What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-28 · 613 added, 626 removed, 1324 unchanged (48% of the section changed)

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To the shareholders and the Board of Directors of

Penn National Gaming, Inc.

and Subsidiaries

PENN Entertainment, Inc.

Opinion on the Financial Statements

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

We have audited the accompanying consolidated balance sheets of PENN Entertainment, Inc.

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

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

Goodwill – Greektown Hotel Casino Reporting Unit Refer to Notes 2 and 9 to the financial statements

Goodwill and Gaming License – Refer to Notes 2 and 9 to the financial statements

Critical Audit Matter Description

The Company’s goodwill is tested annually for impairment, or more frequently if indicators of impairment exist, by comparing the fair value of each reporting unit to their carrying amount for goodwill.

The Company’s goodwill and gaming license indefinite-lived intangible assets are tested annually for impairment, or more frequently if indicators of impairment exist, by comparing the fair value of each reporting unit, as it relates to goodwill, or gaming license to their carrying amount.

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

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

As of December 31, 2021, the book value of goodwill is $ 2,822.5 million of which $67.4 million is allocated to Greektown Hotel Casino (the “property”).

The fair value of Greektown Hotel Casino exceeded its carrying value by 8% as of the measurement date, therefore, no impairment was recognized.

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

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

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

Changes in these assumptions could have a significant impact on the determined fair values and a significant change in fair value could cause a significant change in recorded impairment.

During the third quarter of 2022, the Company identified an indicator of impairment on goodwill and other intangible assets at the Hollywood Casino at Greektown

(“Greektown”).

As a result of the interim assessment for impairment, during the third quarter of 2022, the Company recognized impairment charges on Greektown’s goodwill and gaming licenses of $37.4 million and $65.4 million, respectively.

In addition, as a result of the Company’s annual assessment for impairment, the Company recognized a $13.6 million impairment charge on the gaming license of PENN National Race Course (“PNRC”).

As of December 31, 2022, the book value of goodwill and gaming licenses are $2.7 billion and $1.2 billion, respectively, of which $30.0 million in goodwill is allocated to Greektown and $101.0 million and $74.0 million in gaming licenses are allocated to Greektown and PNRC, respectively.

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

How the Critical Audit Matter Was Addressed in the Audit

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

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

• We tested the effectiveness of controls over determining the respective fair values, including those over the forecasts of revenue and operating cash flows and the selection of the discount rates.

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

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

Acquisitions – Refer to Notes 2 and 6 to the financial statements

Lease Amendments – Refer to Notes 2 and 12 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Score Media and Gaming Inc.

on October 19, 2021 for a purchase price of approximately $2.1 billion.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including gaming technology and tradename.

Management estimated the fair value of the gaming technology and tradename using a relief from royalty income approach.

The fair value determination of the gaming technology and tradename required management to make significant estimates and assumptions related to future cash flows and the selection of the discount rate.

Goodwill was recognized as the excess of the cash consideration and the purchase price over the identifiable assets acquired and liabilities assumed.

The fair value determination of gaming technology and tradename required management to make significant estimates and assumptions around expected cash flows and projected financial results, including forecasted revenues (collectively the “forecast”), as well as the selection of discount rates.

Changes to these assumptions and estimates could have a significant impact on the fair value of the gaming technology and tradename and the recognition of goodwill.

Therefore, auditing the forecast and the selection of the discount rate involved a higher degree of auditor judgment and subjectivity, as well as an increased level of audit effort, including the involvement of fair value specialists.

The Company amended the PENN and Pinnacle Master Lease between the Company and GLPI on January 14, 2022 (collectively the “Lease Amendments”).

The Company concluded the Lease Amendments constituted a modification event under Accounting Standards Codification Topic 842, (“ASC 842”).

As a result of the modification, the Company reassessed the lease classifications resulting in:

(i) the land components of substantially all of the PENN Master Lease and Pinnacle Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases, and (ii) the land and building components associated with the operations of Dayton and Mahoning Valley of the PENN Master Lease, which were previously classified as finance leases, are now classified as operating leases.

As a result of the Company’s measurement of the associated lease liabilities, the Company recognized additional ROU assets and corresponding lease liabilities of $455.4 million and $937.6 million for the PENN Master Lease and Pinnacle Master Lease, respectively.

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

The application of the lease modification framework in ASC 842 to the Lease Amendments was complex with respect to lease modifications conclusions and required an increased extent of effort, including involving professional with expertise in lease accounting.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts and the selection of the discount rate used by management to determine the fair value of the acquired intangible assets and the assigned goodwill included the following, among others:

• We tested the effectiveness of controls over the valuation of the gaming technology and tradename intangible asset, including management’s controls over forecasts of future cash flows and selection of the discount rate.

• We evaluated the assumptions and estimates included in the forecast by:

◦ Comparing the forecasts to information included in the Company’s communications to the Board of Directors, gaming industry reports, and analyst reports for the Company and certain of its peer companies;

◦ Comparing the forecasts to historical financial results;

◦ Conducting inquiries with management;

◦ Evaluating whether the forecast was consistent with evidence obtained in other areas of the audit.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by:

◦ Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.

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

Our procedures related to the Lease Amendments included the following among others:

• We tested the operating effectiveness of internal controls over the initial recognition of balances relating to the Lease Amendments, inclusive of controls over the evaluation of accounting conclusions.

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

• With the assistance of professionals with expertise in lease accounting, we evaluated the appropriateness of the accounting conclusions with respect to lease modifications.

/s/ Deloitte & Touche LLP

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We have served as the Company’s auditor since 2017.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

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

Series D Preferred stock ($ 0.01 par value, 5,000 shares authorized, 969 and 883 shares issued, and 775 and 883 shares outstanding)

Common stock ($ 0.01 par value, 400,000,000 and 200,000,000 shares authorized, 171,729,276 and 157,868,227 shares issued, and 169,561,883 and 155,700,834 shares outstanding)

Exchangeable shares ($ 0.01 par value, 697,539 shares authorized and issued, and 653,059 shares outstanding as of December 31, 2021.

None authorized, issued or outstanding for the year ended December 31, 2020.)

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

Series D Preferred stock ($ 0.01 par value, 5,000 shares authorized, 969 shares issued in both periods, and 581 and 775 shares outstanding)

Common stock ($ 0.01 par value, 400,000,000 shares authorized in both periods, 172,632,389 and 171,729,276 shares issued, and 152,903,708 and 169,561,883 shares outstanding)

Exchangeable shares ($ 0.01 par value, 697,539 shares authorized and issued in both periods, 620,019 and 653,059 shares outstanding)

Treasury stock, at cost, ( 19,728,681 and 2,167,393 shares)

( 629.5 ) ( 28.4 )

Additional paid-in capital 4,220.2 4,239.6

Accumulated deficit ( 86.5 ) ( 507.3 )

Retained earnings (accumulated deficit) 154.5 ( 86.5 )

Accumulated other comprehensive loss ( 168.6 ) ( 54.4 )

Total Penn National stockholders’ equity 4,097.8 2,656.2

Total PENN Entertainment stockholders’ equity 3,597.7 4,097.8

Non-controlling interest ( 1.1 ) ( 0.7 )

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See accompanying notes to the Consolidated Financial Statements.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

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Interest expense, net ( 758.2 ) ( 562.8 ) ( 544.1 )

Interest income 18.3 1.1 0.9

Income from unconsolidated affiliates 23.7 38.7 13.8

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Net (income) loss attributable to non-controlling interest 0.4 0.3 ( 0.4 )

Net income (loss) attributable to Penn National Gaming, Inc.

$ 420.8 $ ( 669.5 ) $ 43.9

Net income (loss) attributable to PENN Entertainment $ 222.1 $ 420.8 $ ( 669.5 )

Earnings (loss) per share

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See accompanying notes to the Consolidated Financial Statements.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

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Comprehensive loss (income) attributable to non-controlling interest 0.4 0.3 ( 0.4 )

Comprehensive income (loss) attributable to Penn National $ 366.4 $ ( 669.5 ) $ 43.9

Comprehensive income (loss) attributable to PENN Entertainment $ 107.9 $ 366.4 $ ( 669.5 )

See accompanying notes to the Consolidated Financial Statements.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

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Comprehensive

Income (Loss) Total Penn National Stock-holders’

Income (Loss) Total PENN Stock-holders’

Equity (Deficit) Non-Controlling Interest Total

Stock-holders’ Equity (Deficit)

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

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

Balance as of January 1, 2020 — $ — 115,958,259 $ 1.2 — $ — $ ( 28.4 ) $ 1,718.3 $ 161.6 $ — $ 1,852.7 $ ( 0.8 ) $ 1,851.9

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

Cumulative-effect adjustment upon adoption of ASC 842 — — — — — — — — 1,085.7 — 1,085.7 — 1,085.7

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

Net Income (loss) — — — — — — — — 43.9 — 43.9 ( 0.8 ) 43.1

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

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

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

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Balance as of December 31, 2021 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 — — 607,818 — — — — 58.1 — — 58.1 — 58.1

Share repurchases (Note 15) — — ( 17,561,288 ) — — — ( 601.1 ) — — — ( 601.1 ) — ( 601.1 )

Preferred stock conversions (Note 15) ( 194 ) ( 6.4 ) 194,200 — — — — 6.4 — — — — —

Common stock issuance (Note 15) — — 68,055 — — — — 2.2 — — 2.2 — 2.2

Exchangeable shares conversions (Note 15) — — 33,040 — ( 33,040 ) — — — — — — — —

Currency translation adjustment — — — — — — — — — ( 114.2 ) ( 114.2 ) — ( 114.2 )

Cumulative-effect adjustment upon adoption of ASU 2020-06 — — — — — — — ( 88.2 ) 18.9 — ( 69.3 ) — ( 69.3 )

Net income (loss) — — — — — — — — 222.1 — 222.1 ( 0.4 ) 221.7

Other — — — — — — — 2.1 — — 2.1 — 2.1

Balance as of December 31, 2022 581 $ 19.4 152,903,708 $ 1.7 620,019 $ — $ ( 629.5 ) $ 4,220.2 $ 154.5 $ ( 168.6 ) $ 3,597.7 $ ( 1.1 ) $ 3,596.6

See accompanying notes to the Consolidated Financial Statements.

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

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Depreciation and amortization 567.5 344.5 366.7

Amortization of items charged to interest expense 22.8 16.3 7.7

Amortization of debt discount and debt issuance costs 9.0 22.8 16.3

Noncash interest expense 27.6 17.9 —

Noncash operating lease expense 87.5 160.8 120.3

Change in fair value of contingent purchase price 1.9 ( 1.1 ) 7.0

Gain on acquisition of Sam Houston — ( 29.9 ) —

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Loss (gain) on sale or disposal of property and equipment 7.9 1.1 ( 29.2 )

Gain on Hurricane Laura ( 10.7 ) — —

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

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Capital expenditures ( 263.4 ) ( 244.1 ) ( 137.0 )

Dispositions of property and equipment 1.5 16.1 0.6

Proceeds from sale of property and equipment 4.9 1.5 16.1

Hurricane Laura insurance proceeds 25.4 — 32.7

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Consideration paid for remaining interest of Sam Houston — ( 42.0 ) —

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

Consideration paid for gaming licenses and other intangible assets ( 9.0 ) ( 24.2 ) ( 4.8 )

Acquisition of equity securities — ( 26.0 ) —

Consideration paid for a cost method investment ( 15.0 ) — —

For the year ended December 31,

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Proceeds from issuance of long-term debt, net of discounts 1,545.0 400.0 322.2

Repayments on credit facilities (Note 11) ( 1,543.2 ) — —

Principal payments on long-term debt ( 39.3 ) ( 64.4 ) ( 161.7 )

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Accrued capital expenditures $ 21.1 $ 27.6 $ 17.2

Acquisition of equity securities $ — $ — $ 16.1

See accompanying notes to the Consolidated Financial Statements

PENN NATIONAL GAMING, INC.

PENN ENTERTAINMENT, INC.

AND SUBSIDIARIES

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Organization:

With a gaming footprint that includes 44 properties across 20 states as of December 31, 2021, Penn National Gaming, Inc., together with its subsidiaries (“Penn National,” the “Company,” “we,” “our,” or “us”) is a highly innovative omni-channel provider of retail casino gaming, online gaming, live racing, sports betting, and digital sports content.

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

In October 2021, we acquired Score Media and Gaming, Inc.

(“theScore”), a sports betting and digital media company.

In addition, in February 2020, we entered a strategic partnership with Barstool Sports, Inc.

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

Combined with the power of theScore and Barstool Sports, Penn National has evolved into a leading North American digital sports content, gaming and technology company.

The Company's omni-channel approach is further bolstered by its my choice customer loyalty program (the “my choice program”), which rewards and recognizes its over 25 million members for their loyalty to both retail and online gaming and sports betting products with a dynamic set of industry offers, experiences, and service levels.

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.

As of December 31, 2022, PENN operated 43 properties in 20 states, online sports betting in 15 jurisdictions and iCasino in five jurisdictions, under a portfolio of well-recognized brands including Hollywood Casino ® , L’Auberge ® , Barstool Sportsbook ® , and theScore Bet Sportsbook and Casino ® .

As of the issuance date of this report, PENN operates online sports betting in 16 jurisdictions upon the addition of Ohio in January 2023.

PENN’s highly differentiated strategy, which is focused on organic cross-sell opportunities, is reinforced by its investments in market-leading retail casinos, sports media assets, technology, including a state-of-the-art, fully integrated digital sports and iCasino betting platform, and an in-house iCasino content studio.

The Company’s portfolio is further bolstered by its industry-leading my choice ® customer loyalty program (the “my choice program”), which offers our approximately 26 million members a unique set of rewards and experiences across business channels.

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

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

Impact of the COVID-19 Pandemic and Company Response:

Impact of the COVID-19 Pandemic:

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

To help combat the spread of COVID-19 and pursuant to various orders from state gaming regulatory bodies or governmental authorities, operations at all of our properties were temporarily suspended for single or multiple time periods during 2020 and into 2021.

Once reopened, properties operated with reduced gaming and hotel capacity and limited food and beverage offerings in order to accommodate social distancing and health and safety protocols.

As of December 31, 2021, the majority of our properties are operating at full capacity while adhering to state mandated health and safety protocols.

The COVID-19 pandemic caused significant disruptions to our business and had a material adverse impact on our financial condition, results of operations and cash flows.

As a consequence, between March 13, 2020 and December 31, 2020, we entered into a series of transactions to improve our financial position and liquidity, as described in the relevant notes to our Consolidated Financial Statements.

Additionally, we completed a $ 400.0 million offering of senior unsecured notes on July 1, 2021, as discussed in Note 11, “ Long term debt.

” We could experience further adverse impacts as a result of the COVID-19 pandemic, including, but not limited to, temporarily suspending operations at our properties if ordered by such governmental bodies, or capacity restrictions on our operations.

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

To help combat the spread of COVID-19 and pursuant to various orders from state gaming regulatory bodies or governmental authorities, operations at all of our properties were temporarily suspended for single, or multiple, time periods during 2020 and into 2021, and we operated with reduced gaming and hotel capacity with limited food and beverage offerings.

As of the date of this filing, none of our properties are closed.

Although the impact of the COVID-19 pandemic has lessened as of late, we could still experience adverse effects from the lingering macroeconomic issues that have resulted from the COVID-19 pandemic.

These could include, though are not limited to, labor shortages and increased turnover, interruption of domestic and global supply chains, and the reinstatement of mask mandates.

Basis of Presentation:

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Principles of Consolidation:

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

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

and its subsidiaries.

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Use of Estimates:

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

with the Master Leases, projected cash flows in assessing the recoverability of long-lived assets, asset impairments, goodwill and other intangible assets, projected cash flows in assessing the initial valuation of intangible assets in conjunction with acquisitions, the initial selection of useful lives for depreciable and amortizable assets in conjunction with acquisitions, contingencies and litigation inclusive of financing arrangements in which the Company receives up-front cash proceeds, and stock-based compensation expense.

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

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

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

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

Interactive includes the operations of Penn Interactive, theScore, and our proportionate share of earnings attributable to Barstool Sports.

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

(“Barstool”).

See Note 18, “Segment Information,” for further information.

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

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

Location Real Estate Assets Lease or Ownership Structure

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Ameristar East Chicago East Chicago, Indiana Pinnacle Master Lease

Greektown Casino-Hotel Detroit, Michigan Greektown Lease

Hollywood Casino Bangor Bangor, Maine PENN Master Lease

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Hollywood Casino Columbus Columbus, Ohio PENN Master Lease

Hollywood Casino at Greektown Detroit, Michigan Greektown Lease

Hollywood Casino Lawrenceburg Lawrenceburg, Indiana PENN Master Lease

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Hollywood Casino Perryville Perryville, Maryland Perryville Lease

Hollywood Casino at The Meadows Washington, Pennsylvania Meadows Lease

Hollywood Casino Toledo Toledo, Ohio PENN Master Lease

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Pennsylvania N/A

Hollywood Casino at Meadows Racetrack Washington, Pennsylvania Meadows Lease

Plainridge Park Casino Plainville, Massachusetts Pinnacle Master Lease

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Cactus Petes and Horseshu Jackpot, Nevada Pinnacle Master Lease

M Resort Henderson, Nevada Penn Master Lease

Tropicana Las Vegas Las Vegas, Nevada Tropicana Lease

M Resort Spa Casino Henderson, Nevada PENN Master Lease

Tropicana Las Vegas (3)

Las Vegas, Nevada Tropicana Lease

Zia Park Casino Hobbs, New Mexico PENN Master Lease

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(2) VGT route operations

(3) On September 26, 2022, PENN sold its equity interest in the Tropicana Las Vegas Hotel and Casino Inc.

(“Tropicana”), which consisted of the gaming license to operate the property as described in Note 6, “Acquisitions and Dispositions” , and as a result of the sale, the Tropicana Lease (as defined in Note 12, “Leases” ) was terminated.

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

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Markers and returned checks $ 13.1 $ 15.1

Credit card and other advances to customers 11.5 8.9

Payment processors, credit card, and other advances to customers 80.2 17.7

Receivables from ATM and cash kiosk transactions 26.1 20.9

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Property and equipment are stated at cost, less accumulated depreciation.

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

Project capital expenditures are for fixed asset additions that expand an existing facility or create a new facility.

Maintenance capital expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost-effective to repair.

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

Project capital expenditures are for fixed asset additions associated with constructing new facilities, or expansions of existing facilities.

Maintenance capital expenditures (replacement) are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost-effective to repair.

Maintenance and repairs that neither add materially to the value of the asset nor appreciably prolong its useful life are charged to expense as incurred.

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Convertible Debt:

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

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

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

Our Convertible Notes (as defined in Note 3, “New Accounting Pronouncements” ) are accounted for in accordance with Accounting Standards Codification (“ASC”) 470-20, “Debt with Conversion and Other Options” (“ASC 470-20”).

Prior to January 1, 2022, pursuant to ASC 470‑20, we accounted for the Convertible Notes using the separate liability (debt) and equity (conversion option) components of the instrument.

The equity component was included in “Additional paid-in capital” within our Consolidated Balance Sheets at the issuance date and the value of the equity component was treated as a debt discount.

Effective January 1, 2022, we adopted ASU 2020-06 (as defined in Note 3, “New Accounting Pronouncements” ), using the modified retrospective approach.

As a result, the Convertible Notes are accounted for as a single liability measured at its amortized cost, as no other embedded features require bifurcation.

See Note 3, “New Accounting Pronouncements” and Note 11, “Long-term Debt” for additional information.

Financing Obligations:

Certain of the components contained within our Master Leases (primarily buildings) are accounted for as financing obligations in accordance with ASC 470 - Debt, rather than leases.

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

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

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

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

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

On October 15, 2018, in connection with the acquisition of Pinnacle Entertainment, Inc.

(the “Pinnacle Acquisition”), we assumed the Pinnacle Master Lease.

Within a business combination, an arrangement that previously did not meet all of the requirements for sale-leaseback accounting treatment (and is accounted for as a financing obligation by the acquiree) retains its classification as a financing obligation on the acquiring entity’s consolidated balance sheets at the business combination date.

As of the date of acquisition, we calculated the financing obligation based on the future minimum lease payments discounted at a rate determined to be fair value at the business combination date, which was determined to be 7.3 %, over the remaining lease term of 32.5 years.

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

Furthermore, in conjunction with the Pinnacle Acquisition, GLPI acquired the real estate assets associated with Plainridge Park Casino and leased back such assets to the Company pursuant to an amendment to the Pinnacle Master Lease (the “Plainridge Park Casino Sale-Leaseback”).

The effective yield used to determine the financing obligation associated with the Plainridge Park Casino Sale-Leaseback was 9.6 %.

Subsequent to the adoption of ASC 842, “Leases” (“ASC 842”) on January 1, 2019, minimum lease payments under our Master Leases are allocated between components that continue to be financing obligations (primarily buildings) and operating lease components (primarily land).

Minimum lease payments related to financing obligations are recorded to interest expense and, in part, as repayments of principal reducing the associated financing obligations.

In accordance with ASC 842, “ Leases” (“ASC 842”), for transactions in which the Company enters into a contract to sell an asset and leases it back from the seller under a sale and leaseback transaction, the Company must determine whether control of the asset has transferred from the Company.

In cases whereby control has not transferred from the Company, we continue to recognize the underlying asset as “Property and equipment, net” within the Consolidated Balance Sheets, which is then depreciated over the shorter of the remaining useful life or lease term.

Additionally, a financial liability is recognized and referred to as a financing obligation, in accordance with ASC 470, “Debt” (“ASC 470”).

The accounting for financing obligations under ASC 470 is materially consistent with the accounting for finance leases under ASC 842.

The Company recognizes interest expense on the minimum lease payments related to a financing obligation under the effective yield method.

Contingent payments are recorded as interest expense as incurred.

The real estate assets subject to the Master Leases and which are accounted for as failed sales, are included in “Property and equipment, net” within the Company’s Consolidated Balance Sheets and are depreciated over the shorter of their remaining useful lives or lease term.

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

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

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

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

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

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

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

We concluded that the components contained within the Master Leases (primarily buildings) and the Morgantown Lease are required to be accounted for as financing obligations on our Consolidated Balance Sheets in accordance with ASC 842, as control of the underlying assets were not considered to have transferred from the Company.

Operating and Finance Leases:

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Control is determined to have occurred if the lessee has the right to (i) obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use and (ii) direct the use of the identified asset.

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

In accordance with ASC 842, we elected the following policies:

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

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

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

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

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

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

ROU assets are monitored for potential impairment similar to the Company’s property and equipment, using the impairment model in ASC 360, “Property, Plant and Equipment”.

If the Company determines the carrying amount of a ROU asset is not recoverable, it would recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value.

Debt Discount and Debt Issuance Costs:

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The evaluation of both positive and negative evidence is a requirement pursuant to ASC 740 in determining more-likely-than-not the net deferred tax assets will be realized.

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

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

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

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Revenue Recognition:

Our revenue from contracts with customers consists primarily of gaming wagers, inclusive of sports betting and iCasino products, food and beverage transactions, retail transactions, hotel room sales, racing wagers, management services related to the management of external operations and third-party revenue sharing agreements.

See Note 5, “Revenue Disaggregation,” for information on our revenue by type and geographic location.

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

For purposes of allocating the transaction price in a gaming contract between the wagering performance obligation and the obligation associated with the loyalty points earned, we allocate an amount to the loyalty point contract liability based on the standalone selling price (“SSP”) of the points earned, which is determined by the value of a point that can be redeemed for slot play and complimentaries such as, food and beverage at our restaurants, lodging at our hotels and products offered at our retail stores, less estimated breakage.

my choice mall and retail stores, less estimated breakage.

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

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

Penn Interactive records deferred revenue from the sale of virtual playing credits and recognizes this revenue over the average redemption period of the credits, which is approximately three days .

PENN Interactive records deferred revenue from the sale of virtual playing credits and recognizes this revenue over the average redemption period of the credits, which is generally one day .

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

Penn Interactive also enters into multi-year agreements with sports betting operators for online sports betting and related iGaming market access (“Skins”) across our portfolio, of which the Company received cash and equity securities, including ordinary shares and warrants, specific to four operator agreements.

In consideration for the use of each skin, the Company receives a monthly revenue share amount of the revenues earned by the operators less contractual fees and obligations primarily consisting of taxes, promotional credits, data fees and player costs.

The market access provided to operators by state and by activity represent separate performance obligations.

The transaction price includes fixed fees for access to certain geographic markets and variable consideration in the form of a monthly revenue share, annual minimum guarantee amounts, and reimbursements for out-of-pocket expenses including state gaming taxes.

PENN Interactive also enters into multi-year agreements with sports betting operators for online sports betting and iCasino market access (“Skins”) across our portfolio, of which the Company generally receives upfront (i) cash or (ii) cash and equity securities.

Additionally, in consideration for the use of each Skin, the Company receives a monthly revenue share amount of the revenues earned by the operators less contractual fees and obligations primarily consisting of taxes, promotional credits, data fees and player costs.

The market access provided to operators by jurisdiction and by activity represent separate performance obligations.

The upfront and fixed access fees relate solely to distinct markets and are allocated to the performance obligations specific to those markets.

Market access fees are recognized as revenue over the term of the related market access agreements.

Market access fees are recognized as revenue over the term of the related market access agreement which commences upon the online launch of the activity by the third-party operator.

Monthly revenue share and annual minimum guarantee variable consideration relate directly to the Company’s efforts to satisfy each individual performance obligation and, as such, is allocated to each performance obligation.

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Minimum guarantee revenue is deferred at the end of the period in which it relates and subsequently recognized as revenue over the remaining term of the market access agreement.

The Company also recognizes revenue for reimbursements of certain out-of-pocket expenses, including license fees and state gaming taxes.

The Company also recognizes revenue for reimbursements of certain out-of-pocket expenses, including license fees and jurisdictional gaming taxes.

The Company has elected the “right to invoice” practical expedient and recognizes revenue upon incurring reimbursable costs, as appropriate.

Complimentaries Associated with Gaming Contracts

Food, beverage, hotel, and other services furnished to patrons for free as an inducement to gamble or through the redemption of our customers’ loyalty points are recorded as food, beverage, hotel, and other revenues, at their estimated SSPs with an offset recorded as a reduction to gaming revenues.

Food, beverage, hotel, and other services furnished to patrons for free as an inducement to gamble or through the redemption of our customers’ loyalty points are recorded as food, beverage, hotel, and other revenues, at their estimated standalone selling prices with an offset recorded as a reduction to gaming revenues.

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

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

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

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

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

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

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

The obligation associated with our my choice program, which is included in “Accrued expenses and other current liabilities” within our Consolidated Balance Sheets, was $ 39.3 million and $ 37.6 million as of December 31, 2022 and 2021, respectively, and consisted principally of the obligation associated with the loyalty points.

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(i) deposits on rooms and convention space, (ii) money deposited on behalf of a customer in advance of their property visit (referred to as “safekeeping” or “front money”), (iii) money deposited in an online wallet not yet wagered or wagered and not yet withdrawn, (iv) outstanding tickets generated by slot machine play or pari-mutuel wagering, (v) outstanding chip liabilities, (vi) unclaimed jackpots, and (vii) gift cards redeemable at our properties.

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

The Company’s advance payments on goods and services yet to be provided and for unpaid wagers were $ 112.0 million and $ 47.1 million as of December 31, 2021 and 2020, respectively, no ne of which was classified as long-term on December 31, 2021 as compared to $ 0.5 million in the prior year.

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

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, from which we received cash and equity securities, including ordinary shares and warrants, specific to two operator agreements.

Unpaid wagers 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 $ 125.8 million and $ 112.0 million as of December 31, 2022 and 2021, respectively, and are included in “Accrued expenses and other current liabilities” within our Consolidated Balance Sheets.

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

Certain of the operations contemplated by these agreements commenced, resulting in the recognition of $ 22.4 million, $ 16.3 million and $ 5.6 million of revenue (most of which was previously deferred) during the years ended December 31, 2022, 2021 and 2020 respectively.

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 Consolidated Balance Sheets was $ 52.2 million and $ 52.7 million as of December 31, 2021 and 2020, respectively.

Deferred revenue associated with third-party sports betting operators for online sports betting and iCasino market access, which is included in “Other long-term liabilities” within our Consolidated Balance Sheets was $ 46.2 million and $ 52.2 million as of December 31, 2022 and 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 “General and administrative” expenses within the Consolidated Statements of Operations, were $ 88.2 million, $ 36.7 million, and $ 59.4 million, for the years ended December 31, 2021, 2020 and 2019, respectively.

Gaming and Racing Taxes:

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

The Company primarily recognizes gaming and pari-mutuel tax expense based on the statutorily required percentage of revenue that is required to be paid to state and local jurisdictions in the states where or in which the wagering occurs, as well as taxes on revenues derived from arrangements which allow for third-party partners to operate online casinos and online sportsbooks under our gaming licenses.

For the years ended December 31, 2021, 2020 and 2019, these expenses, which were recorded in “Gaming” expense or “Food, beverage, hotel and other” expenses within the Consolidated Statements of Operations, were $ 2.0 billion, $ 1.1 billion, and $ 1.6 billion, respectively.

Advertising expenses, which generally relate to media placement costs and are primarily included in “Gaming” expenses within the Consolidated Statements of Operations, were $ 94.8 million, $ 88.2 million, and $ 36.7 million, for the years ended December 31, 2022, 2021 and 2020, respectively.

Gaming and Pari-mutuel Taxes:

We are subject to gaming and pari-mutuel taxes based on gross gaming revenue and pari-mutuel revenue in the jurisdictions in which we operate, as well as taxes on revenues derived from arrangements which allow for third-party partners to operate iCasinos and online sportsbooks under our gaming licenses.

The Company primarily

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

Also, included in gaming and pari-mutuel taxes are costs to support the operations of local regulatory authorities which some jurisdictions require us to pay.

Gaming and pari-mutuel taxes are recorded in “Gaming” expense or “Food, beverage, hotel, and other” expenses within the Consolidated Statements of Operations, and were $ 2.2 billion, $ 2.0 billion, and $ 1.1 billion for the years ended December 31, 2022, 2021 and 2020, respectively.

Foreign Currency Translation:

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

Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss):

Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss:

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

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

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

Stock-Based Compensation:

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

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

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

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

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

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

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

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

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

The Company consolidates the financial position and results of operations of every VOE in which it has a controlling financial interest and VIEs in which it is considered to be the primary beneficiary.

The Company consolidates the financial position and results of operations of every VOE in which it has a controlling

financial interest and VIEs in which it is considered to be the primary beneficiary.

See Note 7, “Investments in and Advances to Unconsolidated Affiliates.”

Note 3—New Accounting Pronouncements

Accounting Pronouncements to be Implemented

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”).

ASU 2022-03 clarifies the guidance on the fair value measurement of an equity security that is subject to a contractual sale restriction and requires specific disclosures related to such an equity security.

Specifically, ASU 2022-03 clarifies that a “contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security” and is not included in the equity security’s unit of account.

Accordingly, the Company is no longer permitted to apply a discount related to the contractual sale restriction, or lack of marketability, when measuring the equity security’s fair value.

In addition, ASU 2022-03 prohibits an entity from recognizing a contractual sale restriction as a separate unit of account.

ASU 2022-03 will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact of the adoption of ASU 2022-03 on our Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

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

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

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

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

The interest rates associated with the Company’s previous borrowings under its Senior Secured Credit Facilities (as defined in Note 11, “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 11, “Long-term Debt” ), upon which the Company adopted ASU 2020-04.

The adoption of ASU 2020-04 did not have an impact on our Consolidated Financial Statements.

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

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

The new standard impacts the Company’s existing 2.75 % convertible senior notes due May 2026 (“Convertible Notes”) which are currently accounted for under the cash conversion feature model.

The new standard impacts the Company’s existing 2.75 % convertible senior notes due May 2026 (“Convertible Notes”) which prior to adoption of the new standard, were accounted for under the cash conversion feature model.

The cash conversion feature model is eliminated under the new standard and entities will no longer separately present in stockholders’ equity an embedded conversion feature of a debt instrument.

The new guidance also requires the use of the if-converted method when calculating diluted earnings per share for convertible instruments and the treasury stock method should no longer be used.

The new guidance also requires the use of the if-converted method when calculating diluted EPS for convertible instruments and the treasury stock method should no longer be used.

Under the new guidance, convertible instruments that may be settled in cash or shares (e.g., the Company’s Convertible Notes) are to be included in the calculation of diluted EPS if the effect is more dilutive, with no option for rebutting the presumption of share settlement based on stated policy or past experience.

Adoption of ASU 2020-06 will result in reclassification of the $ 88.2 million cash conversion feature related to the Company’s Convertible Notes, from stockholders’ equity to liabilities.

The adoption of ASU 2020-06 allows for the recognition of a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption without recasting the financial statements in periods prior to adoption.

The Company plans to elect this transition option.

We expect the adoption of ASU 2020-06 to have a material impact on our Consolidated Financial Statements and related disclosures.

We are finalizing the impact of ASU 2020-06 to our accounting policies, processes, disclosures, and internal control over financial reporting.

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

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

Each of these requirements are consistent with the Company’s previous method for calculating diluted EPS.

The Company adopted ASU 2020-06 effective January 1, 2022, using the modified retrospective approach.

Adoption of ASU 2020-06 resulted in reclassification of the $ 88.2 million cash conversion feature related to the Company’s Convertible Notes, from stockholders’ equity to liabilities.

As a result of the adoption, the Company recognized as a cumulative effect adjustment an increase to the January 1, 2022 opening balance of retained earnings of $ 18.9 million, net of taxes.

Note 4—Hurricane Laura

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

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

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.

The insurance recovery receivable is included in “Accounts Receivable, net” within the Consolidated Balance Sheets.

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

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

As of December 31, 2021 and 2020, the amount of the receivable was $ 28.7 million and $ 23.0 million, respectively.

No proceeds were received from our insurers during the year ended December 31, 2021, as compared to $ 47.5 million received during the year ended December 31, 2020.

For the year ended December 31, 2021, we identified an additional $ 5.7 million of costs related to our policy claim.

We continue to be in the process of quantifying the claim amount under the policies to be submitted to our insurers.

The insurance recovery receivable was included in “Accounts Receivable, net” within the Consolidated Balance Sheets.

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

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

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

During the year ended December 31, 2022, we received insurance claim proceeds totaling $ 39.4 million, resulting in a gain of $ 10.7 million, which is included in “General and administrative” within our Consolidated Statements of Operations.

No proceeds were received from our insurers during the year ended December 31, 2021.

As of February 23, 2023, the insurance claim remains open, and we expect to receive additional future proceeds.

We will record proceeds in excess of the recognized losses and lost profits under our business interruption insurance as a gain contingency in accordance with ASC 450, “Contingencies,” which we expect to recognize at the time of final settlement or when nonrefundable cash advances are made in a period subsequent to December 31, 2022.

During the first quarter of 2022, the Company received insurance payments totaling $ 35.6 million.

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

The following tables summarize the financial impact of Hurricane Laura related matters:

Life to date through December 31,

(in millions) 2022 2021

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Inventory write-off $ 0.2 $ 0.2

(in millions) 2022 2021

Insurance receivable $ — $ 28.7

Note 5—Revenue Disaggregation

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

Our revenues are generated principally by providing the following types of services:

(i) gaming, including iCasino, retail and online sports betting;

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Other revenues are principally comprised of ancillary gaming-related activities, such as commissions received on ATM transactions, racing, PENN Interactive’s social gaming, and revenue from third-party sports betting operators and the related gross-up for taxes.

In addition, we assess our revenues based on geographic location of the related properties, which is consistent with our reportable segments.

During the fourth quarter of 2021, the Company evaluated its reportable segments and changed them to:

Northeast, South, West, Midwest, and Interactive as described in Note 18, “Segment Information.” As a result of the change in reportable segments, we have recast previously reported segment information to conform to the current management view for all prior periods presented.

The changes to reportable segments had no impact to the Company’s consolidated financial statements.

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

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 year ended December 31, 2022

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

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

Other Intersegment Eliminations (2)

Gaming $ 2,434.0 $ 1,050.7 $ 387.6 $ 1,045.9 $ 283.5 $ — $ — $ 5,201.7

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For the year ended December 31, 2021

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

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

Other Intersegment Eliminations (2)

Gaming $ 2,344.2 $ 1,080.4 $ 352.7 $ 1,009.6 $ 158.4 $ — $ — $ 4,945.3

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Total revenues $ 1,639.3 $ 849.6 $ 302.5 $ 681.4 $ 121.1 $ 3.9 $ ( 19.1 ) $ 3,578.7

(1) Other revenues within the Interactive segment are inclusive of gaming tax reimbursement amounts charged to third-party partners for online sports betting and iCasino market access of $ 251.6 million and $ 180.2 million for the years ended December 31, 2022 and 2021, respectively.

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

Note 6—Acquisitions and Dispositions

Greektown Casino-Hotel

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

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

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

During the first quarter of 2020, the Company finalized the allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed, with the excess recorded as goodwill as follows:

(in millions) Fair value

Cash and cash equivalents $ 31.1

Receivables, prepaid expenses, and other current assets 14.5

Property and equipment 28.4

Other intangible assets

Gaming license 166.4

Trademark 24.4

Customer relationships 3.3

Operating lease right-of-use assets 516.1

Finance lease right-of-use assets 4.1

Other assets —

Total assets $ 855.7

Accounts payable, accrued expenses and other current liabilities $ 15.2

Operating lease liabilities 516.1

Finance lease liabilities 4.1

Total liabilities 535.4

Net assets acquired $ 320.3

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

The entire $ 67.4 million goodwill amount is deductible for tax purposes.

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

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

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

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

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

Acquired identifiable intangible assets consist of a gaming license and a trademark, which are both indefinite-lived intangible assets, and customer relationships, which is an amortizing intangible asset with an assigned useful life of two years .

Management valued (i) the gaming license using the Greenfield Method under the income approach;

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

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

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

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

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

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

Revenues $ 195.9

Net income $ 10.9

Margaritaville Resort Casino

On January 1, 2019, the Company acquired the operations of Margaritaville for a net purchase price of $ 122.9 million, after working capital and other adjustments, pursuant to (i) an agreement and plan of merger (the “Margaritaville Merger Agreement”) among the Company, VICI, Bossier Casino Venture (HoldCo), Inc.

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

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

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

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

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

(in millions) Fair value

Cash and cash equivalents $ 10.7

Receivables, prepaid expenses, and other current assets 7.0

Property and equipment 20.7

Other intangible assets

Gaming license 48.1

Customer relationships 2.3

Operating lease right-of-use assets 196.2

Total assets $ 329.2

Accounts payable, accrued expenses and other current liabilities $ 10.1

Operating lease liabilities 196.2

Total liabilities 206.3

Net assets acquired $ 122.9

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

The entire $ 44.2 million goodwill amount is deductible for tax purposes.

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

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

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

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

Management valued (i)

the gaming license using the Greenfield Method under the income approach and (ii) the customer relationships using the with-and-without method of the income approach.

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

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

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

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

Revenues $ 157.6

Net income $ 13.7

Tropicana Las Vegas

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

(“Tropicana”) property 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 12, “Leases” ), beginning in May 2020.

On April 16, 2020, we sold the real estate assets associated with the operations of 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 12, “Leases” ), beginning in May 2020.

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

Pursuant to the purchase agreement, GLPI 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.

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

On January 11, 2022, Penn National 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 National, GLPI, and Bally’s entering into definitive agreements and obtaining regulatory approval.

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

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”).

The transaction closed on September 26, 2022.

On October 1, 2020, we sold the land underlying Hollywood Casino Morgantown (“Morgantown”) to GLPI in exchange for rent credits of $ 30.0 million.

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

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

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

HitPoint Inc.

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(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 preliminary 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 purchase price totaled $ 12.7 million, consisting of $ 6.2 million in cash, $ 3.5 million of the Company’s common stock, 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 stock, 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.

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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

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 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 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 is an amortizing intangible asset with a useful life of two years .

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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.

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 stock, which was allocated to property and equipment.

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

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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.

(the “Purchaser”), an indirectly wholly owned subsidiary of Penn National, acquired each of the issued and outstanding theScore shares (other than those held by Penn National and its subsidiaries) for US$ 17.00 per share in cash consideration, totaling $ 922.8 million, and either 0.2398 of a share of common stock, par value $ 0.01 of Penn Common Stock or, if validly elected, 0.2398 of an exchangeable share in the capital of the Purchaser (each whole share, an “Exchangeable Share”), totaling 12,319,340 shares of Penn Common Stock and 697,539 Exchangeable Shares for approximately $ 1.0 billion.

(the “Purchaser”), an indirectly wholly owned subsidiary of PENN, acquired each of the issued and outstanding theScore shares (other than those held by PENN and its subsidiaries) for US$ 17.00 per share in cash consideration, totaling $ 922.8 million, and either 0.2398 of a share of common stock, par value $ 0.01 of PENN common stock or, if validly elected, 0.2398 of an exchangeable share in the capital of the Purchaser (each whole share, an “Exchangeable Share”), totaling 12,319,340 shares of PENN common stock and 697,539 Exchangeable Shares for approximately $ 1.0 billion.

Each Exchangeable Share will be exchangeable into one share of PENN common stock at the option of the holder, subject to certain adjustments.

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.

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.

See Note 15, “Stockholders’ Equity” for further information.

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.

Based on the acquisition date fair value of this investment of $ 58.9 million, the Company recorded a gain of $ 2.9 million related to remeasurement of the equity security investment immediately prior to the acquisition date which is included in “Other” within our Consolidated Statements of Operations.

The following table reflects the preliminary allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed, with the excess recorded as goodwill:

(in millions) Fair value

Based on the acquisition date fair value of this investment of $ 58.9 million, the Company recorded a gain of $ 2.9 million related to remeasurement of the equity security investment immediately prior to the acquisition date which was included in “Other” within our Consolidated Statements of Operations.

The following table reflects the allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed, with the excess recorded as goodwill.

During the year ended December 31, 2022, we made the following purchase price measurement period adjustment:

(in millions) Estimated fair value, as previously reported .

Measurement period adjustments Final fair value

Cash and cash equivalents $ 160.3 $ — $ 160.3

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Net assets acquired $ 2,082.7 $ — $ 2,082.7

(1) Amounts were initially reported within the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.

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

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All other intangible assets are definite-lived with assigned useful lives primarily ranging from 1 - 7 years.

The re-acquired right intangible asset was assigned a 17.8 year useful life based on the remaining term of a pre-acquisition market access contract between Penn National and theScore.

The re-acquired right intangible asset was assigned a 17.8 year useful life based on the remaining term of a pre-acquisition market access contract between PENN and theScore.

Goodwill, none of which is deductible under the Canadian Income Tax Act, is approximately 81.2 % of the net assets acquired and represents synergies, incremental market share capture and expansion into new markets not existing as of the acquisition date, and future technology development.

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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, 2020.

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.

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

For the year ended December 31, 2021, pro forma adjustments directly attributable to the acquisitions include acquisition and transaction related costs of $ 77.1 million incurred by both Penn National and the respective acquirees’ and gains of $ 51.0 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 year ended December 31, 2021, pro forma adjustments directly attributable to the acquisitions include acquisition and transaction related costs of $ 77.1 million incurred by both PENN and the respective acquirees, gains of $ 51.0 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 year ended December 31, 2020, pro forma adjustments directly attributable to the acquisitions primarily include a net unrealized gain of $ 8.3 million on the equity security investment in theScore.

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Note 7—Investments in and Advances to Unconsolidated Affiliates

As of December 31, 2021 and 2020, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 36 % interest in Barstool Sports;

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

its 50 % interest in Freehold Raceway;

and its 50 % joint venture with Sam Houston that owns and operates racetracks in Texas.

As of December 31, 2022 and 2021, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 36 % interest in Barstool;

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

and our 50 % interest in Freehold Raceway.

On August 1, 2021, the Company purchased the remaining 50 % ownership interest of Sam Houston.

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

Investment in Barstool Sports

In February 2020, we closed on our investment in Barstool Sports pursuant to a stock purchase agreement with Barstool Sports and certain stockholders of Barstool Sports, in which we purchased 36 % (inclusive of 1 % on a delayed basis) of the common stock, par value $ 0.0001 per share, of Barstool Sports for a purchase price of $ 161.2 million.

Prior to August 1, 2021, the Company had a 50 % interest in Sam Houston.

See Note 6, “Acquisitions and Dispositions” for further information, specific to Sam Houston.

Investment in Barstool

As previously disclosed, in February 2020, we closed on our investment in Barstool pursuant to a stock purchase agreement with Barstool and certain stockholders of Barstool, in which we purchased 36 % (inclusive of 1 % on a delayed basis) of the common stock, par value $ 0.0001 per share, of Barstool for a purchase price of $ 161.2 million.

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

Within three years after the closing of the transaction or earlier at our election, we will increase our ownership in Barstool Sports to approximately 50 % by purchasing approximately $ 62.0 million worth of additional shares of Barstool Sports common stock, consistent with the implied valuation at the time of the initial investment, which was $ 450.0 million.

With respect to the remaining Barstool Sports shares, we have immediately exercisable call rights, and the existing Barstool Sports stockholders have put rights exercisable beginning three years after closing, all based on a fair market value calculation at the time of exercise (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 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.

Within three years after the closing of the transaction or earlier at our election, we were required to increase our ownership in Barstool to approximately 50 % by purchasing approximately $ 62.0 million worth of additional shares of Barstool common stock, consistent with the implied valuation at the time of the initial investment, which was $ 450.0 million.

With respect to the remaining Barstool shares, we had immediately exercisable call rights, and the existing Barstool stockholders had 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, all subject to various adjustments).

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 common stock, which eliminated the floor of 2.25 times the annual revenue of Barstool and (ii) fix a number of PENN common shares to be delivered to existing February 2020 employee holders of Barstool common stock, to the extent PENN’s stock price exceeded a specified value defined in the Amended and Restated Stockholders’ Agreement and PENN elected 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 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.

(i) the Barstool common stock

remained subject to our immediately exercisable call rights and the existing Barstool 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 common stock remained 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 common stock, to the extent PENN’s stock price exceeded the updated specified value and PENN elected to settle using a combination of cash and equity.

In conjunction with the February 20, 2020 stock purchase agreement, 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.

1/1,000 th of a share of Series D Preferred Stock is convertible into one share of PENN common stock.

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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 as stipulated in the stock purchase agreement, with the first

20 % tranche having been available for conversion into Penn Common Stock in the first quarter of 2021.

The Series D Preferred Stock issued to certain individual stockholders affiliated with Barstool continue to be available for conversion into PENN common stock in tranches over four years as stipulated in the February 2020 stock purchase agreement, with the first and second 20 % tranches having been available for conversion into PENN common stock in the first quarter of 2021 and first quarter of 2022, respectively.

As of December 31, 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 15, “Stockholders’ Equity,” and Note 16, “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 December 31, 2021 and 2020, we have an amortizing intangible asset pertaining to the customer list of $ 0.8 million and $ 1.6 million, respectively.

As of December 31, 2021 and 2020, we have a prepaid expense pertaining to the advertising in the amount of $ 15.4 million and $ 16.5 million, respectively, of which $ 14.2 million and $ 15.4 million was classified as long-term, respectively.

During the years ended December 31, 2022 and 2021, the Company acquired an additional 0.3 %, and 0.6 % of Barstool common stock, par value $ 0.0001 per share, respectively, which represented a partial settlement of the 1 % purchase on a delayed basis as noted above.

The acquisitions of the acquired Barstool common stock that occurred during the years ended December 31, 2022 and 2021, were settled through a predetermined number of PENN common stock and Series D Preferred Stock, respectively, as contained within the Amended and Restated Stockholders’ Agreement (see Note 15, “Stockholders’ Equity,” for further information).

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

The initial term of the commercial agreement was ten years and, unless earlier terminated and subject to certain exceptions, would have automatically renewed for three additional ten-year terms (a total of 40 years assuming all renewals were exercised).

As of December 31, 2022 and 2021, we had an amortizing intangible asset pertaining to the customer list of $ 0.1 million and $ 0.8 million, respectively.

As of December 31, 2022 and 2021, we had a prepaid expense pertaining to the advertising in the amount of $ 14.2 million and $ 15.4 million, respectively, of which $ 13.0 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 Consolidated Balance Sheets.

As of December 31, 2021 and 2020, our investment in Barstool Sports was $ 162.5 million and $ 147.5 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 December 31, 2021 and 2020.

The Company did not consolidate the financial position of Barstool Sports as of and for the year ended December 31, 2021 and 2020, nor the results of operations for the years ended December 31, 2021 and 2020, as the Company determined that it did not qualify as the primary beneficiary of Barstool Sports either at the commencement date of its investment or for 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.

As of December 31, 2022 and 2021, our investment in Barstool was $ 160.9 million and $ 162.5 million, respectively.

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

Prior to acquisition of the remaining Barstool shares (which occurred on February 17, 2023) as described below, the Company determined that Barstool qualified as a VIE.

However, the Company determined that it did not qualify as the primary beneficiary of Barstool 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’s economic performance.

Therefore, the Company did not consolidate the financial position of Barstool as of December 31, 2022 and 2021, nor the results of operations for the years ended December 31, 2022, 2021, and 2020.

On August 17, 2022, the Company exercised its call rights to bring its ownership of Barstool to 100 %.

Subsequent to year end, on February 17, 2023, the Company completed the acquisition of all of the outstanding shares of common stock of Barstool not already owned by us for approximately $ 388 million, excluding transaction expenses, repayment of Barstool indebtedness, and other purchase price adjustments (the “Barstool Acquisition”).

We issued 2,442,809 shares of our common stock to certain former stockholders of Barstool for the Barstool Acquisition (see Note 15, “Stockholders’ Equity,” for further information) and utilized approximately $ 315 million of cash to complete the Barstool Acquisition, inclusive of transaction expenses and repayment of Barstool indebtedness.

As of the closing of the Barstool Acquisition, Barstool became an indirect wholly owned subsidiary of PENN.

The acquisition of the remaining Barstool shares provides us with a greater ability to execute our organic cross-sell strategy through Barstool’s resources, audience and strong brand recognition.

Due to the timing of the acquisition of the remaining 64 % interest and its proximity to the date of this report, the preliminary purchase price

allocation has not been completed as the Company is currently in the process of determining the purchase price allocation to tangible and identifiable intangible assets acquired and liabilities assumed.

Kansas Joint Venture

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Net income $ 62.9 $ 60.8 $ 28.7

Net income attributable to Penn National $ 30.4 $ 14.4 $ 30.5

Net income attributable to PENN Entertainment $ 31.5 $ 30.4 $ 14.4

Texas and New Jersey Joint Ventures

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No further impairment loss was recorded for the years ended December 31, 2021 and 2020.

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

In addition, through a separate arrangement, the Company has a 50 % interest in a joint venture with Greenwood, which owns and operates Freehold Raceway, in Freehold, New Jersey.

Prior to the August 1, 2021 acquisition of the remaining 50 % interest, the Company determined that our Texas joint venture did not qualify as a VIE.

Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the 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 Sam Houston.

Therefore, the Company did not consolidate the financial position of our Texas joint venture as of December 31, 2020, nor the results of operations for the period of January 1, 2021 through July 31, 2021 or for the year ended December 31, 2020.

The Company has a 50 % interest in a joint venture with Greenwood, which owns and operates Freehold Raceway, in Freehold, New Jersey.

The property features a half-mile standardbred racetrack and a grandstand.

As of December 31, 2021 and 2020, we determined that our New Jersey joint venture did not qualify as a VIE, nor did our former interest in our Texas joint venture for the year ended December 31, 2020.

Using the guidance for entities that are not VIEs, in both cases, the Company determined that it did not have a controlling financial interest in either of the joint ventures as of and for the years ended December 31, 2021 and 2020, primarily as it did not have the ability to direct the activities of either of the joint ventures that most significantly impacted the joint ventures’ economic performance without the input of Sam Houston or Greenwood, respectively.

Therefore, the Company did not consolidate either of its investment in the joint ventures as of and for the years ended December 31, 2021 and 2020.

The Company has determined that our New Jersey joint venture does not qualify as a VIE.

Therefore, the Company did not consolidate the financial position of the New Jersey joint venture as of December 31, 2022 and 2021, nor the results of operations for the years ended December 31, 2022, 2021, and 2020.

Note 8—Property and Equipment

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Accumulated depreciation ( 1,708.3 ) ( 1,634.1 )

1,027.3 918.3

Property and equipment - Subject to Master Leases

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$ 329.1 $ 314.3 $ 336.9

(1) Of such amounts, $ 183.4 million, $ 156.1 million, and $ 158.9 million, respectively, pertained to real estate assets subject to either of our Master Leases.

(1) Of such amounts, $ 175.6 million, $ 183.4 million, and $ 156.1 million, respectively, pertained to real estate assets subject to our Master Leases.

Hurricane Laura

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

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

During the year ended December 31, 2021, we wrote off property and equipment with a net book value of $ 23.2 million, of which $ 2.1 million and $ 21.1 million had been included in Property and equipment – Not subject to Master Leases, and Property and equipment – Subject to Master Leases, respectively.

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

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

There were no impairment charges recorded to property and equipment during the year ended December 31, 2021.

There were no impairment charges recorded to property and equipment during the years ended December 31, 2022 and 2021.

Note 9—Goodwill and Other Intangible Assets

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

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

— — — — — ( 0.6 ) ( 0.6 )

Goodwill acquired during year 9.2 — — — 1,699.0 — 1,708.2

Effect of foreign currency exchange rates — — — — ( 42.8 ) — ( 42.8 )

Balance as of December 31, 2021

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Goodwill, net $ 162.1 $ 175.6 $ 200.2 $ 560.6 $ 1,724.0 $ — $ 2,822.5

Goodwill acquired during year 9.2 — — — 1,699.0 — 1,708.2

Effects of foreign currency exchange rates — — — — ( 42.8 ) — ( 42.8 )

Effect of foreign currency exchange rates — — — — ( 97.1 ) — ( 97.1 )

Impairment losses during year ( 37.4 ) — — — — — ( 37.4 )

— — — — 1.5 — 1.5

Balance as of December 31, 2022

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Goodwill, net $ 124.7 $ 175.6 $ 200.2 $ 560.6 $ 1,628.4 $ — $ 2,689.5

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

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

(1) Amount relates to theScore purchase price measurement period adjustment.

See Note 6, “Acquisitions and Dispositions” .

2022 Annual and Interim Assessment for Impairment

During the third quarter of 2022, we identified an indicator of impairment on goodwill and other intangible assets at the Hollywood Casino at Greektown reporting unit as the majority of the hotel was out of service for longer than anticipated during renovations caused by water damage.

As a result, we revised the cash flow projections for the reporting unit to be reflective of current operating results and the related economic environment.

As a result of the interim assessment for impairment, during the third quarter of 2022, we recognized impairment charges on our goodwill and gaming licenses of $ 37.4 million and $ 65.4 million, respectively.

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

The estimated fair value of the gaming license was determined by using a discounted cash flow model, which utilized Level 3 inputs.

As a result of our 2022 annual assessment for impairment as of October 1, 2022, we recognized a $ 13.6 million impairment charge on our gaming licenses.

The impairment of gaming licenses is specific to Hollywood Casino at PENN National Race Course (“PNRC”) and was largely due to the expansion of gaming legislation in the market and increased supply, particularly from our recent openings of Hollywood Casino York and Hollywood Casino Morgantown, which reduced long-term projections of the property.

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

The annual assessment for impairment did not result in any impairment charges to goodwill or trademarks.

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

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

The total 2022 goodwill and gaming license impairment charges of $ 37.4 million and $ 79.0 million, respectively, pertained to our Northeast segment.

2021 Annual Assessment for Impairment

The Company completed its annual assessment for impairment as of October 1, 2021, which did not result in any impairment charges to goodwill, gaming licenses and trademarks.

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

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

We completed our annual assessment for impairment as of October 1, 2021, which did not result in any impairment charges to goodwill, gaming licenses or trademarks.

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

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

2020 Annual and Interim Assessment for Impairment

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

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

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

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

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

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

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

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

The estimated fair values of the reporting units were determined through a combination of discounted cash

flow models and a market-based approach, which utilized Level 3 inputs.

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

2019 Annual Assessment for Impairment

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

The impairments of goodwill were largely driven by increases in the carrying amount of certain of our reporting units as a result of decreases in the allocated amount of the financing obligation to such reporting units, which was driven by the adoption of ASC 842.

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

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

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

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

The gaming license impairments pertained to our Northeast and South segments in the amounts of $ 55.1 million and $ 7.5 million, respectively.

The trademark impairments pertained to our Northeast, South and Midwest segments, in the amounts of $ 11.5 million, $ 6.5 million and $ 2.0 million, respectively.

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

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

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

Carrying Values of Goodwill and Other Intangible Assets

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Total other intangible assets, net $ 1,932.2 $ ( 193.3 ) $ 1,738.9 $ 2,011.3 $ ( 138.7 ) $ 1,872.6

There were no impairment charges recorded to other intangible assets for the year ended December 31, 2021.

Amortization expense related to our amortizing intangible assets was $ 56.7 million, $ 19.6 million, and $ 21.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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Accrued expenses and other current liabilities $ 804.7 $ 798.5

(1) Amounts as of December 31, 2021 and 2020 include $ 47.6 million and $ 40.8 million, respectively, pertaining to the Company’s accrued progressive jackpot liability.

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

(2) Amounts as of December 31, 2021 and 2020 include $ 82.1 million and $ 86.3 million, respectively, pertaining to the Company’s non-qualified deferred compensation plan that covers management and other highly-compensated employees.

(1) Amounts include the obligation associated with its my choice program and the current portion of advance payments on goods and services yet to be provided and for unpaid wagers, which are discussed in Note 2, “Significant Accounting Policies.” Additionally, amounts as of December 31, 2022 and 2021 include $ 51.4 million and $ 47.6 million, respectively, pertaining to the Company’s accrued progressive jackpot liability.

(2) Amounts as of December 31, 2022 and 2021 include $ 70.8 million and $ 82.1 million, respectively, pertaining to the Company’s non-qualified deferred compensation plan that covers management and other highly-compensated employees and include $ 60.2 million and $ 52.1 million, respectively, pertaining to the Company’s advance deposits.

Note 11—Long-term Debt

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Senior Secured Credit Facilities:

Revolving Credit Facility due 2023 $ — $ —

Amended Revolving Credit Facility due 2027 $ — $ —

Amended Term Loan A Facility due 2027 536.2 —

Amended Term Loan B Facility due 2029 995.0 —

Term Loan A Facility due 2023 — 583.8

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Current maturities of long-term debt ( 56.2 ) ( 99.5 )

Debt discount ( 73.1 ) ( 86.2 )

Debt discounts ( 4.6 ) ( 73.1 )

Debt issuance costs ( 35.7 ) ( 30.6 )

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The following is a schedule of future minimum repayments of long-term debt as of December 31, 2022 (in millions):

Year ending December 31:

Years ending December 31:

Thereafter 1,352.0

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In January 2017, the Company entered into an agreement to amend and restate its previous credit agreement, dated October 30, 2013, as amended (the “Credit Agreement”), which provided for:

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

(i) a five-year $ 700 million revolving credit facility (the “Revolving Facility”);

(ii) a five-year $ 300 million Term Loan A facility (the “Term Loan A Facility”);

and (iii) a seven-year $ 500.0 million Term Loan B facility (the “Term Loan B Facility” and collectively with the Revolving Credit Facility and the Term Loan A Facility, the “Senior Secured Credit Facilities”).

and (iii) a seven-year $ 500 million Term Loan B facility (the “Term Loan B Facility” and collectively with the Revolving Facility and the Term Loan A Facility, the “Senior Secured Credit Facilities”).

On October 15, 2018, in connection with the acquisition of Pinnacle Entertainment, Inc.

(“Pinnacle”), we entered into an incremental joinder agreement (the “Incremental Joinder”), which amended the Credit Agreement (the “Amended Credit Agreement”).

(“Pinnacle”), the Company entered into an incremental joinder agreement (the “Incremental Joinder”), which amended the Credit Agreement (the “Amended Credit Agreement”).

The Incremental Joinder provided for an additional $ 430.2 million of incremental loans having the same terms as the existing Term Loan A Facility, with the exception of extending the maturity date, and an additional $ 1.1 billion of loans as a new tranche having new terms (the “Term Loan B-1 Facility”).

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

On April 14, 2020, the Company entered into a second amendment to its Credit Agreement with its various lenders (the “Second Amendment”) to provide for certain modifications to required financial covenants and interest rates during, and subsequent to, a covenant relief period, which concluded on May 7, 2021 (the “Covenant Relief Period”).

Upon conclusion of the Covenant Relief Period, the Second Amendment permits the Company to (i) maintain a maximum consolidated total net leverage ratio of 5.50 :1.00 for the quarter ended March 31, 2021, 5.00 :1.00 for the quarter ended June 30, 2021, 4.75 :1.00 for the quarter ended September 30, 2021, 4.50 :1.00 for the quarter ended December 31, 2021, and 4.25 :1.00 thereafter, tested quarterly on a pro forma trailing twelve month (“PF TTM”) basis;

(ii) maintain a maximum senior secured net leverage ratio of 4.50 :1.00 for the quarter ended March 31, 2021, 4.00 :1.00 for the quarter ended June 30, 2021, 3.75 :1.00 for

the quarter ended September 30, 2021, 3.50 :1.00 for the quarter ended December 31, 2021, and 3.00 :1.00 thereafter, tested quarterly on a PF TTM basis;

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

In addition, upon conclusion of the Covenant Relief Period, loans under the Senior Secured Credit Facilities bear interest at either a base rate or an adjusted LIBOR rate, plus an applicable margin.

The applicable margins for the Revolving Credit 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 Credit Facility at a rate that ranges from 0.20 % to 0.50 % per annum, depending on the Consolidated Total Net Leverage Ratio as of the most recent fiscal quarter.

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

As of December 31, 2021 and 2020, the Company had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating to $ 26.0 million and $ 28.2 million, respectively, resulting in $ 674.0 million and $ 671.8 million of available borrowing capacity under the Revolving Credit Facility, respectively.

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

On April 14, 2020, the Company entered into a second amendment to its Credit Agreement with its various lenders to provide for certain modifications to required financial covenants and interest rates during, and subsequent to, a covenant relief period, which concluded on May 7, 2021.

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 “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 was initially 1.75 % for Term SOFR loans and 0.75 % for base rate loans until the Company provided financial reports for the first full fiscal quarter following closing and, thereafter, ranges 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 pays a commitment fee on the unused portion of the commitments under the Amended Revolving Credit Facility at a rate that was initially 0.25 % per annum, until the Company provided financial reports for the first full fiscal quarter following closing, and thereafter, ranges 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 12, “Leases” ).

In connection with the repayment of the previous Senior Secured Credit Facilities, during the year ended December 31, 2022 the Company recorded a $ 10.4 million loss on the early extinguishment of debt and additionally recorded $ 1.3 million in refinancing costs, which is included in “General and administrative” within our 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 December 31, 2022, the Company had conditional obligations under letters of credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $ 22.5 million resulting in $ 977.5 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.

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.

Interest on the 5.625 % Notes is payable semi-annually 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.

The Company may redeem the 5.625 % Notes at any time on or after January 15, 2022, at the declining redemption premiums set forth in the indenture governing the 5.625 % Notes, and, prior to January 15, 2022, at a “make-whole” redemption premium set forth in the indenture governing the 5.625 % Notes.

The Company 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.

4.125 % Senior Unsecured Notes

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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 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.

2.75 % Unsecured Convertible Notes

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

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

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

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

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

As of December 31, 2021 and December 31, 2020, 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 December 31, 2022 and 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, 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.

On January 1, 2022, the Company adopted ASU 2020-06, which resulted in a reclassification of the $ 88.2 million cash conversion feature related to the Company’s Convertible Notes, from stockholders’ equity to liabilities as under ASU 2020-06, bifurcation for a cash conversion feature is no longer permitted.

As a result of the adoption, the Company recognized, as a cumulative effect adjustment, an increase to the January 1, 2022 opening balance of retained earnings of $ 18.9 million, net of taxes.

The Convertible Notes consisted of the following components:

(in millions) December 31, 2021 December 31, 2020

(in millions) 2022 2021

Liability component:

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Interest expense $ 760.1 566.9 546.3

Interest income 1.1 0.9 1.4

Capitalized interest ( 1.9 ) ( 4.1 ) ( 2.2 )

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Convertible Notes interest expense $ 10.8 $ 22.7 $ 13.5

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

Subsequent to the adoption of ASU 2020-06, the debt issuance costs attributable to the liability component continues 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 3.4 years as of December 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 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 12, “Leases” ), each with GLPI.

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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 $ 17.9 million for the year ended December 31, 2021.

The amount included in interest expense related to this obligation was $ 27.6 million and $ 17.9 million for the years ended December 31, 2022 and 2021, respectively.

Ohio Relocation Fees

Other long-term obligations included $ 44.5 million and $ 60.9 million as of December 31, 2021 and 2020, 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 $ 27.4 million and $ 44.5 million as of December 31, 2022 and 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:

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PENN Master Lease

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

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

The Company has determined that the lease term is 35 years.

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

As a result of the annual escalator, effective as of November 1, 2021 for the lease year ended October 31, 2021, the fixed component of rent increased by $ 5.6 million and an additional ROU asset and corresponding lease liability of $ 34.2 million were recognized associated with the operating lease components, and an additional ROU asset and corresponding lease liability of $ 3.1 million were recognized associated with the finance lease components.

As a result of the annual escalator, effective as of November 1, 2022 for the lease year ended October 31, 2022, the fixed component of rent increased by $ 5.7 million, additional ROU assets and corresponding lease liabilities of $ 3.6 million were recognized associated with the operating lease components, and additional ROU assets and corresponding lease liabilities of $ 44.8 million were recognized associated with the finance lease components.

As a result of the annual escalator, effective as of November 1, 2021 for the lease year ended October 31, 2021, the fixed component of rent increased by $ 5.6 million, additional ROU assets and corresponding lease liabilities of $ 34.2 million were recognized associated with the operating lease components, and additional ROU assets and corresponding lease liabilities of $ 3.1 million were recognized associated with the finance lease components.

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

As a result of the annual escalator, effective as of November 1, 2019, for the lease year ended October 31, 2019, the fixed component of rent increased by $ 5.5 million and an additional ROU asset and corresponding lease liability of $ 34.4 million were recognized associated with operating lease components and an additional ROU asset and corresponding lease liability of $ 3.1 million were recognized associated with finance lease components.

The next annual escalator test date is scheduled to occur effective November 1, 2022, and the next Penn Percentage Rent reset test date is scheduled for November 1, 2023.

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

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

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

The next annual escalator test date and the next PENN Percentage Rent reset test date are both scheduled to occur effective November 1, 2023.

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

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

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

Total monthly variable expenses were as follows:

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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 PNRC 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.

We concluded the ninth amendment to the Penn Master Lease constitutes a modification event under ASC 842.

We are currently reassessing, remeasuring, and quantifying the impact of the modification to the Consolidated Financial Statements, which may be material.

The modification event will result in (i) a non-cash debt extinguishment charge recorded to our Consolidated Statements of Operations and corresponding change in our financing obligations on our Consolidated Balance Sheets;

and (ii) a revaluation of our lease right-of-use assets and corresponding lease liabilities on our Consolidated Balance Sheets.

We concluded the ninth amendment constituted a modification event under ASC 842, which required us to reassess the classifications of the lease components and remeasure the associated lease liabilities.

As a result of our reassessment of the lease classifications, (i) the land components of substantially all of the PENN Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases, and (ii) the land and building components associated with the operations of Dayton and Mahoning Valley, which were previously classified as finance leases, are now classified as operating leases.

As a result of our measurement of the associated lease liabilities, we recognized additional ROU assets and corresponding lease liabilities of $ 455.4 million.

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

On October 9, 2022, the Company entered into a binding term sheet (the “Term Sheet”) with GLPI.

Pursuant to the Term Sheet, the Company and GLPI agreed to amend and restate the PENN Master Lease (the “Amended and Restated PENN Master Lease”) to (i) remove the land and buildings for Hollywood Casino Aurora (“Aurora”), Hollywood Casino Joliet (“Joliet”), Columbus, Toledo and the M Resort Spa Casino (“M Resort”);

(ii) make associated adjustments to the rent after which the initial rent in the Amended and Restated PENN Master Lease will be $ 284.1 million, consisting of $ 208.2 million of Building Base Rent, $ 43.0 million of Land Base Rent and $ 32.9 million of Percentage Rent (as such terms are defined in the Amended and Restated PENN Master Lease);

and (iii) terminate the existing leases associated with Hollywood Casino at The Meadows (“Meadows”) and Perryville.

Subsequent to year end, the Amended and Restated PENN Master Lease was executed on February 21, 2023 with an effective date of January 1, 2023.

We concluded the Amended and Restated PENN Master Lease constitutes a modification event under ASC 842 and are currently reassessing, remeasuring, and quantifying the impact of the modification to the Consolidated Financial Statements, which may be material.

The modification event is expected to result in (i) a non-cash debt extinguishment charge recorded to our Consolidated Statements of Operations and corresponding change in our financing obligations on our Consolidated Balance Sheets;

and (ii) a revaluation of our ROU assets and corresponding lease liabilities on our Consolidated Balance Sheets.

2023 Master Lease

As part of the Term Sheet and concurrent with the execution of the Amended and Restated PENN Master Lease described above, the Company and GLPI agreed to enter into a new master lease (the “2023 Master Lease”), effective January 1, 2023, specific to the properties associated with Aurora, Joliet, Columbus, Toledo, M Resort, Meadows, and Perryville, and a master development agreement (the “Master Development Agreement”).

The 2023 Master Lease has an initial term through October 31, 2033 with three subsequent five-year renewal periods on the same terms and conditions, exercisable at the Company’s option.

The 2023 Master Lease will be cross-defaulted, cross-collateralized, and coterminous with the Amended and Restated PENN Master Lease, and subject to a parent guarantee.

We are currently assessing, measuring, and quantifying the impact of the 2023 Master Lease to the Consolidated Financial Statements, which may be material.

The 2023 Master Lease includes a base rent (the “2023 Master Lease Base Rent”) equal to $ 232.2 million and the Master Development Agreement contains additional rent (together with the 2023 Master Lease Base Rent, the “2023 Master Lease Rent”) equal to (i) 7.75 % of any project funding received by PENN from GLPI for an anticipated relocation of PENN’s riverboat casino and related developments with respect to Aurora (the “Aurora Project”) and (ii) a percentage based on the then-current GLPI stock price, of any project funding received by PENN from GLPI for certain anticipated development projects with respect to Joliet, Columbus and M Resort (the “Other Development Projects”).

The Master Development Agreement provides that GLPI will fund, upon PENN’s request, up to $ 225 million for the Aurora Project and up to $ 350 million in the aggregate for the Other Development Projects, in accordance with certain terms and conditions set forth in the Master Development Agreement.

These funding obligations of GLPI expire on January 1, 2026.

The 2023 Master Lease Rent will be subject to a one-time increase of $ 1.4 million, effective the fifth anniversary of the effective date.

The 2023 Master Lease Rent will be further subject to a fixed escalator of 1.5 % on November 1, 2023 and annually thereafter.

The Master Development Agreement provides that PENN may elect not to proceed with a development project prior to GLPI’s commencement of any equity or debt offering or credit facility draw intended to fund such project or after such time in certain instances, provided that GLPI will be reimbursed for all costs and expenses incurred in connection with such discontinued project.

The Aurora Project and the Other Development Projects are all subject to necessary regulatory and other government approvals.

Pinnacle Master Lease

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

Upon assumption of the Pinnacle Master Lease, as amended, there were 7.5 years

remaining of the initial ten-year term, with five subsequent, five-year renewal periods, on the same terms and conditions, exercisable at the Company’s option.

In connection with the acquisition of Pinnacle on October 15, 2018, we assumed a triple net master lease with GLPI (the “Pinnacle Master Lease”), originally effective April 28, 2016, pursuant to which the Company leases real estate assets associated with 12 of the gaming facilities used in its operations.

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

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

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

As a result of the annual escalator, effective as of May 1, 2021 for the lease year ended April 30, 2021, the fixed component of rent increased by $ 4.5 million and an additional ROU asset and corresponding lease liability of $ 17.2 million were recognized associated with the operating lease components.

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 additional ROU assets and corresponding lease liabilities of $ 33.2 million were recognized associated with the finance lease components.

As a result of the annual escalator, effective as of May 1, 2021, for the lease year ended April 30, 2021, the fixed component of rent increased by $ 4.5 million, and additional ROU assets and corresponding lease liabilities of $ 17.2 million were recognized associated with the operating lease components.

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

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

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

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

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

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 additional finance lease ROU assets and corresponding lease liabilities of $ 26.1 million.

Effective May 1, 2020, the Pinnacle Percentage Rent resulted in an annual rent reduction of $ 5.0 million, and we recognized additional operating lease ROU assets and corresponding lease liabilities of $ 14.9 million.

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

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The lease term and the five five-year optional renewal periods, which if exercised would extend the Pinnacle Master Lease through April 30, 2051, were not modified in the fifth amendment.

We concluded the fifth amendment to the Pinnacle Master Lease constitutes a modification event under ASC 842.

We are currently reassessing, remeasuring, and quantifying the impact of the modification to the Consolidated Financial Statements, which may be material.

and (ii) a revaluation of our lease right-of-use assets and corresponding lease liabilities on our Consolidated Balance Sheets.

We concluded the fifth amendment to the Pinnacle Master Lease constituted a modification event under ASC 842 (collectively with the ninth amendment to the PENN Master Lease, the “Lease Modification”).

As a result of the modification, the land components of substantially all of the Pinnacle Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases.

As a result of our measurement of the associated lease liabilities, we recognized additional ROU assets and corresponding lease liabilities of $ 937.6 million.

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

Morgantown Lease

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

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

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

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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.”

In conjunction with the acquisition of the operations of 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.

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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 Consolidated Statements of Operations.

In conjunction with entering into the 2023 Master Lease as described above, the Perryville Lease was terminated effective January 1, 2023.

Operating Leases

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

In addition to the 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”), which was terminated on September 26, 2022, and Meadows (the “Meadows Lease”), (ii) individual triple net leases with VICI for the real estate assets used in the operations of Margaritaville Resort Casino (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.

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Tropicana Lease

On April 16, 2020, we entered into the Tropicana Lease with a subsidiary of GLPI for the real estate assets used in the operations of Tropicana for nominal cash rent.

Under the lease agreement, we will continue to operate the Tropicana for two years (subject to three one-year extensions at GLPI’s option) or until the real estate assets and the operations of the Tropicana are earlier sold.

In the event that GLPI sells the real estate assets used in the operations of Tropicana, the Tropicana Lease will automatically terminate.

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

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

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

Prior to the closing of the sale of PENN’s outstanding equity interest in Tropicana on September 26, 2022, the Company leased the real estate assets used in the operations of Tropicana for nominal cash rent.

The term of the Tropicana Lease was for two years (subject to three one-year extensions at GLPI’s option) or until the real estate assets and the operations of the Tropicana were sold.

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

See Note 6, “Acquisitions and Dispositions ” for further details on the sale of PENN’s outstanding equity interest in Tropicana.

Meadows Lease

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

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

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

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We did not incur an annual escalator on October 1, 2022, 2021 or 2020, for the lease years ended September 30, 2022, 2021 and 2020, respectively.

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

The next annual escalator test date is scheduled to occur on October 1, 2022.

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

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

Effective October 1, 2022 and 2020, the Meadows Percentage Rent resulted in an annual rent reduction of $ 0.9 million and $ 2.1 million, respectively.

Upon reset of the Meadows Percentage Rent, effective October 1, 2022 and 2020, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 15.4 million and $ 17.1 million, respectively.

On January 14, 2022, the second amendment to the Meadows Lease between the Company and GLPI became effective.

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

In conjunction with entering into the 2023 Master Lease as described above, the Meadows Lease was terminated effective January 1, 2023.

Margaritaville Lease

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

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

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

The payment structure under the Margaritaville Lease includes a fixed component, a portion that is subject to an annual escalator of up to 2 % depending on a minimum coverage floor ratio of Net Revenue to Rent of 6.1 :1, and a component that is based on performance, which is prospectively adjusted every two years by an amount equal to 4 % of the average change in net revenues of the property compared to a contractual baseline during the preceding two years (“Margaritaville Percentage Rent”).

Subsequent to year end, on February 1, 2023, the Margaritaville Lease 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 $ 2.8 million.

On February 1, 2022, the Margaritaville Lease 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.

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

On February 1, 2021, the Margaritaville Percentage Rent reset resulted in an annual rent reduction of $ 0.1 million which will be in effect until the next Margaritaville Percentage Rent reset, scheduled to occur on February 1, 2023.

On February 1, 2020, the annual escalator test resulted in an annual rent increase of $ 0.3 million and the recognition of an additional operating lease ROU asset and corresponding lease liability of $ 3.1 million.

Subsequent to year end, on February 1, 2023, the Margaritaville Percentage Rent reset resulted in an annual rent increase of $ 2.3 million which will be in effect until the next Margaritaville Percentage Rent reset, scheduled to occur on February 1, 2025.

Upon reset of the Margaritaville Percentage Rent, effective February 1, 2023, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 9.8 million.

On February 1, 2021, the Margaritaville Percentage Rent reset resulted in an annual rent reduction of $ 0.1 million which was in effect until the February 1, 2023 Margaritaville Percentage Rent reset.

Upon reset of the Margaritaville Percentage Rent, effective February 1, 2021, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 5.5 million.

Greektown Lease

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In May 2020, the lease was amended to remove the escalator for the lease years ending May 31, 2022 and 2021 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).

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

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Information related to lease term and discount rate was as follows:

December 31, 2021

Weighted-Average Remaining Lease Term

Operating leases 25.7 years

Finance leases 24.3 years

Financing obligations 28.5 years

Operating leases 19.1 years 25.7 years

Finance leases 26.7 years 24.3 years

Financing obligations 27.5 years 28.5 years

Weighted-Average Discount Rate

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Interest expense, net $ 347.0 $ 416.9 $ 403.1

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

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

The Tropicana Lease was terminated on September 26, 2022.

Prior to the Lease Modification, the operating lease components contained within the Master Leases primarily consisted of the land, inclusive of the variable expense associated with Columbus and Toledo.

Subsequent to the Lease Modification, the operating lease components contained within the Master Leases consist of the land and building components associated with the operations of Dayton and Mahoning Valley.

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

(3) Primarily pertains to the Dayton and Mahoning Valley finance lease components and the Perryville Lease (effective July 1, 2021).

(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.

Subsequent to the Lease Modification, the finance lease components contained within the Master Leases primarily consist of the land, inclusive of the variable expense associated with Columbus and Toledo.

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

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Financing cash flows from finance leases $ 110.5 $ 8.5 $ 6.3

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

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

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

For the year ended December 31,

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Pinnacle Master Lease (1)

334.1 328.3 326.9

Perryville Lease 7.8 3.9 —

Meadows Lease (1)

24.6 24.9 26.4

Margaritaville Lease 23.8 23.5 23.5

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

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

(2) Cash rent payable under the Tropicana Lease was nominal prior to the lease termination on September 26, 2022.

Therefore, it has been excluded from the table above.

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

For the years ended December 31, 2021, 2020, and 2019, the Company recognized $ 231.1 million, $ 146.8 million, and $ 311.0 million, of lessor revenues related to the rental of hotel rooms, respectively.

For the years ended December 31, 2022, 2021, and 2020, the Company recognized $ 262.0 million, $ 231.1 million, and $ 146.8 million of lessor revenues related to the rental of hotel

rooms, respectively.

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

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Purchase obligations totaled $ 255.2 million as of December 31, 2021.

The increase over the prior year is primarily due to Penn Interactive launching operations in new states as well as the acquisition of theScore.

The increase over the prior year is primarily due to additional contractual obligations related to theScore.

Capital Expenditure Commitments

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As of December 31, 2022, we had 35 collective bargaining agreements covering approximately 3,873 active employees.

Four collective bargaining agreements are scheduled to expire in 2022 .

Eight collective bargaining agreements are scheduled to expire in 2023.

Note 14—Income Taxes

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Unrecognized tax benefits 9.8 8.9

Investments in and advances to unconsolidated affiliates 13.0 —

Discount on convertible notes 0.4 —

Net operating losses, interest limitation and tax credit carryforwards 112.7 115.7

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Discount on convertible notes — ( 18.1 )

Undistributed foreign earnings — ( 0.4 )

Intangible assets ( 263.7 ) ( 284.8 )

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

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

Due to the financial results during the year ended December 31, 2021, the Company has a cumulative pre‑tax book loss of $ 189.1 million, which reflects the significant negative evidence used in our assessment.

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

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

ASC 740 suggests that additional scrutiny should be given to deferred taxes of an entity with cumulative pre-tax book losses during the three most recent years and is considered significant negative evidence that is objective and verifiable and therefore, an entity would need sufficient quality and quantity to support a conclusion to overcome.

The Company determined that a valuation allowance was no longer required against its federal, foreign and state deferred tax assets for the portion that is more-likely-than-not to be realized.

The most significant evidence that led to the reversal of the valuation allowance during the third quarter of 2022, included (i) achievement and sustained growth in our three-year cumulative pre-tax earnings, (ii) substantial total revenue and earnings growth for the retail operating segment over the last

seven quarters and (iii) lack of significant asset impairment charges expected to be indicative of the Company’s retail business operations.

For the three months ended December 31, 2022, there were no material changes to our core business operations that altered our prior interim conclusion to release the valuation allowance against the federal, foreign and state net deferred tax assets for the portion that is more-likely-than-not to be realized.

The Company generated three-year cumulative pre-tax income of $ 67.3 million at December 31, 2022 despite the $ 118.2 million impairment charges recorded during the year ended December 31, 2022.

As such, the Company released $ 113.4 million of its total valuation allowance for the year ended December 31, 2022, due to the positive evidence outweighing the negative evidence thereby allowing the Company to achieve the “more-likely-than-not” realization standard.

This reversal is included in “Income tax benefit (expense)” in our Consolidated Statements of Operations.

The Company has also maintained a valuation allowance of $ 31.2 million against its net deferred tax assets primarily related to foreign and state net operating loss carryforwards, excluding net operating losses (“NOLs”) that can be realized based on statutory carryback periods and the reversal of net deferred taxes related to indefinite‑lived intangibles.

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

During the year ended December 31, 2021, the Company increased the valuation allowance by $ 23.3 million of which $ 18.2 million was recorded to the balance sheet as a purchase accounting adjustment for the theScore acquisition and $ 5.1 million was recorded through income tax expense.

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

As of December 31, 2022, we had federal NOL carryforwards from prior acquisitions of $ 96.6 million, and various state NOL carryforwards, the majority of which will expire in periods through 2035.

Following theScore acquisition, the Company has the following NOL carryforwards, (i) indefinite gross U.S.

federal NOL of $ 17.9 million, (ii) foreign NOL of $ 102.1 million that will expire through 2042 and (iii) state NOLs of $ 24 million that will expire through 2042.

The tax benefit associated with these acquired NOLs is $ 3.8 million, $ 26.8 million, and $ 0.2 million respectively, against which a valuation allowance was recorded of $ 0.2 million for U.S.

federal and state NOLs that will not be recognized.

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

In general, the Company has not recognized any U.S.

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The undistributed foreign earnings were immaterial at December 31, 2022.

Following the ownership changes of the Tropicana, the Company has $ 102.8 million of total gross federal NOL carryforwards that will expire on various dates through 2035.

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

During the year ended December 31, 2021, the Company decreased its U.S.

federal NOL carryforward by $ 153.7 million due to the current year utilization and generated a current U.S.

federal NOL carryforward of $ 7.9 million due to the acquisition of the theScore’s U.S.

The Company acquired total gross U.S.

federal NOLs of $ 16.5 million, state NOLs of $ 5.8 million, and Canadian NOLs of $ 42.2 million from theScore acquisition in the amount of $ 64.5 million.

The tax benefit associated with these acquired NOLs is $ 3.4 million, $ 0.4 million, and $ 11.2 million respectively, against which a valuation allowance was recorded of $ 3.9 million for U.S.

federal and state NOLs that will not be recognized.

All acquired tax attributes are subject to limitations under the Internal Revenue Code and underlying Treasury Regulations, however, we believe it is more-likely-than-not that the benefit from these attributes will be realized outside of the portion of NOLs with a valuation allowance recorded as noted above.

For state income tax reporting, as of December 31, 2021, the Company had gross state NOL carryforwards aggregating $ 1.2 billion available to reduce future state income taxes, primarily for the Commonwealth of Pennsylvania, Colorado, Illinois, Iowa, Louisiana, Maryland, Michigan, Missouri, New Mexico and Ohio and Michigan localities.

For state income tax reporting, as of December 31, 2022, the Company had gross state NOL carryforwards aggregating $ 1.2 billion available to reduce future state income taxes, primarily for the Commonwealth of Pennsylvania, Colorado, Illinois, Iowa, Louisiana, Maryland, Michigan, Missouri, New Mexico, and localities within Ohio and Michigan.

The tax benefit associated with these NOL carryforwards was $ 56.4 million.

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2022 2021 2020

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

Percent and amount of pretax income

(in millions, except tax rates) Amount Amount Amount

Amount of pre-tax income

Federal statutory rate $ ( 36.8 ) $ ( 113.2 ) $ 175.2

State and local income taxes, net of federal benefits ( 5.2 ) ( 7.7 ) 12.1

Tax law change ( 10.8 ) — —

Nondeductible expenses ( 7.8 ) ( 13.3 ) ( 2.6 )

2 unchanged sentences

Foreign 0.9 0.9 ( 0.4 )

Federal valuation allowance 1.1 ( 5.9 ) ( 3.9 ) ( 32.7 ) — —

Valuation allowance 113.4 ( 5.9 ) ( 32.7 )

Tax credits 4.6 5.8 10.0

1 unchanged sentence

Other ( 5.7 ) ( 3.0 ) 2.0

Total effective tax rate and income tax benefit (expense) 22.0 % $ ( 118.6 ) 19.8 % $ 165.1 49.9 % $ ( 43.0 )

Income tax benefit (expense) $ 46.4 $ ( 118.6 ) $ 165.1

Effective Tax Rate ( 26.5 ) % 22.0 % 19.8 %

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

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

Such audits could result in

increased tax liabilities, interest and penalties.

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

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

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As of December 31, 2022 and 2021, prepaid income taxes of $ 15.2 million and $ 42.5 million, respectively, were included in “Prepaid expenses” within the Company’s Consolidated Balance Sheets.

Tax Legislation

The Pennsylvania House Bill 1342.

On July 8, 2022, the Bill 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 assessed the impact of the law change and recorded an additional income tax expense of $ 10.0 million in its Consolidated Statements of Operations for the period ended December 31, 2022.

Inflation Reduction Act.

On August 16, 2022, The Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The IRA contains several provisions including a 15% corporate alternative minimum tax (“CAMT”) for certain large corporations that have at least an average of $1.0 billion adjusted financial statement income over a three-year period effective for tax years beginning after December 31, 2022.

A CAMT credit would also be allowed to offset regular federal tax in future years.

The IRA also includes a 1% excise tax on corporate stock repurchases after January 1, 2023.

Although the Company is assessing the impact of the law change and waiting on further guidance from the Department of Treasury, the Company does not believe that these new provisions will have a material impact on its Consolidated Financial Statements.

Note 15—Stockholders’ Equity

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

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

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

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

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 for a total of $ 0.2 million.

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.

These Articles of Incorporation, as amended and restated and approved by the Company’s shareholders at the 2021 Annual Meeting of Shareholders, increase the number of authorized shares of common stock from 200,000,000 to 400,000,000 .

In August 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 December 31, 2021 there were 697,539 Exchangeable Shares issued and 653,059 outstanding.

Share Repurchase Program

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

During the year ended December 31, 2019, the Company repurchased 1,271,823 shares of its common stock in open market transactions for $ 24.9 million at an average price of $ 19.55 per share.

All of the repurchased shares were retired.

There were no repurchases of the Company’s common stock for the years ended December 31, 2021, and 2020.

On February 1, 2022, the Board of Directors of Penn National approved a $ 750.0 million share repurchase program.

The three year authorization expires on January 31, 2025.

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.

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 December 31, 2022 and 2021, there were 620,019 and 653,059 Exchangeable Shares outstanding, respectively.

Subsequent to year end, on February 17, 2023, as part of the Barstool Acquisition as discussed in Note 7, “Investments in and Advances to Unconsolidated Affiliates,” the Company issued 2,442,809 shares of common stock to certain former stockholders of Barstool (the “Share Consideration”).

The issuance of the Share Consideration was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, because such issuance did not involve a public offering.

The Share Consideration is subject to transfer restrictions providing that the former Barstool stockholders (i) may not transfer any of their Share Consideration for one year following the closing of the Barstool Acquisition, (ii) may transfer up to one-third of their Share Consideration after the first anniversary of the closing of the Barstool Acquisition, and (iii) may transfer their remaining Share Consideration after the second anniversary of the closing of the Barstool Acquisition, in each case subject to compliance with applicable securities laws.

In February 2020, the Company issued 883 shares of Series D Preferred Stock, par value $ 0.01 per share, to certain individual stockholders affiliated with Barstool as discussed in Note 7, “Investments in and Advances to Unconsolidated Affiliates.”

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 common stock.

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

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

The acquisition of the incremental Barstool common stock represents a partial settlement of the 1 % purchase on a delayed basis as described in Note 7, “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 December 31, 2022 and 2021, there were 5,000 shares authorized of Series D Preferred Stock of which 581 shares and 775 shares were outstanding, respectively.

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

As of both December 31, 2022 and 2021, there were 1,000,000 and 18,500 shares authorized of our Series B and Series C preferred stock, respectively.

There were no shares outstanding of either Series B or Series C preferred stock as of both December 31, 2022 and 2021.

Share Repurchase Authorizations

On February 1, 2022, the Board of Directors of PENN authorized a $ 750 million share repurchase program, which expires on January 31, 2025 (the “February 2022 Authorization”).

On December 6, 2022, a second share repurchase program was authorized for an additional $ 750 million (the “December 2022 Authorization”).

The December 2022 Authorization expires on December 31, 2025.

The Company plans to utilize the remaining capacity under the February 2022 Authorization prior to effecting any repurchases under the December 2022 Authorization.

Repurchases by the Company will be subject to available liquidity, general market and economic conditions, alternate uses for the capital and other factors.

Share repurchases may be made from time to time through a 10b5-1 trading plan, open market transactions, block trades or in private transactions in accordance with applicable securities laws and regulations and other legal requirements.

There is no minimum number of shares that the

Company is required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice.

During February 2022, the Company repurchased 2,195,290 shares of its common stock in open market transactions for $ 107.1 million at an average price of $ 48.78 per share.

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 year ended December 31, 2022, the Company repurchased 17,561,288 shares of its common stock in open market transactions for $ 601.1 million at an average price of $ 34.23 per share under the February 2022 Authorization.

The cost of all repurchased shares is recorded as “Treasury stock” in the Consolidated Balance Sheets.

The remaining availability under our $ 750.0 million share repurchase program was $ 642.9 million as of February 28, 2022.

Preferred Stock

On February 20, 2020, the Company issued 883 shares of Series D Preferred Stock, par value $ 0.01 per share, to certain individual stockholders affiliated with Barstool Sports as discussed in Note 7, “Investments in and Advances to Unconsolidated Affiliates.”

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

As of December 31, 2021 and 2020, there were 1,000,000 and 18,500 shares authorized of our Series B and Series C preferred stock, respectively.

There were no shares outstanding of either Series B or Series C preferred stock as of December 31, 2021 and 2020.

During each of the quarters ended March 31, 2021 and September 30, 2021, the Company issued 43 shares of Series D Preferred Stock, for a total of 86 shares, in conjunction with acquiring an additional 0.6 % of Barstool Sports common stock.

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 7, “Investments in and Advances to Unconsolidated Affiliates.”

During the quarters ended March 31, 2021 and September 30, 2021, 151.2 and 43 shares of Series D Preferred Stock were converted to Penn Common Stock, respectively.

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

As of December 31, 2021 and December 31, 2020, there were 5,000 shares authorized of Series D Preferred Stock of which 775 shares and 883 shares were outstanding, respectively.

Subsequent to the year ended December 31, 2022, the Company repurchased 1,065,688 shares of its common stock at an average price of $ 31.41 per share for an aggregate amount of $ 33.5 million.

As of February 23, 2023, the remaining availability under our February 2022 Authorization and our December 2022 Authorization was $ 115.8 million and $ 750 million, respectively.

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 %.

The receivable is recorded as a reduction of equity within our Consolidated Balance Sheets and is presented within our Consolidated Statement of Changes in Stockholders’ Equity within the “Other” caption.

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

The promissory notes were settled subsequent to year end in connection with the acquisition of Barstool on February 17, 2023, as described in Note 7, “Investments in and Advances to Unconsolidated Affiliates” .

Note 16—Stock-Based Compensation

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”) to replace our 2018 Plan (as defined below).

The 2022 Plan authorizes the Company to issue stock options (incentive and/or non-qualified), stock appreciation rights (“SARs”), restricted stock (shares and/or units), performance awards (shares and/or units), and cash awards to executive officers, non-employee directors, other employees, consultants, and advisors 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 both the 2018 Plan and theScore Plan (as defined below) as of June 7, 2022 and outstanding awards that are forfeited or settled for cash under each of the prior plans.

For purposes of determining the number of shares available for issuance under the 2022 Plan, stock options, restricted stock and all other equity settled awards 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 December 31, 2021, there were 4,434,660 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.

As of December 31, 2022, there are 6,345,906 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”) authorized it to issue stock options (incentive and/or non-qualified), SARs, restricted stock (shares and/or units), performance awards (shares and/or units), and cash awards to employees and any consultant or advisor to the Company or subsidiary.

Non-employee directors 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 are 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

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 are no longer available for issuance and all future equity awards will be granted pursuant to the 2022 Plan.

On April 12, 2021, the Board of Directors granted 600,000 restricted stock units and 300,000 restricted stock awards with market-based and service-based vesting conditions (collectively the “Stock Awards”), solely to the Company’s Chief Executive Officer and President 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 $ 6.3 million of stock compensation expense for the Stock Awards during the year ended December 31, 2021.

The fair value of the restricted stock awards 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 restricted stock units 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 $ 8.6 million and $ 6.3 million of stock compensation expense for the Stock Awards during the years ended December 31, 2022 and 2021, respectively.

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.

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.

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 Score 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 December 31, 2021, there were 207,156 shares available for future grants to legacy Score employees and service providers.

2008 Long Term Incentive Compensation Plan

In November 2008, the Company’s shareholders approved the 2008 Long Term Incentive Compensation Plan (the “2008 Plan”), which permitted the Company to issue stock options (incentive and/or non-qualified), SARs, RSAs, CPSUs and other equity and cash awards to employees.

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

Upon approval of the 2018 Plan, awards were no longer available to be granted under the 2008 Plan.

However, the 2008 Plan remains in place until all of the awards previously granted thereunder have been paid, forfeited or expired.

theScore Plan authorized the Company to issue non-qualified stock options and restricted stock units 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 restricted stock units equivalent to 853,904 shares of the Company.

Each rollover option and restricted stock unit 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 restricted stock unit, 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 restricted stock units will automatically accelerate and become fully vested on the effective date of termination.

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 are no longer available for issuance and all future equity awards will be pursuant to the 2022 Plan.

Stock-based Compensation Expense

Stock-based compensation expense, which pertains principally to our stock options, RSAs and RSUs for the years ended December 31, 2021, 2020 and 2019 totaled $ 35.1 million, $ 14.5 million and $ 14.9 million, respectively, and is included within the Consolidated Statements of Operations under “General and administrative.”

Stock-based compensation expense pertains to our stock options and restricted stock, including restricted stock with performance conditions.

The Company recognized $ 58.1 million, $ 35.1 million and $ 14.5 million stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020, respectively, which is included within the Consolidated Statements of Operations under “General and administrative.”

Stock Options

Stock options that expire between January 6, 2022 and October 8, 2031 have been granted to officers, directors, employees, and predecessor employees to purchase common stock at prices ranging from $ 2.51 to $ 117.82 per share, including options rolled over from theScore Plan.

Stock options that expire between February 9, 2023 and October 3, 2032 have been granted to officers, directors, employees, and predecessor employees to purchase common stock at prices ranging from $ 2.51 to $ 117.82 per share, including options rolled over from theScore Plan.

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

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

During the year ended December 31, 2021, the Company granted 587,399 stock options, of which 352,768 were rolled over under theScore Plan.

The Company granted 652,733 , and 2,436,811 stock options during the years ended December 31, 2020 and 2019, respectively.

The following table contains information about our stock options:

During the year ended December 31, 2022, the Company granted 398,945 stock options.

The Company granted 587,399 stock options during the year ended December 31, 2021, of which 352,768 were rolled over under theScore Plan, and granted 652,733 stock options during the year ended December 31, 2020.

The following table presents activity related to our stock options for the year ended December 31, 2022:

Number of Option

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Outstanding as of January 1, 2022

Granted and rolled over 587,399 $ 41.96

3,357,374 $ 23.69

Granted 398,945 $ 50.43

Exercised ( 440,170 ) $ 15.64

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Outstanding as of December 31, 2022

3,270,763 $ 27.89 6.2 $ 26.6

Exercisable as of December 31, 2022

The combined weighted-average grant-date fair value of options granted and rolled over under theScore Plan during the year ended December 31, 2021, was $ 57.70 .

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

The aggregate intrinsic values of stock options exercised during the years ended December 31, 2021, 2020 and 2019 were $ 53.1 million, $ 128.9 million and $ 2.0 million, respectively.

The total fair values of stock options that vested during the years ended December 31, 2021, 2020 and 2019 were $ 6.2 million, $ 9.6 million and $ 6.2 million, respectively.

1,971,559 $ 21.37 5.3 $ 19.8

The following table presents information related to the fair value and intrinsic value of our stock options for the years ended December 31, 2022, 2021 and 2020:

For the year ended December 31,

(in millions) 2022 2021 2020

Weighted-average grant-date fair value of options (1)

$ 30.09 $ 57.70 $ 8.62

Aggregate intrinsic value of stock options exercised 8.6 53.1 128.9

Fair value of stock options vested 21.3 6.2 9.6

(1) For the year ended December 31, 2021, the combined weighted-average grant-date fair values of options includes those rolled over under theScore Plan.

As of December 31, 2022, the unamortized compensation costs not yet recognized related to stock options granted totaled $ 18.9 million and the weighted-average period over which the costs are expected to be recognized was 1.6 years.

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Weighted-average expected life (in years) 5.2 5.2 5.0

(1) The expected dividend yield is zero , as the Company has not historically paid dividends.

Restricted Stock Awards and Restricted Stock Units

As noted above, the Company grants RSAs and RSUs to our employees and certain non-employee directors.

In addition, the Company issues its named executive officers (“NEOs”) and other key executives RSAs and RSUs with performance conditions (we refer to our RSAs and RSUs with performance conditions as “PSAs”), which are discussed in further detail below.

As noted above, the Company grants restricted stock to our employees and certain non-employee directors.

In addition, the Company issues its named executive officers (“NEOs”) and other key executives restricted stock with performance conditions, which are discussed in further detail below.

Performance Share Programs

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

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

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

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

On April 12, 2021, in addition to the Stock Awards mentioned above, an aggregate of 94,673 PSAs with performance-based vesting conditions, at target, was granted under the Performance Share Program II, to be granted in one-third increments.

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

The awards have the potential to be earned at between 0 % and 200 % of the number of shares granted depending on achievement of the annual performance goals, but remain subject to vesting for the full three-year service period.

The grant date fair values of our RSAs and RSUs are based on the most recent closing stock price of the Company’s shares of common stock.

The Company’s performance share programs were adopted to provide our NEOs and certain other key executives with stock-based compensation tied directly to the Company’s performance, which further aligns their interests with our shareholders and provides compensation only if the designated performance goals are met for the applicable performance periods.

On February 25, 2020, an aggregate of 107,297 restricted shares with performance-based vesting conditions, at target, were granted under our performance share program (“Performance Share Program II”), to be granted in one-third increments.

On April 12, 2021, in addition to the Stock Awards mentioned above, an aggregate of 94,673 restricted shares and units with performance-based vesting conditions, at target, were granted under the Performance Share Program II.

During the year ended December 31, 2022, an aggregate of 244,955 restricted units with performance-based vesting conditions, at target, were granted under the Performance Share Program II.

Restricted stock issued pursuant to the Performance Share Program II consist of three one-year performance periods over a three-year service period.

The awards have the potential to be earned at between 0 % and 200 % of the number of shares granted during the years ended December 31, 2020 and 2021, and 0 % and 150 % of the number of shares granted during the year ended December 31, 2022, depending on achievement of the annual performance goals, and remain subject to vesting for the full three-year service period.

In addition, during the year ended December 31, 2022, the Company granted key employees of theScore 102,422 restricted units with performance-based vesting conditions that are dependent on the achievement of certain milestones.

The awards have the potential to be earned at between 0 % and 100 % and consist of two , one-year performance periods, each containing an applicable milestone.

The awards also contain a one-year vesting requirement and vesting is subject to:

(a) the satisfaction of the milestones on or before the applicable expiration date and (b) continued service through the date on which the respective portion of the awards vests.

The grant date fair value for restricted stock is generally based on the closing stock price of the Company’s shares of common stock on the trading day preceding the grant date.

The grant date fair value for the performance awards issued to key employees of theScore was determined using the five-day volume weighted average closing stock price of the Company’s shares of common stock as of the trading day immediately preceding the grant date.

The stock-based compensation expense is recognized over the remaining service period at the time of grant, adjusted for the Company’s expectation of the achievement of the performance conditions.

During the year ended December 31, 2021, the Company granted 871,763 RSAs and RSUs without performance conditions, of which 501,136 were RSUs rolled over under theScore Plan.

The following table contains information on our RSAs and RSUs:

The following table presents activity related to our restricted stock for the year ended December 31, 2022:

With Performance Conditions Without Performance Conditions

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Nonvested as of January 1, 2022

Granted and rolled over 1,106,613 $ 62.81 871,763 $ 78.15

1,168,364 $ 58.89 1,103,013 $ 66.90

Granted 428,551 $ 43.23 704,317 $ 36.01

Vested ( 165,101 ) $ 56.20 ( 328,703 ) $ 59.42

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Nonvested as of December 31, 2022

As of December 31, 2021, the unamortized compensation costs not yet recognized related to RSAs and RSUs totaled $ 117.3 million and the weighted-average period over which the costs are expected to be recognized is 3.4 years.

The total fair values of RSAs and RSUs that vested during the year ended December 31, 2021 was $ 28.9 million.

The total fair values of RSAs that vested during the years ended December 31, 2020 and 2019 were $ 16.7 million and $ 5.5 million, respectively.

1,426,208 $ 54.68 1,342,400 $ 53.00

As of December 31, 2022, the unamortized compensation costs not yet recognized related to restricted stock totaled $ 103.7 million and the weighted-average period over which the costs are expected to be recognized is 2.7 years.

The total fair values of restricted stock that vested during the years ended December 31, 2022, 2021 and 2020 were $ 28.8 million, $ 28.9 million and $ 16.7 million, respectively.

Cash-settled Phantom Stock Units

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

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

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 Consolidated Balance Sheets, associated with its cash-settled CPSUs of $ 8.6 million and $ 10.1 million as of December 31, 2021 and 2020 respectively.

For CPSUs held by employees, non-employee directors, and the chairman emeritus of the Company, there was $ 13.2 million of total unrecognized compensation cost as of December 31, 2021 that will be recognized over the awards remaining weighted-average vesting period of 1.1 years.

For the years ended December 31, 2021, 2020 and 2019, the Company recognized $ 12.1 million, $ 11.5 million, and $ 4.1 million of compensation expense associated with these awards, respectively.

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

We paid $ 13.3 million, $ 4.7 million, and $ 2.5 million during the years ended December 31, 2021, 2020 and 2019, respectively, pertaining to our cash-settled CPSUs.

Our outstanding cash-settled phantom stock units (“CPUs”), are settled in cash and entitle plan recipients to receive a cash payment based on the fair value of the Company’s common stock which is based on the closing stock price of the trading day preceding the vest date.

Our CPUs vest over a period of one to four years .

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

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, associated with its cash-settled CPUs of $ 2.1 million and $ 8.6 million as of December 31, 2022 and 2021 respectively.

As of December 31, 2022, there was a total of $ 3.7 million unrecognized compensation cost related to CPUs that will be recognized over the remaining weighted-average vesting period of 0.7 years.

For the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 4.0 million, $ 12.1 million, and $ 11.5 million of compensation expense related to CPU awards, respectively.

Compensation expense associated with our CPUs is recorded in “General and administrative” within the

Consolidated Statements of Operations.

We paid $ 10.5 million, $ 13.3 million, and $ 4.7 million during the years ended December 31, 2022, 2021 and 2020, respectively, pertaining to cash-settled CPSUs.

Stock Appreciation Rights

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

Our outstanding SARs are settled in cash and are accounted for as liability awards, and generally vest over a period of four years .

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

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For SARs held by employees of the Company, there was $ 6.5 million of total unrecognized compensation cost as of December 31, 2022 that will be recognized over the awards remaining weighted-average vesting period of 1.9 years.

For the years ended December 31, 2021, 2020, and 2019 the Company recognized a charge to compensation expense of $ 3.1 million, $ 69.7 million, and $ 10.7 million respectively.

For the year ended December 31, 2022, the Company recognized a reduction to compensation expense of $ 5.5 million, as compared to a charge to compensation expense of $ 3.1 million and $ 69.7 million for the years ended December 31, 2021 and 2020, respectively.

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

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Note 17—Earnings (Loss) per Share

For the years ended December 31, 2021 and December 31, 2019, we recorded net income attributable to Penn National.

As such, we used diluted weighted-average common shares outstanding when calculating diluted income per share for the years ended December 31, 2021 and December 31, 2019.

Stock options, RSAs, RSUs, 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.

For the year ended December 31, 2020, we recorded a net loss attributable to Penn National.

As such, because the dilution from potential common shares was antidilutive, we used basic weighted-average common shares outstanding, rather than

diluted weighted-average common shares outstanding when calculating diluted loss per share.

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

For the years ended December 31, 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.

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.

For the year ended December 31, 2020, we recorded a net loss attributable to PENN.

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

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

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

Assumed conversion of dilutive stock options 3.0

Assumed conversion of dilutive RSAs 0.5

Assumed conversion of dilutive restricted stock 0.5

Assumed conversion of convertible preferred shares 0.7

Assumed conversion of convertible debt 9.1

The following table sets forth the allocation of net income for the year ended December 31, 2021, under the two-class method.

For the year ended December 31, 2020 we did not utilize the two-class method due to incurring a net loss for the period, nor did we utilize the two-class method for the year ended December 31, 2019, as we issued Series D Preferred stock on February 20, 2020, as discussed in Note 15, “Stockholders’ Equity.”

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

For the year ended December 31, 2020, we did not utilize the two-class method due to incurring a net loss for the period.

For the year ended December 31,

(in millions) 2022 2021 2020

Net income (loss) attributable to Penn National $ 420.8 $ ( 669.5 ) $ 43.9

Net income (loss) attributable to PENN Entertainment $ 222.10 $ 420.80 $ ( 669.50 )

Net income applicable to preferred stock 0.9 2.1 —

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Dilutive stock options 1.2 2.3 —

Dilutive RSAs and RSUs 0.4 — 0.3

Dilutive restricted stock 0.1 0.4 —

Convertible debt 14.1 14.1 —

Weighted-average common shares outstanding—Diluted 176.6 175.5 134.0

RSAs and RSUs with performance and market based vesting conditions that have not been met as of the period end date are excluded from the computation of diluted earnings per share.

Options to purchase 0.2 million, 0.0 million , and 2.4 million shares were outstanding during the years ended December 31, 2021, 2020 and 2019, respectively, but were not included in the computation of diluted earnings (loss) per share because they were anti-dilutive.

In addition, 0.8 million shares from the assumed conversion of convertible preferred shares were excluded from the computation of diluted earnings (loss) per share for the year ended December 31, 2021, 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 15, “Stockholders’ Equity.” The following table presents the calculation of basic and diluted earnings (loss) for the Company’s common stock for the years ended December 31, 2021, 2020 and 2019:

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

Options to purchase 0.8 million, 0.2 million, and 0.0 million shares were outstanding during the years ended December 31, 2022, 2021, and 2020, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

The assumed conversion of 0.6 million and 0.8 million preferred shares were excluded from the computation of diluted earnings per share for the years ended December 31, 2022 and 2021, respectively, because including them would have been antidilutive.

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 15, “Stockholders’ Equity.” The following table presents the calculation of basic and diluted earnings (loss) per share for the Company’s common stock for the years ended December 31, 2022, 2021, and 2020:

For the year ended December 31,

(in millions, except per share data) 2022 2021 2020

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Net income (loss) applicable to common stock $ 221.2 $ 418.7 $ ( 669.5 )

Weighted-average shares outstanding - Penn National 158.6 134.0 115.7

Weighted-average shares outstanding - PENN Entertainment 160.6 158.6 134.0

Weighted-average shares outstanding - Exchangeable Shares 0.6 0.1 —

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Diluted earnings (loss) per share $ 1.29 $ 2.48 $ ( 5.00 )

(1) The year ended December 31, 2021 was tax-affected at a rate of 22 %.

(1) The tax-affected rates were 21 % and 22 % for the years ended December 31, 2022 and 2021, respectively.

Note 18—Segment Information

During the fourth quarter of 2021, the Company evaluated its reportable segments and changed them to:

Northeast, South, West, Midwest, and Interactive.

This change reflects management’s belief that the operating results of our Interactive segment represent a strategic and high growth component of our overall operations.

The Interactive segment, which was previously reported within Other, 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.

Corporate expense will continue to be reported in Other in addition to stand-alone racing operations, other joint ventures, management contracts, and Heartland Poker Tour.

As a result of the change in reportable segments described above, the Company has recast previously reported segment information to conform to the current management view for all prior periods presented.

The changes to reportable segments had no impact to the Company’s consolidated financial statements.

We have aggregated our operating segments into five reportable segments.

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Northeast, South, West, and Midwest.

Our Interactive segment includes our interactive operations (as defined above).

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 online sports betting, iCasino and online social gaming operations, management of retail sports betting, media, and our proportionate share of earnings attributable to our equity method investment in Barstool.

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 (loss).

The following tables present the Company’s segment information.

As a result of the change in reportable segments described above, we have recast previously reported segment information to conform to the current presentation in the following tables:

For the year ended December 31,

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Interactive segment 663.1 432.9 121.1

21.3 10.6 3.9

Intersegment eliminations (2)

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Impairment losses (6)

( 118.2 ) — ( 623.4 )

Insurance recoveries, net of deductible charges 10.7 — 0.1

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Interest expense, net ( 758.2 ) ( 562.8 ) ( 544.1 )

Interest income 18.3 1.1 0.9

Loss on early extinguishment of debt ( 10.4 ) — ( 1.2 )

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Net income (loss) $ 221.7 $ 420.5 $ ( 669.1 )

(1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, Sam Houston and Valley Race Parks (the remaining 50 % was acquired by Penn National on August 1, 2021), the Company’s joint venture interests in Freehold Raceway;

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

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

(1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, Sam Houston and Valley Race Parks (the remaining 50 % was acquired by PENN on August 1, 2021), the Company’s joint venture interests in Freehold Raceway, and our management contract for Retama Park Racetrack.

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

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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);

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) The Company’s triple net operating leases include 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.

(primarily land), our individual triple net leases with GLPI for the real estate assets used in the operation of Tropicana Las Vegas Hotel and Casino 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.

(5) During 2019, 2020 and during the first quarter of 2021, acquisition costs were included within pre-opening and acquisition costs.

(3) We define Adjusted EBITDAR as earnings before interest expense, net, interest income, income taxes, depreciation and amortization, rent expense associated with triple net operating leases (see footnote (4) below), stock-based compensation, debt extinguishment 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), and other.

Adjusted EBITDAR is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (see footnote (7) below) added back for Barstool 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, our individual triple net leases with GLPI for the real estate assets used in the operation of Tropicana (on September 26, 2022, we sold the equity interests to Bally’s which terminated the Tropicana Lease with GLPI) and Meadows, and our individual triple net leases with VICI for the real estate assets used in the operations of Margaritaville Resort Casino and Hollywood Casino at Greektown (of which the Tropicana Lease, Meadows Lease, Margaritaville Lease and the Greektown Lease are defined in “ Note 12 , Leases ” ) and are referred to collectively as our “triple net operating leases”.

As a result of the Lease Modification defined in Note 12 , “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.

Subsequent to the Lease Modification, the land components associated with the Master Lease properties are primarily classified as finance leases.

(5) During 2020 and the first quarter of 2021, acquisition costs were included within pre-opening and acquisition costs.

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.

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 19, “Fair Value Measurements.” Additionally, consists of non-recurring acquisition and transaction costs, finance transformation costs associated with the implementation of our new Enterprise Resource Management system and non-recurring restructuring charges (primarily severance) associated with a company-wide initiative, triggered by the COVID-19 pandemic, designed to (i) improve the operational effectiveness across our property portfolio;

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

(6) Amount for 2022 primarily relates to $ 116.4 million of impairment charges in the Northeast segment.

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

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

(8) Includes unrealized holding losses on our equity securities of $ 69.9 million, realized and unrealized losses on our equity securities of $ 24.9 million, and unrealized gains on our equity securities of $ 106.7 million for the years ended December 31, 2022, 2021, and 2020, respectively, which are discussed in Note 19, “Fair Value Measurements.” Additionally, includes a $ 29.9 million gain on our equity method investment for the year ended December 31, 2021, which is discussed in Note 7, “ Investments in and Advances to Unconsolidated Affiliates .

” Also consists of non-recurring acquisition and transaction costs of $ 52.1 million and $ 43.1 million and finance transformation costs associated with the implementation of our new Enterprise Resource Management system for the years ended December 31, 2022 and 2021, respectively.

The table below presents capital expenditures by segment:

For the year ended December 31,

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Total capital expenditures $ 263.4 $ 244.1 $ 137.0

The table below presents investment in and advances to unconsolidated affiliates and total assets by segment:

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

As of December 31, 2021

Balance sheet as of December 31, 2022

Investment in and advances to unconsolidated affiliates $ 0.1 $ — $ — $ 81.5 $ 160.9 $ 6.1 $ 248.6

Total assets $ 2,231.8 $ 1,191.9 $ 372.4 $ 1,305.5 $ 4,233.7 $ 8,166.8 $ 17,502.1

As of December 31, 2020

Balance sheet as of December 31, 2021

Investment in and advances to unconsolidated affiliates $ 0.1 $ — $ — $ 83.8 $ 164.4 $ 6.8 $ 255.1

Total assets $ 2,283.6 $ 1,224.6 $ 394.8 $ 1,215.8 $ 2,618.3 $ 9,135.0 $ 16,872.1

As of December 31, 2019

Balance sheet as of December 31, 2020

Investment in and advances to unconsolidated affiliates $ 0.1 $ — $ — $ 85.2 $ 149.3 $ 32.2 $ 266.8

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Equity Securities

As of December 31, 2021, we held $ 84.3 million in equity securities of ordinary shares which are reported as “Other assets” in our Consolidated Balance Sheets.

During the year ended December 31, 2021, all warrants were exercised for ordinary shares which resulted in a loss of $ 20.1 million included in “Other” within our Consolidated Statements of Operations.

As of December 31, 2020, we held $ 143.1 million in equity securities, which included ordinary shares and warrants which are reported as “Other assets” in our Consolidated Balance Sheets.

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

During the years ended December 31, 2021 and 2020, we recognized realized and unrealized losses of $ 24.9 million and an unrealized gain of $ 106.7 million, respectively, related to these equity securities, which is included in “Other” within our Consolidated Statements of Operations.

As of December 31, 2022 and 2021, we held $ 17.1 million and $ 84.3 million, respectively, in equity securities of ordinary shares which are reported as “Other assets” in our Consolidated Balance Sheets.

During the year ended December 31, 2021, all warrants were exercised for ordinary shares which resulted in a loss of $ 20.1 million included in “Other,” as reported in “Other income (expenses)” within our Consolidated Statements of Operations.

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 iCasino market access across our portfolio.

During the years ended December 31, 2022, 2021, and 2020, we recognized unrealized holding losses of $ 69.9 million, realized and unrealized losses of $ 24.9 million, and an unrealized gain of $ 106.7 million, respectively, related to these equity securities, which are included in “Other” as reported in “Other income (expenses)” within our 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 December 31, 2021 and 2020, PRP held $ 15.1 million in promissory notes issued by RDC and $ 6.7 million in local government corporation bonds issued by RDC, at amortized cost.

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

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

During the year ended December 31, 2019, principally due to the lack of legislative progress and on-going negative operating results of Retama Park Racetrack, we recorded an other-than-temporary impairment on the promissory notes and the local government corporation bonds totaling $ 2.5 million, which is included in “Impairment losses” within our Consolidated Statements of Operations.

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

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Long-term Debt

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

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 December 31, 2022 and 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 11, “Long-term Debt” for details.

The fair values of the Dayton and Mahoning Valley relocations fees and the Lawrenceburg repayment obligation are estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and are classified as Level 2 measurements.

The fair values of the Dayton and Mahoning Valley relocation fees and the Lawrenceburg repayment obligation are estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and are classified as Level 2 measurements.

Additionally, in February 2021, we entered into a financing arrangement providing the Company with upfront cash proceeds while permitting us to participate in future proceeds on certain claims.

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Other liabilities as of December 31, 2022 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.

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 and is based on the achievement of mutual goals established by the Company and Hitpoint.

As of December 31, 2022, there are two annual achievement periods 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 December 31, 2021, we were contractually obligated to make four additional annual payments.

As of December 31, 2022, we were contractually obligated to make three 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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Promissory notes $ 7.9 $ 7.9 $ — $ 7.9 $ —

Puts and calls related to certain Barstool Sports shares $ 1.9 $ 1.9 $ — $ 1.9 $ —

Financial liabilities:

Long-term debt

Senior Secured Credit Facilities $ 1,544.5 $ 1,559.6 $ 1,559.6 $ — $ —

Amended Credit Facilities $ 1,503.6 $ 1,514.7 $ 1,514.7 $ — $ —

5.625 % Notes

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Other liabilities $ 9.9 $ 9.6 $ — $ 2.4 $ 7.2

Puts and calls related to certain Barstool shares $ 0.4 $ 0.4 $ — $ 0.4 $ —

December 31, 2021

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Promissory notes $ 15.1 $ 15.1 $ — $ 15.1 $ —

Puts and calls related to certain Barstool shares $ 1.9 $ 1.9 $ — $ 1.9 $ —

Financial liabilities:

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$ 399.6 $ 411.5 $ 411.5 $ — $ —

4.125 % Notes

$ 392.9 $ 389.3 $ 389.5 $ — $ —

Convertible Notes $ 253.5 $ 780.0 $ 780.0 $ — $ —

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Other liabilities $ 13.3 $ 13.2 $ — $ 2.7 $ 10.5

Puts and calls related to certain Barstool Sports shares $ 0.3 $ 0.3 $ — $ 0.3 $ —

The following table summarizes the changes in fair value of our Level 3 liabilities measured on a recurring basis:

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Payments ( 9.1 )

Included in earnings (1)

Balance as of December 31, 2019 17.5

Payments ( 9.1 )

Included in loss (1)

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Balance as of December 31, 2021

Interest 27.6

Payments ( 2.7 )

Included in earnings (1)

Balance as of December 31, 2022

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

The following table sets forth the assets measured at fair value on a non-recurring basis as of December 31, 2022, which pertained to our Northeast segment.

There were no impairment charges to goodwill, gaming licenses, and trademarks for the year ended December 31, 2021.

The following table sets forth the assets measured at fair value on a non-recurring basis as of December 31, 2020:

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

Property and equipment (1)

12/31/2020 Discounted cash flow $ — $ — $ — $ — $ ( 7.3 )

Gaming licenses 10/1/2022 Discounted cash flow $ — $ — $ 74.0 $ 74.0 $ 13.6

9/30/2022 Discounted cash flow and market approach $ — $ — $ 30.0 $ 30.0 $ 37.4

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9/30/2022 Discounted cash flow $ — $ — $ 101.0 $ 101.0 $ 65.4

Trademarks (2)

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

(1) The fair value, which was concluded to be zero , of our property and equipment associated with Tropicana was determined using Level 3 inputs.

See Note 8, “Property and Equipment,” for more information.

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

(1) During the third quarter of 2022, we identified an indicator of impairment on our goodwill and other intangible assets.

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

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Contingent purchase price - Plainridge Park Casino Discounted cash flow Discount rate 7.8 %

As discussed in Note 9, “Goodwill and Other Intangible Assets,” our annual assessment for impairment as of October 1, 2021, did not result in any impairment charges to goodwill, gaming licenses and trademarks.

We recorded impairments on our goodwill, gaming licenses and trademarks as a result of the interim assessment for impairment during the first quarter of 2020.

As discussed in Note 9, “Goodwill and Other Intangible Assets,” we recorded impairments on goodwill and our gaming licenses, which are indefinite-lived intangible assets, at the Hollywood Casino at Greektown reporting unit as a result of the third quarter of 2022 interim assessment for impairment.

Our annual assessment for impairment as of October 1, 2022, resulted in an additional impairment charge on the gaming license at PNRC.

The following table presents quantitative information about the significant unobservable inputs used in the fair value measurements of other indefinite-lived intangible assets as of the valuation date below:

(in millions) Fair Value Valuation Technique Unobservable Input Range or Amount

As of March 31, 2020

As of December 31, 2022

Gaming licenses $ 74.0 Discounted cash flow Discount rate 13.0 %

Long-term revenue growth rate 2.0 %

Trademarks $ 216.5 Discounted cash flow Discount rate 13.25 % - 14.0 %

As of September 30, 2022

Gaming licenses $ 101.0 Discounted cash flow Discount rate 13.0 %

Long-term revenue growth rate 2.0 %

Pretax royalty rate 1.0 % - 2.0 %

Note 20—Related Party Transactions

The Company currently leases executive office buildings in Wyomissing, Pennsylvania from affiliates of its chairman emeritus of the Board of Directors.

Rent expense was $ 1.2 million for each of the years ended December 31, 2021, 2020 and 2019.

Two leases were renewed in the current year, and expire in December 2022 and August 2026;

the remaining lease, which had been previously on a month-to-month basis, has been terminated as of December 31, 2021.

Rent expense was $ 1.1 million, $ 1.2 million, and $ 1.2 million for the years ended December 31, 2022, 2021, and 2020, respectively.

One lease was renewed in the current year and will expire in December 2025.

The other long-term lease will expire in August 2026.

The remaining lease, which had been previously on a month-to-month basis, was terminated as of December 31, 2021.

The future minimum lease commitments relating to these leases as of December 31, 2022 are $ 2.7 million.

1 unchanged sentence

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What changed 10-K

Item 8. Financial Statements and Supplementary Data