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Item 7. Management’s Discussion and Analysis

2021-02-26 compared with 2020-02-27 · 471 added, 416 removed, 263 unchanged (77% of the section changed)

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The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, our Consolidated Financial Statements and the notes thereto, included in this Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission.

This management’s discussion and analysis of financial condition and results of operations includes discussion as of and for the year ended December 31, 2020 compared to December 31, 2019.

Discussion of our financial condition and results of operations as of and for the year ended December 31, 2019 compared to December 31, 2018 can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission on February 27, 2020.

EXECUTIVE OVERVIEW

Penn National Gaming, Inc., together with its subsidiaries, is a leading, diversified, multi-jurisdictional owner and manager of gaming and racing properties and video gaming terminal (“VGT”) operations.

We currently offer live sports betting at our properties in Indiana, Iowa, Mississippi, Nevada, Pennsylvania and West Virginia.

We operate an interactive gaming (“iGaming”) division through our subsidiary, Penn Interactive Ventures, LLC (“Penn Interactive”), which recently launched an online casino (“iCasino”) in Pennsylvania through our HollywoodCasino.com gaming platform and entered into multi-year agreements with leading sports betting operators for online sports betting and iGaming market access across our portfolio of properties.

Our MYCHOICE ® customer loyalty program currently has over 20 million members and provides such members with various benefits, including complimentary goods and/or services.

References herein to “Penn National,” the “Company,” “we,” “our,” or “us” refer to Penn National Gaming, Inc.

and its subsidiaries, except where stated or the context otherwise indicates.

As of December 31, 2019 , we owned, managed, or had ownership interests in 41 properties in 19 states.

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

the most significant of which are the Penn Master Lease and the Pinnacle Master Lease (as such terms are defined in the “Liquidity and Capital Resources” section below and collectively referred to as the “ Master Leases ”), with Gaming and Leisure Properties, Inc.

Penn National Gaming, Inc., together with its subsidiaries (“Penn National,” the “Company,” “we,” “our,” or “us”), is a leading, diversified, multi-jurisdictional owner and manager of gaming and racing properties, retail and online sports betting operations, and video gaming terminal (“VGT”) operations.

Our wholly-owned interactive division, Penn Interactive Ventures, LLC (“Penn Interactive”), operates retail sports betting across the Company’s portfolio, as well as online sports betting, online social casino, bingo and online casinos (“iGaming”).

In February 2020, the Company acquired 36% (inclusive of 1% on a delayed basis) equity interest in Barstool Sports, Inc.

(“Barstool Sports”), a leading digital sports, entertainment, lifestyle and media company, and entered into a strategic relationship with Barstool Sports, whereby Barstool Sports will exclusively promote the Company's land-based retail sportsbooks, iGaming products and online sports betting products, including the Barstool Sportsbook mobile app, to its national audience.

We launched an online sports betting app called Barstool Sports in Pennsylvania in September 2020 and in Michigan in January 2021.

We also operate iGaming in Pennsylvania and Michigan.

Our my choice program currently has over 20 million members and provides such members with various benefits, including complimentary goods and/or services.

The Company’s strategy has continued to evolve from an owner and manager of gaming and racing properties into an omni-channel provider of retail and online gaming, live racing and sports betting entertainment.

We believe our continued evolution into a best-in-class omni-channel provider of retail and online gaming and sports betting entertainment will be a catalyst for our core land-based business, while also providing a platform for significant long-term shareholder value.

As of December 31, 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 Colorado, Illinois, 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;

the most significant of which are the Penn Master Lease and the Pinnacle Master Lease (as such terms are defined in “Liquidity and Capital Resources” and collectively referred to as the “Master Leases”), with Gaming and Leisure Properties, Inc.

GLPI) (“GLPI”), a real estate investment trust (“REIT”).

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Hollywood Casino York and Hollywood Casino Morgantown, both of which are expected to commence operations by the end of 2021.

In February 2020, we closed on our investment in Barstool Sports, Inc.

(“Barstool Sports”), a leading digital sports, entertainment and media platform, pursuant to a stock purchase agreement with Barstool Sports and stockholders of Barstool Sports, in which we purchased approximately 36% of the common stock of Barstool Sports for a purchase price of approximately $163 million.

The purchase price consisted of approximately $135 million in cash and $28 million in shares of non-voting convertible preferred stock.

Furthermore, three years after the closing of the transaction (or earlier at our election), we will increase our ownership in Barstool Sports to approximately 50% with an incremental investment of approximately $62 million, consistent with the implied valuation at the time of the initial investment.

Impact of the COVID-19 Pandemic and Company Response

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

We began temporarily suspending 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.

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.

During the fourth quarter of 2020, our properties temporarily suspended operations in Pennsylvania, Michigan and Illinois and were subject to increased operational restrictions in Ohio and Massachusetts (among other states).

Our Michigan property was temporarily closed on November 17, 2020 and reopened December 23, 2020.

Our Pennsylvania properties were temporarily closed on December 12, 2020 and reopened on January 4, 2021.

Our Illinois properties were temporarily closed on November 20, 2020 and began reopening with limited hours of operations beginning January 16, 2021 and throughout the week.

The property closures were pursuant to various orders from state gaming regulatory bodies or governmental authorities to combat the rapid spread of COVID-19.

As of February 26, 2021 , all of our properties were open to the public with the

exception of Zia Park and Valley Race Park, which remain closed.

For a thorough discussion of the operating performance of our properties, see “Results of Operations” below.

Between March 13, 2020 and December 31, 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.

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

Further, on November 12, 2020 the Company prepaid $115.0 million of outstanding borrowings on its Term Loan B-1 Facility.

The terms “Revolving Credit Facility,” “Convertible Notes,” “Credit Agreement” and "Term Loan B-1" are defined in “Liquidity and Capital Resources ” .

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, hotel capacity, limiting the number of food and beverage options and limiting other amenities;

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 and safety guidelines, and the sustainability of current trends in recovery at our reopened properties.

Recent Acquisitions, Development Projects and Other

In February 2020, we closed on our investment in Barstool Sports pursuant to a stock purchase agreement with Barstool Sports and certain stockholders of Barstool Sports, in which we purchased 36% (inclusive of 1% on a delayed basis) of the common stock of Barstool Sports for a purchase price of $161.2 million.

Within three years after the closing of the transaction (or earlier at our election), we will increase our ownership in Barstool Sports to approximately 50% by purchasing approximately $62 million worth of additional shares of Barstool Sports common stock, consistent with the implied valuation at the time of the initial investment, which was $450.0 million.

With respect to the remaining Barstool Sports shares, we have immediately exercisable call rights, and the existing Barstool Sports stockholders have put rights exercisable beginning three years after closing, all based on a fair market value calculation at the time of exercise (subject to a cap of $650.0 million and a floor of 2.25 times the annualized revenue of Barstool Sports, all subject to various adjustments).

We also have the option to bring in another partner who would acquire a portion of our share of Barstool Sports.

Upon closing, we became Barstool Sports’ exclusive gaming partner for up to 40 years and have the sole right to utilize the Barstool Sports brand for all of our online and retail sports betting and iCasino products.

We expect to launch our online sports gaming app called Barstool Sports in August 2020 and anticipate that this transaction will facilitate the Company’s omni-channel growth.

As noted above, Penn Interactive launched the Barstool Sports online sports betting app in Pennsylvania in September 2020 and in Michigan in January 2021.

In addition, Penn Interactive has entered into multi-year agreements with leading sports betting operators for online sports betting and iGaming market access across our portfolio of properties.

In December 2020, the Company entered into a definitive agreement to purchase from GLPI the operations of Hollywood Casino Perryville for $31.1 million.

The transaction is expected to close during the second or third quarter of 2021, subject to approval of the Maryland Lottery and Gaming Control Commission and other customary closing conditions.

Simultaneous with the closing of the transaction, we would lease the real estate assets associated with Hollywood Casino Perryville from GLPI with initial annual rent of $7.8 million per year subject to escalation.

In May 2019, we acquired Greektown Casino-Hotel (“Greektown”) in Detroit, Michigan, subject to a triple net lease with VICI Properties Inc.

VICI) (“VICI” and collectively with GLPI, our “REIT Landlords”) (the “Greektown Lease”), and in January 2019, we acquired Margaritaville Casino Resort (“Margaritaville”) in Bossier City, Louisiana, subject to a triple net lease with VICI (the “Margaritaville Lease” and collectively with the Master Leases, the Greektown Lease and the Meadows Lease (as defined in “Liquidity and Capital Resources” below), the “Triple Net Leases”).

VICI) (“VICI”, a REIT and collectively with GLPI, our “REIT Landlords”) (the “Greektown Lease”) and in January 2019, we acquired Margaritaville Casino Resort (“Margaritaville”) in Bossier City, Louisiana, subject to a triple net lease with VICI (the “Margaritaville Lease”).

In March 2020, in light of the COVID-19 pandemic, we temporarily suspended construction of our development of two Category 4 satellite gaming casinos in Pennsylvania:

Hollywood Casino York and Morgantown.

We have since restarted construction and expect both casinos to open in late 2021, subject to regulatory approval.

In October 2018, the Company completed the acquisition of Pinnacle Entertainment, Inc.

(“Pinnacle”), a leading regional gaming operator (the “Pinnacle Acquisition”).

In conjunction with the Pinnacle Acquisition, the Company divested the membership interests of certain Pinnacle subsidiaries, which operated the casinos known as Ameristar St.

Charles, Ameristar Kansas City, Belterra Resort and Belterra Park (referred to collectively as the “Divested Properties”), to Boyd Gaming Corporation (NYSE:

BYD) (“Boyd”).

Additionally, as a part of the transaction, GLPI acquired the real estate assets associated with Plainridge Park Casino and concurrently leased back such assets to the Company (the “Plainridge Park Casino Sale-Leaseback”).

In connection with the sale of the Divested Properties and the Plainridge Park Casino Sale-Leaseback, the Pinnacle Master Lease , which was assumed by the Company concurrent with the closing of the Pinnacle Acquisition, was

The Pinnacle Acquisition added twelve gaming properties to our holdings and has provided us with greater operational scale and geographic diversity.

In May 2017, we completed the acquisitions of 1 st Jackpot Casino (f/k/a Bally’s Casino Tunica) and Resorts Casino Tunica (which ceased operations in June 2019).

In connection with the Pinnacle Acquisition, we added 12 gaming properties to our portfolio, providing us with greater operational scale and geographic diversity.

We assumed the Pinnacle Master Lease concurrently with the closing of the Pinnacle Acquisition to our holdings and has provided us with greater operational scale and geographic diversity.

We believe that our portfolio of assets provides us the benefit of geographically-diversified cash flow from operations.

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Most of our properties operate in mature, competitive markets.

Consequently, we expect a significant amount of our future growth to come from new growth opportunities, such as retail and online gaming and sports betting;

We expect that the majority of our future growth will come from new business lines or distribution channels, such as retail and online gaming and sports betting;

entrance into new jurisdictions;

expansions of gaming in existing jurisdictions;

improvements/expansions of our existing properties;

and strategic acquisitions of gaming properties.

Our portfolio is comprised largely of well-maintained regional gaming facilities.

This has allowed us to develop what we believe to be a solid base for future growth opportunities supported by a flexible and attractively-priced capital structure.

and, to a lesser extent, improvements/expansions of our existing properties and strategic acquisitions of gaming properties.

Our portfolio is comprised largely of well-maintained regional gaming facilities, which has allowed us to develop what we believe to be a solid base for future growth opportunities.

We have also made investments in joint ventures that we believe will allow us to capitalize on additional gaming opportunities in certain states if legislation or referenda are passed that permit and/or expand gaming in these jurisdictions and we are selected as a licensee.

As reported by most jurisdictions, regional gaming industry trends have shown little revenue growth the last several years as numerous jurisdictions now permit gaming or have expanded their gaming offerings.

The proliferation of new gaming properties continues to impact the overall domestic gaming industry as well as our results of operations in certain markets.

However, the current economic environment, specifically historically low levels of unemployment, strength in residential real estate prices, and high levels of consumer confidence, has resulted in a stable operating environment in recent years.

Our ability to continue to succeed in this environment will be predicated on operating our existing properties efficiently, realizing revenue and cost synergies from recent acquisitions, and offering our customers additional gaming experiences through our omni-channel distribution strategy.

We seek to continue to expand our customer database through accretive acquisitions or investments, such as Barstool Sports, and capitalize on organic growth opportunities from the development of new properties or the expansion of recently-developed business lines.

The gaming industry is characterized by an increasingly high degree of competition among a large number of participants, including riverboat casinos, dockside casinos, land-based casinos, video lottery, iGaming, online and retail sports betting, gaming at taverns, gaming at truck stop establishments, sweepstakes and poker machines not located in casinos, the potential for increased fantasy sports, Native American gaming, and other forms of gaming in the U.S.

More specifically, due to recent legislation to expand gaming in and around Illinois, Indiana, Massachusetts and Pennsylvania, several of our properties within our Northeast segment and some of our properties within our Midwest segment have been and will continue to be negatively impacted by new or increased competition.

In recent years, the proliferation of new gaming properties has impacted the overall domestic gaming industry as well as our results of operations in certain markets.

Prior to the COVID-19 pandemic, the economic environment, specifically historically low levels of unemployment, strength in residential real estate prices, and high levels of consumer confidence, had resulted in a stable operating environment in recent years.

The COVID-19 pandemic has increased the level of unemployment and decreased the level of consumer confidence.

Our ability to succeed in this new environment will be predicated on our ability to adjust operations and cost structures at our reopened properties to reflect the new economic and health and safety conditions, operating our properties efficiently, realizing revenue and cost synergies from recent acquisitions, and offering our customers additional gaming experiences through our omni-channel distribution strategy.

We seek to continue to expand our customer database through accretive acquisitions or investments, such as Barstool Sports, capitalize on organic growth opportunities from the development of new properties or the expansion of recently-developed business lines, and develop partnerships that allow us to enter new jurisdictions for iGaming and sports betting.

The gaming industry is characterized by an increasingly high degree of competition among a large number of participants, including riverboat casinos;

dockside casinos;

land-based casinos;

video lottery;

online and retail sports betting;

gaming at taverns;

gaming at truck stop establishments;

sweepstakes and poker machines not located in casinos;

the potential for increased fantasy sports, significant growth of Native American gaming tribes, historic racing or state-sponsored i-lottery products in or adjacent to states we operate in;

and other forms of gaming in the U.S.

See the “Segment comparison of the years ended December 31, 2020 and 2019 ” section below for discussions of the impact of competition on our results of operations by reportable segment.

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For example, decreases in discretionary consumer spending have historically been brought about by weakened general economic conditions, such as lackluster recoveries from recessions, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, and high fuel or other transportation costs.

We believe that the COVID-19 pandemic has led to and will continue to lead to meaningful decreases in discretionary consumer spending and will continue to negatively impact visitation at our properties and the volume of play for the foreseeable future.

In addition, visitation and the volume of play have historically been negatively impacted by significant construction surrounding our properties, adverse regional weather conditions and natural disasters.

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The vast majority of our revenues is gaming revenue, which is highly dependent upon the volume and spending levels of customers at our properties.

Our gaming revenue is derived primarily from slot machines (which represented approximately 92% , 92% and 87% of our gaming revenue in 2019 , 2018 and 2017 , respectively) and, to a lesser extent, table games and sports

Our gaming revenue is derived primarily from slot machines (which represented approximately 87%, 92% and 92% of our gaming revenue in 2020, 2019 and 2018, respectively) and, to a lesser extent, table games and sports betting.

Aside from gaming revenue, our revenues are derived from our hotel, dining, retail, commissions, program sales, admissions, concessions and certain other ancillary activities, and our racing operations.

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As we are primarily focused on regional gaming markets, our table game hold percentages are fairly stable as the majority of these markets do not regularly experience high-end play, which can lead to volatility in hold percentages.

Therefore, changes in table game hold percentages do not typically have a material impact to our results of operations.

Our properties generate significant operating cash flow since most of our revenue is cash-based from slot machines, table games, and pari-mutuel wagering.

Our business is capital intensive, and we rely on cash flow from our properties to generate sufficient cash to satisfy our obligations under the Triple Net Leases, repay debt, fund maintenance capital expenditures, fund new capital projects at existing properties and provide excess cash for future development and acquisitions.

Additional information regarding our capital projects is discussed in the “Liquidity and Capital Resources” section below.

Therefore, changes in table game hold percentages do not typically have a material impact to our results of operations and cash flows.

Under normal operating conditions, our properties generate significant operating cash flow since most of our revenue is cash-based from slot machines, table games, and pari-mutuel wagering.

Our business is capital intensive, and we rely on cash flow from our properties to generate sufficient cash to satisfy our obligations under the Triple Net Leases (as defined in "Liquidity and Capital Resources” ), repay debt, fund maintenance capital expenditures, fund new capital projects at existing properties and provide excess cash for future development and acquisitions.

Additional information regarding our capital projects is discussed in “Liquidity and Capital Resources” below.

Reportable Segments

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RESULTS OF OPERATIONS

The following table highlights our revenues, net income, and Adjusted EBITDA, on a consolidated basis, as well as our revenues and Adjusted EBITDAR by reportable segment.

The following table highlights our revenues, net income (loss), and Adjusted EBITDA, on a consolidated basis, as well as our revenues and Adjusted EBITDAR by reportable segment.

Such segment reporting is on a basis consistent with how we measure our business and allocate resources internally.

We consider net income to be the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures.

Refer to the “Non-GAAP Financial Measures” section below for the definitions of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDAR, and Adjusted EBITDAR margin;

as well as a reconciliation of net income to Adjusted EBITDA and Adjusted EBITDAR and related margins.

We consider net income (loss) to be the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures.

Refer to “Non-GAAP Financial Measures” below for the definitions of Adjusted EBITDA, Adjusted EBITDAR, and Adjusted EBITDAR margin;

as well as a reconciliation of net income (loss) to Adjusted EBITDA, Adjusted EBITDAR and Adjusted EBITDAR margin.

For the year ended December 31,

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South segment 849.6 1,118.9 394.4

West segment 302.5 642.5 437.9

Midwest segment 681.4 1,094.5 823.7

125.0 47.5 40.4

Intersegment eliminations (2)

(19.1) (1.9) —

Total $ 3,578.7 $ 5,301.4 $ 3,587.9

Net income (loss) $ (669.1) $ 43.1 $ 93.5

Adjusted EBITDAR:

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South segment 318.9 369.8 118.9

West segment 82.2 198.8 114.3

Midwest segment 258.3 403.6 294.3

(43.5) (87.8) (68.1)

1,094.8 1,605.2 1,043.2

Rent expense associated with triple net operating leases (4)

(419.8) (366.4) (3.8)

Adjusted EBITDA $ 675.0 $ 1,238.8 $ 1,039.4

Net income margin

Net income (loss) margin (18.7) % 0.8 % 2.6 %

Adjusted EBITDAR margin 30.6 % 30.3 % 29.1 %

Adjusted EBITDA margin (7)

(1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club and the Company’s joint venture 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;

our management contract for Retama Park Racetrack;

and our live and televised poker tournament series that operates under the trademark, Heartland Poker Tour (“HPT”).

our management contract for Retama Park Racetrack and our live and televised poker tournament series that operates under the trade name, Heartland Poker Tour ("HPT").

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

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.

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.

In addition, Adjusted EBITDAR of the Other category includes our proportionate share of the net income or loss of Barstool Sports after adding back our share of non-operating items (such as interest expense, net;

income taxes;

depreciation and amortization;

and stock-based compensation expense).

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

The total is a mathematical calculation derived from the sum of the reportable segments (as well as the Other category and intersegment eliminations).

As noted within “Non-GAAP Financial Measures” below, Adjusted EBITDAR is presented on a consolidated basis outside the financial statements solely as a valuation metric.

Adjusted EBITDAR increased for the year ended December 31, 2019 , as compared to the prior year, principally due to the acquisitions of Pinnacle, Margaritaville, and Greektown, which contributed a combined $695.0 million.

Adjusted EBITDAR increased for the year ended December 31, 2018 , as compared to the prior year, principally due to the acquisition of Pinnacle, which contributed $113.2 million.

Solely comprised of rent expense associated with the operating lease components contained within the Master Leases (primarily land), the Margaritaville Lease, the Greektown Lease, and the Meadows Lease (referred to collectively as our “triple net operating

The finance lease components contained within the Master Leases (primarily buildings) result in interest expense, as opposed to rent expense.

Adjusted EBITDA increased for the year ended December 31, 2019 , as compared to the prior year, due to the acquisitions of Pinnacle, Margaritaville, and Greektown, which contributed a combined $534.9 million, offset by rent expense associated with the Penn Master Lease of $206.3 million.

Adjusted EBITDA increased for the year ended December 31, 2018 , as compared to the prior year, due to the acquisition of Pinnacle, which contributed $109.4 million.

Upon adoption of Accounting Standards Codification (“ASC”) Topic 842, “Leases” (“ASC 842”) on January 1, 2019, certain components (primarily land) of the Penn Master Lease were classified as operating leases (recorded to rent expense) rather than financing obligations (recorded to interest expense) in the prior years.

As rent expense is a normal, recurring cash operating expense, it is included within the calculation of Adjusted EBITDA.

As noted within “Non-GAAP Financial Measures” below, Adjusted EBITDAR margin is presented on a consolidated basis outside the financial statements solely as a valuation metric.

Adjusted EBITDA margin decreased for the year ended December 31, 2019 , as compared to the prior year, due to the adoption of ASC 842 (see footnote (5) above).

Adjusted EBITDA margin increased for the year ended December 31, 2018 , as compared to the prior year, principally due to the acquisition of Pinnacle.

(3) The total is a mathematical calculation derived from the sum of reportable segments (as well as the Other category).

As noted within “Non-GAAP Financial Measures” below, Adjusted EBITDAR, and the related margin, is presented on a consolidated basis outside the financial statements solely as a valuation metric.

(4) Solely comprised of rent expense associated with the operating lease components contained within the Master Leases (primarily land), the Tropicana Lease, the Meadows Lease, the Margaritaville Lease and the Greektown Lease (of which the Tropicana Lease, Meadows Lease, Margaritaville Lease and the Greektown Lease as defined in “Liquidity and Capital Resources” and are referred to collectively as our “triple net operating leases”).

The finance lease components contained within the Master Leases (primarily buildings) and the financing obligation associated with the Morgantown Lease (as defined in “Liquidity and Capital Resources” ) result in interest expense, as opposed to rent expense.

During the year ended December 31, 2020 and as of February 26, 2021, our properties temporary closure dates pursuant to various orders from state gaming regulatory bodies or governmental authorities to combat the rapid spread of COVID-19 are shown below:

Location Temporary Closure and Reopening Date Temporary Closure and Reopening Date

Northeast segment

Ameristar East Chicago East Chicago, IN March 16, 2020 - June 15, 2020

Greektown Casino-Hotel Detroit, MI March 16, 2020 - August 5, 2020 November 17, 2020 - December 23, 2020

Hollywood Casino Bangor Bangor, ME March 16, 2020 - July 10, 2020

Hollywood Casino at Charles Town Races Charles Town, WV March 18, 2020 - June 5, 2020

Hollywood Casino Columbus Columbus, OH March 13, 2020 - June 19, 2020

Hollywood Casino Lawrenceburg Lawrenceburg, IN March 16, 2020 - June 15, 2020

Hollywood Casino at Penn National Race Course Grantville, PA March 17, 2020 - June 19, 2020 December 12, 2020 - January 4, 2021

Hollywood Casino Toledo Toledo, OH March 13, 2020 - June 19, 2020

Hollywood Gaming at Dayton Raceway Dayton, OH March 13, 2020 - June 19, 2020

Hollywood Gaming at Mahoning Valley Race Course Youngstown, OH March 13, 2020 - June 19, 2020

Marquee by Penn (1)

Pennsylvania March 19, 2020 - June 5, 2020 December 12, 2020 - January 4, 2021

Meadows Racetrack and Casino Washington, PA March 17, 2020 - June 9, 2020 December 12, 2020 - January 4, 2021

Plainridge Park Casino Plainville, MA March 15, 2020 - July 8, 2020

South segment

1 st Jackpot Casino

Tunica, MS March 17, 2020 - May 21, 2020

Ameristar Vicksburg Vicksburg, MS March 17, 2020 - May 21, 2020

Boomtown Biloxi Biloxi, MS March 17, 2020 - May 21, 2020

Boomtown Bossier City Bossier City, LA March 17, 2020 - May 20, 2020

Boomtown New Orleans New Orleans, LA March 17, 2020 - May 18, 2020

Hollywood Casino Gulf Coast Bay St.

Louis, MS March 17, 2020 - May 21, 2020

Hollywood Casino Tunica Tunica, MS March 17, 2020 - May 21, 2020

L’Auberge Baton Rouge Baton Rouge, LA March 17, 2020 - May 18, 2020

L’Auberge Lake Charles Lake Charles, LA March 17, 2020 - May 18, 2020

Margaritaville Resort Casino Bossier City, LA March 17, 2020 - May 18, 2020

Ameristar Black Hawk Black Hawk, CO March 17, 2020 - June 17, 2020

Cactus Petes and Horseshu Jackpot, NV March 17, 2020 - June 4, 2020

M Resort Henderson, NV March 17, 2020 - June 4, 2020

Tropicana Las Vegas Las Vegas, NV March 17, 2020 - September 17, 2020

Zia Park Casino Hobbs, NM March 16, 2020 - remains closed

Midwest segment

Ameristar Council Bluffs Council Bluffs, IA March 17, 2020 - June 1, 2020

Argosy Casino Alton Alton, IL March 16, 2020 - July 1, 2020 November 20, 2020 - January 23, 2021

Argosy Casino Riverside Riverside, MO March 18, 2020 - June 1, 2020

Hollywood Casino Aurora Aurora, IL March 16, 2020 - July 1, 2020 November 20, 2020 - January 19, 2021

Hollywood Casino Joliet Joliet, IL March 16, 2020 - July 1, 2020 November 20, 2020 - January 22, 2021

Hollywood Casino at Kansas Speedway Kansas City, KS March 17, 2020 - May 25, 2020

Hollywood Casino St.

Louis Maryland Heights, MO March 18, 2020 - June 16, 2020

Prairie State Gaming (1)

Illinois March 16, 2020 - July 1, 2020 November 20, 2020 - January 16, 2021

River City Casino St.

Louis, MO March 18, 2020 - June 16, 2020

Freehold Raceway Freehold, NJ March 16, 2020 - August 27, 2020

Retama Park Racetrack Selma, TX March 19, 2020 - June 4, 2020

Sam Houston Race Park Houston, TX March 19, 2020 - June 4, 2020

Sanford-Orlando Kennel Club Longwood, FL March 13, 2020 - May 26, 2020

Valley Race Park Harlingen, TX March 19, 2020 - remains closed

(1) VGT route operations

Consolidated comparison of the years ended December 31, 2020 and 2019

The following table presents our consolidated revenues:

For the year ended December 31,

(dollars in millions)

For the year ended December 31, $ Change % Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

2018 2020 vs.

2019 2019 vs.

Gaming $ 3,051.1 $ 4,268.7 $ 2,894.9 $ (1,217.6) $ 1,373.8 (28.5) % 47.5 %

Food, beverage, hotel and other 527.6 1,032.7 629.7 (505.1) 403.0 (48.9) % 64.0 %

1 unchanged sentence

Reimbursable management costs — — 57.3 — (57.3) — (100.0) %

Promotional allowances

Total revenues $ 3,578.7 $ 5,301.4 $ 3,587.9 $ (1,722.7) $ 1,713.5 (32.5) % 47.8 %

The adoption of ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) as of January 1, 2018 using the modified retrospective transition approach impacted the year-over-year comparability of gaming revenues;

food, beverage, hotel and other revenues;

reimbursable management costs;

and promotional allowances;

but had minimal impact on total revenues.

For the year ended December 31, 2017, the retail value of accommodations, food and beverage, hotel and other services furnished to our customers without charge was included in gross revenues, then deducted as promotional allowances in determining net revenues.

Gaming revenues and food, beverage, hotel and other revenues for the year ended December 31, 2019 benefited from the first full year of operations of Pinnacle, which was acquired on October 15, 2018, resulting in increases of $1,117.2 million and $317.0 million, respectively, and the acquisitions of Margaritaville on January 1, 2019, and Greektown on May 23, 2019, which contributed a combined $286.0 million and $67.5 million, respectively.

In addition, gaming, food, beverage, hotel and other revenues benefited from strong year-over-year performances at all of our Ohio properties, resulting in an increase of $23.5 million.

These increases were offset by a decrease in gaming, food, beverage, hotel and other revenues at Plainridge Park Casino of $19.7 million, which was negatively impacted by an increase in competition, and a decrease in gaming, food, beverage, hotel and other revenues at Resorts Casino Tunica, which we closed on June 30, 2019.

Gaming revenues and food, beverage, hotel and other revenues for the year ended December 31, 2018 benefited from the Pinnacle Acquisition, which contributed $303.6 million and $82.0 million, respectively.

In addition, gaming, food, beverage, hotel and other revenues benefited from strong year-over-year performances at all of our Ohio properties, resulting in an increase of $18.5 million;

and Prairie State Gaming, where gaming, food, beverage, hotel and other revenues increased by $15.1 million;

and a full year of operations of 1 st Jackpot Casino and Resorts Casino Tunica, which were acquired on May 1, 2017 and resulted in an increase of $22.3 million.

Management service and license fees and reimbursable management costs relate to our previous management contract with Casino Rama, which is located in Ontario, Canada.

Reimbursable management costs also relates to our previous management contract with Hollywood Casino-Jamul San Diego, which is located on the Jamul Tribe’s trust land in San Diego, California.

The decreases in management service and license fees for the years ended December 31, 2019 and December 31, 2018 , as compared to the prior years, are due to the fact that our management contract with Casino Rama terminated in July

The decrease in reimbursable management costs for the year ended December 31, 2019 , as compared to the prior year, is due to the termination of our Casino Rama management contract as well as the fact that our management contract with Hollywood Casino-Jamul San Diego terminated in May 2018.

The increase in reimbursable management costs for the year ended December 31, 2018 , as compared to the prior year, is a result of the adoption of ASC 606 on January 1, 2018, which required us to record reimbursable management costs on a gross basis as opposed to a net basis.

In comparing the year ended December 31, 2018 to the prior year, adoption of ASC 606 had the effect of decreasing gaming revenues and food, beverage, hotel and other revenues by $206.1 million and $69.4 million, respectively, and increasing reimbursable management costs by $46.8 million, of which $236.8 million related to promotional allowances, resulting in a net impact on total revenues of an increase of $8.1 million.

See “Segment comparison of the years ended December 31, 2019, 2018 and 2017” below for more detailed explanations of the fluctuations in total revenues.

Gaming revenues and food, beverage, hotel and other revenues for the year ended December 31, 2020 decreased compared to the prior year primarily as a result of the COVID-19 pandemic, which caused temporary closures of all of our properties during the year, and upon subsequent property reopenings, our operations were impacted by operating restrictions.

Our properties are subject to restrictions on gaming capacity, which depending on the jurisdiction, are generally 50% less gaming devices.

Furthermore, due primarily to the implementation of social distancing and health and safety protocols, our properties are subject to reduced hotel capacity, limitations on the number of food and beverage offerings and limitations on other amenities.

As a result, upon reopening our properties, gaming revenue now represents a larger portion of our total revenues, which we expect to continue until at least such time that social distancing and health and safety protocols are relaxed or no longer necessary.

Since reopening, our properties have generally experienced reduced visitation and higher spend per trip, as compared to pre-closure levels.

We largely attribute the higher spend per trip to pent-up demand, visitation from our higher worth customers, and customers’ propensity to spend after a prolonged period of limited domestic commerce and upon receipt of government stimulus payments.

In addition, in many of the states in which we operate, leisure alternatives remain partially limited (e.g., bars, concerts, entertainment events, etc.), which may have impacted our operating results upon reopening our properties.

See “Segment comparison of the years ended December 31, 2020, and 2019 ” below for more detailed explanations of the fluctuations in revenues.

Operating expenses

The following table presents our consolidated operating expenses:

For the year ended December 31,

(dollars in millions)

For the year ended December 31, $ Change % Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

2018 2020 vs.

2019 2019 vs.

Operating expenses

Gaming $ 1,530.3 $ 2,281.8 $ 1,551.4 $ (751.5) $ 730.4 (32.9) % 47.1 %

Food, beverage, hotel and other 337.7 672.7 439.3 (335.0) 233.4 (49.8) % 53.1 %

3 unchanged sentences

Impairment losses 623.4 173.1 34.9 450.3 138.2 260.1 % 396.0 %

Provision for (recoveries on) loan loss and unfunded loan commitments

Recoveries on loan loss and unfunded loan commitments — — (17.0) — 17.0 — (100.0) %

Total operating expenses $ 3,988.9 $ 4,729.5 $ 2,953.8 $ (740.6) $ 1,775.7 (15.7) % 60.1 %

N/M - Not meaningful

Gaming expenses consist primarily of salaries and wages associated with our gaming operations and gaming taxes.

Food, beverage, hotel and other expenses consist principally of salaries and wages and costs of goods sold associated with our food, beverage, hotel, retail, racing, and other operations.

Gaming, food, beverage, hotel and other expenses for the year ended December 31, 2019 increased year over year primarily as a result of the acquisitions of Pinnacle, Margaritaville, and Greektown, which increased gaming expenses by a combined $726.0 million and food, beverage, hotel and other expenses by a combined $242.8 million.

Gaming, food, beverage, hotel and other expenses for the year ended December 31, 2018 increased year over year primarily as a result of the Pinnacle Acquisition, which increased gaming expenses by $162.6 million and food, beverage, hotel and other expenses by $56.9 million.

The adoption of ASC 606 had the effect of decreasing food, beverage, hotel and other expenses by $37.3 million.

General and administrative expenses include items such as compliance, facility maintenance, utilities, property and liability insurance, surveillance and security, and certain housekeeping services, as well as all expenses for administrative departments such as accounting, purchasing, human resources, legal and internal audit.

General and administrative expenses also include lobbying expenses, gains and losses on disposal of assets, changes in the fair value of our contingent purchase price obligations, expense associated with cash-settled stock-based awards (including changes in fair value thereto) and rent expense associated with our triple net operating leases.

General and administrative expenses for the year ended December 31, 2019 increased year-over-year primarily as a result of a $362.6 million increase in the rent expense associated with our triple net operating leases, a $229.8 million increase in general and administrative expenses associated with the acquired Pinnacle properties as well as the acquisitions of Margaritaville and Greektown, and a $20.4 million increase in the expense recognized on the Company’s cash-settled stock-based awards, which is primarily the result of an increase in the fair value of the awards year-over-year.

These increases were offset by a decrease in pre-opening and acquisition costs of $72.7 million, which was principally driven by severance and professional service fees incurred in the prior year from the Pinnacle Acquisition.

General and administrative expenses for the year ended December 31, 2018 increased year-over-year primarily as a result of an increase in pre-opening and acquisition costs of $85.3 million, which principally related to the Pinnacle Acquisition, and $62.3 million of general and administrative expenses associated with the acquired Pinnacle properties.

These increases were partially offset by a $28.6 million decrease in the expense recognized on the Company’s cash-settled stock-based awards, which was primarily the result of a decrease in the fair value of the awards year-over-year.

Reimbursable management costs relate to operating costs of Casino Rama and Hollywood Casino-Jamul San Diego.

The decrease for the year ended December 31, 2019 , as compared to the prior year, is due to the terminations of our Casino Rama and Hollywood Casino-Jamul San Diego management contracts in July 2018 and May 2018, respectively.

The increase for the year ended December 31, 2018 , as compared to the prior year, is the result of the adoption of ASC 606 on January 1, 2018, which required the Company to record reimbursable management costs on a gross basis as opposed to a net basis, resulting in the recognition of $46.8 million of reimbursable management costs for the year ended December 31, 2018 .

Depreciation and amortization for the year ended December 31, 2019 increased year over year due primarily to an increase of $118.8 million pertaining to the acquired Pinnacle properties and the acquisitions of Margaritaville and Greektown, which contributed a combined $17.1 million to the year ended December 31, 2019 , partially offset by a $3.6 million decrease in amortization expense at Penn Interactive.

In addition, the year ended December 31, 2019 includes $7.9 million of amortization on finance lease right-of-use assets.

Depreciation and amortization for the year ended December 31, 2018 increased year over year due to the Pinnacle Acquisition, which contributed $38.6 million, partially offset by decreases at the majority of our existing properties due to assets becoming fully depreciated and a decrease in amortization expense at Penn Interactive.

Impairment losses for the year ended December 31, 2019 primarily relate to impairments taken on our goodwill and other intangible assets of $88.0 million and $82.6 million, respectively, as a result of our annual impairment assessment.

Impairment losses for the year ended December 31, 2018 primarily related to an impairment on the property and equipment of Resorts Casino Tunica of $34.3 million, principally relating to the real estate assets subject to the Penn Master Lease.

Impairment losses for the year ended December 31, 2017 related to an impairment taken on our goodwill of $18.0 million relating to Tropicana Las Vegas and Sanford-Orlando Kennel Club.

Recoveries on loan loss and unfunded loan commitments for the year ended December 31, 2018 related to the sale of the Company’s outstanding rights and obligations under its previous term loan C facility, including future unfunded commitments, with Jamul Indian Village Development Corporation (“JIVDC”), resulting in a recovery of $17.0 million .

Provision for loan loss and unfunded loan commitments for the year ended December 31, 2017 related to a provision recorded of $64.0 million pertaining to the previous term loan C facility, a reserve for unfunded loan commitments of $22.0 million , and a charge of $3.8 million related to certain advances made to the JIVDC.

Gaming, food, beverage, hotel and other expenses for the year ended December 31, 2020 decreased year over year primarily as a result of the temporary closures of all of our properties due to the

COVID-19 pandemic, which reduced our salaries and wages, gaming taxes, costs of goods sold, and other expenses.

As discussed above, our reopened properties are operating with reduced gaming, hotel capacity, limited food and beverage and limited other amenity offerings.

As such, our properties are operating with a reduced workforce, which reduced our salaries and wages.

In addition, our properties have reduced marketing costs, which reduces gaming expenses.

General and administrative expenses include items such as compliance, facility maintenance, utilities, property and liability insurance, surveillance and security, lobbying expenses, and certain housekeeping services, as well as all expenses for administrative departments such as accounting, purchasing, human resources, legal and internal audit.

General and administrative expenses also include stock-based compensation expense;

pre-opening and acquisition costs;

gains and losses on disposal of assets;

changes in the fair value of our contingent purchase price obligations;

expense associated with cash-settled stock-based awards (including changes in fair value thereto);

restructuring costs (primarily severance) associated with a company-wide initiative triggered by the COVID-19 pandemic;

and rent expense associated with our triple net operating leases.

General and administrative expenses for the year ended December 31, 2020 decreased year over year primarily as a result of the actions taken to reduce our cost structure while our properties were temporarily closed, which included:

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

(ii) enacting meaningful compensation reductions to our 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.

In addition, we recognized a gain on disposal of assets of $29.2 million, which reduced general and administrative expenses in the current year.

Additionally, the expense associated with the Company’s contingent purchase price obligations and preopening expenses decreased by $8.1 million and $10.5 million, respectively, as compared to the prior year period.

Offsetting these decreases for the year ended December 31, 2020, as compared to the prior year, was an increase in expense associated with the Company’s cash-settled stock-based awards expense of $66.4 million, due to the increase in our stock price, and an increase in rent expense of $53.4 million, which principally relates to the Greektown Lease.

Additionally, we incurred $13.4 million of restructuring costs, primarily related to employee severance as a result of the COVID-19 pandemic as described above.

Depreciation and amortization for the year ended December 31, 2020 decreased year ove r year primarily due to fixed assets becoming fully depreciated since December 31, 2019, a reduction in capital spend in 2020 due to the casino closures and a $2.7 million decrease in amortization expense at Penn Interactive.

These were offset for the year ended December 31, 2020 by an increase of $3.2 million at Greektown, which was acquired in May 2019.

Impair ment losses for the year ended December 31, 2020 primarily relate to impairments taken on our goodwill and other intangible assets of $113.0 million and $498.5 million, respectively, as a result of an interim impairment assessment during the first quarter of 2020.

During the first quarter of 2020, we identified an indicator of impairment triggered by the COVID-19 pandemic, which caused all of our gaming properties to temporarily close.

At the time of the interim impairment assessment, we revised our cash flow projections to reflect the current economic environment, including the uncertainty of the nature, timing and extent of reopening our gaming properties.

Additionally, we recorded an impairment charge of $7.3 million resulting from an impairment analysis of the long-lived assets at the Tropicana Las Vegas and an impairment charge of $4.6 million on our investment in the Texas Joint Venture.

Other income (expenses)

The following table presents our consolidated other income (expenses):

For the year ended December 31,

(dollars in millions)

For the year ended December 31, $ Change % Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

2018 2020 vs.

2019 2019 vs.

Other income (expenses)

2 unchanged sentences

Loss on early extinguishment of debt $ (1.2) $ — $ (21.0) $ (1.2) $ 21.0 — (100.0) %

Income tax benefit (expense)

Income tax benefit (expense) $ 165.1 $ (43.0) $ 3.6 $ 208.1 $ (46.6) N/M N/M

Other $ 106.6 $ 20.0 $ (7.1) $ 86.6 $ 27.1 433.0 % N/M

N/M - Not meaningful

Interest expense, net decreased for the year ended December 31, 2019 , as compared to the prior year, due to the adoption of ASC 842, which resulted in certain components (primarily land) of the Penn Master Lease to be classified as operating leases (recorded to rent expense) rather than financing obligations (recorded to interest expense) in the prior year (resulting in a decrease in interest expense associated with the Penn Master Lease of $181.2 million).

This decrease was largely offset by a $126.0 million increase in interest expense associated with the Pinnacle Master Lease and an increase of $50.8 million associated with our long-term debt, pertaining to the fact that the Company had more long-term debt outstanding during the year ended December 31, 2019 as compared to the prior year, which was primarily the result of financing our acquisitions.

Interest expense, net increased for the year ended December 31, 2018 , as compared to the prior year, primarily due to the Pinnacle Master Lease, which contributed $63.0 million to the year ended December 31, 2018 .

Interest expense associated with the Penn Master Lease also increased as a result of the inclusion of 1 st Jackpot Casino and Resorts Casino Tunica beginning May 2017 and the incurrence of rent escalators.

Lastly, interest expense incurred on long-term debt increased by $7.1 million, pertaining to the fact that the Company had more long-term debt outstanding during the year ended December 31, 2018 as compared to the prior year, which was primarily the result of financing the Pinnacle Acquisition.

Income from unconsolidated affiliates relates principally to our joint venture in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns Hollywood Casino at Kansas Speedway.

The increase for the year ended December 31, 2019 , as compared to the prior year, was principally attributable to Kansas Entertainment reaching a settlement pertaining to prior years’ property tax assessments, which will result in credits to be applied against future property tax assessments.

The increase for the year ended December 31, 2018 as compared to the prior year was attributable to improved operating results of Hollywood Casino at Kansas Speedway.

Loss on early extinguishment of debt for the year ended December 31, 2018 related to the write-offs of previously unamortized debt issuance costs in connection with principal prepayments on our Term Loan B Facility (as defined in “Liquidity and Capital Resources” below) which was repaid in full during the fourth quarter of 2018.

Loss on early extinguishment of debt for the year ended December 31, 2017 related to the early redemption of our $300.0 million 5.875% senior subordinated notes, principally pertaining to a premium paid upon redemption.

Interest expense, net increased for the year ended December 31, 2020, as compared to the prior year, due primarily to increases in interest expense related to our Master Leases of $8.8 million partially offset by an increase in capitalized interest of

$1.9 million.

Additionally, the interest expense associated with our long-term debt increased $1.8 million, as compared to the prior year, due primarily to the issuance of our 2.75% Convertible Notes, which offset the reduction in interest expense incurred on the Senior Secured Credit Facilities (as defined in “ Note 11, “Long-term Debt, ”) from a decrease in the London Interbank Offered Rate (referred to as "LIBOR") during the corresponding periods.

Income from unconsolidated affiliates relates principally to our Kansas Entertainment joint venture.

The decrease for the year ended December 31, 2020, as compared to the prior year, was primarily due to a decrease in the results of operations of Hollywood Casino at Kansas Speedway, which temporarily closed on March 17, 2020 and reopened on May 25, 2020 and continues to be impacted by COVID-19 capacity restrictions.

This decrease was partially offset by income earned from Barstool Sports.

Loss on early extinguishment of debt for the year December 31, 2020 related to the write-offs of previously unamortized debt issuance costs and debt discounts in connection with the prepayment of Term Loan B-1 Facility, (as de fined in N ote 11, “Long-term Debt, ”).

There were no principal prepayments of our long-term debt during the year ended December 31, 2019 .

Income tax benefit (expense) increased by $46.6 million for the year ended December 31, 2019 , as compared to the prior year, and decreased by $494.9 million for the year ended December 31, 2018 , as compared to the prior year.

Our effective tax rate was 49.9% for the year ended December 31, 2019 , as compared to (4.0)% for the year ended December 31, 2018 and 1,990.6% for the year ended December 31, 2017.

Income tax benefit (expense) fo r the year ended December 31, 2020, was a benefit of $165.1 million compared to income tax expense of $43.0 million in the prior year.

Our effective tax rate was 19.8% for the year ended December 31, 2020, as compared to 49.9% for the year ended December 31, 2019.

The Company’s effective tax rate for the year ended December 31, 2020 was lower than the federal statutory tax rate of 21% primarily driven by the increase in the valuation allowance (see Note 14, “Income Taxes” , in the notes to our Consolidated Financial Statements).

The Company’s effective tax rate for the year ended December 31, 2019 was higher than the federal statutory tax rate of 21% primarily driven by the effect of the non-deductible goodwill impairment charge, non-deductible officers’ compensation, and higher state taxable income from operations.

Our effective tax rate for the year ended December 31, 2018 was lower than the federal statutory tax rate primarily due to the release of a partial valuation allowance on our capital loss carryforward that we recognized in the amount of $22.4 million from the Plainridge Park Casino Sale-Leaseback.

The Company’s effective tax rate for the year ended December 31, 2017 was higher than the federal statutory tax rate due principally to the effects of the Tax Act (as defined and discussed below) and the release of our federal valuation allowance of $741.9 million (see Note 13, “Income Taxes,” in the notes to our Consolidated Financial Statements).

For the year ended December 31, 2017, we recorded a provisional amount for certain enactment-date effects of the Tax Cuts and Jobs Act (the “Tax Act”), resulting in a net charge of $266.0 million included as income tax expense within the Consolidated Statements of Income consisting of three components:

(i) a $261.3 million charge due to the revaluation of the net deferred tax assets in the U.S.

based on the new lower federal income tax rate, (ii) a $2.6 million charge related to the one-time mandatory repatriation tax on previously deferred earnings from our wholly-owned Canadian subsidiary (which we will pay interest-free over eight years) and (iii) a $2.1 million foreign withholding tax charge due to the new favorable U.S.

treatment of foreign dividends whereby we have changed our indefinite reinvestment assertion.

During the year ended December 31, 2018, we finalized our assessment of the effects of the Tax Act, resulting in a $1.2 million increase to the provisional amount.

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.

Our effective income tax rate can vary each reporting 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.

Certain of these and other factors, including our history and projections of pre-tax earnings, are considered in assessing our ability to realize our net deferred tax assets.

Other includes miscellaneous income and expense items.

The amount for the year ended December 31, 2019 principally relates to an unrealized holding gain of $19.9 million on equity securities (including warrants), which were acquired during the third quarter of 2019 in connection with Penn Interactive entering into multi-year agreements with sports betting operators for online sports betting and related iGaming market access across our portfolio.

The amount for the year ended December 31, 2018 principally related to costs associated with the debt refinancing in connection with the Pinnacle Acquisition and foreign currency translation losses related to our Casino Rama management contract, which was reclassified from accumulated other comprehensive loss upon termination of the contract.

For the year ended December 31, 2017, in connection with the repayment of the 2013 Senior Secured Credit Facilities (as defined in “Liquidity and Capital Resources” below), we recorded $1.7 million in refinancing costs.

The amount for the years ended December 31, 2020 and 2019 relates primarily to unrealized holding gains of $106.7 million and $19.9 million, respectively, on equity securities (including warrants), which were acquired during the third quarter of 2019 in connection with Penn Interactive entering into multi-year agreements with sports betting operators for online sports betting and related iGaming market access across our portfolio.

Segment comparison of the years ended December 31, 2020 and 2019

Northeast Segment

For the year ended December 31,

% / bps Change

(dollars in millions)

Revenues (1) :

For the year ended December 31, $ Change % / bps Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

2018 2020 vs.

2019 2019 vs.

Gaming $ 1,495.1 $ 2,117.1 $ 1,644.2 $ (622.0) $ 472.9 (29.4) % 28.8 %

Food, beverage, hotel and other 144.2 282.8 194.6 (138.6) 88.2 (49.0) % 45.3 %

1 unchanged sentence

Reimbursable management costs — — 46.8 — (46.8) — (100.0)

Promotional allowances

Total revenues $ 1,639.3 $ 2,399.9 $ 1,891.5 $ (760.6) $ 508.4 (31.7) % 26.9 %

Adjusted EBITDAR $ 478.9 $ 720.8 $ 583.8 $ (241.9) $ 137.0 (33.6) % 23.5 %

Adjusted EBITDAR margin

N/C - Not calculable

See footnote (1) to the consolidated revenues table above.

The Northeast segment’s total revenues and Adjusted EBITDAR for the year ended December 31, 2019 benefited from the first full year of operations of Ameristar East Chicago and Meadows Racetrack and Casino (“Meadows”), which were acquired in the Pinnacle Acquisition, resulting in increases year-over-year of $362.6 million and $82.2 million, respectively, and the acquisition of Greektown in May 2019, which contributed $195.9 million and $56.8 million, respectively.

Northeast segment operating results for the year ended December 31, 2019 also benefited from strong year-over-year performances at all of our Ohio properties, which all individually grew Adjusted EBITDAR margin and, collectively, increased total revenues by $23.5 million and Adjusted EBITDAR by $14.1 million.

Increased competition, primarily Encore Boston Harbor in Eastern Massachusetts, which opened in June 2019, and to a lesser extent, MGM Springfield in Western Massachusetts, which opened in August 2018 and Tiverton Casino in Tiverton, Rhode Island, which is near the border of Massachusetts and opened in September 2018, negatively impacted Plainridge Park Casino, where total revenues decreased by $19.7 million and Adjusted EBITDAR decreased by $9.1 million.

Contraction in Northeast segment Adjusted EBITDAR margin was primarily due to the new competition impacting Plainridge Park Casino and the addition of Meadows, where gaming taxes are unfavorable as compared to the majority of other jurisdictions included in this segment.

The Northeast segment’s total revenues and Adjusted EBITDAR for the year ended December 31, 2018 benefited from the acquisitions of Ameristar East Chicago and Meadows in October 2018, which contributed a combined $99.1 million of revenues and $17.6 million of Adjusted EBITDAR .

Northeast segment operating results also benefited from strong year-over-year performances at all of our Ohio properties, which all individually grew Adjusted EBITDAR margin and, collectively, increased total revenues by $18.5 million and Adjusted EBITDAR by $16.7 million.

Management service and licensing fees decreased due to the fact that the Casino Rama management contract was terminated in July 2018.

Contraction in Northeast segment Adjusted EBITDAR margin was primarily due to the addition of Meadows, where gaming taxes are unfavorable as compared to the majority of other jurisdictions included in this segment.

In comparing the year ended December 31, 2018 to the prior year, the adoption of ASC 606 had the effect of decreasing gaming revenues and food, beverage, hotel and other revenues by $54.8 million and $47.5 million, respectively, and increasing reimbursable management costs, which related to Casino Rama, by $46.8 million, of which $70.7 million related to promotional allowances, resulting in a net impact on Northeast segment total revenues of an increase of $15.2 million.

Adjusted EBITDAR margin 29.2 % 30.0 % 30.9 % (80) bps (90) bps

The Northeast segment’s results of operations for the year ended December 31, 2020 were primarily impacted by the COVID-19 pandemic.

During the year ended December 31, 2020, our properties had temporary closures pursuant to various orders from state gaming regulatory bodies or governmental authorities to combat the rapid spread of COVID-19.

All of our properties within the Northeast segment reopened and continue to operate with reduced gaming and hotel (if applicable) capacity, limited food and beverage and other amenity offerings.

In response to the impact of the COVID-19 pandemic on our operations, we implemented cost saving initiatives to offset inevitable revenue degradation, such as:

operating with a reduced

workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings.

For the year ended December 31, 2020 the Northeast segment’s total revenues, Adjusted EBITDAR and Adjusted EBITDAR margin decreased, as compared to the prior year, due to the temporary closures described above.

While revenues and Adjusted EBITDAR decreased 31.7% and 33.6% compared to the prior year, Adjusted EBITDAR margin decreased 80 basis points primarily as a result of cost cutting measures and other structural changes put in place in response to the COVID-19 pandemic.

South Segment

For the year ended December 31,

% / bps Change

(dollars in millions)

Revenues (1) :

For the year ended December 31, $ Change % / bps Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

2018 2020 vs.

2019 2019 vs.

Gaming $ 684.0 $ 831.1 $ 302.9 $ (147.1) $ 528.2 (17.7) % 174.4 %

Food, beverage, hotel and other 165.6 287.8 91.5 (122.2) 196.3 (42.5) % 214.5 %

Promotional allowances

Total revenues $ 849.6 $ 1,118.9 $ 394.4 $ (269.3) $ 724.5 (24.1) % 183.7 %

Adjusted EBITDAR $ 318.9 $ 369.8 $ 118.9 $ (50.9) $ 250.9 (13.8) % 211.0 %

Adjusted EBITDAR margin

See footnote (1) to the consolidated revenues table above.

The South segment’s total revenues and Adjusted EBITDAR for the year ended December 31, 2019 benefited from the first full year of operations of Ameristar Vicksburg, Boomtown Bossier City, Boomtown New Orleans, L’Auberge Baton Rouge and L’Auberge Lake Charles, which were acquired in the Pinnacle Acquisition, resulting in increases of $572.3 million and $195.3 million, respectively, and the acquisition of Margaritaville in January 2019, which contributed $157.6 million and $51.7 million, respectively.

The closure of Resorts Casino Tunica negatively impacted South segment total revenues by $12.7 million.

Cost synergies generated from the Pinnacle Acquisition as well as operational efficiencies resulted in expansion in South segment Adjusted EBITDAR margin.

The South segment’s total revenues and Adjusted EBITDAR for the year ended December 31, 2018 benefited from the acquisitions of Ameristar Vicksburg, Boomtown Bossier City, Boomtown New Orleans, L’Auberge Baton Rouge and L’Auberge Lake Charles in October 2018, which contributed a combined $151.6 million of revenues and $45.8 million of Adjusted EBITDAR .

In addition, as a result of the timing of the acquisitions of 1 st Jackpot Casino and Resorts Casino Tunica, which occurred in May 2017, total revenues and Adjusted EBITDAR had increases of $22.3 million and $9.0 million, respectively.

Primarily as a result of operational efficiencies, South segment Adjusted EBITDAR margin expanded.

In comparing the year ended December 31, 2018 to the prior year, the adoption of ASC 606 had the effect of decreasing gaming revenues and food, beverage, hotel and other revenues by $53.4 million and $2.1 million, of which $55.3 million related to promotional allowances, resulting in a net impact on South segment total revenues of a decrease of $0.2 million.

For the year ended December 31,

% / bps Change

(dollars in millions)

Revenues (1) :

Adjusted EBITDAR margin 37.5 % 33.1 % 30.1 % 440 bps 300 bps

The South segment’s results of operations for the year ended December 31, 2020 were primarily impacted by the COVID-19 pandemic and Hurricane Laura (described below).

During the year ended December 31, 2020 our properties had temporary closures pursuant to various orders from state gaming regulatory bodies or governmental authorities to combat the rapid spread of COVID-19.

All of our properties within the South segment reopened and continue to operate with reduced gaming, hotel (if applicable) capacity, limited food and beverage and other amenity offerings.

In response to the COVID-19 pandemic on our operations, we implemented cost saving initiatives to offset inevitable revenue degradation, such as:

operating with a reduced workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings.

For the year ended December 31, 2020, the South segment’s total revenues and Adjusted EBITDAR decreased, as compared to the prior year, due to the temporary closures, operational restrictions, and social distancing measures described above.

The Souths segment’s Adjusted EBITDAR margin increased 440 basis points for the year ended December 31, 2020, as compared to the prior year due to our cost structure savings initiatives described above.

On August 27, 2020, Hurricane Laura made landfall in Lake Charles, Louisiana and caused significant damage to L’Auberge Lake Charles, forcing it to close for approximately two weeks.

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

The Company received upfront prepayments of $47.5 million from our insurers related to our anticipated policy claim (i.e.

an advance) for the year ended December 31, 2020.

The insurance proceeds were recorded as an offset to recovery costs incurred (i.e.

Receivables within our Consolidated Balance Sheets) and we did not recognize any gain or loss as a result of this event.

For the year ended December 31, $ Change % / bps Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

2018 2020 vs.

2019 2019 vs.

Gaming $ 194.2 $ 374.3 $ 228.0 $ (180.1) $ 146.3 (48.1) % 64.2 %

Food, beverage, hotel and other 108.3 268.2 199.4 (159.9) 68.8 (59.6) % 34.5 %

Reimbursable management costs — — 10.5 — (10.5) — (100.0) %

Promotional allowances

Total revenues $ 302.5 $ 642.5 $ 437.9 $ (340.0) $ 204.6 (52.9) % 46.7 %

Adjusted EBITDAR $ 82.2 $ 198.8 $ 114.3 $ (116.6) $ 84.5 (58.7) % 73.9 %

Adjusted EBITDAR margin

See footnote (1) to the consolidated revenues table above.

The West segment’s total revenues and Adjusted EBITDAR for the year ended December 31, 2019 benefited from the first full year of operations of Ameristar Black Hawk and the Jackpot Properties, which were acquired in the Pinnacle Acquisition, resulting in increases of $206.9 million and $84.2 million, respectively.

The West segment operating results also benefited from strong year-over-year performance of Zia Park Casino, which experienced gaming volume growth while achieving operational

efficiencies.

Adjusted EBITDAR margin of the West segment grew significantly, primarily as a result of the additions of Ameristar Black Hawk and the Jackpot Properties.

We expect that a large renovation and expansion at Monarch Casino, in Black Hawk, Colorado, which includes a 500-room hotel and a parking garage and is expected to be substantially complete in the first or second quarter of 2020, may initially have an adverse impact on the operating results of Ameristar Black Hawk due to the increased competition.

The West segment’s total revenues and Adjusted EBITDAR for the year ended December 31, 2018 benefited from the acquisitions of Ameristar Black Hawk and the Jackpot Properties in October 2018, which contributed a combined $53.8 million of revenues and $20.8 million of Adjusted EBITDAR .

The West segment operating results also benefited from strong year-over-year performance of Tropicana Las Vegas, which experienced gaming volume growth while achieving operational efficiencies.

Reimbursable management costs decreased due to the fact that the management contract with Hollywood Casino-Jamul San Diego terminated in May 2018.

Adjusted EBITDAR margin of the West segment grew significantly, primarily as a result of the additions of Ameristar Black Hawk and the Jackpot Properties as well as the gaming volume growth at Tropicana Las Vegas.

In comparing the year ended December 31, 2018 to the prior year, the adoption of ASC 606 had the effect of decreasing gaming revenues and food, beverage, hotel and other revenues by $52.1 million and $8.3 million, respectively, of which $57.4 million related to promotional allowances, resulting in a net impact on West segment total revenues of a decrease of $3.0 million.

Adjusted EBITDAR margin 27.2 % 30.9 % 26.1 % (370) bps 480 bps

The West segment’s results of operations for the year ended December 31, 2020 were primarily impacted by the COVID-19 pandemic.

All of our properties within the West segment reopened and continue to operate with reduced gaming, hotel (if applicable) capacity, limited food and beverage and other amenity offerings, with the exception of Zia Park which remains closed.

In response to the COVID-19 pandemic on our operations, we implemented cost saving initiatives to offset inevitable revenue degradation, such as:

operating with a reduced workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings.

For the year ended December 31, 2020, the West segment’s total revenues, Adjusted EBITDAR and Adjusted EBITDAR margin decreased, as compared to the prior year, due to the temporary closures, operational restrictions, and social distancing measures described above.

Midwest Segment

For the year ended December 31,

% / bps Change

(dollars in millions)

Revenues (1) :

For the year ended December 31, $ Change % / bps Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

2018 2020 vs.

2019 2019 vs.

Gaming $ 615.2 $ 938.1 $ 719.8 $ (322.9) $ 218.3 (34.4) % 30.3 %

Food, beverage, hotel and other 66.2 156.4 103.9 (90.2) 52.5 (57.7) % 50.5 %

Promotional allowances

Total revenues $ 681.4 $ 1,094.5 $ 823.7 $ (413.1) $ 270.8 (37.7) % 32.9 %

Adjusted EBITDAR $ 258.3 $ 403.6 $ 294.3 $ (145.3) $ 109.3 (36.0) % 37.1 %

Adjusted EBITDAR margin

See footnote (1) to the consolidated revenues table above.

The Midwest segment’s total revenues and Adjusted EBITDAR for the year ended December 31, 2019 benefited from the first full year of operations of River City Casino and Ameristar Council Bluffs, which were acquired in the Pinnacle Acquisition, resulting in increases of $291.3 million and $111.3 million, respectively.

Adverse winter weather during the first quarter of 2019 and severe flooding during the second quarter of 2019 negatively impacted visitation at several of our properties within the Midwest segment, resulting in year-over-year declines in total revenues and Adjusted EBITDAR at the majority of our existing properties for the year ended December 31, 2019 .

Despite challenges presented by the adverse weather and flooding, a focus on cost containment, operational efficiencies, and the additions of Ameristar Council Bluffs and River City Casino resulted in an increase in Adjusted EBITDAR margin.

The Midwest segment’s total revenues and Adjusted EBITDAR for the year ended December 31, 2018 benefited from the acquisitions of River City Casino and Ameristar Council Bluffs in October 2018, which contributed $81.1 million and $28.8 million, respectively.

In addition, the Midwest segment operating results benefited from strong year-over-year performances of Argosy Casino Riverside and Prairie State Gaming, where gaming volumes increased and total revenues increased by $18.5 million collectively.

Additionally, operational efficiencies at Hollywood Casino St.

Louis helped contribute to the year-over-year increase in Midwest segment Adjusted EBITDAR.

The expansion in Adjusted EBITDAR margin was largely driven by the performances of Argosy Casino Riverside, Prairie State Gaming and Hollywood Casino St.

In comparing the year ended December 31, 2018 to the prior year, the adoption of ASC 606 had the effect of decreasing gaming revenues and food, beverage, hotel and other revenues by $45.8 million and $5.7 million, respectively, of which $52.7 million related to promotional allowances, resulting in a net impact on Midwest segment total revenues of an increase of $1.2 million.

Total revenues and Adjusted EBITDAR of the Other category were $47.5 million and $(87.8) million , respectively, for the year ended December 31, 2019 .

Total revenues increased by $7.1 million for the year ended December 31, 2019 , principally as a result of Penn Interactive, which began operating live sports betting at retail sportsbooks at our properties in Indiana, Iowa, and Pennsylvania, as well as an iCasino in Pennsylvania, during the third quarter of 2019.

Adjusted EBITDAR decreased by $19.7 million for the year ended December 31, 2019 , principally as a result of an increase in corporate overhead costs, largely attributable to payroll and other general and administrative costs associated with the Pinnacle Acquisition.

Total revenues and Adjusted EBITDAR of the Other category were $40.4 million and $(68.1) million , respectively, for the year ended December 31, 2018 , representing year-over-year decreases of $11.3 million and $12.9 million , respectively, principally as a result of Penn Interactive operating results and an increase in corporate overhead costs, largely attributable to payroll and other general and administrative costs associated with the Pinnacle Acquisition.

Adjusted EBITDAR margin 37.9 % 36.9 % 35.7 % 100 bps 120 bps

The Midwest segment’s results of operations for the year ended December 31, 2020 were primarily impacted by the COVID-19 pandemic.

All of our properties within the Midwest segment reopened and continue to operate with reduced gaming, hotel (if applicable) capacity, limited food and beverage and other amenity offerings.

In response to the COVID-19 pandemic on our operations, we implemented cost saving initiatives to offset inevitable revenue degradation, such as:

operating with a reduced workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings.

For the year ended December 31, 2020, the Midwest segment’s total revenues and Adjusted EBITDAR decreased, as compared to the prior year, due to the temporary closures, operational restrictions, and social distancing measures described above.

The Midwest segment’s Adjusted EBITDAR margin increased 100 basis points for the year ended December 31, 2020, as compared to the prior year due to our cost structure savings initiatives described above.

For the year ended December 31, $ Change % / bps Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

2018 2020 vs.

2019 2019 vs.

Gaming $ 62.7 $ 8.8 $ — $ 53.9 $ 8.8 612.5 % —

Food, beverage, hotel and other 62.3 38.7 40.3 23.6 (1.6) 61.0 % (4.0) %

Management service and licensing fees — — 0.1 — (0.1) — (100.0) %

Total revenues $ 125.0 $ 47.5 $ 40.4 $ 77.5 $ 7.1 163.2 % 17.6 %

Adjusted EBITDAR $ (43.5) $ (87.8) $ (68.1) $ 44.3 $ (19.7) (50.5) % 28.9 %

Total revenues and Adjusted EBITDAR of the Other category increased for the year ended December 31, 2020, as compared to the prior ye ar, primarily as a result of Penn Interactive.

Penn Interactive's operations benefited from the launch of the online Barstool Sportsbook in Pennsylvania in September 2020 and increases in online social and real-money gaming revenue.

Real-money online gaming revenue benefited from an improved conversion of the my choice database to our real-money gaming platform, and was also positively impacted by the temporary closures of Pennsylvania casinos throughout portions of 2020.

In addition to benefiting from Penn Interactive's operating results, the increase in Adjusted EBITDAR is driven by decreases in corporate overhead costs of $20.5 million for the year ended December 31, 2020, principally driven by furloughs to team members, compensation reductions effective April 1, 2020 through September 30, 2020, and the overall reduction of expenses due to the temporary closures, as well as an overall permanent reduction to our workforce as a result of the COVID-19 pandemic, offset by increased expenses related to the ramp up of the Penn Interactive online sportsbook operations.

Non-GAAP Financial Measures

Use and Definitions

In addition to GAAP financial measures, management uses Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDAR and Adjusted EBITDAR margin as non-GAAP financial measures.

In addition to GAAP financial measures, management uses Adjusted EBITDA, Adjusted EBITDAR and Adjusted EBITDAR margin as non-GAAP financial measures.

These non-GAAP financial measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP.

11 unchanged sentences

and other income or expenses.

Adjusted EBITDA is inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (such as depreciation and amortization) added back for our joint venture in Kansas Entertainment.

Adjusted EBITDA is inclusive of rent expense associated with our triple net operating leases.

Adjusted EBITDA is inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (such as interest expense, net;

income taxes;

depreciation and amortization;

and stock-based compensation expense) added back for Barstool Sports and our Kansas Entertainment joint venture.

Adjusted EBITDA is inclusive of rent expense associated with our triple net operating leases (the operating lease components contained within the Penn Master Lease and Pinnacle Master Lease (primarily land), the Meadows Lease, the Margaritaville Lease, the Greektown Lease and the Tropicana Lease).

Although Adjusted EBITDA includes rent expense associated with our triple net operating leases, we believe Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our consolidated results of operations.

We define Adjusted EBITDA margin as Adjusted EBITDA divided by consolidated revenues.

Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business, and is especially relevant in evaluating large, long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the substantial non-operational depreciation charges and financing costs of such projects.

1 unchanged sentence

These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry.

In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their Adjusted EBITDA calculations certain corporate expenses that do not relate to the management of specific casino properties.

However, Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP.

6 unchanged sentences

and (ii) using a multiple of Adjusted EBITDAR to calculate enterprise value allows for an adjustment to the balance sheet to recognize estimated liabilities arising from operating leases related to real estate.

However, Adjusted EBITDAR when presented on a consolidated basis is not a financial measure in accordance with

GAAP and should not be viewed as a measure of overall operating performance or considered in isolation or as an alternative to net income because it excludes the rent expense associated with our triple net operating leases and is provided for the limited purposes referenced herein.

Adjusted EBITDAR margin is defined as Adjusted EBITDAR on a consolidated basis divided by revenues on a consolidated basis.

However, Adjusted EBITDAR when presented on a consolidated basis is not a financial measure in accordance with GAAP and should not be viewed as a measure of overall operating performance or considered in isolation or as an alternative to net income because it excludes the rent expense associated with our triple net operating leases and is provided for the limited purposes referenced herein.

Adjusted EBITDAR margin is defined as Adjusted EBITDAR on a consolidated basis (as defined above) divided by revenues on a consolidated basis.

Adjusted EBITDAR margin is presented on a consolidated basis outside the financial statements solely as a valuation metric.

1 unchanged sentence

Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures

The following table includes a reconciliation of net income, which is determined in accordance with GAAP, to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures, as well as related margins:

The following table includes a reconciliation of net income (loss), which is determined in accordance with GAAP, to Adjusted EBITDA, Adjusted EBITDAR and Adjusted EBITDAR margin, which are non-GAAP financial measures:

For the year ended December 31,

(dollars in millions) 2020 2019 2018

Net income (loss) $ (669.1) $ 43.1 $ 93.5

Income tax expense (benefit) (165.1) 43.0 (3.6)

3 unchanged sentences

Other expense (income) (106.6) (20.0) 7.1

Operating income

Operating income (loss) (410.2) 571.9 634.1

Stock-based compensation (1)

14.5 14.9 12.0

Cash-settled stock-based award variance (1)(2)

Loss on disposal of assets (1)

67.2 0.8 (19.6)

(Gain) loss on disposal of assets (1)

(29.2) 5.5 3.2

Contingent purchase price (1)

(1.1) 7.0 0.5

Pre-opening and acquisition costs (1)

11.8 22.3 95.0

Depreciation and amortization 366.7 414.2 269.0

Impairment losses 623.4 173.1 34.9

Provision for (recoveries on) loan loss and unfunded loan commitments

Recoveries on loan loss and unfunded loan commitments — — (17.0)

Insurance recoveries, net of deductible charges (1)

(0.1) (3.0) (0.1)

Income from unconsolidated affiliates 13.8 28.4 22.3

Non-operating items for Kansas JV (3)

Non-operating items of equity method investments (3)

Other expenses (1)(4)

Adjusted EBITDA 675.0 1,238.8 1,039.4

Rent expense associated with triple net operating leases (1)

419.8 366.4 3.8

Adjusted EBITDAR $ 1,094.8 $ 1,605.2 $ 1,043.2

Net income margin

Adjusted EBITDA margin

Net income (loss) margin (18.7) % 0.8 % 2.6 %

Adjusted EBITDAR margin 30.6 % 30.3 % 29.1 %

These items are included in “General and administrative” within the Company’s Consolidated Statements of Income.

(1) These items are included in “General and administrative” within the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss).

(2) Our cash-settled stock-based awards are adjusted to fair value each reporting period based primarily on the price of the Company’s common stock.

As such, significant fluctuations in the price of the Company’s common stock during any reporting period could cause significant variances to budget on cash-settled stock-based awards.

During the year ended December 31, 2019 , the price of the Company’s common stock increased, which resulted in an unfavorable variance to budget.

During the year ended December 31, 2018, the price of the Company’s common stock decreased, which resulted in a favorable variance to budget.

Consists principally of depreciation and amortization associated with the operations of Hollywood Casino at Kansas Speedway.

During the year ended December 31, 2020, the price of the Company’s common stock increased significantly, which resulted in unfavorable variances to budget.

(3) Consists principally of interest expense, net;

income taxes;

depreciation and amortization;

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

(4) Consists of non-recurring restructuring charges (primarily severance) 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.

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, acquisitions or investments, funding of construction for development projects, and our compliance with covenants contained under our debt agreements.

For the year ended December 31,

(dollars in millions)

For the year ended December 31, $ Change % Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

2018 2020 vs.

2019 2019 vs.

Net cash provided by operating activities $ 338.8 $ 703.9 $ 352.8 $ (365.1) $ 351.1 (51.9) % 99.5 %

Net cash used in investing activities $ (233.7) $ (607.5) $ (1,423.1) $ 373.8 $ 815.6 (61.5) % (57.3) %

Net cash provided by (used in) financing activities

Net cash provided by (used in) financing activities $ 1,310.1 $ (122.4) $ 1,272.1 $ 1,432.5 $ (1,394.5) N/M N/M

N/M - Not meaningful

Operating Cash Flow

The increase in net cash provided by operating activities of $351.1 million for the year ended December 31, 2019 , as compared to the prior year, is primarily due to an increase in cash receipts from customers, offset by increases in cash paid to suppliers and vendors and cash paid to employees, all driven primarily by the acquisitions of Pinnacle, Margaritaville, and Greektown.

In addition, during the year ended December 31, 2019 , we received an upfront payment of $12.5 million pursuant to a multi-year agreement with a sports betting operator for online sports betting and iGaming market access.

Furthermore, net cash provided by operating activities was impacted by year-over-year increases in rent and interest payments made under our Triple Net Leases of $342.0 million, principally due to the Pinnacle Master Lease, and in interest payments made on long-term debt of $54.4 million, primarily due to the debt refinancing in October 2018, which increased our total long-term debt.

The decrease in net cash provided by operating activities of $125.0 million for the year ended December 31, 2018 , as compared to the prior year, was primarily due to an increase in interest payments made under the Master Leases of $66.1 million, associated largely with the Pinnacle Master Lease ;

an increase in interest payments made on long-term debt of $11.5 million, primarily due to the debt refinancing in October 2018, which increased our total long-term debt;

and an increase in income tax paid of $67.5 million.

Offsetting these items was a net increase in cash provided by operating activities due to the Pinnacle Acquisition.

The decrease in net cash provided by operating activities of $365.1 million for the year ended December 31, 2020, is due to the temporary closures of our properties due to the COVID-19 pandemic, which significantly decreased cash receipts from customers.

Offsetting this decrease was a $316.2 million decrease in cash paid for rent and interest payments, in total, under our Triple Net Leases, due primarily to utilizing rent credits to pay rent in the current year under the Master Leases, the Meadows Lease and the Morgantown Lease (offset by the increase in payments under the Greektown Lease due to the timing of the acquisition in the second quarter of 2019).

Investing Cash Flow

Net cash used in investing activities for the year ended December 31, 2019 primarily consisted of the acquisitions of the operations of Margaritaville and Greektown for $109.1 million and $289.2 million, respectively, both net of cash acquired, and $190.6 million in capital expenditures, which principally consisted of maintenance capital expenditures (see below).

Net cash used in investing activities for the year ended December 31, 2020 decreased compared to the prior year primarily due to decrease in capital expenditures of $53.6 million in the current year and the 2019 acquisitions of the operations of Margaritaville and Greektown for $109.1 million and $289.2 million, respectively, both net of cash.

As a part of the acquisitions of Margaritaville and Greektown, the Company entered into sale-leaseback transactions with VICI in the amounts of $261.1 million and $700.0 million, respectively, which had no net impact on net cash used in investing activities for the year ended December 31, 2019.

In addition, during the year ended December 31, 2019, we paid $10.0 million for online and retail sports betting licenses in Pennsylvania.

Capital expenditures increased year-over-year principally due to the Pinnacle Acquisition, which added twelve gaming properties.

Net cash used in investing activities for the year ended December 31, 2018 primarily included the Pinnacle Acquisition of $1,945.2 million , net of cash acquired, offset partially by the cash received for the sale of the Divested Properties of $661.7 million .

In addition, during the year ended December 31, 2018 , we spent $92.6 million on capital expenditures, which principally consisted of maintenance capital expenditures, purchased two separate Category 4 gaming licenses in York County, Pennsylvania for $50.1 million and Berks County, Pennsylvania for $7.5 million, and purchased iCasino and sports betting licenses in Pennsylvania for $20.0 million.

Net cash used in investing activities for the year ended December 31, 2017 primarily consisted of acquisitions of 1 st Jackpot Casino and Resorts Casino Tunica in the amount of $127.7 million and capital expenditures of $99.3 million, which principally consisted of maintenance capital expenditures.

The decrease in capital expenditures in the current year primarily reflects our efforts to reduce or defer our planned Category 4 project capital expenditures as we mitigate the impact of the COVID-19 pandemic.

These decreases were partially offset by our $135.0 million investment in Barstool Sports made during the first quarter of 2020.

Capital Expenditures

Capital expenditures are accounted for as either project capital (new or expansions) or maintenance (replacement) capital expenditures.

Capital expenditures are accounted for as either project capital (new facilities or expansions) or maintenance (replacement) capital expenditures.

Cash provided by operating activities as well as cash available under our Revolving Credit Facility funded our capital expenditures for the years ended December 31, 2020, 2019 and 2018.

The following table summarizes our project capital expenditures for the years ended December 31, 2019 , 2018 and 2017 , by segment:

For the year ended December 31,

(in millions)

During the year ended December 31, 2019 , we spent $4.1 million and $21.0 million on our Hollywood Casino York and Hollywood Casino Morgantown development projects, respectively.

Hollywood Casino York, which is located in the York Galleria Mall in Springettsbury Township, will represent an overall capital investment of approximately $120 million inclusive of the gaming license.

Hollywood Casino Morgantown is being built on a previously vacant 36-acre site in Caernarvon Township with a capital investment of approximately $111 million inclusive of the gaming license.

We anticipate that both of these projects will be complete by the end of 2020.

During the year ended December 31, 2017, we made enhancements to Tropicana Las Vegas, including adding a celebrity chef restaurant, the Robert Irvine Public House, which opened on July 27, 2017.

The following table summarizes our expected capital expenditures for the year ending December 31, 2020 by segment:

(in millions)

During the year ended December 31, 2020, we had capital expenditures of $137.0 million primarily related to our maintenance projects and our Category 4 development projects.

For the year ending December 31, 2021, our e xpected capital expenditures are $296.8 million of which $98.9 million relates our Category 4 projects and $197.9 million relates to our maintenance projects .

Our Category 4 projects are Hollywood Casino York and Hollywood Casino Morgantown.

Hollywood Casino York, which is located in the York Galleria Mall in York County, will represent an overall capital investment of approximately $120.0 million inclusive of the gaming license.

Hollywood Casino Morgantown is being built on a previously vacant 36-acre site in Berks County with a capital investment of approximately $111.0 million inclusive of the gaming license.

We anticipate that both of these projects will be completed by the end of 2021.

Financing Cash Flow

Net cash used by financing activities for the year ended December 31, 2019 consisted principally of net repayments of long-term debt of $18.6 million despite the borrowing associated with the acquisition of Greektown, $51.6 million of principal payments on our financing obligations, $6.2 million of principal payments on our finance leases, and $24.9 million in payments related to the repurchase of common stock.

Net cash provided by financing activities for the year ended December 31, 2018 was largely driven by $1,149.8 million of net borrowings of long-term debt and $250.0 million in cash received from the Plainridge Park Casino Sale-Leaseback, offset by $67.4 million of principal payments on our financing obligations and $50.0 million in payments related to the repurchase of common stock.

The net borrowings of long-term debt is primarily due to the refinancing of our debt in conjunction with the Pinnacle Acquisition and the acquisition of Margaritaville on January 1, 2019.

Net cash used in financing activities for the year ended December 31, 2017 was largely driven by $162.1 million of net repayments of long-term debt, $57.8 million of principal payments on our financing obligations, $24.8 million in payments related to the repurchase of our common stock, $19.6 million of contingent purchase price payments, and the repayment of a loan used to acquire a previously-leased corporate airplane in the amount of $20.8 million, offset by $82.6 million in cash received from the sale of the real estate assets of 1 st Jackpot Casino and Resorts Casino Tunica to GLPI.

Senior Secured Credit Facilities

As of December 31, 2019 , our Senior Secured Credit Facilities (as defined below) had a gross outstanding balance of $1,929.8 million , consisting of a $672.3 million Term Loan A Facility, a $1,117.5 million Term Loan B-1 Facility (as such terms are defined below), and a Revolving Credit Facility, which had $140.0 million drawn as of December 31, 2019 .

Additionally, as of December 31, 2019 and 2018 , the Company had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating $30.0 million in both periods, resulting in $530.0 million and $558.0 million of available borrowing capacity under the Revolving Credit Facility, respectively.

On October 30, 2013, the Company entered into a credit agreement (the “2013 Credit Agreement”) providing for:

(i) a five -year $500.0 million revolving credit facility (the “ 2013 Revolving Credit Facility ”), (ii) a five -year $500.0 million term loan A facility (the “ 2013 Term Loan A Facility ”) and (iii) a seven -year $250.0 million term loan B facility (the “ 2013 Term Loan B Facility ” and collectively with the 2013 Revolving Credit Facility and the 2013 Term Loan A Facility , the “ 2013 Senior Secured Credit Facilities ”).

On April 28, 2015, the Company entered into an agreement to amend its 2013 Credit Agreement (the “Amended 2013 Credit Agreement”).

In August 2015, the Amended 2013 Credit Agreement went into effect, which increased the capacity under the 2013 Revolving Credit Facility to $633.2 million and increased the 2013 Term Loan A Facility to $646.7 million.

The Amended 2013 Credit Agreement did not impact the 2013 Term Loan B Facility .

On January 19, 2017, the Company entered into an agreement to amend and restate its Amended 2013 Credit Agreement (the “2017 Credit Agreement”), which provided for:

(i) a five -year $700.0 million revolving credit facility (the “Revolving Credit Facility”), a five -year $300.0 million term loan A facility (the “Term Loan A Facility”), and a seven -year $500.0 million Term Loan B facility (the “Term Loan B Facility” and collectively with the Revolving Credit Facility and the Term Loan A Facility, the “Senior Secured Credit Facilities”).

On October 15, 2018, in connection with the Pinnacle Acquisition, we entered into an incremental joinder agreement (the “Incremental Joinder”), which amended the 2017 Credit Agreement (the “Amended 2017 Credit Agreement”).

The Incremental Joinder provided for an additional $430.2 million of incremental loans having the same terms as the existing Term Loan A Facility, with the exception of extending the maturity date, and an additional $1,128.8 million of loans as a new tranche having new terms (the “Term Loan B-1 Facility”).

The proceeds resulting from the Incremental Joinder were used;

together with cash on hand and proceeds received from (i) newly-issued shares of the Company’s common stock, (ii) the sale of the Divested Properties, (iii) the Plainridge Park Casino Sale-Leaseback, and (iv) the sale of the real estate assets associated with Belterra Park;

to (a) acquire all of the issued and outstanding equity interests of Pinnacle, (b) repay in full Pinnacle’s existing senior secured credit facilities at the time of the acquisition, (c) redeem, repurchase, defease or satisfy and discharge in full Pinnacle’s outstanding 5.625% senior notes due 2024, (d) repay in full the Company’s outstanding borrowings under its Term Loan B Facility at the time of the acquisition, and (e) pay fees, costs and expenses associated with the foregoing.

With the exception of extending the maturity date, the Incremental Joinder did not impact the Revolving Credit Facility.

The final maturity dates for the Term Loan A Facility and Term Loan B-1 Facility are October 19, 2023 and October 15, 2025, respectively.

The applicable margin for the Term Loan A Facility ranges from 1.25% to 3.00% per annum for LIBOR loans and 0.25% to 2.00% per annum for base rate loans, in each case depending on the Consolidated Total Net Leverage Ratio (as defined in the Amended 2017 Credit Agreement) as of the most recent fiscal quarter.

The applicable margin for the Term Loan B-1 Facility is 2.25% per annum for LIBOR loans and 1.25% per annum for base rate loans.

The Term Loan B-1 Facility is subject to a LIBOR “floor” of 0.75%.

Prior to extinguishment, the applicable margin for the Term Loan B Facility was 2.50% per annum for LIBOR loans and 1.50% per annum for base rate loans.

In addition, we pay a commitment fee on the unused portion of the commitments under the Revolving Credit Facility at a rate that ranges from 0.20% to 0.50% per annum, depending on the Consolidated Total Net Leverage Ratio as of the most recent fiscal quarter.

The payment and performance of obligations under the Senior Secured Credit Facilities are guaranteed by a lien on and security interest in substantially all of the assets (other than excluded property, such as gaming licenses) of the Company.

5.625% Senior Unsecured Notes

On January 19, 2017, the Company completed an offering of $400.0 million aggregate principal amount of 5.625% senior unsecured notes that mature on January 15, 2027 (the “5.625% Notes”) at a price of par.

Interest on the 5.625% Notes is payable on January 15 th and July 15 th of each year.

The 5.625% Notes are not guaranteed by any of the Company’s subsidiaries except in the event that the Company in the future issues certain subsidiary-guaranteed debt securities.

The Company may redeem the 5.625% Notes at any time on or after January 15, 2022, at the declining redemption premiums set forth in the

indenture governing the 5.625% Notes, and, prior to January 15, 2022, at a “make-whole” redemption premium set forth in the indenture governing the 5.625% Notes.

The Company used a portion of the proceeds from the issuance of the 5.625% Notes to retire all of its $300.0 million aggregate principal amount of 5.875% senior subordinated notes due 2021 and, along with loans funded under the 2017 Credit Agreement, repay amounts outstanding under its Amended 2013 Credit Agreement, including to fund related transaction fees and expenses.

The remaining proceeds from the issuance of the 5.625% Notes were used for general corporate purposes.

Net cash provided by financing activities for the year ended December 31, 2020 was $1,310.1 million compared to net cash used in financing activities of $122.4 million in the prior year.

The change is driven primarily by the separate public offerings of Penn Common Stock on May 14, 2020 and September 24, 2020, in which we received net proceeds of $331.2 million and $957.6 million, respectively.

Additionally, we received $322.2 million of net proceeds from the issuance of the Convertible Notes.

These proceeds were partially offset by net repayments under our Senior Secured Credit Facilities of $301.7 million.

In the current year we fully repaid $670.0 million of outstanding borrowings under our Revolving Credit Facility and a $115.0

million prepayment of outstanding borrowings on our Term Loan B-1 Facility.

In comparison, in the prior year net cash used by financing activities consisted principally of net repayments of long-term debt of $18.6 million despite the borrowing associated with the acquisition of Greektown, $51.6 million of principal payments on our financing obligations, $6.2 million of principal payments on our finance leases, and $24.9 million in payments related to the repurchase of common stock.

Debt Issuances, Redemptions and Other Long-term Obligations

On March 13, 2020, we borrowed the remaining available amount of $430.0 million under our Revolving Credit Facility.

The Company elected to draw down the remaining available funds from its Revolving Credit Facility in order to maintain maximum financial flexibility in light of the COVID-19 pandemic.

Through the use of our September 2020 equity raise proceeds, we fully repaid $670.0 million outstanding borrowings under our Revolving Credit Facility.

Additionally, o n November 12, 2020 the Company prepaid $115.0 million of outstanding borrowings on its Term Loan B-1 Facility.

On April 14, 2020, the Company entered into a second amendment to its Credit Agreement with its various lenders ( the “Second Amendment”) to provide for certain modifications.

During the period beginning on April 14, 2020 and ending on the earlier of (x) the date that is two business days after the date on which the Company delivers a covenant relief period termination notice to the administrative agent and (y) the date on which the administrative agent receives a compliance certificate for the quarter ending March 31, 2021 (the “Covenant Relief Period”), the Company will not have to comply with any Maximum Leverage Ratio or Minimum Interest Coverage Ratio (as such terms are defined in the Credit Agreement that was amended on January 19, 2017, the "Amended 2017 Credit Agreement").

During the Covenant Relief Period, the Company will be subject to a minimum liquidity covenant that requires cash and cash equivalents and availability under its Revolving Credit Facility to be (i) at least $400.0 million through April 30, 2020;

(ii) $350.0 million during the period from May 1, 2020 through May 31, 2020;

(iii) $300.0 million during the period from June 1, 2020 through June 30, 2020;

and (iv) $225.0 million during the period from July 1, 2020 through March 31, 2021.

The Second Amendment also amended the financial covenants that are applicable after the Covenant Relief Period to permit the Company to (i) maintain a maximum consolidated total net leverage ratio of up to a ratio that varies by quarter, ranging between 5.50:1.00 and 4.50:1.00 in 2021 and 4.25:1.00 thereafter, tested quarterly on a pro forma trailing twelve month (“PF TTM”) basis;

(ii) maintain a maximum senior secured net leverage ratio of up to a ratio that varies by quarter, ranging between 4.50:1.00 and 3.50:1.00 in 2021 and 3.00:1.00 thereafter, tested quarterly on a PF TTM basis;

and (iii) maintain an interest coverage ratio of 2.50:1.00, tested quarterly on a PF TTM basis.

In addition, the Second Amendment (i) provides that, during the Covenant Relief Period, loans under the Revolving Credit Facility and the Term Loan A Facility shall bear interest at either a base rate or an adjusted LIBOR rate, in each case, plus an applicable margin, in the case of base rate loans, of 2.00%, and in the case of adjusted LIBOR rate loans, of 3.00%;

(ii) provides that, during the Covenant Relief Period, the Company shall pay a commitment fee on the unused portion of the commitments under the Revolving Credit Facility at a rate of 0.50% per annum;

(iii) provides for a 0.75% LIBOR floor applicable to all LIBOR loans under the Senior Secured Credit Facilities;

(iv) carves out COVID-19 related effects from certain terms of the Senior Secured Credit Facilities during the Covenant Relief Period;

and (v) makes certain other changes to the covenants and other provisions of the Credit Agreement.

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.

Interest on the Convertible Notes is payable on May 15 th and November 15 th of each year, beginning on November 15, 2020.

The Convertible Notes are convertible into shares of the Company’s common stock at an initial conversion price of $23.40 per share, or 42.7350 shares, per $1,000 principal amount of notes, subject to adjustment if certain corporate events occur.

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

As of December 31, 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 $1,255.3 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.

The Company has the option to redeem the Convertible Notes, in whole or in part, beginning November 20, 2023.

In addition, the Convertible Notes convert into shares of the Company’s common stock upon the occurrence of certain corporate events that constitute a fundamental change under the indenture governing the Convertible Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of repurchase.

In connection with certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their Convertible Notes in connection with such corporate events or during the relevant redemption period for such Convertible Notes.

At December 31, 2020, we had $2,431.6 million in aggregate principal amount of indebtedness, including $1,628.1 million outstanding under our Senior Secured Credit Facilities, $330.5 million outstanding under our Convertible Notes, $400.0 million outstanding under our 5.625% senior unsecured notes, and $73.0 million outstanding in other long-term obligations .

No amounts were drawn on our Revolving Credit Facility.

We have no debt maturing prior to 2023.

As of December 31, 2020 we had co nditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating to $28.2 million resulting in $671.8 million available borrowing capacity under our Revolving Credit Facility.

Our Senior Secured Credit Facilities and 5.625% Notes require us, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests, including the Maximum Consolidated Total Net Leverage Ratio, Maximum Consolidated Senior Secured Net Leverage Ratio and Minimum Interest Coverage Ratio (as such terms are defined in our Amended 2017 Credit Agreement) as well as the Fixed Charge Coverage Ratio (as defined in the indenture governing our 5.625% Notes).

In addition, our Senior Secured Credit Facilities and 5.625% Notes restrict, among other things, our ability to incur additional indebtedness, incur guarantee obligations, amend debt instrument s, pay dividends, create liens on assets, make investments, engage in mergers or consolidations, and otherwise restrict corporate activities.

As of December 31, 2020, the Company was in compliance with all required financial covenants.

When our covenant relief period ends, the Company is subject to and expects to be in compliance with all required financial covenants including ( i) Maximum Consolidated Total Net Leverage Ratio;

(ii) Maximum Consolidated Senior Secured Net Leverage Ratio;

and (iii) Minimum Interest Coverage Ratio (as discussed above) with the Company's submission of its compliance certificate for the quarter ending March 31, 2021.

See Note 11, “Long-term Debt,” in the notes to our Consolidated Financial Statements for additional information of the Company's debt and other long-term obligations.

Common Stock Offering

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.

Triple Net Leases

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Prior to the adoption of ASC 842, all components contained within the Master Leases were accounted for as financing obligations.

In addition, three of the gaming facilities used in our operations are subject to individual triple net leases.

As previously mentioned, we refer to the Penn Master Lease, the Pinnacle Master Lease, the Margaritaville Lease, the Greektown Lease and the Meadows Lease, collectively, as our Triple Net Leases.

In addition, five of the gaming facilities used in our operations are subject to individual triple net leases.

As previously mentioned, we refer to the Penn Master Lease, the Pinnacle Master Lease, the Meadows Lease, the Margaritaville Lease, the Greektown Lease, the Tropicana Lease and the Morgantown Lease, collectively, as our Triple Net Leases.

Under our Triple Net Leases, in addition to lease payments for the real estate assets, we are required to pay the following, among other things:

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(3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor);

and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

Penn Master Lease

Pursuant to a triple net master lease with GLPI (the “Penn Master Lease”), which became effective November 1, 2013, the Company leases real estate assets associated with 19 of the gaming facilities used in its operations.

The Penn Master Lease has an initial term of 15 years with four subsequent, five -year renewal periods on the same terms and conditions, exercisable at the Company’s option.

The payment structure under the Penn Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2% , depending on the Adjusted Revenue to Rent Ratio (as defined in the Penn Master Lease ) of 1.8:1, and a component that is based on the performance of the properties, which is prospectively adjusted (i) every five years by an amount equal to 4% of the average change in net revenues of all properties under the Penn Master Lease (other than Hollywood Casino Columbus and Hollywood Casino Toledo) compared to a contractual baseline during the preceding five years (“Penn Percentage Rent”) and (ii) monthly by an amount equal to 20% of the net revenues of Hollywood Casino Columbus and Hollywood Casino Toledo in excess of a contractual baseline and subject to a rent floor specific to Hollywood Casino Toledo.

As a result of the annual escalator, the fixed component of rent increased by $5.5 million , $5.4 million and $2.4 million effective as of November 1, 2019 , 2018 and 2017 , respectively.

Additionally, effective November 1, 2018, the Penn Percentage Rent reset resulted in an annual rent reduction of $11.3 million , which will be in effect until the next Penn Percentage Rent reset, occurring on November 1, 2023.

Pinnacle Master Lease

In connection with the Pinnacle Acquisition, the Company assumed a triple net master lease with GLPI (“Pinnacle Master Lease”), originally effective April 28, 2016.

Concurrent with the closing of the Pinnacle Acquisition on October 15, 2018, the Company entered into an amendment to the Pinnacle Master Lease to, among other things, (i) remove Ameristar St.

Charles, Ameristar Kansas City and Belterra Resort and (ii) add Plainridge Park Casino, whose real estate assets were sold to GLPI and concurrently leased back to the Company for a fixed annual rent of $25.0 million.

Further, the rent payment under the Pinnacle Master Lease was increased by a fixed annual amount of $13.9 million to adjust the rent to reflect current market conditions.

Reflecting this amendment, the Company leases real estate assets associated with twelve of the gaming facilities used in the Company’s operations from GLPI.

Upon assumption of the Pinnacle Master Lease , as amended, there were 7.5 years remaining of the initial ten -year term, with five subsequent, five -year renewal periods exercisable at the Company’s option.

The payment structure under the Pinnacle Master Lease includes a fixed component, which is subject to an annual escalator of up to 2% , depending on the Adjusted Revenue to Rent Ratio (as defined in the Pinnacle Master Lease ) of 1.8 :1, and a component that is based on the performance of the properties, which is prospectively adjusted every two years by an amount equal to 4% of the average change in net revenues of all properties under the Pinnacle Master Lease compared to a contractual baseline during the preceding two years (“Pinnacle

Percentage Rent”).

As a result of the annual escalator, effective as of May 1, 2019, the fixed component of rent increased by $1.0 million .

The next Pinnacle Percentage Rent reset is scheduled to occur on May 1, 2020.

Meadows Lease, Margaritaville Lease, and Greektown Lease

In connection with the Pinnacle Acquisition, we assumed a triple net lease of the real estate assets used in the operations of Meadows (the “Meadows Lease”), originally effective September 9, 2016, with GLPI as the landlord.

Upon assumption of the Meadows Lease, there were eight years remaining of the initial ten-year term, with three subsequent, five-year renewal options followed by one four-year renewal option on the same terms and conditions, exercisable at the Company’s option.

The payment structure under the Meadows Lease includes a fixed component (“Meadows Base Rent”), which is subject to an annual escalator of up to 5% for the initial term or until the lease year in which Meadows Base Rent plus Meadows Percentage Rent (as defined below) is a total of $31.0 million, subject to certain adjustments, and up to 2% thereafter, subject to an Adjusted Revenue to Rent Ratio (as defined in the Meadows Lease) of 2.0:1.

The “Meadows Percentage Rent” is based on performance, which is prospectively adjusted for the next two-year period equal to 4% of the average annual net revenues of the property during the trailing two-year period.

As a result of the annual escalator, effective as of October 1, 2019, the Meadows Base Rent increased by $0.8 million .

The next Meadows Percentage Rent reset is scheduled to occur on October 1, 2020.

In connection with the acquisition of Margaritaville, we entered into the Margaritaville Lease with VICI for the real estate assets used in the operations of Margaritaville.

The Margaritaville Lease has an initial term of 15 years, with four subsequent five-year renewal options on the same terms and conditions, exercisable at the Company’s option.

The payment structure under the Margaritaville Lease includes a fixed component (“Margaritaville Base Rent”), which is subject to an annual escalator of up to 2% subject to an Adjusted Revenue to Rent Ratio (as defined in the Margaritaville Lease) of 1.9:1, and a component that is based on performance, which is prospectively adjusted every two years by an amount equal to 4% of the average change in net revenues of the facility compared to a contractual baseline during the preceding two years (“Margaritaville Percentage Rent”).

The first Margaritaville Percentage Rent reset is scheduled to occur on February 1, 2021.

On February 1, 2020, the Margaritaville Lease was amended to provide for a change in the measurement of the annual escalator.

Under the amendment, the Margaritaville Base Rent is subject to an annual escalator of up to 2% subject to a minimum ratio of net revenue to rent of 6.1:1.

In connection with the acquisition of Greektown, we entered into the Greektown Lease with VICI for the real estate assets used in the operations of Greektown.

The Greektown Lease has an initial term of 15 years, with four subsequent five-year renewal options on the same terms and conditions, exercisable at the Company’s option.

The payment structure under the Greektown Lease includes a fixed component (“Greektown Base Rent”), which is subject to an annual escalator of up to 2% subject to an Adjusted Revenue to Rent Ratio (as defined in the Greektown Lease) of 1.85:1, and a component that is based on performance, which is prospectively adjusted every two years by an amount equal to 4% of the average change in net revenues of the facility compared to a contractual baseline during the preceding two years (“Greektown Percentage Rent”).

The first Greektown Percentage Rent reset is scheduled to occur on June 1, 2021.

(4) all tenant capital improvements;

and (5) all utilities and other services necessary or appropriate for the

leased properties and the business conducted on the leased properties.

As of December 31, 2020, we are required to make annual minimum rent payments of $814.6 million.

Additionally, our Triple Net Leases are subject to annual escalators and periodic percentage rent resets, as applicable.

See Note 12, “Leases,” in the notes to our Consolidated Financial Statements for further discussion and disclosure related to the Company's leases .

Payments to our REIT Landlords under Triple Net Leases

Total payments made to our REIT Landlords, GLPI and VICI, were as follows:

Total payments made to our REIT Landlords, GLPI and VICI, inclusive of rent credits utilized, were as follows:

For the year ended December 31,

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Penn Master Lease (1)

$ 457.9 $ 457.9 $ 461.5

Pinnacle Master Lease (1)

326.9 328.6 70.3

Meadows Lease (1)

26.4 26.4 5.6

Margaritaville Lease 23.5 23.1 —

Greektown Lease 55.6 33.8 —

Other Long-Term Obligations

Ohio Relocation Fees

As of December 31, 2019 and 2018 , other long-term obligations included $76.4 million and $91.3 million , respectively, related to the relocation fees for Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course, which opened in August 2014 and September 2014, respectively.

In June 2013, we finalized the terms of our

memorandum of understanding with the State of Ohio, which included an agreement for us to pay a relocation fee in return for being able to relocate our existing racetracks in Toledo and Grove City to Dayton and Mahoning Valley, respectively.

Upon opening Dayton and Mahoning Valley, each relocation fee was recorded at the present value of the contractual obligation, which was calculated as $75.0 million based on the 5.0% discount rate included in the agreement.

Each relocation fee is payable as follows:

$7.5 million upon opening and eighteen semi-annual payments of $4.8 million beginning one year after opening.

As of December 31, 2019 and 2018 , other long-term obligations included $12.6 million and $13.2 million , respectively, related to the repayment obligation of a hotel and event center located less than a mile away from Hollywood Casino Lawrenceburg, which was constructed by the City of Lawrenceburg Department of Redevelopment.

Effective in January 2015, by contractual agreement, we assumed a repayment obligation for the hotel and event center in the amount of $15.3 million , which was financed through a loan with the City of Lawrenceburg Department of Redevelopment, in exchange for conveyance of the property.

Beginning in January 2016, the Company was obligated to make annual payments on the loan of $1.0 million for 20 years .

Morgantown Lease (1)

$ 891.1 $ 869.8 $ 537.4

(1) During the twelve months ended December 31, 2020 we utilized rent credits to pay $190.7 million, $135.5 million, $11.0 million and $0.3 million of rent under the Penn Master Lease, Pinnacle Master Lease, Meadows Lease and Morgantown Lease, respectively.

(2) Cash rent payable under the Tropicana Lease is nominal.

Therefore, it has been excluded from the table above.

Share Repurchase Programs

On February 3, 2017, the Company announced a share repurchase program pursuant to which the Board of Directors authorized to repurchase up to $100.0 million of the Company’s common stock, which expired on February 1, 2019.

During the years ended December 31, 2018 and 2017, the Company repurchased 2,299,498 and 1,264,149 shares, respectively, of its common stock in open market transactions for $50.0 million at an average price of $21.74 per share and $24.8 million at an average price of $19.59 per share, respectively.

On January 9, 2019, the Company announced a new share repurchase program pursuant to which the Board of Directors authorized to repurchase up to $200.0 million of the Company’s common stock.

The new share repurchase program covers an authorization period of two years, expiring on December 31, 2020.

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 expired on December 31, 2020.

During the year ended December 31, 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 addition, our Senior Secured Credit Facilities and 5.625% Notes restrict, among other things, our ability to incur additional indebtedness, incur guarantee obligations, amend debt instruments, pay dividends, create liens on assets, make investments, engage in mergers or consolidations, and otherwise restrict corporate activities.

As of December 31, 2019 , the Company was in compliance with all required financial covenants.

Based on our current level of operations, we believe that cash generated from operations and cash on hand, together with amounts available under our Senior Secured Credit Facilities, will be adequate to meet our anticipated obligations under our Triple Net Leases, debt service requirements, capital expenditures and working capital needs for the foreseeable future.

However, we cannot be certain that our business will generate sufficient cash flow from operations;

that the U.S.

economy will continue to grow in 2020;

that our anticipated earnings projections will be realized;

that we will achieve the expected synergies from our acquisitions, principally Pinnacle;

or that future borrowings will be available under our Senior Secured Credit Facilities or otherwise will be available in the credit markets to enable us to service our indebtedness or to make anticipated capital expenditures.

In addition, we expect a majority of our future growth to come from acquisitions of gaming properties;

further investment in retail sportsbooks, online sports betting, and iGaming;

greenfield projects;

jurisdictional expansions;

and property expansion in under-penetrated markets.

If we consummate significant acquisitions in the future, undertake any significant property expansions, or make additional investments in Barstool Sports, our cash requirements may increase significantly and we may need to make additional borrowings or complete equity or debt financings to meet these requirements.

Our future operating performance and our ability to service or refinance our debt will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

See “Risk Factors—Risks Related to Our Capital Structure” within “Item 1A.

Risk Factors,” of this Annual Report on Form 10-K for a discussion of the risks related to our capital structure.

We have historically maintained a capital structure comprised of a mix of equity and debt financing.

We vary our leverage to pursue opportunities in the marketplace and in an effort to maximize our enterprise value for our shareholders.

We expect to meet our debt obligations as they come due through internally-generated funds from operations and/or refinancing them through the debt or equity markets prior to their maturity.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

Contractual Cash Obligations

As of December 31, 2019 , there was $530.0 million available for borrowing under our Revolving Credit Facilities.

The following table presents our contractual cash obligations as of December 31, 2019 :

All of the repurchased shares were retired.

There were no repurchases of the Company’s common stock for the year ended December 31, 2020 .

Other Contractual Cash Obligations

The following table presents our other contractual cash obligations as of December 31, 2020:

Payments Due By Period

(in millions)

2025 and After

Senior Secured Credit Facilities

(in millions) Total 2021 2022-2023 2024-2025 2026 and After

Purchase obligations $ 149.1 $ 59.7 $ 33.3 $ 12.9 $ 43.2

Capital expenditure commitments (2)

Operating leases (3)

Finance leases (3)

Financing obligations (3)

Ohio relocation fees (4)

Other liabilities reflected within our Consolidated Balance Sheets (1)

The interest rates are estimated using the forward LIBOR curves plus the applicable spread as of December 31, 2019 .

The contractual amounts to be paid on our variable rate obligations are affected by changes in market interest rates and changes in our spreads, which are based on our leverage ratios.

Future changes in such ratios will impact the contractual amounts to be paid.

We anticipate spending $324.3 million for future capital expenditures over the next year, of which we are contractually committed to spend $54.1 million as of December 31, 2019 .

Pursuant to each of our Triple Net Leases, we are obligated to spend a minimum of 1% of annual net revenues, in the aggregate under each lease, on the maintenance of such facilities.

See Note 11, “Leases,” in the notes to our Consolidated Financial Statements.

In addition to the Ohio Relocation Fees discussed in Note 10, “Long-term Debt,” in the notes to our Consolidated Financial Statements, the Company agreed to pay $110.0 million (of which $36.0 million remains to be paid) to the State of Ohio over ten years in return for certain clarifications from the State of Ohio with respect to various financial matters and limits on competition within the ten-year time period.

9.4 0.8 0.6 0.6 7.4

Total $ 158.5 $ 60.5 $ 33.9 $ 13.5 $ 50.6

(1) Excludes the liability for unrecognized tax benefits of $38.2 million, as we cannot reasonably estimate the period of cash settlement with the respective taxing authorities.

Additionally, it does not include an estimate of the payments associated with our contingent purchase price obligations of $7.3 million as it is not a fixed obligation.

Other Commercial Commitments

The following table presents our material commercial commitments as of December 31, 2019 :

Payments Due By Period

(in millions)

2025 and After

Letters of credit (1)

The available balance under our Revolving Credit Facilities is reduced by outstanding letters of credit.

However, our ability to generate sufficient cash flow from operations will depend on a range of economic, competitive and business factors, many of which are outside our control, including the impact of the COVID-19 pandemic.

We cannot be certain:

(i) of the impact of the operating restrictions to accommodate social distancing and health and safety guidelines on our properties;

(ii) of the magnitude and duration of the impact of the COVID-19 pandemic (including reoccurrences) on general economic conditions, capital markets, unemployment and our liquidity, operations, supply chain and personnel, including the potential that some or all of our properties may be forced to close or cease operations for a certain period of time;

(iii) that the U.S.

economy and our business will recover to levels that existed prior to the COVID-19 pandemic and on what time frame;

(iv) that our anticipated earnings projections will be realized;

(v) that we will achieve the expected synergies from our

acquisitions;

(vi) that future borrowings will be available under our Senior Secured Credit Facilities or otherwise will be available in the credit markets to enable us to service our indebtedness or to make anticipated capital expenditures.

We caution you that the trends seen at our reopened properties (e.g., higher spend per trip) may not continue.

In addition, while we anticipated that a significant amount of our future growth would come through the pursuit of opportunities within other distribution channels, such as retail and online sports betting, social gaming, retail gaming, and iGaming;

from acquisitions of gaming properties at reasonable valuations;

greenfield projects;

and jurisdictional expansions and property expansion in under-penetrated markets;

there can be no assurance that this will be the case given the uncertainty arising from the COVID-19 pandemic.

If we consummate significant acquisitions in the future or undertake any significant property expansions, our cash requirements may increase significantly and we may need to make additional borrowings or complete equity or debt financings to meet these requirements.

See “Risk Factors—Risks Related to Our Indebtedness and Capital Structure” within “Item 1A.

Risk Factors,” of this Annual Report on Form 10-K for a discussion of the risks related to our capital structure.

We have historically maintained a capital structure comprised of a mix of equity and debt financing.

We vary our leverage to pursue opportunities in the marketplace in an effort to maximize our enterprise value for our shareholders.

We expect to meet our debt obligations as they come due through internally-generated funds from operations and/or refinancing them through the debt or equity markets prior to their maturity.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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Goodwill and other intangible assets

As of December 31, 2019 , the Company had $1,270.7 million in goodwill and $2,026.5 million in other intangible assets within its Consolidated Balance Sheet, representing 9.0% and 14.3% of total assets, respectively.

As of December 31, 2020, the Company had $1,157.1 million in goodwill and $1,513.5 million in other intangible assets within its Consolidated Balance Sheet, represen ting 7.9% and 10.3% of total assets, respectively.

The Company’s goodwill and other intangible assets are primarily the result of acquisitions of businesses and payments for gaming licenses.

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(i) the valuation in connection with initial purchase price allocations and (ii) the ongoing evaluation for impairment.

During the fourth quarter we performed our annual impairment analysis and the fair value of goodwill for all reporting units exceeded the carrying value by a substantial margin.

Therefore, none of our reporting units incurred any goodwill impairment charges as a result of the annual assessment.

In connection with the Company’s acquisitions, valuations are completed to determine the allocation of the purchase price.

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If our ongoing estimates of future cash flows are not met, we may have to record additional impairment charges in future periods.

Our estimates of cash flows are based on the current regulatory and economic climates, recent operating information and budgets of the various properties where it conducts operations.

Our estimates of cash flows are based on the current regulatory and economic climates (including as a result of COVID-19), recent operating information and budgets of the various properties where it conducts operations.

These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting our properties.

Forecasted cash flows (based on our annual operating plan as determined in the fourth quarter) can be significantly impacted by the local economy in which our reporting units operate.

For example, increases in unemployment rates can result in decreased customer visitations and/or lower customer spend per visit.

Forecasted cash flows (based on our annual operating plan as determined in the fourth quarter) can be significantly impacted by the local economy in which our reporting units operate, as illustrated by the COVID-19 pandemic which caused temporary suspension of our operations pursuant to various orders from state gaming regulatory bodies or governmental authorities.

Increases in unemployment rates can also result in decreased customer visitations and/or lower customer spend per visit.

In addition, the impact of new legislation which approves gaming in nearby jurisdictions or further expands gaming in jurisdictions where our reporting units currently operate can result in opportunities for us to expand our operations.

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Risk Factors” of this Annual Report on Form 10-K.

Circumstances include, for instance, changes in legislation that approves gaming in nearby jurisdictions, further expansion of gaming in jurisdictions where we currently operate, new state legislation that requires the implementation of smoking restrictions at our casinos or any other events outside of our control that make the customer experience less desirable.

As a result of our 2019 annual impairment test, we recognized impairments on our goodwill, gaming licenses and trademarks, of $88.0 million , $62.6 million and $20.0 million , respectively.

Circumstances include, for instance, temporary property closures as a result of COVID-19, changes in legislation that approves gaming in nearby jurisdictions, further expansion of gaming in jurisdictions where we currently operate, new state legislation that requires the implementation of smoking restrictions at our casinos or any other events outside of our control that make the customer experience less desirable.

During the first quarter of 2020, we identified an indicator of impairment as a result of the COVID-19 pandemic and recognized impairments on our goodwill, gaming licenses and trademarks, of $113.0 million, $437.0 million and $61.5 million, respectively.

Upon reopening of our gaming facilities and throughout the fourth quarter of 2020 we undertook various initiatives to mitigate the impact of regulatory restrictions imposed as a result of the COVID-19 pandemic.

We completed our annual assessment for impairment as of October 1, 2020, which did not result in any impairment charges to goodwill, gaming licenses and trademarks.

See Note 9, “Goodwill and Other Intangible Assets,” in the notes to our Consolidated Financial Statements.

Goodwill of reporting units and gaming licenses and trademarks of properties recently acquired or impaired are particularly at-risk for future impairment given the fact that they are recorded at fair value as of the date of acquisition or impairment.

As of October 1, 2019, the date of the most recent annual impairment test, the reporting units with goodwill and the gaming licenses and trademarks associated with our properties with less than a substantial cushion, including a sensitivity analysis of the impact on the recorded amount of impairment losses, were as follows:

Increase in the Recorded Amount of Impairment Loss as a Result of:

(dollars in millions)

Carrying Amount

Discount Rate

Terminal Growth Rate -50 bps

Hollywood Casino Aurora

Margaritaville Resort Casino

Gaming licenses

Ameristar East Chicago

Boomtown Bossier City

Boomtown New Orleans

L’Auberge Lake Charles

Meadows Racetrack and Casino

River City Casino

Ameristar Black Hawk

Ameristar Council Bluffs

Ameristar East Chicago

Ameristar Vicksburg

Boomtown Bossier City

L’Auberge Baton Rouge

Meadows Racetrack and Casino

Under ASC Topic 740, “Income Taxes” (“ASC 740”), deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and are measured at the prevailing enacted tax rates that will be in effect when these differences are settled or realized.

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In the event the Company determines that the deferred income tax assets would be realized in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be recorded, which would reduce the provision for income taxes.

During the third quarter of 2017, we determined that a valuation allowance was no longer required against our federal net deferred tax assets for the portion that was expected to be realized upon the achievement of the “more-likely-than-not” standard.

As such, we released $741.9 million of our total valuation allowance during the year ended December 31, 2017.

ASC 740 suggests that additional scrutiny should be given to deferred tax assets of an entity with cumulative pre‑tax losses during the three most recent years and is widely considered significant negative evidence that is objective and verifiable and therefore, difficult to overcome.

For the year ended December 31, 2020, we have cumulative pre‑tax losses and considered this factor in our analysis of deferred taxes.

Additionally, we expect to remain in a three year cumulative loss position in the near future.

As a result, the Company has recorded a valuation allowance against its net deferred tax assets, excluding assets that can be realized based on our ability to carry back losses to recoup taxes previously paid and excluding the reversal of deferred tax liabilities related to indefinite‑lived intangibles.

We intend to continue to maintain a valuation allowance on our net deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.

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-K

Item 7. Management’s Discussion and Analysis