XML 34 R21.htm IDEA: XBRL DOCUMENT
v3.24.2.u1

Fair Value Measurements | 6 Months Ended
--- | ---
Jun. 30, 2024
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 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 payable 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 June 30, 2024 and December 31, 2023, we held $5.3 million and $10.7 million in equity securities of ordinary shares, respectively, which are reported as “Other assets” in our unaudited Consolidated Balance Sheets. These equity securities are the result of PENN Interactive entering into multi-year agreements with third-party online sports betting and/or iCasino operators for online sports betting and iCasino market access across our portfolio. We recognized unrealized holding losses of $3.9 million and $5.4 million for the three and six months ended June 30, 2024, respectively, and unrealized holding gains of $6.3 million and $3.1 million for the three and six months ended June 30, 2023, respectively, which are included in “Other,” as reported in “Other income (expenses)” within our unaudited Consolidated Statements of Operations. The fair value of the equity securities was determined using Level 1 inputs, which use market approach valuation techniques. The primary inputs to those techniques include the quoted market price of the equity securities and foreign currency exchange rates. Available-for-Sale Debt Securities The Company acquired 12.0% secured convertible notes in a technology provider on April 7, 2023 for $20.0 million, due on the third-year anniversary of the date of issuance. The terms contain optional and mandatory conversion provisions pursuant to which we will receive common stock upon conversion. As of both periods ended June 30, 2024 and December 31, 2023, the balance of the convertible notes was $24.2 million, which are reported in “Other assets” in our unaudited Consolidated Balance Sheets. As of June 30, 2024, the fair value of the convertible notes approximates the carrying value as of December 31, 2023. Therefore, we did not record any unrealized gains or losses to “Other comprehensive income (loss)” within our unaudited Consolidated Statements of Comprehensive Income (Loss). The fair value of the convertible notes was determined using a binomial lattice model and is categorized as a Level 3 measurement. 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 both periods ended June 30, 2024 and December 31, 2023, PRP held $7.9 million in promissory notes issued by RDC and $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 June 30, 2024 and December 31, 2023, the promissory notes and the local government corporation bonds were included in “Other assets” within our unaudited Consolidated Balance Sheets. 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 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 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. During the first quarter of 2024, we reassessed the trading frequency of our previously described long-term debt instruments and reclassified them from a Level 1 measurement to a Level 2 measurement. Other long-term obligations as of June 30, 2024 and December 31, 2023 included a financing arrangement entered in February of 2021 as well as the repayment obligation of the hotel and event center located near Hollywood Casino Lawrenceburg. The fair value of the Lawrenceburg repayment obligation is estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and is classified as a Level 2 measurement. As of December 31, 2023, other long-term obligations also included the relocation fees for Dayton and Mahoning Valley, which were paid off during the second quarter of 2024. The fair values of the Dayton and Mahoning Valley relocation fees were estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and were classified as Level 2 measurements. See Note 7, “Long-term Debt” for details. Additionally, in February 2021, we entered into a third-party 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 unaudited Consolidated Balance Sheets in “Long-term debt, net of current maturities, debt discount, and debt issuance costs.” See Note 7, “Long-term Debt.” Other Liabilities Other liabilities as of June 30, 2024 and December 31, 2023 include contingent purchase price liabilities related to Plainridge Park Casino and HitPoint. The Hitpoint contingent purchase price liability is payable in installments up to a maximum of $1.0 million in the form of cash and equity, on the first three anniversaries of the acquisition close date and is based on the achievement of mutual goals established by the Company and Hitpoint. The final payment of shares and cash were issued during the second and third quarters of 2024, respectively. See Note 12, “Stockholders’ Equity and Stock-Based Compensation.” As of June 30, 2024, there are no 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 June 30, 2024, we were contractually obligated to make two 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 unaudited Consolidated Balance Sheets in “Accrued expenses and other current liabilities” or “Other long-term liabilities,” depending on the timing of the next payment. Additionally, as of June 30, 2024 and December 31, 2023, Other liabilities include a $39.5 million and $70.0 million tax indemnification, respectively, as described in Note 2, “Significant Accounting Policies and Basis of Presentation.” Liabilities associated with the indemnification of $39.5 million are recorded in “Other long-term liabilities” within our unaudited Consolidated Balance Sheets. The indemnity has been classified as a Level 3 measurement. Key assumptions used to estimate the fair value of the indemnification include the expected tax rate and the probability of potential outcomes based on valuation methods that utilize unobservable inputs that are significant to the overall fair value as of June 30, 2024 and December 31, 2023. The assessment of the significance of a particular input to the fair value measurement requires judgment. The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows:
| June 30, 2024
(in millions) | Carrying Amount |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Financial assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 877.6 |  |  | $ | 877.6 |  |  | $ | 877.6 |  |  | $ | — |  |  | $ | — |
Equity securities | $ | 5.3 |  |  | $ | 5.3 |  |  | $ | 5.3 |  |  | $ | — |  |  | $ | — |
Available-for-sale debt securities | $ | 24.2 |  |  | $ | 24.2 |  |  | $ | — |  |  | $ | — |  |  | $ | 24.2 |
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 | $ | 1,453.2 |  |  | $ | 1,468.8 |  |  | $ | — |  |  | $ | 1,468.8 |  |  | $ | — |
5.625% Notes | $ | 399.8 |  |  | $ | 387.0 |  |  | $ | — |  |  | $ | 387.0 |  |  | $ | — |
4.125% Notes | $ | 395.0 |  |  | $ | 344.0 |  |  | $ | — |  |  | $ | 344.0 |  |  | $ | — |
Convertible Notes | $ | 327.0 |  |  | $ | 362.7 |  |  | $ | — |  |  | $ | 362.7 |  |  | $ | — |
Other long-term obligations | $ | 185.4 |  |  | $ | 184.2 |  |  | $ | — |  |  | $ | 8.1 |  |  | $ | 176.1 |
Other liabilities | $ | 48.4 |  |  | $ | 48.3 |  |  | $ | — |  |  | $ | 2.7 |  |  | $ | 45.6 |
| December 31, 2023
(in millions) | Carrying Amount |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Financial assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 1,071.8 |  |  | $ | 1,071.8 |  |  | $ | 1,071.8 |  |  | $ | — |  |  | $ | — |
Equity securities | $ | 10.7 |  |  | $ | 10.7 |  |  | $ | 10.7 |  |  | $ | — |  |  | $ | — |
Available-for-sale securities | $ | 24.2 |  |  | $ | 24.2 |  |  | $ | — |  |  | $ | — |  |  | $ | 24.2 |
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 | $ | 1,471.7 |  |  | $ | 1,483.5 |  |  | $ | 1,483.5 |  |  | $ | — |  |  | $ | — |
5.625% Notes | $ | 399.7 |  |  | $ | 388.0 |  |  | $ | 388.0 |  |  | $ | — |  |  | $ | — |
4.125% Notes | $ | 394.6 |  |  | $ | 340.0 |  |  | $ | 340.0 |  |  | $ | — |  |  | $ | — |
Convertible Notes | $ | 326.1 |  |  | $ | 427.6 |  |  | $ | 427.6 |  |  | $ | — |  |  | $ | — |
Other long-term obligations | $ | 173.5 |  |  | $ | 172.1 |  |  | $ | — |  |  | $ | 18.0 |  |  | $ | 154.1 |
Other liabilities | $ | 79.0 |  |  | $ | 78.9 |  |  | $ | — |  |  | $ | 2.7 |  |  | $ | 76.2 |
The following table summarizes the changes in fair value of our Level 3 assets and liabilities measured on a recurring basis:
(in millions) | Other Assets and Liabilities
Balance as of January 1, 2024 | $ | 254.5 |
Interest | 22.0 |
Payment installments | (30.6) |
Balance as of June 30, 2024 | $ | 245.9 |
The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities as of June 30, 2024:
| Valuation Technique |  | Unobservable Input |  | Discount Rate
Available-for-sale debt securities | Discounted cash flow |  | Discount rate |  | 35.0 | %
Other long-term obligation | Discounted cash flow |  | Discount rate |  | 27.0 | %
Contingent purchase price - Plainridge Park Casino | Discounted cash flow |  | Discount rate |  | 7.0 | %

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration