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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 307 added, 271 removed, 846 unchanged (41% of the section changed)

FINANCIAL STATEMENTS

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data) March 31,

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

2022 December 31,

37 unchanged sentences

Accumulated other comprehensive loss ( 81.3 ) ( 54.4 )

Total Penn National Gaming stockholders’ equity 3,953.5 4,097.8

Total PENN Entertainment stockholders’ equity 3,766.8 4,097.8

Non-controlling interest ( 0.8 ) ( 0.7 )

2 unchanged sentences

See accompanying notes to the unaudited Consolidated Financial Statements.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended March 31,

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

(in millions, except per share data) 2022 2021 2022 2021

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Net loss attributable to non-controlling interest — — 0.1 0.1

Net income attributable to Penn National Gaming $ 51.7 $ 91.0

Net income attributable to PENN Entertainment $ 26.1 $ 198.7 $ 77.8 $ 289.7

Earnings per share:

4 unchanged sentences

See accompanying notes to the unaudited Consolidated Financial Statements.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three months ended March 31,

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

(in millions) 2022 2021 2022 2021

Net income $ 26.1 $ 198.7 $ 77.7 $ 289.6

Other comprehensive income:

Other comprehensive loss:

Foreign currency translation adjustment during the period ( 62.7 ) — ( 26.9 ) —

Other comprehensive income 35.8 —

Total comprehensive income 87.4 90.9

Other comprehensive loss ( 62.7 ) — ( 26.9 ) —

Total comprehensive income (loss) ( 36.6 ) 198.7 50.8 289.6

Comprehensive loss attributable to non-controlling interest — — 0.1 0.1

Comprehensive income attributable to Penn National Gaming $ 87.5 $ 91.0

Comprehensive income (loss) attributable to PENN Entertainment $ ( 36.6 ) $ 198.7 $ 50.9 $ 289.7

See accompanying notes to the unaudited Consolidated Financial Statements.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2022 and 2021

Three Months Ended June 30, 2022 and 2021

Preferred Stock Common Stock Treasury Stock Additional

Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total Penn Stockholders’ Equity Non-Controlling Interest Total Stockholders’ Equity

(in millions, except share data) Shares Amount Penn National Gaming Shares Amount Exchangeable Shares Amount

Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total PENN Stockholders’ Equity Non-Controlling Interest Total Stockholders’ Equity

(in millions, except share data) Shares Amount PENN Entertainment Shares Amount Exchangeable Shares Amount

Balance as of April 1, 2022 581 $ 19.4 166,161,818 $ 1.7 633,189 $ — $ ( 203.5 ) $ 4,170.4 $ ( 15.9 ) $ ( 18.6 ) $ 3,953.5 $ ( 0.8 ) $ 3,952.7

Share-based compensation arrangements — — 30,551 — — — — 14.5 — — 14.5 — 14.5

Share repurchases (Note 13) — — ( 5,539,177 ) — — — ( 167.0 ) — — — ( 167.0 ) — ( 167.0 )

Common stock issuance (Note 13) — — 64,000 — — — — 2.0 — — 2.0 — 2.0

Exchangeable shares conversions (Note 13) — — 8,531 — ( 8,531 ) — — — — — — — —

Currency translation adjustment — — — — — — — — — ( 62.7 ) ( 62.7 ) — ( 62.7 )

Net income — — — — — — — — 26.1 — 26.1 — 26.1

Other — — — — — — — 0.4 — — 0.4 — 0.4

Balance as of June 30, 2022 581 $ 19.4 160,725,723 $ 1.7 624,658 $ — $ ( 370.5 ) $ 4,187.3 $ 10.2 $ ( 81.3 ) $ 3,766.8 $ ( 0.8 ) $ 3,766.0

Balance as of April 1, 2021 775 $ 24.2 156,330,141 $ 1.6 — $ — $ ( 28.4 ) $ 3,175.2 $ ( 416.3 ) $ — $ 2,756.3 $ ( 0.5 ) $ 2,755.8

Share-based compensation arrangements — — 413,048 — — — — 9.4 — — 9.4 — 9.4

Share issuance (Note 13) — — 43,684 — — — — 3.5 — — 3.5 — 3.5

Net income — — — — — — — — 198.7 — 198.7 — 198.7

Other — — — — — — — ( 9.6 ) — — ( 9.6 ) — ( 9.6 )

Balance as of June 30, 2021 775 $ 24.2 156,786,873 $ 1.6 — $ — $ ( 28.4 ) $ 3,178.5 $ ( 217.6 ) $ — $ 2,958.3 $ ( 0.5 ) $ 2,957.8

See accompanying notes to the unaudited Consolidated Financial Statements.

Six Months Ended June 30, 2022 and 2021

Preferred Stock Common Stock Treasury Stock Additional

Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total PENN Stockholders’ Equity Non-Controlling Interest Total Stockholders’ Equity

(in millions, except share data) Shares Amount PENN Entertainment Shares Amount Exchangeable Shares Amount

Balance as of January 1, 2022 775 $ 25.8 169,561,883 $ 1.7 653,059 $ — $ ( 28.4 ) $ 4,239.6 $ ( 86.5 ) $ ( 54.4 ) $ 4,097.8 $ ( 0.7 ) $ 4,097.1

Share-based compensation arrangements — — 218,824 — — — — 31.5 — — 31.5 — 31.5

Share repurchases — — ( 3,802,408 ) — — — ( 175.1 ) — — — ( 175.1 ) — ( 175.1 )

Share repurchases (Note 13) — — ( 9,341,585 ) — — — ( 342.1 ) — — — ( 342.1 ) — ( 342.1 )

Preferred stock conversions (Note 13) ( 194 ) ( 6.4 ) 194,200 — — — — 6.4 — — — — —

Common stock issuance (Note 13) — — 64,000 — — — — 2.0 — — 2.0 — 2.0

Exchangeable shares conversions (Note 13) — — 28,401 — ( 28,401 ) — — — — — — — —

3 unchanged sentences

Other — — — — — — — ( 4.0 ) — — ( 4.0 ) — ( 4.0 )

Balance as of March 31, 2022 581 $ 19.4 166,161,818 $ 1.7 633,189 $ — $ ( 203.5 ) $ 4,170.4 $ ( 15.9 ) $ ( 18.6 ) $ 3,953.5 $ ( 0.8 ) $ 3,952.7

Balance as of June 30, 2022 581 $ 19.4 160,725,723 $ 1.7 624,658 $ — $ ( 370.5 ) $ 4,187.3 $ 10.2 $ ( 81.3 ) $ 3,766.8 $ ( 0.8 ) $ 3,766.0

Balance as of January 1, 2021 883 $ 23.1 155,700,834 $ 1.6 — $ — $ ( 28.4 ) $ 3,167.2 $ ( 507.3 ) $ — $ 2,656.2 $ ( 0.4 ) $ 2,655.8

1 unchanged sentence

Share issuance (Note 13) 43 5.1 43,684 — — — — 3.5 — — 8.6 — 8.6

Conversion of Preferred Stock (Note 13) ( 151 ) ( 4.0 ) 151,200 — — — — 4.0 — — — — —

Preferred stock conversion (Note 13) ( 151 ) ( 4.0 ) 151,200 — — — — 4.0 — — — — —

Net income (loss) — — — — — — — — 289.7 — 289.7 ( 0.1 ) 289.6

Balance as of March 31, 2021 775 $ 24.2 156,330,141 $ 1.6 — $ — $ ( 28.4 ) $ 3,175.2 $ ( 416.3 ) $ — $ 2,756.3 $ ( 0.5 ) $ 2,755.8

Other — — — — — — — ( 9.6 ) — — ( 9.6 ) — ( 9.6 )

Balance as of June 30, 2021 775 $ 24.2 156,786,873 $ 1.6 — $ — $ ( 28.4 ) $ 3,178.5 $ ( 217.6 ) $ — $ 2,958.3 $ ( 0.5 ) $ 2,957.8

See accompanying notes to the unaudited Consolidated Financial Statements.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31,

For the six months ended June 30,

(in millions) 2022 2021

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Noncash operating lease expense 47.2 75.5

Holding (gain) loss on equity securities 38.7 ( 26.2 )

Holding loss (gain) on equity securities 55.6 ( 18.8 )

Loss (gain) on sale or disposal of property and equipment 7.2 ( 0.2 )

Gain on Hurricane Laura ( 8.8 ) —

3 unchanged sentences

Stock-based compensation 31.5 13.4

Loss on early extinguishment of debt 10.4 —

Changes in operating assets and liabilities, net of businesses acquired

7 unchanged sentences

Other current and long-term liabilities ( 36.6 ) 7.5

Other 0.3 4.4

Net cash provided by operating activities 436.4 504.6

3 unchanged sentences

Hurricane Laura insurance proceeds 24.2 —

Consideration paid for acquisitions of businesses, net of cash acquired — ( 6.2 )

Consideration paid for a cost method investment ( 15.0 ) —

Consideration paid for gaming licenses and other intangible assets ( 1.9 ) ( 18.7 )

Other — ( 10.0 )

Net cash used in investing activities ( 113.7 ) ( 99.1 )

For the six months ended June 30,

(in millions) 2022 2021

Financing activities

Proceeds from issuance of long-term debt, net of discounts 1,545.0 —

Repayments on credit facilities (Note 8) ( 1,543.2 ) —

Principal payments on long-term debt ( 20.5 ) ( 32.2 )

Debt issuance costs ( 18.2 ) —

Proceeds from other long-term obligations — 72.5

10 unchanged sentences

Change in cash, cash equivalents, and restricted cash ( 155.2 ) 424.3

For the three months ended March 31,

(in millions) 2022 2021

Cash, cash equivalents and restricted cash at the beginning of the year 1,880.1 1,870.4

7 unchanged sentences

Cash paid for interest, net of amounts capitalized $ 338.5 $ 275.2

Cash payments (refunds) related to income taxes, net $ 1.0 $ ( 8.8 )

Cash payments related to income taxes, net $ 45.5 $ 27.7

Non-cash activities:

3 unchanged sentences

See accompanying notes to the unaudited Consolidated Financial Statements.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

2 unchanged sentences

Organization:

Penn National Gaming, Inc., together with its subsidiaries (“Penn,” the “Company,” “we,” “our,” or “us”), is North America’s leading provider of integrated entertainment, sports content, and casino gaming experiences.

On August 4, 2022, Penn National Gaming, Inc.

was renamed PENN Entertainment, Inc.

PENN Entertainment, Inc., together with its subsidiaries (“PENN,” the “Company,” “we,” “our,” or “us”), is North America’s leading provider of integrated entertainment, sports content, and casino gaming experiences.

A member of the S&P 500 ® , PENN operates 44 properties in 20 states, online sports betting in 13 jurisdictions and iCasino in five , under a portfolio of well-recognized brands including Hollywood Casino ® , L’Auberge ® , Barstool Sportsbook ® , and theScore Bet ® .

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Principles of Consolidation:

The unaudited Consolidated Financial Statements include the accounts of Penn National Gaming, Inc.

The unaudited Consolidated Financial Statements include the accounts of PENN Entertainment, Inc.

and its subsidiaries.

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We consider our combined Video Gaming Terminal (“VGT”) operations, by state, to be separate operating segments.

Interactive includes the operating results of Penn Interactive Ventures, LLC (“Penn Interactive”), Score Media and Gaming, Inc.

(“theScore”), and our proportionate share of earnings attributable to our equity method investment in Barstool Sports, Inc.

Interactive includes all of our iCasino and online sports betting operations, management of retail sports betting, media, and our proportionate share of earnings attributable to our equity method investment in Barstool Sports, Inc.

(“Barstool Sports”).

4 unchanged sentences

Ameristar East Chicago East Chicago, Indiana Pinnacle Master Lease

Greektown Casino-Hotel Detroit, Michigan Greektown Lease

Hollywood Casino at Greektown Detroit, Michigan Greektown Lease

Hollywood Casino Bangor Bangor, Maine PENN Master Lease

55 unchanged sentences

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

For the three months ended March 31,

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

(in millions) 2022 2021 2022 2021

8 unchanged sentences

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

The obligation associated with our my choice program, which is included in “Accrued expenses and other current liabilities” within our unaudited Consolidated Balance Sheets, was $ 45.5 million and $ 37.6 million as of March 31, 2022 and December 31, 2021, respectively, and consisted principally of the obligation associated with the loyalty points.

The obligation associated with our my choice program, which is included in “Accrued expenses and other current liabilities” within our unaudited Consolidated Balance Sheets, was $ 43.4 million and $ 37.6 million as of June 30, 2022 and December 31, 2021, respectively, and consisted principally of the obligation associated with the loyalty points.

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

3 unchanged sentences

Unpaid wagers primarily relate to the Company’s obligation to settle outstanding slot tickets, pari-mutuel racing tickets, gaming chips with customers and online wagers not yet withdrawn 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 $ 101.6 million and $ 112.0 million as of March 31, 2022 and December 31, 2021.

The Company’s advance payments on goods and services yet to be provided and for unpaid wagers were $ 93.2 million and $ 112.0 million as of June 30, 2022 and December 31, 2021, respectively.

Advance payments on goods and services yet to be provided and for unpaid wagers are included in “Accrued expenses and other current liabilities” within our unaudited Consolidated Balance Sheets.

Penn Interactive enters into multi-year agreements with sports betting operators for online sports betting and related iCasino market access across our portfolio of properties.

Deferred revenue associated with third-party sports betting operators for online sports betting and related iCasino market access, which is included in “Other long-term liabilities” within our unaudited Consolidated Balance Sheets was $ 58.2 million and $ 52.2 million as of March 31, 2022 and December 31, 2021, respectively.

PENN Interactive Ventures, LLC (“PENN Interactive”) enters into multi-year agreements with sports betting operators for online sports betting and related iCasino market access across our portfolio of properties.

Deferred revenue associated with third-party sports betting operators for online sports betting and related iCasino market access, which is included in “Other long-term liabilities” within our unaudited Consolidated Balance Sheets was $ 55.4 million and $ 52.2 million as of June 30, 2022 and December 31, 2021, respectively.

The Company expenses advertising costs the first time the advertising takes place or as incurred.

Advertising expenses, which generally relate to media placement costs and are primarily included in “Gaming” expenses within the unaudited Consolidated Statements of Operations, were $ 24.1 million, and $ 17.1 million, for the three months ended March 31, 2022 and 2021, respectively .

Advertising expenses, which generally relate to media placement costs and are primarily included in “Gaming” expenses within the unaudited Consolidated Statements of Operations, were $ 18.5 million, and $ 42.6 million for the three and six months ended June 30, 2022, respectively, as compared to $ 15.3 million and $ 32.4 million for the three and six months ended June 30, 2021, respectively.

Gaming and Racing Taxes:

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We consider these prepaid costs to be a type of gaming and racing tax.

Gaming and racing taxes are recorded in “Gaming” expense or “Food, beverage, hotel, and other” expenses within the unaudited Consolidated Statements of Operations, and were $ 472.2 million and $ 417.9 million for the three months ended March 31, 2022 and 2021, respectively.

Gaming and racing taxes are recorded in “Gaming” expense or “Food, beverage, hotel, and other” expenses within the unaudited Consolidated Statements of Operations, and were $ 486.8 million and $ 959.0 million for the three and six months ended June 30, 2022, respectively, as compared to $ 515.9 million and $ 933.8 million for the three and six months ended June 30, 2021, respectively.

Foreign Currency Translation:

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Gains or losses resulting from foreign currency transactions are included in “Other” within our unaudited Consolidated Statements of Operations.

Comprehensive Income and Accumulated Other Comprehensive Income (Loss):

Comprehensive income includes net income and all other non-stockholder changes in equity, or other comprehensive income.

The balance of accumulated other comprehensive income consists solely of foreign currency translation adjustments.

Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss:

Comprehensive income (loss) includes net income and all other non-stockholder changes in equity, or other comprehensive income (loss).

The balance of accumulated other comprehensive loss consists solely of foreign currency translation adjustments.

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.

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

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

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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 14, “Earnings (Loss) per Share,” for more information.

See Note 14, “Earnings per Share,” for more information.

Voting Interest Entities and Variable Interest Entities:

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ASU 2020-04 provides an optional expedient and exceptions for applying GAAP 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 8, “Long - term Debt” ) are tied to LIBOR.

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.

The interest rates associated with the Company’s previous borrowings under its Senior Secured Credit Facilities (as defined in Note 8, “Long-term Debt” ) were tied to LIBOR.

Subsequent to the amendment of the Senior Secured Credit Facilities on May 3, 2022, the Company’s borrowings are tied to SOFR (see Note 8, “Long-term Debt” ).

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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.

The Company maintains insurance, subject to certain deductibles and coinsurance, that covers business interruption, including lost profits, and covers the repair or replacement of assets that suffered losses.

The Company recorded a receivable relating to our estimate of repairs and maintenance costs which have been incurred and property and equipment which have been written off, and for which we deem the recovery of such costs and property and equipment from our insurers to be probable.

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As of December 31, 2021, the receivable was $ 28.7 million.

During three months ended March 31, 2022, we received additional insurance claim proceeds totaling $ 37.5 million, resulting in a gain of $ 8.8 million, which is included in “General and administrative” within our unaudited Consolidated Statements of Operations.

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 March 31, 2022.

During the six months ended June 30, 2022, we received additional insurance claim proceeds totaling $ 37.5 million, resulting in a gain of $ 8.8 million, which is included in “General and administrative” within our unaudited Consolidated Statements of Operations.

We did not receive insurance proceeds during the three months ended June 30, 2022.

As of August 4, 2022, the insurance claim remains open and we expect to receive additional future proceeds.

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

(in millions) March 31, 2022 December 31, 2021

(in millions) June 30, 2022 December 31, 2021

Insurance proceeds received through the end of the period $ 85.0 $ 47.5

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Our revenue is disaggregated by type of revenue and geographic location of the related properties, which is consistent with our reportable segments, as follows:

For the three months ended March 31, 2022

For the three months ended June 30, 2022

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

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Total revenues $ 684.9 $ 338.6 $ 153.8 $ 296.3 $ 154.9 $ 5.9 $ ( 7.5 ) $ 1,626.9

For the three months ended March 31, 2021

For the three months ended June 30, 2021

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

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Total revenues $ 652.5 $ 368.2 $ 140.4 $ 294.8 $ 96.0 $ 1.7 $ ( 7.8 ) $ 1,545.8

For the six months ended June 30, 2022

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

Gaming $ 1,220.5 $ 547.6 $ 193.0 $ 523.5 $ 132.2 $ — $ — $ 2,616.8

Food and beverage 63.4 64.0 40.9 25.7 — 2.5 — 196.5

Hotel 18.4 48.0 48.7 16.7 — — — 131.8

Other 41.1 20.4 12.1 13.3 164.2 10.7 ( 15.8 ) 246.0

Total revenues $ 1,343.4 $ 680.0 $ 294.7 $ 579.2 $ 296.4 $ 13.2 $ ( 15.8 ) $ 3,191.1

For the six months ended June 30, 2021

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

Gaming $ 1,129.5 $ 549.8 $ 165.8 $ 489.0 $ 53.4 $ — $ — $ 2,387.5

Food and beverage 45.0 52.5 30.1 16.7 — 0.3 — 144.6

Hotel 12.5 43.7 32.4 12.9 — — — 101.5

Other 36.4 18.1 8.7 10.9 128.9 3.0 ( 18.9 ) 187.1

Total revenues $ 1,223.4 $ 664.1 $ 237.0 $ 529.5 $ 182.3 $ 3.3 $ ( 18.9 ) $ 2,820.7

(1) Primarily represents the elimination of intersegment revenues associated with our internally-branded retail sportsbooks, which are operated by PENN Interactive.

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On April 16, 2020, we sold the real estate assets associated with the operations of Tropicana Las Vegas Hotel and Casino, Inc.

(“Tropicana”) to GLPI in exchange for rent credits of $ 307.5 million, and utilized the rent credits to pay rent under our existing Master Leases and the Meadows Lease, (as defined and discussed in Note 9, “Leases” ), beginning in May 2020.

Contemporaneous with the sale, the Company entered into the Tropicana Lease, (as defined and discussed in Note 9, “Leases” ).

Pursuant to the purchase agreement, GLPI would 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.

(“Tropicana”) to GLPI in exchange for rent credits of $ 307.5 million, and utilized the rent credits to pay rent under our existing Master Leases and the Meadows Racetrack and Casino Lease, beginning in May 2020.

On January 11, 2022, PENN entered into a definitive purchase agreement to sell its outstanding equity interest in Tropicana, which has the gaming license and operates the Tropicana, to Bally’s Corporation (“Bally’s”).

This transaction is expected to close within the second half of 2022, subject to PENN, GLPI, and Bally’s entering into definitive agreements and obtaining regulatory approval.

HitPoint Inc.

and LuckyPoint Inc.

On May 11, 2021, we acquired 100 % of the outstanding equity of HitPoint Inc.

and Lucky Point Inc.

(collectively, “Hitpoint”).

The purchase price totaled $ 12.7 million, consisting of $ 6.2 million in cash, $ 3.5 million of the Company’s common equity, and a $ 3.0 million contingent liability.

The contingent liability is payable in annual installments over three years , through a combination of cash and the Company’s common equity, and is based on achievement of certain performance factors.

The purchase price allocation resulted in a recognition of $ 8.8 million of goodwill, $ 4.0 million in developed technology which is included in “Other intangible assets, net” within the Consolidated Balance Sheets, along with other miscellaneous operating assets and liabilities.

The developed technology is an amortizing intangible asset with an assigned useful life of five years , and was valued using the multi-period excess earnings method, a variation of the income approach, which is supported by observable market data for peer companies.

Hollywood Casino Perryville

On July 1, 2021, we completed the acquisition of the operations of Hollywood Casino Perryville (“Perryville”), from GLPI for a purchase price of $ 39.4 million, including working capital adjustments.

The preliminary purchase price allocation resulted in the recognition of a $ 12.7 million gaming license asset and a $ 1.0 million customer relationship asset, both of which are included in “Other intangible assets, net” within our Consolidated Balance Sheets, $ 9.2 million of goodwill, $ 8.2 million of tangible long-term assets, comprised primarily of property and equipment, and $ 8.3 million of various operating assets and liabilities.

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

The gaming license is an indefinite-lived intangible asset, and the customer relationships are an amortizing intangible asset with a useful life of two years .

The Company valued (i) the gaming license using the Greenfield Method, a form of the income approach;

(ii) the customer relationships using the “with and without” method, a form of the income approach, and (iii) the property and equipment and other various operating assets and liabilities primarily utilizing the cost approach.

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

Sam Houston Race Park and Valley Race Park

On August 1, 2021, we completed the acquisition of the remaining 50 % ownership interest in the Sam Houston Race Park in Houston, Texas, the Valley Race Park in Harlingen, Texas, and a license to operate a racetrack in Austin, Texas (collectively, “Sam Houston”), from PM Texas Holdings, LLC for a purchase price of $ 57.8 million, comprised of $ 42.0 million in cash and $ 15.8 million of the Company’s common equity, which was preliminarily allocated to property and equipment.

In conjunction with the acquisition, we recorded a gain of $ 29.9 million on our equity method investment, which was included in “Other” within our Consolidated Statements of Operations.

The property and equipment assets were valued using a combination of the market and cost approaches.

Score Media and Gaming Inc.

On October 19, 2021, we acquired 100 % of theScore for a purchase price of approximately $ 2.1 billion.

On October 19, 2021, we acquired 100 % of Score Media and Gaming, Inc.

(“theScore”) for a purchase price of approximately $ 2.1 billion.

The acquisition provides us with the technology, resources and audience reach to accelerate our media and sports betting strategy across North America.

Under the terms of the agreement, 1317774 B.C.

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In addition, Purchaser may redeem all outstanding Exchangeable Shares in exchange for shares of PENN Common Stock at any time following the fifth anniversary of the closing, or earlier under certain circumstances.

The acquisition provides us with the technology, resources and audience reach to accelerate our media and sports betting strategy across North America.

The Company held shares of theScore common stock prior to the acquisition and, as such, the acquisition date estimated fair value of this previously held investment was a component of the purchase consideration.

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Unaudited Pro Forma Financial Information

The following table includes unaudited pro forma consolidated financial information assuming our acquisition of Hitpoint, Perryville, Sam Houston and theScore had occurred as of January 1, 2021.

The pro forma amounts include the historical operating results of Penn and Hitpoint, Perryville, Sam Houston and theScore prior to our acquisitions.

The following table includes unaudited pro forma consolidated financial information assuming our acquisition of Hitpoint Inc.

and Lucky Point Inc.

(collectively “Hitpoint”), Hollywood Casino Perryville (“Perryville”), Sam Houston Race Park and Valley Race Park (collectively “Sam Houston”), and theScore had occurred as of January 1, 2021.

We acquired Hitpoint on May 11, 2021, Perryville on July 1, 2021, and Sam Houston on August 1, 2021.

The pro forma amounts include the historical

operating results of PENN and Hitpoint, Perryville, Sam Houston and theScore prior to our acquisitions.

The pro forma financial information does not necessarily represent the results that may occur in the future.

For the three months ended March 31, 2021, pro forma adjustments directly attributable to the acquisitions include acquisition and transaction related costs of $ 1.6 million incurred by both Penn and the respective acquirees’ and gains of $ 43.4 million related to our purchase of the remaining 50 % of Sam Houston and a net unrealized gain on the equity security investment in theScore.

For the three months ended March 31,

For the three and six months ended June 30, 2021, pro forma adjustments directly attributable to the acquisitions include acquisition and transaction related costs of $ 2.1 million and $ 3.7 million, respectively, incurred by both PENN and the respective acquirees.

For the three and six months ended June 30, 2021, pro forma adjustments directly attributable to the acquisitions also include a loss of $ 8.5 million and gains of $ 34.9 million, respectively, related to our purchase of the remaining 50 % of Sam Houston and a net unrealized gain on the equity security investment in theScore.

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

(in millions) 2021

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Effect of foreign currency exchange rates — — — — ( 22.9 ) — ( 22.9 )

Balance as of March 31, 2022

Balance as of June 30, 2022

Goodwill, gross $ 923.5 $ 236.6 $ 216.8 $ 1,116.7 $ 1,701.1 $ 87.7 $ 4,282.4

1 unchanged sentence

Goodwill, net $ 162.1 $ 175.6 $ 200.2 $ 560.6 $ 1,701.1 $ — $ 2,799.6

There were no impairment charges recorded to goodwill during the three months ended March 31, 2022 and 2021.

There were no impairment charges recorded to goodwill during the three and six months ended June 30, 2022 and 2021.

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

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

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Total other intangible assets $ 2,008.8 $ ( 166.7 ) $ 1,842.1 $ 2,011.3 $ ( 138.7 ) $ 1,872.6

There were no impairment charges recorded to other intangible assets, net for the three months ended March 31, 2022 and 2021.

Amortization expense related to our amortizing intangible assets was $ 15.0 million and $ 2.2 million for the three months ended March 31, 2022 and 2021, respectively.

The following table presents the estimated amortization expense based on our amortizing intangible assets as of March 31, 2022 (in millions):

There were no impairment charges recorded to other intangible assets, net for the three and six months ended June 30, 2022 and 2021.

Amortization expense related to our amortizing intangible assets was $ 14.9 million and $ 29.9 million for the three and six months ended June 30, 2022, respectively, as compared to $ 2.5 million and $ 4.7 million for the three and six months ended June 30, 2021, respectively.

The following table presents the estimated amortization expense based on our amortizing intangible assets as of June 30, 2022 (in millions):

Years ending December 31,

2022 (excluding the three months ended March 31, 2022)

2022 (excluding the six months ended June 30, 2022)

Thereafter 41.7

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The table below presents long-term debt, net of current maturities, debt discounts and issuance costs:

(in millions) March 31,

(in millions) June 30,

2022 December 31,

Senior Secured Credit Facilities:

Revolving Credit Facility due 2023 $ — $ —

Amended Revolving Credit Facility due 2027 $ — $ —

Amended Term Loan A Facility due 2027 550.0 —

Amended Term Loan B Facility due 2029 1,000.0 —

Term Loan A Facility due 2023 — 583.8

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$ 2,730.4 $ 2,637.3

The following is a schedule of future minimum repayments of long-term debt as of June 30, 2022 (in millions):

Years ending December 31:

2022 (excluding the six months ended June 30, 2022)

Thereafter 2,189.2

Total minimum payments $ 2,830.6

Senior Secured Credit Facilities

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Upon conclusion of the Covenant Relief Period, loans under the Senior Secured Credit Facilities called for interest at either a base rate or an adjusted LIBOR rate, plus an applicable margin.

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

The Term Loan B-1 Facility continues to bear interest at 2.25 % per annum for LIBOR loans and 1.25 % per annum for base rate loans.

All loans under the Senior Secured Credit Facilities are subject to a LIBOR “floor” of 0.75 %.

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

The applicable margins for the Revolving Facility and Term Loan A Facility ranged from 1.25 % to 3.00 % per annum for LIBOR loans and 0.25 % to 2.00 % per annum for base rate loans, in each case depending on the Consolidated Total Net Leverage Ratio as of the most recent fiscal quarter.

The Term Loan B-1 Facility bore interest at 2.25 % per annum for LIBOR loans and 1.25 % per annum for base rate loans.

All loans under the Senior Secured Credit Facilities were subject to a LIBOR “floor” of 0.75 %.

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

On May 3, 2022, the Company entered into a Second Amended and Restated Credit Agreement with its various lenders (the “Second Amended and Restated Credit Agreement”).

The Second Amended and Restated Credit Agreement provides for a $ 1.0 billion revolving credit facility, undrawn at close, (the “Revolving Credit Facility”), a five-year $ 550.0 million term loan A facility (the “Term Loan A”) and a seven-year $ 1.0 billion term loan B facility (the “Term Loan B”) (together, the “Credit Facilities”).

The proceeds from the Credit Facilities were used to repay the existing Term Loan A Facility and Term Loan B-1 Facility balances.

The interest rates per annum applicable to loans under the Credit Facilities are, at the Company’s option, equal to either a secured overnight financing rate plus a 0.10 % credit spread adjustment (“Term SOFR”) or a base rate, in each case, plus an applicable margin.

The applicable margin for each of the Revolving Credit Facility and the Term Loan A is initially 1.75 % for Term SOFR loans and 0.75 % for base rate loans until the Company provides financial reports for the first full fiscal quarter following closing and, thereafter, will range from 2.25 % to 1.50 % per annum for Term SOFR loans and 1.25 % to 0.50 % per annum for base rate loans, in each case depending on the Company’s total net leverage ratio.

The applicable margin for the Term Loan B is 2.75 % per annum for Term SOFR loans and 1.75 % per annum for base rate loans.

The Term Loan B is subject to a Term SOFR “floor” of 0.50 % per annum and a base rate “floor” of 1.50 % per annum.

The Term Loan A and Revolving Credit Facility are subject to a Term SOFR “floor” of 0.00 % per annum and a base rate “floor” of 1.00 %.

In addition, the Company will pay a commitment fee on the unused portion of the commitments under the Revolving Credit Facility at a rate that is initially 0.25 % per annum, until the Company provides financial reports for the first full fiscal quarter following closing, and thereafter, will range from 0.35 % to 0.20 % per annum, depending on the Company’s total net leverage ratio.

The Credit Facilities contain customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and certain of its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, pay dividends and make other restricted payments and prepay certain indebtedness that is subordinated in right of payment to the obligations under the Credit Facilities.

The Credit Facilities contain two financial covenants:

a maximum total net leverage ratio of 4.50 to 1.00, which is subject to a step up to 5.00 to 1.00 in the case of certain significant acquisitions, and a minimum interest coverage ratio of 2.00 to 1.00.

The Credit Facilities also contain certain customary affirmative covenants and events of default, including the occurrence of a change of control (as defined in the documents governing the Credit Facilities), termination and certain defaults under the Penn Master Lease and the Pinnacle Master Lease (both of which are defined in Note 9, “Leases” ).

As of March 31, 2022, and December 31, 2021, the Company had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating to $ 25.7 million and $ 26.0 million, respectively, resulting in $ 674.3 million and $ 674.0 million of available borrowing capacity under the Revolving Facility, respectively.

5.625 % Senior Unsecured Notes

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

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

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

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.

4.125 % Senior Unsecured Notes

On July 1, 2021, the Company completed an offering of $ 400.0 million aggregate principal amount of 4.125 % senior unsecured notes that mature on July 1, 2029 (the “ 4.125 % Notes”).

The 4.125 % Notes were issued at par and interest is payable semi-annually on January 1st and July 1st of each year.

The 4.125 % 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 4.125 % Notes at any time on or after July 1, 2024, at the declining redemption premiums set forth in the indenture governing the 4.125 % Notes, and, prior to July 1, 2024, at a “make-whole” redemption premium set forth in the indenture governing the 4.125 % Notes.

The Second Amended and Restated Credit Agreement provides for a $ 1.0 billion revolving credit facility, undrawn at close, (the “Amended Revolving Credit Facility”), a five-year $ 550.0 million term loan A facility (the “Amended Term Loan A Facility”) and a seven-year $ 1.0 billion term loan B facility (the “Amended Term Loan B Facility”) (together, the “Amended Credit Facilities”).

The proceeds from the Amended Credit Facilities were used to repay the existing Term Loan A Facility and Term Loan B-1 Facility balances.

The interest rates per annum applicable to loans under the Amended Credit Facilities are, at the Company’s option, equal to either an adjusted secured overnight financing rate (“Term SOFR”) or a base rate, plus an applicable margin.

The applicable margin for each of the Amended Revolving Credit Facility and the Amended Term Loan A Facility is initially 1.75 % for Term SOFR loans and 0.75 % for base rate loans until the Company provides financial reports for the first full fiscal quarter following closing and, thereafter, will range from 2.25 % to 1.50 % per annum for Term SOFR loans and 1.25 % to 0.50 % per annum for base rate loans, in each case depending on the Company’s total net leverage ratio (as defined within the Second Amended and Restated Credit Agreement).

The applicable margin for the Amended Term Loan B Facility is 2.75 % per annum for Term SOFR loans and 1.75 % per annum for base rate loans.

The Amended Term Loan B Facility is subject to a Term SOFR “floor” of 0.50 % per annum and a base rate “floor” of 1.50 % per annum.

In addition, the Company will pay a commitment fee on the unused portion of the commitments under the Amended Revolving Credit Facility at a rate that is initially 0.25 % per annum, until the Company provides financial reports for the first full fiscal quarter following closing, and thereafter, will range from 0.35 % to 0.20 % per annum, depending on the Company’s total net leverage ratio.

The Amended Credit Facilities contain customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and certain of its subsidiaries to grant liens on their assets, incur indebtedness, sell

assets, make investments, engage in acquisitions, mergers or consolidations, pay dividends and make other restricted payments and prepay certain indebtedness that is subordinated in right of payment to the obligations under the Amended Credit Facilities.

The Amended Credit Facilities contain two financial covenants:

a maximum total net leverage ratio (as defined within the Second Amended and Restated Credit Agreement) of 4.50 to 1.00, which is subject to a step up to 5.00 to 1.00 in the case of certain significant acquisitions, and a minimum interest coverage ratio (as defined within the Second Amended and Restated Credit Agreement) of 2.00 to 1.00.

The Amended Credit Facilities also contain certain customary affirmative covenants and events of default, including the occurrence of a change of control (as defined in the documents governing the Second Amended and Restated Credit Agreement), termination and certain defaults under the PENN Master Lease and the Pinnacle Master Lease (both of which are defined in Note 9, “Leases” ).

In connection with the repayment of the previous Senior Secured Credit Facilities, the Company recorded $ 1.3 million in refinancing costs and a $ 10.4 million loss on the early extinguishment of debt for the three and six months ended June 30, 2022 which is included in “Other” within our unaudited Consolidated Statements of Operations.

In addition, we recorded $ 5.0 million of original issue discount related to the Amended Term Loan B Facility which will be amortized to interest expense over the life of the Amended Term Loan B Facility.

As of June 30, 2022, the Company had conditional obligations under letters of credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $ 25.4 million resulting in $ 974.6 million of available borrowing capacity under the Amended Revolving Credit Facility.

As of December 31, 2021, the Company had conditional obligations under letters of credit issued pursuant to the Senior Security Credit Facilities with face amounts aggregating to $ 26.0 million resulting in $ 674.0 million of available borrowing capacity under the Revolving Facility.

2.75 % Unsecured Convertible Notes

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

As of March 31, 2022, 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 $ 448.4 million.

As of June 30, 2022, 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 $ 228.0 million.

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

3 unchanged sentences

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.

As of March 31, 2022 and December 31, 2021, no Convertible Notes have been converted into the Company’s common stock.

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

As of June 30, 2022 and December 31, 2021, no Convertible Notes have been converted into the Company’s common stock.

The Convertible Notes contain a cash conversion feature, and as a result, the Company 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.

The equity component, 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.

2 unchanged sentences

The Convertible Notes consisted of the following components:

(in millions) March 31,

(in millions) June 30,

2022 December 31,

7 unchanged sentences

The table below presents interest expense, net:

For the three months ended March 31,

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

(in millions) 2022 2021 2022 2021

4 unchanged sentences

The table below presents interest expense related to the Convertible Notes:

For the three months ended March 31,

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

(in millions) 2022 2021 2022 2021

4 unchanged sentences

Subsequent to the adoption of ASU 2020-06, the debt issuance costs attributable to the liability component continue to be amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 3.329 %.

The remaining term of the Convertible Notes was 4.1 years as of March 31, 2022.

Our Senior Secured Credit Facilities, 5.625 % Notes and 4.125 % Notes, require us, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests.

In addition, our Senior Secured Credit Facilities, 5.625 % Notes and 4.125 % 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 (both of which are defined in Note 9, “Leases” ), each with GLPI.

The remaining term of the Convertible Notes was 3.9 years as of June 30, 2022.

Our Amended Credit Facilities, 5.625 % Notes and 4.125 % Notes, require us, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests.

In addition, our Amended Credit Facilities, 5.625 % Notes and 4.125 % 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 (both of which are

defined in Note 9, “Leases” ), 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 terms.

As of March 31, 2022, the Company was in compliance with all required financial covenants.

As of June 30, 2022, the Company was in compliance with all required financial covenants.

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

4 unchanged sentences

Consistent with an obligor’s accounting under a debt instrument, period interest will be accreted using an effective interest rate of 27.0 % and until such time that the claims and related obligation is settled.

The amount included in interest expense related to this obligation was $ 6.2 million and $ 1.5 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

The amount included in interest expense related to this obligation was $ 6.7 million and $ 12.9 million for the three and six months ended June 30, 2022, respectively, as compared to $ 3.7 million and $ 5.2 million for the three and six months ended June 30, 2021, respectively.

Ohio Relocation Fees

Other long-term obligations included $ 44.5 million as of March 31, 2022 and December 31, 2021, respectively, related to the relocation fees for Hollywood Gaming at Dayton Raceway (“Dayton”) and Hollywood Gaming at Mahoning Valley Race Course (“Mahoning Valley”), which opened in August 2014 and September 2014, respectively.

Other long-term obligations included $ 36.1 million and $ 44.5 million as of June 30, 2022 and December 31, 2021, respectively, related to the relocation fees for Hollywood Gaming at Dayton Raceway (“Dayton”) and Hollywood Gaming at Mahoning Valley Race Course (“Mahoning Valley”), which opened in August 2014 and September 2014, respectively.

The relocation fee for each facility is payable as follows:

1 unchanged sentence

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

As of March 31, 2022 and December 31, 2021, other long-term obligations included $ 10.8 million and $ 11.4 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 June 30, 2022 and December 31, 2021, other long-term obligations included $ 10.7 million and $ 11.4 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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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 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.

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 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.

The next annual escalator test date is scheduled to occur effective November 1, 2022.

1 unchanged sentence

On January 14, 2022, the ninth amendment to the PENN Master Lease between the Company and GLPI became effective.

The ninth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a

patron is physically present at a leased property, establishes a “floor” with respect to the Hollywood Casino at Penn National Race Course Net Revenue amount used in the calculation of the annual rent escalator and Penn Percentage Rent, and modifies the rent calculations upon a lease termination event as defined in the amendment.

The ninth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at a leased property, establishes a “floor” with respect to the Hollywood Casino at PENN National Race Course Net Revenue amount used in the calculation of the annual rent escalator and PENN Percentage Rent, and modifies the rent calculations upon a lease termination event as defined in the amendment.

The lease term and the four five-year optional renewal periods, which if exercised would extend the PENN Master Lease through October 31, 2048, were not modified in the ninth amendment.

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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, 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”).

The next annual escalator test date is scheduled to occur effective May 1, 2022.

The next Pinnacle Percentage Rent reset is scheduled to occur on May 1, 2022.

On January 14, 2022, the fifth amendment to the Pinnacle Master Lease between the Company and GLPI became effective.

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The building components of substantially all of the Pinnacle Master Lease properties continue to be classified as financing obligations.

As a result of the annual escalator, effective as of May 1, 2022 for the lease year ended April 30, 2022, the fixed component of rent increased by $ 4.6 million and an additional ROU asset and corresponding lease liability of $ 33.2 million were recognized associated with the finance lease components of the Pinnacle Master Lease.

The next annual escalator test date is scheduled to occur on May 1, 2023.

The May 1, 2022 Pinnacle Percentage Rent reset resulted in an annual rent increase of $ 1.9 million, which will be in effect until the next Pinnacle Percentage Rent reset, scheduled to occur on May 1, 2024.

Upon reset of the Pinnacle Percentage Rent, effective May 1, 2022, we recognized an additional finance lease ROU asset and corresponding lease liability of $ 26.1 million.

Morgantown Lease

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All improvements made on the land, including the constructed building, 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 unaudited Consolidated Balance Sheets.

Lease payments are included in “Interest expense, net” within our unaudited Consolidated Statements of Operations.

Perryville Lease

In conjunction with the acquisition of the operations of Hollywood Casino Perryville on July 1, 2021, the Company entered into a triple net lease with GLPI for the real estate assets associated with the property (“Perryville Lease”) for initial annual rent of $ 7.8 million per year subject to escalation, as discussed in Note 6 “Acquisitions and Dispositions.”

The initial term of the Perryville Lease is 20 years with three subsequent, five-year renewal periods, exercisable at the Company’s option.

The building portion of the annual rent is subject to a fixed annual escalation of 1.50 % in each of the following three years , with subsequent annual escalations of either (i) 1.25 %, if the consumer price index increase is greater than 0.50 %, or (ii) zero , if the consumer price index increase is less than 0.50 %.

We determined the transaction to be a finance lease arrangement and upon execution of the Perryville Lease, recorded a $ 102.9 million ROU asset and a corresponding lease liability.

The interest portion of lease payments is included in “Interest expense, net” and the depreciation of the ROU asset is included in “Depreciation and amortization”, both within our unaudited Consolidated Statements of Operations.

Operating Leases

In addition to any operating lease components contained within the Master Leases, 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 Hollywood Casino at Meadows Racetrack (the “Meadows Lease”), (ii) individual triple net leases with VICI Properties Inc.

VICI) (“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, 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.

In addition to any operating lease components contained within the Master Leases, 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 (the “Tropicana Lease”) and Hollywood Casino at Meadows Racetrack (the “Meadows Lease”), (ii) individual triple net leases with VICI Properties Inc.

VICI) (“VICI”) for the real estate assets used in the operations of Margaritaville Casino Resort (the “Margaritaville Lease”) and Hollywood Casino at Greektown (the “Greektown Lease” and collectively with the Master Leases’ operating lease components, 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.

4 unchanged sentences

This amendment did not result in a modification event under ASC 842.

On February 1, 2022, the Margaritaville annual escalator test resulted in an annual rent increase of $ 0.4 million, and an additional operating lease ROU asset and corresponding lease liability of $ 2.9 million were recognized.

On February 1, 2022, the Margaritaville annual escalator test resulted in an annual rent increase of $ 0.4 million, and the recognition of an additional operating lease ROU asset and corresponding lease liability of $ 2.9 million.

We did not incur an annual escalator for the lease year ended January 31, 2021.

The following is a maturity analysis of our operating leases, finance leases and financing obligations as of March 31, 2022:

The next annual escalator and Margaritaville Percentage Rent reset are scheduled to occur on February 1, 2023.

In May 2020, the Greektown 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).

In April 2022, the lease was further amended to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the fifth lease year (June 1, 2023).

The following is a maturity analysis of our operating leases, finance leases and financing obligations as of June 30, 2022:

(in millions) Operating Leases Finance Leases Financing Obligations

Year ended December 31,

2022 (excluding the three months ended March 31, 2022) $ 102.0 $ 272.8 $ 280.7

2022 (excluding the six months ended June 30, 2022) $ 68.0 $ 193.2 $ 186.3

2023 125.2 375.2 369.8

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Total payments made under the Triple Net Leases were as follows:

For the three months ended March 31,

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

(in millions) 2022 2021 2022 2021

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Location on unaudited

Consolidated Statements of Operations For the three months ended March 31,

Consolidated Statements of Operations For the three months ended June 30, For the six months ended June 30,

(in millions) 2022 2021 2022 2021

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(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) Pertains to the finance lease components contained within the Master Leases, and the Perryville Lease (effective July 1, 2021) which results in interest expense and depreciation expense (as opposed to rent expense).

(3) Pertains to the finance lease components contained within the Master Leases, and the Perryville Lease (effective July 1, 2021) which results in interest expense and amortization expense (as opposed to rent expense).

Prior to the Lease Modification, the finance lease components contained within the Master Leases consisted of the land and building components associated with the operations of Dayton and Mahoning Valley.

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Note 10— Investments in and Advances to Unconsolidated Affiliates

As of March 31, 2022, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 36 % interest in Barstool Sports;

As of June 30, 2022, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 36 % interest in Barstool Sports;

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

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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 (originally subject to a cap of $ 650.0 million and, subject to such cap, a floor of 2.25 times the annualized revenue of Barstool Sports, all subject to various adjustments).

On October 1, 2021, the terms of the February 2020 stock purchase agreement were amended (“Amended and Restated Stockholders’ Agreement”) to (i) set a definitive purchase price of $ 325.0 million on the second 50 % of Barstool Sports common stock, which eliminates the floor of 2.25 times the annual revenue of Barstool Sports and (ii) fix a number of Penn common shares to be delivered to existing February 2020 employee holders of Barstool Sports common stock, to the extent Penn’s stock price exceeds a specified value defined in the amended stock purchase agreement and Penn elects to settle using a combination of cash and equity.

On October 1, 2021, the terms of the February 2020 stock purchase agreement were amended and restated (“Amended and Restated Stockholders’ Agreement”) to (i) set a definitive purchase price of $ 325.0 million on the second 50 % of Barstool Sports common stock, which eliminates the floor of 2.25 times the annual revenue of Barstool Sports and (ii) fix a number of PENN common shares to be delivered to existing February 2020 employee holders of Barstool Sports common stock, to the extent PENN’s stock price exceeds a specified value defined in the Amended and Restated Stockholder’s Agreement and PENN elects to settle using a combination of cash and equity.

Consistent with the February 2020 stock purchase agreement:

(i) the Barstool Sports common stock remains subject to our immediately exercisable call rights and the existing Barstool Sports stockholders put rights beginning in February 2023, (ii) the requirement to increase our ownership in Barstool Sports to approximately 50 % by purchasing approximately $ 62.0 million worth of additional shares in Barstool Sports common stock remains consistent with the implied valuation at the time of the initial investment, which was $ 450.0 million, and (iii), we may settle the call and put options, at our sole election, using either cash or a combination of cash and equity.

On July 7, 2022, we entered into the first amendment to the Amended and Restated Stockholders’ Agreement (“First Amendment”).

The First Amendment updated the share price specified value used to calculate the fixed number of PENN common shares to be delivered to existing February 2020 employee holders of Barstool Sports common stock, to the extent PENN’s stock price exceeds the updated specified value and PENN elects to settle using a combination of cash and equity.

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

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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 four years , beginning February 21, 2021, as stipulated in the stock purchase agreement.

As of March 31, 2022, 51 shares of the Series D Preferred Stock can be converted into Penn Common 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 four years , beginning February 21, 2021, as stipulated in the Amended and Restated Stockholder’s Agreement.

As of June 30, 2022, 51 shares of the Series D Preferred Stock can be converted into PENN Common Stock.

During the first quarter of 2021, the Company acquired 0.3 %, and subsequently acquired an additional 0.3 % during the third quarter of 2021, of Barstool Sports common stock, par value $ 0.0001 per share, which represents a partial settlement of the 1 % purchase on a delayed basis as noted above.

The acquisition of the acquired Barstool Sports common stock was settled through a predetermined number of Series D Preferred Stock as contained within the stock purchase agreement (see Note 13, “Stockholders’ Equity and Stock-Based Compensation,” for further information).

During the three months ended June 30, 2022, the Company acquired an additional 0.3 % of Barstool Sports common stock, par value $ 0.0001 per share, which represents a partial settlement of the 1 % purchase on a delayed basis as noted above.

The acquisition of the acquired Barstool Sports common stock was settled through a predetermined number of PENN Common Stock as contained within the Amended and Restated Stockholder’s Agreement (see Note 13, “Stockholders’ Equity and Stock-Based Compensation,” for further information)

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 March 31, 2022 and December 31, 2021, we have an amortizing intangible asset pertaining to the customer list of $ 0.6 million and $ 0.8 million, respectively.

As of March 31, 2022 and December 31, 2021, we have a prepaid expense pertaining to the advertising in the amount of $ 15.1 million, and $ 15.4 million respectively, of which $ 13.9 million and $ 14.2 million was classified as long-term, respectively.

As of June 30, 2022 and December 31, 2021, we have an amortizing intangible asset pertaining to the customer list of $ 0.4 million and $ 0.8 million, respectively.

As of June 30, 2022 and December 31, 2021, we have a prepaid expense pertaining to the advertising in the amount of $ 14.8 million, and $ 15.4 million respectively, of which $ 13.6 million and $ 14.2 million was classified as long-term, respectively.

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

As of March 31, 2022 and December 31, 2021, our investment in Barstool Sports was $ 164.1 million and $ 162.5 million, respectively.

As of June 30, 2022 and December 31, 2021, our investment in Barstool Sports was $ 159.4 million and $ 162.5 million, respectively.

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 March 31, 2022 and December 31, 2021.

The Company did not consolidate the financial position of Barstool Sports as of March 31, 2022 and December 31, 2021, nor the results of operations for the three months ended March 31, 2022 and 2021, 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 subsequent periods, 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.

The Company determined that Barstool Sports qualified as a VIE as of June 30, 2022 and December 31, 2021.

The Company did not consolidate the financial position of Barstool Sports as of June 30, 2022 and December 31, 2021, nor the results of operations for the three and six months ended June 30, 2022 and 2021, 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 subsequent periods, primarily as a result of the Company not having the power to direct the activities of the VIE that most significantly affect Barstool Sports’ economic performance.

Kansas Joint Venture

As of March 31, 2022 and December 31, 2021, our investment in Kansas Entertainment was $ 83.4 million and $ 83.8 million, respectively.

During the three months ended March 31, 2022 and 2021, the Company received distributions from Kansas Entertainment totaling $ 8.0 million and $ 5.5 million, respectively.

As of June 30, 2022 and December 31, 2021, our investment in Kansas Entertainment was $ 82.4 million and $ 83.8 million, respectively.

During the three and six months ended June 30, 2022, the Company received distributions from Kansas Entertainment totaling $ 9.0 million and $ 17.0 million, respectively, as compared to $ 7.9 million for the three months ended June 30, 2021 and $ 13.4 million for the six months ended June 30, 2021.

The Company deems these distributions to be returns on its investment based on the source of those cash flows from the normal business operations of Kansas Entertainment.

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

Therefore, the Company did not consolidate the financial position of Kansas Entertainment as of March 31, 2022 and December 31, 2021, nor the results of operations for the three months ended March 31, 2022 and 2021.

Therefore, the Company did not consolidate the financial position of Kansas Entertainment as of June 30, 2022 and December 31, 2021, nor the results of operations for the three and six months ended June 30, 2022 and 2021.

Texas Joint Venture

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On August 1, 2021, we completed the acquisition of the remaining 50 % ownership interest in Sam Houston.

See Note 6, “Acquisitions and Dispositions” for further information.

Note 11— Income Taxes

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The tax effects of discrete items, including but not limited to, excess tax benefits associated with stock-based compensation, are reported in the interim period in which they occur.

The effective tax rate (income taxes as a percentage of income or loss before income taxes) including discrete items was 48.0 % for the three months ended March 31, 2022, as compared to 18.5 % for the three months ended March 31, 2021.

The effective tax rate (income taxes as a percentage of income or loss before income taxes) including discrete items was 68.3 % and 57.2 % for the three and six months ended June 30, 2022, as compared to 21.1 % and 20.3 % for the three and six months ended June 30, 2021.

We excluded certain foreign losses from our worldwide effective tax rate calculation due to a year-to-date ordinary loss for which no benefit may be recognized.

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

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

As of each reporting date, the Company considers all available positive and negative evidence that could affect its view of the future realization of deferred tax assets pursuant to ASC Topic 740, “Income Taxes.” As of March 31, 2022, we intend to continue maintaining a valuation allowance on our deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.

As of each reporting date, the Company considers all available positive and negative evidence that could affect its view of the future realization of deferred tax assets pursuant to ASC Topic 740, “Income Taxes.” As of June 30, 2022, we intend to continue maintaining a valuation allowance on our deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.

A reduction in the valuation allowance would result in a significant decrease to income tax expense in the period the release is recorded.

Although the exact timing and valuation reversal amount are unknown at this time, the Company believes there is a possibility that a significant portion of the valuation allowance may be released within the year, which is contingent upon the earnings level we achieve in 2022 as well as our projected income levels in future periods.

During the three months ended March 31, 2022, the Company increased the valuation allowance in the amount of $ 35.7 million related primarily to accounting modifications to certain master leases (see Note 9, “Leases” ) and the adoption of ASU 2020-06 (see Note 3, “New Accounting Pronouncements” ) that had the effect on certain federal and state deferred tax assets that are not more likely than not to be realized.

A portion of the $ 35.7 million valuation allowance increase was recorded through equity in the amount of $ 18.6 million related to the Company’s adoption of ASU 2020-06.

As of March 31, 2022 and December 31, 2021, prepaid income taxes of $ 19.6 million and $ 42.5 million, respectively, were included in “Prepaid expenses” within our unaudited Consolidated Balance Sheets.

During the three months ended June 30, 2022, the Company increased the valuation allowance in the amount of $ 27.2 million related primarily to accounting modifications to certain master leases (see Note 9, “Leases” ).

As of June 30, 2022 and December 31, 2021, prepaid income taxes of $ 27.1 million and $ 42.5 million, respectively, were included in “Prepaid expenses” within our unaudited Consolidated Balance Sheets.

The reduction in prepaid income taxes is primarily related to an Internal Revenue Service refund of $ 28.2 million related to the Company’s carryback claim under the CARES Act for the year ended December 31, 2020.

On July 8, 2022, the Pennsylvania House Bill 1342 was signed into law that reduces the corporate income tax rate over the next nine years from the current rate of 9.99% to 4.99% by 2031.

The Company is evaluating this law change and the impact it will have on our consolidated financial statements.

The tax law change is accounted for in the period of enactment and therefore, we will recognize the impact during the quarter ended September 30, 2022.

Note 12— Commitments and Contingencies

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Note 13— Stockholders’ Equity and Stock-Based Compensation

Common and Preferred Stock

On May 11, 2021, as part of the acquisition of Hitpoint, the Company issued 43,684 shares for a total of $ 3.5 million.

See Note 6, “Acquisitions and Dispositions.”

On July 8, 2022, the Company issued 4,055 shares, in connection with the achievement of the first of three annual mutual goals established by the Company and Hitpoint.

On June 17, 2021, the Company filed its Second Amended and Restated Articles of Incorporation with the Department of State of the Commonwealth of Pennsylvania.

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On August 1, 2021, as part of the acquisition of Sam Houston, the Company issued 198,103 shares for a total of $ 15.8 million.

See Note 6, “Acquisitions and Dispositions.”

On October 19, 2021, as part of the acquisition of theScore, the Company issued 12,319,340 shares of common stock and authorized and issued 697,539 Exchangeable Shares for approximately $ 1.0 billion, each with a par value of $ 0.01 , as discussed in Note 6, “Acquisitions and Dispositions.” As of March 31, 2022 and December 31, 2021, there were 633,189 and 653,059 Exchangeable Shares outstanding, respectively.

On October 19, 2021, as part of the acquisition of theScore, the Company issued 12,319,340 shares of common stock and authorized and issued 697,539 Exchangeable Shares for approximately $ 1.0 billion, each with a par value of $ 0.01 , as discussed in Note 6, “Acquisitions and Dispositions.” As of June 30, 2022 and December 31, 2021, there were 624,658 and 653,059 Exchangeable Shares outstanding, respectively.

On each of February 22, 2021 and August 23, 2021, the Company issued 43 shares of Series D Preferred Stock in conjunction with acquiring additional shares of Barstool Sports common stock.

On June 1, 2022, the Company issued 64,000 shares of common stock in conjunction with acquiring additional shares of Barstool Sports common stock from certain individual stockholders affiliated with Barstool Sports.

The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

The acquisition of the incremental Barstool Sports common stock represents a partial settlement of the 1 % purchase on a delayed basis as described in Note 10, “Investments in and Advances to Unconsolidated Affiliates.”

On February 22, 2021 and August 23, 2021, 151 shares of Series D Preferred Stock and 43 shares of Series D Preferred Stock, respectively, were converted to common stock.

As a result of the conversion, the Company issued 151,200 shares of common stock and 43,000 shares of common stock, respectively, each with a par value of $ 0.01 .

On February 23, 2022 and February 24, 2022, 43 shares of Series D Preferred Stock and 151 shares of Series D Preferred Stock, respectively, were converted to common stock.

As a result of the conversion, the Company issued 43,000 shares of common stock and 151,200 shares of common stock, respectively, each with a par value of $ 0.01 .

The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

As of June 30, 2022 and December 31, 2021, there were 5,000 shares authorized of Series D Preferred Stock, of which 581 shares and 775 shares were outstanding, respectively.

Share Repurchase Authorization

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There is no minimum number of shares that the Company is required to repurchase and the repurchase authorization may be suspended or discontinued at any time without prior notice.

During the three months ended March 31, 2022, the Company repurchased 3,802,408 shares of its common stock in open market transactions for $ 175.1 million at an average price of $ 46.04 per share.

During the three months ended June 30, 2022, the Company repurchased 5,539,177 shares of its common stock in open market transactions for $ 167.0 million at an average price of $ 30.16 per share.

During the six months ended June 30, 2022, the Company repurchased 9,341,585 shares of its common stock in open market transactions for $ 342.1 million at an average price of $ 36.62 per share.

The cost of all repurchased shares is recorded as “Treasury stock” within our unaudited Consolidated Balance Sheets.

The remaining availability under our $ 750.0 million share repurchase authorization was $ 574.9 million as of May 5, 2022.

Preferred Stock

During the year ended December 31, 2021, the Company issued 86 shares of Series D Preferred Stock in conjunction with acquiring an additional 0.6 % of Barstool Sports common stock.

As of March 31, 2022, Series D Preferred Stock holders converted a total of 388 shares of Series D Preferred Stock to 388,400 shares of Penn Common Stock, of which, 194 and 151 Series D Preferred Stock were converted into 194,200 and 151,200 shares of common stock during the three months ended March 31, 2022 and 2021, respectively.

All common shares were issued with a par value of $ 0.01 .

As of March 31, 2022 and December 31, 2021, there were 5,000 shares authorized of Series D Preferred Stock, of which 581 shares and 775 shares were outstanding in each period, respectively.

Subsequent to the quarter ended June 30, 2022, the Company repurchased 3,019,790 million shares of its common stock at an average price of $ 31.46 per share for an aggregate amount of $ 95.0 million.

The remaining availability under our $ 750.0 million share repurchase authorization was $ 313.1 million as of August 3, 2022.

2022 Long Term Incentive Compensation Plan

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

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

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

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

On June 7, 2022, the Company’s shareholders, upon the recommendation of the Company’s Board of Directors, approved the Company’s 2022 Long Term Incentive Compensation Plan (the “2022 Plan”).

The 2022 Plan permits the Company to issue stock options (incentive and/or non-qualified), SARs, RSAs, RSUs, performance and other equity and cash awards to executive directors and other employees of the Company and its subsidiaries.

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

Pursuant to the 2022 Plan, 6,870,000 shares of the Company’s common stock are reserved for issuance, plus any shares of common stock subject to outstanding awards under the 2018 Plan or theScore Plan (both as defined below) as of June 7, 2022 that are forfeited or settled for cash.

For purposes of determining the number of shares available for issuance under the 2022 Plan, stock options, restricted stock and SARs (except cash-settled SARs) count against the 6,870,000 limit as one share of common stock for each share granted.

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

As of March 31, 2022, there were 2,969,937 shares available for future grants under the 2018 Plan.

On April 12, 2021, the Board of Directors granted 600,000 RSUs and 300,000 RSAs with market-based and service-based vesting conditions (collectively the “Stock Awards”), solely to the Company’s President and Chief Executive Officer pursuant to the 2018 Plan.

The Stock Awards are classified as equity with separate tranches and requisite service periods identified for each separately achievable component.

As of the grant date, the fair value of the Stock Awards was $ 48.7 million and was calculated using a Monte Carlo simulation.

The fair value of the RSAs was estimated at $ 19.4 million and segregated into 15 tranches with expense recognition periods ranging from 2.2 to 6.0 years.

The fair value of the RSUs was estimated at $ 29.3 million and segregated into four tranches with expense recognition periods ranging from 6.7 to 8.7 years.

We recognized $ 2.1 million of stock compensation expense for the Stock Awards during the three months ended March 31, 2022.

As of June 30, 2022, there 6,816,817 shares available for future grants under the 2022 Plan.

2018 Long Term Incentive Compensation Plan

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

Non-employee directors and the chairman emeritus were 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 were reserved for issuance.

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

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

In connection with the approval of the 2022 Plan, the 2018 Plan remains in place until all of the awards previously granted thereunder have been paid, forfeited or expired.

However, the shares which remained available for issuance under the 2018 Plan, which totaled 2,858,438 as of June 30, 2022 , are no longer available for issuance and all future equity awards will be granted pursuant to the 2022 Plan.

Score Media And Gaming Inc.

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In connection with the acquisition of theScore on October 19, 2021, the Company registered theScore Plan.

theScore Plan permits the Company to issue non-qualified stock options and RSUs to employees and service providers affiliated with theScore prior to the acquisition date.

theScore Plan permitted the Company to issue non-qualified stock options and RSUs to employees and service providers affiliated with theScore prior to the acquisition date.

At the date of acquisition, the Company rolled over all outstanding, non-vested and unexercised stock options and non-vested RSUs equivalent to 853,904 shares of the Company.

Each rollover option and RSU is subject to substantially the same terms and conditions applicable to the award immediately prior to the acquisition.

Each rollover option and RSU were subject to substantially the same terms and conditions applicable to the award immediately prior to the acquisition.

In connection with the transaction, the vesting provisions of unvested options and RSUs, awarded under the theScore Plan prior to August 4, 2021, were amended to provide for a new acceleration right for legacy theScore employees and service providers.

The amendment provides that, if an involuntary termination without cause occurs at any time prior to April 19, 2023, unvested options and RSUs will automatically accelerate and become fully vested on the effective date of termination.

As of March 31, 2022, there were 232,913 shares available for future grants to legacy theScore employees and service providers.

In connection with the approval of the 2022 Plan, theScore Plan remains in place until all of the awards previously granted thereunder have been paid, forfeited or expired.

However, the shares which remained available for future grants under theScore Plan, which totaled 251,825 as of June 30, 2022 , are no longer available for issuance and all future equity awards will be pursuant to the 2022 Plan.

Performance Share Program

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

An aggregate of 238,784 RSUs with performance-based vesting conditions, at target, was granted during the three months ended March 31, 2022 under the Performance Share Program, with the grant having a three-year award period consisting of three one-year performance periods and a three-year service period.

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.

An aggregate of 244,955 RSUs and 95,276 RSAs and RSUs with performance-based vesting conditions, at target, were granted during the six months ended June 30, 2022 and June 30, 2021, respectively, under the Performance Share Program II, with the grant having a three-year award period consisting of three one-year performance periods and a three-year service period.

The performance threshold for vesting of these awards is 50 % of target and, based on the level of achievement, up to 150 % of target.

There were no RSAs or RSUs issued from the Performance Share Program during the three months ended March 31, 2021.

Stock-based Compensation Expense

Stock-based compensation expense, which pertains principally to our stock options, RSAs and RSUs, for the three months ended March 31, 2022 and 2021 was $ 17.0 million and $ 4.2 million, respectively, and is included within the unaudited Consolidated Statements of Operations under “General and administrative.”

Stock-based compensation expense, which pertains principally to our stock options, RSAs and RSUs, for the three and six months ended June 30, 2022 was $ 14.5 million and $ 31.5 million, respectively, as compared to $ 9.2 million and $ 13.4 million for the three and six months ended June 30, 2021 and is included within the unaudited Consolidated Statements of Operations under “General and administrative.”

Stock Options

The Company granted 393,049 and 229,361 stock options during the three months ended March 31, 2022 and 2021, respectively.

The Company granted 3,316 and 396,365 stock options during the three and six months ended June 30, 2022, respectively, as compared to 804 and 230,165 stock options during the three and six months ended June 30, 2021, respectively.

Cash-settled Phantom Stock Units

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

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled CPSUs of $ 1.8 million and $ 8.6 million as of March 31, 2022 and December 31, 2021, respectively.

For CPSUs held by employees, non-employee directors, and the chairman emeritus of the Company, there was $ 9.5 million of total unrecognized compensation cost as of March 31, 2022 that will be recognized over the awards remaining weighted-average vesting period of one year .

For the three months ended March 31, 2022 and 2021, the Company recognized $ 0.6 million and $ 4.7 million of compensation expense associated with these awards, respectively.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled CPSUs of $ 2.0 million and $ 8.6 million as of June 30, 2022 and December 31, 2021, respectively.

For CPSUs, there was $ 5.9 million of total unrecognized compensation cost as of June 30, 2022 that will be recognized over the awards remaining weighted-average vesting period of 0.9 years.

For the three and six months ended June 30, 2022 the Company recognized $ 0.8 million and $ 1.4 million of compensation expense associated with these awards, respectively, as compared to $ 1.0 million and $ 5.7 million for the three and six months ended June 30, 2021, respectively.

Compensation expense associated with our CPSUs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations.

We paid $ 7.4 million and $ 5.9 million during the three months ended March 31, 2022 and 2021, respectively, pertaining to cash-settled CPSUs.

We paid $ 8.0 million and $ 6.0 million for the six months ended June 30, 2022 and 2021, respectively, pertaining to cash-settled CPSUs.

Stock Appreciation Rights

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

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled SARs of $ 16.9 million and $ 18.5 million as of March 31, 2022 and December 31, 2021, respectively.

For SARs held by employees of the Company, there was $ 21.9 million of total unrecognized compensation cost as of March 31, 2022 that will be recognized over the awards remaining weighted-average vesting period of 2.2 years.

The Company recognized no compensation expense for the three months ended March 31, 2022 and $ 20.3 million for the three months ended March 31, 2021.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled SARs of $ 9.1 million and $ 18.5 million as of June 30, 2022 and December 31, 2021, respectively.

For SARs, there was $ 11.5 million of total unrecognized compensation cost as of June 30, 2022 that will be recognized over the awards remaining weighted-average vesting period of 2 years.

The Company recognized a reduction to compensation expense of $ 6.8 million for the three and six months ended June 30, 2022, and recognized a reduction to compensation expense of $ 9.9 million and a charge to compensation expense of $ 10.4 million for the three and six months ended June 30, 2021, respectively.

Compensation expense associated with our SARs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations.

We paid $ 0.2 million and $ 37.2 million during the three months ended March 31, 2022 and 2021, respectively, related to cash-settled SARs.

We paid $ 2.1 million and $ 38.0 million during six months ended June 30, 2022 and 2021, respectively, related to cash-settled SARs.

In the second quarter of 2021, the Company entered into two promissory notes with shareholders for a total of $ 9.0 million.

The promissory notes are unsecured and bear interest of 2.25 %.

As of March 31, 2022 and December 31, 2021, the receivable is recorded as a reduction of equity within “Additional paid-in capital” in our unaudited Consolidated Balance Sheets .

As of June 30, 2022 and December 31, 2021, the receivable is recorded as a reduction of equity within “Additional paid-in capital” in our unaudited Consolidated Balance Sheets.

Note 14— Earnings per Share

For the three months ended March 31, 2022, and March 31, 2021 we recorded net income attributable to Penn.

As such, we used diluted weighted-average common shares outstanding when calculating diluted income per share for the three months ended March 31, 2022, and March 31, 2021.

For the three and six months ended June 30, 2022, and 2021 we recorded net income attributable to PENN.

As such, we used diluted weighted-average common shares outstanding when calculating diluted income per share for the three and six months ended June 30, 2022, and 2021.

Stock options, restricted stock, convertible preferred shares and convertible debt that could potentially dilute basic EPS in the future are included in the computation of diluted income per share.

The following table sets forth the allocation of net income for the three months ended March 31, 2022 and March 31, 2021 under the two-class method.

For the three months ended March 31,

The following table sets forth the allocation of net income for the three and six months ended June 30, 2022 and 2021 under the two-class method.

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

(in millions) 2022 2021 2022 2021

Net income attributable to Penn National Gaming $ 51.7 $ 91.0

Net income attributable to PENN Entertainment $ 26.1 $ 198.7 $ 77.8 $ 289.7

Net income applicable to preferred stock 0.1 1.0 0.3 1.5

Net income applicable to common stock $ 26.0 $ 197.7 $ 77.5 $ 288.2

The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three months ended March 31, 2022 and 2021:

For the three months ended March 31,

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

(in millions) 2022 2021 2022 2021

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Weighted-average common shares outstanding - Diluted 180.2 172.7 182.3 172.8

Restricted stock with performance and market based vesting conditions that have not been met as of March 31, 2022 were excluded from the computation of diluted earnings per share.

Options to purchase 0.8 million and 0.2 million shares were outstanding during the three months ended March 31, 2022, and March 31, 2021, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

In addition, 0.7 million and 0.8 million shares from the assumed conversion of convertible preferred shares were excluded from the computation of diluted earnings per share for the three months ended March 31, 2022 and March 31, 2021, respectively, because including them would have been anti-dilutive.

The Company's calculation of weighted-average common shares outstanding includes the Exchangeable Shares issued in connection with theScore acquisition, as discussed in Note 6, “Acquisitions and Dispositions” and Note 13, “Stockholders’ Equity and Stock-Based Compensation.” The following table presents the calculation of basic and diluted earnings per share for the Company’s common stock for the three months ended March 31, 2022 and 2021:

For the three months ended March 31,

Restricted stock with performance and market based vesting conditions that have not been met as of June 30, 2022 were excluded from the computation of diluted earnings per share.

Options to purchase 0.9 million and 0.8 million shares were outstanding during the three and six months ended June 30, 2022, respectively, compared to 0.2 million during the three and six months ended June 30, 2021, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

The assumed conversion of 0.6 million preferred shares were excluded from the computation of diluted earnings per share for the three and six months ended June 30, 2022, as compared to 0.8 million preferred shares for the three and six months ended June 30, 2021, because including them would have been anti-dilutive.

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

(in millions, except per share data) 2022 2021 2022 2021

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Net income applicable to common stock $ 26.0 $ 197.7 $ 77.5 $ 288.2

Weighted-average shares outstanding - Penn National Gaming 167.5 155.7

Weighted-average shares outstanding - PENN Entertainment 164.2 156.0 165.9 155.8

Weighted-average shares outstanding - Exchangeable Shares 0.6 — 0.6 —

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Diluted earnings per share $ 0.15 $ 1.17 $ 0.45 $ 1.72

(1) The three months ended March 31, 2022 were tax-affected at a rate of 20 %.

(1) The three and six months ended June 30, 2022 were tax-affected at a rate of 21 % .

The three and six months ended June 30, 2021, were tax-affected at a rate of 20 %.

Note 15— Fair Value Measurements

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Equity Securities

As of March 31, 2022 and December 31, 2021, we held $ 48.2 million and $ 84.3 million in equity securities of ordinary shares, respectively, which are reported as “Other assets” in our unaudited 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,” (which includes online sports betting and online social casino, bingo, and iCasino products) market access across our portfolio.

During the three months ended March 31, 2022 and 2021, we recognized a holding loss of $ 38.7 million and a holding gain of $ 26.1 million related to these equity securities, which is included in “Other,” as reported in “Other income (expenses)” within our unaudited Consolidated Statements of Operations.

As of June 30, 2022 and December 31, 2021, we held $ 31.4 million and $ 84.3 million in equity securities of ordinary shares, respectively, which are reported as “Other assets” in our unaudited 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 three and six months ended June 30, 2022, we recognized holding losses of $ 16.9 million and $ 55.6 million related to these equity securities, respectively, compared to a holding loss of $ 7.4 million and a holding gain of $ 18.8 million for the three and six months ended June 30, 2021, respectively, which is included in “Other,” as reported in “Other income (expenses)” within our unaudited Consolidated Statements of Operations.

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 March 31, 2022 and December 31, 2021, PRP held $ 7.9 million and $ 15.1 million in promissory notes issued by RDC, respectively.

As of March 31, 2022 and December 31, 2021, PRP held $ 6.7 million in local government corporation bonds issued by RDC at amortized cost.

As of June 30, 2022 and December 31, 2021, PRP held $ 7.9 million and $ 15.1 million in promissory notes issued by RDC, respectively.

As of June 30, 2022 and December 31, 2021, PRP held $ 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 March 31, 2022 and December 31, 2021, the promissory notes and the local government corporation bonds were included in “Other assets” within our unaudited Consolidated Balance Sheets.

As of June 30, 2022 and December 31, 2021, the promissory notes and the local government corporation bonds were included in “Other assets” within our unaudited Consolidated Balance Sheets.

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

however, we have not recorded accrued interest on these promissory notes because uncertainty exists as to RDC’s ability to make interest payments.

We have the positive intent and ability to hold the local government corporation bonds to maturity and until the amortized cost is recovered.

We have the positive intent and ability to hold the local government corporation bonds to maturity and until the amortized cost is

The estimated fair values of such investments are principally based on appraised values of the land associated with Retama Park Racetrack, which are classified as Level 2 inputs.

Long-term Debt

The fair value of our Term Loan A Facility, Term Loan B-1 Facility, 5.625 % Notes, 4.125 % Notes, and the 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 Facility approximates its carrying amount as it is revolving, variable-rate debt, which we also classify as a Level 1 measurement.

Other long-term obligations as of March 31, 2022 and December 31, 2021 included a financing arrangement entered in February of 2021, the relocation fees for Dayton and Mahoning Valley, and the repayment obligation of the hotel and event center located near Hollywood Casino Lawrenceburg.

The fair value of our Term Loan A Facility, Term Loan B-1 Facility, Amended Term Loan A Facility, Amended Term Loan B Facility, 5.625 % Notes, 4.125 % Notes, and the Convertible Notes is estimated based on quoted prices in active markets and is classified as a Level 1 measurement.

Other long-term obligations as of June 30, 2022 and December 31, 2021 included a financing arrangement entered in February of 2021, the relocation fees for Dayton and Mahoning Valley, and the repayment obligation of the hotel and event center located near Hollywood Casino Lawrenceburg.

See Note 8, “Long-term Debt” for details.

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Other Liabilities

Other liabilities as of March 31, 2022 and December 31, 2021 includes contingent purchase price liabilities related to Plainridge Park Casino and Hitpoint, of which Hitpoint was acquired on May 11, 2021.

The Hitpoint contingent purchase price liability is payable in $ 1.0 million installments in the form of cash and equity, on the first three anniversaries of the acquisition close date (May 11, 2021) and is based on the achievement of mutual goals established by the Company and Hitpoint.

Other liabilities as of June 30, 2022 and December 31, 2021 includes contingent purchase price liabilities related to Plainridge Park Casino and Hitpoint, of which Hitpoint was acquired on May 11, 2021.

The Hitpoint contingent purchase price liability is payable in installments up to a maximum of $ 1.0 million in the form of cash and equity, on the first three anniversaries of the acquisition close date (May 11, 2021) and is based on the achievement of mutual goals established by the Company and Hitpoint.

As of June 30, 2022, there are two annual achievement evaluations remaining.

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

As of March 31, 2022, we were contractually obligated to make four additional annual payments.

As of June 30, 2022, we were contractually obligated to make four additional annual payments.

The fair value of the Plainridge Park Casino contingent purchase price liability is estimated based on an income approach using a discounted cash flow model.

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

March 31, 2022

June 30, 2022

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

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Promissory notes $ 7.9 $ 7.9 $ — $ 7.9 $ —

Puts and calls related to certain Barstool Sports shares $ 0.9 $ 0.9 $ — $ 0.9 $ —

Financial liabilities:

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Other liabilities $ 11.4 $ 11.3 $ — $ 2.6 $ 8.7

Puts and calls related to certain Barstool Sports shares $ 0.6 $ 0.6 $ — $ 0.6 $ —

December 31, 2021

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Balance as of January 1, 2022 $ 100.9

Interest 12.9

Payment installments ( 0.8 )

Included in earnings (1)

Balance as of March 31, 2022 $ 107.0

Balance as of June 30, 2022 $ 112.0

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

The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities on a recurring basis as of March 31, 2022:

The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities on a recurring basis as of June 30, 2022:

Valuation Technique Unobservable Input Discount Rate

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Northeast, South, West, and Midwest.

Our Interactive segment includes the operating results of Penn Interactive, theScore, and the Company’s proportionate share of earnings attributable to its equity method investment in Barstool Sports.

The Other category is included in the following tables in order to reconcile the segment information to the consolidated information.

Our Interactive segment includes all of our iCasino and online sports betting operations, management of retail sports betting, media, and our proportionate share of earnings attributable to our equity method investment in Barstool Sports.

The Other category is included in the following tables to reconcile the segment information to the consolidated information.

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.

For the three months ended March 31,

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

(in millions) 2022 2021 2022 2021

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Interactive segment 154.9 96.0 296.4 182.3

5.9 1.7 13.2 3.3

Intersegment eliminations (2)

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( 23.4 ) ( 26.9 ) ( 47.1 ) ( 49.5 )

504.5 586.6 999.2 1,033.6

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

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Cash-settled stock-based awards variance 9.5 12.4 12.4 ( 9.1 )

Gain on disposal of assets 0.1 0.1

Gain (loss) on disposal of assets ( 7.3 ) 0.1 ( 7.2 ) 0.2

Contingent purchase price 0.9 ( 1.2 ) 1.0 ( 1.3 )

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(2) Primarily represents the elimination of intersegment revenues associated with our internally-branded retail sportsbooks, which are operated by PENN Interactive.

(3) We define Adjusted EBITDAR as earnings before interest expense, net;

income taxes;

depreciation and amortization;

rent expense associated with triple net operating leases (see footnote (4) below);

stock-based compensation;

debt extinguishment and financing charges;

impairment losses;

insurance recoveries, net of deductible charges;

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

gain or loss on disposal of assets;

the difference between budget and actual expense for cash-settled stock-based awards;

pre-opening expenses (see footnote (5) below);

(3) We define Adjusted EBITDAR as earnings before interest expense, net, income taxes, depreciation and amortization, rent expense associated with triple net operating leases (see footnote (4) below), stock-based compensation, debt extinguishment and financing charges, which is included in “Other” (see footnote (7) below), impairment losses, insurance recoveries, net of deductible charges, changes in the estimated fair value of our contingent purchase price obligations, gain or loss on disposal of assets, the difference between budget and actual expense for cash-settled stock-based awards, pre-opening expenses (see footnote (5) below), and other.

Adjusted EBITDAR is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (see footnote (6) below) added back for Barstool Sports and our Kansas Entertainment joint venture.

(4) Solely comprised of rent expense associated with the operating lease components contained within our triple net master lease dated November 1, 2013 with GLPI and the triple net master lease assumed in connection with our acquisition of Pinnacle Entertainment, Inc., our individual triple net leases with GLPI for the real estate assets used in the operation of Tropicana and Hollywood Casino at Meadows Racetrack, and our individual triple net leases with VICI for the real estate assets used in the operations of Margaritaville Casino Resort and Greektown Casino-Hotel (of which the Tropicana Lease, Meadows Lease, Margaritaville Lease and the Greektown Lease are defined in “Note 9, Leases” ) and are referred to collectively as our “triple net operating leases”.

(4) Solely comprised of rent expense associated with the operating lease components contained within our triple net master lease dated November 1, 2013 with GLPI and the triple net master lease assumed in connection with our acquisition of Pinnacle Entertainment, Inc., our individual triple net leases with GLPI for the real estate assets used in the operation of Tropicana and Hollywood Casino at Meadows Racetrack, and our individual triple net leases with VICI for the real estate assets used in the operations of Margaritaville Casino Resort and Hollywood Casino at Greektown (of which the Tropicana Lease, Meadows Lease, Margaritaville Lease and the Greektown Lease are defined in “Note 9, Leases” ) and are referred to collectively as our “triple net operating leases”.

As a result of the Lease Modification defined in Note 9, “Leases” , the land and building components associated with the operations of Dayton and Mahoning Valley are classified as operating leases which is recorded to rent expense, as compared to prior to the Lease Modification, whereby the land components of substantially all of the Master Lease properties were classified as operating leases and recorded to rent expense.

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Beginning with the quarter ended June 30, 2021, acquisition costs are presented as part of other expenses.

(6) Consists principally of interest expense, net;

income taxes;

depreciation and amortization;

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

(6) Consists principally of interest expense, net, income taxes, depreciation and amortization, and stock-based compensation expense associated with Barstool Sports and our Kansas Entertainment joint venture.

We record our portion of Barstool Sports’ net income or loss, including adjustments to arrive at Adjusted EBITDAR, one quarter in arrears.

(7) Includes holding gains and losses on our equity securities, which are discussed in Note 15, “Fair Value Measurements.” Additionally, consists of non-recurring acquisition and transaction costs, and finance transformation costs associated with the implementation of our new Enterprise Resource Management system.

(7) Includes holding gains and losses on our equity securities, which are discussed in Note 15, “Fair Value Measurements.” Also consists of non-recurring acquisition and transaction costs, finance transformation costs associated with the implementation of our new Enterprise Resource Management system, and debt extinguishment and financing charges, which are discussed in Note 8, “Long-term Debt.”

The table below presents capital expenditures by segment:

For the three months ended March 31,

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

(in millions) 2022 2021 2022 2021

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

Balance sheet as of March 31, 2022

Balance sheet as of June 30, 2022

Investment in and advances to unconsolidated affiliates $ 0.1 $ — $ — $ 82.4 $ 161.3 $ 6.5 $ 250.3

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

What changed 10-Q

Item 1. Financial Statements