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Significant Accounting Policies (Tables) | 9 Months Ended
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Sep. 30, 2022
Accounting Policies [Abstract] |
Schedule of Operating and Reportable Segments | 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 at Greektown | Detroit, Michigan |  | Greektown Lease
Hollywood Casino Bangor | Bangor, Maine |  | PENN Master Lease
Hollywood Casino at Charles Town Races | Charles Town, West Virginia |  | PENN Master Lease
Hollywood Casino Columbus | Columbus, Ohio |  | PENN Master Lease
Hollywood Casino Lawrenceburg | Lawrenceburg, Indiana |  | PENN Master Lease
Hollywood Casino Morgantown | Morgantown, Pennsylvania |  | Morgantown Lease
Hollywood Casino at PENN National Race Course | Grantville, Pennsylvania |  | PENN Master Lease
Hollywood Casino Perryville | Perryville, Maryland |  | Perryville 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 (1) | Pennsylvania |  | N/A
Hollywood Casino at The Meadows | Washington, Pennsylvania |  | Meadows Lease
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 (2) | 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 (3) | Alton, Illinois |  | PENN Master Lease
Argosy Casino Riverside | Riverside, Missouri |  | PENN Master Lease
Hollywood Casino Aurora | Aurora, Illinois |  | PENN Master Lease
Hollywood Casino Joliet | Joliet, Illinois |  | PENN Master Lease
Hollywood Casino at Kansas Speedway (4) | Kansas City, Kansas |  | Owned - JV
Hollywood Casino St. Louis | Maryland Heights, Missouri |  | PENN Master Lease
Prairie State Gaming (1) | Illinois |  | N/A
River City Casino | St. Louis, Missouri |  | Pinnacle Master Lease
(1)VGT route operations (2)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 9, “Leases”) was terminated. (3)The riverboat is owned by us and not subject to the PENN Master Lease. (4)Pursuant to a joint venture (“JV”) with NASCAR and includes the Company’s 50% investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns Hollywood Casino at Kansas Speedway. The following table highlights our revenues and Adjusted EBITDAR for each reportable segment and reconciles Adjusted EBITDAR on a consolidated basis to net income.
| For the three months ended September 30, |  | For the nine months ended September 30,
(in millions) | 2022 |  | 2021 |  | 2022 |  | 2021
Revenues: |  |  |  |  |  |  |
Northeast segment | $ | 685.4 |  |  | $ | 672.4 |  |  | $ | 2,028.8 |  |  | $ | 1,895.8 |
South segment | 329.8 |  |  | 318.2 |  |  | 1,009.8 |  |  | 982.3 |
West segment | 156.5 |  |  | 145.7 |  |  | 451.2 |  |  | 382.7 |
Midwest segment | 298.4 |  |  | 285.7 |  |  | 877.6 |  |  | 815.2 |
Interactive segment | 158.7 |  |  | 93.0 |  |  | 455.1 |  |  | 275.3 |
Other (1) | 4.2 |  |  | 3.5 |  |  | 17.4 |  |  | 6.8 |
Intersegment eliminations (2) | (8.0) |  |  | (6.7) |  |  | (23.8) |  |  | (25.6) |
Total | $ | 1,625.0 |  |  | $ | 1,511.8 |  |  | $ | 4,816.1 |  |  | $ | 4,332.5 |
Adjusted EBITDAR (3): |  |  |  |  |  |  |
Northeast segment | $ | 217.9 |  |  | $ | 221.1 |  |  | $ | 637.5 |  |  | $ | 645.9 |
South segment | 139.9 |  |  | 137.0 |  |  | 429.7 |  |  | 448.0 |
West segment | 60.5 |  |  | 54.5 |  |  | 171.4 |  |  | 151.1 |
Midwest segment | 129.4 |  |  | 125.8 |  |  | 386.2 |  |  | 374.0 |
Interactive segment | (49.3) |  |  | (32.0) |  |  | (80.1) |  |  | (29.5) |
Other (1) | (26.5) |  |  | (26.1) |  |  | (73.6) |  |  | (75.6) |
Total (3) | 471.9 |  |  | 480.3 |  |  | 1,471.1 |  |  | 1,513.9 |
Other operating benefits (costs) and other income (expenses): |  |  |  |  |  |  |
Rent expense associated with triple net operating leases (4) | (31.5) |  |  | (116.0) |  |  | (119.6) |  |  | (342.9) |
Stock-based compensation | (13.6) |  |  | (8.5) |  |  | (45.1) |  |  | (21.9) |
Cash-settled stock-based awards variance | 3.8 |  |  | (5.2) |  |  | 16.2 |  |  | (14.3) |
Gain (loss) on disposal of assets | 0.2 |  |  | (0.3) |  |  | (7.0) |  |  | (0.1) |
Contingent purchase price | (0.1) |  |  | (0.6) |  |  | 0.9 |  |  | (1.9) |
Pre-opening expenses (5) | (0.5) |  |  | (1.6) |  |  | (4.1) |  |  | (2.8) |
Depreciation and amortization | (148.7) |  |  | (83.7) |  |  | (417.2) |  |  | (246.9) |
Impairment losses (6) | (104.6) |  |  | — |  |  | (104.6) |  |  | — |
Insurance recoveries, net of deductible charges | 1.9 |  |  | — |  |  | 10.7 |  |  | — |
Non-operating items of equity method investments (7) | (2.6) |  |  | (3.0) |  |  | (4.7) |  |  | (6.0) |
Interest expense, net | (193.3) |  |  | (144.9) |  |  | (547.7) |  |  | (418.6) |
Other (5)(8) | (41.7) |  |  | 6.0 |  |  | (126.1) |  |  | 27.3 |
Income (loss) before income taxes | (58.8) |  |  | 122.5 |  |  | 122.8 |  |  | 485.8 |
Income tax benefit (expense) | 182.0 |  |  | (36.4) |  |  | 78.1 |  |  | (110.1) |
Net income | $ | 123.2 |  |  | $ | 86.1 |  |  | $ | 200.9 |  |  | $ | 375.7 |
(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. Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property. The Other category also includes corporate overhead costs, which consist of certain expenses, such as: payroll, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have not otherwise been allocated to a property. (2)Primarily represents the elimination of intersegment revenues associated with our internally-branded retail sportsbooks, which are operated by PENN Interactive. (3)We define Adjusted EBITDAR as earnings before interest expense, net, income taxes, depreciation and amortization, rent expense associated with triple net operating leases (see footnote (4) below), stock-based compensation, debt extinguishment and financing charges, which is included in “Other” (see footnote (8) below), impairment losses, insurance recoveries, net of deductible charges, changes in the estimated fair value of our contingent purchase price obligations, gain or loss on disposal of assets, the difference between budget and actual expense for cash-settled stock-based awards, pre-opening expenses (see footnote (5) below), and other. Adjusted EBITDAR is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (see footnote (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 Entertainment, Inc., 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) and Hollywood Casino at The 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 9, Leases”) and are referred to collectively as our “triple net operating leases”. As a result of the Lease Modification defined in Note 9, “Leases”, the land and building components associated with the operations of Dayton and Mahoning Valley are classified as operating leases which is recorded to rent expense, as compared to prior to the Lease Modification, whereby the land components of substantially all of the Master Lease properties were classified as operating leases and recorded to rent expense. Subsequent to the Lease Modification, the land components associated with the Master Lease properties are primarily classified as finance leases. (5)During 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 primarily relates to a $102.8 million impairment charge 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 holding losses on our equity securities of $10.8 million and $66.4 million for the three and nine months ended September 30, 2022, respectively, and holding gains on our equity securities of $10.1 million and $28.9 million for the three and nine months ended September 30, 2021, respectively, which are discussed in Note 15, “Fair Value Measurements.” Also consists of non-recurring acquisition and transaction costs of $31.9 million and $46.3 million for the three and nine months ended September 30, 2022, respectively, and $12.9 million and $14.7 million for the three and nine months ended September 30, 2021, respectively, finance transformation costs associated with the implementation of our new Enterprise Resource Management system, and a $10.4 million debt extinguishment and financing charge incurred in the second quarter of 2022, which is discussed in Note 8, “Long-term Debt.” The table below presents capital expenditures by segment:
| For the three months ended September 30, |  | For the nine months ended September 30,
(in millions) | 2022 |  | 2021 |  | 2022 |  | 2021
Capital expenditures: |  |  |  |  |  |  |
Northeast segment | $ | 26.4 |  |  | $ | 35.1 |  |  | $ | 82.1 |  |  | $ | 71.3 |
South segment | 14.8 |  |  | 16.4 |  |  | 51.1 |  |  | 24.5 |
West segment | 3.3 |  |  | 2.3 |  |  | 7.3 |  |  | 5.5 |
Midwest segment | 11.3 |  |  | 7.3 |  |  | 25.5 |  |  | 12.8 |
Interactive segment | 6.5 |  |  | 2.7 |  |  | 9.7 |  |  | 4.1 |
Other | 1.7 |  |  | 9.4 |  |  | 13.9 |  |  | 19.6 |
Total capital expenditures | $ | 64.0 |  |  | $ | 73.2 |  |  | $ | 189.6 |  |  | $ | 137.8 |
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 September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Investment in and advances to unconsolidated affiliates | $ | 0.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 79.9 |  |  | $ | 160.2 |  |  | $ | 6.1 |  |  | $ | 246.3 |
Total assets | $ | 2,172.8 |  |  | $ | 1,169.7 |  |  | $ | 375.0 |  |  | $ | 1,382.4 |  |  | $ | 4,228.8 |  |  | $ | 8,206.4 |  |  | $ | 17,535.1 |
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 |
(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.
Schedule of Complimentaries | Revenues recorded to food, beverage, hotel and other and offset to gaming revenues were as follows:
| For the three months ended September 30, |  | For the nine months ended September 30,
(in millions) | 2022 |  | 2021 |  | 2022 |  | 2021
Food and beverage | $ | 54.0 |  |  | $ | 46.1 |  |  | $ | 156.8 |  |  | $ | 126.3 |
Hotel | 37.6 |  |  | 35.7 |  |  | 106.4 |  |  | 92.8 |
Other | 4.0 |  |  | 3.2 |  |  | 9.3 |  |  | 7.2 |
Total complimentaries associated with gaming contracts | $ | 95.6 |  |  | $ | 85.0 |  |  | $ | 272.5 |  |  | $ | 226.3 |

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