice facility. I think it will be successful and meet our performance targets. But it isn't going to be fun and it isn't going to be easy. How's that. Ryan Worst - Brean Murray, Carret & Co: Yeah, that's a good answer. What is the minimum spend required there?

Well, for every 500 slot machines you've got to spend $25 million in capital plus every 500 machines you also have to pay $3 million application fee. Ryan Worst - Brean Murray, Carret & Co: Okay, great. Thanks.

Thank you for your question sir. Our next question comes from the line of Dennis Forst of KeyBanc. Please go ahead sir. Your line is open.

Good morning. All the good questions have been taken so I just want to go through some of the busy (ph) part of the income statement if I could. Then these probably mainly for Bill, the lobbying costs that you alluded to in the headlines, that's in corporate expense Bill?

Yes.

Okay, so if we backed that out, is that a fairly good run rate going forward, something in the low teens per quarter for corporate expense?

Actually I think we're looking at something we'll -- we're probably more in the middle high teen in terms of our expectations on corporate overheads.

Okay.

For last year?

And then the other charges for the stock option charge to severance charge that were in the editorial, where were those?

Stock options chart was also in the corporate stock compensation.

And the million plus of severance, was that at Lawrenceburg or was that spread out among the properties?

A little less than a million was in Lawrenceburg, the rest was spread out at the other properties that's in the UK.

Okay. Yeah and then there was other income of $4.9 million, what did that consist of?

That's primarily currency translation. We've got a FAS 109 basically has a requirement to take it where we have a fairly large reserve for the disagreement with the changing government on the allocation of where we earned our management fees, the casino line up, and what you see there is the impact of the currency trend on the rate shift of the U.S. dollar with the Canadian dollar in the fourth quarter where we actually we've been taking a lot of hit through the year.

Yeah,0 saw that.

And this was the year fourth quarter went the other way. So it's basically a mark-to-market on that Canadian tax liability.

Okay, so we will continue to see that line go...

Go up and down. With somebody eventually some day we've been having this argument with the government since I have joined the company in 2001 so it's moving along at an incredible pace that is --. And I -- then we are hopeful that maybe this year or next year we might actually make some progress on that.

And to be fair to that -- let me squeeze in here Bill, its not actually up against the gradient government, it's the U.S. government to get the Canadian government and we're holding them back so...

Right.

How much of the income is U.S. versus Canadian and we have U.S. could get the Canadian government to agree on the allocation of the income and...

That's going to happen real soon I'm sure.

We've spent seven years in the making so far. So...

Next question has to do with the promotional fiasco in Pennsylvania and Harrisburg, how much was that and was that in Penn National Raceway's fourth quarter?

Dennis it was. It was an error in issuing free flop play to customers. Probably represented about $1 million EBITDA hit that's reflected in the fourth quarter of Penn National.

So that's not much. Okay. I thought it might have been higher and then lastly back to Bill on shares, how many shares are outstanding today common shares?

Well I think, probably just to get to the hunt, we haven't yet finished this in fourth quarter around the kind of treatment around the impairment. We expect next year diluted share count to be roughly 110 million.

Yes, that's in the press release.

Yes.

So how is that composed?

Outstanding shares versus dilutions. I believe the outstanding is around 78, as far as the dilution you have got to factor in maybe 79. As far as the dilution impact you have got obviously the fourth conservative transaction and the options to be demonstrated 79 and 110.

Okay and the Fortress transaction, do you go to the most conservative route and use the 28 million?

Yes.

And then so if we had 28, then dilution gets to 110. Okay I see that. Now why in the fourth quarter was it 19.9 million diluted shares deducted because there was a loss?

Well there is a weighted average -- well on the net loss, the generally accepted accounting principals were reviewed. If you recognize a net loss in the period you do not count your diluted shares in your calculation of earnings per share.

Oh, that's and all the Fortress shares were not outstanding the whole fourth quarter.

Well they are not outstanding, they are in the diluted share. They are actually in the preferred equity position, so they're not a common stock. So they get kind of diluted share count not on the basic.

Yeah.

So, those shares get pulled out because we had a net loss.

Yeah, but the reason it was 19.9 million and not the 27.7 was because they weren't all outstanding in the whole quarter. So the last piece of the puzzle closed in the fourth quarter.

Right. What we've got in the table is in the press release to reconcile our expected number against the guidance.

Yeah.

That had some weighted average calculations in there.

Got you. Okay. And then for the guidance I had one other question. Oh no, it had to do with the fourth quarter. If we backed out all the noise in the fourth quarter which we usually do, where do you think earnings per share were in the fourth quarter, what tax rate should we use for the fourth quarter?

That's a great question. The reality existing between all of the transactions that happened in the quarter, between the lobbying expenses, between the separation agreement, between the net loss, all of that stuff has completely distorted your effective tax rate. What we have done and that's the reason we've broke it into these three separate reconciliations because trying to bring it back to EPS apples-to-apples comparison is an academic exercise, its probably is beyond my intellectual capacity to make it happen. We actually had a table. I took it out because I think it was still misleading that it ends up with the results that doesn't really properly reflects reality. Reality is, we pretty much hit our number. From an operations perspective we hit the number, obviously that's my view on it after backing up the lobbying expenses. And then from an operations perspective, on the below the line issues you've got, these other issues are really non-recurring type item or are items that are really kind of annoying. So its my view that we are probably within a penny or two, if I could figure out to get a reconciliation that I could put on paper that would show that. That's what my intuition is for that.

If I wanted to just do a simple exercise and back out the impairment and the lobbying charges and then apply a 45% tax rate, is that a reasonable way to look at it?

It's better than any other way.

Okay. Good, thanks a lot.

Thank you. And our next question comes from the line of Steve Wieczynski from Stifel Nicolaus. Please go ahead, your line is open.

Yeah, good morning guys. Just first in the release you basically said it sounds like it might delay or cancel the hotel tower in New Mexico. Any thoughts on timing there and basically your thoughts behind that?

Well basically the issue there is what we're doing as we've been looking at what the construction cost and we're also -- we have some views in terms of what the returns are. At the current numbers that are coming back from the construction department, it doesn't hit our thresholds for an adequate return and we won't do the projects, more things about Penn as we have been very fiscally disappointed and are now making sure that we don't -- not that we don't make mistakes but we don't start off normally making mistakes. We maybe sometimes end up with the results different than what we expected but we don't start a project knowing that we got a problem. So, I got a favorite line that I have used for many years in the construction business that is, if you can't make a pencil and paper, it's sure that isn't pencil. Or you actually go and build it. It only gets worse. So it is never good news. I've been making up numbers but the $20 million is probably a slow project of 30 to 35 and not so cool. So we would love to have a hotel there and we think it will be a tremendous plus for the properties for a whole lot of reasons. There clearly is demand in the market. I think practically we are going to go back and take another look at design and look at cost and maybe the method of construction happen to be an area by the way with no workers, no contractors, no materials. It's just sort of an odd place to kind of develop a project like this. So we saw the same interest, we are just going to get the cost to work.

And we are looking at the program right now. It is clearly not a dead project but we obviously had to put a sharper pencil to it and see if we make it work and we'll probably have something more definitive later this year on how that project is going to proceed.

Okay, got you and last question basically, if you look at just where your slot has been for 2009, do you view this as an opportunity I guess, I mean just you are so much better positioned and allow your competitors to keep their floor's a little bit fresher and the opportunity to potentially take market share?

Well, you know, certainly there are some competitors out there that have very tight constraints on capital. We do think we're going to continue to refresh our floor with new products, as it gets introduced and as the consumer reacts to it. The effect of that though, it takes a couple of years to realize. It's not going to be something I think you should build in to any of our numbers in 2009 because we are only going to refresh typically 1/6th to 1/7th of our floor which is typically what we have done over the years. I do think as competitors continue to have tight constraints on capital and markets were up against them, overtime it will have an effect on revenues in those businesses but it takes a couple of years to fully develop.

Okay, got you. Thanks guys.

I will just add on. Let's put it this way. If it doesn't, we'll give you how much we have spent on that.

Thank you gentlemen. Continuing on, our next question comes from the line of Larry Havarti (ph) from Gameco. Please go ahead. Your line is open.

Hi, I have quick questions on Pennsylvania and Nevada. You guys are doing pretty well in Pennsylvania, what do you think the potential is on EBITDA margins there close to 20 in a terrible environment and on a subsidiary basis if someone could wave the magic wand and you would swap your property for the Las Vegas Sands property would you do that? And how much of -- in Pennsylvania how much of that revenue is pure gaming and how much in non-gaming?

In Pennsylvania at our racino operation the revenues are about 80% gaming. Larry, I didn't hear the first part of your Pennsylvania question?

How high can the EBITDA margins go, they are pretty good considering the 20 -- 53% tax rate?

Yes, I think once we get the place fully stabilized and continue to grow our business, we're going to get close to 20% EBITDA margins in that business.

But that would probably be the peak at that tax rate?

Yes, I think short term we can get 20% of business volumes grow, it could go slightly north of that.

And would you swap for Bethlehem if you could?

I think that's sort of one of those hypothetical questions. No, we think that was a great property, we are right at the center of the state. We don't have a lot of competitors around us. I mean their problem is frankly they are spending too much money. I mean it's going to be a great facility, they have got a nice market to grow from no I wouldn't do it. And I think they are going to be very hard pressed frankly to get the kind of returns that they need on their capital spend.

We believe the horse racing operation which I know near and dear to Peter's heart.

I want to go in to Nevada for a second based on your comments about the banks. You have got an interesting political situation in Nevada where you have thousands of jobs in this industry and clearly MGM and Las Vegas Sands in financial extremists both of them for various infantry reasons and not the least of which are money they are spending in Nevada and you got Harry Reed, isn't Harry at the end of the day just going to really get on top of these banks to say hey guys, lets win -- send money to these guys. We just don't want to throw these tens of thousands of people out of work. We have already got stationed in bankruptcy. And then just your observers of this and it's not unimportant for your business, kind of a cosmic question?

Yeah, I don't know how much ability these guys have force that. I suppose at some level you somehow can get some nice spending directly to the bank that's got a problem there may be but I don't -- we kind of assume that it's a pretty straight up game and the things we are going to play out the way they're going to play out.

Just like Illinois.

No, not Illinois.

Louisiana. Okay, thanks a lot guys.

Thanks Larry.

Thank you gentlemen. Our next question comes from the line of Ken Howe (ph) from KeyBanc. Please go ahead your line is open.

Hi, good morning. I know Penn is looking for some acquisitions, probably pretty open to any opportunities in every market. Can you just kind of talk about what type of personality property you're looking for may be in Vegas and what multiple ranges you would deem attractive?

You know, actually we can't say on a public call all the things that we're thinking about. Obviously that wouldn't be wise but I'd love to give you the perfect answer but I don't think we can. We've been real clear, we would love to get strip property, but suffice it to say that we believe that these selling multiples now just don't reflect the current reality. And I think we're just at the beginning of thousands and thousands and thousands of new rooms and openings and a further impact on this market over the next couple of years that is going to be profound. Now where is it all going to settle out, I mean how do you make a purchase. I mean kick any operator there and you know who they are. If they are going to offer a property today and say well look we did it. That's great but how do you buy into X when you know its going to be X minus. It would be very wrong. I don't know how to do that. And in any case if we make the case that we ought to, any seller is likely to say well, I mean I'm not going to sell for something you know the drill. I think we have to let this play out longer, in fact we've seen where it is, seen where it goes. It's just too early now to for us to even seriously think about doing anything. But I think it is clearly and I think pretty much only, pretty much only in a strip property. Something that will benefit our current customer base around United States and Canada.

Okay, great. Thanks.

Thank you sir. We now have a follow up from the line of Larry Klatzkin. We had to close that line unfortunately we are having multiple feedback from Mr. Klatzkin's line. We are continuing our next with David Forst from KeyBanc. Please go ahead sir.

I had a follow up. I was looking at your interest income line for the fourth quarter, $6.5 million and can I assume that the interest on the high yield bonds portfolio is included in that Bill.

Yes.

Okay, and you accrue that interest or you take it in when it's paid by the bonds?

We accrue.

Accrue, and is that a fairly decent run rate then for 2009.

Yes, but it also includes our amazing interesting thing we are getting off to 600 million in cash and that's in treasury so...

Yes, are you paying the treasury?

Very funny.

Yeah, okay. Thank you.

We're holding that money.

Thank you Mr. Forst for your question. Gentlemen I'll turn it back to you now to continue for your concluding remarks.

Okay, well hopefully this has been helpful to all of you. I think you know we got the expertise to be frank and as open as all out that's to be with you and let's see how things progress each quarter-to-quarter these days, and we look forward to seeing you next quarter. Thank you.

Thank you, sir. Ladies and gentlemen that does conclude the conference call for today. We thank you all for your participation and announce that you please disconnect. Thank you once again, have a great day.