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Stockholders’ Equity and Stock-Based Compensation | 3 Months Ended
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Mar. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Stockholders’ Equity and Stock-Based Compensation | Stockholders’ Equity and Stock-Based Compensation Common and Preferred Stock On February 17, 2023, as part of the Barstool Acquisition as discussed in Note 6, “Acquisition s,” 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 conjunction with the February 20, 2020 stock purchase agreement between PENN and Barstool, 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. 1/1,000th 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. During the three months ended March 31, 2023, an additional tranche of 30% became available for conversion. On February 23, 2022 and February 24, 2022, 43 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 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. On March 3, 2023, 227 shares of Series D Preferred Stock were converted to common stock. As a result of the conversion, the Company issued 226,800 shares of common stock 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 March 31, 2023, 89 shares of the Series D Preferred Stock can be converted into PENN common stock. As of March 31, 2023 and December 31, 2022, there were 5,000 shares authorized of Series D Preferred Stock, of which 354 shares and 581 shares were outstanding, respectively. In connection with the acquisition of theScore in October 2021, we issued 12,319,340 of PENN common stock and 697,539 exchangeable shares (“Exchangeable Shares”) through the capital of an indirect wholly-owned subsidiary of PENN, in addition to cash consideration. Each Exchangeable Share is exchangeable into one share of PENN Common Stock at the option of the holder, subject to certain adjustments. Upon the acquisition of theScore, certain employees of theScore elected to have their outstanding equity awards, which were assumed under theScore plan (as defined below), issued as Exchangeable Shares, once the shares vest or are exercised. In addition, the Company may redeem all outstanding Exchangeable Shares in exchange for shares of PENN common stock at any time following the fifth anniversary of the closing (October 19, 2021), or earlier under certain circumstances. During the three months ended March 31, 2023, we issued 2,854 Exchangeable Shares. No Exchangeable Shares were issued during the three months ended March 31, 2022. As of March 31, 2023 and December 31, 2022, there were 768,441 Exchangeable shares authorized in both periods, of which 560,758 shares and 620,019 shares were outstanding, respectively. Share Repurchase Authorization On February 1, 2022, the Board of Directors of PENN approved a $750.0 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 $750.0 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 three months ended March 31, 2023, the Company repurchased 1,646,963 shares of its common stock in open market transactions for $50.0 million at an average price of $30.36 per share under the February 2022 Authorization. During the three months ended March 31, 2022, the Company repurchased 3,802,408 shares of its common stock in open market transactions for $175.1 million at an average price of $46.04 per share under the February 2022 Authorization. The cost of all repurchased shares is recorded as “Treasury stock” within our unaudited Consolidated Balance Sheets. Subsequent to the quarter ended March 31, 2023, the Company repurchased 647,319 shares of its common stock at an average price of $29.21 per share for an aggregate amount of $18.9 million. As of May 3, 2023, the remaining availability under our February 2022 Authorization and our December 2022 Authorization was $80.4 million and $750.0 million, respectively. 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”). 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 previous 2018 Long Term Incentive Compensation Plan, as amended (“2018 Plan”) and the Score Media and Gaming Inc. Second Amended and Restated Stock Option and Restricted Stock Unit Plan (the “theScore Plan”) 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 March 31, 2023, there are 3,915,291 shares available for future grants under the 2022 Plan. Performance Share Program 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. An aggregate of 461,747 and 238,784 restricted units with performance-based vesting conditions, at target, were granted during the three months ended March 31, 2023 and 2022, respectively, under the Performance Share Program II. Restricted stock issued pursuant to the Performance Share Program II consist of three one year-year performance periods over a three-year service period. The awards have the potential to be earned at between 0% and 150% of the number of shares granted depending on achievement of the annual performance goals, and remain subject to vesting for the full three-year service period. In addition to the above, during the three months ended March 31, 2023, the Company granted key employees of theScore 202,518 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-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. Stock-based Compensation Expense Stock-based compensation expense, which pertains principally to our stock options and restricted stock, including restricted stock with performance conditions, was $16.5 million and $17.0 million for the three months ended March 31, 2023 and 2022 and is included within the unaudited Consolidated Statements of Operations under “General and administrative.” Stock Options The Company granted 837,873 and 393,049 stock options during the three months ended March 31, 2023, and 2022 respectively. Cash-settled Phantom Stock Units Our outstanding 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 or four years. The 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 unaudited Consolidated Balance Sheets, associated with its cash-settled CPUs of $1.4 million and $2.1 million as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023, there was a total of $4.1 million unrecognized compensation cost related to CPUs that will be recognized over the awards remaining weighted-average vesting period of 0.9 years. For the three months ended March 31, 2023 and 2022, the Company recognized $0.7 million and $0.6 million of compensation expense associated with these awards, respectively. Compensation expense associated with our CPUs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations. We paid $1.4 million and $7.4 million for the three months ended March 31, 2023 and 2022, respectively, pertaining to cash-settled CPUs. 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 unaudited Consolidated Balance Sheets, associated with its cash-settled SARs of $8.7 million and $9.2 million as of March 31, 2023 and December 31, 2022, respectively. For SARs held by employees of the Company, there was $4.2 million of total unrecognized compensation cost as of March 31, 2023 that will be recognized over the awards remaining weighted-average vesting period of 1.9 years. The Company recognized a reduction to compensation expense of $0.1 million for the three months ended March 31, 2023, and no compensation expense for the three months ended March 31, 2022. Compensation expense associated with our SARs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations. We paid $0.5 million and $0.2 million during the three months ended March 31, 2023 and 2022, respectively, related to cash-settled SARs. 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 were unsecured with interest of 2.25%. During the three months ended March 31, 2023, the outstanding loan balance was settled and recorded as an increase of equity within “Additional paid-in capital” in our unaudited Consolidated Balance Sheets.

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI https://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI https://asc.fasb.org/topic&trid=2228938 + Details
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