PENN Entertainment, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of PENN Entertainment, Inc. Opinion on the Financial Statements 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”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Goodwill and Gaming License – Refer to Notes 2 and 9 to the financial statements Critical Audit Matter Description 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 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 56 Table of Contents (“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 and gaming license included the following, among others: • 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. • We evaluated the reasonableness of management’s operating cash flow forecasts by comparing the forecasts to: ◦ Historical results ◦ Internal communications to management and the Board of Directors ◦ Forecasted information included in the Company’s press release as well as in analyst and industry reports for the Company and certain of its peer companies ◦ The impact of the regulatory environment on management’s projections. • With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rates by: ◦ Testing the source information underlying the determination of the discount rates and the mathematical accuracy of the calculations. ◦ Developing a range of independent estimates and comparing those to the discount rates selected by management. Lease Amendments – Refer to Notes 2 and 12 to the financial statements Critical Audit Matter Description 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. 57 Table of Contents 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 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 Philadelphia, Pennsylvania February 23, 2023 We have served as the Company’s auditor since 2017. 58 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, (in millions, except share and per share data) 2022 2021 Assets Current assets Cash and cash equivalents $ 1,624.0 $ 1,863.9 Accounts receivable, net 246.4 195.0 Prepaid expenses 106.1 132.3 Other current assets 36.9 32.4 Total current assets 2,013.4 2,223.6 Property and equipment, net 4,515.5 4,582.2 Investment in and advances to unconsolidated affiliates 248.6 255.1 Goodwill 2,689.5 2,822.5 Other intangible assets, net 1,738.9 1,872.6 Lease right-of-use assets 6,103.3 4,853.0 Other assets 192.9 263.1 Total assets $ 17,502.1 $ 16,872.1 Liabilities Current liabilities Accounts payable $ 40.1 $ 53.3 Current maturities of long-term debt 56.2 99.5 Current portion of financing obligations 63.4 39.0 Current portion of lease liabilities 194.3 142.9 Accrued expenses and other current liabilities 804.7 798.5 Total current liabilities 1,158.7 1,133.2 Long-term debt, net of current maturities, debt discount, and debt issuance costs 2,721.3 2,637.3 Long-term portion of financing obligations 3,970.7 4,057.8 Long-term portion of lease liabilities 5,903.0 4,628.6 Deferred income taxes 33.9 189.1 Other long-term liabilities 117.9 129.0 Total liabilities 13,905.5 12,775.0 Commitments and contingencies (Note 13) Stockholders’ equity Series B preferred stock ($ 0.01 par value, 1,000,000 shares authorized, no shares issued and outstanding) — — 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 shares issued in both periods, and 581 and 775 shares outstanding) 19.4 25.8 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) 1.7 1.7 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 Retained earnings (accumulated deficit) 154.5 ( 86.5 ) Accumulated other comprehensive loss ( 168.6 ) ( 54.4 ) Total PENN Entertainment stockholders’ equity 3,597.7 4,097.8 Non-controlling interest ( 1.1 ) ( 0.7 ) Total stockholders’ equity 3,596.6 4,097.1 Total liabilities and stockholders’ equity $ 17,502.1 $ 16,872.1 See accompanying notes to the Consolidated Financial Statements. 59 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the year ended December 31, (in millions, except per share data) 2022 2021 2020 Revenues Gaming $ 5,201.7 $ 4,945.3 $ 3,051.1 Food, beverage, hotel and other 1,200.0 959.7 527.6 Total revenues 6,401.7 5,905.0 3,578.7 Operating expenses Gaming 2,864.4 2,540.7 1,530.3 Food, beverage, hotel and other 767.2 607.3 337.7 General and administrative 1,110.4 1,352.9 1,130.8 Depreciation and amortization 567.5 344.5 366.7 Impairment losses 118.2 — 623.4 Total operating expenses 5,427.7 4,845.4 3,988.9 Operating income (loss) 974.0 1,059.6 ( 410.2 ) Other income (expenses) 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 Loss on early extinguishment of debt ( 10.4 ) — ( 1.2 ) Other ( 72.1 ) 2.5 106.6 Total other expenses ( 798.7 ) ( 520.5 ) ( 424.0 ) Income (loss) before income taxes 175.3 539.1 ( 834.2 ) Income tax benefit (expense) 46.4 ( 118.6 ) 165.1 Net income (loss) 221.7 420.5 ( 669.1 ) Less: Net (income) loss attributable to non-controlling interest 0.4 0.3 ( 0.4 ) Net income (loss) attributable to PENN Entertainment $ 222.1 $ 420.8 $ ( 669.5 ) Earnings (loss) per share Basic earnings (loss) per share $ 1.37 $ 2.64 $ ( 5.00 ) Diluted earnings (loss) per share $ 1.29 $ 2.48 $ ( 5.00 ) Weighted-average common shares outstanding—basic 161.2 158.7 134.0 Weighted-average common shares outstanding—diluted 176.6 175.5 134.0 See accompanying notes to the Consolidated Financial Statements. 60 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the year ended December 31, (in millions) 2022 2021 2020 Net income (loss) $ 221.7 $ 420.5 $ ( 669.1 ) Other comprehensive loss: Foreign currency translation adjustment during the period ( 114.2 ) ( 54.4 ) — Other comprehensive loss ( 114.2 ) ( 54.4 ) — Total comprehensive income (loss) 107.5 366.1 ( 669.1 ) Less: Comprehensive loss (income) attributable to non-controlling interest 0.4 0.3 ( 0.4 ) Comprehensive income (loss) attributable to PENN Entertainment $ 107.9 $ 366.4 $ ( 669.5 ) See accompanying notes to the Consolidated Financial Statements. 61 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Preferred Stock Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total PENN Stock-holders’ Equity (Deficit) Non-Controlling Interest Total Stock-holders’ Equity (Deficit) (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 Common stock offerings (Note 15) — — 35,266,667 0.4 — — — 1,288.4 — — 1,288.8 — 1,288.8 Convertible debt offering (Note 11) — — — — — — — 88.2 — — 88.2 — 88.2 Barstool Sports investment (Note 7) 883 23.1 — — — — — — — — 23.1 — 23.1 Cumulative-effect adjustment upon adoption of ASU 2016-13 — — — — — — — — 0.6 — 0.6 — 0.6 Net income (loss) — — — — — — — — ( 669.5 ) — ( 669.5 ) 0.4 ( 669.1 ) Other — — — — — — — 1.3 — — 1.3 — 1.3 Balance as of December 31, 2020 883 23.1 155,700,834 1.6 — — ( 28.4 ) 3,167.2 ( 507.3 ) — 2,656.2 ( 0.4 ) 2,655.8 Share-based compensation arrangements — — 1,061,242 — — — — 35.1 — — 35.1 — 35.1 Share issuance in connection with acquisitions (Note 15) — — 12,561,127 0.1 697,539 — — 1,039.5 — — 1,039.6 — 1,039.6 Preferred stock issuance (Note 15) 86 8.1 — — — — — — — — 8.1 — 8.1 Preferred stock conversions (Note 15) ( 194 ) ( 5.4 ) 194,200 — — — — 5.4 — — — — — Exchangeable shares conversions (Note 15) — — 44,480 — ( 44,480 ) — — — — — — — — Currency translation adjustment — — — — — — — — — ( 54.4 ) ( 54.4 ) — ( 54.4 ) Net income (loss) — — — — — — — — 420.8 — 420.8 ( 0.3 ) 420.5 Other — — — — — — — ( 7.6 ) — — ( 7.6 ) — ( 7.6 ) 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. 62 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended December 31, (in millions) 2022 2021 2020 Operating activities Net income (loss) $ 221.7 $ 420.5 $ ( 669.1 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 567.5 344.5 366.7 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 Gain on acquisition of Sam Houston — ( 29.9 ) — Holding loss (gain) on equity securities 69.9 24.9 ( 106.7 ) 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 Income from unconsolidated affiliates ( 23.7 ) ( 38.7 ) ( 13.8 ) Return on investment from unconsolidated affiliates 33.8 31.8 21.8 Deferred income taxes ( 150.7 ) ( 4.5 ) ( 118.3 ) Stock-based compensation 58.1 35.1 14.5 Impairment losses 118.2 — 623.4 Loss on early extinguishment of debt 10.4 — 1.2 Changes in operating assets and liabilities, net of businesses acquired Accounts receivable ( 81.2 ) ( 82.3 ) ( 16.5 ) Prepaid expenses and other current assets ( 24.1 ) ( 32.3 ) 13.5 Other assets ( 2.2 ) ( 21.7 ) ( 12.8 ) Accounts payable ( 13.4 ) ( 30.4 ) ( 6.6 ) Accrued expenses 17.4 138.4 ( 40.9 ) Income taxes 27.3 10.2 ( 32.5 ) Operating lease liabilities ( 83.0 ) ( 136.5 ) ( 94.8 ) Other current and long-term liabilities ( 2.2 ) 65.2 16.3 Other 13.1 ( 0.8 ) ( 1.1 ) Net cash provided by operating activities 878.2 896.1 338.8 Investing activities Capital expenditures ( 263.4 ) ( 244.1 ) ( 137.0 ) Proceeds from sale of property and equipment 4.9 1.5 16.1 Hurricane Laura insurance proceeds 25.4 — 32.7 Consideration paid for Barstool Sports investment — — ( 135.0 ) Consideration paid for acquisitions of businesses, net of cash acquired — ( 877.6 ) ( 3.0 ) Consideration paid for remaining interest of Sam Houston — ( 42.0 ) — 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 ) — — 63 Table of Contents For the year ended December 31, (in millions) 2022 2021 2020 Additional contributions to joint ventures — ( 1.4 ) ( 5.4 ) Other ( 1.5 ) ( 8.0 ) 2.7 Net cash used in investing activities ( 258.6 ) ( 1,221.8 ) ( 233.7 ) Financing activities Proceeds from revolving credit facility — — 540.0 Repayments on revolving credit facility — — ( 680.0 ) 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 ) Debt and equity issuance costs ( 18.2 ) ( 7.5 ) ( 6.9 ) Proceeds from other long-term obligations — 72.5 — Payments of other long-term obligations ( 17.8 ) ( 17.0 ) ( 16.2 ) Principal payments on financing obligations ( 63.2 ) ( 36.0 ) ( 26.7 ) Principal payments on finance leases ( 110.5 ) ( 8.5 ) ( 3.9 ) Proceeds from common stock offerings, net of discounts and fees — — 1,288.8 Proceeds from exercise of options 6.9 10.8 62.7 Repurchase of common stock ( 601.1 ) — — Proceeds from insurance financing — 26.6 20.2 Payments on insurance financing — ( 26.7 ) ( 21.4 ) Other ( 11.6 ) ( 9.9 ) ( 7.0 ) Net cash provided by (used in) financing activities ( 853.0 ) 339.9 1,310.1 Effect of currency rate changes on cash, cash equivalents, and restricted cash ( 2.5 ) ( 4.5 ) — Change in cash, cash equivalents, and restricted cash ( 235.9 ) 9.7 1,415.2 Cash, cash equivalents and restricted cash at the beginning of the year 1,880.1 1,870.4 455.2 Cash, cash equivalents and restricted cash at the end of the year $ 1,644.2 $ 1,880.1 $ 1,870.4 For the year ended December 31, (in millions) 2022 2021 2020 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 1,624.0 $ 1,863.9 $ 1,853.8 Restricted cash included in Other current assets 19.0 15.0 15.3 Restricted cash included in Other assets 1.2 1.2 1.3 Total cash, cash equivalents and restricted cash $ 1,644.2 $ 1,880.1 $ 1,870.4 Supplemental disclosure: Cash paid for interest, net of amounts capitalized $ 721.7 $ 514.6 $ 355.0 Cash payments (refunds) related to income taxes, net $ 72.8 $ 108.3 $ ( 15.2 ) Non-cash activities: Rent credits received upon sale of Tropicana land and buildings and Morgantown land $ — $ — $ 337.5 Commencement of operating leases $ 58.5 $ 96.4 $ 73.6 Commencement of finance leases $ 1,462.1 $ 106.1 $ — Accrued capital expenditures $ 21.1 $ 27.6 $ 17.2 See accompanying notes to the Consolidated Financial Statements 64 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Organization and Basis of Presentation Organization: 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; the most significant of which are the PENN Master Lease and the Pinnacle Master Lease (as such terms are defined in Note 12, “Leases,” and collectively referred to as the “Master Leases”), with Gaming and Leisure Properties, Inc. (Nasdaq: GLPI) (“GLPI”), a real estate investment trust (“REIT”). 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, 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: The Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Note 2—Significant Accounting Policies Principles of Consolidation: The Consolidated Financial Statements include the accounts of PENN Entertainment, Inc. and its subsidiaries. Investments in and advances to unconsolidated affiliates that do not meet the consolidation criteria of the authoritative guidance for voting interest entities (“VOEs”) or variable interest entities (“VIEs”) are accounted for under the equity method. All intercompany accounts and transactions have been eliminated in consolidation. Reclassifications: Certain reclassifications have been made to conform the prior period presentation. Use of Estimates: The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, and (iii) the reported amounts of revenues and expenses during the reporting period. 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. Actual results may differ from those estimates. 65 Table of Contents Segment Information: We have five reportable segments: Northeast, South, West, Midwest, and Interactive. Our gaming and racing properties are grouped by geographic location and each is viewed as an operating segment with the exception of our two properties in Jackpot, Nevada, which are viewed as one operating segment. We consider our combined Video Gaming Terminal (“VGT”) operations, by state, to be separate operating segments. 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 segments into the following reportable segments: Location Real Estate Assets Lease or Ownership Structure Northeast segment Ameristar East Chicago East Chicago, Indiana Pinnacle Master Lease Hollywood Casino Bangor Bangor, Maine PENN Master Lease Hollywood Casino at Charles Town Races Charles Town, West Virginia PENN Master Lease Hollywood Casino Columbus Columbus, Ohio PENN Master Lease Hollywood Casino at Greektown Detroit, Michigan Greektown Lease Hollywood Casino Lawrenceburg Lawrenceburg, Indiana PENN Master Lease Hollywood Casino Morgantown Morgantown, Pennsylvania Morgantown Lease (1) Hollywood Casino at PENN National Race Course Grantville, Pennsylvania PENN Master Lease Hollywood Casino Perryville Perryville, Maryland Perryville Lease Hollywood Casino at The Meadows Washington, Pennsylvania Meadows Lease Hollywood Casino Toledo Toledo, Ohio PENN Master Lease Hollywood Casino York York, Pennsylvania Operating Lease (not with REIT Landlord) Hollywood Gaming at Dayton Raceway Dayton, Ohio PENN Master Lease Hollywood Gaming at Mahoning Valley Race Course Youngstown, Ohio PENN Master Lease Marquee by PENN (2) Pennsylvania N/A Plainridge Park Casino Plainville, Massachusetts Pinnacle Master Lease South segment 1 st Jackpot Casino Tunica, Mississippi PENN Master Lease Ameristar Vicksburg Vicksburg, Mississippi Pinnacle Master Lease Boomtown Biloxi Biloxi, Mississippi PENN Master Lease Boomtown Bossier City Bossier City, Louisiana Pinnacle Master Lease Boomtown New Orleans New Orleans, Louisiana Pinnacle Master Lease Hollywood Casino Gulf Coast Bay St. Louis, Mississippi PENN Master Lease Hollywood Casino Tunica Tunica, Mississippi PENN Master Lease L’Auberge Baton Rouge Baton Rouge, Louisiana Pinnacle Master Lease L’Auberge Lake Charles Lake Charles, Louisiana Pinnacle Master Lease Margaritaville Resort Casino Bossier City, Louisiana Margaritaville Lease West segment Ameristar Black Hawk Black Hawk, Colorado Pinnacle Master Lease Cactus Petes and Horseshu Jackpot, Nevada Pinnacle Master 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 Midwest segment Ameristar Council Bluffs Council Bluffs, Iowa Pinnacle Master Lease Argosy Casino Alton (4) Alton, Illinois PENN Master Lease Argosy Casino Riverside Riverside, Missouri PENN Master Lease Hollywood Casino Aurora Aurora, Illinois PENN Master Lease Hollywood Casino Joliet Joliet, Illinois PENN Master Lease Hollywood Casino at Kansas Speedway (5) Kansas City, Kansas Owned - Joint Venture Hollywood Casino St. Louis Maryland Heights, Missouri PENN Master Lease Prairie State Gaming (2) Illinois N/A River City Casino St. Louis, Missouri Pinnacle Master Lease 66 Table of Contents (1) Upon termination of the Morgantown Lease, ownership of the constructed building and all tenant improvements will transfer from the Company to GLPI. (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. (5) Pursuant to a joint venture with NASCAR and includes the Company’s 50 % investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns Hollywood Casino at Kansas Speedway. Cash and Cash Equivalents: The Company considers all cash balances and highly-liquid investments with original maturities of three months or less at the date of purchase to be cash and cash equivalents. Concentration of Credit Risk: Financial instruments that subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. The Company’s policy is to limit the amount of credit exposure to any one financial institution, and place investments with financial institutions evaluated as being creditworthy, or in short-term money market and tax-free bond funds which are exposed to minimal interest rate and credit risk. The Company has bank deposits and overnight repurchase agreements that exceed federally-insured limits. Concentration of credit risk, with respect to casino receivables, is limited through the Company’s credit evaluation process. The Company issues markers to approved casino customers following investigations of creditworthiness. The Company utilizes a forward-looking current expected credit loss model to measure the provision for credit losses. The Company’s receivables as of December 31, 2022 and 2021 primarily consisted of the following: December 31, (in millions) 2022 2021 Markers and returned checks $ 13.1 $ 15.1 Payment processors, credit card, and other advances to customers 80.2 17.7 Receivables from ATM and cash kiosk transactions 26.1 20.9 Hotel and banquet 4.7 4.1 Racing settlements 8.0 12.8 Online gaming and licensing receivables from third party operators, including taxes 62.7 66.3 Media receivables 15.0 10.3 Insurance Receivable - Hurricane Laura — 28.7 Other 45.1 27.1 Provision for credit losses ( 8.5 ) ( 8.0 ) Accounts receivable, net $ 246.4 $ 195.0 Property and Equipment: Property and equipment are stated at cost, less accumulated depreciation. 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. Gains or losses on the disposal of property and equipment are included in the determination of income. The estimated useful lives of property and equipment are determined based on the nature of the assets as well as the Company’s current operating strategy. Depreciation of property and equipment is recorded using the straight-line method over the shorter of the estimated useful life of the asset or the related lease term, if any, as follows: Years Land improvements 15 Buildings and improvements 5 to 31 Vessels 10 to 31 Furniture, fixtures, and equipment 1 to 31 67 Table of Contents All costs funded by the Company considered to be an improvement to the real estate assets subject to any of our Triple Net Leases are recorded as leasehold improvements. Leasehold improvements are depreciated over the shorter of the estimated useful life of the improvement or the related lease term. The Company reviews the carrying amount of its property and equipment for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based on undiscounted estimated future cash flows expected to result from its use and eventual disposition. The factors considered by the Company in performing this assessment include current operating results, trends and prospects, as well as the effect of obsolescence, demand, competition, and other regulatory and economic factors. For purposes of recognizing and measuring impairment, assets are grouped at the individual property level representing the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. In assessing the recoverability of the carrying amount of property and equipment, we must make assumptions regarding future cash flows and other factors. If these estimates or the related assumptions change in the future, we may be required to record an impairment loss for these assets. Such an impairment loss would be recognized as a non-cash component of operating income. See Note 8, “Property and Equipment.” Goodwill and Other Intangible Assets: Goodwill represents the future economic benefits of a business combination measured as the excess of the purchase price over the fair value of net assets acquired and has been allocated to our reporting units. Goodwill is tested for impairment annually on October 1 st of each year, or more frequently if indicators of impairment exist. For the quantitative goodwill impairment test, an income approach, in which a discounted cash flow (“DCF”) model is utilized, and a market-based approach using guideline public company multiples of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) from the Company’s peer group are utilized in order to estimate the fair market value of the Company’s reporting units. In determining the carrying amount of each reporting unit that utilizes real estate assets subject to our Triple Net Leases, if and as applicable, (i) the Company allocates each reporting unit their pro-rata portion of the right-of-use (“ROU”) assets, lease liabilities, and/or financing obligations, and (ii) pushes down the carrying amount of the property and equipment subject to such leases. The Company compares the fair value of its reporting units to the carrying amounts. If the carrying amount of the reporting unit exceeds the fair value, an impairment is recorded equal to the amount of the excess (not to exceed the amount of goodwill allocated to the reporting unit). We consider our gaming licenses, trademarks, and certain other intangible assets to be indefinite-lived based on our future expectations to operate our gaming properties indefinitely as well as our historical experience in renewing these intangible assets at minimal cost with various state commissions. Indefinite-lived intangible assets are tested annually for impairment on October 1 st of each year, or more frequently if indicators of impairment exist, by comparing the fair value of the recorded assets to their carrying amount. If the carrying amounts of the indefinite-lived intangible assets exceed their fair value, an impairment is recognized. The Company completes its testing of its indefinite-lived intangible assets prior to assessing the realizability of its goodwill. The Company assesses the fair value of its gaming licenses using the Greenfield Method under the income approach, which estimates the fair value using a DCF model assuming the Company built a casino with similar utility to that of the existing casino. The method assumes a theoretical start-up company going into business without any assets other than the intangible asset being valued. The Company assesses the fair value of its trademarks using the relief-from-royalty method under the income approach. The principle behind this method is that the value of the trademark is equal to the present value of the after-tax royalty savings attributable to the owned trademark. Other intangible assets that have a definite-life, including gaming technology and media technology, are amortized on a straight-line basis over their estimated useful lives or related service contract. The Company reviews the carrying amount of its amortizing intangible assets for possible impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Should events and circumstances indicate amortizing intangible assets may not be recoverable, the Company performs a test for recoverability whereby estimated undiscounted cash flows are compared to the carrying values of the assets. Should the estimated undiscounted cash flows exceed the carrying value, no impairments are recorded. If the undiscounted cash flows do not exceed the carrying values, an impairment is recorded based on the fair value of the asset, typically measured using either a discounted cash flow or replacement cost approach. Once an impairment of goodwill or other intangible asset has been recorded, it cannot be reversed. See Note 9, “Goodwill and Other Intangible Assets.” 68 Table of Contents Equity Securities: The Company’s equity securities (including warrants) are measured at fair value each reporting period with unrealized gains and losses included in current period earnings. The Company records realized and unrealized gains and losses in “Other” within our Consolidated Statements of Operations. Convertible Debt: 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: 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. 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.” 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: The Company determines if a contract is or contains a leasing element at contract inception or the date in which a modification of an existing contract occurs. In order for a contract to be considered a lease, the contract must transfer the right to control the use of an identified asset for a period of time in exchange for consideration. 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. 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. The Company has leasing arrangements that contain both lease and non-lease components. We account for both the lease and non-lease components as a single component for all classes of underlying assets. In determining the present value of lease payments at lease commencement date, the Company utilizes its incremental borrowing rate based on the information available, unless the rate implicit in the lease is readily determinable. The liability for operating and finance leases is based on the present value of future lease payments. 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. 69 Table of Contents Debt Discount and Debt Issuance Costs: Debt issuance costs that are incurred by the Company in connection with the issuance of debt are deferred and amortized to interest expense using the effective interest method over the contractual term of the underlying indebtedness. These costs are classified as a direct reduction of long-term debt within the Company’s Consolidated Balance Sheets. Self-Insurance Reserves: The Company is self-insured for employee health coverage, general liability and workers’ compensation up to certain stop-loss amounts (for general liability and workers’ compensation). We use a reserve method for each reported claim plus an allowance for claims incurred but not yet reported to a fully-developed claims reserve method based on an actuarial computation of ultimate liability. Self-insurance reserves are included in “Accrued expenses and other current liabilities” within the Company’s Consolidated Balance Sheets. Contingent Purchase Price: The consideration for the Company’s acquisitions may include future payments that are contingent upon the occurrence of a particular event. We record an obligation for such contingent payments at fair value as of the acquisition date. We revalue our contingent purchase price obligations each reporting period. Changes in the fair value of the contingent purchase price obligation can result from changes to one or multiple inputs, including adjustments to the discount rate and changes in the assumed probabilities of successful achievement of certain financial targets. The changes in the fair value of contingent purchase price are recognized within our Consolidated Statements of Operations as a component of “General and administrative” expense. Income Taxes: Under ASC 740, “Income Taxes” (“ASC 740”), deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and are measured at the prevailing enacted tax rates that will be in effect when these differences are settled or realized. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more-likely-than-not (a greater than 50% probability) that some portion or all of the deferred tax assets will not be realized. The realizability of the net deferred tax assets is evaluated quarterly by assessing the valuation allowance and by adjusting the amount of the allowance, if necessary. The Company considers all available positive and negative evidence including projected future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The evaluation of both positive and negative evidence is a requirement pursuant to ASC 740 in determining more-likely-than-not the net deferred tax assets will be realized. 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. It also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. See Note 14, “Income Taxes.” 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, and third-party revenue sharing agreements. See Note 5, “Revenue Disaggregation,” for information on our revenue by type and geographic location. The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered. The transaction price for food and beverage, hotel and retail contracts is the net amount collected from the customer for such goods and services. Sales tax and other taxes collected on behalf of governmental authorities are accounted for on the net basis and are not included in revenues or expenses. The transaction price for our racing operations, inclusive of live racing events conducted at our racing facilities and our import and export arrangements, is the commission received from the pari-mutuel pool less contractual fees and obligations primarily consisting of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to the racing operations. The transaction price for our management service contracts is the amount collected for services rendered in accordance with the contractual terms. Gaming revenue contracts involve two performance obligations for those customers earning points under our my choice program and a single performance obligation for customers that do not participate in the my choice program. 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 70 Table of Contents 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. The liability associated with the loyalty points is deferred and recognized as revenue when the customer redeems the loyalty points for slot play and complimentaries and such goods and services are delivered to the customer. Food and beverage, hotel and retail services have been determined to be separate, standalone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred to the customer over their stay at the hotel or when the delivery is made for the food and beverage or retail product. Cancellation fees for hotel and meeting space services are recognized upon cancellation by the customer and are included in food, beverage, hotel and other revenue within our Consolidated Statements of Operations. Racing revenue contracts, inclusive of our (i) host racing facilities, (ii) import arrangements that permit us to simulcast in live racing events occurring at other racetracks, and (iii) export arrangements that permit our live racing events to be simulcast at other racetracks, provide access to and the processing of wagers into the pari-mutuel pool. The Company has concluded it is not the controlling entity to the arrangement, but rather functions as an agent to the pari-mutuel pool. Commissions earned from the pari-mutuel pool less contractual fees and obligations are recognized on a net basis, which is included within food, beverage, hotel and other revenues within our Consolidated Statements of Operations. Management services have been determined to be separate, standalone performance obligations and the transaction price for such contracts are recorded as services are performed. The Company records revenues on a monthly basis calculated by applying the contractual rate called for in the contracts. In addition to sports betting and iCasino revenues, PENN Interactive generates in-app purchase and advertising revenues from free-to-play social casino games, which can be downloaded to mobile phones and tablets from digital storefronts. Players can purchase virtual playing credits within our social casino games, which allows for increased playing opportunities and functionality. 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 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 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 jurisdictional gaming taxes. 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 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. Revenues from monthly revenue shares are recognized in the period in which the revenue was earned by our third-party operators. 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 jurisdictional gaming taxes. The Company has elected the “right to invoice” practical expedient and recognizes revenue upon incurring reimbursable costs, as appropriate. 71 Table of Contents 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 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. Revenues recorded to food, beverage, hotel, and other and offset to gaming revenues were as follows: For the year ended December 31, (in millions) 2022 2021 2020 Food and beverage $ 209.5 $ 173.7 $ 123.6 Hotel 138.3 125.4 79.6 Other 12.3 10.2 6.7 Total complimentaries associated with gaming contracts $ 360.1 $ 309.3 $ 209.9 Customer-related Liabilities 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 iCasino market access. 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. Our loyalty point obligations are generally settled within six months of issuance. Changes between the opening and closing balances primarily relate to the timing of our customers’ election to redeem loyalty points as well as the timing of when our customers receive their earned tier status benefits. The Company’s advance payments on goods and services yet to be provided and for unpaid wagers primarily consist of the following: (i) deposits on rooms and convention space, (ii) money deposited on behalf of a customer in advance of their property visit (referred to as “safekeeping” or “front money”), (iii) 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 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 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. Advertising: The Company expenses advertising costs the first time the advertising takes place or as incurred. Advertising expenses, which generally relate to media placement costs and are primarily included in “Gaming” expenses within the 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 72 Table of Contents 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: The functional currency of the Company’s foreign subsidiaries is the local currency in which the subsidiary operates. Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date. Translation adjustments resulting from this process are recorded to other comprehensive income (loss). Revenues and expenses are translated at the average exchange rates during the year. 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 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 loss consists solely of foreign currency translation adjustments. Stock-Based Compensation: The cost of employee services received in exchange for an award of equity instruments is based on the grant-date fair value of the award and the expense is recognized ratably over the requisite service period. The Company accounts for forfeitures in the period in which they occur based on actual amounts. The fair value of stock options is estimated at the grant date using the Black-Scholes option-pricing model, which requires us to make assumptions, including the expected term, which is based on the contractual term of the stock option and historical exercise data of the Company’s employees; the risk-free interest rate, which is based on the U.S. Treasury spot rate with a term equal to the expected term assumed at the grant date; the expected volatility, which is estimated based on the historical volatility of the Company’s stock price over the expected term assumed at the grant date; and the expected dividend yield, which is zero since we have not historically paid dividends. See Note 16, “Stock-based Compensation.” Earnings Per Share: Basic earnings per share (“EPS”) is computed by dividing net income (loss) applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the additional dilution, if any, for all potentially-dilutive securities such as stock options, unvested restricted stock awards (“RSAs”) 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. Accordingly, the Series D Preferred Stock shares are considered a participating security and the Company is required to apply the two-class method to consider the impact of the preferred shares on the calculation of basic and diluted EPS. The holders of the Company’s Series D Preferred Stock are not obligated to absorb losses; therefore, in reporting periods where the Company is in a net loss position, it does not apply the two-class method. In reporting periods where the Company is in a net income position, the two-class method is applied by allocating all earnings during the period to common shares and preferred shares. See Note 17, “Earnings (Loss) per Share,” for more information. Application of Business Combination Accounting: We utilize the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” which requires us to allocate the purchase price to tangible and identifiable intangible assets based on their fair values. The excess of the purchase price over the fair value ascribed to tangible and identifiable intangible assets is recorded as goodwill. If the fair value ascribed to tangible and identifiable intangible assets changes during the measurement period (due to additional information being available and related Company analysis), the measurement period adjustment is recognized in the reporting period in which the adjustment amount is determined and offset against goodwill. The measurement period for our acquisitions is no more than one year in duration. See Note 6, “Acquisitions and Dispositions.” Voting Interest Entities and Variable Interest Entities: The Company consolidates all subsidiaries or other entities in which it has a controlling financial interest. The consolidation guidance requires an analysis to determine if an entity should be evaluated for consolidation using the VOE model or the VIE model. 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. 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 73 Table of Contents 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 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): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides an optional expedient and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate (referred to as “LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. ASU 2020-04 also provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). ASU 2020-06 eliminates the number of accounting models used to account for convertible debt instruments and convertible preferred stock. The update also amends the disclosure requirements for convertible instruments and EPS in 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 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 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. 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, 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 74 Table of Contents equipment from our insurers to be probable. 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. The following tables summarize the financial impact of Hurricane Laura related matters: Life to date through December 31, (in millions) 2022 2021 Insurance proceeds received through the end of the period $ 86.9 $ 47.5 Deductible $ 15.0 $ 15.0 Coinsurance $ 2.5 $ 2.5 Clean-up, restoration, and other costs $ 52.8 $ 52.8 Fixed asset write-off $ 23.2 $ 23.2 Inventory write-off $ 0.2 $ 0.2 December 31, (in millions) 2022 2021 Insurance receivable $ — $ 28.7 75 Table of Contents Note 5—Revenue Disaggregation Our revenues are generated principally by providing the following types of services: (i) gaming, including iCasino, retail and online sports betting; (ii) food and beverage; (iii) hotel; and (iv) other. 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. 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 (1) Other Intersegment Eliminations (2) Total Revenues: Gaming $ 2,434.0 $ 1,050.7 $ 387.6 $ 1,045.9 $ 283.5 $ — $ — $ 5,201.7 Food and beverage 132.4 126.8 80.3 53.7 — 3.5 — 396.7 Hotel 43.4 96.3 89.0 33.3 — — — 262.0 Other 86.1 40.4 25.0 26.7 379.6 17.8 ( 34.3 ) 541.3 Total revenues $ 2,695.9 $ 1,314.2 $ 581.9 $ 1,159.6 $ 663.1 $ 21.3 $ ( 34.3 ) $ 6,401.7 For the year ended December 31, 2021 (in millions) Northeast South West Midwest Interactive (1) Other Intersegment Eliminations (2) Total Revenues: Gaming $ 2,344.2 $ 1,080.4 $ 352.7 $ 1,009.6 $ 158.4 $ — $ — $ 4,945.3 Food and beverage 103.3 110.6 69.0 39.4 — 1.0 — 323.3 Hotel 28.1 93.3 80.1 29.6 — — — 231.1 Other 76.8 37.9 19.6 24.1 274.5 9.6 ( 37.2 ) 405.3 Total revenues $ 2,552.4 $ 1,322.2 $ 521.4 $ 1,102.7 $ 432.9 $ 10.6 $ ( 37.2 ) $ 5,905.0 For the year ended December 31, 2020 (in millions) Northeast South West Midwest Interactive Other Intersegment Eliminations (2) Total Revenues: Gaming $ 1,495.1 $ 684.0 $ 194.2 $ 615.2 $ 62.4 $ 0.3 $ ( 0.1 ) $ 3,051.1 Food and beverage 68.9 76.9 46.0 32.0 — 0.6 — 224.4 Hotel 17.4 64.3 46.4 18.7 — — — 146.8 Other 57.9 24.4 15.9 15.5 58.7 3.0 ( 19.0 ) 156.4 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 Tropicana Las Vegas 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” ). 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 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. 76 Table of Contents Morgantown 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 utilized all of the rent credits pertaining to the Tropicana and Morgantown transactions which totaled $ 337.5 million (see Note 12, “Leases” ). HitPoint Inc. and LuckyPoint Inc. On May 11, 2021, we acquired 100 % of the outstanding equity of HitPoint Inc. and Lucky Point Inc. (collectively, “Hitpoint”). The purchase price totaled $ 12.7 million, consisting of $ 6.2 million in cash, $ 3.5 million of the Company’s common 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. Hollywood Casino Perryville On July 1, 2021, we completed the acquisition of the operations of Hollywood Casino Perryville (“Perryville”), from GLPI for a purchase price of $ 39.4 million, including working capital adjustments. The 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 . The Company valued (i) the gaming license using the Greenfield Method, a form of the income approach; (ii) the customer relationships using the “with-and-without” method, a form of the income approach, and (iii) the property and equipment and other various operating assets and liabilities primarily utilizing the cost approach. All valuation methods of the income approach are supported by observable market data for peer casino operator companies. For the period beginning July 1, 2021 through December 31, 2021 Perryville’s revenue and net income included in the Consolidated Statements of Operations were $ 46.9 million and $ 2.5 million, respectively. 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 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. The property and equipment assets were valued using a combination of the market and cost approaches. Score Media and Gaming Inc. On October 19, 2021, we acquired 100 % of 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. Ltd. (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, 77 Table of Contents 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 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 . (1) Measurement period adjustments Final fair value Cash and cash equivalents $ 160.3 $ — $ 160.3 Other current assets 22.8 — 22.8 ROU assets 2.6 — 2.6 Property and equipment 1.8 — 1.8 Goodwill 1,690.2 1.5 1,691.7 Other intangible assets Gaming technology 160.0 — 160.0 Media technology 57.0 — 57.0 Tradename 100.0 — 100.0 Advertising relationships 11.0 — 11.0 Customer relationships 8.0 — 8.0 Re-acquired right 2.6 — 2.6 Other long-term assets 5.2 — 5.2 Total assets $ 2,221.5 $ 1.5 $ 2,223.0 Accounts payable, accrued expenses and other current liabilities $ 67.9 $ 1.5 $ 69.4 Deferred tax liabilities 69.2 — 69.2 Other non-current liabilities 1.7 — 1.7 Total liabilities 138.8 1.5 140.3 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. 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. Acquired identifiable intangible assets consist of gaming technology, media technology, tradename, advertising relationships, customer relationships, and a re-acquired right. Tradename is an indefinite-lived intangible asset. 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 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. 78 Table of Contents The following valuation approaches were utilized to determine the fair value of each intangible asset: Intangible Asset Valuation Approach Gaming technology Relief-from-royalty (variation of income approach) Media technology Replacement cost Tradename Relief-from-royalty (variation of income approach) Advertising relationships With-and-without (variation of income approach) Customer relationships Replacement cost Re-acquired right Replacement cost For the period beginning October 19, 2021 through December 31, 2021 theScore’s revenue and net loss included in the Consolidated Statements of Operations were $ 7.5 million and $ 11.9 million, respectively. Unaudited Pro Forma Financial Information The following table includes unaudited pro forma consolidated financial information assuming our acquisition of Hitpoint, Perryville, Sam Houston, and theScore had occurred as of January 1, 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. 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. For the year ended December 31, (in millions) 2021 2020 Revenues $ 5,978.0 $ 3,677.4 Net income (loss) $ 347.6 $ ( 705.4 ) Note 7—Investments in and Advances to Unconsolidated Affiliates 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. 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 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 common stock 79 Table of Contents 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. The Series D Preferred stockholders are entitled to participate equally and ratably in all dividends and distributions paid to holders of PENN common stock based on the number of shares of PENN common stock into which such Series D Preferred Stock could convert. Series D Preferred Stock is nonvoting stock. The Series D Preferred Stock issued to certain individual stockholders affiliated with Barstool 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 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, 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 80 Table of Contents 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 As of December 31, 2022 and 2021, our investment in Kansas Entertainment was $ 81.5 million and $ 83.8 million, respectively. During the years ended December 31, 2022, 2021 and 2020, the Company received distributions from Kansas Entertainment totaling $ 33.8 million, $ 31.8 million and $ 20.0 million, respectively. The Company deems these distributions to be returns on its investment based on the source of those cash flows from the normal business operations of Kansas Entertainment. The Company has determined that Kansas Entertainment does not qualify as a VIE. Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the joint venture, primarily as it did not have the ability to direct the activities of the joint venture that most significantly impacted the joint venture’s economic performance without the input of NASCAR. Therefore, the Company did not consolidate the financial position of Kansas Entertainment as of December 31, 2022 and 2021, nor the results of operations for the years ended December 31, 2022, 2021, and 2020. The following table provides summarized balance sheet and results of operations information related to Kansas Entertainment and our share of income from unconsolidated affiliates from our investment in Kansas Entertainment: December 31, (in millions) 2022 2021 Current assets $ 21.1 $ 19.1 Long-term assets $ 142.4 $ 145.1 Current liabilities $ 15.0 $ 11.0 For the year ended December 31, (in millions) 2022 2021 2020 Revenues $ 161.9 $ 149.5 $ 104.2 Operating expenses 99.0 88.7 75.5 Operating income 62.9 60.8 28.7 Net income $ 62.9 $ 60.8 $ 28.7 Net income attributable to PENN Entertainment $ 31.5 $ 30.4 $ 14.4 Texas and New Jersey Joint Ventures Sam Houston The Company had a 50 % interest in a joint venture with Sam Houston, which owns and operates the Sam Houston Race Park in Houston, Texas and the Valley Race Park in Harlingen, Texas, and holds a license for a racetrack in Austin, Texas. On August 1, 2021, we completed the acquisition of the remaining 50 % ownership interest in Sam Houston. 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. See Note 6, “Acquisitions and Dispositions” for further information. During the first quarter of 2020, we recorded an other-than-temporary impairment on our investment in the joint venture of $ 4.6 million, which is included in “Impairment losses” within our Consolidated Statements of Operations. No further impairment loss was recorded for the years ended December 31, 2021 and 2020. 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. 81 Table of Contents New Jersey 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. The Company has determined that our New Jersey joint venture does not qualify as a VIE. Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the 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 Greenwood. 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 Property and equipment, net, consisted of the following: December 31, (in millions) 2022 2021 Property and equipment - Not Subject to Master Leases Land and improvements $ 137.1 $ 147.6 Building, vessels and improvements 324.6 327.3 Furniture, fixtures and equipment 1,753.6 1,714.8 Leasehold improvements 353.5 292.0 Construction in progress 166.8 70.7 2,735.6 2,552.4 Less: Accumulated depreciation ( 1,708.3 ) ( 1,634.1 ) 1,027.3 918.3 Property and equipment - Subject to Master Leases Land and improvements 1,523.2 1,523.2 Building, vessels and improvements 3,640.0 3,640.0 5,163.2 5,163.2 Less: Accumulated depreciation ( 1,675.0 ) ( 1,499.3 ) 3,488.2 3,663.9 Property and equipment, net $ 4,515.5 $ 4,582.2 Depreciation expense was as follows: For the year ended December 31, (in millions) 2022 2021 2020 Depreciation expense (1) $ 329.1 $ 314.3 $ 336.9 (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. 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. Tropicana 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 years ended December 31, 2022 and 2021. 82 Table of Contents Note 9—Goodwill and Other Intangible Assets A reconciliation of goodwill and accumulated goodwill impairment losses, by reportable segment, is as follows: (in millions) Northeast South West Midwest Interactive Other Total Balance as of January 1, 2021 Goodwill, gross $ 914.3 $ 236.6 $ 216.8 $ 1,116.7 $ 67.8 $ 87.7 $ 2,639.9 Accumulated goodwill impairment losses ( 761.4 ) ( 61.0 ) ( 16.6 ) ( 556.1 ) — ( 87.7 ) ( 1,482.8 ) Goodwill, net $ 152.9 $ 175.6 $ 200.2 $ 560.6 $ 67.8 $ — $ 1,157.1 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 Goodwill, gross $ 923.5 $ 236.6 $ 216.8 $ 1,116.7 $ 1,724.0 $ 87.7 $ 4,305.3 Accumulated goodwill impairment losses ( 761.4 ) ( 61.0 ) ( 16.6 ) ( 556.1 ) — ( 87.7 ) ( 1,482.8 ) Goodwill, net $ 162.1 $ 175.6 $ 200.2 $ 560.6 $ 1,724.0 $ — $ 2,822.5 Effect of foreign currency exchange rates — — — — ( 97.1 ) — ( 97.1 ) Impairment losses during year ( 37.4 ) — — — — — ( 37.4 ) Other (1) — — — — 1.5 — 1.5 Balance as of December 31, 2022 Goodwill, gross $ 923.5 $ 236.6 $ 216.8 $ 1,116.7 $ 1,628.4 $ 87.7 $ 4,209.7 Accumulated goodwill impairment losses ( 798.8 ) ( 61.0 ) ( 16.6 ) ( 556.1 ) — ( 87.7 ) ( 1,520.2 ) Goodwill, net $ 124.7 $ 175.6 $ 200.2 $ 560.6 $ 1,628.4 $ — $ 2,689.5 (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. 83 Table of Contents 2021 Annual Assessment for Impairment 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 During the first quarter of 2020, we identified an indicator of impairment on our goodwill and other intangible assets due to the COVID-19 pandemic. As a result of the COVID-19 pandemic, we revised our cash flow projections to reflect the current economic environment, including the uncertainty surrounding the nature, timing and extent of reopening our gaming properties. As a result of the interim assessment for impairment, during the first quarter of 2020, we recognized impairments on our goodwill, gaming licenses and trademarks of $ 113.0 million, $ 437.0 million and $ 61.5 million, respectively. The estimated fair 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. The gaming license impairments pertained to our Northeast, South and Midwest segments in the amounts of $ 177.0 million, $ 166.0 million and $ 94.0 million, respectively. The trademark impairments pertained to our Northeast, South, Midwest and West segments, in the amounts of $ 17.0 million, $ 17.0 million, $ 15.0 million and $ 12.5 million, respectively. Upon reopening of our gaming facilities and throughout the fourth quarter of 2020 we undertook various initiatives to mitigate the impact of regulatory restrictions imposed as a result of the COVID-19 pandemic. We completed our annual assessment for impairment as of October 1, 2020, which did not result in any impairment charges to goodwill, gaming licenses 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 As of October 1, 2022, the date of the most recent annual impairment test, seven reporting units had negative carrying amounts. The amount of goodwill at these reporting units was as follows (in millions): Northeast segment Hollywood Casino Toledo $ 5.8 Plainridge Park Casino $ 6.3 South segment Ameristar Vicksburg $ 19.5 Boomtown New Orleans $ 5.2 Hollywood Casino Gulf Coast $ 2.7 West segment Cactus Petes and Horseshu $ 10.2 Midwest segment Ameristar Council Bluffs $ 36.2 84 Table of Contents The table below presents the gross carrying amount, accumulated amortization, and net carrying amount of each major class of other intangible assets: December 31, 2022 December 31, 2021 (in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Indefinite-lived intangible assets Gaming licenses $ 1,207.6 $ — $ 1,207.6 $ 1,285.4 $ — $ 1,285.4 Trademarks 332.2 — 332.2 338.2 — 338.2 Other 0.7 — 0.7 0.7 — 0.7 Amortizing intangible assets Customer relationships 114.4 ( 102.0 ) 12.4 114.9 ( 91.4 ) 23.5 Technology 249.6 ( 80.4 ) 169.2 252.7 ( 40.5 ) 212.2 Other 27.7 ( 10.9 ) 16.8 19.4 ( 6.8 ) 12.6 Total other intangible assets, net $ 1,932.2 $ ( 193.3 ) $ 1,738.9 $ 2,011.3 $ ( 138.7 ) $ 1,872.6 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. The following table presents the estimated amortization expense based on our amortizing intangible assets as of December 31, 2022 (in millions): Years ending December 31: 2023 $ 50.5 2024 46.2 2025 30.4 2026 23.7 2027 21.7 Thereafter 25.9 Total $ 198.4 Note 10—Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: December 31, (in millions) 2022 2021 Accrued salaries and wages $ 148.6 $ 155.5 Accrued gaming, pari-mutuel, property, and other taxes 110.2 103.6 Accrued interest 20.8 20.9 Other accrued expenses (1) 321.4 317.5 Other current liabilities (2) 203.7 201.0 Accrued expenses and other current liabilities $ 804.7 $ 798.5 (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. 85 Table of Contents Note 11—Long-term Debt The table below presents long-term debt, net of current maturities, debt discounts and issuance costs: December 31, (in millions) 2022 2021 Senior Secured Credit Facilities: 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 Term Loan B-1 Facility due 2025 — 979.9 5.625 % Notes due 2027 400.0 400.0 4.125 % Notes due 2029 400.0 400.0 2.75 % Convertible Notes due 2026 330.5 330.5 Other long-term obligations 156.1 146.3 2,817.8 2,840.5 Less: Current maturities of long-term debt ( 56.2 ) ( 99.5 ) Less: Debt discounts ( 4.6 ) ( 73.1 ) Less: Debt issuance costs ( 35.7 ) ( 30.6 ) $ 2,721.3 $ 2,637.3 The following is a schedule of future minimum repayments of long-term debt as of December 31, 2022 (in millions): Years ending December 31: 2023 $ 56.2 2024 47.6 2025 38.2 2026 486.8 2027 837.0 Thereafter 1,352.0 Total minimum payments $ 2,817.8 Senior Secured Credit Facilities 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 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 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”), 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 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 86 Table of Contents $ 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 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. 4.125 % Senior Unsecured Notes On July 1, 2021, the Company completed an offering of $ 400.0 million aggregate principal amount of 4.125 % senior unsecured notes that mature on July 1, 2029 (the “ 4.125 % Notes”). The  4.125 % Notes were issued at par and interest is payable semi-annually on January 1st and July 1st of each year. The  4.125 % Notes are not guaranteed by any of the Company’s subsidiaries except in the event that the Company, in the future, issues certain subsidiary-guaranteed debt securities. The Company may redeem the  4.125 % Notes at any time on or after July 1, 2024, at the declining redemption premiums set forth in 87 Table of Contents 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 In May 2020, the Company completed a public offering of $ 330.5 million aggregate principal amount of 2.75 % unsecured convertible notes that mature, unless earlier converted, redeemed or repurchased, on May 15, 2026 at a price of par. After lender fees and discounts, net proceeds received by the Company were $ 322.2 million. Interest on the Convertible Notes is payable on May 15 th and November 15 th of each year. The Convertible Notes are convertible into shares of the Company’s common stock at an initial conversion price of $ 23.40 per share, or 42.7350 shares, per $1,000 principal amount of notes, subject to adjustment if certain corporate events occur. However, in no event will the conversion exceed 55.5555 shares of common stock per $1,000 principal amount of notes. As of December 31, 2022, the maximum number of shares that could be issued to satisfy the conversion feature of the Convertible Notes is 18,360,815 and the amount by which the Convertible Notes if-converted value exceeded its principal amount was $ 214.8 million. Starting in the fourth quarter of 2020 and prior to February 15, 2026, at their election, holders of the Convertible Notes may convert outstanding notes if the trading price of the Company’s common stock exceeds 130 % of the initial conversion price or, starting shortly after the issuance of the Convertible Notes, if the trading price per $1,000 principal amount of notes is less than 98 % of the product of the trading price of the Company’s common stock and the conversion rate then in effect. The Convertible Notes may, at the Company’s election, be settled in cash, shares of common stock of the Company, or a combination thereof. 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, 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, 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. 88 Table of Contents The Convertible Notes consisted of the following components: December 31, (in millions) 2022 2021 Liability component: Principal $ 330.5 $ 330.5 Unamortized debt discount — ( 71.7 ) Unamortized debt issuance costs ( 6.2 ) ( 5.3 ) Net carrying amount $ 324.3 $ 253.5 Carrying amount of equity component $ — $ 88.2 Interest expense, net The table below presents interest expense, net: For the year ended December 31, (in millions) 2022 2021 2020 Interest expense $ 760.1 566.9 546.3 Capitalized interest ( 1.9 ) ( 4.1 ) ( 2.2 ) Interest expense, net $ 758.2 $ 562.8 $ 544.1 The table below presents interest expense related to the Convertible Notes: For the year ended December 31, (in millions) 2022 2021 2020 Coupon interest $ 9.1 $ 9.1 $ 5.7 Amortization of debt discount — 12.7 7.3 Amortization of debt issuance costs 1.7 0.9 0.5 Convertible Notes interest expense $ 10.8 $ 22.7 $ 13.5 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. Covenants 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. If we are unable to meet our financial covenants or in the event of a cross-default, it could trigger an acceleration of payment terms. As of December 31, 2022, the Company was in compliance with all required financial covenants. The Company believes that it will remain in compliance with all of its required financial covenants for at least the next twelve months following the date of filing this Annual Report on Form 10-K with the SEC. Other Long-Term Obligations Other Long-term Obligation 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. The financing obligation has been classified as a non-current liability, which is expected to be settled in a future period of which the principal is contingent and predicated on other events. 89 Table of Contents 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 $ 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 $ 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: $ 7.5 million upon the opening of the facilities and eighteen semi-annual payments of $ 4.8 million beginning one year after the commencement of operations. This obligation is accreted to interest expense at an effective yield of 5.0 %. Event Center As of December 31, 2022 and 2021, other long-term obligations included $ 10.7 million and $ 11.4 million, respectively, related to the repayment obligation of a hotel and event center located less than a mile away from Hollywood Casino Lawrenceburg, which was constructed by the City of Lawrenceburg Department of Redevelopment. Effective in January 2015, by contractual agreement, we assumed a repayment obligation for the hotel and event center in the amount of $ 15.3 million, which was financed through a loan with the City of Lawrenceburg Department of Redevelopment, in exchange for conveyance of the property. Beginning in January 2016, the Company was obligated to make annual payments on the loan of $ 1.0 million for 20 years. This obligation is accreted to interest expense at its effective yield of 3.0 %. Note 12—Leases Lessee Master Leases The components contained within the Master Leases are accounted for as either (i) operating leases, (ii) finance leases, or (iii) financing obligations. Changes to future lease payments under the Master Leases (i.e., when future escalators become known or future variable rent resets occur), which are discussed below, require the Company to either (i) increase both the ROU assets and corresponding lease liabilities with respect to operating and finance leases or (ii) record the incremental variable payment associated with the financing obligation to interest expense. In addition, monthly rent associated with Hollywood Casino Columbus (“Columbus”) and monthly rent in excess of the Hollywood Casino Toledo (“Toledo”) rent floor, which are discussed below, are considered contingent rent. PENN Master Lease Pursuant to 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, 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, 90 Table of Contents 2020. 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 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: For the year ended December 31, (in millions) 2022 2021 2020 Variable expenses included in “General and administrative” $ 1.2 $ 18.7 $ 12.9 Variable expenses included in “Interest expense, net” 36.4 17.1 11.8 Total variable expenses $ 37.6 $ 35.8 $ 24.7 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 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 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. 91 Table of Contents 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 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, 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. The next annual escalator test date is scheduled to occur on May 1, 2023. The May 1, 2022 Pinnacle Percentage Rent reset resulted in an annual rent increase of $ 1.9 million, which will be in effect until the next Pinnacle Percentage Rent reset, scheduled to occur on May 1, 2024. Upon reset of the Pinnacle Percentage Rent, effective May 1, 2022, we recognized 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. The fifth 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 and modifies the rent calculations upon a lease termination event as defined in the amendment. 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 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. 92 Table of Contents Morgantown Lease 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. Initial annual rent under the Morgantown Lease is $ 3.0 million, subject to a 1.50 % fixed annual escalation in each of the first three years subsequent to the facility opening, which occurred on December 22, 2021. Thereafter, the lease will be subject to an annual escalator consisting of either (i) 1.25 %, if the consumer price index increase is greater than 0.50 %, or (ii) zero , if the consumer price index increase is less than 0.50 %. All improvements made on the land, including the constructed building, will be owned by the Company while the lease is in effect, however, on the expiration or termination of the Morgantown Lease, ownership of all tenant improvements on the land will transfer to GLPI. We determined the transaction to be a financing arrangement and upon execution of the Morgantown Lease, recorded a $ 30.0 million financing obligation which is included in “Long-term portion of financing obligations” within our Consolidated Balance Sheets. Lease payments are included in “Interest expense, net” within our Consolidated Statements of Operations. Perryville Lease 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. The building portion of the annual rent is subject to a fixed annual escalation of 1.50 % in each of the following three years , with subsequent annual escalations of either (i) 1.25 %, if the consumer price index increase is greater than 0.50 %, or (ii) zero , if the consumer price index increase is less than 0.50 %. We determined the transaction to be a finance lease arrangement and upon execution of the Perryville Lease, recorded a $ 102.9 million ROU asset and a corresponding lease liability. The interest portion of lease payments is included in “Interest expense, net” and the depreciation of the ROU asset is included in “Depreciation and amortization”, both within our 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, 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. The Company’s leases include options to extend the lease terms. The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Tropicana Lease 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. 93 Table of Contents Meadows Lease 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. The payment structure under the Meadows Lease includes a fixed component (“Meadows Base Rent”), which is subject to an annual escalator of up to 5 % for the initial term or until the lease year in which Meadows Base Rent plus Meadows Percentage Rent (as defined below) is a total of $ 31.0 million, subject to certain adjustments, and up to 2 % thereafter, subject to an Adjusted Revenue to Rent Ratio (as defined in the Meadows Lease) of 2.0 :1. The “Meadows Percentage Rent” is based on performance, which is prospectively adjusted for the next two-year period equal to 4.0 % of the average annual net revenues of the property during the trailing two-year period. 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, 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. The second amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at the facility. 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 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. 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 The Greektown Lease has an initial term of 15 years, with four subsequent five-year renewal options on the same terms and conditions, exercisable at the Company’s option. The payment structure under the Greektown Lease includes a fixed component, a portion subject to an annual escalator of up to 2 % depending on an Adjusted Revenue to Rent Ratio (as defined in the Greektown Lease) of 1.85 :1, and a component that is based on performance, which is prospectively adjusted every two years by an amount equal to 4 % of the average change in net revenues of the property compared to a contractual baseline during the preceding two years (“Greektown Percentage Rent”). 94 Table of Contents 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. On June 1, 2021, the Greektown Percentage Rent reset resulted in an annual rent reduction of $ 4.2 million, which will be in effect until the next Greektown Percentage Rent reset, scheduled to occur on June 1, 2023. Upon reset of the Greektown Percentage Rent, effective June 1, 2021, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 4.1 million. Information related to lease term and discount rate was as follows: December 31, 2022 2021 Weighted-Average Remaining Lease Term 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 Operating leases 5.8 % 6.7 % Finance leases 5.2 % 6.4 % Financing obligations 7.7 % 8.1 % The components of lease expense were as follows: Location on Consolidated Statements of Operations For the year ended December 31, (in millions) 2022 2021 2020 Operating Lease Costs Rent expense associated with triple net operating leases (1) General and administrative $ 149.6 $ 454.4 $ 419.8 Operating lease cost (2) Primarily General and administrative 19.7 16.6 15.8 Short-term lease cost Primarily Gaming expense 74.6 64.9 37.7 Variable lease cost (2) Primarily Gaming expense 4.3 4.3 2.5 Total $ 248.2 $ 540.2 $ 475.8 Finance Lease Costs Interest on lease liabilities (3) Interest expense, net $ 258.4 $ 17.2 $ 15.2 Amortization of ROU assets (3) Depreciation and amortization 181.6 10.6 8.0 Total $ 440.0 $ 27.8 $ 23.2 Financing Obligation Costs Interest expense (4) Interest expense, net $ 347.0 $ 416.9 $ 403.1 (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) 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. 95 Table of Contents 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). Supplemental cash flow information related to leases was as follows: For the year ended December 31, (in millions) 2022 2021 2020 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ 258.4 $ 17.2 $ 15.2 Operating cash flows from operating leases $ 163.2 $ 428.3 $ 426.7 Financing cash flows from finance leases $ 110.5 $ 8.5 $ 6.3 Total payments made under the Triple Net Leases were as follows: For the year ended December 31, (in millions) 2022 2021 2020 PENN Master Lease (1) $ 480.3 $ 475.7 $ 457.9 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 Greektown Lease 51.3 53.1 55.6 Morgantown Lease (1) 3.1 3.0 0.8 Total (2) $ 925.0 $ 912.4 $ 891.1 (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 was nominal prior to the lease termination on September 26, 2022. Therefore, it has been excluded from the table above. The following is a maturity analysis of our operating leases, finance leases, and financing obligations as of December 31, 2022: (in millions) Operating Leases Finance Leases Financing Obligations Years ending December 31: 2023 $ 133.7 $ 378.5 $ 369.8 2024 126.2 354.7 355.3 2025 116.9 350.2 355.4 2026 112.5 350.2 355.4 2027 99.5 350.2 355.4 Thereafter 1,245.6 7,592.7 7,930.3 Total lease payments 1,834.4 9,376.5 9,721.6 Less: Imputed interest ( 787.3 ) ( 4,326.3 ) ( 5,687.5 ) Present value of future lease payments 1,047.1 5,050.2 4,034.1 Less: Current portion of lease obligations ( 77.8 ) ( 116.5 ) ( 63.4 ) Long-term portion of lease obligations $ 969.3 $ 4,933.7 $ 3,970.7 Lessor 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, 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 96 Table of Contents rooms, respectively. Hotel leasing arrangements vary in duration, but are short-term in nature. The cost and accumulated depreciation of property and equipment associated with hotel rooms is included in “Property and equipment, net” within our Consolidated Balance Sheets. Note 13—Commitments and Contingencies Litigation The Company is subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions, development agreements and other matters arising in the ordinary course of business. Although the Company maintains what it believes to be adequate insurance coverage to mitigate the risk of loss pertaining to covered matters, legal and administrative proceedings can be costly, time-consuming and unpredictable. The Company does not believe that the final outcome of these matters will have a material adverse effect on its financial position, results of operations, or cash flows. Location Share Agreements Prairie State Gaming (“PSG”) enters into location share agreements with bar and retail establishments in Illinois. These agreements are contracts which allow PSG to place VGTs in the bar or retail establishment in exchange for a percentage of the variable revenue generated by the VGTs. PSG holds the gaming license with the state of Illinois and the location share percentage is determined by the state of Illinois. For the years ended December 31, 2022, 2021, and 2020, the total location share payments made by PSG, which are recorded within our Consolidated Statements of Operations as gaming expenses, were $ 43.6 million, $ 43.3 million, and $ 20.2 million, respectively. Purchase Obligations The Company has obligations to purchase various goods and services totaling $ 405.6 million as of December 31, 2022, of which $ 126.2 million will be incurred in 2023. Purchase obligations totaled $ 255.2 million as of December 31, 2021. The increase over the prior year is primarily due to additional contractual obligations related to theScore. Capital Expenditure Commitments Pursuant to each of our Triple Net Leases, with the exception of our Morgantown Lease (which is a land lease we entered into on October 1, 2020 with GLPI as discussed in Note 12, “Leases” ), we are obligated to spend a minimum of 1 % of annual net revenues, in the aggregate under each lease, on the maintenance of such facilities. Employee Benefit Plans The Company maintains a qualified retirement plan under the provisions of Section 401(k) of the Internal Revenue Code of 1986, as amended, which covers all eligible employees (the “PENN 401(k) Plan”). The PENN 401(k) Plan enables participating employees to defer a portion of their salary in a retirement fund to be administered by the Company. The Company makes a discretionary match contribution, where applicable, of 50 % of employees’ elective salary deferrals, up to a maximum of 6 % of eligible employee compensation. The matching contributions to the PENN 401(k) Plan for the years ended December 31, 2022, 2021 and 2020 were $ 12.1 million, $ 10.2 million, and $ 6.0 million, respectively. We maintain a non-qualified deferred compensation plan (the “EDC Plan”) that covers most management and other highly-compensated employees. The EDC Plan was effective beginning March 1, 2001. The EDC Plan allows the participants to defer, on a pre-tax basis, a portion of their base annual salary and/or their annual bonus and earn tax-deferred earnings on these deferrals. The EDC Plan also provides for matching Company contributions that vest over a five-year period. The Company has established a trust, and transfers to the trust, on a periodic basis, an amount necessary to provide for its respective future liabilities with respect to participant deferral and Company contribution amounts. The Company’s matching contributions for the EDC Plan for the years ended December 31, 2022, 2021 and 2020 were $ 4.6 million, $ 3.3 million, and $ 2.6 million, respectively. Our deferred compensation liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, was $ 70.8 million and $ 82.1 million as of December 31, 2022 and 2021, respectively. As part of our initiative to reduce our cost structure while our properties were temporarily closed due to the COVID-19 pandemic, we suspended our matching contributions to the PENN 401(k) Plan and the EDC Plan from April 1, 2020 to September 30, 2020. 97 Table of Contents Labor Agreements We are required to have agreements with the horsemen at the majority of our racetracks to conduct our live racing and/or simulcasting activities. In addition, in order to operate gaming machines and table games in West Virginia, the Company must maintain agreements with each of the Charles Town horsemen, pari-mutuel clerks and breeders. As of December 31, 2022, we had 35 collective bargaining agreements covering approximately 3,873 active employees. Eight collective bargaining agreements are scheduled to expire in 2023. Note 14—Income Taxes The following table summarizes the tax effects of temporary differences between the Consolidated Financial Statements carrying amount of assets and liabilities and their respective tax basis, which are recorded at the prevailing enacted tax rate that will be in effect when these differences are settled or realized. These temporary differences result in taxable or deductible amounts in future years. The Company assessed all available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize our existing net deferred tax assets. The components of the Company’s deferred tax assets and liabilities were as follows: December 31, (in millions) 2022 2021 Deferred tax assets: Stock-based compensation expense $ 8.1 $ 10.6 Accrued expenses 86.1 86.2 Financing and operating leasing obligations 2,619.3 2,351.3 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 Gross deferred tax assets 2,849.4 2,572.7 Less: Valuation allowance ( 31.2 ) ( 124.3 ) Net deferred tax assets 2,818.2 2,448.4 Deferred tax liabilities: Property and equipment, not subject to the Master Leases ( 99.1 ) ( 65.6 ) Property and equipment, subject to the Master Leases ( 925.0 ) ( 992.9 ) Investments in and advances to unconsolidated affiliates — ( 6.8 ) Discount on convertible notes — ( 18.1 ) Intangible assets ( 263.7 ) ( 284.8 ) Lease right of use assets ( 1,564.3 ) ( 1,269.3 ) Net deferred tax liabilities ( 2,852.1 ) ( 2,637.5 ) Long-term deferred tax liabilities, net $ ( 33.9 ) $ ( 189.1 ) The realizability of the net deferred tax assets is evaluated quarterly by assessing the need for a valuation allowance and by adjusting the amount of the allowance, if necessary. The Company gives appropriate consideration to all available positive and negative evidence including statutory carryback periods, projected future taxable income, and available tax planning strategies that could be implemented to realize the net deferred tax assets. The evaluation of both positive and negative evidence is a requirement pursuant to ASC 740 in determining if the net deferred tax assets will be realized. ASC 740 suggests that additional scrutiny should be given to deferred taxes of an entity with cumulative pre-tax book losses during the three most recent years and is 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 98 Table of Contents 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. 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. tax expense on undistributed foreign earnings, as we intend to reinvest and expand into new markets outside the U.S. for the foreseeable future. If our intent changes or if these earnings are needed for our U.S. operations, we would be required to accrue and pay U.S. taxes on a portion or all these undistributed earnings. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries. The undistributed foreign earnings were immaterial at December 31, 2022. 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. Due to statutorily limited NOL carryforwards and the level of earnings projections in the respective jurisdictions, a valuation allowance of $ 9.0 million has been recorded. If not used, the majority of the carryforwards will expire at various dates from December 31, 2022 through December 31, 2041 with the remaining being carried forward indefinitely. The domestic and foreign components of income (loss) before income taxes for the years ended December 31, 2022, 2021, and 2020 were as follows: For the year ended December 31, (in millions) 2022 2021 2020 Domestic $ 295.3 $ 606.0 $ ( 834.0 ) Foreign ( 120.0 ) ( 66.9 ) ( 0.2 ) Total $ 175.3 $ 539.1 $ ( 834.2 ) 99 Table of Contents The components of income tax benefit (expense) for the years ended December 31, 2022, 2021, and 2020 were as follows: For the year ended December 31, (in millions) 2022 2021 2020 Current tax benefit (expense) Federal $ ( 89.0 ) $ ( 100.0 ) $ 47.0 State ( 15.3 ) ( 23.1 ) 0.2 Foreign — — ( 0.4 ) Total current ( 104.3 ) ( 123.1 ) 46.8 Deferred tax benefit (expense) Federal 33.7 ( 11.9 ) 103.6 State 78.5 13.3 14.7 Foreign 38.5 3.1 — Total deferred 150.7 4.5 118.3 Total income tax benefit (expense) $ 46.4 $ ( 118.6 ) $ 165.1 The following table reconciles the statutory federal income tax rate to the actual effective income tax rate, and related amounts of income tax benefit (expense), for the years ended December 31, 2022, 2021, and 2020: For the year ended December 31, 2022 2021 2020 (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 ) Goodwill impairment losses — — ( 19.0 ) Compensation ( 6.2 ) 6.5 20.5 Foreign 0.9 0.9 ( 0.4 ) Valuation allowance 113.4 ( 5.9 ) ( 32.7 ) Tax credits 4.6 5.8 10.0 Equity investment write-off — 11.3 — Other ( 5.7 ) ( 3.0 ) 2.0 Income tax benefit (expense) $ 46.4 $ ( 118.6 ) $ 165.1 Effective Tax Rate ( 26.5 ) % 22.0 % 19.8 % 100 Table of Contents A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows: (in millions) Unrecognized tax benefits Unrecognized tax benefits as of January 1, 2020 $ 36.0 Additions based on prior year positions 1.2 Decreases due to settlements and/or reduction in reserves ( 0.9 ) Unrecognized tax benefits as of December 31, 2020 36.3 Additions based on prior year positions 3.8 Decreases due to settlements and/or reduction in reserves ( 0.1 ) Unrecognized tax benefits as of December 31, 2021 40.0 Additions based on prior year positions 2.9 Decreases due to settlements and/or reduction in reserves ( 0.2 ) Unrecognized tax benefits as of December 31, 2022 $ 42.7 During the year ended December 31, 2022, we did no t record any new tax reserves, and accrued interest or penalties related to current year uncertain tax positions. Regarding prior year tax positions, we recorded $ 3.7 million of tax reserves and accrued interest and reversed $ 0.2 million of previously recorded tax reserves and accrued interest for uncertain tax positions. As of December 31, 2022 and 2021, unrecognized tax benefits, inclusive of accruals for income tax related penalties and interest, of $ 46.0 million and $ 42.3 million, respectively, were included in “Other long-term liabilities” within the Company’s Consolidated Balance Sheets. Overall, the Company recorded a net tax expense of $ 3.3 million in connection with its uncertain tax positions for the year ended December 31, 2022. The liability for unrecognized tax benefits as of December 31, 2022 and 2021 included $ 36.3 million and $ 33.4 million, respectively, of tax positions that, if reversed, would affect the effective tax rate. During the years ended December 31, 2022, 2021 and 2020, we recognized $ 0.6 million, $ 0.7 million and $ 0.5 million, respectively, of interest and penalties, net of deferred taxes. In addition, the Company had no reductions in previously accrued interest and penalties for the years ended December 31, 2022 and 2021. We classify any income tax related penalties and interest accrued related to unrecognized tax benefits in “Income tax benefit (expense)” within the Consolidated Statements of Operations. The Company is currently in various stages of the examination process in connection with its open audits. Generally, it is difficult to determine when these examinations will be closed, but the Company reasonably expects that its ASC 740 liabilities will not significantly change over the next twelve months. As of December 31, 2022, the Company has open tax years 2019 through 2021 that could be subject to examination for U.S. federal income taxes. In addition, we are subject to state and local income tax examinations for various tax years in the taxing jurisdictions in which we operate. Such audits could result in increased tax liabilities, interest and penalties. While the Company believes its tax positions are appropriate, we cannot assure the outcome will remain consistent with our expectation. The Company believes we have adequately reserved for potential audit exposures of uncertain tax positions. In the event the final outcome of these matters is different than the amounts recorded, such differences will impact our income tax provision in the period in which the determination is made. As of December 31, 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. 101 Table of Contents Note 15—Stockholders’ Equity 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. 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 . 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. 102 Table of Contents 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 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. 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. Other In the second quarter of 2021, the Company entered into two promissory notes with shareholders for a total of $ 9.0 million. The promissory notes are unsecured and bear interest of 2.25 %. As of 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 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, 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 103 Table of Contents share limit. In connection with the approval of the 2022 Plan, the 2018 Plan remains in place until all of the awards previously granted thereunder have been paid, forfeited or expired. However, the shares which remained available for issuance under the 2018 Plan 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 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. Second Amended And Restated Stock Option And Restricted Stock Unit Plan ( “ theScore Plan ” ) In connection with the acquisition of theScore on October 19, 2021, the Company registered theScore Plan. 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 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 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, 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. 104 Table of Contents The following table presents activity related to our stock options for the year ended December 31, 2022: Number of Option Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in millions) Outstanding as of January 1, 2022 3,357,374 $ 23.69 Granted 398,945 $ 50.43 Exercised ( 440,170 ) $ 15.64 Forfeited ( 45,386 ) $ 34.09 Outstanding as of December 31, 2022 3,270,763 $ 27.89 6.2 $ 26.6 Exercisable as of December 31, 2022 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. The following are the weighted-average assumptions used in the Black-Scholes option-pricing model for the years ended December 31, 2022, 2021 and 2020: For the year ended December 31, 2022 2021 2020 Risk-free interest rate 1.40 % 0.46 % 1.55 % Expected volatility 71.00 % 75.33 % 33.78 % Dividend yield (1) — — — 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 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 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. 105 Table of Contents 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. The following table presents activity related to our restricted stock for the year ended December 31, 2022: With Performance Conditions Without Performance Conditions Number of Shares Weighted- Average Grant Date Fair Value Number of Shares Weighted- Average Grant Date Fair Value Nonvested as of January 1, 2022 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 Forfeited ( 5,606 ) $ 67.23 ( 136,227 ) $ 61.87 Nonvested as of December 31, 2022 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 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 106 Table of Contents 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 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. The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, associated with its cash-settled SARs of $ 9.2 million and $ 18.5 million as of December 31, 2022 and 2021 respectively. 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 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. We paid $ 3.1 million, $ 39.6 million, and $ 32.6 million during the years ended December 31, 2022, 2021, and 2020, respectively, related to cash-settled SARs. Note 17—Earnings (Loss) per Share 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 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 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 Entertainment $ 222.10 $ 420.80 $ ( 669.50 ) Net income applicable to preferred stock 0.9 2.1 — Net income (loss) applicable to common stock $ 221.2 $ 418.7 $ ( 669.5 ) 107 Table of Contents The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the years ended December 31, 2022, 2021 and 2020: For the year ended December 31, (in millions) 2022 2021 2020 Weighted-average common shares outstanding—Basic 161.2 158.7 134.0 Assumed conversion of: Dilutive stock options 1.2 2.3 — 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 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 Calculation of basic earnings (loss) per share: Net income (loss) applicable to common stock $ 221.2 $ 418.7 $ ( 669.5 ) Weighted-average shares outstanding - PENN Entertainment 160.6 158.6 134.0 Weighted-average shares outstanding - Exchangeable Shares 0.6 0.1 — Weighted-average common shares outstanding - basic 161.2 158.7 134.0 Basic earnings (loss) per share $ 1.37 $ 2.64 $ ( 5.00 ) Calculation of diluted earnings (loss) per share: Net income (loss) applicable to common stock $ 221.2 $ 418.7 $ ( 669.5 ) Interest expense, net of tax (1) : Convertible Notes 7.2 17.0 — Diluted income applicable to common stock $ 228.4 $ 435.7 $ ( 669.5 ) Weighted-average common shares outstanding - diluted 176.6 175.5 134.0 Diluted earnings (loss) per share $ 1.29 $ 2.48 $ ( 5.00 ) (1) The tax-affected rates were 21 % and 22 % for the years ended December 31, 2022 and 2021, respectively. Note 18—Segment Information We have aggregated our operating segments into five reportable segments. Retail operating segments are based on the similar characteristics within the regions in which they operate: Northeast, South, West, and Midwest. 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. 108 Table of Contents 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). For the year ended December 31, (in millions) 2022 2021 2020 Revenues: Northeast segment $ 2,695.9 $ 2,552.4 $ 1,639.3 South segment 1,314.2 1,322.2 849.6 West segment 581.9 521.4 302.5 Midwest segment 1,159.6 1,102.7 681.4 Interactive segment 663.1 432.9 121.1 Other (1) 21.3 10.6 3.9 Intersegment eliminations (2) ( 34.3 ) ( 37.2 ) ( 19.1 ) Total $ 6,401.7 $ 5,905.0 $ 3,578.7 Adjusted EBITDAR (3) : Northeast segment $ 842.5 $ 848.4 $ 478.9 South segment 548.1 587.0 318.9 West segment 220.1 195.0 82.2 Midwest segment 501.2 500.1 258.3 Interactive segment ( 74.9 ) ( 35.4 ) 37.2 Other (1) ( 97.6 ) ( 100.7 ) ( 80.7 ) Total (3) 1,939.4 1,994.4 1,094.8 Other operating benefits (costs) and other income (expenses): Rent expense associated with triple net operating leases (4) ( 149.6 ) ( 454.4 ) ( 419.8 ) Stock-based compensation ( 58.1 ) ( 35.1 ) ( 14.5 ) Cash-settled stock-based awards variance 15.5 ( 1.2 ) ( 67.2 ) Gain (loss) on disposal of assets ( 7.9 ) ( 1.1 ) 29.2 Contingent purchase price 0.6 ( 1.9 ) 1.1 Pre-opening expenses (5) ( 4.1 ) ( 5.4 ) ( 11.8 ) Depreciation and amortization ( 567.5 ) ( 344.5 ) ( 366.7 ) Impairment losses (6) ( 118.2 ) — ( 623.4 ) Insurance recoveries, net of deductible charges 10.7 — 0.1 Non-operating items of equity method investments (7) ( 7.9 ) ( 7.7 ) ( 4.7 ) 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 ) Other (5)(8) ( 127.3 ) ( 42.3 ) 93.1 Income (loss) before income taxes 175.3 539.1 ( 834.2 ) Income tax benefit (expense) 46.4 ( 118.6 ) 165.1 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 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: payroll, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have not otherwise been allocated to a property. (2) Primarily represents the elimination of intersegment revenues associated with our internally-branded retail sportsbooks, which are operated by PENN Interactive. 109 Table of Contents (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) 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, (in millions) 2022 2021 2020 Capital expenditures: Northeast segment $ 110.6 $ 144.8 $ 78.0 South segment 70.7 39.0 15.8 West segment 11.5 8.5 8.2 Midwest segment 35.8 19.8 15.1 Interactive segment 19.7 6.3 9.1 Other 15.1 25.7 10.8 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) Total 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 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 Balance sheet as of December 31, 2020 Investment in and advances to unconsolidated affiliates $ 0.1 $ — $ — $ 85.2 $ 149.3 $ 32.2 $ 266.8 Total assets $ 1,958.4 $ 1,165.4 $ 401.5 $ 1,161.1 $ 434.1 $ 9,546.8 $ 14,667.3 (1) The real estate assets subject to the Master Leases, which are classified as either property and equipment, operating lease ROU assets, or finance lease ROU assets, are included within the Other category. 110 Table of Contents Note 19—Fair Value Measurements ASC Topic 820, “Fair Value Measurements and Disclosures,” establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). The levels of the hierarchy are described below: • Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets, such as interest rates and yield curves that are observable at commonly quoted intervals. • Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions, as there is little, if any, related market activity. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy. The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate. The fair value of the Company’s trade accounts receivable and payables approximates the carrying amounts. Cash and Cash Equivalents The fair value of the Company’s cash and cash equivalents approximates their carrying amount, due to the short maturity of the cash equivalents. Equity Securities 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. The primary inputs to those techniques include the quoted market price of the equity securities, foreign currency exchange rates, a discount for lack of marketability (“DLOM”) with respect to the ordinary shares, and a Black-Scholes option pricing model previously associated with the exercised warrants. The DLOM is based on the remaining term of the relevant lock-up periods and the volatility associated with the underlying equity securities. The Black-Scholes option pricing model utilizes the exercise price of the warrants, a risk-free rate, volatility associated with the underlying equity securities and the expected life of the warrants. Held-to-maturity Securities and Promissory Notes We have a management contract with Retama Development Corporation (“RDC”), a local government corporation of the City of Selma, Texas, to manage the day-to-day operations of Retama Park Racetrack, located outside of San Antonio, Texas. 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, 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. 111 Table of Contents The contractual terms of these promissory notes include interest payments due at maturity; however, we have not recorded accrued interest on these promissory notes because uncertainty exists as to RDC’s ability to make interest payments. We have the positive intent and ability to hold the local government corporation bonds to maturity and until the amortized cost is recovered. The estimated fair values of such investments are principally based on appraised values of the land associated with Retama Park Racetrack, which are classified as Level 2 inputs. Long-term Debt The fair value of our Term Loan A Facility, Term Loan B-1 Facility, 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 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. The financing obligation has been classified as a non-current liability and the fair value of the financing obligation is based on what we expect to be settled in a future period of which the principal is contingent and predicated on other events, plus accreted period non-cash interest using an effective interest rate of 27.0 % until the claims and related obligation is settled. The financing obligation has been classified as a Level 3 measurement and is included within our Consolidated Balance Sheets in “Long-term debt, net of current maturities, debt discount and debt issuance costs.” See Note 11, “Long-term Debt.” Other Liabilities 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 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, 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. These contingent purchase price liabilities have been classified as a Level 3 measurement and are included within our Consolidated Balance Sheets in “Accrued expenses and other current liabilities” or “Other long-term liabilities,” depending on the timing of the next payment. 112 Table of Contents The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows: December 31, 2022 (in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 1,624.0 $ 1,624.0 $ 1,624.0 $ — $ — Equity securities $ 17.1 $ 17.1 $ — $ 17.1 $ — Held-to-maturity securities $ 6.7 $ 6.7 $ — $ 6.7 $ — Promissory notes $ 7.9 $ 7.9 $ — $ 7.9 $ — Financial liabilities: Long-term debt Amended Credit Facilities $ 1,503.6 $ 1,514.7 $ 1,514.7 $ — $ — 5.625 % Notes $ 399.7 $ 371.0 $ 371.0 $ — $ — 4.125 % Notes $ 393.8 $ 327.0 $ 327.0 $ — $ — Convertible Notes $ 324.3 $ 550.8 $ 550.8 $ — $ — Other long-term obligations $ 156.1 $ 154.4 $ — $ 36.4 $ 118.0 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 (in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 1,863.9 $ 1,863.9 $ 1,863.9 $ — $ — Equity securities $ 84.3 $ 84.3 $ — $ 84.3 $ — Held-to-maturity securities $ 6.7 $ 6.7 $ — $ 6.7 $ — Promissory notes $ 15.1 $ 15.1 $ — $ 15.1 $ — Puts and calls related to certain Barstool 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 $ — $ — 5.625 % Notes $ 399.6 $ 411.5 $ 411.5 $ — $ — 4.125 % Notes $ 392.9 $ 389.3 $ 389.5 $ — $ — Convertible Notes $ 253.5 $ 780.0 $ 780.0 $ — $ — Other long-term obligations $ 146.3 $ 144.3 $ — $ 53.9 $ 90.4 Other liabilities $ 13.3 $ 13.2 $ — $ 2.7 $ 10.5 113 Table of Contents The following table summarizes the changes in fair value of our Level 3 liabilities measured on a recurring basis: (in millions) Other Liabilities Balance as of January 1, 2020 $ 17.5 Payments ( 9.1 ) Included in loss (1) ( 1.1 ) Balance as of December 31, 2020 7.3 Additions 75.5 Interest 17.9 Payments ( 1.7 ) Included in earnings (1) 1.9 Balance as of December 31, 2021 100.9 Interest 27.6 Payments ( 2.7 ) Included in earnings (1) ( 0.6 ) Balance as of December 31, 2022 $ 125.2 (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. (in millions) Valuation Date Valuation Technique Level 1 Level 2 Level 3 Total Balance Total Reduction in Fair Value Recorded Gaming licenses 10/1/2022 Discounted cash flow $ — $ — $ 74.0 $ 74.0 $ 13.6 Goodwill (1) 9/30/2022 Discounted cash flow and market approach $ — $ — $ 30.0 $ 30.0 $ 37.4 Gaming licenses (1) 9/30/2022 Discounted cash flow $ — $ — $ 101.0 $ 101.0 $ 65.4 (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. The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities on a recurring basis as of December 31, 2022: Valuation Technique Unobservable Input Discount Rate Other long-term obligation Discounted cash flow Discount rate 27.0 % Contingent purchase price - Plainridge Park Casino Discounted cash flow Discount rate 7.8 % 114 Table of Contents 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 December 31, 2022 Gaming licenses $ 74.0 Discounted cash flow Discount rate 13.0 % Long-term revenue growth rate 2.0 % As of September 30, 2022 Gaming licenses $ 101.0 Discounted cash flow Discount rate 13.0 % Long-term revenue growth rate 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 $ 1.1 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. 115 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.