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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number 333-88679

(Registrants' telephone number, including area code) (318) 220-0711

        Indicate by check mark whether each of the Registrants (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that each of the Registrants was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý        No o

        Indicate by check mark whether each of the Registrants is an accelerated filer (as defined in Rule 12-b-2 of the Exchange Act). Yes ý        No o

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Introductory Notes to Condensed Consolidated Financial Statements

        Hollywood Casino Shreveport ("HCS") is a general partnership registered in the state of Louisiana. HCS developed, owns and operates a riverboat gaming complex located in Shreveport, Louisiana, approximately 180 miles east of Dallas, Texas (the "Shreveport Casino"). The Shreveport Casino was completed and opened on December 20, 2000. Prior to opening, HCS had no operating activities other than development, financing and construction activities with respect to the Shreveport Casino. The Shreveport Casino consists of a three-level riverboat casino with approximately 1,423 slot machines, 64 table games and seven poker stations and a 403-room, all suite, art deco style hotel. The project also includes approximately 45,000 square feet of restaurant and entertainment facilities developed by a third party.

        The partners in HCS consist of the following companies: HCS I, Inc. and HCS II, Inc., both Louisiana corporations and wholly owned subsidiaries of HWCC-Louisiana, Inc. ("HCL") and Shreveport Paddlewheels, L.L.C. ("Paddlewheels"), a Louisiana limited liability company. HCS I, Inc. has an effective 99% interest in HCS and is its managing general partner. HCS II, Inc. has an effective 1% interest in HCS. Paddlewheels has a residual interest in the event that the project is ever sold amounting to 10% plus any capital contributions made by Paddlewheels to HCS or otherwise credited to their account and also receives an amount equal to 1% of "complex net revenues", as defined, of the Shreveport Casino. HCL is a Louisiana corporation which is ultimately wholly owned by Hollywood Casino Corporation ("HCC").

        In July 1999, HCS formed a new, wholly owned subsidiary, Shreveport Capital Corporation ("Shreveport Capital"), a Louisiana corporation. HCS contributed $1,000 of capital to Shreveport Capital. Shreveport Capital was formed for the purpose of being a co-issuer with respect to $150,000,000 of 13% First Mortgage Notes with contingent interest (the "First Mortgage Notes") due 2006 and the 13% Senior Secured Notes issued in June 2001. Shreveport Capital has not and is not expected to have any operating activities, acquire any assets or incur any other liabilities. Accordingly, separate financial statements of Shreveport Capital are not included herein because management has determined that such information is not material to investors.

        Equity contributions from HCL and Paddlewheels provided the initial $50,000,000 of construction financing for the Shreveport Casino. During August 1999, HCS successfully completed the issuance of $150,000,000 of 13% First Mortgage Notes with contingent interest due 2006. These sources of funds, together with $30,000,000 of furniture, fixture and equipment financing, provided the initial funding for the project.

        The principal executive offices of HCS and Shreveport Capital are located at 451 Clyde Fant Parkway, Shreveport, Louisiana 71101, telephone (318) 220-0711. The principal executive offices of HCL are located at Two Galleria Tower, Suite 2200, 13455 Noel Road, Dallas, Texas 75240, telephone (972) 392-7777. The website for the Shreveport Casino is www.hollywoodcasinoshreveport.com.

        The condensed consolidated financial statements as of March 31, 2003 and for the three month periods ended March 31, 2003 and 2002 have been prepared by HCS and HCL without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the consolidated financial positions of HCS and HCL as of March 31, 2003 and the results of their operations and cash flows for the three month periods ended March 31, 2003 and 2002.

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        Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in HCS and Shreveport Capital's 2002 Annual Report on Form 10-K. The Form 10-K and other filings with the Securities and Exchange Commission will be provided upon request without charge from the offices of HCL as soon as reasonably practicable after such reports are electronically filed with the Commission. Such filings are not presently available at the Shreveport Casino's website as HCS is a partnership and has no public shareholders.

        Management believes that activity at the Shreveport Casino is modestly seasonal, with stronger results expected during the first and third quarters. Consequently, the results of operations for the three month period ended March 31, 2003 are not necessarily indicative of the operating results to be reported for the full year.

        As more fully explained in Note 2 of the Notes to Condensed Consolidated Financial Statements, HCC (the ultimate parent of HCS, HCL and Shreveport Capital), Penn National Gaming, Inc., a Pennsylvania corporation ("Penn National"), and P Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Penn National, entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 7, 2002, pursuant to which HCC became a wholly owned subsidiary of Penn National through the merger of P Acquisition Corp. with and into HCC on March 3, 2003.

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HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Note 2)

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.

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HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Note 2)

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.

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HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Note 2)
(Unaudited)

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated financial statements.

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HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN PARTNERS' DEFICIENCY (Notes 1 and 2)
(Unaudited)

For the Periods from January 1, 2003 Through February 28, 2003 (Predecessor Basis)
and From March 1, 2003 Through March 31, 2003 (Successor Basis)

(1)

Hilton New Orleans Corporation and New Orleans Paddlewheels, Inc. withdrew as partners and transferred their interests to HWCC-Louisiana, Inc., Sodak Louisiana, L.L.C. and Shreveport Paddlewheels, L.L.C. during September 1998. At the time of such transfer, all assets and liabilities of the joint venture had been distributed to the withdrawing partners with the exception of a $5,000,000 obligation to the City of New Orleans (see Notes 1 and 2).

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.

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HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 2)
(Unaudited)

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated financial statements.

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HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1)   Organization, Business and Basis of Presentation

        Hollywood Casino Shreveport ("HCS") is a general partnership registered in the state of Louisiana. The original partnership agreement was amended on September 22, 1998 to include as partners in what is now referred to as HCS the following companies: HWCC-Louisiana, Inc. ("HCL"), a Louisiana corporation which is ultimately wholly owned by Hollywood Casino Corporation ("HCC"); Sodak Louisiana, L.L.C. ("Sodak"), a Louisiana limited liability company; and Shreveport Paddlewheels, L.L.C. ("Paddlewheels"), a Louisiana limited liability company. The general partnership was originally formed in May 1992 for the purpose of developing and operating a riverboat casino in New Orleans, Louisiana. Originally named Queen of New Orleans at the Hilton Joint Venture ("QNOV"), the partnership was 50%-owned by Hilton New Orleans Corporation ("Hilton") and 50%-owned by New Orleans Paddlewheels, Inc. ("NOP"). Hilton and NOP are collectively referred to herein as the "former partners." QNOV's riverboat operations in New Orleans commenced in February 1994 and were discontinued in October 1997.

        During October 1996, QNOV received approval from state gaming authorities to relocate its license to operate to the City of Shreveport, Louisiana, approximately 180 miles east of Dallas, Texas. Subsequent to receiving approval to relocate, QNOV made the decision in 1997 not to conduct gaming operations in Shreveport. The former partners sought to transfer the license to operate in Shreveport to another interested party. Under Louisiana gaming regulations, the license to operate a riverboat gaming operation is not transferable; however, the ownership of an entity licensed to operate is transferable, subject to the approval of the Louisiana Gaming Control Board (the "LGCB"). Accordingly, the transfer of the license to HCL, Sodak and Paddlewheels to operate in Shreveport was structured as the acquisition of the interests of the former partners of QNOV. The former partners disposed of QNOV's assets other than its license to operate and satisfied all but one of its obligations so that when the former partners withdrew on September 22, 1998, QNOV's only asset was its license to operate in Shreveport (which had no recorded value) and its only liability was a $5,000,000 obligation to the City of New Orleans. The $5,000,000 obligation was paid by HCS in August 1999 upon the issuance of $150,000,000 of 13% First Mortgage Notes with contingent interest due 2006 (the "First Mortgage Notes") (Note 3(a)).

        Upon admission of the new partners, HCS proceeded with entirely new plans to develop, own and operate a riverboat gaming complex to be constructed in Shreveport (the "Shreveport Casino"). The Shreveport Casino was completed and opened on December 20, 2000. Prior to opening, HCS had no operating activities other than development, financing and construction activities with respect to the Shreveport Casino. The Shreveport Casino consists of a three-level riverboat dockside casino with approximately 1,423 slot machines, 64 table games and seven poker stations and a 403-room, all suite, art deco style hotel. The project also includes approximately 45,000 square feet of available restaurant and entertainment space developed by a third party lessee (Note 6).

        Riverboat gaming operations in Louisiana are subject to regulatory control by the LGCB. HCS's current license to operate the Shreveport Casino expires on October 15, 2004.

        It was originally anticipated that HCS would develop the Shreveport Casino with each of HCL and Sodak having a 50% interest in the development and subsequent operations. Once operations commenced, Paddlewheels was to have a residual interest in the event that the project was ever sold amounting to 10% plus any capital contributions made by Paddlewheels to HCS or otherwise credited to their account. On March 31, 1999, HCL entered into a definitive agreement with Sodak's parent to acquire Sodak for the $2,500,000 Sodak had contributed to HCS, with $1,000 paid at closing and the

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remainder paid by HCL in June 2001. The revised structure of the partnership was approved by the LGCB on April 20, 1999. As a result of the acquisition, HCL obtained an effective 100% ownership interest in HCS with Paddlewheels retaining their 10% residual interest. During July 1999, Sodak was merged into HCL.

        Also during July 1999, HCL formed two new, wholly owned subsidiaries, HCS I, Inc. and HCS II, Inc., both Louisiana corporations. HCL contributed $1,000 of capital to each entity, along with 99% of its interest in HCS to HCS I, Inc. and the remaining 1% to HCS II, Inc. In addition, the HCS joint venture agreement was amended and restated on July 21, 1999, to reflect, among other things, the admission of HCS I, Inc. and HCS II, Inc. as partners of HCS and the withdrawal of HCL as managing partner of HCS. As a result, HCS I, Inc. now has an effective 99% interest in HCS and has become its managing general partner. HCS II, Inc. now has an effective 1% interest in HCS. Paddlewheels retained its 10% residual interest in HCS. The revised partnership structure was approved by the LGCB on July 20, 1999. HCL contributed an additional $300,000 to HCS through HCS I, Inc. and HCS II, Inc. in July 1999. Once HCS secured financing for the Shreveport Casino (Note 3(a)), HCL contributed an additional $43,700,000 to HCS through HCS I, Inc. and HCS II, Inc. HCL also loaned $1,000,000 to Paddlewheels which Paddlewheels contributed to HCS. HCL made additional capital contributions to HCS through HCS I, Inc. and HCS II, Inc. of $8,675,000 in May 2001 and $5,900,000 in December 2000. Capital contributions from HCC, HCL's parent, were used by HCL to make the capital contributions to its subsidiaries and the loan to Paddlewheels.

        Additionally, in July 1999, HCS formed a new, wholly owned subsidiary, Shreveport Capital Corporation ("Shreveport Capital"), a Louisiana corporation. HCS contributed $1,000 of capital to Shreveport Capital. Shreveport Capital was formed for the sole purpose of being a co-issuer with respect to the First Mortgage Notes and subsequently became a co-issuer with respect to the 13% Senior Secured Notes issued in June 2001. Shreveport Capital has not and is not expected to have any operating activities, acquire any assets or incur any other liabilities. Accordingly, separate financial statements of Shreveport Capital are not included herein because management has determined that such information is not material to investors.

        In November 2002, HCL issued additional shares of its common stock to HWCC-Holdings, Inc. ("Holdings"), a wholly owned subsidiary of HCC which was not subject to certain restrictions on making investments under HCC's then existing loan agreements. The initial stock purchase in the amount of $250,000, together with subsequent capital contributions of $1,831,000 in December 2002, were contributed by Holdings through HCS I, Inc. and HCS II, Inc. to HCS for working capital needs. During the three month period ended March 31, 2003, an additional $800,000 was contributed by Holdings through HCS I, Inc. and HCS II, Inc. to HCS.

        The accompanying condensed consolidated financial statements include the accounts of HCS and its wholly owned subsidiaries, Shreveport Capital and HCS-Golf Course, LLC ("Golf"). All significant intercompany balances have been eliminated in consolidation. Golf, a Delaware corporation, was formed in 2000 to own an eventual 50% interest in Shreveport Golf Company, a joint venture formed to develop and operate a golf course to be used by patrons of the Shreveport Casino. Golf's ownership interest in Shreveport Golf Company was accounted for under the equity method. Given the difficult market conditions, the partners in the golf course provided notice in April 2002 that they were terminating the lease for the land on which the golf course would have been constructed. Accordingly, HCS provided a

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reserve of $313,000 during April 2002 to write down its investment in the limited liability corporation to a zero value. The partners terminated the joint venture effective as of September 30, 2002.

        HCS estimates that a significant amount of the Shreveport Casino's revenues are derived from patrons living in the Dallas/Ft. Worth and east Texas areas. The Shreveport Casino faces intense competition from other riverboat gaming operations in Shreveport and Bossier City, Louisiana and management believes that this competition will continue in the future.

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

        The condensed consolidated financial statements as of March 31, 2003 and for the three month periods ended March 31, 2003 and 2002 have been prepared by HCS without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these condensed consolidated financial statements contain all adjustments (consisting of purchase price adjustments as more fully described in Note 2 and other normal recurring adjustments) necessary to present fairly the consolidated financial position of HCS as of March 31, 2003 and the results of its operations and cash flows for the three month periods ended March 31, 2003 and 2002.

        HCC (the ultimate parent of HCS, HCL and Shreveport Capital), Penn National Gaming, Inc., a Pennsylvania corporation ("Penn National"), and P Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Penn National, entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 7, 2002, pursuant to which HCC became a wholly owned subsidiary of Penn National through the merger of P Acquisition Corp. with and into HCC on March 3, 2003 (Note 2).

Liquidity Issues—

        The terms of the merger agreement entered into by HCC and Penn National on August 7, 2002 restricted HCC, or any of its subsidiaries, from making any additional capital contributions to HCS. Subsequent to entering into the merger agreement, HCC received approval from Penn National to contribute to HCS any funds necessary to make the February 1, 2003 interest payments due with respect to the First Mortgage Notes and Senior Secured Notes. With Penn National's approval, Holdings contributed an aggregate of $800,000 during 2003 to assist HCS in making its February 1, 2003 interest payments.

        The terms of the indentures for the First Mortgage Notes and Senior Secured Notes provide that, upon consummation of the merger, HCS must offer to purchase any and all of such notes at a price of 101% of their face amount plus accrued interest (the "Repurchase Offer"). Penn National announced on February 24, 2003 that it had commenced the solicitation of consents from holders of record of the notes on February 21, 2003 to waive the Repurchase Offer and related provisions. Penn concurrently announced that it did not intend to, or to permit any of its subsidiaries to, provide financing or credit support to enable any of them or HCS to make the Repurchase Offer. On March 3, 2003, Penn National announced that the requisite number of consents from holders of the First Mortgage Notes and Senior Secured Notes were not obtained in the solicitation.

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        On March 14, 2003, HCS received notice from a representative of the holders of the First Mortgage Notes and Senior Secured Notes that HCS had failed to make the Repurchase Offer within ten days of the merger as required under the respective governing indentures. Pursuant to these indentures, HCS has sixty days from receipt of such notice to cure such failure or an Event of Default, as defined under each of the indentures, will have occurred.

        If HCS does not reach some arrangement with the requisite number of holders of the First Mortgage Notes and Senior Secured Notes to cure or otherwise waive HCS's requirement to make the Repurchase Offer, then HCS would likely be required to file for protection under the federal bankruptcy code.

        Even in the event that HCS's failure to launch the required Repurchase Offer is either waived by the noteholders or otherwise cured, HCS has experienced net losses and has a significant deficiency in its partners' capital. Accordingly, management believes that HCS's existing cash and cash flow from operations may not be sufficient to fund its operating and capital needs for the next 24 months. In such event, HCS would require additional capital contributions or other financial support from Penn National. Penn National has not publicly stated its plans or intentions for HCS after the merger; accordingly, management of HCS can make no assurances that Penn National will provide additional liquidity to HCS. All of these matters raise substantial doubt about HCS's ability to continue as a going concern. Management is currently in the process of developing its plans with respect to these matters.

(2) Acquisition of Hollywood Casino Shreveport

        Effective with the close of business on February 28, 2003, Penn National completed the acquisition of HCC and its subsidiaries, including HCS. Penn National "pushed down" its basis in HCS in accordance with Staff Accounting Bulletin No. 54, "Push Down Basis of Accounting Required in Certain Limited Circumstances". Therefore, the accompanying condensed consolidated financial statements for the period following the acquisition ("Successor Period") includes management's best estimate of the purchase price adjustments required in accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"). SFAS 141 requires that assets and liabilities of the acquired entity be reflected at their fair values. Therefore, the assets and liabilities of HCS are recorded on the same basis as Penn National. The accompanying condensed consolidated financial statements for periods prior to the acquisition ("Predecessor Period") reflect the historical cost basis of HCS's assets and liabilities.

        The purchase price adjustments reflected on the accompanying Successor Basis condensed consolidated financial statements include revaluing HCS's property and equipment to their estimated fair market values based on an independent appraisal obtained by Penn National. Such appraisal resulted in a reduction of the recorded net book value of property and equipment as of the date of the merger in the amount of $38,800,000. Deficiencies in HCS's partners' capital accounts (including the carryover deficiency of the former partners) were adjusted by $37,165,000 to a zero basis as of the merger date. No goodwill was recorded in connection with the merger. As a result of HCS's failure to make the Repurchase Offer and other liquidity matters (Notes 1 and 3), a valuation allowance in the amount of $69,544,000 was established with respect to the First Mortgage Notes and Senior Secured Notes to reduce their carrying amount to management's estimate of their fair market value. Management's estimate was based on the fair market values of the assets and liabilities assumed. In addition, a

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valuation allowance in the amount of $6,420,000 was established at the merger date to fully reserve the management fee payable to a subsidiary of HCC (Note 5). Such management fee is subordinated in payment to the First Mortgage Notes and Senior Secured Notes.

        The accompanying Successor Basis condensed consolidated statement of operations also includes certain reclassifications made by Penn National to conform the post-merger statement of operations to the same presentation used by other properties owned and operated by Penn National. The accompanying Predecessor Basis condensed consolidated statements of operations do not include such reclassifications. In addition, depreciation of property and equipment for the period from March 1, 2003 through March 31, 2003 has been adjusted to reflect the revised estimates of fair market value established as a result of the aforementioned appraisal.

(3) Long-term Debt

        As discussed in Note 1—"Liquidity Issues", following consummation of the merger of HCC with Penn National, HCS failed to make the Repurchase Offer as required under the respective indentures to the First Mortgage Notes and Senior Secured Notes and was unable to obtain the requisite number of consents from holders of the notes to waive the Repurchase Offer and related provisions. On March 14, 2003, HCS received notice from a representative of the holders of the First Mortgage Notes and Senior Secured Notes that HCS had failed to make the Repurchase Offer within ten days of the merger as required under the indentures. Pursuant to the indentures, HCS has sixty days from receipt of such notice to cure such failure or an Event of Default, as defined under each of the indentures, will have occurred. If HCS does not reach some arrangement with the requisite number of holders of the First Mortgage Notes and Senior Secured Notes to cure or otherwise waive HCS's requirement to make the Repurchase Offer, then HCS would likely be required to file for protection under the federal bankruptcy code.

        Long-term debt at March 31, 2003 and December 31, 2002 consists of the following:

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(a)

In August 1999, HCS and Shreveport Capital issued the First Mortgage Notes. Fixed interest on the First Mortgage Notes at the annual rate of 13% is payable on each February 1 and August 1. In addition, contingent interest accrues and is payable on each interest payment date subsequent to the opening of the Shreveport Casino. The amount of contingent interest is equal to 5% of the consolidated cash flow of HCS for the applicable period subject to a maximum contingent interest of $5,000,000 for any four consecutive fiscal quarters. Contingent interest amounting to $260,000 and $324,000 was incurred during the three month periods ended March 31, 2003 and 2002, respectively. Accrued contingent interest amounted to $1,482,000 and $1,222,000 at March 31, 2003 and December 31, 2002, respectively. Contingent interest may not be paid to the extent that payment would result in certain financial coverage ratios not being met. Consequently, no contingent interest has been paid by the Shreveport Casino since its opening.

The First Mortgage Notes are secured by, among other things, (1) a first priority security interest in substantially all of the assets that comprise the Shreveport Casino other than certain assets secured by the 13% Senior Secured Notes (Note 3(b)) and up to $6,000,000 in assets that may be acquired with future equipment financing; (2) a collateral assignment of the Shreveport Casino's interest in the principal agreements under which it was constructed and is currently operated and managed; and (3) a collateral assignment of certain licenses and permits with respect to the operation and management of the Shreveport Casino. In addition, the First Mortgage Notes are guaranteed on a senior secured basis by HCL, HCS I, Inc. and HCS II, Inc. (collectively, the "Guarantors"). Such guarantees are secured by a first priority secured interest in substantially all of the Guarantors' assets, including a pledge of the capital stock of HCS I, Inc. and HCS II, Inc. and their partnership interests in HCS.

The First Mortgage Notes may be redeemed at any time on or after August 1, 2003 at 106.5% of the then outstanding principal amount, decreasing to 103.25% and 100% on August 1, 2004 and 2005, respectively.

The indenture to the First Mortgage Notes contains various provisions limiting the ability of HCS to borrow money, pay distributions on its equity interests or prepay debt, make investments, create liens, sell its assets or enter into mergers or consolidations (see Note 1—"Liquidity Issues"). In addition, the indenture restricts the ability of the Guarantors and Shreveport Capital to acquire additional assets, become liable for additional obligations or engage in any significant business activities.

(b)

In June 2001, HCS and Shreveport Capital issued $39,000,000 of 13% Senior Secured Notes, with contingent interest, due August 2006 (the "Senior Secured Notes"). The Senior Secured Notes were issued at an initial premium of $1,170,000 to yield interest at an effective rate of 12.21% per annum. Fixed interest on the Senior Secured Notes at the annual rate of 13% is payable on each February 1 and August 1. In addition, contingent interest accrues and is payable on each interest payment date. The amount of contingent interest is equal to 1.3% of the consolidated cash flow of HCS for the applicable period subject to a maximum contingent interest of $1,300,000 for any four consecutive fiscal quarters. Contingent interest amounting to $68,000 and $81,000 was incurred during the three month periods ended March 31, 2003 and 2002, respectively. Accrued contingent interest amounted to $365,000 and $297,000 at March 31, 2003 and December 31, 2002,

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respectively. Contingent interest may not be paid to the extent that payment would result in certain financial coverage ratios not being met. Consequently, no contingent interest has been paid by the Shreveport Casino since its opening. Proceeds from the Senior Secured Notes were used, in part, to retire HCS's then outstanding capital lease obligation with the remainder available for working capital purposes.

Under the terms of certain intercreditor collateral agreements, the Senior Secured Notes are secured by, among other things, (1) a security interest in certain furniture, fixtures and equipment acquired prior to the opening of the Shreveport Casino for $30,000,000 and (2) a security interest on an equal basis in up to $10,000,000 of the collateral which secures the First Mortgage Notes (Note 3(a)). The furniture, fixtures and equipment in (1) above were obtained with the proceeds from the capital lease obligation retired with a portion of the proceeds from the Senior Secured Notes.

The Senior Secured Notes may be redeemed on the same terms and conditions as the First Mortgage Notes (Note 3(a)). The indenture to the Senior Secured Notes also carries substantially the same limitations, covenants and restrictions as those included in the indenture to the First Mortgage Notes (see Note 3(a) and Note 1—"Liquidity Issues").

Scheduled payments of long-term debt as of March 31, 2003 are set forth below:

(4) Operating Leases

        In May 1999, HCS entered into a ground lease with the City of Shreveport for the land on which the Shreveport Casino was built. The term of the lease began when construction commenced and will end on the tenth anniversary of the date the Shreveport Casino opened. HCS has options to renew the lease on the same terms for up to an additional forty years. The lease may be further renewed after that time at prevailing rates and terms for similar leases. The City of Shreveport may terminate the lease as a result of, among other things, a default by HCS under the lease. HCS may terminate the lease at any time if the operation of the Shreveport Casino becomes uneconomic. Base rental payments under the lease were $10,000 per month during the construction period. The base rental amount increased to $450,000 per year upon opening and continues at that amount for the remainder of the initial ten-year lease term. During the first five-year renewal term, the base annual rental will be $402,500. Subsequent renewal period base rental payments will increase by 15% during each of the next four five-year renewal terms with no further increases. In addition to the base rent, HCS pays monthly percentage rent of not less than $500,000 per year equal to 1% of monthly adjusted gross revenues and the amount, if any, by which monthly parking facilities net income exceeds the parking income credit, as all such terms are defined in the lease agreement. Ground lease rentals amounted to $495,000 and $526,000, respectively, for the three month periods ended March 31, 2003 and 2002, including percentage rentals amounting to $352,000 and $383,000, respectively. In addition, the ground lease agreement calls for payments in lieu

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of admission fees to the City of Shreveport and payments to the local school board amounting to 3.225% and .5375% of Net Gaming Proceeds (as defined in the agreement), respectively. These additional charges amounted to $1,318,000 and $1,455,000 during the three month periods ended March 31, 2003 and 2002, respectively.

        HCS also leases office, parking and warehouse space and certain equipment under lease agreements accounted for as operating leases. The lease agreements expire at various dates through 2015. Many of the lease agreements are cancellable or have initial terms of one year or less. A number of the leases contain automatic renewal options unless notice of termination is given and some include contingent rental payments based on a specified level of use; such contingent rental payments have not been significant. Total rental expense for such leases amounted to $626,000 and $622,000, respectively, during the three month periods ended March 31, 2003 and 2002.

        Future minimum lease payments as of March 31, 2003 under operating lease obligations (other than the ground lease) having an initial or remaining noncancellable term in excess of one year are as follows:

(5) Transactions with Affiliates

        The operations of the Shreveport Casino are managed by HWCC-Shreveport, Inc. ("Shreveport Management"), a wholly owned subsidiary of HCC, under the terms of a management agreement. The management agreement became effective when the LGCB approved the development of the Shreveport Casino and will remain in effect as long as HCS holds its license, unless sooner terminated in accordance with its terms. Under the terms of the management agreement, HCS incurs basic and incentive management fees to Shreveport Management for its services. The basic fee is equal to 2% of gross revenues, as defined in the agreement, from the operations of the Shreveport Casino. The incentive fee is equal to the sum of (1) 5% of earnings before interest, taxes, depreciation and amortization ("EBITDA"), as defined in the agreement, in excess of $25,000,000 and up to $35,000,000; (2) 7% of EBITDA in excess of $35,000,000 and up to $40,000,000; and (3) 10% of EBITDA over $40,000,000. In addition, HCS reimburses Shreveport Management for expenses incurred in connection with services provided under the management agreement. Total management fees incurred amounted to $703,000 and $765,000, respectively, for the three month periods ended March 31, 2003 and 2002 and are included in general and administrative expenses on the accompanying condensed consolidated statements of operations. Total management fees incurred at March 31, 2003 and December 31, 2002 amounted to $6,664,000 and $5,961,000, respectively. Such fees, reduced by a valuation allowance of $6,420,000 at March 31, 2003 (Note 2), are included in due to affiliates on the accompanying condensed consolidated balance sheets. Under the indentures governing the First Mortgage Notes and Senior Secured Notes

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(Note 3), management fees are subordinated to all payments under the First Mortgage Notes and Senior Secured Notes and may not be paid to the extent that their payment would result in certain financial coverage ratios not being met. Consequently, no management fees have been paid by the Shreveport Casino since its opening.

        The Shreveport Casino's casino system software was provided and installed by Advanced Casino Systems Corporation ("ACSC"). Prior to March 19, 2002, ACSC was a wholly owned subsidiary of Greate Bay Casino Corporation ("Greate Bay") which had certain officers, directors and principal shareholders in common with HCC. On March 19, 2002, GBCC completed the sale of ACSC to Bally Gaming, Inc., a wholly owned subsidiary of Alliance Gaming Corporation, an unaffiliated third party. Costs incurred in connection with the installation of the software system amounting to $2,626,000 are included in operating equipment on the accompanying condensed consolidated balance sheets at both March 31, 2003 and December 31, 2002. The Shreveport Casino also had a maintenance and support agreement with ACSC effective as of October 12, 2000 which provided for a monthly fee of $11,000 commencing 90 days after installation of ACSC's casino system plus additional services at rates charged by ACSC to third parties. HCS incurred charges and fees to ACSC amounting to $47,000 during the period prior to March 19, 2002. A new maintenance and support agreement was entered into with ACSC's new owners effective March 19, 2002.

        HCS has also entered into a Marine Services Agreement with Paddlewheels to provide certain marine services for so long as Paddlewheels remains a joint venture partner in HCS. The Marine Services Agreement became effective on September 22, 1998 and, in addition to the reimbursement to Paddlewheels for its direct expenses incurred, if any, HCS pays a monthly fee of $30,000 effective with the opening of the Shreveport Casino. HCS expensed $90,000 during each of the three month periods ended March 31, 2003 and 2002 under the agreement. Unpaid charges of $30,000 are included in due to affiliates on the accompanying condensed consolidated balance sheets at both March 31, 2003 and December 31, 2002.

(6) Commitments and Contingencies

        For so long as it remains a joint venture partner in HCS, Paddlewheels receives, among other things, an amount equal to 1% of "complex net revenues", as defined, of the Shreveport Casino, which approximates net revenues, in exchange for the assignment by Paddlewheels and its affiliates of their joint venture interest in HCS to HCL and Sodak. Allocations to Paddlewheels of such amounts are reflected as partnership distributions to HCS I, Inc. and HCS II, Inc. Such interest amounted to $352,000 and $383,000, respectively, during the three month periods ended March 31, 2003 and 2002. Unpaid distributions of $122,000 and $123,000, respectively, are included in due to affiliates on the accompanying condensed consolidated balance sheets at March 31, 2003 and December 31, 2002.

        During July 2002, HCS reimbursed $598,000 of construction finish out costs incurred by an outside lessee with respect to approximately 45,000 square feet of available restaurant and entertainment space located on property leased from the Shreveport Casino. Effective as of May 1, 2002, HCS began receiving rental payments of $6 per square foot annually, payable at the rate of $22,000 per month. In addition, HCS is to receive percentage rentals as specified in the lease agreement. Total rental income earned during the three month period ended March 31, 2003 amounted to $67,000. The lessee is a limited liability company in which certain relatives of Jack E. Pratt, formerly a principal stockholder and director of HCC, held directly or indirectly an approximate 20% interest. These relatives, as well as

16

certain other associates of the former principal stockholder, have held and may continue to hold directly or indirectly interests in certain sublessees of the lessee that are or will be operating tenants in the space.

        On April 23, 2000, the construction site for the Shreveport Casino suffered tornado damage which contributed to the delay in the opening of the facility. Management filed damage claims and received reimbursements from its insurance carrier during 2000 in the amount of approximately $1,500,000 to cover substantially all of the cost of repairing the damage incurred. Management is also seeking to recover lost profits and related claims under its business interruption insurance coverage. To the extent the delay in the facility's opening was the responsibility of contractors, management is also seeking to recover damages from those entities. These matters are the subject of a lawsuit pending in U.S. District Court in Louisiana. For this and other reasons, HCS has withheld payment of certain retainage amounts which the general contractor is currently seeking. The general contractor has also submitted additional change orders which HCS is disputing. The accompanying condensed consolidated balance sheets at March 31, 2003 and December 31, 2002 include a liability in the amount of approximately $3,600,000 in accounts payable in connection with the construction project. Both the recovery of any amounts by HCS from either its insurance companies or the contractors and the need to pay the general contractor any additional amounts are currently subject to litigation and management is unable to determine the amounts, if any, that will ultimately be received or paid.

        HCS is or may become a party in various legal proceedings with respect to the conduct of casino and hotel operations. Although a possible range of loss cannot be estimated, in the opinion of management, based upon the advice of counsel, settlement or resolution of these proceedings should not have a material adverse impact on the consolidated financial position or results of operations of HCS and its subsidiaries. However, settlement or resolution of these proceedings could have a material adverse impact on the liquidity of HCS and its subsidiaries (see Note 1—"Liquidity Issues").

(7) Stock Option Plan

        HCS has adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 allows an entity to continue to measure compensation cost for employee stock-based compensation using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("Opinion 25"). Entities electing to remain with the accounting under Opinion 25 are required to make pro forma disclosures of net income as if the fair value based method of accounting under SFAS 123 had been applied.

        Certain HCS employees were granted stock options to acquire common stock of HCC under the Hollywood Casino Corporation 1996 Long-Term Incentive Plan (the "1996 Plan"). The 1996 Plan provided for the granting of nonqualified stock options and incentive stock options that were intended to qualify for the special tax treatment under the Internal Revenue Code and also provided for the granting of restricted stock. The 1996 Plan provided for the granting of 3,000,000 shares of Class A Common Stock.

        The 1996 Plan was administered by a committee of HCC's Board of Directors. Options granted under the 1996 Plan became vested at the discretion of the Committee of the Board of Directors (however, vesting for employees who were executive officers, directors or 10% or greater shareholders of the company could not be less than six months) and could be exercised for a period of not more than ten

17

years (five years in the case of incentive stock options) from the date of grant. No more than 500,000 shares could be awarded to any individual during any fiscal year and incentive stock options were subject to a $100,000 calendar year limitation. All options granted under the 1996 Plan were granted at exercise prices equal to the fair market value as of the date of the grant. All stock options outstanding, regardless of vesting status, were redeemed by Penn National upon consummation of the merger in March 2003.

        Based on HCS's election to apply Opinion 25, no compensation expense has been recognized in the accompanying condensed consolidated financial statements as a result of the granting of stock options. Had compensation expense been determined consistent with Statement of Financial Accounting Standards No. 123, the net loss for the three month periods ended March 31, 2003 and 2002 would have increased by approximately $3,000 and $5,000, respectively.

        The fair value of each option grant was estimated on the date of grant using a method approximating the Black-Scholes option pricing model. There were no grants made during either of the three month periods ended March 31, 2003 or 2002.

(8) Supplemental Cash Flow Information

        HCS paid interest totaling $12,285,000 and $12,286,000, respectively, during the three month periods ended March 31, 2003 and 2002. HCS paid no income taxes during either of the three month periods ended March 31, 2003 or 2002.

        As more fully described in Note 2, certain purchase price adjustments have been reflected on the accompanying Successor Basis condensed consolidated financial statements. The $38,800,000 revaluation of HCS's property and equipment to their estimated fair market values, the $37,165,000 adjustment of deficiencies in its partners' capital accounts to a zero basis and the establishment of valuation allowances in the amounts of $69,544,000 and $6,420,000, respectively, to reflect management's estimate of the fair market value of the First Mortgage Notes and Senior Secured Notes and to fully reserve the management fee payable to a subsidiary of HCC (Note 5) have all been excluded from the accompanying Successor Basis condensed consolidated statement of cash flows for the period from March 1, 2003 through March 31, 2003 as noncash transactions.

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HWCC-LOUISIANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Note 2)

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.

19

HWCC-LOUISIANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Note 2)

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.

20

HWCC-LOUISIANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Note 2)
(Unaudited)

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated financial statements.

21

HWCC-LOUISIANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY (DEFICIENCY) (Notes 1 and 2)
(Unaudited)

For the Periods from January 1, 2003 Through February 28, 2003 (Predecessor Basis)
and March 1, 2003 Through March 31, 2003 (Successor Basis)

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.

22

HWCC-LOUISIANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 2)
(Unaudited)

The accompanying introductory notes and notes to condensed consolidated financial statements
are an integral part of these condensed consolidated financial statements.

23

HWCC-LOUISIANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Organization, Business and Basis of Presentation

        HWCC-Louisiana, Inc. ("HCL") is a Louisiana corporation approximately 99%-owned by Hollywood Casino Corporation ("HCC") and 1%-owned by HWCC-Holdings, Inc., which is a wholly owned subsidiary of HCC. HCL was formed in April 1993 for the purpose of obtaining a license to develop and own a riverboat casino in Louisiana. HCL's initial efforts to obtain sites in Lake Charles and Bossier City, Louisiana proved unsuccessful. In September 1998, HCL, Sodak Louisiana, L.L.C. ("Sodak") and Shreveport Paddlewheels, L.L.C. ("Paddlewheels") acquired the interests of Queen of New Orleans at the Hilton Joint Venture ("QNOV"). QNOV was a general partnership which owned and operated a riverboat gaming facility in New Orleans, Louisiana. QNOV ceased operating the riverboat casino in October 1997 having requested and obtained approval from the Louisiana Gaming Control Board (the "LGCB") to move their licensed site to the City of Shreveport, approximately 180 miles east of Dallas, Texas. Subsequent to receiving approval to relocate the license, QNOV made the decision not to conduct gaming operations in Shreveport. The partners of QNOV sought to transfer the license to operate in Shreveport to another interested party. Under Louisiana gaming regulations, the license to operate a riverboat gaming operation is not transferable; however, the ownership of an entity licensed to operate is transferable, subject to the approval of the LGCB. Accordingly, the acquisition by HCL, Sodak and Paddlewheels of the license to operate in Shreveport was structured as an acquisition of the interests of QNOV's partners. The former partners disposed of QNOV's assets other than its license to operate and satisfied all but one of its obligations so that when the former partners withdrew on September 22, 1998 transferring their interests to HCL, Sodak and Paddlewheels, QNOV's only asset was its license to operate in Shreveport (which had no recorded value) and its only liability was a $5,000,000 obligation to the City of New Orleans (see below). HCL, Sodak and Paddlewheels obtained the necessary approvals from the LGCB to proceed with the project in Shreveport. In June 1999, HCL obtained approval to change the name of the partnership to Hollywood Casino Shreveport ("HCS").

        Upon admission of the new partners, HCS proceeded with entirely new plans to develop, own and operate a riverboat gaming complex to be constructed in Shreveport (the "Shreveport Casino"). The Shreveport Casino was completed and opened on December 20, 2000. Prior to opening, HCS had no operating activities other than development, financing and construction activities with respect to the Shreveport Casino. The Shreveport Casino consists of a three-level riverboat dockside casino with approximately 1,423 slot machines, 64 table games and seven poker stations and a 403-room, all suite, art deco style hotel. The project also includes approximately 45,000 square feet of available restaurant and entertainment space developed by a third party lessee (Note 7).

        Riverboat gaming operations in Louisiana are subject to regulatory control by the LGCB. HCS's current license to operate the Shreveport Casino expires on October 15, 2004.

        When the former partners of QNOV proposed moving to Shreveport, they negotiated a settlement with the City of New Orleans to pay $10,000,000 with respect to claims asserted by the City in connection with the relocation. During September 1998, HCS, the former partners of QNOV and the City of New Orleans entered into a Compromise Agreement under which one of QNOV's former partners agreed to pay $5,000,000 to the City and QNOV was released from any further relocation claims. The remaining $5,000,000 obligation continued to be reflected as a liability by HCS until it was paid in August 1999 upon the issuance of $150,000,000 of 13% First Mortgage Notes with contingent interest due 2006 (the "First Mortgage Notes") (Note 3(a)). HCL treated this $5,000,000 as part of the cost of acquiring their interest in HCS and included the cost in property and equipment on the accompanying condensed consolidated balance sheets for periods prior to March 1, 2003 (Note 2).

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        It was originally anticipated that HCS would develop the Shreveport Casino with each of HCL and Sodak having a 50% interest in the development and subsequent operations. Once operations commenced, Paddlewheels was to have a residual interest in the event that the project was ever sold amounting to 10% plus any capital contributions made by Paddlewheels to HCS or otherwise credited to their account (Note 7). The joint venture partner also receives an amount equal to 1% of "complex net revenues", as defined, of the Shreveport Casino (Note 7). On March 31, 1999, HCL entered into a definitive agreement with Sodak's parent to acquire Sodak for the $2,500,000 Sodak had contributed to HCS, with $1,000 paid at closing and the remainder paid by HCL in June 2001. The revised structure of the partnership was approved by the LGCB on April 20, 1999. As a result, HCL obtained an effective 100% ownership interest in HCS with Paddlewheels retaining their 10% residual interest and their monthly payment of 1% of "complex net revenues". During July 1999, Sodak was merged with HCL.

        In July 1999, HCL formed two new, wholly owned subsidiaries, HCS I, Inc. and HCS II, Inc., both Louisiana corporations. HCL contributed $1,000 of capital to each entity, along with 99% of its interest in HCS to HCS I, Inc. and the remaining 1% to HCS II, Inc. In addition, the HCS joint venture agreement was amended and restated on July 21, 1999, to reflect, among other things, the admission of HCS I, Inc. and HCS II, Inc. as partners of HCS and the withdrawal of HCL as managing partner of HCS. As a result, HCS I, Inc. now has an effective 99% interest in HCS and has become its managing general partner. HCS II, Inc. now has an effective 1% interest in HCS. Paddlewheels retained its 10% residual interest in HCS. The revised partnership structure was approved by the LGCB on July 20, 1999.

        In November 2002, HCL issued shares of its common stock to Holdings, a wholly owned subsidiary of HCC which was not subject to certain restrictions on making investments under HCC's then existing loan agreements. The initial stock purchase in the amount of $250,000, together with subsequent capital contributions of $1,831,000 in December 2002, were contributed by Holdings through HCS I, Inc. and HCS II, Inc. to HCS for working capital needs. During the three month period ended March 31, 2003, an additional $800,000 was contributed by Holdings through HCS I, Inc. and HCS II, Inc. to HCS.

        Additionally, in July 1999, HCS formed a new, wholly owned subsidiary, Shreveport Capital Corporation ("Shreveport Capital"), a Louisiana corporation. HCS contributed $1,000 of capital to Shreveport Capital. Shreveport Capital was formed for the sole purpose of being a co-issuer with respect to the First Mortgage Notes and the 13% Senior Secured Notes issued in June 2001. Shreveport Capital has not and is not expected to have any operating activities, acquire any assets or incur any other liabilities. Accordingly, separate financial statements of Shreveport Capital are not included herein because management has determined that such information is not material to investors.

        The accompanying condensed consolidated financial statements include the accounts of HCS and its wholly owned subsidiaries, Shreveport Capital and HCS-Golf Course, LLC ("Golf"). All significant intercompany balances have been eliminated in consolidation. Golf, a Delaware corporation, was formed in 2000 to own an eventual 50% interest in Shreveport Golf Company, a joint venture formed to develop and operate a golf course to be used by patrons of the Shreveport Casino. Golf's ownership interest in Shreveport Golf Company was accounted for under the equity method. Given the difficult market conditions, the partners in the golf course provided notice in April 2002 that they were terminating the lease for the land on which the golf course would have been constructed. Accordingly, HCS provided a

25

reserve of $313,000 during April 2002 to write down its investment in the limited liability corporation to a zero value. The partners terminated the joint venture effective as of September 30, 2002.

        HCS estimates that a significant amount of the Shreveport Casino's revenues are derived from patrons living in the Dallas/Ft. Worth and east Texas areas. The Shreveport Casino faces intense competition from other riverboat gaming operations in Shreveport and Bossier City, Louisiana and management believes that this competition will continue in the future.

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

        The condensed consolidated financial statements as of March 31, 2003 and for the three month periods ended March 31, 2003 and 2002 have been prepared by HCS without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these condensed consolidated financial statements contain all adjustments (consisting of purchase price adjustments as more fully described in Note 2 and other normal recurring adjustments) necessary to present fairly the consolidated financial position of HCS as of March 31, 2003 and the results of its operations and cash flows for the three month periods ended March 31, 2003 and 2002.

        HCC (the ultimate parent of HCS, HCL and Shreveport Capital), Penn National Gaming, Inc., a Pennsylvania corporation ("Penn National"), and P Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Penn National, entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 7, 2002, pursuant to which HCC became a wholly owned subsidiary of Penn National through the merger of P Acquisition Corp. with and into HCC on March 3, 2003 (Note 2).

Liquidity Issues—

        The terms of the merger agreement entered into by HCC and Penn National on August 7, 2002 restricted HCC, or any of its subsidiaries, from making any additional capital contributions to HCS. Subsequent to entering into the merger agreement, HCC received approval from Penn National to contribute to HCS any funds necessary to make the February 1, 2003 interest payments due with respect to the First Mortgage Notes and Senior Secured Notes. With Penn National's approval, Holdings contributed an aggregate of $800,000 during 2003 to assist HCS in making its February 1, 2003 interest payments.

        The terms of the indentures for the First Mortgage Notes and Senior Secured Notes provide that, upon consummation of the merger, HCS must offer to purchase any and all of such notes at a price of 101% of their face amount plus accrued interest (the "Repurchase Offer"). Penn National announced on February 24, 2003 that it had commenced the solicitation of consents from holders of record of the notes on February 21, 2003 to waive the Repurchase Offer and related provisions. Penn concurrently announced that it did not intend to, or to permit any of its subsidiaries to, provide financing or credit support to enable any of them or HCS to make the Repurchase Offer. On March 3, 2003, Penn National announced that the requisite number of consents from holders of the First Mortgage Notes and Senior Secured Notes were not obtained in the solicitation.

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        On March 14, 2003, HCS received notice from a representative of the holders of the First Mortgage Notes and Senior Secured Notes that HCS had failed to make the Repurchase Offer within ten days of the merger as required under the respective governing indentures. Pursuant to these indentures, HCS has sixty days from receipt of such notice to cure such failure or an Event of Default, as defined under each of the indentures, will have occurred.

        If HCS does not reach some arrangement with the requisite number of holders of the First Mortgage Notes and Senior Secured Notes to cure or otherwise waive HCS's requirement to make the Repurchase Offer, then HCS would likely be required to file for protection under the federal bankruptcy code.

        Even in the event that HCS's failure to launch the required Repurchase Offer is either waived by the noteholders or otherwise cured, HCS has experienced net losses and has a significant deficiency in its partners' capital. Accordingly, management believes that HCS's existing cash and cash flow from operations may not be sufficient to fund its operating and capital needs for the next 24 months. In such event, HCS would require additional capital contributions or other financial support from Penn National. Penn National has not publicly stated its plans or intentions for HCS after the merger; accordingly, management of HCS can make no assurances that Penn National will provide additional liquidity to HCS. All of these matters raise substantial doubt about HCS's ability to continue as a going concern. Management is currently in the process of developing its plans with respect to these matters.

(2) Acquisition of HWC-Louisiana, Inc.

        Effective with the close of business on February 28, 2003, Penn National completed the acquisition of HCC and its subsidiaries, including HCL. Penn National "pushed down" its basis in HCL in accordance with Staff Accounting Bulletin No. 54, "Push Down Basis of Accounting Required in Certain Limited Circumstances". Therefore, the accompanying condensed consolidated financial statements for the period following the acquisition ("Successor Period") includes management's best estimate of the purchase price adjustments required in accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"). SFAS 141 requires that assets and liabilities of the acquired entity be reflected at their fair values. Therefore, the assets and liabilities of HCL are recorded on the same basis as Penn National. The accompanying condensed consolidated financial statements for periods prior to the acquisition ("Predecessor Period") reflect the historical cost basis of HCS's assets and liabilities.

        The purchase price adjustments reflected on the accompanying Successor Basis condensed consolidated financial statements include revaluing HCL's property and equipment to their estimated fair market values based on an independent appraisal obtained by Penn National. Such appraisal resulted in a reduction of the recorded net book value of property and equipment as of the date of the merger in the amount of $44,800,000, consisting of $38,800,000 of property and equipment at HCS and $6,000,000 of project costs recorded by HCL (Notes 1 and 7). HCL's additional paid-in capital and accumulated deficiency were adjusted by $68,076,000 and $101,241,000, respectively, as of the merger date. The $2,000,000 minority interest arising from Paddlewheels' initial cash contribution with funds borrowed from HCL and otherwise credited to their account (Note 7) was also eliminated. No goodwill was recorded in connection with the merger. As a result of HCS's failure to make the Repurchase Offer and other liquidity matters (Notes 1 and 3), a valuation allowance in the amount of $69,544,000 was

27

established with respect to the First Mortgage Notes and Senior Secured Notes to reduce their carrying amount to management's estimate of their fair market value. Management's estimate was based on the fair market values of the assets and liabilities assumed. In addition, a valuation allowance in the amount of $6,420,000 was established at the merger date to fully reserve the management fee payable to a subsidiary of HCC (Note 6). Such management fee is subordinated in payment to the First Mortgage Notes and Senior Secured Notes.

        The accompanying Successor Basis condensed consolidated statement of operations also includes certain reclassifications made by Penn National to conform the post-merger statement of operations to the same presentation used by other properties owned and operated by Penn National. The accompanying Predecessor Basis condensed consolidated statements of operations do not include such reclassifications. In addition, depreciation of property and equipment for the period from March 1, 2003 through March 31, 2003 has been adjusted to reflect the revised estimates of fair market value established as a result of the aforementioned appraisal.

(3) Long-term Debt

        As discussed in Note 1—"Liquidity Issues", following consummation of the merger of HCC with Penn National, HCS failed to make the Repurchase Offer as required under the respective indentures to the First Mortgage Notes and Senior Secured Notes and was unable to obtain the requisite number of consents from holders of the notes to waive the Repurchase Offer and related provisions. On March 14, 2003, HCS received notice from a representative of the holders of the First Mortgage Notes and Senior Secured Notes that HCS had failed to make the Repurchase Offer within ten days of the merger as required under the indentures. Pursuant to the indentures, HCS has sixty days from receipt of such notice to cure such failure or an Event of Default, as defined under each of the indentures, will have occurred. If HCS does not reach some arrangement with the requisite number of holders of the First Mortgage Notes and Senior Secured Notes to cure or otherwise waive HCS's requirement to make the Repurchase Offer, then HCS would likely be required to file for protection under the federal bankruptcy code.

        Long-term debt at March 31, 2003 and December 31, 2002 consists of the following:

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(a)

In August 1999, HCS and Shreveport Capital issued the First Mortgage Notes. Fixed interest on the First Mortgage Notes at the annual rate of 13% is payable on each February 1 and August 1. In addition, contingent interest accrues and is payable on each interest payment date subsequent to the opening of the Shreveport Casino. The amount of contingent interest is equal to 5% of the consolidated cash flow of HCS for the applicable period subject to a maximum contingent interest of $5,000,000 for any four consecutive fiscal quarters. Contingent interest amounting to $260,000 and $324,000 was incurred during the three month periods ended March 31, 2003 and 2002, respectively. Accrued contingent interest amounted to $1,482,000 and $1,222,000 at March 31, 2003 and December 31, 2002, respectively. Contingent interest may not be paid to the extent that payment would result in certain financial coverage ratios not being met. Consequently, no contingent interest has been paid by the Shreveport Casino since its opening.

The First Mortgage Notes are secured by, among other things, (1) a first priority security interest in substantially all of the assets that comprise the Shreveport Casino other than certain assets secured by the 13% Senior Secured Notes (Note 3(b)) and up to $6,000,000 in assets that may be acquired with future equipment financing; (2) a collateral assignment of the Shreveport Casino's interest in the principal agreements under which it was constructed and is currently operated and managed; and (3) a collateral assignment of certain licenses and permits with respect to the operation and management of the Shreveport Casino. In addition, the First Mortgage Notes are guaranteed on a senior secured basis by HCL, HCS I, Inc. and HCS II, Inc. (collectively, the "Guarantors"). Such guarantees are secured by a first priority secured interest in substantially all of the Guarantors' assets, including a pledge of the capital stock of HCS I, Inc. and HCS II, Inc. and their partnership interests in HCS.

The First Mortgage Notes may be redeemed at any time on or after August 1, 2003 at 106.5% of the then outstanding principal amount, decreasing to 103.25% and 100% on August 1, 2004 and 2005, respectively.

The indenture to the First Mortgage Notes contains various provisions limiting the ability of HCS to borrow money, pay distributions on its equity interests or prepay debt, make investments, create liens, sell its assets or enter into mergers or consolidations (see Note 1—"Liquidity Issues"). In addition, the indenture restricts the ability of the Guarantors and Shreveport Capital to acquire additional assets, become liable for additional obligations or engage in any significant business activities.

(b)

In June 2001, HCS and Shreveport Capital issued $39,000,000 of 13% Senior Secured Notes, with contingent interest, due August 2006 (the "Senior Secured Notes"). The Senior Secured Notes were issued at an initial premium of $1,170,000 to yield interest at an effective rate of 12.21% per annum. Fixed interest on the Senior Secured Notes at the annual rate of 13% is payable on each February 1 and August 1. In addition, contingent interest accrues and is payable on each interest payment date. The amount of contingent interest is equal to 1.3% of the consolidated cash flow of HCS for the applicable period subject to a maximum contingent interest of $1,300,000 for any four consecutive fiscal quarters. Contingent interest amounting to $68,000 and $81,000 was incurred during the three month periods ended March 31, 2003 and 2002, respectively. Accrued contingent interest amounted to $365,000 and $297,000 at March 31, 2003 and December 31,

29

2002, respectively. Contingent interest may not be paid to the extent that payment would result in certain financial coverage ratios not being met. Consequently, no contingent interest has been paid by the Shreveport Casino since its opening. Proceeds from the Senior Secured Notes were used, in part, to retire HCS's then outstanding capital lease obligation with the remainder available for working capital purposes.

Under the terms of certain intercreditor collateral agreements, the Senior Secured Notes are secured by, among other things, (1) a security interest in certain furniture, fixtures and equipment acquired prior to the opening of the Shreveport Casino for $30,000,000 and (2) a security interest on an equal basis in up to $10,000,000 of the collateral which secures the First Mortgage Notes (Note 3(a)). The furniture, fixtures and equipment in (1) above were obtained with the proceeds from the capital lease obligation retired with a portion of the proceeds from the Senior Secured Notes.

The Senior Secured Notes may be redeemed on the same terms and conditions as the First Mortgage Notes (Note 3(a)). The indenture to the Senior Secured Notes also carries substantially the same limitations, covenants and restrictions as those included in the indenture to the First Mortgage Notes (see Note 3(a) and Note 1—"Liquidity Issues").

Scheduled payments of long-term debt as of March 31, 2003 are set forth below:

(4) Operating Leases

        In May 1999, HCS entered into a ground lease with the City of Shreveport for the land on which the Shreveport Casino was built. The term of the lease began when construction commenced and will end on the tenth anniversary of the date the Shreveport Casino opened. HCS has options to renew the lease on the same terms for up to an additional forty years. The lease may be further renewed after that time at prevailing rates and terms for similar leases. The City of Shreveport may terminate the lease as a result of, among other things, a default by HCS under the lease. HCS may terminate the lease at any time if the operation of the Shreveport Casino becomes uneconomic. Base rental payments under the lease were $10,000 per month during the construction period. The base rental amount increased to $450,000 per year upon opening and continues at that amount for the remainder of the initial ten-year lease term. During the first five-year renewal term, the base annual rental will be $402,500. Subsequent renewal period base rental payments will increase by 15% during each of the next four five-year renewal terms with no further increases. In addition to the base rent, HCS pays monthly percentage rent of not less than $500,000 per year equal to 1% of monthly adjusted gross revenues and the amount, if any, by which monthly parking facilities net income exceeds the parking income credit, as all such terms are defined in the lease agreement. Ground lease rentals amounted to $495,000 and $526,000, respectively, for the three month periods ended March 31, 2003 and 2002, including percentage rentals amounting to $352,000 and $383,000, respectively. In addition, the ground lease agreement calls for payments in lieu

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of admission fees to the City of Shreveport and payments to the local school board amounting to 3.225% and .5375% of Net Gaming Proceeds (as defined in the agreement), respectively. These additional charges amounted to $1,318,000 and $1,455,000 during the three month periods ended March 31, 2003 and 2002, respectively.

        HCS also leases office, parking and warehouse space and certain equipment under lease agreements accounted for as operating leases. The lease agreements expire at various dates through 2015. Many of the lease agreements are cancellable or have initial terms of one year or less. A number of the leases contain automatic renewal options unless notice of termination is given and some include contingent rental payments based on a specified level of use; such contingent rental payments have not been significant. Total rental expense for such leases amounted to $626,000 and $622,000, respectively, during the three month periods ended March 31, 2003 and 2002.

        Future minimum lease payments as of March 31, 2003 under operating lease obligations (other than the ground lease) having an initial or remaining noncancellable term in excess of one year are as follows:

(5) Income Taxes

        HCL's benefit for income taxes consists of the following:

        HCL is included in Penn National's consolidated federal income tax return for periods subsequent to the merger and was included in HCC's consolidated federal income tax return for periods prior to the merger. Pursuant to agreements between HCL and Penn National and HCC, HCL's benefit for income taxes is based on the amount of tax that would be provided if a separate federal income tax return were filed. HCL paid no federal or state income taxes for either of the three month periods ended March 31, 2003 or 2002.

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        At March 31, 2003, HCL has net operating loss carryforwards ("NOL's") for federal income tax purposes totaling approximately $109,900,000 which do not begin to expire until the year 2012. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", requires that the tax benefit of such NOL's, together with the tax benefit of deferred tax assets resulting from temporary differences, be recorded as an asset and, to the extent that management can not assess that the utilization of all or a portion of such deferred tax assets is more likely than not, a valuation allowance should be recorded. Based on the losses incurred to date and the lack of historical operating activity upon which to estimate future taxable income, management has provided valuation allowances to fully reserve the net deferred tax assets for all periods presented.

        As a result of the acquisition of HCC by Penn National, a "change of control", as defined in Section 382 of the Internal Revenue Code of 1986, as amended, occurred. Accordingly, the amount of HCL's loss carryforwards available for use in any one year by Penn National will most likely be substantially reduced. Future treasury regulations, administrative rulings or court decisions may also affect Penn National's future utilization of HCL's loss carryforwards.

        The Internal Revenue Service recently opened an examination of the consolidated federal income tax returns of HCC for the years 1999 through 2001 in which HCL was included.

(6) Transactions with Affiliates

        The operations of the Shreveport Casino are managed by HWCC-Shreveport, Inc. ("Shreveport Management"), a wholly owned subsidiary of HCC, under the terms of a management agreement. The management agreement became effective when the LGCB approved the development of the Shreveport Casino and will remain in effect as long as HCS holds its license, unless sooner terminated in accordance with its terms. Under the terms of the management agreement, HCS incurs basic and incentive management fees to Shreveport Management for its services. The basic fee is equal to 2% of gross revenues, as defined in the agreement, from the operations of the Shreveport Casino. The incentive fee is equal to the sum of (1) 5% of earnings before interest, taxes, depreciation and amortization ("EBITDA"), as defined in the agreement, in excess of $25,000,000 and up to $35,000,000; (2) 7% of EBITDA in excess of $35,000,000 and up to $40,000,000; and (3) 10% of EBITDA over $40,000,000. In addition, HCS reimburses Shreveport Management for expenses incurred in connection with services provided under the management agreement. Total management fees incurred amounted to $703,000 and $765,000, respectively, for the three month periods ended March 31, 2003 and 2002 and are included in general and administrative expenses on the accompanying condensed consolidated statements of operations. Total management fees incurred at March 31, 2003 and December 31, 2002 amounted to $6,664,000 and $5,961,000, respectively. Such fees, reduced by a valuation allowance of $6,420,000 at March 31, 2003 (Note 2), are included in due to affiliates on the accompanying condensed consolidated balance sheets. Under the indentures governing the First Mortgage Notes and Senior Secured Notes (Note 3), management fees are subordinated to all payments under the First Mortgage Notes and Senior Secured Notes and may not be paid to the extent that their payment would result in certain financial coverage ratios not being met. Consequently, no management fees have been paid by the Shreveport Casino since its opening.

        The Shreveport Casino's casino system software was provided and installed by Advanced Casino Systems Corporation ("ACSC"). Prior to March 19, 2002, ACSC was a wholly owned subsidiary of

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Greate Bay Casino Corporation ("Greate Bay") which had certain officers, directors and principal shareholders in common with HCC. On March 19, 2002, GBCC completed the sale of ACSC to Bally Gaming, Inc., a wholly owned subsidiary of Alliance Gaming Corporation, an unaffiliated third party. Costs incurred in connection with the installation of the software system amounting to $2,626,000 are included in operating equipment on the accompanying condensed consolidated balance sheets at both March 31, 2003 and December 31, 2002. The Shreveport Casino also had a maintenance and support agreement with ACSC effective as of October 12, 2000 which provided for a monthly fee of $11,000 commencing 90 days after installation of ACSC's casino system plus additional services at rates charged by ACSC to third parties. HCS incurred charges and fees to ACSC amounting to $47,000 during the period prior to March 19, 2002. A new maintenance and support agreement was entered into with ACSC's new owners effective March 19, 2002.

        HCS has also entered into a Marine Services Agreement with Paddlewheels to provide certain marine services for so long as Paddlewheels remains a joint venture partner in HCS. The Marine Services Agreement became effective on September 22, 1998 and, in addition to the reimbursement to Paddlewheels for its direct expenses incurred, if any, HCS pays a monthly fee of $30,000 effective with the opening of the Shreveport Casino. HCS expensed $90,000 during each of the three month periods ended March 31, 2003 and 2002 under the agreement. Unpaid charges of $30,000 are included in due to affiliates on the accompanying condensed consolidated balance sheets at both March 31, 2003 and December 31, 2002.

(7) Commitments and Contingencies

        HCL agreed that upon obtaining construction financing for the Shreveport Casino, it would loan $1,000,000 to Paddlewheels which Paddlewheels would use to make a $1,000,000 capital contribution to HCS. HCL loaned the $1,000,000 to Paddlewheels and Paddlewheels made its capital contribution to HCS in August 1999; the $1,000,000 was included in minority interest for periods prior to March 1, 2003 (Note 2). The loan to Paddlewheels earns interest at the rate of prime commencing with the opening of the Shreveport Casino and is payable monthly. Because the loan had no stated interest prior to completion of the Shreveport Casino, HCL recorded a discount on the note which was accreted during the construction period resulting in a note receivable balance of $1,000,000 at the opening date. Principal on the loan is due to be repaid on December 20, 2010.

        Paddlewheels was also given credit for an additional $1,000,000 capital contribution at the time construction financing was obtained and the $5,000,000 liability described in Note 1 was paid. Such credit was in recognition of guarantees provided by an affiliate of Paddlewheels necessary to obtain LGCB approval for the Shreveport Casino. The additional $1,000,000 credit to Paddlewheels's capital account resulted in an additional $1,000,000 minority interest and was treated as an additional project cost for periods prior to March 1, 2003 (Note 2).

        For so long as it remains a joint venture partner in HCS, Paddlewheels receives, among other things, an amount equal to 1% of "complex net revenues", as defined, of the Shreveport Casino, which approximates net revenues, in exchange for the assignment by Paddlewheels and its affiliates of their joint venture interest in HCS to HCL and Sodak. Allocations to Paddlewheels of such amounts are reflected as minority interest in Hollywood Casino Shreveport on the accompanying condensed consolidated statements of operations. Such interest amounted to $352,000 and $383,000, respectively, during the three month periods ended March 31, 2003 and 2002. Unpaid distributions of $122,000 and

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$123,000, respectively, are included in minority interest on the accompanying condensed consolidated balance sheets at March 31, 2003 and December 31, 2002.

        During July 2002, HCS reimbursed $598,000 of construction finish out costs incurred by an outside lessee with respect to approximately 45,000 square feet of available restaurant and entertainment space located on property leased from the Shreveport Casino. Effective as of May 1, 2002, HCS began receiving rental payments of $6 per square foot annually, payable at the rate of $22,000 per month. In addition, HCS is to receive percentage rentals as specified in the lease agreement. Total rental income earned during the three month period ended March 31, 2003 amounted to $67,000. The lessee is a limited liability company in which certain relatives of Jack E. Pratt, formerly a principal stockholder and director of HCC, held directly or indirectly an approximate 20% interest. These relatives, as well as certain other associates of the former principal stockholder, have held and may continue to hold directly or indirectly interests in certain sublessees of the lessee that are or will be operating tenants in the space.

        On April 23, 2000, the construction site for the Shreveport Casino suffered tornado damage which contributed to the delay in the opening of the facility. Management filed damage claims and received reimbursements from its insurance carrier during 2000 in the amount of approximately $1,500,000 to cover substantially all of the cost of repairing the damage incurred. Management is also seeking to recover lost profits and related claims under its business interruption insurance coverage. To the extent the delay in the facility's opening was the responsibility of contractors, management is also seeking to recover damages from those entities. These matters are the subject of a lawsuit pending in U.S. District Court in Louisiana. For this and other reasons, HCS has withheld payment of certain retainage amounts which the general contractor is currently seeking. The general contractor has also submitted additional change orders which HCS is disputing. The accompanying condensed consolidated balance sheets at March 31, 2003 and December 31, 2002 include a liability in the amount of approximately $3,600,000 in accounts payable in connection with the construction project. Both the recovery of any amounts by HCS from either its insurance companies or the contractors and the need to pay the general contractor any additional amounts are currently subject to litigation and management is unable to determine the amounts, if any, that will ultimately be received or paid.

        HCL is or may become a party in various legal proceedings with respect to the conduct of casino and hotel operations. Although a possible range of loss cannot be estimated, in the opinion of management, based upon the advice of counsel, settlement or resolution of these proceedings should not have a material adverse impact on the consolidated financial position or results of operations of HCL and its subsidiaries. However, settlement or resolution of these proceedings could have a material adverse impact on the liquidity of HCL and its subsidiaries (see Note 1—"Liquidity Issues").

(8) Stock Option Plan

        HCL has adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 allows an entity to continue to measure compensation cost for employee stock-based compensation using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("Opinion 25"). Entities electing to remain with the accounting under Opinion 25 are required to make pro forma disclosures of net income as if the fair value based method of accounting under SFAS 123 had been applied.

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        Certain HCS employees were granted stock options to acquire common stock of HCC under the Hollywood Casino Corporation 1996 Long-Term Incentive Plan (the "1996 Plan"). The 1996 Plan provided for the granting of nonqualified stock options and incentive stock options that were intended to qualify for the special tax treatment under the Internal Revenue Code and also provided for the granting of restricted stock. The 1996 Plan provided for the granting of 3,000,000 shares of Class A Common Stock.

        The 1996 Plan was administered by a committee of HCC's Board of Directors. Options granted under the 1996 Plan became vested at the discretion of the Committee of the Board of Directors (however, vesting for employees who were executive officers, directors or 10% or greater shareholders of the company could not be less than six months) and could be exercised for a period of not more than ten years (five years in the case of incentive stock options) from the date of grant. No more than 500,000 shares could be awarded to any individual during any fiscal year and incentive stock options were subject to a $100,000 calendar year limitation. All options granted under the 1996 Plan were granted at exercise prices equal to the fair market value as of the date of the grant. All stock options outstanding, regardless of vesting status, were redeemed by Penn National upon consummation of the merger in March 2003.

        Based on HCL's election to apply Opinion 25, no compensation expense has been recognized in the accompanying condensed consolidated financial statements as a result of the granting of stock options. Had compensation expense been determined consistent with Statement of Financial Accounting Standards No. 123, the net loss for the three month periods ended March 31, 2003 and 2002 would have increased by approximately $3,000 and $5,000, respectively.

        The fair value of each option grant was estimated on the date of grant using a method approximating the Black-Scholes option pricing model. There were no grants made during either of the three month periods ended March 31, 2003 or 2002.

(9) Supplemental Cash Flow Information

        HCL paid interest totaling $12,285,000 and $12,286,000, respectively, during the three month periods ended March 31, 2003 and 2002. HCL paid no income taxes during either of the three month periods ended March 31, 2003 or 2002.

        As more fully described in Note 2, certain purchase price adjustments have been reflected on the accompanying Successor Basis condensed consolidated financial statements. The $38,800,000 revaluation of HCS's property and equipment to their estimated fair market values, the $6,000,000 adjustment to project costs, the adjustments to shareholders' equity and minority interest and the establishment of valuation allowances in the amounts of $69,545,000 and $6,420,000, respectively, to reflect management's estimate of the fair market value of the First Mortgage Notes and Senior Secured Notes and to fully reserve the management fee payable to a subsidiary of HCC (Note 6) have all been excluded from the accompanying Successor Basis condensed consolidated statement of cash flows for the period from March 1, 2003 through March 31, 2003 as noncash transactions.

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HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        This Quarterly Report on Form 10-Q contains forward-looking statements about the business, results of operations, cash flows, financial condition and prospects of HCS and HCL. The actual results could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, among other things, changes in competition, economic conditions, tax regulations, state regulations or legislation applicable to the gaming industry in general or HCS and HCL in particular, decisions of courts and other risks indicated in their filings with the Securities and Exchange Commission. Such risks and uncertainties are beyond management's ability to control and, in many cases, can not be predicted by management. When used in this Quarterly Report on Form 10-Q, the words "believes", "estimates", "expects", "anticipates" and similar expressions as they relate to HCS and HCL or their management are intended to identify forward-looking statements. Similarly, statements herein that describe HCS and HCL's business strategy, outlook, objectives, plans, intentions or goals are forward-looking statements.

        HCL has had no significant operating activities. Accordingly, management's discussion that follows primarily addresses the results of operations and liquidity and capital resources of HCS. Activities of HCL exclusive of HCS and its subsidiaries are separately noted where significant.

Results of Operations

        As a result of the acquisition of HCC by Penn National, certain accounting reclassifications were made to the accompanying condensed consolidated Successor Basis statement of operations to present it on a consistent basis with those of other Penn National properties. Accordingly, comparisons with the Predecessor Basis statements of operations are not meaningful. The table below reflects departmental profit from operations at the Shreveport Casino on a comparable basis as if Penn National's Successor Basis reclassifications had been in effect for all periods presented. The discussion which follows is based on this Successor Basis presentation.