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Investments in and Advances to Unconsolidated Affiliates
 12 Months Ended
Dec. 31, 2020
Equity Method Investments and Joint Ventures [Abstract]  
Investments in and Advances to Unconsolidated Affiliates
Note 7—Investments in and Advances to Unconsolidated Affiliates
As of December 31, 2020 and 2019, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s approximate 36% interest in Barstool Sports; its 50% investment in Kansas Entertainment, the JV with NASCAR that owns Hollywood Casino at Kansas Speedway; its 50% interest in Freehold Raceway; and its 50% JV with MAXXAM, Inc. (“MAXXAM”) that owns and operates racetracks in Texas.
Investment in Barstool Sports
In February 2020, we closed on our investment in Barstool Sports pursuant to a stock purchase agreement with Barstool Sports and certain stockholders of Barstool Sports, in which we purchased 36% (inclusive of 1% on a delayed basis) of the common stock, par value $0.0001 per share, of Barstool Sports for a purchase price of $161.2 million. The purchase price primarily 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 the three years after the closing of the transaction or earlier at our election, we will increase our ownership in Barstool Sports to approximately 50% by purchasing approximately $62.0 million worth of additional shares of Barstool Sports 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 Sports shares, we have immediately exercisable call rights, and the existing Barstool Sports stockholders have put rights exercisable beginning three years after closing, all based on a fair market value calculation at the time of exercise (subject to a cap of $650.0 million and a floor of 2.25 times the annualized revenue of Barstool Sports, all subject to various adjustments).
On February 20, 2020, the Company issued 883 shares of Series D Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”) to certain individual stockholders affiliated with Barstool Sports. 1/1,000th of a share of Series D Preferred Stock is convertible into one share of Penn Common Stock. The Series D Preferred Stock will be 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 Sports will be available for conversion into Penn Common Stock in tranches over the next four years as stipulated in the stock purchase agreement, with the first 20% tranche available for conversion into Penn Common Stock in the first quarter of 2021. As of December 31, 2020, none of the Series D Preferred Stock can be converted into Penn Common Stock.
As a part of the stock purchase agreement, we entered into a commercial agreement that provides us with access to Barstool Sports’ customer list and exclusive advertising on the Barstool Sports platform over the term of the agreement. The initial term of the commercial agreement is ten years and, unless earlier terminated and subject to certain exceptions, will automatically renew for three additional ten-year terms (a total of 40 years assuming all renewals are exercised). As of December 31, 2020 we have an amortizing intangible asset pertaining to the customer list of $1.6 million and a prepaid expense pertaining to the advertising in the amount of $16.5 million, of which $15.4 million is classified as long-term. The long-term portion of the prepaid advertising expense is included in “Other assets” within our Consolidated Balance Sheets.
As of December 31, 2020, our investment in Barstool Sports was $147.5 million, which is inclusive of $3.4 million of costs we incurred to close the transaction. We record our proportionate share of Barstool Sports’ net income or loss one quarter in arrears.
The Company determined that Barstool Sports qualified as a VIE as of December 31, 2020. The Company did not consolidate its investment in Barstool Sports as of and for the year ended December 31, 2020 as the Company determined that it did not qualify as the primary beneficiary of Barstool Sports either at the commencement date of its investment or for the subsequent period ended December 31, 2020, primarily as a result of the Company not having the power to direct the activities of the VIE that most significantly affect Barstool Sports’ economic performance.
Kansas Joint Venture 
As of December 31, 2020 and 2019, our investment in Kansas Entertainment was $85.2 million and $90.8 million, respectively. During the years ended December 31, 2020, 2019 and 2018, the Company received distributions from Kansas Entertainment totaling $20.0 million, $29.0 million and $27.0 million, respectively, which the Company deemed to be returns on its investment based on the source of those cash flows from the normal business operations of Kansas Entertainment. 
As of the years ended December 31, 2020 and 2019, we 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 JV as of and for the years ended December 31, 2020 and 2019, primarily as it did not have the ability to direct the activities
of the JV that most significantly impacted the JV’s economic performance without the input of NASCAR. Therefore, the Company did not consolidate its investment in the JV as of and for the years ended December 31, 2020 and 2019.
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)20202019
Current assets$14.7 $21.5 
Long-term assets$151.4 $159.2 
Current liabilities$10.2 $13.5 
For the year ended December 31,
(in millions)202020192018
Revenues$104.2 $162.3 $159.0 
Operating expenses75.5 101.3 110.4 
Operating income28.7 61.0 48.6 
Net income$28.7 $61.0 $48.6 
Net income attributable to Penn National$14.4 $30.5 $24.3 
Texas and New Jersey Joint Ventures 
The Company has a 50% interest in a JV with MAXXAM, 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. During the first quarter of 2020, principally due to on-going negative operating results of these racetracks, we recorded an other-than-temporary impairment on our investment in the JV of $4.6 million, which is included in “Impairment losses” within our Consolidated Statements of Operations and Comprehensive Income (Loss). Sam Houston Race Park hosts thoroughbred and quarter-horse racing and offers daily simulcast operations, and Valley Race Park features dog racing and simulcasting. In addition, through a separate arrangement, the Company has a 50% interest in a JV with Greenwood, which owns and operates Freehold Raceway, in Freehold, New Jersey. The property features a half-mile standardbred racetrack and a grandstand. 
As of December 31, 2020 and 2019, we determined that neither our Texas JV nor our New Jersey JV qualify as a VIE. Using the guidance for entities that are not VIEs, in both cases, the Company determined that it did not have a controlling financial interest in either of the JVs as of and for the years ended December 31, 2020 and 2019, primarily as it did not have the ability to direct the activities of either of the JVs that most significantly impacted the JVs’ economic performance without the input of MAXXAM or Greenwood, respectively. Therefore, the Company did not consolidate either of its investment in the JVs as of and for the years ended December 31, 2020 and 2019.