PENN Entertainment, Inc.PENN
PENN Entertainment, Inc. Fair Value Disclosure
Note 18—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.
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, which are recorded in “Other assets” in our Consolidated Balance Sheets. Additionally, the terms of these notes contain optional and mandatory conversion provisions pursuant to which we would receive common stock upon conversion.
As of December 31, 2025 and 2024, the fair value of the convertible notes was $26.4 million and $31.5 million, respectively. As such, during the years ended December 31, 2025 and 2024, we recorded an unrealized loss of $5.1 million and an unrealized gain of $7.3 million, respectively, and corresponding tax benefit of $1.3 million and tax expense of $1.9 million, respectively, to “Other comprehensive income (loss)” within our Consolidated Statements of Comprehensive Loss.
The fair value of the convertible notes was determined using valuation models that utilize Level 3 measurements.
Long-Term Debt
The fair value of our Amended Credit Facilities, 5.625% Notes, 4.125% Notes, and the Convertible Notes is estimated based on quoted prices in active markets. The previously described long-term debt instruments have been classified as Level 2 measurements.
As of December 31, 2024, other long-term obligations included a third-party financing arrangement entered into in February 2021, as discussed in Note 10, “Long-term Debt.” The financing arrangement provided the Company with upfront and non-refundable cash proceeds, while permitting us to participate in future proceeds on certain claims. The financing obligation was classified as a Level 3 measurement and as of December 31, 2024, and was included within the Consolidated Balance Sheets in “Long-term debt, net of current maturities, debt discount, and debt issuance costs.”
Other Liabilities
As of both December 31, 2025 and 2024, Other liabilities includes a $39.5 million tax indemnification, as described in Note 2, “Significant Accounting Policies and Basis of Presentation.” Liabilities associated with the indemnification are recorded in “Other long-term liabilities” within our 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 December 31, 2025 and 2024.
The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows:
| December 31, 2025 | |||||||||||||||||||||||||||||
| (in millions) | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 686.6 | $ | 686.6 | $ | 686.6 | $ | — | $ | — | |||||||||||||||||||
| Available-for-sale debt securities | $ | 26.4 | $ | 26.4 | $ | — | $ | — | $ | 26.4 | |||||||||||||||||||
| 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 | $ | 1,975.8 | $ | 1,993.0 | $ | — | $ | 1,993.0 | $ | — | |||||||||||||||||||
5.625% Notes | $ | 399.8 | $ | 399.0 | $ | — | $ | 399.0 | $ | — | |||||||||||||||||||
4.125% Notes | $ | 396.4 | $ | 368.0 | $ | — | $ | 368.0 | $ | — | |||||||||||||||||||
| Convertible Notes | $ | 106.5 | $ | 105.6 | $ | — | $ | 105.6 | $ | — | |||||||||||||||||||
| Other long-term obligations | $ | 8.6 | $ | 7.3 | $ | — | $ | 7.3 | $ | — | |||||||||||||||||||
| Other liabilities | $ | 42.8 | $ | 42.8 | $ | — | $ | 2.7 | $ | 40.1 | |||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| (in millions) | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 706.6 | $ | 706.6 | $ | 706.6 | $ | — | $ | — | |||||||||||||||||||
| Equity securities | $ | 10.6 | $ | 10.6 | $ | 10.6 | $ | — | $ | — | |||||||||||||||||||
| Available-for-sale debt securities | $ | 31.5 | $ | 31.5 | $ | — | $ | — | $ | 31.5 | |||||||||||||||||||
| 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 | $ | 1,437.0 | $ | 1,453.9 | $ | — | $ | 1,453.9 | $ | — | |||||||||||||||||||
5.625% Notes | $ | 399.8 | $ | 393.0 | $ | — | $ | 393.0 | $ | — | |||||||||||||||||||
4.125% Notes | $ | 395.5 | $ | 356.0 | $ | — | $ | 356.0 | $ | — | |||||||||||||||||||
| Convertible Notes | $ | 327.9 | $ | 355.7 | $ | — | $ | 355.7 | $ | — | |||||||||||||||||||
| Other long-term obligations | $ | 210.5 | $ | 209.3 | $ | — | $ | 8.1 | $ | 201.2 | |||||||||||||||||||
| Other liabilities | $ | 44.6 | $ | 44.6 | $ | — | $ | 2.7 | $ | 41.9 | |||||||||||||||||||
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, 2023 | $ | 125.2 | |||
| Additions | 90.0 | ||||
| Interest | 36.1 | ||||
| Payments | (2.9) | ||||
Included in net loss and other comprehensive income | 6.1 | ||||
Balance as of December 31, 2023 | 254.5 | ||||
| Interest | 47.1 | ||||
| Payments | (33.1) | ||||
Included in net loss and other comprehensive loss | 6.1 | ||||
Balance as of December 31, 2024 | 274.6 | ||||
| Interest | 13.9 | ||||
| Payments | (2.0) | ||||
Included in net loss and other comprehensive income (1) | (220.0) | ||||
Balance as of December 31, 2025 | $ | 66.5 | |||
(1)Includes a non-cash gain on financing arrangement and an unrealized loss on debt securities. See Note 10, “Long-Term Debt.”
The following table sets forth the assets measured at fair value on a non-recurring basis as of December 31, 2025 and 2024:
| (in millions) | Valuation Date | Valuation Technique | Level 1 | Level 2 | Level 3 | Total Balance | |||||||||||||||||||||||||||||||||||
| Trademark | 4/30/2025 | Discounted cash flow | $ | — | $ | — | $ | 7.0 | $ | 7.0 | $ | 15.0 | |||||||||||||||||||||||||||||
| Goodwill | 9/30/2025 | Discounted cash flow and market approach | $ | — | $ | — | $ | 766.0 | $ | 766.0 | $ | 825.0 | |||||||||||||||||||||||||||||
| Goodwill | 10/1/2025 | Discounted cash flow and market approach | $ | — | $ | — | $ | 35.0 | $ | 35.0 | $ | 7.0 | |||||||||||||||||||||||||||||
| Gaming licenses | 10/1/2025 | Discounted cash flow | $ | — | $ | — | $ | 73.5 | $ | 73.5 | $ | 88.3 | |||||||||||||||||||||||||||||
| Trademarks | 10/1/2025 | Discounted cash flow | $ | — | $ | — | $ | 33.0 | $ | 33.0 | $ | 10.0 | |||||||||||||||||||||||||||||
| Goodwill | 10/1/2024 | Discounted cash flow and market approach | $ | — | $ | — | $ | 197.0 | $ | 197.0 | $ | 12.3 | |||||||||||||||||||||||||||||
| Gaming licenses | 10/1/2024 | Discounted cash flow | $ | — | $ | — | $ | 71.0 | $ | 71.0 | $ | 69.3 | |||||||||||||||||||||||||||||
| Trademarks | 10/1/2024 | Discounted cash flow | $ | — | $ | — | $ | 56.0 | $ | 56.0 | $ | 7.5 | |||||||||||||||||||||||||||||
The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities on a recurring basis as of December 31, 2025:
| Valuation Technique | Unobservable Input | Discount Rate | |||||||||||||||
| Available-for-sale debt securities | Discounted cash flow | Discount rate | 32.5% | ||||||||||||||
As discussed in Note 8, “Goodwill and Other Intangible Assets,” we recorded impairment charges on the indefinite-lived intangible asset classes below, following both interim assessments and our annual impairment assessment during the year ended December 31, 2025, and our annual impairment assessment during the year ended December 31, 2024. The table below presents quantitative information about the significant unobservable inputs used in the fair value measurements as of the valuation dates below:
| (in millions) | Fair Value | Valuation Technique | Unobservable Input | Range or Amount | |||||||||||||||||||
| As of April 30, 2025 | |||||||||||||||||||||||
| Trademark | $ | 7.0 | Discounted cash flow | Discount rate | 12.5 | % | |||||||||||||||||
| Pre-tax royalty rate | 2.3 | % | |||||||||||||||||||||
| As of October 1, 2025 | |||||||||||||||||||||||
| Gaming licenses | $ | 73.5 | Discounted cash flow | Discount rate | 12.0 | % | |||||||||||||||||
| Long-term revenue growth rate | 2.0 | % | |||||||||||||||||||||
| Trademarks | $ | 33.0 | Discounted cash flow | Discount rate | 12.0% | ||||||||||||||||||
| Long-term revenue growth rate | 2.0% | ||||||||||||||||||||||
| Pretax royalty rate | 1.5% | ||||||||||||||||||||||
| As of October 1, 2024 | |||||||||||||||||||||||
| Gaming licenses | $ | 71.0 | Discounted cash flow | Discount rate | 12.5 | % | |||||||||||||||||
| Long-term revenue growth rate | 2.0 | % | |||||||||||||||||||||
| Trademarks | $ | 56.0 | Discounted cash flow | Discount rate | 12.5% - 14.5% | ||||||||||||||||||
| Long-term revenue growth rate | 2.0% - 4.0% | ||||||||||||||||||||||
| Pretax royalty rate | 1.5% - 5.0% | ||||||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Mar 15, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.