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Segment Information | 9 Months Ended
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Sep. 30, 2023
Segment Reporting [Abstract] |
Segment Information | 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 VGT operations, by state, to be separate operating segments. Interactive includes all of our online sports betting, iCasino and social gaming operations, management of retail sports betting, media, and the operating results of Barstool. We owned 36% of Barstool common stock prior to the February 17, 2023 Barstool Acquisition (as defined in Note 6, “Acquisitions and Dispositions,”) pursuant to which we acquired the remaining 64% of Barstool common stock. On August 8, 2023, we entered into the Barstool SPA, and we sold 100% of the outstanding shares of Barstool common stock (as defined in Note 6, “Acquisitions and Dispositions”). 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 three months ended September 30, |  | For the nine months ended September 30,
(in millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Revenues: |  |  |  |  |  |  |
Northeast segment | $ | 687.0 |  |  | $ | 685.4 |  |  | $ | 2,075.5 |  |  | $ | 2,028.8 |
South segment | 308.2 |  |  | 329.8 |  |  | 931.3 |  |  | 1,009.8 |
West segment | 135.1 |  |  | 156.5 |  |  | 394.8 |  |  | 451.2 |
Midwest segment | 293.4 |  |  | 298.4 |  |  | 882.0 |  |  | 877.6 |
Interactive segment | 196.3 |  |  | 158.7 |  |  | 687.3 |  |  | 455.1 |
Other (1) | 4.5 |  |  | 4.2 |  |  | 16.5 |  |  | 17.4 |
Intersegment eliminations (2) | (5.1) |  |  | (8.0) |  |  | (19.9) |  |  | (23.8) |
Total | $ | 1,619.4 |  |  | $ | 1,625.0 |  |  | $ | 4,967.5 |  |  | $ | 4,816.1 |
Adjusted EBITDAR (3): |  |  |  |  |  |  |
Northeast segment | $ | 208.3 |  |  | $ | 217.9 |  |  | $ | 638.5 |  |  | $ | 637.5 |
South segment | 136.6 |  |  | 139.9 |  |  | 381.1 |  |  | 429.7 |
West segment | 54.7 |  |  | 60.5 |  |  | 153.4 |  |  | 171.4 |
Midwest segment | 123.8 |  |  | 129.4 |  |  | 376.5 |  |  | 386.2 |
Interactive segment | (50.2) |  |  | (49.3) |  |  | (68.7) |  |  | (80.1) |
Other (1) | (28.1) |  |  | (26.5) |  |  | (80.7) |  |  | (73.6) |
Total (3) | 445.1 |  |  | 471.9 |  |  | 1,400.1 |  |  | 1,471.1 |
Other operating benefits (costs) and other income (expenses): |  |  |  |  |  |  |
Rent expense associated with triple net operating leases (4) | (146.6) |  |  | (31.5) |  |  | (439.0) |  |  | (119.6) |
Stock-based compensation | (35.2) |  |  | (13.6) |  |  | (71.4) |  |  | (45.1) |
Cash-settled stock-based awards variance | 2.9 |  |  | 3.8 |  |  | 12.0 |  |  | 16.2 |
Gain (loss) on disposal of assets | — |  |  | 0.2 |  |  | — |  |  | (7.0) |
Contingent purchase price | (1.3) |  |  | (0.1) |  |  | (1.8) |  |  | 0.9 |
Pre-opening expenses | — |  |  | (0.5) |  |  | — |  |  | (4.1) |
Depreciation and amortization | (105.8) |  |  | (148.7) |  |  | (323.9) |  |  | (417.2) |
Impairment losses (5) | — |  |  | (104.6) |  |  | — |  |  | (104.6) |
Insurance recoveries, net of deductible charges | 0.3 |  |  | 1.9 |  |  | 13.9 |  |  | 10.7 |
Non-operating items of equity method investments (6) | (1.0) |  |  | (2.6) |  |  | (6.4) |  |  | (4.7) |
Interest expense, net | (117.5) |  |  | (198.5) |  |  | (346.1) |  |  | (554.7) |
Interest income | 10.2 |  |  | 5.2 |  |  | 30.5 |  |  | 7.0 |
Loss on disposal of Barstool (7) | (923.2) |  |  | — |  |  | (923.2) |  |  | — |
Gain on Barstool Acquisition, net (8) | — |  |  | — |  |  | 83.4 |  |  | — |
Gain on REIT transactions, net (9) | — |  |  | — |  |  | 500.8 |  |  | — |
Loss on early extinguishment of debt | — |  |  | — |  |  | — |  |  | (10.4) |
Other (10) | (14.7) |  |  | (41.7) |  |  | (20.6) |  |  | (115.7) |
Income (loss) before income taxes | (886.8) |  |  | (58.8) |  |  | (91.7) |  |  | 122.8 |
Income tax benefit (expense) | 161.7 |  |  | 182.0 |  |  | (40.9) |  |  | 78.1 |
Net income (loss) | $ | (725.1) |  |  | $ | 123.2 |  |  | $ | (132.6) |  |  | $ | 200.9 |
(1)The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, Sam Houston and Valley Race Park, 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 or have not otherwise been allocated. Corporate overhead costs were $27.0 million and $26.5 million for the three months ended September 30, 2023 and 2022, respectively, and $78.1 million and $74.9 million for the nine months ended September 30, 2023 and 2022, respectively. (2)Primarily represents the elimination of intersegment revenues associated with our retail sportsbooks, which are operated by PENN Interactive. (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; loss on disposal of a business; non-cash gains/losses associated with REIT transactions; non-cash gains/losses associated with partial and step acquisitions as measured in accordance with ASC 805 “Business Combinations”; and other. Adjusted EBITDAR is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (see footnote (6) below) added back for Barstool and our Kansas Entertainment joint venture. (4)For the three and nine months ended September 30, 2023, pertains to the operating lease components contained within the: (i) AR PENN Master Lease; (ii) 2023 Master Lease; (iii) Margaritaville Lease; and (iv) Greektown Lease. For the three and nine months ended September 30, 2022, pertains to the operating lease components contained within the (i) PENN Master Lease (specific to the land and building components associated with the operations of Dayton and Mahoning Valley); (ii) Meadows Lease; (iii) Margaritaville Lease; (iv) Greektown Lease; and (v) Tropicana Lease (which terminated on September 26, 2022). (5)Amount primarily relates to a $102.8 million impairment charge in the Northeast segment. (6)Consists principally of interest expense, net, income taxes, depreciation and amortization, and stock-based compensation expense associated with Barstool prior to us acquiring the remaining 64% of Barstool common stock (see Note 6, “Acquisitions and Dispositions”) and our Kansas Entertainment joint venture (7)Relates to the loss incurred on the sale of 100% of the outstanding shares of Barstool which was completed on August 8, 2023 (see Note 6, “Acquisitions and Dispositions”). (8)Includes a gain of $66.5 million associated with Barstool related to remeasurement of the equity investment immediately prior to the acquisition date of February 17, 2023 and a gain of $16.9 million related to the acquisition of the remaining 64% of Barstool common stock (see Note 6, “Acquisitions and Dispositions”). (9)Upon the execution of the February 21, 2023 AR PENN Master Lease and the 2023 Master Lease, both effective January 1, 2023, we recognized a gain of $500.8 million as a result of the reclassification and remeasurement of lease components (see Note 9, “Leases”). (10)Primarily relates to unrealized holding losses on our equity securities of $11.6 million and $10.8 million for the three months ended September 30, 2023 and 2022, respectively. Primarily relates to unrealized holding losses of $8.5 million and $66.4 million for the nine months ended September 30, 2023 and 2022, respectively. In addition, during the three and nine months ended September 30, 2023, the unrealized holding losses were partially offset by dividend income received (see 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. The table below presents capital expenditures by segment:
| For the three months ended September 30, |  | For the nine months ended September 30,
(in millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Capital expenditures: |  |  |  |  |  |  |
Northeast segment | $ | 27.1 |  |  | $ | 26.4 |  |  | $ | 74.6 |  |  | $ | 82.1 |
South segment | 20.3 |  |  | 14.8 |  |  | 49.4 |  |  | 51.1 |
West segment | 5.6 |  |  | 3.3 |  |  | 15.9 |  |  | 7.3 |
Midwest segment | 11.1 |  |  | 11.3 |  |  | 40.7 |  |  | 25.5 |
Interactive segment | 8.6 |  |  | 6.5 |  |  | 18.3 |  |  | 9.7 |
Other | 2.3 |  |  | 1.7 |  |  | 8.9 |  |  | 13.9 |
Total capital expenditures | $ | 75.0 |  |  | $ | 64.0 |  |  | $ | 207.8 |  |  | $ | 189.6 |
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, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Investment in and advances to unconsolidated affiliates | $ | 0.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 77.8 |  |  | $ | — |  |  | $ | 4.7 |  |  | $ | 82.6 |
Total assets | $ | 1,993.6 |  |  | $ | 1,250.0 |  |  | $ | 382.1 |  |  | $ | 1,260.8 |  |  | $ | 2,366.6 |  |  | $ | 8,915.5 |  |  | $ | 16,168.6 |
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 |
(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.

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