What changed in this filing

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Item 1. Financial Statements

2020-11-04 compared with 2020-08-06 · 222 added, 181 removed, 906 unchanged (31% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data) June 30,

(in millions, except share and per share data) September 30,

2020 December 31,

44 unchanged sentences

COMPREHENSIVE INCOME (LOSS)

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(in millions, except per share data) 2020 2019 2020 2019

12 unchanged sentences

Interest expense, net ( 142.3 ) ( 133.5 ) ( 407.1 ) ( 400.5 )

Income (loss) from unconsolidated affiliates ( 1.7 ) 6.2 2.4 11.9

Income from unconsolidated affiliates 5.0 9.8 7.4 21.7

Other 68.0 7.2 75.5 7.2

17 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended June 30, 2020 and 2019

Three Months Ended September 30, 2020 and 2019

Preferred Stock Common Stock Treasury

5 unchanged sentences

(in millions, except share data) Shares Amount Shares Amount

Balance as of April 1, 2020 883 $ 23.1 116,793,722 $ 1.2 $ ( 28.4 ) $ 1,728.9 $ ( 446.4 ) $ 1,278.4 $ ( 0.8 ) $ 1,277.6

Balance as of July 1, 2020 883 $ 23.1 137,435,090 $ 1.4 $ ( 28.4 ) $ 2,170.4 $ ( 660.3 ) $ 1,506.2 $ ( 1.3 ) $ 1,504.9

Share-based compensation arrangements — — 1,718,828 — — 28.3 — 28.3 — 28.3

Common stock offering (Note 15) — — 16,100,000 0.2 — 957.4 — 957.6 — 957.6

Convertible debt offering (Note 9) — — — — — 88.2 — 88.2 — 88.2

Net loss — — — — — — ( 213.9 ) ( 213.9 ) ( 0.5 ) ( 214.4 )

Net income (loss) — — — — — — 141.9 141.9 ( 0.7 ) 141.2

Other — — — — — ( 0.3 ) — ( 0.3 ) — ( 0.3 )

Balance as of June 30, 2020 883 $ 23.1 137,435,090 $ 1.4 $ ( 28.4 ) $ 2,170.4 $ ( 660.3 ) $ 1,506.2 $ ( 1.3 ) $ 1,504.9

Balance as of April 1, 2019 — $ — 117,140,551 $ 1.2 $ ( 28.4 ) $ 1,730.3 $ 158.6 $ 1,861.7 $ — $ 1,861.7

Balance as of September 30, 2020 883 $ 23.1 155,253,918 $ 1.6 $ ( 28.4 ) $ 3,155.8 $ ( 518.4 ) $ 2,633.7 $ ( 2.0 ) $ 2,631.7

Balance as of July 1, 2019 — $ — 115,869,769 $ 1.2 $ ( 28.4 ) $ 1,708.9 $ 210.2 $ 1,891.9 $ ( 0.2 ) $ 1,891.7

Share-based compensation arrangements — — 7,496 — — 4.0 — 4.0 — 4.0

Share repurchases — — ( 1,271,823 ) — — ( 24.9 ) — ( 24.9 ) — ( 24.9 )

Net income (loss) — — — — — — 43.9 43.9 ( 0.2 ) 43.7

Balance as of June 30, 2019 — $ — 115,869,769 $ 1.2 $ ( 28.4 ) $ 1,708.9 $ 210.2 $ 1,891.9 $ ( 0.2 ) $ 1,891.7

Six Months Ended June 30, 2020 and 2019

Balance as of September 30, 2019 — $ — 115,877,265 $ 1.2 $ ( 28.4 ) $ 1,712.9 $ 254.1 $ 1,939.8 $ ( 0.4 ) $ 1,939.4

Nine Months Ended September 30, 2020 and 2019

Preferred Stock Common Stock Treasury

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Other — — — — — ( 0.1 ) — ( 0.1 ) — ( 0.1 )

Balance as of June 30, 2020 883 $ 23.1 137,435,090 $ 1.4 $ ( 28.4 ) $ 2,170.4 $ ( 660.3 ) $ 1,506.2 $ ( 1.3 ) $ 1,504.9

Balance as of September 30, 2020 883 $ 23.1 155,253,918 $ 1.6 $ ( 28.4 ) $ 3,155.8 $ ( 518.4 ) $ 2,633.7 $ ( 2.0 ) $ 2,631.7

Balance as of January 1, 2019 — $ — 116,687,808 $ 1.2 $ ( 28.4 ) $ 1,726.4 $ ( 968.0 ) $ 731.2 $ — $ 731.2

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Net income (loss) — — — — — — 136.4 136.4 ( 0.4 ) 136.0

Balance as of June 30, 2019 — $ — 115,869,769 $ 1.2 $ ( 28.4 ) $ 1,708.9 $ 210.2 $ 1,891.9 $ ( 0.2 ) $ 1,891.7

Balance as of September 30, 2019 — $ — 115,877,265 $ 1.2 $ ( 28.4 ) $ 1,712.9 $ 254.1 $ 1,939.8 $ ( 0.4 ) $ 1,939.4

See accompanying notes to the Condensed Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30,

For the nine months ended September 30,

(in millions) 2020 2019

1 unchanged sentence

Net income (loss) $ ( 681.8 ) $ 136.0

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 275.3 316.4

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Other current and long-term liabilities 1.5 24.1

Net cash provided by (used in) operating activities ( 130.9 ) 315.2

Net cash provided by operating activities 220.8 519.2

Investing activities

3 unchanged sentences

Proceeds from sale-and-leaseback transactions in conjunction with acquisitions — 961.1

Acquisition of equity securities — ( 5.1 )

Additional contributions to joint ventures ( 3.9 ) —

1 unchanged sentence

Net cash used in investing activities ( 235.9 ) ( 542.1 )

For the six months ended June 30,

For the nine months ended September 30,

(in millions) 2020 2019

8 unchanged sentences

Principal payments on finance leases ( 2.7 ) ( 4.6 )

Proceeds from common stock offering, net of discounts and fees 331.2 —

Proceeds from common stock offerings, net of discounts and fees 1,288.8 —

Proceeds from exercise of options 55.5 1.0

3 unchanged sentences

Other ( 7.0 ) ( 4.1 )

Net cash provided by financing activities 1,155.1 86.9

Net cash provided by (used in) financing activities 1,445.5 ( 33.9 )

Change in cash, cash equivalents, and restricted cash 1,430.4 ( 56.8 )

14 unchanged sentences

Accrued capital expenditures $ ( 13.1 ) $ 8.3

Acquisition of equity securities $ — $ 16.1

See accompanying notes to the Condensed Consolidated Financial Statements.

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(“Barstool Sports”), a leading digital sports, entertainment and media platform.

We also operate an interactive gaming (“iGaming”) division through our subsidiary, Penn Interactive Ventures, LLC (“Penn Interactive”), which launched an online casino (“iCasino”) through our HollywoodCasino.com gaming platform in the third quarter of 2019 and is scheduled to launch an online sports betting app called Barstool Sports in the third quarter of 2020.

We also operate an interactive gaming (“iGaming”) division through our subsidiary, Penn Interactive Ventures, LLC (“Penn Interactive”), which operates an online casino (“iCasino”) and launched an online sports betting app called Barstool Sports in Pennsylvania in September 2020.

Our MYCHOICE ® customer loyalty program (the “my choice program”) provides our members with various benefits, including complimentary goods and/or services.

As of June 30, 2020, we owned, managed, or had ownership interests in 41 gaming and racing properties in 19 states and were licensed to offer live sports betting at our properties in Indiana, Iowa, Michigan, Mississippi, Nevada, Pennsylvania and West Virginia.

As of September 30, 2020, we owned, managed, or had ownership interests in 41 gaming and racing properties in 19 states and were licensed to offer live sports betting at our properties in Indiana, Iowa, Michigan, Mississippi, Nevada, Pennsylvania and West Virginia.

The majority of the real estate assets (i.e., land and buildings) used in our operations are subject to triple net master leases;

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On March 11, 2020, the World Health Organization declared the novel coronavirus (known as “COVID-19”) outbreak to be a global pandemic.

We began temporary suspension of the operations of all of our 41 properties starting between March 13, 2020 and March 19, 2020 pursuant to various orders from state gaming regulatory bodies or governmental authorities to combat the rapid spread of COVID-19.

We began reopening our properties on May 18, 2020 with reduced gaming and hotel capacity and limited food and beverage offerings in order to accommodate comprehensive social distancing and health and safety protocols developed in close consultation with state regulators and local and state public health officials.

As of June 30, 2020, we reopened 31 of our properties and as of the date of filing this Quarterly Report on Form 10-Q with the U.S.

Securities and Exchange Commission (the “SEC”), all of our properties, with the exception of Tropicana Las Vegas (“Tropicana”), which is scheduled to reopen on September 1, 2020;

Valley Race Park;

and Zia Park Casino;

have reopened.

During the first quarter of 2020, the Company took various actions to reduce its cost structure during the property closures to help mitigate the operating and financial impact of the COVID-19 pandemic, which included:

(i) furloughing approximately 26,000 employees and operating with a minimum staffing of less than 850 employees company-wide during the closures;

(ii) enacting meaningful compensation reductions to its remaining property and corporate leadership teams effective April 1, 2020 until such time as the Company determines that its properties have substantially returned to normal operations;

and (iii) executing substantial reductions in operating expenses, capital expenditures, including temporarily suspending construction of its two planned Category 4 development projects in Pennsylvania, and overall costs.

In addition, the Company’s Board of Directors elected to forgo their cash compensation effective April 1, 2020 until such time as the Company determines that its properties have substantially returned to normal operations.

As of June 30, 2020, approximately 13,000 employees have returned to work.

Between March 13, 2020 and May 19, 2020, the Company entered into a series of transactions to improve its financial position and liquidity in light of the COVID-19 pandemic, including:

(i) borrowing the remaining available amount of $ 430.0 million under its Revolving Credit Facility;

(ii) entering into a binding term sheet with GLPI (the “Term Sheet”) whereby GLPI agreed to (a) purchase the real estate assets associated with Tropicana in exchange for rent credits of $ 307.5 million, which closed on April 14, 2020, and (b) purchase the land underlying the Company’s H ollywood Casino Morgantown (“Morgantown”) development project in Morgantown, Pennsylvania, in exchange for rent credits of $ 30.0 million, which is expected to close in the fourth quarter of 2020 (the land will be immediately leased back from GLPI);

(iii) completing an offering of $ 330.5 million aggregate principal amount of 2.75 % Convertible Notes ;

and (iv) completing a public offering of 19,166,667 aggregate shares of common stock, par value of $ 0.01 per share, of the Company (“Penn Common Stock”) for gross proceeds of $ 345.0 million.

We began temporary suspension of the operations of all of our properties between March 13, 2020 and March 19, 2020 pursuant to various orders from state gaming regulatory bodies or governmental authorities to combat the rapid spread of COVID-19.

As of September 30, 2020 , with the exception of Valley Race Park and Zia Park Casino, all of our properties have reopened.

During the first quarter of 2020, the Company took various actions to reduce its cost structure to help mitigate the operating and financial impact of the COVID-19 pandemic during the period the properties were closed, which included:

(i) furloughing the vast majority of its employees and operating with a minimum staffing of less than 850 employees company-wide during the closures;

(ii) enacting meaningful compensation reductions to its remaining property and corporate leadership teams effective April 1, 2020 and through September 30, 2020 (compensation was fully restored effective October 1, 2020);

and (iii) executing substantial reductions in operating expenses and capital expenditures, including temporarily suspending construction of its two planned Category 4 development projects in Pennsylvania.

In addition, during the pendency of property closures, the Company’s Board of Directors elected to forgo their cash compensation effective April 1, 2020 and through September 30, 2020.

Between March 13, 2020 and September 30, 2020, we entered into a series of transactions to improve our financial position and liquidity in light of the COVID-19 pandemic, including:

(i) on March 13, 2020, we provided notice to our lenders to borrow the remaining available amount of $ 430.0 million under our Revolving Credit Facility;

(ii) on March 27, 2020, we entered into a binding term sheet with GLPI (the “Term Sheet”) whereby GLPI agreed to (a) purchase the real estate assets associated with Tropicana Las Vegas (“Tropicana”) in exchange for rent credits of $ 307.5 million, which closed on April 16, 2020, and (b) a sale-leaseback of the land underlying our Hollywood Casino Morgantown (“Morgantown”) development project in Morgantown, Pennsylvania, in exchange for rent credits of $ 30.0 million, which closed on October 1, 2020;

(iii) on May 14, 2020 (May 19, 2020 with respect to the Underwriters’ exercising their options to acquire additional 2.75% Convertible Notes), we completed a public offering of $ 330.5 million aggregate principal amount of 2.75 % Convertible Notes;

(iv) on May 14, 2020 (May 19, 2020 with respect to the Underwriters’ exercising their options to purchase additional shares), we completed a public offering of 19,166,667 aggregate shares of common stock, par value of $ 0.01 per share, of the Company (“Penn Common Stock”) for gross proceeds of $ 345.0 million;

and (v) on September 24, 2020 (September 25, 2020 with respect to the Underwriters’ exercising their options to purchase additional shares), we completed a public offering of 16,100,000 aggregate shares of Penn Common Stock for gross proceeds of $ 982.1 million.

In addition, on April 14, 2020, the Company entered into an amendment to its Credit Agreement, which, among other things, provides it with relief from its financial covenants for a period of up to one year.

Further, on September 30, 2020, the Company fully repaid $ 670.0 million of outstanding borrowings under its Revolving Credit Facility.

The terms “Revolving Credit Facility,” “Convertible Notes” and “Credit Agreement” are defined in Note 10, “Long-term Debt.”

The COVID-19 pandemic caused significant disruptions to our business and a material adverse impact on our financial condition, results of operations and cash flows, the magnitude of which continues to develop based on (i) the timing and extent of any recovery in visitation and consumer spending at our properties;

(ii) the continued impact of implementing social

distancing and health and safety guidelines at our properties, including reductions in gaming and hotel capacity and limiting the number of food and beverage options;

and (iii) whether any of our properties will be required to again temporarily suspend operations in the event that the pandemic worsens.

We are currently unable to determine whether, when or how the conditions surrounding the COVID-19 pandemic will change or whether any recovery in visitation and consumer spending is sustainable.

In the event that the COVID-19 pandemic worsens and/or we are required to again temporarily suspend our operations, we may need to take additional actions to reduce costs, preserve liquidity and remain in compliance with our financial covenants.

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which provides emergency economic assistance for American workers, families and businesses affected by the COVID-19 pandemic.

The economic relief package includes government loan enhancement programs and various tax provisions to help improve liquidity for American businesses.

Based on our evaluation of the CARES Act, we qualify for certain employer refundable payroll credits, deferral of applicable payroll taxes, net operating loss carryback and immediate expensing for eligible qualified improvement property.

We intend to continue to review and consider any available potential benefits under the CARES Act for which we qualify, including those described above.

Based on our evaluation of the CARES Act, we qualify for certain employer refundable payroll credits, deferral of applicable payroll taxes, net operating loss (“NOL”) carrybacks and immediate expensing for eligible qualified improvement property.

We intend to continue to review and consider available benefits under the CARES Act for which we qualify, including those described above.

The COVID-19 pandemic caused significant disruptions to our business and had a material adverse impact on our financial condition, results of operations and cash flows, the magnitude of which continues to develop based on (i) the timing and extent of the recovery in visitation and consumer spending at our properties;

(ii) the continued impact of implementing social distancing and health and safety guidelines at our properties, including reductions in gaming and hotel capacity and limiting the number of food and beverage options;

and (iii) whether any of our properties will be required to again temporarily suspend operations in the event that the pandemic significantly worsens.

We are currently unable to determine whether, when or how the conditions surrounding the COVID-19 pandemic will change or whether the recovery in visitation and consumer spending is sustainable.

The Company could experience other potential adverse impacts as a result of the COVID-19 pandemic, including, but not limited to, further charges from adjustments to the carrying amount of goodwill and other intangible assets, long-lived asset impairment charges, or impairments of investments in joint ventures.

In addition, the negative impacts of the COVID-19 pandemic may result in further changes in the amount of valuation allowance required.

Actual results may differ materially from the Company’s current estimates as the scope of the COVID-19 pandemic evolves, depending largely, though not exclusively, on the impact of required capacity reductions, social distancing and health guidelines, and the sustainability of current trends in recovery at our reopened properties.

Actual results may differ materially from the Company’s current estimates as the scope of the COVID-19 pandemic evolves, depending largely, though not exclusively, on the impact of required capacity reductions, social distancing and health and safety guidelines, and the sustainability of current trends in recovery at our reopened properties.

Basis of Presentation:

The unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the rules and regulations of the SEC.

Securities and Exchange Commission (the “SEC”).

Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements.

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Revenues recorded to food, beverage, hotel and other and offset to gaming revenues were as follows:

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

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In addition, members of the my choice program earn credit toward tier status, which entitles them to receive certain other benefits, such as gifts.

The obligation associated with our my choice program, which is included in “Accrued expenses and other current liabilities” within our unaudited Condensed Consolidated Balance Sheets, was $ 40.5 million and $ 36.2 million as of June 30, 2020 and December 31, 2019, respectively, and consisted principally of the obligation associated with the loyalty points.

The obligation associated with our my choice program, which is included in “Accrued expenses and other current liabilities” within our unaudited Condensed Consolidated Balance Sheets, was $ 35.2 million and $ 36.2 million as of September 30, 2020 and December 31, 2019, respectively, and consisted principally of the obligation associated with the loyalty points.

Our loyalty point obligations are generally settled within six months of issuance;

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Unpaid wagers primarily relate to the Company’s obligation to settle outstanding slot tickets, pari-mutuel racing tickets and gaming chips with customers and generally represent obligations stemming from prior wagering events, of which revenue was previously recognized.

The Company’s advance payments on goods and services yet to be provided and for unpaid wagers were $ 31.8 million and $ 42.2 million as of June 30, 2020 and December 31, 2019, respectively, of which $ 0.6 million were classified as long-term in both periods.

The Company’s advance payments on goods and services yet to be provided and for unpaid wagers were $ 42.1 million and $ 42.2 million as of September 30, 2020 and December 31, 2019, respectively, of which $ 0.6 million were classified as long-term in both periods.

The current portion and long-term portion of our advance payments on goods and services yet to be provided and for unpaid wagers are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities” within our unaudited Condensed Consolidated Balance Sheets, respectively.

During the third quarter of 2019, Penn Interactive entered into multi-year agreements with sports betting operators for online sports betting and related iGaming market access across our portfolio of properties, of which we received cash and equity securities, including ordinary shares and warrants, specific to two operator agreements.

Deferred revenue associated with third-party sports betting operators for online sports betting and related iGaming market access, which is included in “Other long-term liabilities” within our unaudited Condensed Consolidated Balance Sheets, was $ 46.3 million and $ 43.6 million as of June 30, 2020 and December 31, 2019, respectively.

Penn Interactive enters into multi-year agreements with sports betting operators for online sports betting and related iGaming market access across our portfolio of properties, from which we received cash and equity securities, including ordinary shares and warrants, specific to two operator agreements.

Deferred revenue associated with third-party sports betting operators for online sports betting and related iGaming market access, which is included in “Other long-term liabilities” within our unaudited Condensed Consolidated Balance Sheets, was $ 51.8 million and $ 43.6 million as of September 30, 2020 and December 31, 2019, respectively.

Gaming and Racing Taxes:

We are subject to gaming and pari-mutuel taxes based on gross gaming revenue and pari-mutuel revenue in the jurisdictions in which we operate.

The Company primarily recognizes gaming and pari-mutuel tax expense based on the statutorily required percentage of revenue that is required to be paid to state and local jurisdictions in the states where or in which wagering occurs.

For the three and six months ended June 30, 2020, these expenses, which were recorded primarily in gaming expense within the unaudited Condensed Consolidated Statements of Operations and

Comprehensive Income (Loss), were $ 97.6 million and $ 433.9 million, respectively, as compared to $ 399.8 million and $ 786.3 million, respectively , for the three and six months ended June 30, 2019.

For the three and nine months ended September 30, 2020, these expenses, which

were recorded primarily in gaming expense within the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), were $ 349.2 million and $ 783.1 million, respectively, as compared to $ 403.1 million and $ 1,189.4 million, respectively , for the three and nine months ended September 30, 2019.

Convertible Debt:

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Basic earnings per share (“EPS”) is computed by dividing net income (loss) applicable to common stock by the weighted-average number of common shares outstanding during the period.

Diluted EPS reflects the additional dilution, if any, for all potentially-dilutive securities such as stock options, unvested restricted stock awards (“RSAs”), and outstanding convertible preferred stock and convertible debt.

Diluted EPS reflects the additional dilution, if any, for all potentially-dilutive securities such as stock options, unvested restricted stock awards (“RSAs”), outstanding convertible preferred stock and convertible debt.

Holders of the Company’s Series D Preferred Stock (as defined in Note 12, “Investments in and Advances to Unconsolidated Affiliates” ) are entitled to participate equally and ratably in all dividends and distributions paid to holders of Penn Common Stock irrespective of any vesting requirement.

Accordingly, the Series D Preferred Stock shares are considered a participating security and the Company is required to apply the two-class method to consider the impact of the preferred shares on the calculation of basic and diluted EPS.

Since the Company is currently in a net loss position and the holders of the Company’s Series D Preferred Stock are not obligated to absorb losses, the Company is not required to present the two-class method.

However, in the event the Company is in a net income position, the two-class method must be applied by allocating all earnings during the period to common shares and preferred shares.

The holders of the Company’s Series D Preferred Stock are not obligated to absorb losses;

therefore, in reporting periods where the Company is in a net loss position, it does not apply the two-class method.

In reporting periods where the Company is in a net income position, the two-class method is applied by allocating all earnings during the period to common shares and preferred shares.

See Note 16, “Earnings (Loss) per Share,” for more information.

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2018-15, “Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”).

Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license.

Under the new guidance, customers apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license.

This will result in certain implementation costs being capitalized;

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We adopted ASU 2018-15 during the first quarter of 2020 using a prospective approach, which did not have a material impact on our unaudited Condensed Consolidated Financial Statements.

Accounting Pronouncements to be Implemented

In December 2019, the FASB issued ASU No.

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ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company is currently evaluating the impact of the adoption of ASU 2019-12 on its consolidated financial statements.

We adopted ASU 2019-12 during the third quarter of 2020 on a prospective basis, which did not have a material impact on our unaudited Condensed Consolidated Financial Statements.

Accounting Pronouncements to be Implemented

In January 2020, the FASB issued ASU No.

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similar investment of the same issuer.

Among other topics, ASU 2020-01 clarifies that an entity should consider observable transactions that requires it to either apply or discontinue the equity method of accounting.

Among other topics, ASU 2020-01 clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting.

For public business entities, ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

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The Company is currently evaluating the impact of the adoption of ASU 2020-04 on its consolidated financial statements.

In August 2020, The FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Topic 814):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”).

ASU 2020-06 eliminates the number of accounting models used to account for convertible debt instruments and convertible preferred stock.

The update also amends the disclosure requirements for convertible instruments and EPS in effort to increase financial reporting transparency.

ASU 2020-06 will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact of the adoption of ASU 2020-06 on its consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently being studied by standard-setting organizations and certain regulatory agencies.

Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.

Note 4— Hurricane Laura

On August 27, 2020, Hurricane Laura made landfall in Lake Charles, Louisiana, which caused significant damage to our L’Auberge Lake Charles property and closure of the property for 17 days.

The Company maintains insurance, subject to certain deductibles, for the repair or replacement of assets that suffered loss and provides coverage for interruption to our business, including lost profits.

As of September 30, 2020, the Company recorded a receivable of $ 50.6 million relating to our estimate of repairs and maintenance costs which have been incurred as well as identified property and equipment which have been written off for which we deem the recovery of such costs from our insurer to be probable.

The insurance recovery receivable is included in “Receivables” within the unaudited Condensed Consolidated Balance Sheets.

As we deem it is probable that the proceeds to be recovered from our insurers exceeds the total of our insurance recovery recorded and our insurers’ deductible, we did not record any loss associated with the impact of this natural disaster.

Additionally, as of September 30, 2020, we were in process of performing our due diligence in an effort to quantify the claim amount under the policy that will be submitted to the insurer.

We expect to complete our due diligence and submit the claim to the insurer during the fourth quarter of 2020.

As such, the Company did not receive any proceeds relating to this event for the three and nine months ended September 30, 2020.

Timing differences are likely to exist between the recognition of (i) impairment losses and capital expenditures made to repair or restore the assets and (ii) the receipt of insurance proceeds within the Company’s consolidated financial statements.

We will record proceeds in excess of the recognized losses and lost profits under our business interruption insurance as a gain contingency in accordance with ASC 450, “Contingencies,” which we expect to recognize at the time of final settlement or when nonrefundable cash advances are made in a period subsequent to September 30, 2020.

Note 5— Revenue Disaggregation

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Our revenue disaggregation by type of revenue and geographic location was as follows:

For the three months ended June 30, 2020

For the three months ended September 30, 2020

(in millions) Northeast South West Midwest Other Intersegment Eliminations (1)

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Total revenues $ 545.1 $ 255.6 $ 78.7 $ 229.1 $ 23.7 $ ( 2.5 ) $ 1,129.7

For the three months ended June 30, 2019

For the three months ended September 30, 2019

(in millions) Northeast South West Midwest Other Intersegment Eliminations (1)

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Total revenues $ 628.9 $ 276.6 $ 161.5 $ 275.8 $ 12.4 $ ( 0.7 ) $ 1,354.5

For the six months ended June 30, 2020

For the nine months ended September 30, 2020

(in millions) Northeast South West Midwest Other Intersegment Eliminations (1)

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Total revenues $ 1,168.5 $ 600.4 $ 223.0 $ 493.2 $ 71.6 $ ( 5.4 ) $ 2,551.3

For the six months ended June 30, 2019

For the nine months ended September 30, 2019

(in millions) Northeast South West Midwest Other Intersegment Eliminations (1)

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Hollywood Casino Perryville Purchase Option

The Term Sheet discussed in Note 1, “Organization and Basis of Presentation” provides that the Company and GLPI will enter into an option agreement whereby GLPI will grant the Company the exclusive right until December 31, 2020 to purchase the operations of Hollywood Casino Perryville for $ 31.1 million, with the closing of such purchase to occur on a date selected by the Company during 2021.

If the option is exercised and the transaction is completed, we would lease the real estate assets associated with Hollywood Casino Perryville from GLPI with initial rent of $ 7.8 million per year subject to escalation.

The option agreement is expected to be formalized in the third quarter of 2020.

If, as anticipated, the option is exercised and the transaction is completed, we would lease the real estate assets associated with Hollywood Casino Perryville from GLPI with initial rent of $ 7.8 million per year subject to escalation.

We expect to exercise the purchase option by the end of 2020.

Tropicana Las Vegas

On April 16, 2020, we closed on a purchase agreement with GLPI pursuant to which GLPI acquired the real estate assets associated with our Tropicana property in exchange for rent credits of $ 307.5 million that we began utilizing to pay rent under our existing Master Leases and the Meadows Lease in May 2020.

On April 16, 2020, we sold the real estate assets associated with our Tropicana property to GLPI in exchange for rent credits of $ 307.5 million that we began utilizing to pay rent under our existing Master Leases and the Meadows Lease in May 2020.

Contemporaneous with the sale, the Company entered into the Tropicana Lease (as defined and discussed in Note 11, “Leases” ).

Pursuant to the purchase agreement, GLPI will conduct a sale process with respect to both the real estate assets and the operations of Tropicana for up to 24 months (the “Sale Period”), with the Company receiving (i) 75 % of the proceeds above $ 307.5 million plus certain taxes, expenses and costs if an agreement for such sale is signed in the first 12 months of the Sale Period or (ii) 50 % of the proceeds above $ 307.5 million plus certain taxes, expenses and costs if an agreement for such sale is signed in the remainder of the Sale Period.

As noted above, Tropicana is scheduled to reopen on September 1, 2020.

As of June 30, 2020, we had $ 176.7 million of rent credits that will be utilized in future periods.

As of September 30, 2020, we had $ 35.0 million of rent credits that will be utilized in future periods pertaining to this transaction (see “Morgantown” discussion below).

The rent credits are included in “Other current assets” within our unaudited Condensed Consolidated Balance Sheets.

We recognized a gain on this transaction of $ 28.5 million during the three and six months ended June 30, 2020, which is included in “General and administrative” within our unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

We recognized gains on this transaction of $ 1.8 million and $ 30.3 million during the three and nine months ended September 30, 2020, respectively, which are included in “General and administrative” within our unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

On October 1, 2020, we sold the land underlying our Morgantown development project to GLPI in exchange for rent credits of $ 30.0 million.

Contemporaneous with the sale, the Company entered into a triple net lease with GLPI for the land underlying Morgantown (“Morgantown Lease”).

The initial term of the Morgantown Lease is twenty years with six subsequent, five-year renewal periods, exercisable at the Company’s option.

Annual rent under the Morgantown Lease will be $ 3.0 million and is subject to an annual escalator based on the consumer price index.

All improvements made on the leased land, including the building being constructed, will be owned by the Company while the lease is in effect, however, on the expiration or earlier termination of the Morgantown Lease, ownership of all tenant improvements on the land will transfer to GLPI.

The rent credits received as a part of this transaction may be utilized to pay rent under the Master Leases, the Meadows Lease, and the Morgantown Lease.

Note 7— Property and Equipment

Property and equipment, net, consisted of the following:

(in millions) June 30,

(in millions) September 30,

2020 December 31,

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Depreciation expense was as follows:

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

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Goodwill, net 196.4 184.6 200.2 621.1 68.4 1,270.7

Impairment losses during period ( 43.5 ) ( 9.0 ) — ( 60.5 ) — ( 113.0 )

Balance as of June 30, 2020

Impairment losses during year-to-date period ( 43.5 ) ( 9.0 ) — ( 60.5 ) — ( 113.0 )

Balance as of September 30, 2020

Goodwill, gross 914.3 236.6 216.8 1,116.7 156.1 2,640.5

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The trademark impairments pertained to our Northeast, South, Midwest and West segments, in the amounts of $ 17.0 million, $ 17.0 million, $ 15.0 million and $ 12.5 million, respectively.

There were no impairment charges recorded on goodwill and other intangible assets during the three months ended June 30, 2020 or the three and six months ended June 30, 2019.

There were no impairment charges recorded on goodwill and other intangible assets during the three months ended September 30, 2020 or the three and nine months ended September 30, 2019.

The aforementioned impairments are included in “Impairment losses” within our unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

See Note 17, “Fair Value Measurements,” for quantitative information about the significant unobservable inputs used in the fair value measurements of other intangible assets.

As of March 31, 2020, the date of the most recent interim impairment test, five reporting units had negative carrying amounts.

As of March 31, 2020, five reporting units had negative carrying amounts.

The amount of goodwill at these reporting units was as follows (in millions):

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The table below presents the gross carrying amount, accumulated amortization and net carrying amount of each major class of other intangible assets:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

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Total other intangible assets $ 1,632.3 $ ( 117.2 ) $ 1,515.1 $ 2,125.5 $ ( 99.0 ) $ 2,026.5

Amortization expense related to our amortizing intangible assets was $ 6.2 million and $ 12.3 million for the three and six months ended June 30, 2020, respectively, as compared to $ 6.4 million and $ 12.3 million for the three and six months ended June 30, 2019, respectively.

The following table presents the estimated amortization expense based on our amortizing intangible assets as of June 30, 2020 (in millions):

Amortization expense related to our amortizing intangible assets was $ 5.9 million and $ 18.2 million for the three and nine months ended September 30, 2020, respectively, as compared to $ 6.4 million and $ 18.7 million for the three and nine months ended September 30, 2019, respectively.

The following table presents the estimated amortization expense based on our amortizing intangible assets as of September 30, 2020 (in millions):

Years ending December 31,

2020 (excluding the six months ended June 30, 2020) $ 8.4

2020 (excluding the nine months ended September 30, 2020) $ 3.0

Thereafter 4.9

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Accrued expenses and other current liabilities consisted of the following:

(in millions) June 30,

(in millions) September 30,

2020 December 31,

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Accrued expenses and other current liabilities $ 609.7 $ 631.3

(1) Amounts as of June 30, 2020 and December 31, 2019 included $ 40.4 million and $ 38.3 million, respectively, pertaining to the Company’s accrued progressive jackpot liability.

(1) Amounts as of September 30, 2020 and December 31, 2019 included $ 40.7 million and $ 38.3 million, respectively, pertaining to the Company’s accrued progressive jackpot liability.

Additionally, amounts include the obligation associated with its my choice program and the current portion of advance payments on goods and services yet to be provided and for unpaid wagers, which are discussed in Note 2, “Significant Accounting Policies.”

(2) Amounts as of June 30, 2020 and December 31, 2019 included $ 71.7 million and $ 80.1 million, respectively, pertaining to the Company’s non-qualified deferred compensation plan that covers management and other highly-compensated employees.

(2) Amounts as of September 30, 2020 and December 31, 2019 included $ 76.8 million and $ 80.1 million, respectively, pertaining to the Company’s non-qualified deferred compensation plan that covers management and other highly-compensated employees.

Note 10— Long-term Debt

Long-term debt, net of current maturities, was as follows:

(in millions) June 30,

(in millions) September 30,

2020 December 31,

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The Term Loan B Facility was fully repaid and terminated prior to 2019.

As of June 30, 2020, the Company had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating $ 29.4 million.

As of September 30, 2020, the Company had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating $ 29.4 million.

In October 2018, in connection with the acquisition of Pinnacle Entertainment, Inc.

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2.75 % Unsecured Convertible Notes

In May 2020, the Company completed an offering of $ 330.5 million aggregate principal amount of 2.75 % unsecured convertible notes that mature, unless earlier converted, redeemed or repurchased, on May 15, 2026 (the “Convertible Notes”) at a price of par.

In May 2020, the Company completed a public offering of $ 330.5 million aggregate principal amount of 2.75 % unsecured convertible notes that mature, unless earlier converted, redeemed or repurchased, on May 15, 2026 (the “Convertible Notes”) at a price of par.

After lender fees and discounts, net proceeds received by the Company were $ 322.2 million.

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However, in no event will the conversion exceed 55.5555 shares of common stock per $1,000 principal amount of notes.

As of June 30, 2020, based on the initial conversion price, the maximum number of shares that could be issued to satisfy the conversion feature of the Convertible Notes is 18,360,815 and the amount by which the Convertible Notes if-converted value exceeded its principal amount was $ 230.2 million.

Prior to February 15, 2026, at their election, holders of the Convertible Notes may convert outstanding notes starting in the fourth quarter of 2020 if the trading price of the Company’s common stock exceeds 130 % of the initial conversion price or, starting shortly after the issuance of the Convertible Notes, if the trading price per $1,000 principal amount of notes is less than 98 % of the product of the trading price of the Company’s common stock and the conversion rate then in effect.

As of September 30, 2020, the maximum number of shares that could be issued to satisfy the conversion feature of the Convertible Notes is 18,360,815 and the amount by which the Convertible Notes if-converted value exceeded its principal amount was $ 1,004.3 million.

Prior to February 15, 2026, at their election, holders of the Convertible Notes may convert outstanding notes starting in the fourth quarter of 2020 if the trading price of the Company’s common stock exceeds 130 % of the conversion price or, starting shortly after the issuance of the Convertible Notes, if the trading price per $1,000 principal amount of notes is less than 98 % of the product of the trading price of the Company’s common stock and the conversion rate then in effect.

The Convertible Notes may, at the Company’s election, be settled in cash, shares of common stock of the Company, or a combination thereof.

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The Convertible Notes consisted of the following components:

(in millions) June 30,

(in millions) September 30,

Liability component:

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Interest expense, net, was as follows:

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

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Interest expense related to the Convertible Notes was as follows:

For the three and six months ended June 30, 2020

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2020

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The debt discount and the debt issuance costs attributable to the liability component are being amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 9.23 %.

The remaining term of the Convertible Notes was 5.9 years as of June 30, 2020.

The remaining term of the Convertible Notes was 5.6 years as of September 30, 2020.

Our Credit Agreement and the indenture governing our 5.625 % Notes require us, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests.

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If we are unable to meet our financial covenants or in the event of a cross-default, it could trigger an acceleration of payment terms.

As of June 30, 2020, the Company was in compliance with all required financial covenants.

As of September 30, 2020, the Company was in compliance with all required financial covenants.

The Company believes that it will remain in compliance with all of its required financial covenants for at least the next twelve months following the date of filing this Quarterly Report on Form 10-Q with the SEC.

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Ohio Relocation Fees

As of June 30, 2020 and December 31, 2019, other long-term obligations included $ 68.8 million and $ 76.4 million, respectively, related to the relocation fees for Hollywood Gaming at Dayton Raceway (“Dayton”) and Hollywood Gaming at Mahoning Valley Race Course (“Mahoning Valley”), which opened in August 2014 and September 2014, respectively.

As of September 30, 2020 and December 31, 2019, other long-term obligations included $ 68.8 million and $ 76.4 million, respectively, related to the relocation fees for Hollywood Gaming at Dayton Raceway (“Dayton”) and Hollywood Gaming at Mahoning Valley Race Course (“Mahoning Valley”), which opened in August 2014 and September 2014, respectively.

The relocation fee for each property is payable as follows:

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This obligation is accreted to interest expense at an effective yield of 5.0 %.

The amount included in interest expense related to this obligation was $ 0.9 million and $ 1.8 million for the three and six months ended June 30, 2020, respectively, as compared to $ 1.1 million and $ 2.2 million for the three and six months ended June 30, 2019, respectively.

The amount included in interest expense related to this obligation was $ 0.8 million and $ 2.6 million for the three and nine months ended September 30, 2020, respectively, as compared to $ 1.0 million and $ 3.2 million for the three and nine months ended September 30, 2019, respectively.

Note 11— Leases

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In the future, upon exercising each of these renewal options, the term of the Penn Master Lease would extend to November 30, 2033 and the term of the Pinnacle Master Lease would extend to April 30, 2031;

and if all renewal options contained within the Penn Master Lease and the Pinnacle Master Lease were exercised, inclusive of the these renewal options, the term of the Penn Master Lease would extend to November 30, 2053 and the term of the Pinnacle Master Lease would extend to April 30, 2056.

and if all renewal

options contained within the Penn Master Lease and the Pinnacle Master Lease were exercised, inclusive of the these renewal options, the term of the Penn Master Lease would extend to November 30, 2053 and the term of the Pinnacle Master Lease would extend to April 30, 2056.

Penn Master Lease

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The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

extensions at GLPI’s option) or until the real estate assets and the operations of the Tropicana are earlier sold, as discussed in Note 5, “Acquisitions and Dispositions.” In the event that GLPI sells the real estate assets used in the operations of Tropicana, the Tropicana Lease will automatically terminate.

On April 16, 2020, we entered into the Tropicana Lease with a subsidiary of GLPI for the real estate assets used in the operations of Tropicana for nominal rent and will continue to operate the Tropicana for two years (subject to three one-year extensions at GLPI’s option) or until the real estate assets and the operations of the Tropicana are earlier sold, as discussed in Note 6, “Acquisitions and Dispositions.” In the event that GLPI sells the real estate assets used in the operations of Tropicana, the Tropicana Lease will automatically terminate.

Upon execution of the Tropicana Lease, we recorded an operating lease ROU asset of $ 61.6 million, which is included in “Lease right-of-use assets” within the unaudited Condensed Consolidated Balance Sheets.

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As a result of the annual escalator, which was determined to be $ 0.3 million, effective February 1, 2020, an additional operating lease ROU asset and corresponding operating lease liability of $ 3.1 million were recognized.

The following is a maturity analysis of our operating leases, finance leases and financing obligations as of June 30, 2020:

The following is a maturity analysis of our operating leases, finance leases and financing obligations as of September 30, 2020:

(in millions) Operating Leases Finance Leases Financing Obligations

Years ending December 31,

2020 (excluding the six months ended June 30, 2020) $ 214.4 $ 10.8 $ 183.6

2020 (excluding the nine months ended September 30, 2020) $ 105.4 $ 5.4 $ 91.8

2021 412.7 21.7 367.3

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Total payments made under the Triple Net Leases, inclusive of rent credits utilized, were as follows:

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

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$ 228.1 $ 222.6 $ 668.5 $ 645.4

(1) During the three months ended June 30, 2020, we utilized rent credits to pay $ 72.1 million, $ 54.2 million and $ 4.5 million of rent under the Penn Master Lease, Pinnacle Master Lease and Meadows Lease, respectively.

(1) During the three and nine months ended September 30, 2020, we utilized rent credits to pay $ 83.0 million, $ 54.2 million and $ 4.5 million and $ 155.1 million, $ 108.4 million, and $ 9.0 million of rent under the Penn Master Lease, Pinnacle Master Lease and Meadows Lease, respectively.

(2) Rent payable under the Tropicana Lease is nominal.

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The components of lease expense were as follows:

Location on unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For the three months ended June 30, For the six months ended June 30,

Location on unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

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Interest expense, net $ 103.7 $ 97.6 $ 300.2 $ 293.6

(1) Pertains to the operating lease components contained within the Master Leases (primarily land), the Meadows Lease, the Margaritaville Lease, the Greektown Lease, and the Tropicana Lease, inclusive of the variable expense associated with Columbus and Toledo for the operating lease components (the land), which was $ 1.6 million and $ 4.7 million for the three and six months ended June 30, 2020, respectively, pertaining to Columbus, and $ 6.2 million and $ 13.0 million for the three and six months ended June 30, 2019, respectively, pertaining to Columbus and Toledo.

(1) Pertains to the operating lease components contained within the Master Leases (primarily land), the Meadows Lease, the Margaritaville Lease, the Greektown Lease, and the Tropicana Lease, inclusive of the variable expense associated with Columbus and Toledo for the operating lease components (the land), which was $ 4.8 million and $ 9.5 million for the three and nine months ended September 30, 2020, respectively, pertaining to Columbus, and $ 2.3 million and $ 15.4 million for the three and nine months ended September 30, 2019, respectively, pertaining to Columbus and Toledo.

(2) Excludes the operating lease costs and variable lease costs pertaining to our triple net leases with our REIT landlords classified as operating leases, discussed in footnote (1) above.

(3) Primarily pertains to the Dayton and Mahoning Valley finance leases.

(4) Pertains to the components contained within the Master Leases (primarily buildings) determined to be financing obligations, inclusive of the variable expense associated with Columbus and Toledo for the finance lease components (the buildings), which was $ 2.2 million and $ 5.6 million for the three and six months ended June 30, 2020, respectively, pertaining to Columbus, and $ 5.7 million and $ 12.0 million for the three and six months ended June 30, 2019, respectively, pertaining to Columbus and Toledo.

(4) Pertains to the components contained within the Master Leases (primarily buildings) determined to be financing obligations, inclusive of the variable expense associated with Columbus and Toledo for the finance lease components (the buildings), which was $ 5.0 million and $ 10.6 million for the three and nine months ended September 30, 2020, respectively, pertaining to Columbus, and $ 2.1 million and $ 14.1 million for the three and nine months ended September 30, 2019, respectively, pertaining to Columbus and Toledo.

Note 12— Investments in and Advances to Unconsolidated Affiliates

As of June 30, 2020, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 36 % interest in Barstool Sports, its 50 % investment in Kansas Entertainment, the JV with International Speedway that owns Hollywood Casino at Kansas Speedway, its 50 % interest in Freehold Raceway, and its 50 % JV with MAXXAM, Inc.

As of September 30, 2020, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 36 % interest in Barstool Sports;

its 50 % investment in Kansas Entertainment, the JV with International Speedway that owns Hollywood Casino at Kansas Speedway;

its 50 % interest in Freehold Raceway;

and its 50 % JV with MAXXAM, Inc.

(“MAXXAM”) that owns and operates racetracks in Texas.

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1/1,000 th of a share of Series D Preferred Stock is convertible into one share of Penn Common Stock.

The Series D Preferred Stock will be entitled to participate equally and ratably in all dividends and distributions paid to holders of Penn Common Stock based on the number of shares of Penn

Common Stock into which such Series D Preferred Stock could convert.

The Series D Preferred Stock will be entitled to participate equally

and ratably in all dividends and distributions paid to holders of Penn Common Stock based on the number of shares of Penn Common Stock into which such Series D Preferred Stock could convert.

Series D Preferred Stock is nonvoting stock.

The Series D Preferred Stock issued to certain individual stockholders affiliated with Barstool Sports will be available for conversion into Penn Common Stock in tranches over the next four years as stipulated in the stock purchase agreement, with the first 20 % tranche available for conversion into Penn Common Stock in the first quarter of 2021.

As of June 30, 2020, none of the Series D Preferred Stock can be converted into Penn Common Stock.

As of September 30, 2020, none of the Series D Preferred Stock can be converted into Penn Common Stock.

As a part of the stock purchase agreement, we entered into a commercial agreement that provides us with access to Barstool Sports’ customer list and exclusive advertising on the Barstool Sports platform over the term of the agreement.

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The long-term portion of the prepaid advertising expense is included in “Other assets” within our unaudited Condensed Consolidated Balance Sheets.

As of June 30, 2020, our investment in Barstool Sports was $ 144.0 million, which is inclusive of $ 3.4 million of costs we incurred to close the transaction.

We record our proportionate share of Barstool Sports’ net income (loss) one quarter in arrears.

The Company determined that Barstool Sports qualified as a VIE as of June 30, 2020.

The Company did not consolidate its investment in Barstool Sports as of and for the three and six months ended June 30, 2020 as the Company determined that it did not qualify as the primary beneficiary of Barstool Sports either at the commencement date of its investment or for the subsequent period ended June 30, 2020, primarily as a result of the Company not having the power to direct the activities of the VIE that most significantly affect Barstool Sports’ economic performance.

As of September 30, 2020, our investment in Barstool Sports was $ 145.8 million, which is inclusive of $ 3.4 million of costs we incurred to close the transaction.

We record our proportionate share of Barstool Sports’ net income or loss one quarter in arrears.

The Company determined that Barstool Sports qualified as a VIE as of September 30, 2020.

The Company did not consolidate its investment in Barstool Sports as of and for the three and nine months ended September 30, 2020 as the Company determined that it did not qualify as the primary beneficiary of Barstool Sports either at the commencement date of its investment or for the subsequent period ended September 30, 2020, primarily as a result of the Company not having the power to direct the activities of the VIE that most significantly affect Barstool Sports’ economic performance.

Kansas Joint Venture

As of June 30, 2020 and December 31, 2019, our investment in Kansas Entertainment was $ 87.3 million and $ 90.8 million, respectively.

As of September 30, 2020 and December 31, 2019, our investment in Kansas Entertainment was $ 84.8 million and $ 90.8 million, respectively.

The Company has determined that Kansas Entertainment does not qualify as a VIE.

Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the JV, primarily as it did not have the ability to direct the activities of the JV that most significantly impacted the JV’s economic performance without the input of International Speedway.

Therefore, the Company did not consolidate its investment in Kansas Entertainment as of June 30, 2020 and December 31, 2019 and for the three and six months ended June 30, 2020 and 2019.

Therefore, the Company did not consolidate its investment in Kansas Entertainment as of September 30, 2020 and December 31, 2019 and for the three and nine months ended September 30, 2020 and 2019.

The following table provides summary income statement information of Kansas Entertainment for the comparative periods that are included within the Company’s unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss):

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

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Among other provisions, the CARES Act provides various forms of income tax relief to U.S.

taxpayers through temporary amendments to net operating loss (“NOLs”) rules, temporarily increases the limitation on interest expense deductibility and immediate expensing for eligible qualified improvement property.

taxpayers through temporary amendments to NOL rules, temporarily increases the limitation on interest expense deductibility and immediate expensing for eligible qualified improvement property.

We are currently evaluating the provisions of the CARES Act.

As of June 30, 2020, although we do not expect these provisions to have a significant impact on our effective tax rate, we are estimating an income tax refund between approximately $ 40 million and $ 50 million primarily attributable to the carryback of NOLs.

As of September 30, 2020, we are estimating an income tax refund between approximately $ 40 million and $ 50 million primarily attributable to the carryback of NOLs generated in the current year.

The Company calculates the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to its year-to-date pretax book income or loss.

The tax effects of discrete items, including but not limited to, excess tax benefits associated with stock-based compensation, valuation allowance adjustments based on new evidence and enactment of tax laws, are reported in the interim period in which they occur.

The effective tax rate (income taxes as a percentage of income or loss before income taxes) including discrete items was 21.4 % and 16.1 % for the three and six months ended June 30, 2020, as compared to 26.5 % for both the three and six months ended June 30, 2019.

The effective tax rate (income taxes as a percentage of income or loss before income taxes) including discrete items was ( 11.3 )% and 20.2 % for the three and nine months ended September 30, 2020, as compared to 31.0 % and 28.0 % for the three and nine months ended September 30, 2019.

Our effective income tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings, changes to our valuation allowance and the level of our tax credits.

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The Company’s valuation allowance as of December 31, 2019 was $ 54.2 million.

During the three months ended June 30, 2020, the Company determined that a valuation allowance was still necessary due to the significant impairment charge previously recorded during the first quarter of 2020, related to the COVID-19 pandemic.

During the three months ended September 30, 2020, the Company determined that a valuation allowance was still necessary due to the significant impairment charge previously recorded during the first quarter of 2020, related to the COVID-19 pandemic.

Such objective evidence of being in a three-year cumulative pretax loss limits our ability to consider other subjective evidence such as our forecast of pretax earnings.

As a result of this objective negative evidence, during the three months ended June 30, 2020, the Company increased the valuation allowance in the amount of $ 9.4 million on certain federal and state deferred tax assets that are more likely than not to be realized.

The Company also recorded a $ 22.5 million release in the valuation allowance recognized as part of “Additional paid-in-capital” related to the offering of the Convertible Notes (see Note 9, “Long-term Debt” ).

On March 27, 2020, we entered into the Term Sheet with GLPI whereby GLPI agreed to (i) purchase the real estate assets associated with our Tropicana property, which closed on April 16, 2020 , and (ii) purchase the land underlying our Morgantown development project subject to regulatory approval, which we expect to close in the fourth quarter of 2020.

These transactions are treated as a sale of business assets for income tax purposes.

The Morgantown land sale will be included in the interim period when the transaction closes, which may impact our estimated 2020 net operating loss.

During the three months ended September 30, 2020, the Company decreased the valuation allowance in the amount of $ 37.7 million on certain federal and state deferred tax assets that are more likely than not to be realized as a result of the recent law change whereby qualified improvement property now qualifies for accelerated bonus depreciation, which was applied on a retroactive basis.

Note 14— Commitments and Contingencies

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Note 15— Stockholders’ Equity and Stock-Based Compensation

Common Stock Offering

Common Stock Offerings

On May 14, 2020, the Company completed a public offering of 16,666,667 shares of Penn Common Stock and on May 19, 2020, the underwriters exercised their right to purchase an additional 2,500,000 shares of Penn Common Stock, resulting in an aggregate public offering of 19,166,667 shares of Penn Common Stock.

All of the shares were issued at a public offering price of $ 18.00 per share, resulting in gross proceeds of $ 345.0 million, and net proceeds of $ 331.2 million after underwriter fees and discounts of $ 13.8 million.

On September 24, 2020, the Company completed a public offering of 14,000,000 shares of Penn Common Stock and on September 25, 2020, the underwriters exercised their right to purchase an additional 2,100,000 shares of Penn Common Stock, resulting in an aggregate public offering of 16,100,000 shares of Penn Common Stock.

All of the shares were issued at a public offering price of $ 61.00 per share, resulting in gross proceeds of $ 982.1 million, and net proceeds of $ 957.6 million after underwriter fees and discounts of $ 24.5 million.

2018 Long Term Incentive Compensation Plan

The Company’s 2018 Long Term Incentive Compensation Plan (the “2018 Plan”) permits it to issue stock options (incentive and/or non-qualified), stock appreciation rights (“SARs”), RSAs, phantom stock units (“PSUs”) and other equity and cash awards to employees.

Non-employee directors are eligible to receive all such awards, other than incentive stock options.

The Company’s 2018 Long Term Incentive Compensation Plan, as amended (the “2018 Plan”) permits it to issue stock options (incentive and/or non-qualified), stock appreciation rights (“SARs”), RSAs, phantom stock units (“PSUs”) and other equity and cash awards to employees.

Non-employee directors and the chairman emeritus are eligible to receive all such awards, other than incentive stock options.

Pursuant to the 2018 Plan, 12,700,000 shares of the Company’s common stock are reserved for issuance.

For purposes of determining the number of shares available for issuance under the 2018 Plan, stock options and SARs (except cash-settled SARs) count against the 12,700,000 limit as one share of common stock for each share granted and restricted stock or any other full value stock award count as issuing 2.30 shares of common stock for each share granted.

Any awards that are not settled in shares of common stock are not counted against the limit.

As of June 30, 2020, there were 7,532,384 shares available for future grants under the 2018 Plan.

Any awards that are not settled in shares of common stock are not counted against the share limit.

As of September 30, 2020, there were 7,592,306 shares available for future grants under the 2018 Plan.

Performance Share Program

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Stock Options

The Company granted 0.6 million and 1.3 million stock options during the six months ended June 30, 2020 and 2019, respectively.

The Company granted 0.6 million and 2.4 million stock options during the nine months ended September 30, 2020 and 2019, respectively.

Stock-based Compensation Expense

Stock-based compensation expense, which pertains principally to our stock options and RSAs, for the three and six months ended June 30, 2020 was $ 2.9 million and $ 8.9 million, respectively, as compared to $ 3.3 million and $ 6.7 million for the three and six months ended June 30, 2019, respectively, and is included within the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) under “General and administrative.”

Stock-based compensation expense, which pertains principally to our stock options and RSAs, for the three and nine months ended September 30, 2020 was $ 2.8 million and $ 11.7 million, respectively, as compared to $ 3.7 million and $ 10.4 million for the three and nine months ended September 30, 2019, respectively, and is included within the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) under “General and administrative.”

Stock Appreciation Rights

Our SARs are accounted for as liability awards since they will be settled in cash and vest over a period of four years .

Our outstanding SARs are accounted for as liability awards since they will be settled in cash and vest over a period of four years .

The fair value of cash-settled SARs is calculated each reporting period and estimated using the Black-Scholes option pricing model.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Condensed Consolidated Balance Sheets, associated with its cash-settled SARs of $ 17.0 million and $ 14.4 million as of June 30, 2020 and December 31, 2019, respectively.

For SARs held by employees of the Company, there was $ 23.0 million of total unrecognized compensation cost as of June 30, 2020 that will be recognized over the awards remaining weighted-average vesting period of 2.9 years.

For the three and six months ended June 30, 2020, the Company recognized a charge to compensation expense of $ 17.7 million and $ 12.2 million, respectively, associated with these awards, as compared to a reduction to compensation expense of $ 0.5 million and a charge to compensation expense of $ 2.5 million for the three and six months ended June 30, 2019, respectively.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Condensed Consolidated Balance Sheets, associated with its cash-settled SARs of $ 43.9 million and $ 14.4 million as of September 30, 2020 and December 31, 2019, respectively.

For SARs held by employees of the Company, there was $ 60.0 million of total unrecognized compensation cost as of September 30, 2020 that will be recognized over the awards remaining weighted-average vesting period of 2.8 years.

For the three and nine months ended September 30, 2020, the Company recognized a charge to compensation expense of $ 37.8 million and $ 50.0 million, respectively, associated with these awards, as compared to a reduction to compensation expense of $ 0.5

million and a charge to compensation expense of $ 2.0 million for the three and nine months ended September 30, 2019, respectively.

Compensation expense associated with our SARs is recorded in “General and administrative” within the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

We paid $ 10.2 million and $ 1.8 million during the six months ended June 30, 2020 and 2019, respectively, related to cash-settled SARs.

We paid $ 22.8 million and $ 2.2 million during the nine months ended September 30, 2020 and 2019, respectively, related to cash-settled SARs.

Phantom Stock Units

Our PSUs entitle employees and directors to receive cash based on the fair value of the Company’s common stock on the vesting date.

Our outstanding PSUs entitle employees, non-employee, and the chairman emeritus to receive cash based on the fair value of the Company’s common stock on the vesting date.

Our PSUs vest over a period of three or four years .

The cash-settled PSUs are accounted for as liability awards and are re-measured at fair value each reporting period until they become vested with compensation expense being recognized over the requisite service period.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Condensed Consolidated Balance Sheets, associated with its cash-settled PSUs of $ 2.6 million and $ 3.3 million as of June 30, 2020 and December 31, 2019, respectively.

For PSUs held by employees and directors of the Company, there was $ 3.3 million of total unrecognized compensation cost as of June 30, 2020 that will be recognized over the awards remaining weighted-average vesting period of 1.7 years.

For the three and six months ended June 30, 2020, the Company recognized $ 1.9 million and $ 2.0 million of compensation expense, respectively, associated with these awards, as compared to $ 0.5 million and $ 1.6 million for the three and six months ended June 30, 2019, respectively.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Condensed Consolidated Balance Sheets, associated with its cash-settled PSUs of $ 6.1 million and $ 3.3 million as of September 30, 2020 and December 31, 2019, respectively.

For PSUs held by employees, non-employee directors, and the chairman emeritus of the Company, there was $ 15.4 million of total unrecognized compensation cost as of September 30, 2020 that will be recognized over the awards remaining weighted-average vesting period of 2.5 years.

For the three and nine months ended September 30, 2020, the Company recognized $ 5.3 million and $ 7.3 million of compensation expense, respectively, associated with these awards, as compared to $ 0.5 million and $ 2.1 million for the three and nine months ended September 30, 2019, respectively.

Compensation expense associated with our PSUs is recorded in “General and administrative” within the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

We paid $ 2.8 million and $ 2.5 million during the six months ended June 30, 2020 and 2019, respectively, pertaining to cash-settled PSUs.

We paid $ 4.5 million and $ 2.5 million during the nine months ended September 30, 2020 and 2019, respectively, pertaining to cash-settled PSUs.

Share Repurchase Program

In January 2019, the Company announced a share repurchase program pursuant to which the Board of Directors authorized to repurchase up to $ 200.0 million of the Company’s common stock, which expires on December 31, 2020.

The Company did not repurchase any shares of its common stock during the six months ended June 30, 2020.

During the six months ended June 30, 2019, the Company repurchased 1,271,823 shares of its common stock in open market transactions for $ 24.9 million at an average price of $ 19.55 per share.

In January 2019, the Company announced a share repurchase program pursuant to which the Board of Directors authorized the repurchase of up to $ 200.0 million of the Company’s common stock, which expires on December 31, 2020.

The Company did not repurchase any shares of its common stock during the nine months ended September 30, 2020.

During the nine months ended September 30, 2019, the Company repurchased 1,271,823 shares of its common stock in open market transactions for $ 24.9 million at an average price of $ 19.55 per share.

All of the repurchased shares were retired.

Note 16— Earnings (Loss) per Share

For the three and six months ended June 30, 2020, we recorded a net loss attributable to Penn National.

As such, because the dilution from potential common shares was antidilutive, we used basic weighted-average common shares outstanding, rather than diluted weighted-average common shares outstanding when calculating diluted loss per share.

For nine months ended September 30, 2020, we recorded a net loss attributable to Penn National.

The stock options, RSAs, convertible preferred shares and convertible debt that could potentially dilute basic EPS in the future that were not included in the computation of diluted loss per share were as follows:

(in millions) For the three months ended June 30, 2020 For the six months ended June 30, 2020

(in millions) For the nine months ended September 30, 2020

Assumed conversion of dilutive stock options 2.5

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Assumed conversion of convertible debt 7.4

The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three and six months ended June 30, 2019:

(in millions) For the three months ended June 30, 2019 For the six months ended June 30, 2019

The following table sets forth the allocation of net income for the three and nine months ended September 30, 2020 and 2019 under the two-class method:

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

Net income (loss) attributable to Penn National $ 141.9 $ 43.9 $ ( 680.6 ) $ 136.4

Net income applicable to preferred stock 0.8 — — —

Net income (loss) applicable to common stock $ 141.1 $ 43.9 $ ( 680.6 ) $ 136.4

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

Weighted-average common shares outstanding - Basic 138.2 115.2 126.9 115.8

Assumed conversion of dilutive stock options 1.6 1.9

Assumed conversion of dilutive RSAs 0.1 0.2

Assumed conversion of:

Dilutive stock options 2.8 1.4 — 1.7

Dilutive RSAs 0.4 0.1 — 0.2

Convertible debt 14.1 — — —

Weighted-average common shares outstanding - Diluted 155.5 116.7 126.9 117.7

Options to purchase 3.0 million and 1.9 million shares were outstanding during the three and six months ended June 30, 2020, respectively, as compared to 2.0 million and 1.9 million shares during the three and six months ended June 30, 2019, respectively, but were not included in the computation of diluted earnings (loss) per share because they were antidilutive.

The following table presents the calculation of basic and diluted earnings (loss) per share for the Company’s common stock for the three and six months ended June 30, 2020 and 2019:

For the three months ended June 30, For the six months ended June 30,

In addition, 0.8 million shares from the assumed conversion of convertible preferred shares were excluded from the computation of diluted income per share for the three months ended September 30, 2020 because including them would have been anti-dilutive.

Options to purchase zero and 0.9 million shares were outstanding during the three and nine months ended September 30, 2020, respectively, as compared to 2.5 million and 2.1 million shares during the three and nine months ended September 30, 2019, respectively, but were not included in the computation of diluted earnings (loss) per share because they were antidilutive.

The following table presents the calculation of basic and diluted earnings (loss) per share for the Company’s common stock for the three and nine months ended September 30, 2020 and 2019:

For the three months ended September 30, For the nine months ended September 30,

(in millions, except per share data) 2020 2019 2020 2019

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Net income (loss) applicable to common stock $ 141.1 $ 43.9 $ ( 680.6 ) $ 136.4

Interest expense, net of tax (1) :

Convertible Notes 4.2 — — —

Diluted income (loss) applicable to common stock $ 145.3 $ 43.9 $ ( 680.6 ) $ 136.4

Weighted-average common shares outstanding - diluted 155.5 116.7 126.9 117.7

Diluted earnings (loss) per share $ 0.93 $ 0.38 $ ( 5.36 ) $ 1.16

(1) The three months ended September 30, 2020 were tax-affected at a rate of 21%.

Note 17— Fair Value Measurements

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Equity Securities

As of June 30, 2020 and December 31, 2019, we held $ 48.3 million and $ 40.5 million in equity securities, respectively, including ordinary shares and warrants, which are reported as “Other assets” in our unaudited Condensed Consolidated Balance Sheet.

These equity securities are the result of Penn Interactive entering into multi-year agreements with third-party sports betting operators for online sports betting and related iGaming market access across our portfolio during the third quarter of 2019.

During the three and six months ended June 30, 2020, we recognized a holding gain of $ 29.5 million and $ 7.7 million, respectively, related to these equity securities, which is included in “Other,” as reported in “Other income (expenses)” within our unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

As of September 30, 2020 and December 31, 2019, we held $ 112.1 million and $ 40.5 million in equity securities, respectively, including ordinary shares and warrants, which are reported as “Other assets” in our unaudited Condensed Consolidated Balance Sheet.

During the three and nine months ended September 30, 2020, we recognized a holding gain of $ 67.9 million and $ 75.6 million, respectively, related to these equity securities, which is included in “Other,” as reported in “Other income (expenses)” within our unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The fair value of the equity securities was determined using Level 2 inputs, which use market approach valuation techniques.

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In addition, we own 1.0 % of the equity of Retama Nominal Holder, LLC, which holds a nominal interest in the racing license used to operate Retama Park Racetrack, and a 75.5 % interest in Pinnacle Retama Partners, LLC (“PRP”), which owns the contingent gaming rights that may arise if gaming under the existing racing license becomes legal in Texas in the future.

As of June 30, 2020 and December 31, 2019, PRP held $ 15.1 million in promissory notes issued by RDC and $ 6.7 million in local government corporation bonds issued by RDC, at amortized cost.

As of September 30, 2020 and December 31, 2019, PRP held $ 15.1 million in promissory notes issued by RDC and $ 6.7 million in local government corporation bonds issued by RDC, at amortized cost.

The promissory notes and the local government corporation bonds are collateralized by the assets of Retama Park Racetrack.

As of June 30, 2020 and December 31, 2019, the promissory notes and the local government corporation bonds, which have long-term contractual maturities, were included in “Other assets” within our unaudited Condensed Consolidated Balance Sheets.

As of September 30, 2020 and December 31, 2019, the promissory notes and the local government corporation bonds, which have long-term contractual maturities, were included in “Other assets” within our unaudited Condensed Consolidated Balance Sheets.

The contractual terms of these promissory notes include interest payments due at maturity;

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The fair value of our Revolving Credit Facility approximates its carrying amount as it is revolving, variable-rate debt, which we also classify as a Level 1 measurement.

Other long-term obligations as of June 30, 2020 and December 31, 2019 included the relocation fees for Dayton and Mahoning Valley, which are discussed in Note 9, “Long-term Debt,” and the repayment obligation of the hotel and event center located near Hollywood Casino Lawrenceburg.

Other long-term obligations as of September 30, 2020 and December 31, 2019 included the relocation fees for Dayton and Mahoning Valley, which are discussed in Note 10, “Long-term Debt,” and the repayment obligation of the hotel and event center located near Hollywood Casino Lawrenceburg.

The fair values of these long-term obligations are estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and are classified as Level 2 measurements.

Other Liabilities

Other liabilities as of June 30, 2020 principally consisted of contingent purchase price related to Plainridge Park Casino and, as of December 31, 2019, principally consisted of contingent purchase price related to Plainridge Park Casino and Absolute Games, LLC (“Absolute Games”), which was acquired by Penn Interactive during the second quarter of 2018.

The Plainridge Park Casino contingent purchase price is calculated based on earnings of the gaming operations over the first ten years of operations, which commenced in June 24, 2015.

As of June 30, 2020, we were contractually obligated to make six additional annual payments.

Other liabilities as of September 30, 2020 principally consisted of contingent purchase price related to Plainridge Park Casino and, as of December 31, 2019, principally consisted of contingent purchase price related to Plainridge Park Casino and Absolute Games, LLC (“Absolute Games”), which was acquired by Penn Interactive during the second quarter of 2018.

The Plainridge Park Casino contingent purchase price is calculated based on earnings of the gaming operations over the first ten years of operations, which commenced on June 24, 2015.

As of September 30, 2020, we were contractually obligated to make five additional annual payments.

During the second quarter of 2020, we made the second and final payment of $ 8.2 million on the Absolute Games contingent purchase price, which corresponded to the second year of operations after the acquisition and was calculated based on earnings.

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The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows:

June 30, 2020

September 30, 2020

(in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3

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Included in loss (1)

Balance as of June 30, 2020 $ 7.8

Balance as of September 30, 2020 $ 7.0

(1) The reduction in expense is included in “General and administrative” within our unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The following table sets forth the assets measured at fair value on a non-recurring basis during the six months ended June 30, 2020:

The following table sets forth the assets measured at fair value on a non-recurring basis during the nine months ended September 30, 2020:

(in millions) Valuation Date Valuation Technique Level 1 Level 2 Level 3 Total Balance Total Reduction in Fair Value

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Trademarks 3/31/2020 Discounted cash flow $ — $ — $ 216.5 $ 216.5 $ ( 61.5 )

The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities on a recurring basis as of June 30, 2020:

The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities on a recurring basis as of September 30, 2020:

Valuation Technique Unobservable Input Discount Rate

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The following table highlights our revenues and Adjusted EBITDAR for each reportable segment and reconciles Adjusted EBITDAR on a consolidated basis to net income (loss).

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

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( 14.6 ) ( 25.0 ) ( 42.2 ) ( 66.1 )

Intersegment eliminations (2)

— ( 0.1 ) — ( 0.1 )

452.6 407.9 729.4 1,205.8

Other operating benefits (costs) and other income (expenses):

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Interest expense, net ( 142.3 ) ( 133.5 ) ( 407.1 ) ( 400.5 )

Other 29.3 — 7.5 —

55.6 7.2 63.1 7.2

Income (loss) before income taxes 126.9 63.3 ( 854.0 ) 189.0

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(1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club and the Company’s JV interests in Sam Houston Race Park, Valley Race Park, and Freehold Raceway.

The Other category also includes Penn Interactive, which operates social gaming, our internally-branded retail sportsbooks, and iGaming;

The Other category also includes Penn Interactive, which operates social gaming, our internally-branded retail sportsbooks, iGaming and our Barstool Sports online sports betting app;

our management contract for Retama Park Racetrack;

Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property.

Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise

incurred to support a property are allocated to each property.

The Other category also includes corporate overhead costs, which consist of certain expenses, such as:

payroll, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have not otherwise been allocated to a property.

addition, the Other category includes our proportionate share of the Adjusted EBITDAR of Barstool Sports (as determined and discussed in footnotes (3) and (5) below).

In addition, the Other category includes our proportionate share of the Adjusted EBITDAR of Barstool Sports (as determined and discussed in footnotes (3) and (5) below).

(2) Represents the elimination of intersegment revenues associated with Penn Interactive and HPT.

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and stock-based compensation expense associated with Barstool Sports and our Kansas Entertainment JV.

For the three months ended June 30, For the six months ended June 30,

(6) Principally includes holding gains on our equity securities, which are discussed in Note 17, “Fair Value Measurements.” Additionally, includes non-recurring restructuring charges (primarily severance) of $ 12.4 million associated with a company-wide initiative, triggered by the COVID-19 pandemic, designed to (i) improve the operational effectiveness across our property portfolio;

and (ii) improve the effectiveness and efficiency of our Corporate functional support areas.

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2020 2019 2020 2019

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(in millions) Northeast South West Midwest Other (1)

As of June 30, 2020

As of September 30, 2020

Investment in and advances to unconsolidated affiliates (2)

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements