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Item 8. Financial Statements and Supplementary Data

2021-02-26 compared with 2020-02-27 · 808 added, 706 removed, 1019 unchanged (60% of the section changed)

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We have audited the accompanying consolidated balance sheets of Penn National Gaming, Inc.

and subsidiaries (the “Company”) as of December 31, 2019 and 2018 , the related consolidated statements of income, comprehensive income, changes in stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2019 , and the related notes (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Gaming License - Refer to Notes 2 and 8 to the financial statements

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Other Intangible Assets - Refer to Notes 2 and 9 to the financial statements

Critical Audit Matter Description

The Company’s gaming license indefinite-lived intangible assets are tested annually for impairment, or more frequently if indicators of impairment exist, by comparing the fair value of the recorded assets to their carrying amount.

The Company assesses the fair value of its gaming licenses using the Greenfield Method under the income approach, which estimates the fair value using a discounted cash flow model assuming the Company built a casino with similar utility to that of the existing casino.

The key inputs in determining the fair value, among others, include projected revenue and operating cash flows

discounted to reflect the level of risk associated with receiving future cash flows attributable to the licenses.

Total gaming licenses were $1,681.9 million as of December 31, 2019, of which $115.5 million, $101.5 million, $304.0 million, $158.5 million and $226.5 million was allocated to Ameristar East Chicago, Boomtown New Orleans, L’Auberge Lake Charles, Meadows Racetrack and Casino, and River City Casino (the “properties”), respectively.

Auditing the fair value of the properties’ gaming licenses involved a high degree of subjectivity in evaluating whether management’s estimates and assumptions of projected revenue and operating cash flows and the selection of the discount rates used to derive the fair value were reasonable, including the need to involve our fair value specialists.

The Company’s goodwill, gaming license, and trademarks are tested annually for impairment, or more frequently if indicators of impairment exist, by comparing the fair value of each reporting unit to their carrying amount for goodwill and by comparing the fair value of each gaming license or trademark to its carrying value.

The Company determines the fair value of its reporting units using a combination of income-based and market-based approaches.

The Company assesses the fair value of its gaming

licenses using the Greenfield Method under the income approach, which estimates the fair value using a discounted cash flow model assuming the Company built a casino with similar utility to that of the existing casino.

The Company assesses the fair value of its trademarks using the relief-from-royalty method under the income approach.

The key inputs in determining the fair value, among others, include projected revenue and operating cash flows discounted to reflect the level of risk associated with receiving future cash flows.

As of December 31, 2020, the book value of goodwill is $1,157.1 million, gaming license is $1,246.1 million, and trademarks is $240.9 million.

Auditing the fair value of the Company’s reporting units, gaming licenses, and trademarks involved a high degree of subjectivity in evaluating whether management’s estimates and assumptions of projected revenue and operating cash flows and the selection of the discount rates used to derive the fair value were reasonable, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to forecasts of future revenue and operating cash flows and the determination of the discount rates used by management to estimate the fair value of the properties’ gaming licenses included the following, among others:

We tested the effectiveness of controls over determining the fair value of gaming licenses, including those over the forecasts of future revenue and operating cash flows and the selection of the discount rates.

Our audit procedures related to forecasts of future revenue and operating cash flows and the determination of the discount rates used by management to estimate the fair value of the reporting units, gaming licenses, and trademarks included the following, among others:

• We tested the effectiveness of controls over determining the fair value of the Company’s reporting units, gaming licenses, and trademarks, including those over the forecasts of future revenue and operating cash flows and the selection of the discount rates.

• We evaluated management’s ability to accurately forecast future revenues and operating cash flows by comparing actual results to management’s historical forecasts.

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◦ Developing a range of independent estimates and comparing those to the discount rates selected by management.

Adoption of Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) for Master Leases - Refer to Notes 2, 3 and 11 to the financial statements (also see ASC 842 explanatory paragraph above)

Critical Audit Matter Description

On January 1, 2019, the Company adopted ASC 842 and recorded a cumulative-effect adjustment to retained earnings of $1,085.7 million.

Under the provisions of ASC 842, the Company was required to evaluate its existing sale-leaseback transactions to determine whether a sale had occurred, and if a sale had occurred, to determine the classification (operating or finance) of each component contained within each of its Master Leases.

The Company assessed each Master Lease component and determined certain land components to be operating leases and certain building components to be financing obligations.

The assessment of the classification of each component resulted in the (1) derecognition of certain property and equipment and financing obligations, (2) recognition of an operating lease liability and an operating lease right-of-use (“ROU”) asset for the operating leases, and (3) continued recognition of the financing obligation utilizing the original assumptions as of the date the Company entered into or acquired each Master Lease.

The Company also was required to evaluate the components contained within the build-to-suit arrangements, which resulted in the Dayton and Mahoning Valley lease components being classified as finance leases.

The significant complexity of the adoption of ASC 842, which resulted in a material adjustment to opening retained earnings, required significant auditor judgment with respect to evaluating the determination of lease classifications, interpretation of build-to-suit accounting guidance, and assessment of sale lease back accounting, including the need to involve professionals in our firm with expertise in lease accounting.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the adoption of ASC 842 for its Master Leases included the following, among others:

We tested the effectiveness of internal controls over the adoption of ASC 842, inclusive of controls over the evaluation of lease classifications and accounting conclusions.

With the assistance of professionals in our firm with expertise in lease accounting, we evaluated the appropriateness of the accounting conclusions, including;

Lease classification

Build to suit and sale lease back transactions.

We evaluated the financial statement impact of (i) the derecognition of the existing financing obligation and the carrying amount of the property and equipment that resulted in a cumulative-effect adjustment to retained earnings, (ii) the recognition of an operating lease liability and an operating lease ROU asset primarily pertaining to the land component, and (iii) the recognition of a ROU asset and financing lease liability relating to certain leases which were previously considered build-to-suit leases.

We tested the leasing components contained within each of the Master Leases that were determined to continue to represent financing obligations (consisting primarily of the building components) at the adoption date, which resulted in the (i) continued recognition of the leased assets in “Property and equipment, net” within the financial statements and (ii) continued recognition of the financing obligation.

We tested the accuracy and completeness of contract terms and key assumptions utilized in key accounting determinations through comparison to the underlying lease contracts and supporting documentation.

/s/ Deloitte & Touche LLP

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Investment in and advances to unconsolidated affiliates 266.8 128.3

Goodwill 1,157.1 1,270.7

Other intangible assets, net 1,513.5 2,026.5

Deferred income taxes

Operating lease right-of-use assets

Finance lease right-of-use assets

Lease right-of-use assets 4,817.7 4,837.3

Other assets 297.9 168.7

Total assets $ 14,667.3 $ 14,194.5

Current liabilities

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Current portion of financing obligations 36.0 40.5

Current portion of operating lease liabilities

Current portion of finance lease liabilities

Current portion of lease liabilities 134.3 130.6

Accrued expenses and other current liabilities 575.1 631.3

Total current liabilities 860.0 905.6

Long-term debt, net of current maturities and debt issuance costs

Long-term debt, net of current maturities, debt discount and debt issuance costs 2,231.2 2,322.2

Long-term portion of financing obligations 4,096.4 4,102.2

Long-term portion of operating lease liabilities

Long-term portion of finance lease liabilities

Long-term portion of lease liabilities 4,578.2 4,670.0

Deferred income taxes 126.3 244.6

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Series C preferred stock ($ 0.01 par value, 18,500 shares authorized, no shares issued and outstanding)

Series D Preferred stock ($ 0.01 par value, 5,000 shares authorized, 883 shares issued and outstanding)

Common stock ($ 0.01 par value, 200,000,000 shares authorized, 157,868,227 and 118,125,652 shares issued, and 155,700,834 and 115,958,259 shares outstanding)

Treasury stock, at cost, ( 2,167,393 shares held in both periods)

( 28.4 ) ( 28.4 )

Additional paid-in capital 3,167.2 1,718.3

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

For the year ended December 31,

(in millions, except per share data) 2020 2019 2018

Gaming $ 3,051.1 $ 4,268.7 $ 2,894.9

Food, beverage, hotel and other 527.6 1,032.7 629.7

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Reimbursable management costs — — 57.3

Promotional allowance

Total revenues 3,578.7 5,301.4 3,587.9

Operating expenses

Gaming 1,530.3 2,281.8 1,551.4

Food, beverage, hotel and other 337.7 672.7 439.3

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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 )

Total operating expenses 3,988.9 4,729.5 2,953.8

Operating income

Operating income (loss) ( 410.2 ) 571.9 634.1

Other income (expenses)

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Loss on early extinguishment of debt ( 1.2 ) — ( 21.0 )

Other 106.6 20.0 ( 7.1 )

Total other expenses ( 424.0 ) ( 485.8 ) ( 544.2 )

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Income tax benefit (expense) 165.1 ( 43.0 ) 3.6

Net loss attributable to non-controlling interest

Net income attributable to Penn National

Earnings per common share

Basic earnings per common share

Diluted earnings per common share

Weighted-average basic shares outstanding

Weighted-average diluted shares outstanding

See accompanying notes to the Consolidated Financial Statements .

PENN NATIONAL GAMING, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the year ended December 31,

(in millions)

Other comprehensive income, net of tax:

Foreign currency translation adjustment during the period

Other comprehensive income

Total comprehensive income

Comprehensive loss attributable to non-controlling interest

Comprehensive income attributable to Penn National

Net income (loss) ( 669.1 ) 43.1 93.5

Net (income) loss attributable to non-controlling interest ( 0.4 ) 0.8 —

Net income (loss) attributable to Penn National $ ( 669.5 ) $ 43.9 $ 93.5

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

Comprehensive (income) loss attributable to non-controlling interest ( 0.4 ) 0.8 —

Comprehensive income (loss) attributable to Penn National $ ( 669.5 ) $ 43.9 $ 93.5

Earnings (loss) per share

Basic earnings (loss) per share $ ( 5.00 ) $ 0.38 $ 0.96

Diluted earnings (loss) per share $ ( 5.00 ) $ 0.37 $ 0.93

Weighted-average common shares outstanding - basic 134.0 115.7 97.1

Weighted-average common shares outstanding - diluted 134.0 117.8 100.3

See accompanying notes to the Consolidated Financial Statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

Retained Earnings (Accum-

ulated Deficit)

Total Penn National Stock-holders’

Equity (Deficit)

Non-Controlling Interest

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Preferred Stock Common Stock Treasury

Stock Additional

Capital Retained Earnings (Accum-

ulated Deficit) Accum-

Loss Total Penn National Stock-holders’

Equity (Deficit) Non-Controlling Interest Total

Stock-holders’ Equity (Deficit)

(in millions, except share data)

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

Balance as of January 1, 2018 — $ — 91,225,242 $ 0.9 $ ( 28.4 ) $ 1,007.6 $ ( 1,051.9 ) $ ( 1.5 ) $ ( 73.3 ) $ — $ ( 73.3 )

Share-based compensation arrangements — — 1,466,625 — — 19.4 — — 19.4 — 19.4

Foreign currency translation adjustment

Share repurchases

Balance as of December 31, 2017

Share-based compensation arrangements

Pinnacle Acquisition — — 26,295,439 0.3 — 749.4 — — 749.7 — 749.7

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Share repurchases — — ( 2,299,498 ) — — ( 50.0 ) — — ( 50.0 ) — ( 50.0 )

Net income — — — — — — 93.5 — 93.5 — 93.5

Balance as of December 31, 2018 — — 116,687,808 1.2 ( 28.4 ) 1,726.4 ( 968.0 ) — 731.2 — 731.2

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Balance as of December 31, 2019 — — 115,958,259 1.2 ( 28.4 ) 1,718.3 161.6 — 1,852.7 ( 0.8 ) 1,851.9

Share-based compensation arrangements — — 4,475,908 — — 71.0 — — 71.0 — 71.0

Common stock offerings (Note 15) — — 35,266,667 0.4 — 1,288.4 — — 1,288.8 — 1,288.8

Convertible debt offering (Note 11) — — — — — 88.2 — — 88.2 — 88.2

Barstool Sports investment (Note 7) 883 23.1 — — — — — — 23.1 — 23.1

Cumulative-effect adjustment upon adoption of ASU 2016-13 — — — — — — 0.6 — 0.6 — 0.6

Net income (loss) — — — — — — ( 669.5 ) — ( 669.5 ) 0.4 ( 669.1 )

Other — — — — — 1.3 — — 1.3 — 1.3

Balance as of December 31, 2020 883 $ 23.1 155,700,834 $ 1.6 $ ( 28.4 ) $ 3,167.2 $ ( 507.3 ) $ — $ 2,656.2 $ ( 0.4 ) $ 2,655.8

See accompanying notes to the Consolidated Financial Statements.

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Operating activities

Adjustments to reconcile net income to net cash provided by operating activities:

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

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

Depreciation and amortization 366.7 414.2 269.0

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Noncash operating lease expense 120.3 100.4 —

Change in fair value of contingent purchase price

Change in fair values of contingent purchase price ( 1.1 ) 7.0 0.5

Holding gain on equity securities ( 106.7 ) ( 19.9 ) —

Loss on sale or disposal of property and equipment

Loss (gain) on sale or disposal of property and equipment ( 29.2 ) 5.5 3.2

Noncash rent and interest expense related to the utilization of rent credits 287.1 — —

Income from unconsolidated affiliates ( 13.8 ) ( 28.4 ) ( 22.3 )

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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 )

Reclassification of accumulated other comprehensive loss to earnings upon termination of management contract — — 1.5

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Prepaid expenses and other current assets 13.5 9.7 13.3

Other assets ( 12.8 ) ( 2.3 ) 1.5

Accounts payable ( 6.6 ) 4.4 ( 6.1 )

Accrued expenses ( 40.9 ) ( 3.9 ) ( 47.0 )

Income taxes ( 32.5 ) ( 7.2 ) ( 3.3 )

Operating lease liabilities ( 94.8 ) ( 139.1 ) —

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Investing activities

Project capital expenditures

Maintenance capital expenditures

Capital expenditures ( 137.0 ) ( 190.6 ) ( 92.6 )

Dispositions of property and equipment 16.1 0.6 0.4

Hurricane Laura insurance proceeds 32.7 — —

Consideration paid for Barstool Sports investment ( 135.0 ) — —

Consideration paid for acquisitions of businesses, net of cash acquired ( 3.0 ) ( 1,359.4 ) ( 1,945.2 )

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Additional contributions from (to) joint ventures ( 5.4 ) ( 0.4 ) 18.9

Proceeds from sale of loan

Receipts applied against nonaccrual loan

Net cash used in investing activities

For the year ended December 31,

(in millions) 2020 2019 2018

Proceeds from sale of loan — — 15.2

Receipts applied against non-accrual loan — — 0.5

Other 2.7 ( 2.0 ) ( 0.4 )

Net cash used in investing activities ( 233.7 ) ( 607.5 ) ( 1,423.1 )

Financing activities

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Repayments on revolving credit facility ( 680.0 ) ( 384.0 ) ( 89.0 )

Proceeds from issuance of long-term debt

Proceeds from issuance of long-term debt, net of discounts 322.2 — 1,558.9

Principal payments on long-term debt ( 161.7 ) ( 46.6 ) ( 482.5 )

Prepayment penalties and modification payments incurred with debt refinancing — — ( 11.3 )

Debt issuance costs and debt discount

Debt and equity issuance costs ( 6.9 ) — ( 27.3 )

Payments of other long-term obligations ( 16.2 ) ( 15.4 ) ( 15.7 )

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Proceeds from the sale of real estate assets in conjunction with acquisitions — — 250.0

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

Proceeds from exercise of options 62.7 1.9 7.4

Repurchase of common stock — ( 24.9 ) ( 50.0 )

Payments of contingent purchase price

Proceeds from insurance financing 20.2 16.1 13.1

Payments on insurance financing ( 21.4 ) ( 19.4 ) ( 11.0 )

Other ( 7.0 ) ( 4.3 ) ( 4.1 )

Net cash provided by (used in) financing activities 1,310.1 ( 122.4 ) 1,272.1

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Non-cash investing activities:

Rent credits received upon sale of Tropicana land and buildings and Morgantown land $ 337.5 $ — $ —

Commencement of operating leases $ 73.6 $ 713.5 $ —

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Acquisition of equity securities $ — $ 16.1 $ —

Accrued advances to Jamul Tribe

See accompanying notes to the Consolidated Financial Statements

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Organization:

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 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 (the “my choice program”) provides its 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;

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 MYCHOICE ® customer loyalty program (the "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.

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 Note 12, “Leases,” and collectively referred to as the “Master Leases”), with Gaming and Leisure Properties, Inc.

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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 Note 3, “New Accounting Pronouncements” ), the “Triple Net Leases”).

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

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 Leas e”).

See Note 12, “Leases,” In October 2018, the Company completed the acquisition of Pinnacle Entertainment, Inc.

(“Pinnacle”), a leading regional gaming operator (the “Pinnacle Acquisition”), which added 12 gaming properties to our holdings.

For more information on our acquisitions, see Note 5, “Acquisitions and Other Investments.”

For more information on our acquisitions, see Note 6, “Acquisitions and Dispositions.”

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.

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 Note 11, “Long-term Debt.”

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.

As of December 31, 2020, the Company has a strong balance sheet and sufficient liquidity in place, including total cash and cash equivalents, excluding restricted cash, of $ 1.9 billion and available borrowing capacity of $ 0.7 billion.

Basis of Presentation:

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All intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications:

Certain reclassifications have been made to conform the prior period presentation.

Use of Estimates:

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements , and (iii) the reported amounts of revenues and expenses during the reporting period.

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions as of the date of the Consolidated Financial Statements that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, and (iii) the reported amounts of revenues and expenses during the reporting period.

Estimates used by us include, among other things, the useful lives for depreciable and amortizable assets, the allowance for doubtful accounts receivable, income tax provisions, the evaluation of the future realization of deferred tax assets, determining the adequacy of reserves for self-insured liabilities, the liabilities associated with our my choice program, the initial measurements of financing obligations associated with the Master Leases, projected cash flows in assessing the recoverability of long-lived assets, asset impairments, goodwill and other intangible assets, projected cash flows in assessing the initial valuation of intangible assets in conjunction with acquisitions, the initial selection of useful lives for depreciable and amortizable assets in conjunction with acquisitions, contingencies and litigation, and stock-based compensation expense.

We applied estimation methods consistently for all periods presented within our Consolidated Financial Statements.

Actual results may differ from those estimates .

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For financial reporting purposes, we aggregate our operating segments into the following four reportable segments:

Real Estate Assets Lease or Ownership Structure

Location Real Estate Assets Lease or Ownership Structure

Northeast segment

Ameristar East Chicago

East Chicago, Indiana

Pinnacle Master Lease

Greektown Casino-Hotel (1)

Detroit, Michigan

Greektown Lease

Hollywood Casino Bangor

Bangor, Maine

Penn Master Lease

Hollywood Casino at Charles Town Races

Charles Town, West Virginia

Penn Master Lease

Hollywood Casino Columbus

Columbus, Ohio

Penn Master Lease

Hollywood Casino Lawrenceburg

Lawrenceburg, Indiana

Penn Master Lease

Hollywood Casino at Penn National Race Course

Grantville, Pennsylvania

Penn Master Lease

Hollywood Casino Toledo

Penn Master Lease

Hollywood Gaming at Dayton Raceway

Penn Master Lease

Hollywood Gaming at Mahoning Valley Race Course

Youngstown, Ohio

Penn Master Lease

Ameristar East Chicago East Chicago, Indiana Pinnacle Master Lease

Greektown Casino-Hotel Detroit, Michigan Greektown Lease

Hollywood Casino Bangor Bangor, Maine Penn Master Lease

Hollywood Casino at Charles Town Races Charles Town, West Virginia Penn Master Lease

Hollywood Casino Columbus Columbus, Ohio Penn Master Lease

Hollywood Casino Lawrenceburg Lawrenceburg, Indiana Penn Master Lease

Hollywood Casino at Penn National Race Course Grantville, Pennsylvania Penn Master Lease

Hollywood Casino Toledo Toledo, Ohio Penn Master Lease

Hollywood Gaming at Dayton Raceway Dayton, Ohio Penn Master Lease

Hollywood Gaming at Mahoning Valley Race Course Youngstown, Ohio Penn Master Lease

Marquee by Penn (1)

Meadows Racetrack and Casino

Washington, Pennsylvania

Meadows Lease

Plainridge Park Casino

Plainville, Massachusetts

Pinnacle Master Lease

Pennsylvania N/A

Meadows Racetrack and Casino Washington, Pennsylvania Meadows Lease

Plainridge Park Casino Plainville, Massachusetts Pinnacle Master Lease

South segment (2)

1 st Jackpot Casino

Tunica, Mississippi

Penn Master Lease

Ameristar Vicksburg

Vicksburg, Mississippi

Pinnacle Master Lease

Boomtown Biloxi

Biloxi, Mississippi

Penn Master Lease

Boomtown Bossier City

Bossier City, Louisiana

Pinnacle Master Lease

Boomtown New Orleans

New Orleans, Louisiana

Pinnacle Master Lease

Hollywood Casino Gulf Coast

Louis, Mississippi

Penn Master Lease

Hollywood Casino Tunica

Tunica, Mississippi

Penn Master Lease

L’Auberge Baton Rouge

Baton Rouge, Louisiana

Pinnacle Master Lease

L’Auberge Lake Charles

Lake Charles, Louisiana

Pinnacle Master Lease

Margaritaville Resort Casino (4)

Bossier City, Louisiana

Margaritaville Lease

Ameristar Black Hawk

Black Hawk, Colorado

Pinnacle Master Lease

Cactus Petes and Horseshu

Jackpot, Nevada

Pinnacle Master Lease

Henderson, Nevada

Penn Master Lease

Tropicana Las Vegas

Las Vegas, Nevada

Zia Park Casino

Hobbs, New Mexico

Penn Master Lease

Tunica, Mississippi Penn Master Lease

Ameristar Vicksburg Vicksburg, Mississippi Pinnacle Master Lease

Boomtown Biloxi Biloxi, Mississippi Penn Master Lease

Boomtown Bossier City Bossier City, Louisiana Pinnacle Master Lease

Boomtown New Orleans New Orleans, Louisiana Pinnacle Master Lease

Hollywood Casino Gulf Coast Bay St.

Louis, Mississippi Penn Master Lease

Hollywood Casino Tunica Tunica, Mississippi Penn Master Lease

L’Auberge Baton Rouge Baton Rouge, Louisiana Pinnacle Master Lease

L’Auberge Lake Charles Lake Charles, Louisiana Pinnacle Master Lease

Margaritaville Resort Casino Bossier City, Louisiana Margaritaville Lease

Ameristar Black Hawk Black Hawk, Colorado Pinnacle Master Lease

Cactus Petes and Horseshu Jackpot, Nevada Pinnacle Master Lease

M Resort Henderson, Nevada Penn Master Lease

Tropicana Las Vegas Las Vegas, Nevada Tropicana Lease

Zia Park Casino Hobbs, New Mexico Penn Master Lease

Midwest segment

Ameristar Council Bluffs

Council Bluffs, Iowa

Pinnacle Master Lease

Ameristar Council Bluffs Council Bluffs, Iowa Pinnacle Master Lease

Argosy Casino Alton (3)

Alton, Illinois

Penn Master Lease

Argosy Casino Riverside

Riverside, Missouri

Penn Master Lease

Hollywood Casino Aurora

Aurora, Illinois

Penn Master Lease

Hollywood Casino Joliet

Joliet, Illinois

Penn Master Lease

Alton, Illinois Penn Master Lease

Argosy Casino Riverside Riverside, Missouri Penn Master Lease

Hollywood Casino Aurora Aurora, Illinois Penn Master Lease

Hollywood Casino Joliet Joliet, Illinois Penn Master Lease

Hollywood Casino at Kansas Speedway (4)

Kansas City, Kansas

Kansas City, Kansas Owned - JV

Hollywood Casino St.

Maryland Heights, Missouri

Penn Master Lease

Louis Maryland Heights, Missouri Penn Master Lease

Prairie State Gaming (1)

River City Casino

Louis, Missouri

Pinnacle Master Lease

Acquired on May 23, 2019

River City Casino St.

Louis, Missouri Pinnacle Master Lease

(1) VGT route operations

(2) Resorts Casino Tunica ceased operations on June 30, 2019, but remains subject to the Penn Master Lease.

Acquired on January 1, 2019

(3) The riverboat is owned by us and not subject to the Penn Master Lease.

Pursuant to a joint venture (“JV”) with International Speedway Corporation (“International Speedway”) and includes the Company’s 50 % investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns Hollywood Casino at Kansas Speedway.

(4) Pursuant to a joint venture (“JV”) with NASCAR and includes the Company’s 50 % investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns Hollywood Casino at Kansas Speedway.

Cash and Cash Equivalents:

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Concentration of credit risk, with respect to casino receivables, is limited through the Company’s credit evaluation process.

The Company issues markers to approved casino customers only following investigations of creditworthiness.

The Company issues markers to approved casino customers following investigations of creditworthiness.

The Company’s receivables as of December 31, 2020 and 2019 primarily consisted of the following:

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Receivables due from platform providers for social casino games 10.5 3.3

Insurance Receivable - Hurricane Laura 23.0 —

Other 26.7 26.2

Allowance for doubtful accounts ( 8.8 ) ( 7.7 )

Accounts receivable, net $ 96.4 $ 88.7

Accounts are written off when management determines that an account is uncollectible.

Recoveries of accounts previously written off are recorded when received.

An allowance for doubtful accounts is determined to reduce the Company’s receivables to their carrying amount, which approximates fair value.

The allowance is estimated based on historical collection experience, specific review of individual customer accounts, and current economic and business conditions.

The Company adopted Accounting Standards Codification (“ASC”) No.

2016-13 (“ASC 2016-13”), “Financial Instruments - Credit Losses (Topic 326):

Measurements of Credit Losses on Financial Instruments” during the first quarter of 2020 which utilizes a forward-looking current expected credit loss model to measure the allowance for doubtful accounts.

Prior to the adoption of ASC 2016-13, accounts were written off when management determined that an account was uncollectible.

Recoveries of accounts previously written off were recorded when received.

Historically, the Company has not incurred any significant credit-related losses.

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Land improvements 15

Buildings and improvements

Furniture, fixtures and equipment

Buildings and improvements 5 to 31

Vessels 10 to 35

Furniture, fixtures and equipment 3 to 31

All costs funded by the Company considered to be an improvement to the real estate assets subject to any of our Triple Net Leases are recorded as leasehold improvements.

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The Company reviews the carrying amount of its property and equipment for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based on undiscounted estimated future cash flows expected to result from its use and eventual disposition.

The factors considered by the Company in

performing this assessment include current operating results, trends and prospects, as well as the effect of obsolescence, demand, competition and other regulatory and economic factors.

The factors considered by the Company in performing this assessment include current operating results, trends and prospects, as well as the effect of obsolescence, demand, competition and other regulatory and economic factors.

For purposes of recognizing and measuring impairment, assets are grouped at the individual property level representing the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets.

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For the quantitative goodwill impairment test, an income approach, in which a discounted cash flow (“DCF”) model is utilized, and a market-based approach using guideline public company multiples of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) from the Company’s peer group are utilized in order to estimate the fair market value of the Company’s reporting units.

In determining the carrying amount of each reporting unit that utilizes real estate assets subject to the Triple Net Leases, if and as applicable, (i) the Company allocates each reporting unit their pro-rata portion of the right-of-use (“ROU”) assets, lease liabilities, and/or financing obligations, and (ii) pushes down the carrying amount of the property and equipment subject to such leases.

In determining the carrying amount of each reporting unit that utilizes real estate assets subject to our Triple Net Leases, if and as applicable, (i) the Company allocates each reporting unit their pro-rata portion of the right-of-use (“ROU”) assets, lease liabilities, and/or financing obligations, and (ii) pushes down the carrying amount of the property and equipment subject to such leases.

The Company compares the fair value of its reporting units to the carrying amounts.

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The Company reviews the carrying amount of its amortizing intangible assets for possible impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

If the carrying amount of the amortizing intangible assets exceed their fair value, an impairment loss is recognized.

If the carrying amount of the amortizing intangible assets exceed their fair value, an impairment is recognized.

See Note 9, “Goodwill and Other Intangible Assets.”

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The Company’s equity securities (including warrants) are measured at fair value each reporting period with unrealized holding gains and losses included in current period earnings.

During the year ended December 31, 2019 , the Company recognized a holding gain of $ 19.9 million related to equity securities held as of December 31, 2019, which is included in “Other,” as reported in “Other income (expenses)” within our Consolidated Statements of Income.

During the year ended December 31, 2020, the Company recognized a holding gain of $ 106.7 million related to equity securities, which is included in “Other,” as reported in “Other income (expenses)” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

Convertible Debt:

Under ASC 470-20, “Debt with Conversion and Other Options” (“ASC 470-20”), an entity must separately account for the liability and equity components of convertible debt instruments that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest.

The effect of ASC 470-20 on the accounting for our Convertible Notes is that the equity component is required to be included in “Additional paid-in capital” within our Consolidated Balance Sheets at the issuance date and the value of the equity component is treated as a debt discount.

See Note 11, “Long-term Debt,” for more information.

Financing Obligations:

Subsequent to the adoption of Accounting Standards Codification (“ASC”) Topic 842, “Leases” (“ASC 842”) on January 1, 2019, certain of the components contained within our Master Leases (primarily buildings) are accounted for as financing obligations, rather than leases.

Subsequent to the adoption of ASC 842, “Leases” (“ASC 842”) on January 1, 2019, certain of the components contained within our Master Leases (primarily buildings) are accounted for as financing obligations, rather than leases.

Prior to the adoption of ASC 842, our Master Leases, in their entirety, were accounted for as financing obligations.

See Note 3, “New Accounting Pronouncements,” for a discussion of the impact of ASC 842 on our Consolidated Financial Statements.

On November 1, 2013, the Company spun-off its real estate assets into GLPI (the “Spin-Off”) and entered into the Penn Master Lease.

This transaction did not meet all of the requirements for sale-leaseback accounting treatment under ASC Topic 840, “Leases,” (“ASC 840”);

This transaction did not meet all of the requirements for sale-leaseback accounting treatment under ASC 840, “Leases,” (“ASC 840”);

specifically, the Penn Master Lease contains provisions that indicate the Company has prohibited forms of continuing involvement in the leased assets, which are not a normal leaseback.

Accordingly, at lease inception, we calculated a financing obligation based on the future minimum lease payments discounted at our estimated incremental borrowing rate at lease inception over the lease term of 35 years, which was determined to be 9.7 %.

The lease term included

renewal options that were reasonably assured of being exercised and the funded construction of certain leased assets in development at the commencement of the Penn Master Lease .

The lease term included renewal options that were reasonably assured of being exercised and the funded construction of certain leased assets in development at the commencement of the Penn Master Lease.

On October 15, 2018, in connection with the Pinnacle Acquisition, we assumed the Pinnacle Master Lease.

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For more information, see Note 8, “Property and Equipment,” and Note 12, “Leases ” .

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

Contemporaneous with the sale, the Company entered into a triple net lease with GLPI for the land underlying Morgantown (as defined and discussed in Note 12, “Leases.” ).

The sale-leaseback transaction did not meet the requirements for sale accounting as control of the underlying asset as defined in accordance with ASC 842 remains with the Company.

Accordingly, at lease inception, we calculated a financing obligation based on the future minimum lease payments discounted at our estimated incremental borrowing rate over the lease term of 50 years, which was determined to be 11.4 %.

The lease term included renewal options that were reasonably assured of being exercised.

Operating and Finance Leases:

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Upon adoption of ASC 842, we elected the following policies:

(a) to account for lease and non-lease components as a single component for all classes of underlying assets and (b) to not recognize short-term leases (i.e., leases that are less than 12 months and do not contain purchase options) within the Consolidated Balance Sheets, with the expense related to these short-term leases recorded in total operating expenses within the Consolidated Statements of Income.

The Company has leasing arrangements that contain both lease and non-lease components.

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The liability for operating and finance leases is based on the present value of future lease payments.

Operating lease expenses are recorded as rent expense, which is included within general and administrative expense, within the Consolidated Statements of Income and presented as operating cash outflows within the Consolidated Statements of Cash Flows.

Finance lease expenses are recorded as amortization expense, which is included within depreciation and amortization expense within the Consolidated Statements of Income and interest expense over the lease term.

Principal payments associated with finance leases are presented as financing cash outflows and interest payments associated with finance leases are presented as operating cash outflows within our Consolidated Statements of Cash Flows.

Operating lease expenses are recorded as rent expense, which is included within general and administrative expense, within the Consolidated Statements of Operations and Comprehensive Income (Loss) and presented as operating cash outflows within the Consolidated Statements of Cash Flows.

Finance lease expenses are recorded as depreciation expense, which is included within depreciation and amortization expense within the Consolidated Statements of Operations and Comprehensive Income (Loss) and interest expense over the lease term.

Principal payments associated with finance leases are

presented as financing cash outflows and interest payments associated with finance leases are presented as operating cash outflows within our Consolidated Statements of Cash Flows.

Debt Discount and Debt Issuance Costs:

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We revalue our contingent purchase price obligations each reporting period.

Changes in the fair value of

the contingent purchase price obligation can result from changes to one or multiple inputs, including adjustments to the discount rate and changes in the assumed probabilities of successful achievement of certain financial targets.

The changes in the fair value of contingent purchase price are recognized within our Consolidated Statements of Income as a component of “General and administrative” expense.

Changes in the fair value of the contingent purchase price obligation can result from changes to one or multiple inputs, including adjustments to the discount rate and changes in the assumed probabilities of successful achievement of certain financial targets.

The changes in the fair value of contingent purchase price are recognized within our Consolidated Statements of Operations and Comprehensive Income (Loss) as a component of “General and administrative” expense.

Income Taxes:

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.

ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

Under ASC 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.

ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more-likely-than-not (a greater than 50% probability) that some portion or all of the deferred tax assets will not be realized.

The realizability of the net deferred tax assets is evaluated quarterly by assessing the valuation allowance and by adjusting the amount of the allowance, if necessary.

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ASC 740 also creates a single model to address uncertainty in tax positions and clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in an enterprise’s financial statements.

It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

It also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

See Note 14, “Income Taxes.”

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The transaction price for our former management service contracts was the amount collected for services rendered in accordance with the contractual terms.

The transaction price for the reimbursable costs associated with our former management contracts was the gross amount of the reimbursable expenditure, which primarily consisted of payroll costs incurred by the Company for the benefit of the managed entity.

Since the Company was the controlling entity to the arrangement, the reimbursement was recorded on a gross basis with an offsetting amount charged to operating expense.

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The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as opposed to an individual wagering contract.

For purposes of allocating the transaction price in a gaming contract between the wagering performance obligation and the obligation associated with the loyalty points earned, we allocate an amount to the loyalty point contract liability based on the standalone selling price (“SSP”) of the points earned, which is determined by the value of a point that can be redeemed for slot play and complimentaries;

such as, food and beverage at our restaurants, lodging at our hotels and products offered at our retail stores, less estimated breakage.

The allocated revenue for gaming wagers is recognized when the wagering occurs as all such wagers settle immediately.

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Food and beverage, hotel and retail services have been determined to be separate, standalone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred to the customer over their stay at the hotel or when the delivery is made for the food and beverage or retail product.

Cancellation fees for hotel and

meeting space services are recognized upon cancellation by the customer and are included in food, beverage, hotel and other revenue.

Cancellation fees for hotel and meeting space services are recognized upon cancellation by the customer and are included in food, beverage, hotel and other revenue within our Consolidated Statements of Operations and Comprehensive Income (Loss).

Racing revenue contracts, inclusive of our (i) host racing facilities, (ii) import arrangements that permit us to simulcast in live racing events occurring at other racetracks, and (iii) export arrangements that permit our live racing events to be simulcast at other racetracks, provide access to and the processing of wagers into the pari-mutuel pool.

The Company has concluded it is not the controlling entity to the arrangement, but rather functions as an agent to the pari-mutuel pool.

Commissions earned from the pari-mutuel pool less contractual fees and obligations are recognized on a net basis, which is included within food, beverage, hotel and other revenues.

Commissions earned from the pari-mutuel pool less contractual fees and obligations are recognized on a net basis, which is included within food, beverage, hotel and other revenues within our Consolidated Statements of Operations and Comprehensive Income (Loss).

Management services have been determined to be separate, standalone performance obligations and the transaction price for such contracts was recorded as services were performed.

The Company recorded revenues on a monthly basis calculated by applying the contractual rate called for in the contracts.

Penn Interactive generates in-app purchase and advertising revenues from free-to-play social casino games, which can be downloaded to mobile phones and tablets from digital storefronts.

In addition to sports betting and iGaming revenues, Penn Interactive generates in-app purchase and advertising revenues from free-to-play social casino games, which can be downloaded to mobile phones and tablets from digital storefronts.

Players can purchase virtual playing credits within our social casino games, which allows for increased playing opportunities and functionality.

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Advertising revenues are recognized in the period when the advertising impression, click or install delivery occurs.

Penn Interactive also generates revenue through revenue-sharing arrangements with third-party content providers whereby revenues are recognized on a net basis since Penn Interactive is not the controlling entity in the arrangement.

Complimentaries Associated with Gaming Contracts

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The cost of providing complimentary goods and services to patrons as an inducement to gamble as well as for the fulfillment of our loyalty point obligation is included in food, beverage, hotel, and other expenses.

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

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

For the year ended December 31,

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Food and beverage $ 123.6 $ 261.4 $ 137.2

Hotel 79.6 159.6 60.8

Other 6.7 17.6 8.1

Total complimentaries associated with gaming contracts $ 209.9 $ 438.6 $ 206.1

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The Company has three general types of liabilities related to contracts with customers:

(i) the obligation associated with our my choice program (loyalty points and tier status benefits), (ii) advance payments on goods and services yet to be provided and for unpaid wagers, and (iii) deferred revenue associated with third-party sports betting operators for online sports betting and related iGaming market access.

(i) the obligation associated with its my choice program (loyalty points and tier status benefits), (ii) advance payments on goods and services yet to be provided and

for unpaid wagers, and (iii) deferred revenue associated with third-party sports betting operators for online sports betting and related iGaming market access.

Our my choice program allows members to utilize their reward membership cards to earn loyalty points that are redeemable for slot play and complimentaries, such as food and beverage at our restaurants, lodging at our hotels and products offered at our retail stores across the vast majority of our properties.

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

The Company accounts for the obligation associated with our my choice program utilizing a deferred revenue model, which defers revenue at the point in time when the loyalty points and tier status benefits are earned by our customers.

Deferred revenue associated with the my choice program is recognized at the point-in-time when the loyalty points are redeemed by our customers or at the point-in-time when our customers receive the tier status benefits.

The obligation associated with our my choice program is based on the estimated SSP of the loyalty points and the tier status benefits earned after factoring in the likelihood of redemption.

The obligation associated with our my choice program, which is included in “Accrued expenses and other current liabilities” within our Consolidated Balance Sheets, was $ 35.8 million and $ 36.2 million as of December 31, 2020 and 2019, respectively, and consisted principally of the obligation associated with the loyalty points.

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

Changes between the opening and closing balances primarily

relate to the timing of our customers’ election to redeem loyalty points as well as the timing of when our customers receive their earned tier status benefits.

however, as a result of the COVID-19 pandemic and resulting temporary closures, loyalty point obligations may take longer to settle.

Changes between the opening and closing balances primarily relate to the timing of our customers’ election to redeem loyalty points as well as the timing of when our customers receive their earned tier status benefits.

The Company’s advance payments on goods and services yet to be provided and for unpaid wagers primarily consist of the following:

(i) deposits on rooms and convention space, (ii) money deposited on behalf of a customer in advance of their property visit (referred to as “safekeeping” or “front money”), (iii) outstanding tickets generated by slot machine play or pari-mutuel wagering, (iv) outstanding chip liabilities, (v) unclaimed jackpots, and (vi) gift cards redeemable at our properties.

Advance payments on goods and services are recognized as revenue when the good or service is transferred to the customer.

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

The Company’s advance payments on goods and services yet to be provided and for unpaid wagers were $ 42.2 million and $ 34.3 million as of December 31, 2019 and 2018 , respectively, of which $ 0.6 million and $ 0.7 million were classified as long-term, respectively.

The Company’s advance payments on goods and services yet to be provided and for unpaid wagers were $ 47.1 million and $ 42.2 million as of December 31, 2020 and 2019, respectively, of which $ 0.5 million and $ 0.6 million were classified as long-term in both periods.

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

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

During the fourth quarter of 2019, certain of the operations contemplated by these agreements commenced, resulting in the recognition of $ 0.6 million of revenue during the year ended December 31, 2019 .

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

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

During the fourth quarter of 2019, certain of the operations contemplated by these agreements commenced, resulting in the recognition of $ 5.6 million and $ 0.6 million of revenue (most of which was previously deferred) during the year ended December 31, 2020 and 2019, respectively.

Deferred revenue associated with third-party sports betting operators for online sports betting and related iGaming market access, which is included in “Other long-term liabilities” within our Consolidated Balance Sheets was $ 52.7 million and $ 43.6 million as of December 31, 2020 and 2019, respectively.

Gaming and Racing Taxes:

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

For the years ended December 31, 2019 , 2018 and 2017 , these expenses, which were recorded primarily in gaming expense within the Consolidated Statements of Income, were $ 1,590.0 million , $ 1,102.3 million , and $ 983.3 million , respectively.

For the years ended December 31, 2020, 2019 and 2018, these expenses, which were recorded primarily in gaming expense within the Consolidated Statements of Operations and Comprehensive Income (Loss), were $ 1,098.9 million, $ 1,590.0 million, and $ 1,102.3 million, respectively.

Stock-Based Compensation:

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Earnings Per Share:

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

Diluted EPS reflects the additional dilution for all potentially-dilutive securities such as stock options and unvested restricted stock awards.

See Note 16, “Earnings per Share.”

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

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

Holders of the Company’s Series D Preferred Stock (as defined in Note 7, “Investments in and Advances to Unconsolidated Affiliates” ) are entitled to participate equally and ratably in all dividends and distributions paid to holders of Penn Common Stock irrespective of any vesting requirement.

Accordingly, the Series D Preferred Stock shares are considered a

participating security and the Company is required to apply the two-class method to consider the impact of the preferred shares on the calculation of basic and diluted EPS.

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

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

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

See Note 17, “Earnings (Loss) per Share,” for more information.

Application of Business Combination Accounting:

We utilize the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations,” which requires us to allocate the purchase price to tangible and identifiable intangible assets based on their fair values.

We utilize the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” which requires us to allocate the purchase price to tangible and identifiable intangible assets based on their fair values.

The excess of the purchase price over the fair value ascribed to tangible and identifiable intangible assets is recorded as goodwill.

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The measurement period for our acquisitions are no more than one year in duration.

See Note 5, “Acquisitions and Other Investments.”

See Note 6, “Acquisitions and Dispositions.”

Voting Interest Entities and Variable Interest Entities:

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Under the VOE model, controlling financial interest is generally defined as a majority ownership of voting rights.

Under the VIE model, controlling financial interest is defined as (i) the power to direct activities that most significantly impact the economic performance of the entity and (ii) the obligation to

absorb losses of or the right to receive benefits from the entity that could potentially be significant to the entity.

Under the VIE model, controlling financial interest is defined as (i) the power to direct activities that most significantly impact the economic performance of the entity and (ii) the obligation to absorb losses of or the right to receive benefits from the entity that could potentially be significant to the entity.

For those entities that qualify as a VIE, the primary beneficiary is generally defined as the party who has a controlling financial interest in the VIE.

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Accounting Pronouncements Implemented in 2020

On January 1, 2019, the Company adopted ASC 842, and all the related amendments (the “new lease standard”) using the modified retrospective method with an effective date of January 1, 2019 (the “adoption date”) and a cumulative-effect adjustment to retained earnings.

The core principle of ASC 842 is that a lessee should recognize on the balance sheet the lease assets and lease liabilities that arise from all lease arrangements with terms greater than 12 months.

The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

As part of the adoption, the Company elected to utilize the package of practical expedients included in this guidance, which permitted the Company to not reassess (i) whether any expired or existing contracts contain leases;

(ii) the lease classification for any expired or existing leases;

and (iii) the initial direct costs for existing leases.

Master Leases

The most significant impact of the adoption of the new lease standard relates to the accounting for our Master Leases with GLPI.

Under previous GAAP, as contained within ASC 840, the Company concluded that (i) the Penn Master Lease and (ii) the Pinnacle Master Lease to each be a failed sale-leaseback transaction resulting in (a) the land and building assets associated with the Master Leases to be recognized in “Property and equipment, net” within the Consolidated Balance Sheets, (b) the recognition of a financing obligation, with the associated interest recorded to “Interest expense, net” within the Consolidated Statements of Income, and (c) the contingent rentals to be recorded as additional interest expense.

Under the provisions of the new lease standard, the Company was required to evaluate its existing sale-leaseback transactions with GLPI to determine whether a sale had occurred, and if a sale had occurred, to determine the classification (operating or finance) of each component contained within each of the Master Leases.

Lease components contained within each of the Master Leases that were determined to be operating leases (consisting primarily of the land components) at the adoption date resulted in (i) the derecognition of the existing financing obligation and the carrying amount of the property and equipment with an adjustment to the opening balance of retained earnings and (ii) the recognition of an operating lease liability and an operating lease ROU asset.

Lease components contained within each of the Master Leases that were determined to continue to be financing obligations (consisting primarily of the building components) at the adoption date resulted in (i) the continued recognition of the leased assets in “Property and equipment, net” within our Consolidated Balance Sheets and (ii) the continued recognition of the financing obligation utilizing assumptions as determined (a) at the lease commencement date with respect to the Penn Master Lease or (b) at the acquisition date with respect to the Pinnacle Master Lease.

Our Hollywood Casino at Dayton Raceway and Hollywood Casino at Mahoning Valley Race Course (“Dayton and Mahoning Valley”) properties included within the Penn Master Lease were previously accounted for under build-to-suit guidance pursuant to ASC 840.

The Company was required to evaluate the components contained within the build-to-suit arrangements and determine the classification (operating or finance) under the provisions of the new lease standard at the adoption date.

The Dayton and Mahoning Valley lease components were determined to be finance leases, which resulted in (i) the recognition of a finance lease ROU asset (recorded to depreciation and amortization expense over the lease term), (ii) a corresponding finance lease liability (recorded to interest expense over the lease term), and (iii) a write-off of the previous (a) carrying amount of the property and equipment and (b) financing obligation recorded with an adjustment to the opening balance of retained earnings at the adoption date.

Operating Leases, inclusive of the Meadows Lease

The adoption of the new lease standard required us to recognize ROU assets and lease liabilities that had not previously been recorded within the Consolidated Balance Sheets.

Upon adoption, the lease liability for operating leases was based on the present value of future lease payments and the ROU asset for operating leases was based on the operating lease liability adjusted for the reclassification of certain balance sheet amounts, such as deferred rent.

Under ASC 842, deferred and prepaid rent are no longer presented separately.

Leases that are short-term in nature are not recognized as ROU assets within the

Consolidated Balance Sheets, but are recognized as an expense (recorded within total operating expenses) within the Consolidated Statements of Income.

The impact of the adoption of the new lease standard on our Consolidated Balance Sheets at January 1, 2019 was as follows (only financial statement line items impacted are presented):

(in millions)

As Reported as of December 31, 2018

Financing Obligations - Master Leases (1)

Finance Leases

- Dayton and Mahoning Valley

Operating Leases - Master Leases (2)

Operating Lease - Meadows (3)

Other Operating Leases - Non-Master Leases

As Adjusted for ASC 842

Increase/(Decrease)

Current assets

Prepaid expenses

Total current assets

Property and equipment, net (4)

Operating lease right-of-use assets (5)

Finance lease right-of-use assets (6)

Current liabilities

Current portion of financing obligations (7)

Current portion of operating lease liabilities (5)

Current portion of finance lease liabilities (6)

Accrued expenses and other current liabilities

Total current liabilities

Long-term portion of financing obligations (7)

Long-term portion of operating lease liabilities (5)

Long-term portion of finance lease liabilities (6)

Deferred income taxes (8)

Other long-term liabilities

Total liabilities

Stockholders’ equity

Retained earnings (accumulated deficit)

Total Penn National stockholders’ equity

Total stockholders’ equity

Total liabilities and stockholders’ equity

During the first quarter of 2019, the Company identified an adjustment to the purchase price allocation associated with the Pinnacle Acquisition.

The purchase price adjustment increased the financing obligation upon the adoption of the new lease standard, resulting in an increase to goodwill (see Note 5, “Acquisitions and Other Investments” ).

Represents components contained within each of the Master Leases determined to be operating leases (primarily land).

Represents the triple net lease with GLPI for the real estate assets used in the operations of Meadows Racetrack and Casino (the “Meadows Lease”).

Represents the (i) derecognition of the carrying amount of the property and equipment, net, associated with land components contained within our Master Leases determined to be operating leases upon the adoption of the new lease standard;

and (ii) derecognition of the carrying amount of the property and equipment, net, associated with land and building components associated with Dayton and Mahoning Valley determined to be finance leases upon the adoption of the new lease standard.

Operating lease ROU assets represent (i) the land components contained within the Master Leases determined to be operating leases upon the adoption of the new lease standard;

and (ii) with respect to other Operating Leases, represent (a) the Meadows Lease, which was acquired by the Company in conjunction with the acquisition of Pinnacle;

(b) ground and levee leases with landlords, which were not assumed by GLPI and remain an obligation of the Company;

and (c) buildings and equipment not associated with our Master Leases.

For leases where the rate implicit in the lease was not readily determinable, we used our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

We utilized the incremental borrowing rate on the adoption date for operating leases that commenced prior to that date.

The operating lease liability is based on the net present value of future lease payments.

Amounts primarily represent finance leases associated with Dayton and Mahoning Valley, which are included in the Penn Master Lease, that under ASC 840 utilized specific build-to-suit guidance.

The adoption of the new lease standard required the Company to evaluate the components under current guidance contained within the new lease standard, which resulted in all components being classified as finance leases.

Finance leases result in (i) the recognition of a finance lease ROU asset amortized over the lease term and (ii) a corresponding finance lease liability (recorded to interest expense over the lease term).

We utilized our incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments.

The finance lease liability is based on the net present value of future lease payments.

Represents components associated with our Master Leases that remain financing obligations (primarily buildings).

The financing obligation at the adoption date was calculated utilizing previous assumptions as determined (a) at the lease commencement date with respect to the Penn Master Lease and (b) at the acquisition date with respect to the Pinnacle Master Lease.

Represents the tax impacts related to the adoption of the new lease standard.

See Note 13, “Income Taxes.”

Accounting Pronouncements to be Implemented in 2020

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326):

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This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and must be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

Although we are still finalizing our assessment of the impact of the adoption of ASU 2016-13, which is effective January 1, 2020, we currently do not expect it to have a material impact on our Consolidated Financial Statements.

We adopted ASU 2016-13 during the first quarter of 2020 using a modified retrospective approach, which resulted in a cumulative-effect adjustment to retained earnings of $ 0.6 million as of January 1, 2020.

In August 2018, the FASB issued ASU No.

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

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

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

This will result in certain implementation costs being capitalized;

the associated amortization charge will, however, be recorded as an operating expense.

Under the previous guidance, costs incurred when implementing a cloud computing arrangement deemed to be a service contract are recorded as an operating expense when incurred.

ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Entities can choose to adopt the new guidance prospectively to eligible costs incurred on or after the date the guidance is first applied or retrospectively.

We have elected to adopt the net guidance on a prospective basis.

Although we are still finalizing our assessment of the impact of the adoption of ASU 2018-15, which is effective January 1, 2020, we currently do not expect it to have a material impact on our Consolidated Financial Statements.

Accounting Pronouncements to be Implemented in 2021

Under the previous guidance, costs incurred when implementing a cloud computing arrangement deemed to be a service contract were recorded as an operating expense when incurred.

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

In December 2019, the FASB issued ASU No.

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

Although we are currently evaluating the impact of the adoption of ASU 2019-12, we do not expect it to have a material impact on our Consolidated Financial Statements.

We elected to early adopt ASU 2019-12 during the third quarter of 2020 on a prospective basis, which did not have a material impact on our Consolidated Financial Statements.

In January 2020, the FASB issued ASU No.

2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815” (“ASU 2020-01”), which made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

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

ASU 2020-01 is effective for fiscal

years beginning after December 15, 2020, and interim periods within those fiscal years with early adoption permitted.

The Company's early adoption of ASU 2020-01 did not have a material impact on our Consolidated Financial Statements.

In October 2020, the FASB issued ASU No.

2020-10, “Codification Improvements,” (“ASU 2020-10”) which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations.

ASU 2020-10 is effective for fiscal years beginning after December 15, 2020 with early adoption permitted.

The Company's early adoption of ASU 2020-10 did not have a material impact on our Consolidated Financial Statements.

Accounting Pronouncements to be Implemented

In March 2020, the FASB issued ASU No.

2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”).

ASU 2020-04 provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate (referred to as “LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation.

ASU 2020-04 also provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued.

ASU 2020-04 can be adopted no later than December 1, 2022 with early adoption permitted.

The interest rates associated with the Company’s borrowings under its Senior Secured Credit Facilities (as defined in Note 11, “Long-term Debt” ) are tied to LIBOR.

The Company is currently evaluating the impact of the adoption of ASU 2020-04 on our Consolidated Financial Statements.

In August 2020, The FASB issued ASU No.

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

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

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

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

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

Early adoption is permitted.

The Company is currently evaluating the impact of the adoption of ASU 2020-06 on our Consolidated Financial Statements.

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

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

Note 4—Hurricane Laura

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

As of December 31, 2020, the Company recorded a receivable of $ 23.0 million relating to our estimate of repairs and maintenance costs which have been incurred as well as identified property and equipment which have been written off for which we deem the recovery of such costs from our insurers to be probable.

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

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

Additionally as of December 31, 2020, we continue to be in the process of performing our due diligence in an effort to quantify the claim amount under the policy that will be submitted to the insurers.

During the fourth quarter we received $ 47.5 million of insurance proceeds from our insurers representing upfront payments related to our anticipated policy claim.

Timing differences are likely to exist between the recognition of (i) impairment losses and capital expenditures made to repair or restore the assets and (ii) the receipt of insurance proceeds within the Consolidated Financial Statements.

We will record proceeds in excess of the recognized losses and lost profits under our business interruption insurance as a gain contingency in accordance with ASC 450, “Contingencies,” which we expect to recognize at the time of final settlement or when nonrefundable cash advances are made in a period subsequent to December 31, 2020.

The following table summarizes the financial impact of Hurricane Laura related matters:

(in millions) For the year ended December 31, 2020

Insurance Proceeds $ 47.5

Deductible $ 15.0

Coinsurance $ 2.5

Clean-up and Restoration Costs $ 47.1

Fixed Asset Write-off $ 23.2

Inventory Write-off $ 0.2

Insurance Receivable $ 23.0

Note 5—Revenue Disaggregation

We generate revenues at our owned, managed or operated properties principally by providing the following types of services:

(i) gaming, (ii) food and beverage, (iii) hotel, (iv) racing, (v) reimbursable management costs and (vi) other.

Other revenues is principally comprised of ancillary gaming-related activities, such as commissions received on ATM transactions, and iGaming.

(i) gaming, including iGaming and online sportsbook;

(ii) food and beverage;

(iv) reimbursable management costs;

and (v) other.

Other revenues are principally comprised of ancillary gaming-related activities, such as commissions received on ATM transactions, racing, and Penn Interactive’s social gaming.

In addition, we assess our revenues based on geographic location of the related properties, which is consistent with our reportable segments (see Note 18, “Segment Information,” for further information).

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For the year ended December 31, 2020

(in millions)

Intersegment Eliminations (1)

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

Gaming $ 1,495.1 $ 684.0 $ 194.2 $ 615.2 $ 62.7 $ ( 0.1 ) $ 3,051.1

Food and beverage 68.9 76.9 46.0 32.0 0.6 — 224.4

Hotel 17.4 64.3 46.4 18.7 — — 146.8

Other 57.9 24.4 15.9 15.5 61.7 ( 19.0 ) 156.4

Total revenues $ 1,639.3 $ 849.6 $ 302.5 $ 681.4 $ 125.0 $ ( 19.1 ) $ 3,578.7

Represents the elimination of intersegment revenues associated with our internally-branded retail sportsbooks, which are operated by Penn Interactive, and our live and televised poker tournament series that operates under the trademark, Heartland Poker Tour (“HPT”).

For the year ended December 31, 2019

(in millions)

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

Gaming $ 2,117.1 $ 831.1 $ 374.3 $ 938.1 $ 8.8 $ ( 0.7 ) $ 4,268.7

Food and beverage 155.1 154.1 116.7 84.7 1.4 — 512.0

Reimbursable management costs

Hotel 43.5 98.2 125.9 43.4 — — 311.0

Other 84.2 35.5 25.6 28.3 37.3 ( 1.2 ) 209.7

Total revenues $ 2,399.9 $ 1,118.9 $ 642.5 $ 1,094.5 $ 47.5 $ ( 1.9 ) $ 5,301.4

For the year ended December 31, 2018

(in millions)

(in millions) Northeast South West Midwest Other Total

Gaming $ 1,644.2 $ 302.9 $ 228.0 $ 719.8 $ — $ 2,894.9

Food and beverage 109.6 56.6 89.6 57.9 1.1 314.8

Hotel 23.2 23.3 90.8 26.3 — 163.6

Reimbursable management costs 46.8 — 10.5 — — 57.3

Promotional allowances

Other 67.7 11.6 19.0 19.7 39.3 157.3

Total revenues $ 1,891.5 $ 394.4 $ 437.9 $ 823.7 $ 40.4 $ 3,587.9

Note 5—Acquisitions and Other Investments

(1) Represents the elimination of intersegment revenues associated with our Barstool-branded and internally-branded retail sportsbooks, which are operated by Penn Interactive, and our live and televised poker tournament series that operates under the trade name, Heartland Poker Tour (“HPT”).

Note 6—Acquisitions and Dispositions

Greektown Casino-Hotel

On May 23, 2019, the Company acquired all of the membership interests of Greektown Holdings, L.L.C., for a net purchase price of $ 320.3 million, after working capital and other adjustments, pursuant to a transaction agreement among the Company, VICI Properties L.P., a wholly-owned subsidiary of VICI, and Greektown Mothership LLC.

In connection with the

acquisition, the real estate assets relating to Greektown were acquired by a subsidiary of VICI for an aggregate sales price of $ 700.0 million and the Company entered into the Greektown Lease, which has an initial annual rent of $ 55.6 million and an initial term of 15 years , with four five -year renewal options.

In connection with the acquisition, the real estate assets relating to Greektown were acquired by a subsidiary of VICI for an aggregate sales price of $ 700.0 million and the Company entered into the Greektown Lease, which has an initial annual rent of $ 55.6 million and an initial term of 15 years, with four five-year renewal options.

The acquisition of the operations was financed through a combination of cash on hand and incremental borrowings under the Company’s Revolving Credit Facility (as defined in Note 11, “Long-term Debt” ).

The Company is in the process of finalizing the assumptions that derive the fair value of certain assets acquired and liabilities assumed.

Therefore, the allocation of the purchase price is preliminary and subject to change.

During the year ended December 31, 2019 , subsequent to the date of acquisition, we made the following adjustments to the preliminary purchase price:

(in millions)

Estimated fair value, as previously reported (1)

Measurement period adjustments

Estimated fair value, as adjusted

During the first quarter of 2020, the Company finalized the allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed which resulted in no measurement period adjustments for the year ended December 31, 2020.

The fair value is as follows:

(in millions) Fair value

Cash and cash equivalents $ 31.1

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Gaming license 166.4

Trademark 24.4

Customer relationships 3.3

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Finance lease right-of-use assets 4.1

Other assets —

Total assets $ 855.7

Accounts payable, accrued expenses and other current liabilities $ 15.2

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Net assets acquired $ 320.3

Amounts were initially reported within the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2019, filed with the SEC on August 8, 2019.

(1) The goodwill has been assigned to our Northeast segment.

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(ii) the trademark using the relief-from-royalty method under the income approach;

and (iii) customer relationships (rated player databases) using the with-and-without method of the income approach.

and (iii) customer relationships (rated player databases) using the

with-and-without method of the income approach.

All valuation methods are forms of the income approach supported by observable market data for peer casino operator companies.

See Note 2, “Significant Accounting Policies,” for more information.

The following table includes the financial results of Greektown since the acquisition date, which is included within our Consolidated Statement of Income for the year ended December 31, 2019:

(in millions)

Period from May 23, 2019 through December 31, 2019

The following table includes the financial results of Greektown from the acquisition date through December 31, 2019, which is included within our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2019:

(in millions) Period from May 23, 2019 through December 31, 2019

Revenues $ 195.9

Net income $ 10.9

Margaritaville Resort Casino

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(“Holdco”), and Silver Slipper Gaming, LLC, and (ii) a membership interest purchase agreement (the “MIPA”) among VICI and the Company.

Pursuant to the Margaritaville Merger Agreement, a subsidiary of VICI merged with and into Holdco with Holdco surviving the merger as a wholly-owned subsidiary of VICI (the “Merger”) and owner of the real estate assets relating to Margaritaville.

Pursuant to the MIPA, immediately following the consummation of the Merger, HoldCo sold its interests in its sole direct subsidiary and owner of the Margaritaville operating assets, to the Company.

Pursuant to the MIPA, HoldCo sold its interests in its sole direct subsidiary and owner of the Margaritaville operating assets, to the Company.

In connection with the acquisition, the real estate assets used in the operations of Margaritaville were acquired by VICI for $ 261.1 million and the Company entered into the Margaritaville Lease, which has an initial annual rent of $ 23.2 million and an initial term of 15 years, with four five-year renewal options.

The acquisition of the operations was financed through incremental borrowings under the Company’s Revolving Credit Facility.

During the fourth quarter of 2019, the Company finalized the allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed, with the excess recorded as goodwill.

During the year ended December 31, 2019 , prior to its finalization, we made the following adjustments to the preliminary purchase price allocation:

(in millions)

Estimated fair value, as previously reported (1)

Measurement period adjustments

Fair value, as finalized

(in millions) Fair value

Cash and cash equivalents $ 10.7

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Operating lease right-of-use assets 196.2

Total assets $ 329.2

Accounts payable, accrued expenses and other current liabilities $ 10.1

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Net assets acquired $ 122.9

Amounts were initially reported within the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2019, filed with the SEC on May 8, 2019.

(1) The goodwill has been assigned to our South segment.

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The Company used the income, market, or cost approach (or a combination thereof) for the valuation, as appropriate, and used valuation inputs in these models and analyses that were based on market participant assumptions.

Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability.

Property and equipment acquired consists of non-REIT assets (e.g., equipment for use in gaming operations, furniture and other equipment).

We determined that the land and buildings subject to the Margaritaville Lease, which was entered into at the time of the acquisition, represented operating lease ROU assets with a corresponding operating lease liability calculated based on the present value of the future lease payments at the acquisition date in accordance with GAAP.

Management determined the fair value of its office equipment, computer equipment and slot machine gaming devices based on the market approach and other personal property based on the cost approach, supported where available by observable market data, which includes consideration of obsolescence.

Management determined the fair value of its office equipment, computer equipment and slot machine gaming devices based on the market

approach and other personal property based on the cost approach, supported where available by observable market data, which includes consideration of obsolescence.

Acquired identifiable intangible assets consist of a gaming license, which is an indefinite-lived intangible asset, and a customer relationship, which is an amortizing intangible asset with an assigned useful life of 2 years.

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See Note 2, “Significant Accounting Policies,” for more information.

The following table includes the financial results of Margaritaville since the acquisition date, which is included within our Consolidated Statement of Income for the year ended December 31, 2019:

(in millions)

For the year ended December 31, 2019

The following table includes the financial results of Margaritaville from the acquisition date through December 31, 2019, which is included within our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2019:

(in millions) For the year ended December 31, 2019

Revenues $ 157.6

Net income $ 13.7

Pinnacle Acquisition

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

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

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.

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 amended.

The Pinnacle Acquisition added 12 gaming properties to our holdings and provides us with greater operational scale and geographic diversity.

The Pinnacle Acquisition added 12 gaming properties to our holdings and provided us with greater operational scale and geographic diversity.

For more information on the Pinnacle Master Lease and related amendment, see Note 12, “Leases.”

During the third quarter of 2019, the Company finalized the allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed, with the excess recorded as goodwill.

During the year ended December 31, 2019 , prior to its finalization, we made the following adjustments to the preliminary purchase price allocation:

(in millions)

Estimated fair value, as previously reported (1)

Measurement period adjustments

Fair value, as finalized

(in millions) Fair value

Cash and restricted cash $ 124.2

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Gaming licenses 1,067.6

Trademarks 298.0

Customer relationships 22.4

Other long-term assets 38.9

Total assets $ 6,811.4

Long-term financing obligation, including current portion (3)

Other current liabilities

Deferred tax liabilities

Current liabilities 206.1

Deferred income taxes 340.0

Other long-term liabilities 16.6

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Net assets acquired $ 2,816.2

Amounts were initially reported within the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019.

(1) Includes buildings, boats, vessels, barges, and implied land and land use rights.

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(in millions) 2019 2018

Revenues $ 5,434.9 $ 5,552.2

Net income (loss) $ 64.9 $ 101.9

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Resorts Casino Tunica ceased operations on June 30, 2019.

In August 2016, Penn Interactive acquired 100 % of the outstanding equity securities of social casino game developer, Rocket Speed, Inc.

(“Rocket Speed”), for initial cash consideration of $ 60.5 million subject to customary working capital adjustments.

The stock purchase agreement included contingent payments over the next two years that were based on a multiple of 6.25 times Rocket Games’ then trailing- twelve -months EBITDA, subject to a cap of $ 110.0 million .

Up to $ 10.0 million of the contingent purchase price was accounted for as compensation as it was tied to continued employment over a two -year period.

The fair value of the contingent purchase price was estimated to be $ 34.4 million at the acquisition date.

In September 2017, Penn Interactive reached an agreement with the former shareholders of Rocket Speed to buy out the remaining contingent purchase price, which resulted in a benefit of $ 22.2 million , which is included within “General and administrative” within our Consolidated Statements of Income for the year ended December 31, 2017.

Jamul Indian Village Development Corporation

In April 2013, the Company and the Jamul Tribe, a federally recognized Indian Tribe holding a government-to-government relationship with the U.S., entered into definitive agreements to assist the Jamul Tribe in the development of a Hollywood Casino-branded casino on the Jamul Tribe’s trust land in San Diego County, California.

Casino-branded casino on the Jamul Tribe’s trust land in San Diego County, California.

In addition, the definitive agreements and a related loan commitment letter set forth the terms and conditions under which the Company would provide loans to the Jamul Indian Village Development Corporation (the “JIVDC”) to fund certain development costs.

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Consequently, the Company performed an analysis of the expected future cash flows it would receive based on forecasted operations of the property, discounted at the Term Loan C Facility’s effective interest rate, as well as any concessions it would grant to the JIVDC.

As a result of such analysis, the Company recorded a charge of $ 86.0 million for the year ended December 31, 2017, of which $ 64.0 million pertained to the Term Loan C Facility and $ 22.0 million was a reserve

for unfunded loan commitments.

In addition, the Company recorded charges of $ 3.8 million related to certain advances made to the JIVDC.

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The sale of the loan resulted in a recovery of loan losses and unfunded loan commitments of $ 17.0 million for the year ended December 31, 2018.

Tropicana Las Vegas

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

Contemporaneous with the sale, the Company entered into the Tropicana Lease (as defined and discussed in Note 12, “Leases” ).

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

We recognized a gain on this transaction of $ 29.8 million during the year ended December 31, 2020, which is included in “General and administrative” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

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

Contemporaneous with the sale, the Company entered into a triple net lease with GLPI for the land underlying Morgantown (as defined and discussed in Note 12, “Leases” ).

As of December 31, 2020, we had utilized all of the rent credits pertaining to the Tropicana and Morgantown transactions which totaled $ 337.5 million (see Note 12, “Leases” ).

Hollywood Casino Perryville

On December 15, 2020, the Company entered into a definitive agreement with GLPI to purchase 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.

Note 7—Investments in and Advances to Unconsolidated Affiliates

As of December 31, 2019 and 2018 , investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 50 % interest in Kansas Entertainment, which is a JV with International Speedway that owns Hollywood Casino at Kansas Speedway, its JV with MAXXAM, Inc.

(“MAXXAM”), and its JV with Greenwood Limited Jersey, Inc.

(“Greenwood”).

As of December 31, 2020 and 2019, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s approximate 36 % interest in Barstool Sports;

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

its 50 % interest in Freehold Raceway;

and its 50 % JV with MAXXAM, Inc.

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

Investment in Barstool Sports

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, par value $ 0.0001 per share, of Barstool Sports for a purchase price of $ 161.2 million.

The purchase price primarily consisted of $ 135.0 million in cash and $ 23.1 million in shares of a new class of non-voting convertible preferred stock of the Company (as discussed below).

Within the 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 $ 62.0 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).

On February 20, 2020, the Company issued 883 shares of Series D Preferred Stock, par value $ 0.01 per share (the “Series D Preferred Stock”) to certain individual stockholders affiliated with Barstool Sports.

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

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

Series D Preferred Stock is nonvoting stock.

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

As of December 31, 2020, none of the Series D Preferred Stock can be converted into Penn Common Stock.

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

The initial term of the commercial agreement is ten years and, unless earlier terminated and subject to certain exceptions, will automatically renew for three additional ten-year terms (a total of 40 years assuming all renewals are exercised).

As of December 31, 2020 we have an amortizing intangible asset pertaining to the customer list of $ 1.6 million and a prepaid expense pertaining to the advertising in the amount of $ 16.5 million, of which $ 15.4 million is classified as long-term.

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

As of December 31, 2020, our investment in Barstool Sports was $ 147.5 million, which is inclusive of $ 3.4 million of costs we incurred to close the transaction.

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

The Company determined that Barstool Sports qualified as a VIE as of December 31, 2020.

The Company did not consolidate its investment in Barstool Sports as of and for the year ended December 31, 2020 as the Company determined that it did not qualify as the primary beneficiary of Barstool Sports either at the commencement date of its investment or for the subsequent period ended December 31, 2020, primarily as a result of the Company not having the power to direct the activities of the VIE that most significantly affect Barstool Sports’ economic performance.

Kansas Joint Venture

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As of the years ended December 31, 2020 and 2019, we determined that Kansas Entertainment does not qualify as a VIE.

Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the JV as of and for the years ended December 31, 2019 and 2018 , primarily as it did not have the ability to direct the activities of the JV that most significantly impacted the JV’s economic performance without the input of International Speedway.

of the JV that most significantly impacted the JV’s economic performance without the input of NASCAR.

Therefore, the Company did not consolidate its investment in the JV as of and for the years ended December 31, 2020 and 2019.

For the year ended December 31, 2019 , our investment in Kansas Entertainment met the requirements to provide summarized balance sheet and income statement information for the comparative periods that are included within our Consolidated Financial Statements:

The following table provides summarized balance sheet and results of operations information related to Kansas Entertainment and our share of income from unconsolidated affiliates from our investment in Kansas Entertainment:

(in millions) 2020 2019

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(in millions) 2020 2019 2018

Revenues $ 104.2 $ 162.3 $ 159.0

Operating expenses 75.5 101.3 110.4

Operating income 28.7 61.0 48.6

Net income $ 28.7 $ 61.0 $ 48.6

Net income attributable to Penn National $ 14.4 $ 30.5 $ 24.3

In addition, for the year ended December 31, 2019 , we determined that it was required to provide audited financial statements of Kansas Entertainment.

The audited financial statements of Kansas Entertainment for the years ended June 30, 2019 , 2018 and 2017 are provided as exhibits to this Annual Report on Form 10-K for the year ended December 31, 2019 .

Texas and New Jersey Joint Ventures

The Company has a 50 % interest in a JV with MAXXAM, which owns and operates the Sam Houston Race Park in Houston, Texas and the Valley Race Park in Harlingen, Texas, and holds a license for a racetrack in Austin, Texas.

During the first quarter of 2020, principally due to on-going negative operating results of these racetracks, we recorded an other-than-temporary impairment on our investment in the JV of $ 4.6 million, which is included in “Impairment losses” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

Sam Houston Race Park hosts thoroughbred and quarter-horse racing and offers daily simulcast operations, and Valley Race Park features dog racing and simulcasting.

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Land and improvements (1)

$ 105.6 $ 353.2

Building, vessels and improvements (1)

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Construction in progress 89.8 59.3

2,240.7 2,614.8

Accumulated depreciation (1)

( 1,559.0 ) ( 1,548.3 )

681.7 1,066.5

Property and equipment - Subject to Master Leases

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Building, vessels and improvements 3,640.3 3,664.6

5,163.5 5,190.5

Accumulated depreciation ( 1,315.9 ) ( 1,136.8 )

3,847.6 4,053.7

Property and equipment, net $ 4,529.3 $ 5,120.2

Upon adoption of ASC 842, approximately $ 1.4 billion of land was derecognized and replaced with operating lease ROU assets based on the present value of future lease payments and $ 180.4 million of building and improvements, gross, was derecognized and replaced with finance lease ROU assets based on the present value of future lease payments.

See Note 3, “New Accounting Pronouncements.”

(1) On April 16, 2020, we sold real estate assets associated with our Tropicana property to GLPI.

See Note 6, Acquisitions and Dispositions.

Depreciation expense was as follows:

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Depreciation expense (1)

$ 336.9 $ 381.6 $ 251.9

(1) Of such amounts, $ 156.1 million, $ 158.9 million, and $ 112.1 million, respectively, pertained to real estate assets subject to either of our Master Leases.

During the year ended December 31, 2018, we recorded $ 34.3 million of impairment on the property and equipment associated with Resorts Casino Tunica, principally relating to the real estate assets subject to the Penn Master Lease, which is included in “Impairment losses” within our Consolidated Statements of Income.

The charge was the result of an impairment assessment performed after reviewing the financial results and projected results of this property, which had been impacted by nearby competition.

We subsequently ceased operations of Resorts Casino Tunica on June 30, 2019.

Hurricane Laura

In August 2020, Hurricane Laura made landfall in Lake Charles, Louisiana, which caused significant damage to our L’Auberge Lake Charles property.

As a result, we wrote off property and equipment with a net book value of $ 23.2 million of which $ 2.1 million and $ 21.1 million was included in Property and equipment – Not subject to Master Lease, and Property and equipment – Subject to Master Leases, respectively.

During the year ended December 31, 2020, we recorded $ 7.3 million of impairment on the property and equipment associated with Tropicana, relating to the operating assets, which is included in “Impairment losses” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

The charge was the result of an impairment assessment performed after reviewing the projected results of this property over the remaining lease term contained within the Tropicana Lease.

Note 9—Goodwill and Other Intangible Assets

A reconciliation of goodwill and accumulated goodwill impairment losses, by reportable segment, is as follows:

(in millions)

(in millions) Northeast South West Midwest Other Total

Balance as of January 1, 2019

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Goodwill acquired during year 67.4 44.2 — — — 111.6

Impairment losses during year ( 10.3 ) ( 17.4 ) — ( 60.3 ) — ( 88.0 )

( 1.5 ) 7.2 6.4 6.6 — 18.7

Balance as of December 31, 2019

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Goodwill, net 196.4 184.6 200.2 621.1 68.4 1,270.7

Goodwill acquired during year

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

— — — — ( 0.6 ) ( 0.6 )

Balance as of December 31, 2020

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Goodwill, net $ 152.9 $ 175.6 $ 200.2 $ 560.6 $ 67.8 $ 1,157.1

Amounts relate to adjustments made to the preliminary purchase price allocation of Pinnacle during the year ended December 31, 2019 , prior to it being finalized, as described in Note 5, “Acquisitions and Other Investments”

(1) Amounts relate to adjustments made to the preliminary purchase price allocation of Pinnacle during the year ended December 31, 2019, prior to it being finalized.

(2) Amounts relate to the write-off of goodwill related to the land sale at Sanford Orlando Kennel Club which discontinued our racing operations.

The write-off of this goodwill balance is included as a component of the gain calculation recorded on the sale.

2020 Annual and Interim Assessment for Impairment

During the first quarter of 2020, we identified an indicator of impairment on our goodwill and other intangible assets due to the COVID-19 pandemic.

As a result of the COVID-19 pandemic, we revised our cash flow projections to reflect the current economic environment, including the uncertainty surrounding the nature, timing and extent of reopening our gaming properties.

As a result of the interim assessment for impairment, during the first quarter of 2020, we recognized impairments on our goodwill, gaming licenses and trademarks of $ 113.0 million, $ 437.0 million and $ 61.5 million, respectively.

The estimated fair values of the reporting units were determined through a combination of a discounted cash flow model and a market-based approach, which utilized Level 3 inputs.

The estimated fair values of the gaming licenses and trademarks were determined by using discounted cash flow models, which utilized Level 3 inputs.

As noted in the table above, the goodwill impairments pertained to our Northeast, South and Midwest segments, in the amounts of $ 43.5 million, $ 9.0 million and $ 60.5 million, respectively.

The gaming license impairments pertained to our Northeast, South and Midwest segments in the amounts of $ 177.0 million, $ 166.0 million and $ 94.0 million, respectively.

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

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.

The estimated fair values of the reporting units were determined through a combination of discounted cash flow models and a market-based approach, which utilized Level 3 inputs.

The estimated fair values of the gaming licenses and trademarks were determined by using discounted cash flow models, which utilized Level 3 inputs.

2019 Annual Assessment for Impairment

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The impairments of gaming licenses and trademarks were largely driven by reductions in the long-term projections for certain of our properties where competition has increased due to expansion of gaming legislation, primarily within the Northeast segment.

The estimated fair values of the reporting units were determined through a combination of a DCF model and a market-based approach, which utilized Level 3 inputs.

The estimated fair values of the gaming licenses and trademarks were determined by using DCF models, which utilized Level 3 inputs.

The estimated fair values of the reporting units were determined through a combination of discounted cash flow models and a market-based approach, which utilized Level 3 inputs.

The estimated fair values of the gaming licenses and trademarks were determined by using discounted cash flow models, which utilized Level 3 inputs.

As noted in the table above, the goodwill impairments pertained to our Northeast, South and Midwest segments, in the amounts of $ 10.3 million, $ 17.4 million and $ 60.3 million, respectively.

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During the year ended December 31, 2018, the Company completed its 2018 annual assessment for impairment, which did not result in any impairment charges to goodwill or other intangible assets.

2017 Annual and Interim Assessments for Impairment

During the third quarter of 2017, the Company identified an indicator of impairment on its goodwill as a result of a reversal of a significant deferred tax valuation allowance, which caused increases in the carrying amounts of certain of our reporting units.

As a result of an interim assessment for impairment, one of our reporting units within the West segment was fully impaired, resulting in an impairment charge of $ 14.8 million , and the goodwill at Sanford-Orlando Kennel Club, which is included in the Other category, was partially impaired, resulting in an impairment charge of $ 3.2 million .

The estimated fair values of the reporting units were determined by using DCF models, which utilized Level 3 inputs.

During the year ended December 31, 2017, subsequent to the interim assessment discussed above, the Company completed its 2017 annual assessment for impairment, which did not result in any impairment charges to goodwill or other intangible assets.

The aforementioned impairments are included in “Impairment losses” within our Consolidated Statements of Income.

The aforementioned impairments for the years ended December 31, 2020 and 2019 are included in “Impairment losses” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

See Note 19, “Fair Value Measurements,” for quantitative information about the significant unobservable inputs used in the fair value measurements of other intangible assets.

As of October 1, 2019, the date of the most recent annual impairment test, three reporting units had negative carrying amounts.

Carrying Values of Goodwill and Other Intangible Assets

As of October 1, 2020, the date of the most recent annual impairment test, seven reporting units had negative carrying amounts.

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

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Hollywood Casino at Charles Town Races $ 8.7

Hollywood Casino Toledo $ 5.8

Plainridge Park Casino $ 6.3

South segment

Ameristar Vicksburg $ 19.5

Boomtown New Orleans $ 5.2

Cactus Petes and Horseshu $ 10.2

Midwest segment

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

December 31, 2019

December 31, 2018

(in millions)

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

December 31, 2020 December 31, 2019

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

Indefinite-lived intangible assets

Gaming licenses $ 1,246.1 $ — $ 1,246.1 $ 1,681.9 $ — $ 1,681.9

Trademarks 240.9 — 240.9 302.4 — 302.4

Other 0.7 — 0.7 0.7 — 0.7

Amortizing intangible assets

Customer relationships 106.9 ( 85.2 ) 21.7 104.4 ( 69.0 ) 35.4

Other 39.6 ( 35.5 ) 4.1 36.1 ( 30.0 ) 6.1

Total other intangible assets $ 1,634.2 $ ( 120.7 ) $ 1,513.5 $ 2,125.5 $ ( 99.0 ) $ 2,026.5

During the year ended December 31, 2019 , we paid $ 10.0 million for online and retail sports betting licenses in Pennsylvania and during the year ended December 31, 2018, we purchased two Category 4 gaming licenses to operate up to 750 slot machines and initially up to 30 table games, under each license, in York County, Pennsylvania for $ 50.1 million and in Berks County, Pennsylvania for $ 7.5 million , and iGaming and sports betting licenses in Pennsylvania for $ 20.0 million , all of which have been classified as indefinite-lived intangible assets.

During the year ended December 31, 2020 we paid $ 1.3 million for online and retail sports betting licenses.

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

During the year ended December 31, 2018, we purchased two Category 4 gaming licenses to operate up to 750 slot machines and initially up to 30 table games, under each license, in York County, Pennsylvania for $ 50.1 million and in Berks County, Pennsylvania for $ 7.5 million, and iGaming and sports betting licenses in Pennsylvania for $ 20.0 million, all of which have been classified as indefinite-lived intangible assets.

Amortization expense related to our amortizing intangible assets was $ 21.7 million, $ 24.7 million, and $ 17.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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Years ending December 31:

Thereafter 0.4

Note 10—Accrued Expenses and Other Current Liabilities

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Accrued expenses and other current liabilities $ 575.1 $ 631.3

Amounts include $ 38.3 million and $ 33.8 million , respectively, pertaining to the Company’s accrued progressive jackpot liability.

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

Amounts include $ 80.1 million and $ 64.1 million , respectively, pertaining to the Company’s non-qualified deferred compensation plan that covers most management and other highly-compensated employees.

(1) Amounts as of December 31, 2020 and 2019 include $ 40.8 million and $ 38.3 million, respectively, pertaining to the Company’s accrued progressive jackpot liability.

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

(2) Amounts as of December 31, 2020 and 2019 include $ 86.3 million and $ 80.1 million, respectively, pertaining to the Company’s non-qualified deferred compensation plan that covers management and other highly-compensated employees.

Note 11—Long-term Debt

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5.625 % Notes due 2027

2.75 % Convertible Notes due 2026

Other long-term obligations 73.0 89.2

Capital leases (1)

2,431.6 2,419.0

Current maturities of long-term debt ( 81.4 ) ( 62.9 )

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Debt issuance costs ( 32.8 ) ( 31.5 )

Reclassified to finance lease liabilities upon the adoption of ASC 842.

$ 2,231.2 $ 2,322.2

The following is a schedule of future minimum repayments of long-term debt as of December 31, 2020 (in millions):

Year ending December 31:

Thereafter 739.1

Total minimum payments $ 2,431.6

Senior Secured Credit Facilities

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 “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”).

(i) a five-year $ 700.0 million revolving credit facility (the “Revolving Credit Facility”);

(ii) a five-year $ 300.0 million Term Loan A facility (the “Term Loan A Facility”);

and (iii) 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 Credit Agreement (the “Amended 2017 Credit Agreement”).

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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.

The Term Loan B-1 Facility

is subject to a LIBOR “floor” of 0.75 %.

Prior to the Amended 2017 Credit Agreement and related extinguishment of the Term Loan B Facility, 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.

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 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 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.

We are required to maintain specified financial ratios and to satisfy certain financial tests when our covenant relief period terminates on 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.

As of December 31, 2020 and 2019, the Company had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating to $ 28.2 million and $ 30.0 million, respectively, resulting in $ 671.8 million and $ 530.0 million of available borrowing capacity under the Revolving Credit Facility, respectively.

During the fourth quarter of 2020, in connection with a prepayment of $ 115.0 million of outstanding borrowings on our Term Loan B-1 Facility, we recorded a $ 1.2 million loss on early extinguishment of debt, related to the write-off of debt issuance costs and debt discounts.

For the year ended December 31, 2018, in connection with the debt financing transactions relating to the Pinnacle Acquisition and principal repayments on the Term Loan B Facility, the Company recorded $ 5.5 million in refinancing costs and a $ 21.0 million loss on early extinguishment of debt, related to refinancing costs on the extinguishment of the Term Loan B Facility and the write-off of debt issuance costs and the discount on the Term Loan B Facility.

For the year ended December 31, 2017, in connection with the repayment of the 2013 Senior Secured Credit Facilities , the Company recorded $ 1.7 million in refinancing costs and a $ 2.3 million loss on early extinguishment of debt, related to the write-off of debt issuance costs and the discount on the 2013 Term Loan B Facility .

The refinancing costs are included in “Other,” as reported in “Other income (expenses)” within our Consolidated Statements of Income.

The refinancing costs are included in “Other,” as reported in “Other income (expenses)” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

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.

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

The 5.625 % Notes will not be 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 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 its existing 5.875 % Notes (as defined below) 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.

Redemption of 5.875 % Senior Subordinated Notes

During the year ended December 31, 2017, the Company redeemed all of its $ 300.0 million 5.875 % senior subordinated notes (“ 5.875 % Notes”), which were due in 2021.

In connection with this redemption, the Company recorded a $ 21.1 million loss on early extinguishment of debt for the year ended December 31, 2017 related to the difference between the reacquisition price of the 5.875 % Notes and their carrying amount.

2.75 % Unsecured Convertible Notes

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.

The Convertible Notes contain a cash conversion feature, and as a result, the Company has separated it into liability and equity components.

The Company valued the liability component based on its borrowing rate for a similar debt instrument that does not contain a conversion feature.

The equity component, which is recognized as debt discount, was valued as the difference between the face value of the Convertible Notes and the fair value of the liability component.

The equity component was valued at $ 91.8 million upon issuance of the Convertible Notes.

In connection with the Convertible Notes issuance, the Company incurred debt issuance costs of $ 10.2 million, which were allocated on a pro rata basis to the liability component and the equity component in the amounts of $ 6.6 million and $ 3.6 million, respectively.

The Convertible Notes consisted of the following components:

(in millions) December 31,

Liability component:

Principal $ 330.5

Unamortized debt discount ( 84.4 )

Unamortized debt issuance costs ( 6.2 )

Net carrying amount $ 239.9

Carrying amount of equity component $ 88.2

Interest expense, net

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Interest expense, net $ ( 543.2 ) $ ( 534.2 ) $ ( 538.4 )

Interest expense related to the Convertible Notes was as follows:

(in millions) For the year ended December 31, 2020

Coupon interest $ 5.7

Amortization of debt discount 7.3

Amortization of debt issuance costs 0.5

Convertible Notes interest expense $ 13.5

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

The remaining term of the Convertible Notes was 5.4 years as of December 31, 2020.

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.

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.

Our debt agreements also contain customary events of default, including cross-default provisions that require us to meet certain requirements under the Penn Master Lease and the Pinnacle Master Lease, each with GLPI.

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

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.

Other Long-Term Obligations

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The amount included in interest expense related to this obligation was $ 3.4 million, $ 4.1 million and $ 4.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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.

As of December 31, 2020 and 2019, other long-term obligations included $ 12.0 million and $ 12.6 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.

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Master Leases

Upon adoption of the new lease standard, components contained within the Master Leases were determined to be either (i) operating leases, (ii) finance leases, or (iii) financing obligations.

The components contained within the Master Leases are accounted for as either (i) operating leases, (ii) finance leases, or (iii) financing obligations.

Changes to future lease payments under the Master Leases (i.e., when future escalators become known or future variable rent resets occur), which are discussed below, require the Company to either (i) increase both the ROU assets and corresponding lease liabilities with respect to operating and finance leases or (ii) record the incremental variable payment associated with the financing obligation to interest expense.

In addition, monthly rent associated with Hollywood Casino Columbus (“Columbus”) and monthly rent in excess of the Hollywood Casino Toledo (“Toledo”) rent floor, which are discussed below, are considered contingent rent.

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 Company has determined that the lease term is 35 years .

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 (“Columbus”) and Hollywood Casino Toledo (“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 Columbus and Toledo in excess of a contractual baseline and subject to a rent floor specific to Toledo (see below).

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.

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, 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 Columbus and 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 Columbus and Toledo in excess of a contractual baseline and subject to a rent floor specific to Toledo (see below).

We did not incur an annual escalator on November 1, 2020 for the lease year ended October 31, 2020.

The next annual escalator test date is scheduled to occur effective November 1, 2021.

As a result of the annual escalator, effective as of November 1, 2019 and 2018, the fixed component of rent increased by $ 5.5 million and $ 5.4 million, for each respective year.

As a result of the annual escalator effective November 1, 2019, an additional ROU asset and corresponding lease liability of $ 34.4 million were recognized associated with operating lease components and an additional ROU asset and corresponding lease liability of $ 3.1 million were recognized associated with finance lease components.

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.

The acquisition of Greektown on May 23, 2019 activated a competition clause within the Penn Master Lease, which introduced a rent floor specific to Toledo.

As a result, an additional ROU asset and corresponding lease liability of $ 151.2 million were recognized associated with operating lease components.

Lease payments resulting from the rent floor associated with components determined to continue to be financing obligations are included in “Interest expense, net” within our Consolidated Statements of Income.

Monthly rent associated with Columbus and monthly rent in excess of the Toledo rent floor are considered contingent rent.

Expense related to operating lease components associated with Columbus and Toledo are included in “General and administrative” within our Consolidated Statements of Income and the variable expense related to the financing obligation component is included in “Interest expense, net” within our Consolidated Statements of Income.

The entire variable expense related to prior years was included in “Interest expense, net” pursuant to the failed sale-leaseback accounting treatment under ASC 840.

Monthly rent associated with Columbus and monthly rent in excess of the Toledo rent floor are variable and considered contingent rent.

Expense related to operating lease components associated with Columbus and Toledo are included in “General and administrative” within our Consolidated Statements of Operations and Comprehensive Income (Loss) and the variable expense related to the financing obligation component is included in “Interest expense, net” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

The entire variable expense related to the year ended December 31, 2018 was included in “Interest expense, net” pursuant to the failed sale-leaseback accounting treatment under ASC 840.

Total monthly variable expenses were as follows:

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In connection with the Pinnacle Acquisition, we assumed a triple net master lease with GLPI (the “Pinnacle Master Lease”), originally effective April 28, 2016, pursuant to which the Company leases real estate assets associated with 12 of the gaming facilities used in its operations.

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, on the same terms and conditions, exercisable at the Company’s option.

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, on the same terms and conditions, exercisable at the Company’s option.

The Company has determined that the lease term is 32.5 years.

The payment structure under the Pinnacle 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 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 compared to a contractual baseline during the preceding two years (“Pinnacle Percentage Rent”).

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

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

As a result of the annual escalator, an additional ROU asset and corresponding lease liability of $ 3.8 million were recognized associated with operating lease components of the Pinnacle Master Lease.

We did not incur an annual escalator on May 1, 2020 for the lease year ended April 30, 2020.

As a result of the annual escalator, effective as of May 1, 2019 for the lease year ended April 30, 2019, the fixed component of rent increased by $ 1.0 million and an additional ROU asset and corresponding lease liability of $ 3.8 million were recognized associated with operating lease components of the Pinnacle Master Lease.

The next annual escalator test date is scheduled to occur on May 1, 2021.

Effective May 1, 2020, the Pinnacle Percentage Rent resulted in an annual rent reduction of $ 5.0 million, which will be in effect until the next Pinnacle Percentage Rent reset, scheduled to occur on May 1, 2022.

Upon reset of the Pinnacle Percentage Rent, effective May 1, 2020, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 14.9 million.

Morgantown Lease

On October 1, 2020, the Company entered into a triple net lease with a subsidiary of GLPI for the land underlying our development project in Morgantown, Pennsylvania (“Morgantown Lease”) in exchange for $ 30.0 million in rent credits to be utilized to pay rent under the Master Leases, Meadows Lease, and the Morgantown Lease, as discussed in Note 6, “Acquisitions and Dispositions.”

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

Annual rent under the Morgantown Lease will be $ 3.0 million and is subject to 1.50 % fixed annual escalation in each of the first three years subsequent to the facility opening, and thereafter will be subject to an annual escalator consisting of either (i) 1.25 % or (ii) zero depending upon the consumer price index being greater or less than 0.50 %.

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

We determined the transaction to be a financing arrangement and upon execution of the Morgantown Lease, recorded a $ 30.0 million financing obligation which is included in “Long-term portion of financing obligations” within our Consolidated Balance Sheets.

Lease payments are included in “Interest expense, net” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

Operating Leases

The Company’s operating leases consist mainly of (i) the Meadows Lease with GLPI, (ii) the Margaritaville Lease with VICI, (iii) the Greektown Lease with VICI, (iv) ground and levee leases to landlords which were not assumed by our REIT Landlords and remain an obligation of the Company, and (v) building and equipment not subject to the Master Leases.

In addition to the operating lease components contained within the Master Leases (primary land), the Company’s operating leases consist mainly of (i) individual triple net leases with GLPI for the real estate assets used in the operations of Tropicana Las Vegas (the “Tropicana Lease”) and Meadows Racetrack and Casino (the “Meadows Lease”), (ii) individual triple net leases with VICI for the real estate assets used in the operations of Margaritaville (the “Margaritaville Lease”) and Greektown (the “Greektown Lease” and collectively with the Master Leases operating lease components (primarily the land), the Meadows Lease, the Margaritaville Lease and the Tropicana Lease, the “Triple Net Operating Leases”), (iii) ground and levee leases to landlords which were not assumed by our REIT Landlords and remain an obligation of the Company, and (iv) building and equipment not subject to the Master Leases.

Certain of our lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation, and rental payments based on usage.

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

Meadows Lease, Margaritaville Lease, and Greektown Lease

Tropicana Lease

On April 16, 2020, we entered into the Tropicana Lease with a subsidiary of GLPI for the real estate assets used in the operations of Tropicana for nominal cash rent and will continue to operate the Tropicana for two years (subject to three one-

year extensions at GLPI’s option) or until the real estate assets and the operations of the Tropicana are earlier sold, as discussed in Note 6, “Acquisitions and Dispositions.” In the event that GLPI sells the real estate assets used in the operations of Tropicana, the Tropicana Lease will automatically terminate.

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

Meadows Lease

In connection with the Pinnacle Acquisition, we assumed the Meadows Lease, originally effective September 9, 2016.

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The “Meadows Percentage Rent” is based on performance, which is prospectively adjusted for the next two-year period equal to 4.0 % of the average annual net revenues of the property during the trailing two-year period.

As a result of the annual escalator, which was determined to be $ 0.8 million , effective October 1, 2019, an additional operating ROU asset and corresponding operating lease liability of $ 4.3 million were recognized.

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

We did not incur an annual escalator on October 1, 2020 for the lease year ended September 30, 2020.

Effective October 1, 2019, as a result of the annual escalator for the lease year ended September 30, 2019, which was determined to be $ 0.8 million, an additional operating ROU asset and corresponding operating lease liability of $ 4.3 million were recognized.

Effective October 1, 2020, the Meadows Percentage Rent resulted in an annual rent reduction of $ 2.1 million, which will be in effect until the next Meadows Percentage Rent reset, scheduled to occur on October 1, 2022.

Upon reset of the Meadows Percentage Rent, effective October 1, 2020, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 17.1 million.

Margaritaville Lease

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 property 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.

The payment structure under the Margaritaville Lease includes a fixed component, a portion which was originally subject to an annual escalator of up to 2 % depending on 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 property compared to a contractual baseline during the preceding two years (“Margaritaville Percentage Rent”).

On February 1, 2020, the Margaritaville Lease was amended to provide for a change in the measurement of the annual escalator from an Adjusted Revenue to Rent Ratio of 1.9 :1 to a minimum coverage floor ratio of Net Revenue to Rent of 6.1 :1.

As a result of the annual escalator, which was determined to be $ 0.3 million, effective February 1, 2020 for the lease year ended January 31, 2020, an additional operating lease ROU asset and corresponding operating lease liability of $ 3.1 million were recognized.

The first percentage rent reset is scheduled to occur on February 1, 2021.

Greektown Lease

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 property compared to a contractual baseline during the preceding two years (“Greektown Percentage Rent”).

The payment structure under the Greektown Lease includes a fixed component, a portion subject to an annual escalator of up to 2 % depending on 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 property compared to a contractual baseline during the preceding two years (“Greektown Percentage Rent”).

We did not incur an annual escalator on June 1, 2020 for the lease year ended May 31, 2020.

In May 2020, the lease was amended to remove the escalator for the lease years ending May 31, 2021 and 2022 and to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the fourth lease year (June 1, 2022).

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

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Weighted-Average Remaining Lease Term

Operating leases

Finance leases

Financing obligations

Operating leases 26.7 years

Finance leases 27.8 years

Financing obligations 29.5 years

Weighted-Average Discount Rate

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The components of lease expense were as follows:

Classification

Location on Consolidated Statements of Operations and Comprehensive Income (Loss) For the year ended December 31,

(in millions) 2020 2019

Gaming Expense

Food, Beverage, Hotel and Other Expense

General and Administrative

Interest Expense, net

Depreciation and Amortization

Total for the year ended December 31, 2019

Operating Lease Costs

Rent expense associated with triple net leases classified as operating leases (1)

Rent expense associated with triple net operating leases (1)

General and administrative $ 419.8 $ 366.4

Operating lease cost (2)

Short-term lease cost

Primarily General and administrative 15.8 17.5

Short-term lease cost Primarily Gaming expense 37.7 56.6

Variable lease cost (2)

Primarily Gaming expense 2.5 3.9

Total $ 475.8 $ 444.4

Finance Lease Costs

Interest expense (3)

Amortization expense (3)

Interest on lease liabilities (3)

Interest expense, net $ 15.2 $ 15.4

Amortization of ROU assets (3)

Depreciation and amortization 8.0 7.9

Total $ 23.2 $ 23.3

Financing Obligation Costs

Interest expense (4)

Pertains to the components contained within the Master Leases (primarily land) determined to be operating leases, the Meadows Lease, the Margaritaville Lease, and the Greektown Lease, inclusive of the variable expense associated with Columbus and Toledo for the operating lease components (the land) (see table above).

Interest expense, net $ 403.1 $ 394.1

(1) Pertains to the operating lease components contained within the Master Leases (primarily land), the Meadows Lease, the Margaritaville Lease, the Greektown Lease, and the Tropicana Lease, inclusive of the variable expense associated with Columbus and Toledo for the operating lease components (the land).

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

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

Pertains to the components contained within the Master Leases (primarily buildings) determined to continue to be financing obligations, inclusive of the variable expense associated with Columbus and Toledo for the finance lease components (the buildings) (see table above).

Total rent expense under all operating lease agreements pursuant to the accounting treatment under ASC 840 was $ 58.1 million and $ 45.4 million for the years ended December 31, 2018 and 2017, respectively.

(4) Pertains to the components contained within the Master Leases (primarily buildings) and Morgantown Lease determined to be financing obligations, inclusive of the variable expense associated with Columbus and Toledo for the finance lease components (the buildings).

Total rent expense under all operating lease agreements pursuant to the accounting treatment under ASC 840 was $ 58.1 million for the year ended December 31, 2018.

Supplemental cash flow information related to leases was as follows:

(in millions)

For the year ended December 31,

(in millions) 2020 2019

Cash paid for amounts included in the measurement of lease liabilities (1)

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Financing cash flows from finance leases $ 6.3 $ 6.2

The following is a maturity analysis of our operating leases, finance leases and financing obligations as of December 31, 2019 :

(1) Amounts related to the year ended December 31, 2020 are inclusive of utilized rent credits.

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

For the year ended December 31,

(in millions) 2020 2019

Operating Leases

Finance Leases

Financing Obligations

Penn Master Lease (1)

$ 457.9 $ 457.9

Pinnacle Master Lease (1)

Meadows Lease (1)

Margaritaville Lease 23.5 23.1

Greektown Lease 55.6 33.8

Morgantown Lease (1)

$ 891.1 $ 869.8

(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.

The following is a maturity analysis of our operating leases, finance leases and financing obligations as of December 31, 2020:

(in millions) Operating Leases Finance Leases Financing Obligations

Years ending December 31:

2021 $ 422.6 $ 21.7 $ 370.3

2022 412.4 21.6 370.3

2023 399.9 20.8 370.4

2024 383.7 16.7 370.4

2025 380.7 16.7 370.5

Thereafter 7,779.9 376.7 9,095.3

Total lease payments 9,779.2 474.2 10,947.2

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Long-term portion of lease obligations $ 4,365.7 $ 212.5 $ 4,096.4

During the year ended December 31, 2019 , total payments made under the Triple Net Leases were $ 869.8 million .

During the year ended December 31, 2018 , total payments made under the Master Leases and Meadows Lease were $ 537.4 million .

During the year ended December 31, 2017, total payments made under the Penn Master Lease were $ 455.4 million .

The Company leases its hotel rooms to patrons and records the corresponding lessor revenue in “Food, beverage, hotel and other revenues” within our Consolidated Statements of Income.

For the years ended December 31, 2019 , 2018 , and 2017 , the Company recognized $ 311.0 million , $ 163.6 million , and $ 129.9 million , of lessor revenues related to the rental of hotel rooms, respectively.

The Company leases its hotel rooms to patrons and records the corresponding lessor revenue in “Food, beverage, hotel and other revenues” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

For the years ended

December 31, 2020, 2019, and 2018, the Company recognized $ 146.8 million, $ 311.0 million, and $ 163.6 million, of lessor revenues related to the rental of hotel rooms, respectively.

Hotel leasing arrangements vary in duration, but are short-term in nature.

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PSG holds the gaming license with the state of Illinois and the location share percentage is determined by the state of Illinois.

For the years ended December 31, 2019 , 2018 and 2017 , the total location share payments made by PSG, which are recorded within our Consolidated Statements of Income as gaming expenses, were $ 33.1 million , $ 34.7 million , and $ 29.7 million , respectively.

For the years ended December 31, 2020, 2019 and 2018, the total location share payments made by PSG, which are recorded within our Consolidated Statements of Operations and Comprehensive Income (Loss) as gaming expenses, were $ 20.2 million, $ 33.1 million, and $ 34.7 million, respectively.

Purchase Obligations

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Capital Expenditure Commitments

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.

Pursuant to each of our Triple Net Leases with the exception of our Morgantown Lease (which is a land lease we entered into on October 1, 2020 with GLPI as discussed in Note 12 " 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.

Employee Benefit Plans

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Our deferred compensation liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, was $ 86.3 million and $ 80.1 million as of December 31, 2020 and 2019, respectively.

As part of our initiative to reduce our cost structure while our properties were temporarily closed due to the COVID-19 pandemic, we suspended our matching contributions to the Penn 401(k) Plan and the EDC Plan from April 1, 2020 to September 30, 2020.

Labor Agreements

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In addition, in order to operate gaming machines and table games in West Virginia, the Company must maintain agreements with each of the Charles Town horsemen, pari-mutuel clerks and breeders.

As of December 31, 2019 , we had 31 collective bargaining agreements covering approximately 5,900 employees.

Seven collective bargaining agreements are scheduled to expire in 2020, and we are currently renegotiating three collective bargaining agreements that expired in 2019.

As of December 31, 2020, we had 38 collective bargaining agreements covering approximately 2,779 active employees.

Nine collective bargaining agreements are scheduled to expire in 2021, and we are currently renegotiating three collective bargaining agreements that expired in 2020.

Note 14—Income Taxes

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The Company assessed all available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize our existing net deferred tax assets.

For the year ended December 31, 2020, the Company made a reclassification within the below table to separate the right of use asset from the financing and operating lease obligations.

This reclassification change was also made to 2019 for transparency, which has no impact to the net deferred tax amount.

The components of the Company’s deferred tax assets and liabilities were as follows:

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Accrued expenses 43.3 37.6

Financing obligations associated with the Master Leases

Financing and operating leasing obligations 2,336.9 2,178.0

Unrecognized tax benefits 7.9 7.7

Investments in and advances to unconsolidated affiliates

Net operating losses, interest limitation and tax credit carryforwards 153.9 87.6

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Investments in and advances to unconsolidated affiliates ( 27.9 ) ( 2.9 )

Discount on convertible notes ( 20.9 ) —

Undistributed foreign earnings ( 0.4 ) ( 0.4 )

Intangible assets ( 183.4 ) ( 287.3 )

Lease right of use assets ( 1,250.6 ) ( 1,080.4 )

Net deferred tax liabilities ( 2,585.5 ) ( 2,513.0 )

Long-term deferred tax assets (liabilities), net $ ( 126.3 ) $ ( 244.6 )

Upon adoption of the new lease standard on January 1, 2019, we recorded a $ 739.2 million decrease in net deferred tax assets associated with our financing obligations and $ 435.4 million decrease in net deferred tax liabilities associated with property and equipment that is subject to our Master Leases.

The net amount of these two adjustments was recorded as a decrease to stockholders’ equity (see Note 3, “New Accounting Pronouncements” ).

The realizability of the net deferred tax assets is evaluated quarterly by assessing the need for a valuation allowance and by adjusting the amount of the allowance, if necessary.

The Company gives appropriate consideration to all available positive and negative evidence including projected future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.

The evaluation of both positive and negative evidence is a requirement pursuant to ASC 740 in determining the net deferred tax assets will be realized.

The Company gives appropriate consideration to all available positive and negative evidence including statutory carryback periods, projected future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.

The evaluation of both positive and negative evidence is a requirement pursuant to ASC 740 in determining if the net deferred tax assets will be realized.

ASC 740 suggests that additional scrutiny should be given to deferred taxes of an entity with cumulative pre‑tax book losses during the three most recent years

and is widely considered significant negative evidence that is objective and verifiable and therefore, difficult to overcome.

Due to the financial results during the year ended December 31, 2020, the Company has a cumulative pre‑tax book loss of $ 658.2 million, which is significant negative evidence used in our assessment.

Additionally, the Company expects to remain in a three year cumulative loss position in the near future.

As a result of these facts, the Company has recorded a valuation allowance against its net deferred tax assets, excluding net operating losses ("NOLs") that can be realized based on statutory carryback periods and the reversal of net deferred taxes related to indefinite‑lived intangibles.

The Company intends to continue to maintain a valuation allowance on its net deferred tax assets until there is sufficient objectively verifiable positive evidence to support the realization of all or some portion of these deferred tax assets.

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.

As of December 31, 2019 , the Company has significant three-year cumulative pretax income of $ 150.9 million , supporting the position that a federal valuation allowance is not necessary except for the valuation allowance recorded on federal capital loss carryforwards.

The Company continues to maintain a valuation allowance of $ 54.2 million as of December 31, 2019 primarily related to certain state filing groups where we continue to be in a three-year cumulative pretax loss position.

During the year ended December 31, 2018, we released a partial valuation allowance on a capital loss carryforward in the amount of $ 22.4 million that offset the capital gain realized on the Plainridge Park Casino Sale-Leaseback.

This reversal is reflected in our income tax benefit within the Consolidated Statements of Income.

During the third quarter of 2017, we determined that a valuation allowance was no longer required against our federal and state net deferred tax assets for the portion that will be realized.

The most significant evidence that led to the reversal of our valuation allowance as of the aforementioned period included, (i) the achievement and sustained growth in our three-year cumulative pretax earnings, (ii) substantial pretax income in seven of the last eight quarters with the only loss reported eight quarters ago, and (iii) the lack of significant goodwill and other intangible asset impairment losses expected in 2017.

During the fourth quarter of 2017, there were no material changes to our core business operations that altered our prior interim conclusion to release the valuation allowance against the federal and state net deferred tax assets for the portion that is more-likely-than-not to be realized.

As such, we released $ 741.9 million of our total valuation allowance for the year ended December 31, 2017 due to the positive evidence outweighing the negative evidence thereby allowing us to achieve the more-likely-than-not realization standard.

Overall, our valuation allowance decreased year-over-year by a net amount of $ 35.3 million , primarily due to the adoption of the new lease standard as of January 1, 2019, and was recorded as an increase to stockholders’ equity.

The impact of the new lease standard was partially offset by an increase in the valuation allowance for state net operating loss carryforwards.

Following the ownership changes of the Tropicana Las Vegas, the Company has $ 120.3 million of total gross federal net operating loss carryforwards that will expire on various dates from 2020 through 2035.

The Company acquired federal net operating loss carryforwards from the Pinnacle Acquisition, which were fully utilized as of December 31, 2019 .

All acquired tax attributes are subject to limitations under the Internal Revenue Code and underlying Treasury Regulations, however, we believe it is more-likely-than-not that the benefit from these tax attributes will be realized.

For state income tax reporting, as of December 31, 2019 , we had gross state net operating loss carryforwards aggregating $ 766.2 million available to reduce future state income taxes, primarily for the Commonwealth of Pennsylvania and the States of Colorado, Iowa, Louisiana, Missouri, New Mexico and Ohio localities.

The tax benefit associated with these net operating loss carryforwards was $ 52.2 million .

Due to statutorily limited operating loss carryforwards and income and loss projections in the applicable jurisdictions, a valuation allowance has been recorded to reflect the net operating losses which are not presently expected to be realized in the amount of $ 36.4 million .

If not used, substantially all the carryforwards will expire at various dates from December 31, 2020 through December 31, 2039.

During the year ended December 31, 2020, the Company increased the valuation allowance by $ 46.8 million, primarily related to federal and state NOL carryforwards, which substantially increased in the current year as a result of the global pandemic.

Following the ownership changes of the Tropicana, the Company has $ 120.3 million of total gross federal NOL carryforwards that will expire on various dates through 2035.

All acquired tax attributes are subject to limitations under the Internal Revenue Code and underlying Treasury Regulations.

During the year ended December 31, 2020, the Company increased its federal NOL carryforward by $ 148.1 million due to the current year loss, which resulted in an indefinite federal NOL carryforward.

The utilization of the indefinite federal NOL carryforward is limited to 80% of taxable income in any given year.

For state income tax reporting, as of December 31, 2020, the Company had gross state NOL carryforwards aggregating $ 1,332.0 million available to reduce future state income taxes, primarily for the Commonwealth of Pennsylvania and the States of Colorado, Iowa, Louisiana, Missouri, New Mexico and Ohio localities.

The tax benefit associated with these NOL carryforwards was $ 78.3 million.

Due to statutorily limited NOL carryforwards and income and loss projections in the applicable jurisdictions, a valuation allowance has been recorded to reflect the NOLs which are not presently expected to be realized in the amount of $ 60.2 million.

If not used, the majority of the carryforwards will expire at various dates from December 31, 2021 through December 31, 2040.

The domestic and foreign components of income (loss) before income taxes for the years ended December 31, 2020, 2019 and 2018 were as follows:

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(in millions) 2020 2019 2018

Domestic $ ( 834.0 ) $ 85.5 $ 89.6

Foreign ( 0.2 ) 0.6 0.3

Total $ ( 834.2 ) $ 86.1 $ 89.9

The components of income tax benefit (expense) for the years ended December 31, 2020, 2019 and 2018 were as follows:

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Current tax benefit (expense)

Federal $ 47.0 $ ( 12.5 ) $ ( 15.3 )

State 0.2 ( 9.2 ) ( 6.4 )

Foreign ( 0.4 ) ( 0.2 ) ( 1.4 )

Total current 46.8 ( 21.9 ) ( 23.1 )

Deferred tax benefit (expense)

Federal 103.6 ( 16.7 ) 14.6

State 14.7 ( 4.4 ) 10.9

Foreign — — 1.2

Total deferred 118.3 ( 21.1 ) 26.7

Total income tax benefit (expense) $ 165.1 $ ( 43.0 ) $ 3.6

On December 22, 2017, the President of the United States signed into law comprehensive tax reform legislation commonly known as Tax Cuts and Jobs Act (the “Tax Act”), which most notably, reduced the U.S.

federal corporate tax rate from 35% to 21% effective January 1, 2018.

For the year ended December 31, 2017, we recorded a provisional amount for certain enactment-date effects of 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, which increased the effective tax rate by 1.3 % .

The following table reconciles the statutory federal income tax rate to the actual effective income tax rate, and related amounts of income tax benefit (expense), for the years ended December 31, 2020, 2019 and 2018:

For the year ended December 31,

(in millions, except tax rates)

2020 2019 2018

(in millions, except tax rates) Percent Amount Percent Amount Percent Amount

Percent and amount of pretax income

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Goodwill impairment losses ( 2.3 ) ( 19.0 ) 14.4 ( 12.4 ) — —

Contingent liability settlement

Valuation allowance

Tax Act - deferred rate change

Compensation 2.5 20.5 0.3 ( 0.3 ) ( 3.8 ) 3.4

Foreign — ( 0.4 ) 0.1 ( 0.1 ) ( 0.1 ) 0.1

Federal valuation allowance ( 3.9 ) ( 32.7 ) — — ( 20.3 ) 18.3

Tax credits 1.2 10.0 — — — —

Other 0.2 2.0 0.2 ( 0.1 ) ( 1.5 ) 1.3

Total effective tax rate and income tax benefit (expense) 19.8 % $ 165.1 49.9 % $ ( 43.0 ) ( 4.0 ) % $ 3.6

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

(in millions)

Unrecognized tax benefits

(in millions) Unrecognized tax benefits

Unrecognized tax benefits as of January 1, 2018 $ 30.9

Additions based on current year positions

Additions based on prior year positions 0.8

Decreases due to settlements and/or reduction in reserves ( 2.0 )

Currency translation adjustments

Settlement payments

Unrecognized tax benefits as of December 31, 2018 29.7

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During the year ended December 31, 2020, we did no t record any new tax reserves, and accrued interest or penalties related to current year uncertain tax positions.

Regarding prior year tax positions, we recorded $ 7.1 million of tax reserves and accrued interest and reversed $ 0.2 million of previously recorded tax reserves and accrued interest for uncertain tax positions that are anticipated to settle and/or close within the next 12 months.

Regarding prior year tax positions, we recorded $ 1.9 million of tax reserves and accrued

interest and reversed $ 1.0 million of previously recorded tax reserves and accrued interest for uncertain tax positions.

As of December 31, 2020 and 2019, unrecognized tax benefits, inclusive of accruals for income tax related penalties and interest, of $ 38.2 million and $ 37.2 million, respectively, were included in “Other long-term liabilities” within the Company’s Consolidated Balance Sheets.

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During the years ended December 31, 2020, 2019 and 2018, we recognized $ 0.5 million, $ 0.1 million and $ 0.5 million, respectively, of interest and penalties, net of deferred taxes.

In addition, due to settlements and/or reductions in previously recorded liabilities, the Company had reductions in previously accrued interest and penalties of $ 0.1 million, net of deferred taxes.

The Company had no reductions in previously accrued interest and penalties for the year ended December 31, 2019.

We classify any income tax related penalties and interest accrued related to unrecognized tax benefits in “Income tax benefit (expense)” within the Consolidated Statements of Income.

We classify any income tax related penalties and interest accrued related to unrecognized tax benefits in “Income tax benefit (expense)” within the Consolidated Statements of Operations and Comprehensive Income (Loss).

The Company is currently in various stages of the examination process in connection with its open audits.

Generally, it is difficult to determine when these examinations will be closed, but the Company reasonably expects that its ASC 740 liabilities will not significantly change over the next twelve months.

As of December 31, 2019 , the Company is subject to U.S.

income tax examinations for the tax years 2015 , 2016 , 2017 and 2018 .

As of December 31, 2020, the Company has open tax years 2017 through 2019 that could be subject to examination for U.S.

federal income taxes.

In addition, we are subject to state and local income tax examinations for various tax years in the taxing jurisdictions in which we operate.

Such audits could result in increased tax liabilities, interest and penalties.

While the Company believes its tax positions are appropriate, we cannot assure the outcome will remain consistent with our expectation.

The Company believes we have adequately reserved for potential audit exposures of uncertain tax positions.

In the event the final outcome of these matters is different than the amounts recorded, such differences will impact our income tax provision in the period in which the determination is made.

As of December 31, 2020 and 2019, prepaid income taxes of $ 52.7 million and $ 22.2 million, respectively, were included in “Prepaid expenses” within the Company’s Consolidated Balance Sheets.

Note 15—Stockholders’ Equity

Common Stock Offerings

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

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

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

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

Share Repurchase Program

On January 9, 2019, the Company announced a share repurchase program pursuant to which the Board of Directors authorized to repurchase up to $ 200.0 million of the Company’s common stock, which expires on December 31, 2020.

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.

All repurchased shares were retired.

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.

All repurchased shares were retired.

All of the repurchased shares were retired.

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

Preferred Stock

On February 20, 2020, the Company issued 883 shares of Series D Preferred Stock, par value $ 0.01 per share (the “Series D Preferred Stock”), to certain individual stockholders affiliated with Barstool Sports as discussed in " Note 7—Investments in and Advances to Unconsolidated Affiliates ." There were 5,000 shares authorized of Series D Preferred Stock and 883 shares outstanding as of December 31, 2020.

The Company previously issued two series of preferred stock, Series B and Series C, each with a par value of $ 0.01 per share.

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2018 Long Term Incentive Compensation Plan

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

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

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

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

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

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Stock-based Compensation Expense

Stock-based compensation expense, which pertains principally to our stock options and RSAs, for the years ended December 31, 2019 , 2018 and 2017 totaled $ 14.9 million , $ 12.0 million and $ 7.8 million , respectively, and is included within the Consolidated Statements of Income under “General and administrative.”

Stock-based compensation expense, which pertains principally to our stock options and RSAs, for the years ended December 31, 2020, 2019 and 2018 totaled $ 14.5 million, $ 14.9 million and $ 12.0 million, respectively, and is included within the Consolidated Statements of Operations and Comprehensive Income (Loss) under “General and administrative.”

Stock Options

Stock options that expire between April 1, 2020 and October 1, 2029 have been granted to officers, directors, employees, and predecessor employees to purchase common stock at prices ranging from $ 11.61 to $ 32.90 per share.

All options were granted at the fair market value of the common stock on the grant date (as defined in the respective plan document) and have

contractual lives ranging from two to ten years .

Stock options that expire between February 21, 2021 and October 31, 2030 have been granted to officers, directors, employees, and predecessor employees to purchase common stock at prices ranging from $ 12.65 to $ 55.74 per share.

All options were granted at the fair market value of the common stock on the grant date (as defined in the respective plan document) and have contractual lives ranging from four to ten years .

The Company issues new authorized common shares to satisfy stock option exercises.

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Number of Option

Weighted-Average

Exercise Price

Weighted-Average Remaining Contractual

Term (in years)

Shares Weighted-Average

Exercise Price Weighted-Average Remaining Contractual

(in years) Aggregate

Intrinsic Value

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Outstanding as of January 1, 2020 7,817,436 $ 16.30

Granted 652,733 $ 26.79

Exercised ( 4,362,654 ) $ 14.37

Forfeited ( 508,326 ) $ 21.69

Outstanding as of December 31, 2020 3,599,189 $ 19.79 6.46 $ 242.2

Exercisable as of December 31, 2020 1,343,421 $ 16.71 3.94 $ 94.6

The weighted-average grant-date fair value of options granted during the years ended December 31, 2019 , 2018 and 2017 was $ 6.39 , $ 9.88 and $ 4.48 , respectively.

The weighted-average grant-date fair value of options granted during the years ended December 31, 2020, 2019 and 2018 were $ 8.62 , $ 6.39 and $ 9.88 , respectively.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2020, 2019 and 2018 was $ 128.9 million, $ 2.0 million and $ 28.7 million, respectively.

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The following table summarizes information about our outstanding stock options as of December 31, 2020:

Exercise Price Range

Exercise Price Range Total

Outstanding options

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For the year ended December 31,

2020 2019 2018

Risk-free interest rate 1.55 % 2.00 % 2.26 %

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The Company’s Performance Share Programs (as defined below) were adopted in order to provide our NEOs and certain other key executives with stock-based compensation tied directly to the Company’s performance, which further aligns their interests with those of shareholders and provides compensation only if the designated performance goals are met for the applicable performance periods.

On February 14, 2019, the Company’s Compensation Committee of the Board of Directors adopted a performance share program (the “Performance Share Program II”) pursuant to the 2018 Plan, which, for awards made in 2019, provided for the issuance of 278,780 PSAs, at target, to be granted in one-third increments.

On February 6, 2018, our Compensation Committee adopted a performance share program (the “2018 Performance Share Program”) pursuant to the 2018 Plan, which provided for the issuance of 197,727 PSAs, at target, to be granted in one-third increments.

On February 9, 2016, our Compensation Committee adopted a performance share program (the “2016 Performance Share Program” and collectively with the Performance Share Program II and the 2018 Performance Share Program, the “Performance Share Programs”) pursuant to the 2008 Plan, which provided for the issuance of 189,085 PSAs, at target, to be granted in one-third increments.

In addition, the 2016 Performance Share Program provided for the issuance of 172,245 PSAs, at target, on February 17, 2017, to be granted in one-third increments.

In February 2019, the Company’s Compensation Committee of the Board of Directors adopted a performance share program (the “Performance Share Program II”) pursuant to the 2018 Plan.

On February 14, 2019, an aggregate of 278,780 PSAs with performance-based vesting conditions, at target, was granted under the Performance Share Program II, to be granted in one-third increments.

On February 25, 2020, an aggregate of 107,297 PSAs with performance-based vesting conditions, at target, was granted under the Performance Share Program II, to be granted in one-third increments.

PSAs issued pursuant to the Performance Share Programs consist of three one-year performance periods over a three-year service period.

The awards have the potential to be earned at between 0 % and 150 % of the number of shares granted depending on achievement of the annual performance goals, but remain subject to vesting for the full three-year service period.

The performance goal as it pertains to the first and second performance periods of the awards granted under the Performance Share Program II is based on a combination of EBITDA, adjusted for certain items, principally payments made to our REIT landlords (“EBITDA, as adjusted”);

and run-rate cost synergies from the Pinnacle Acquisition.

The performance goal for the third performance period is based on EBITDA, as adjusted.

The performance goals for each of the one -year performance periods of the awards granted under the 2018 Performance Share Program and 2016 Performance Share Program are based on EBITDA, as adjusted.

Awards are not considered granted, for accounting purposes, under the Performance Share Programs until the targets are established and mutually understood by the Company and the individuals receiving the PSAs.

The grant date fair value of our RSAs is based on the most recent closing stock price of the Company’s shares of common stock.

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The following table contains information on our RSAs:

With Performance Conditions

Without Performance Conditions

Weighted- Average Grant Date Fair Value

With Performance Conditions Without Performance Conditions

Shares Weighted- Average Grant Date Fair Value Number of

Shares Weighted- Average Grant Date Fair Value

Nonvested as of January 1, 2020 395,362 $ 24.35 298,479 $ 23.15

Granted 179,045 $ 28.68 131,313 $ 26.18

Vested ( 352,371 ) $ 23.63 ( 106,666 ) $ 22.53

Forfeited — $ — ( 39,180 ) $ 25.18

Nonvested as of December 31, 2020 222,036 $ 28.73 283,946 $ 24.50

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Phantom Stock Units

Our PSUs, which vest over a period of three to four years , entitle employees and directors to receive cash based on the fair value of the Company’s common stock on the vesting date.

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

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the

Consolidated Balance Sheets, associated with its PSUs of $ 3.3 million and $ 1.7 million as of December 31, 2019 and 2018 , respectively.

For PSUs held by employees and directors of the Company, there was $ 3.3 million of total unrecognized compensation cost as of December 31, 2019 that will be recognized over the awards remaining weighted-average vesting period of 1.6 years.

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

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

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

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, associated with its cash-settled PSUs of $ 10.1 million and $ 3.3 million as of December 31, 2020 and 2019, respectively.

For PSUs held by employees, non-employee directors, and the chairman emeritus of the Company, there was $ 16.0 million of total unrecognized compensation cost as of December 31, 2020 that will be recognized over the awards remaining weighted-average vesting period of 2.3 years.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 11.5 million, $ 4.1 million, and $ 1.1 million of compensation expense associated with these awards, respectively.

Compensation expense associated with our PSUs is recorded in “General and administrative” within the Consolidated Statements of Income.

We paid $ 2.5 million , $ 4.2 million , and $ 12.7 million during the years ended December 31, 2019 , 2018 and 2017 , respectively, pertaining to our cash-settled PSUs.

Compensation expense associated with our PSUs is recorded in “General and administrative” within the Consolidated Statements of

Operations and Comprehensive Income (Loss).

We paid $ 4.7 million, $ 2.5 million, and $ 4.2 million during the years ended December 31, 2020, 2019 and 2018, respectively, pertaining to cash-settled PSUs.

Stock Appreciation Rights

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

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

Accordingly, the Company has a liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, associated with its SARs of $ 14.4 million and $ 6.8 million as of December 31, 2019 and 2018 , respectively.

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

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

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, associated with its cash-settled SARs of $ 54.6 million and $ 14.4 million as of December 31, 2020 and 2019, respectively.

For SARs held by employees of the Company, there was $ 71.2 million of total unrecognized compensation cost as of December 31, 2020 that will be recognized over the awards remaining weighted-average vesting period of 2.7 years.

For the year ended December 31, 2019 , the Company recognized compensation expense of $ 10.7 million as compared to a reduction to compensation expense of $ 6.7 million and compensation expense of $ 21.9 million for the years ended December 31, 2018 and 2017 , respectively, associated with these awards.

Compensation expense associated with our SARs is recorded in “General and administrative” within the Consolidated Statements of Income.

We paid $ 3.5 million , $ 10.5 million and $ 6.2 million during the years ended December 31, 2019 , 2018 and 2017 , respectively, pertaining to our cash-settled SARs.

Note 16—Earnings per Share

For the years ended December 31, 2020 and 2019, the Company recognized a charge to compensation expense of $ 69.7 million and $ 10.7 million, respectively, associated with these awards, as compared to a reduction to compensation expense of $ 6.7 million for the year ended December 31, 2018.

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

We paid $ 32.6 million, $ 3.5 million and $ 10.5 million during the years ended December 31, 2020, 2019 and 2018, respectively, related to cash-settled SARs.

Note 17—Earnings (Loss) per Share

For the year ended December 31, 2020, we recorded a net loss attributable to Penn Common Stock.

As such, because the dilution from potential common shares was antidilutive, we used basic weighted-average common shares outstanding, rather than diluted weighted-average common shares outstanding when calculating diluted loss per share for the year ended December 31, 2020.

On February 20, 2020, the Company issued 883 shares of Series D Preferred Stock to certain individual stockholders affiliated with Barstool Sports which can be converted into 883,000 shares of Penn Common Stock.

The Series D Preferred Stock will be entitled to participate equally and ratably in all dividends and distributions paid to holders of Penn Common Stock.

Holders of the Company's Series D Preferred Stock are not obligated to absorb losses therefore the two-class method was not applied for the year ended December 31, 2020.

(See Note 7 - Investments in and Advances to Unconsolidated Affiliates ).

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

(in millions) For the year ended December 31, 2020

Assumed conversion of dilutive stock options 3.0

Assumed conversion of dilutive RSAs 0.5

Assumed conversion of convertible preferred shares 0.7

Assumed conversion of convertible debt 9.1

The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the years ended December 31, 2019 and 2018:

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(in millions) 2019 2018

Determination of shares:

Weighted-average common shares outstanding

Assumed conversion of dilutive stock options

Assumed conversion of dilutive restricted stock awards

Diluted weighted-average common shares outstanding

Options to purchase 2,353,307 , 656,588 , and 51,803 shares were outstanding during the years ended December 31, 2019 , 2018 and 2017 , respectively, but were not included in the computation of diluted EPS because they were antidilutive.

The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the years ended December 31, 2019 , 2018 and 2017 :

For the year ended December 31,

Weighted-average common shares outstanding—Basic 115.7 97.1

Assumed conversion of:

Dilutive stock options 1.8 3.0

Dilutive RSAs 0.3 0.2

Weighted-average common shares outstanding—Diluted 117.8 100.3

Options to purchase zero , 2.4 million, and 0.7 million shares were outstanding during the years ended December 31, 2020, 2019 and 2018, respectively, but were not included in the computation of diluted EPS because they were antidilutive.

The following table presents the calculation of basic and diluted earnings (loss) for the Company’s common stock for the years ended December 31, 2020, 2019 and 2018:

(in millions, except per share data) 2020 2019 2018

Calculation of basic EPS:

Net income applicable to common stock

Weighted-average common shares outstanding

Calculation of diluted EPS:

Net income applicable to common stock

Diluted weighted-average common shares outstanding

Calculation of basic earnings (loss) per share:

Net income (loss) applicable to common stock $ ( 669.5 ) $ 43.9 $ 93.5

Weighted-average common shares outstanding - basic 134.0 115.7 97.1

Basic earnings (loss) per share $ ( 5.00 ) $ 0.38 $ 0.96

Calculation of diluted earnings (loss) per share:

Net income (loss) applicable to common stock ( 669.5 ) $ 43.9 $ 93.5

Weighted-average common shares outstanding - diluted 134.0 117.8 100.3

Diluted earnings (loss) per share $ ( 5.00 ) $ 0.37 $ 0.93

Note 18—Segment Information

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The Company utilizes Adjusted EBITDAR (as defined below) as its measure of segment profit or loss.

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

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

For the 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

Adjusted EBITDAR (3) :

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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

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

Rent expense associated with triple net operating leases (4)

( 419.8 ) ( 366.4 ) ( 3.8 )

Stock-based compensation ( 14.5 ) ( 14.9 ) ( 12.0 )

Cash-settled stock-based awards variance ( 67.2 ) ( 0.8 ) 19.6

Loss on disposal of assets

Gain (loss) on disposal of assets 29.2 ( 5.5 ) ( 3.2 )

Contingent purchase price 1.1 ( 7.0 ) ( 0.5 )

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Impairment losses ( 623.4 ) ( 173.1 ) ( 34.9 )

Recoveries on (provision for) loan loss and unfunded loan commitments

Recoveries on loan loss and unfunded loan commitments — — 17.0

Insurance recoveries, net of deductible charges 0.1 3.0 0.1

Non-operating items for Kansas JV

Non-operating items of equity method investments (5)

( 4.7 ) ( 3.7 ) ( 5.1 )

Interest expense, net ( 543.2 ) ( 534.2 ) ( 538.4 )

Loss on early extinguishment of debt ( 1.2 ) — ( 21.0 )

Income before income taxes

93.1 20.0 ( 7.1 )

Income (loss) before income taxes ( 834.2 ) 86.1 89.9

Income tax benefit (expense) 165.1 ( 43.0 ) 3.6

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

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

The Other category also includes Penn Interactive;

which operates social gaming, our internally-branded retail sportsbooks, and iGaming;

our management contract for Retama Park Racetrack;

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

each property.

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 social gaming, our 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.

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

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

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debt extinguishment and financing charges;

impairment charges;

impairment losses;

insurance recoveries and deductible charges;

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and other income or expenses.

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

The Company’s triple net operating leases include certain components of the Master Leases (primarily land), the Meadows Lease, the Margaritaville Lease, and the Greektown Lease.

Adjusted EBITDAR is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (see footnote (5) below) added back for Barstool Sports and our Kansas Entertainment JV.

(4) The Company’s triple net operating leases include certain components of the Master Leases (primarily land), the Meadows Lease, the Margaritaville Lease, the Greektown Lease, and the Tropicana Lease.

(5) Consists principally of interest expense, net;

income taxes;

depreciation and amortization;

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

(6) Principally includes holding gains on our equity securities, which are discussed in Note 19, “Fair Value Measurements.” Additionally, includes non-recurring restructuring charges (primarily severance) of $ 13.4 million associated with a company-wide initiative, triggered by the COVID-19 pandemic, designed to (i) improve the operational effectiveness across our property portfolio;

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

For the year ended December 31,

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South segment 15.8 29.8 10.6

West segment 8.2 21.2 12.8

Midwest segment 15.1 32.7 25.3

Other 19.9 10.7 5.0

Total capital expenditures $ 137.0 $ 190.6 $ 92.6

(in millions)

(in millions) Northeast South West Midwest Other Total

As of December 31, 2020

Investment in and advances to unconsolidated affiliates (1)

$ 0.1 $ — $ — $ 85.2 $ 181.5 $ 266.8

Total assets (2)

$ 1,958.4 $ 1,165.4 $ 401.5 $ 1,161.1 $ 9,980.9 $ 14,667.3

As of December 31, 2019

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Total assets (2)

$ 2,273.7 $ 1,397.0 $ 752.1 $ 1,412.2 $ 8,359.5 $ 14,194.5

As of December 31, 2018

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Total assets (3)

As of December 31, 2019 , total assets of the Other category includes the real estate assets subject to the Master Leases, which are either classified as property and equipment, operating lease ROU assets, or finance lease ROU assets, depending on whether the underlying component of the Master Leases was determined to be an operating lease, a finance lease, or continue to be financing obligations, upon adoption of ASC 842.

As of December 31, 2018 and 2017, total assets of the Other category includes the real estate assets subject to the Master Leases, which are classified as property and equipment.

$ 1,330.2 $ 1,082.3 $ 755.7 $ 1,411.5 $ 6,381.3 $ 10,961.0

(1) Our investment in Barstool Sports is included within the Other category.

(2) As of December 31, 2020 and 2019, total assets of the Other category includes real estate assets subject to the Master Leases, which are classified as either property and equipment, operating lease ROU assets, or finance lease ROU assets.

(3) As of December 31, 2018, total assets of the Other category includes the real estate assets subject to the Master Leases, which are classified as property and equipment.

Note 19—Fair Value Measurements

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Equity Securities

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

As discussed in Note 2, “Significant Accounting Policies,” these equity securities are the result of Penn Interactive entering into multi-year agreements with third-party sports betting operators for online sports betting and related iGaming market access across our portfolio during the third quarter of 2019.

As of December 31, 2020 and 2019, we held $ 143.1 million and $ 40.5 million in equity securities, respectively, including ordinary shares and warrants, which are reported as “Other assets” in our Consolidated Balance Sheets.

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

During the year ended December 31, 2020 and 2019, we recognized a holding gain of $ 106.7 million and $ 19.9 million, respectively, related to these equity securities, which is included in “Other,” as reported in “Other income (expenses)” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

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

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

As of December 31, 2019 and 2018 , PRP held $ 15.1 million and $ 16.9 million , respectively, in promissory notes issued by RDC and $ 6.7 million and $ 7.5 million , respectively, in local government corporation bonds issued by RDC, at amortized cost.

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

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

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

During the year ended December 31, 2019 , principally due to the lack of legislative progress and on-going negative operating results of Retama Park Racetrack, we recorded an other-than-temporary impairment on the promissory notes and the local government corporation bonds totaling $ 2.5 million , which is included in “Impairment losses” within our Consolidated Statements of Income.

During the year ended December 31, 2019, principally due to the lack of legislative progress and on-going negative operating results of Retama Park Racetrack, we recorded an other-than-temporary impairment on the promissory notes and the local government corporation bonds totaling $ 2.5 million, which is included in “Impairment losses” within our Consolidated Statements of Operations and Comprehensive Income (Loss).

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

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Long-term Debt

The fair value of our Term Loan A Facility, Term Loan B-1 Facility and 5.625 % Notes is estimated based on quoted prices in active markets and is classified as a Level 1 measurement.

The fair value of our Term Loan A Facility, Term Loan B-1 Facility, 5.625 % Notes, and the 2.75 % Convertible Notes is estimated based on quoted prices in active markets and is classified as a Level 1 measurement.

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

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Other Liabilities

Other liabilities as of December 31, 2019 and 2018 principally consists of contingent purchase price related to Plainridge Park Casino and Absolute Games, LLC, which was acquired by Penn Interactive during the second quarter of 2018.

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

As of December 31, 2019 and 2018 , we were contractually obligated to

make six and seven additional annual payments, respectively.

The Absolute Games, LLC, contingent purchase price is calculated based on earnings over the first two years of operations after the acquisition.

As of December 31, 2019 , we were contractually obligated to make one additional payment, corresponding to the second year of operations after the acquisition, which will become payable in the third quarter of 2020.

The fair value of these liabilities, which are both estimated based on an income approach using a DCF model and have been classified as Level 3 measurements, are included within our Consolidated Balance Sheets in “Accrued expenses and other current liabilities” or “Other long-term liabilities,” depending on the timing of the next payment.

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

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

As of December 31, 2020 and 2019, we were contractually obligated to make five and six additional annual payments, respectively.

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

The fair value of these liabilities, which are estimated based on an income approach using a discounted cash flow model and have been classified as Level 3 measurements, are included within our Consolidated Balance Sheets in “Accrued expenses and other current liabilities” or “Other long-term liabilities,” depending on the timing of the next payment.

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

December 31, 2020

(in millions)

Carrying Amount

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

Financial assets:

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Senior Secured Credit Facilities $ 1,600.3 $ 1,609.3 $ 1,609.3 $ — $ —

5.625 % Notes

$ 399.5 $ 418.0 $ 418.0 $ — $ —

Convertible Notes $ 239.8 $ 1,274.5 $ 1,274.5 $ — $ —

Other long-term obligations $ 73.0 $ 72.8 $ — $ 72.8 $ —

Other liabilities $ 10.1 $ 10.1 $ — $ 2.8 $ 7.3

Puts and calls related to certain Barstool Sports shares $ 0.3 $ 0.3 $ — $ 0.3 $ —

December 31, 2019

(in millions)

Carrying Amount

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

Financial assets:

Cash and cash equivalents $ 437.4 $ 437.4 $ 437.4 $ — $ —

Equity securities $ 40.5 $ 40.5 $ — $ 40.5 $ —

Held-to-maturity securities $ 6.7 $ 6.7 $ — $ 6.7 $ —

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Senior Secured Credit Facilities $ 1,896.5 $ 1,930.6 $ 1,930.6 $ — $ —

5.625 % Notes

$ 399.4 $ 426.0 $ 426.0 $ — $ —

Other long-term obligations $ 89.2 $ 89.7 $ — $ 89.7 $ —

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Other Liabilities

(in millions)

Contingent Purchase Price

(in millions) Contingent Purchase Price

Balance as of January 1, 2018 $ 22.7

Payments ( 4.2 )

Included in earnings (1)

Balance as of December 31, 2018 19.0

Payments ( 8.5 )

Included in earnings (1)

Balance as of December 31, 2019 17.5

Included in earnings (1)

Payments ( 9.1 )

Included in loss (1)

Balance as of December 31, 2020 $ 7.3

The expense is included in “General and administrative” within our Consolidated Statements of Income.

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

The following table sets forth the assets measured at fair value on a non-recurring basis during the years ended December 31, 2020 and 2019:

(in millions)

Valuation Date

Valuation Technique

Total Balance

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

Property and equipment (1)

12/31/2020 Discounted cash flow $ — $ — $ — $ — $ ( 7.3 )

3/31/2020 Discounted cash flow and market approach $ — $ — $ 160.5 $ 160.5 $ ( 113.0 )

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3/31/2020 Discounted cash flow $ — $ — $ 568.0 $ 568.0 $ ( 437.0 )

Trademarks (2)

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

Property and equipment (1)

Cost and market approach

The fair value, which was concluded to be zero, of our property and equipment associated with Resorts Casino Tunica was determined using Level 2 inputs.

Goodwill 10/1/2019 Discounted cash flow and market approach $ — $ — $ 161.1 $ 161.1 $ ( 88.0 )

Gaming licenses 10/1/2019 Discounted cash flow $ — $ — $ 290.0 $ 290.0 $ ( 62.6 )

Trademarks 10/1/2019 Discounted cash flow $ — $ — $ 87.5 $ 87.5 $ ( 20.0 )

(1) The fair value, which was concluded to be zero, of our property and equipment associated with Tropicana was determined using Level 3 inputs.

See Note 8, “Property and Equipment,” for more information.

(2) During the first quarter of 2020, we identified an indicator of impairment on our goodwill and other intangible assets due to the COVID-19 pandemic.

See Note 9, “Goodwill and Other Intangible Assets” for more information.

The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities on a recurring basis as of December 31, 2020:

Valuation Technique

Unobservable Input

Discount Rate

Plainridge Park Casino contingent purchase price

Discounted cash flow

Discount rate

As discussed in Note 8, “Goodwill and Other Intangible Assets,” we recorded impairments on our gaming licenses and trademarks, which are indefinite-lived intangible assets, as a result of our 2019 annual assessment for impairment.

Valuation Technique Unobservable Input Discount Rate

Contingent purchase price - Plainridge Park Casino Discounted cash flow Discount rate 5.05 %

As discussed in Note 9, “Goodwill and Other Intangible Assets,” we recorded impairments on our goodwill, gaming licenses and trademarks as a result of the interim assessment for impairment during the first quarter of 2020.

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

The following table presents quantitative information about the significant unobservable inputs used in the fair value measurements of other indefinite-lived intangible assets as of the valuation date below:

(in millions)

Valuation Technique

Unobservable Input

Range or Amount

As of October 1, 2019

Gaming licenses

Discounted cash flow

Discount rate

10.5% - 11.25%

(in millions) Fair Value Valuation Technique Unobservable Input Range or Amount

As of March 31, 2020

Gaming licenses $ 568.0 Discounted cash flow Discount rate 13.25 % - 14.00 %

Long-term revenue growth rate 2.0 %

Discounted cash flow

Discount rate

10.5% - 11.25%

Trademarks $ 216.5 Discounted cash flow Discount rate 13.25 % - 14.00 %

Long-term revenue growth rate 2.0 %

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The future minimum lease commitments relating to these leases as of December 31, 2020 were $ 1.5 million.

Note 20—Summarized Quarterly Data (Unaudited)

The following table summarizes the quarterly results of operations for the years ended December 31, 2019 and 2018 :

Fiscal Quarter

(in millions, except per share data)

Operating income

Net income (loss)

Earnings (loss) per common share:

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Fiscal Quarter

(in millions, except per share data)

Operating income

Net income (loss)

Earnings (loss) per common share:

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

During the fourth quarter of 2019, we recorded $ 170.6 million of impairment on our goodwill and other intangible assets.

See Note 8, “Goodwill and Other Intangible Assets,” for further details.

During the second quarter of 2018, the Company recorded a recovery of loan losses and unfunded loan commitments of $ 17.0 million relating to the JIVDC.

See Note 5, “Acquisitions and Other Investments,” for further details.

During the fourth quarter of 2018, we acquired Pinnacle, which resulted in the incurrence of $ 74.7 million in pre-opening and acquisition costs.

See Note 5, “Acquisitions and Other Investments,” for further details.

In addition, we recorded a $ 34.3 million impairment of long-lived assets.

See Note 7, “Property and Equipment,” for further details.

Lastly, we recorded a $ 17.2 million loss on early extinguishment of debt.

See Note 10, “Long-term Debt,” for more details .

Note 21—Subsequent Events

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 certain stockholders of Barstool Sports (the “Sellers”), in which we purchased approximately 36 % of the common stock, par value $ 0.0001 per share, of Barstool Sports (“Barstool Sports Common Stock”) for a purchase price of approximately $ 163.0 million .

The purchase price consisted of approximately $ 135.0 million in cash and $ 28.0 million in shares of non-voting convertible preferred stock of the Company (the “Penn Preferred Stock”).

1/1,000 th of a share of the Penn Preferred Stock will be convertible into one share of common stock, par value $ 0.01 per share, of the Company (“Penn Common Stock”), and the Penn Preferred Stock will be entitled to participate equally and ratably in all dividends and distributions paid to holders of Penn Common Stock based on the number of shares of Penn Common Stock into which such Penn Preferred Stock could convert.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data