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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to            
Commission file number 001-33998
Churchill Downs Incorporated
(Exact name of registrant as specified in its charter)
Kentucky
61-0156015
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
600 North Hurstbourne Parkway, Suite 400
Louisville,Kentucky
40222
(Address of Principal Executive Offices)
(Zip Code)
(502) 636-4400
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, No Par ValueCHDNThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  
The number of shares outstanding of registrant’s common stock at April 13, 2022 was 38,025,490 shares.




CHURCHILL DOWNS INCORPORATED
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2022
 
Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
2


PART I.    FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended March 31,
(in millions, except per common share data)20222021
Net revenue:
Live and Historical Racing$86.0 $63.2 
TwinSpires100.3 103.5 
Gaming177.3 152.0 
All Other0.5 5.6 
Total net revenue364.1 324.3 
Operating expense:
Live and Historical Racing67.7 54.7 
TwinSpires74.9 77.5 
Gaming125.2 106.3 
All Other3.1 8.8 
Selling, general and administrative expense35.9 30.2 
Asset impairments4.9  
Transaction expense, net5.0 0.1 
Total operating expense316.7 277.6 
Operating income47.4 46.7 
Other income (expense):
Interest expense, net(21.3)(19.4)
Equity in income of unconsolidated affiliates32.5 24.9 
Miscellaneous, net 0.1 
Total other income (expense)11.2 5.6 
Income from operations before provision for income taxes58.6 52.3 
Income tax provision(16.5)(16.2)
Net income$42.1 $36.1 
Net income per common share data:
Basic net income$1.10 $0.93 
Diluted net income$1.08 $0.91 
Weighted average shares outstanding:
Basic38.3 39.0 
Diluted38.8 39.6 
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
3


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions)March 31, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$294.5 $291.3 
Restricted cash
65.5 64.3 
Accounts receivable, net
46.0 42.3 
Income taxes receivable
59.8 66.0 
Other current assets
54.5 37.6 
Total current assets520.3 501.5 
Property and equipment, net
1,035.8 994.9 
Investment in and advances to unconsolidated affiliates
655.5 663.6 
Goodwill
366.8 366.8 
Other intangible assets, net
351.9 348.1 
Other assets
18.8 18.9 
Long-term assets held for sale87.8 87.8 
Total assets$3,036.9 $2,981.6 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$96.9 $81.6 
Accrued expenses and other current liabilities224.3 232.6 
Current deferred revenue
104.0 47.7 
Current maturities of long-term debt
7.0 7.0 
Dividends payable
 26.1 
Total current liabilities432.2 395.0 
Long-term debt, net of current maturities and loan origination fees
667.2 668.6 
Notes payable, net of debt issuance costs
1,292.7 1,292.4 
Non-current deferred revenue13.3 13.3 
Deferred income taxes
263.1 252.9 
Other liabilities
50.6 52.6 
Total liabilities2,719.1 2,674.8 
Commitments and contingencies
Shareholders' equity:
Preferred stock  
Common stock  
Retained earnings
318.7 307.7 
Accumulated other comprehensive loss
(0.9)(0.9)
Total shareholders' equity317.8 306.8 
Total liabilities and shareholders' equity$3,036.9 $2,981.6 
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
4


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Common StockRetained
Earnings
Accumulated Other Comprehensive LossTotal Shareholders' Equity
(in millions, except per common share data)SharesAmount
Balance, December 31, 202138.1$ $307.7 $(0.9)$306.8 
Net income42.1 42.1 
Issuance of common stock0.1 
Repurchase of common stock(0.1)(7.0)(18.0)(25.0)
Taxes paid related to net share settlement of stock awards(0.1)(13.1)(13.1)
Stock-based compensation7.0 7.0 
Balance, March 31, 202238.0$ $318.7 $(0.9)$317.8 
Common StockRetained
Earnings
Accumulated Other Comprehensive LossTotal Shareholders' Equity
(in millions, except per common share data)SharesAmount
Balance, December 31, 202039.5 $18.2 $349.8 $(0.9)$367.1 
Net income36.1 36.1 
Issuance of common stock0.1  
Repurchase of common stock(1.0)(22.0)(171.9)(193.9)
Taxes paid related to net share settlement of stock awards(0.1)(12.6)(12.6)
Stock-based compensation5.5 5.5 
Balance, March 31, 202138.5$1.7 $201.4 $(0.9)$202.2 
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
5


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
(in millions)20222021
Cash flows from operating activities:
Net income $42.1 $36.1 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization25.1 26.0 
Distributions from unconsolidated affiliates40.6 22.0 
Equity in income of unconsolidated affiliates(32.5)(24.9)
Stock-based compensation7.0 5.5 
Deferred income taxes10.2 5.7 
Asset impairments4.9  
Amortization of operating lease assets1.3 0.2 
Other1.2 1.2 
Changes in operating assets and liabilities:
Income taxes6.4 9.2 
Deferred revenue56.3 21.0 
Other assets and liabilities(27.4)2.2 
Net cash provided by operating activities135.2 104.2 
Cash flows from investing activities:
Capital maintenance expenditures(10.0)(4.7)
Capital project expenditures(45.5)(7.6)
Other(7.3) 
Net cash used in investing activities(62.8)(12.3)
Cash flows from financing activities:
Proceeds from borrowings under long-term debt obligations 780.8 
Repayments of borrowings under long-term debt obligations(1.8)(425.7)
Payment of dividends(25.7)(24.8)
Repurchase of common stock(24.3)(193.9)
Taxes paid related to net share settlement of stock awards (13.1)(12.6)
Debt issuance costs (5.8)
Change in bank overdraft(3.0)(12.8)
Other(0.1)1.6 
Net cash (used in) provided by financing activities(68.0)106.8 
Cash flows from discontinued operations:
Operating activities of discontinued operations  (124.0)
Net increase in cash, cash equivalents and restricted cash4.4 74.7 
Cash, cash equivalents and restricted cash, beginning of period355.6 121.0 
Cash, cash equivalents and restricted cash, end of period$360.0 $195.7 
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
6


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Three Months Ended March 31,
(in millions)20222021
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest$20.7 $15.4 
Income taxes0.1 0.1 
Schedule of non-cash operating, investing and financing activities:
Property and equipment additions included in accounts payable and accrued expenses$29.9 $4.2 
Debt issuance costs included in accrued expense and other current liabilities 3.2 
Right-of-use assets obtained in exchange for lease obligations in operating leases 0.9  
Repurchase of common stock included in accrued expense and other current liabilities0.7  
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
7

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)


1. DESCRIPTION OF BUSINESS
Basis of Presentation
Churchill Downs Incorporated (the "Company", "we", "us", "our") financial statements are presented in conformity with the requirements of this Quarterly Report on Form 10-Q and consequently do not include all of the disclosures normally required by U.S. generally accepted accounting principles ("GAAP") or those normally made in our Annual Report on Form 10-K. The December 31, 2021 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.
The following information is unaudited. All per share amounts assume dilution unless otherwise noted. This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021.
In the opinion of management, all adjustments necessary for a fair statement of this information have been made, and all such adjustments are of a normal, recurring nature.
We conduct our business through three reportable segments: Live and Historical Racing, TwinSpires, and Gaming. We aggregate our other businesses as well as certain corporate operations, and other immaterial joint ventures, in All Other. We report net revenue and operating expense associated with these reportable segments in the accompanying condensed consolidated statements of comprehensive income.
Segments
During the first quarter of 2022, we updated our operating segments to reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources. Our chief operating decision maker decided to include the results of our United Tote business in the TwinSpires segment as we evolve our strategy to integrate the United Tote offering with TwinSpires Horse Racing, which we believe will create additional business to business revenue opportunities. Results of our United Tote business were previously included in our All Other segment. The prior year results were reclassified to conform to this presentation.
Impact of COVID-19 Pandemic
In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The COVID-19 global pandemic has resulted in travel limitations and business and government shutdowns which have had significant negative economic impacts in the United States and in relation to our business. Although vaccines are now available, we cannot predict the duration of the COVID-19 global pandemic. The extent to which the COVID-19 pandemic, including the emergence of variant strains, will continue to impact the Company remains uncertain and will depend on many factors that are not within our control. We will continue to monitor for new developments related to the pandemic and assess these developments to maintain continuity in our operations.
Exit of the Direct Online Sports and Casino Business
On February 24, 2022 the Company announced plans to exit the direct online Sports and Casino business. The Company will maintain its retail Sports operations and pursue monetization of its online market access licenses.
2. RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements - Effective in 2022 or Thereafter
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, and simplifies the accounting for transitioning from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and if elected, will be applied prospectively through December 31, 2022. We are currently evaluating the effect the adoption of this new accounting standard will have on our results of operations, financial condition, and cash flows.
3. NATURAL DISASTER
In August 2021, Hurricane Ida caused damage to portions of Louisiana, including Fair Grounds Race Course & Slots, and 15 off-track betting facilities ("OTBs") owned by Video Services, LLC ("VSI") (collectively, "Fair Grounds and VSI"). Two OTBs remain closed.
The Company carries property and casualty insurance, as well as business interruption insurance subject to certain deductibles. During the first quarter of 2022, the Company incurred $2.3 million of operating expenses related to ongoing recovery and
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
8

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

maintenance efforts and received $0.3 million from our insurance carriers. Through March 31, 2022, the Company has received $3.0 million in insurance recoveries from our insurance carriers and has an insurance recovery receivable of $4.6 million as of March 31, 2022. The Company is currently working with its insurance carriers to finalize its claim. We continue to assess damages and insurance coverage, and we currently do not expect our losses to exceed the applicable insurance recoveries.
4. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Discontinued Operations
On January 9, 2018, the Company completed the sale of its mobile gaming subsidiary, Big Fish Games, Inc. ("Big Fish Games"). The Big Fish Games business met the criteria for discontinued operation presentation. The condensed consolidated statements of cash flows reflect Big Fish Games as discontinued operations for all periods presented. The Company previously reported combined continuing and discontinued operations in our condensed consolidated statement of cash flows. The Company now separates continuing from discontinued operations in our condensed consolidated statement of cash flows. The prior year results were reclassified to conform to the current period presentation.
On May 22, 2020, we entered into an agreement in principle to settle Cheryl Kater v. Churchill Downs Incorporated and Manasa Thimmegowda v. Big Fish Games, Inc. The $124.0 million settlement was paid on March 25, 2021.
Assets Held for Sale
On September 29, 2021, the Company announced an agreement to sell the 326-acre property in Arlington Heights, Illinois (the "Arlington Property"), to the Chicago Bears for $197.2 million. The closing of the sale of the Arlington Property is subject to the satisfaction of various closing conditions and the Company anticipates closing the sale of the Arlington Property in early 2023.
The Company has classified certain assets of Arlington International Racecourse ("Arlington") totaling $81.5 million as held for sale as of March 31, 2022 and December 31, 2021, on the accompanying condensed consolidated balance sheets. Arlington’s operations and assets are included in All Other in our consolidated results.
On November 22, 2021, the Company announced an agreement to sell 115.7 acres of land near Calder Casino and Racing ("Calder") for $291.0 million or approximately $2.5 million per acre to Link Logistics Real Estate, a Blackstone portfolio company. The closing of the sale of the land is subject to the satisfaction of various closing conditions. The Company anticipates closing the sale of the land in the second quarter of 2022.
As of March 31, 2022 and December 31, 2021, the Company has classified certain assets of Calder totaling $6.3 million as held for sale on the accompanying condensed consolidated balance sheets. Calder's operations and assets are included in Gaming in our consolidated results.
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill was $366.8 million as of March 31, 2022 and December 31, 2021.
Other intangible assets are comprised of the following:
March 31, 2022December 31, 2021
(in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Definite-lived intangible assets$31.2 $(20.3)$10.9 $31.2 $(19.1)$12.1 
Indefinite-lived intangible assets341.0 336.0 
Total$351.9 $348.1 
During the first quarter of 2022 we established an indefinite-lived intangible asset of $5.0 million for gaming rights in Indiana associated with the planned development of the Queen of Terre Haute Casino Resort.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
9

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

6. ASSET IMPAIRMENTS
On February 24, 2022, the Company announced plans to exit the direct online Sports and Casino business. The Company will maintain its retail Sports operations and pursue monetization of its online market access licenses. During the quarter ended March 31, 2022, the Company evaluated whether this planned exit would indicate it is more likely than not that any of the Company’s intangible assets, long-lived assets, current assets or property and equipment, were impaired (“Trigger Event”). Based on the Company’s evaluation, the Company concluded that a Trigger Event occurred related to certain TwinSpires assets. As a result, the Company recorded a $4.9 million non-cash impairment charge related to certain assets in the TwinSpires segment.
7. INCOME TAXES
The Company’s effective income tax rate for the three months ended March 31, 2022 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer’s compensation. This expense was partially offset by tax benefits resulting from year-to-date tax deductions from vesting of restricted stock compensation in excess of book deductions.

The Company’s effective income tax rate for the three months ended March 31, 2021 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes, non-deductible officer’s compensation, and an increase to our unrecognized tax benefits due to an extension of the statute of limitations for certain tax positions. This expense was partially offset by tax benefits resulting from year-to-date tax deductions from vesting of restricted stock compensation in excess of book deductions.
8. SHAREHOLDERS’ EQUITY
Stock Repurchase Programs
On October 30, 2018, the Board of Directors of the Company approved a common stock repurchase program of up to $300.0 million ("2018 Stock Repurchase Program"). The 2018 Stock Repurchase Program was in effect until September 29, 2021 and had unused authorization of $97.9 million.
On September 29, 2021, the Board of Directors of the Company approved a common stock repurchase program of up to $500.0 million ("2021 Stock Repurchase Program"). The 2021 Stock Repurchase Program includes and is not in addition to any unspent amount remaining under the prior 2018 Stock Purchase Program authorization. Repurchases may be made at management’s discretion from time to time on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The repurchase program has no time limit and may be suspended or discontinued at any time. We had approximately $420.6 million of repurchase authority remaining under the 2021 Stock Repurchase Program at March 31, 2022, based on trade date.
Three Months Ended March 31,
(in millions, except share data)20222021
Repurchase Program SharesAggregate Purchase PriceSharesAggregate Purchase Price
2021 Stock Repurchase Program 116,863 $25.0  $ 
As of March 31, 2022, we had $0.7 million accrued for the future cash settlement of executed repurchases of our common stock and no accrual as of March 31, 2021.
The Duchossois Group Share Repurchase
On February 1, 2021, the Company entered into an agreement (the "Stock Repurchase Agreement") with an affiliate of The Duchossois Group, Inc. ("TDG") to repurchase 1,000,000 shares of the Company’s common stock for $193.94 per share in a privately negotiated transaction for an aggregate purchase price of $193.9 million. The repurchase of shares of common stock from TDG pursuant to the Stock Repurchase Agreement was approved by the Company's Board of Directors separately from, and did not reduce the authorized amount remaining under, the existing common stock repurchase program.
9. STOCK-BASED COMPENSATION PLANS
We have stock-based employee compensation plans with awards outstanding under the Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan (the "2016 Plan") and the Executive Long-Term Incentive Compensation Plan, which was
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
10

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

adopted pursuant to the 2016 Plan. Our total stock-based compensation expense, which includes expenses related to restricted stock awards, restricted stock unit awards ("RSUs"), performance share unit awards, and stock options associated with our employee stock purchase plan was $7.0 million for the three months ended March 31, 2022 and $5.5 million for the three months ended March 31, 2021.
During the three months ended March 31, 2022, the Company awarded RSUs to employees and certain named executive officers ("NEOs").
A summary of the RSUs granted during 2022 is presented below (units in thousands):
Grant YearAward TypeNumber of Units AwardedVesting Terms
2022RSU59
Vest equally over three service periods ending in 2025
10. DEBT
Credit Agreement
On December 27, 2017, we entered into a senior secured credit agreement (as amended, the "Credit Agreement") with a syndicate of lenders. The Credit Agreement provides for a $700.0 million senior secured revolving credit facility due 2024 (the "Revolver") and a $400.0 million senior secured term loan B due 2024 (the "Term Loan B"). Included in the maximum borrowing of $700.0 million under the Revolver is a letter of credit sub facility not to exceed $50.0 million and a swing line commitment up to a maximum principal amount of $50.0 million. The Credit Agreement is collateralized by substantially all of the wholly-owned assets of the Company.
On April 28, 2020, the Company entered into a Second Amendment to the Credit Agreement (the "Second Amendment"), which (i) provided for a financial covenant relief period through the date on which the Company delivered the Company's quarterly financial statements and compliance certificate for the fiscal quarter ended June 30, 2021, subject to certain exceptions (the "Financial Covenant Relief Period"), (ii) amended the definition of "Consolidated EBITDA" in the Credit Agreement with respect to the calculation of Consolidated EBITDA for the first two fiscal quarters after the termination of the Financial Covenant Relief Period, (iii) extended certain deadlines and made certain other amendments to the Company’s financial reporting obligations, (iv) placed certain restrictions on restricted payments during the Financial Covenant Relief Period, and (v) amended the definitions of "Material Adverse Effect" and "License Revocation" in the Credit Agreement to take into consideration COVID-19.
On February 1, 2021, the Company entered into the Third Amendment to the Credit Agreement to increase the restricted payments capacity during the Financial Covenant Relief Period from $26.0 million to $226.0 million to accommodate a share repurchase from an affiliate of TDG. Refer to Note 8, Shareholders' Equity, for information regarding this transaction.
On March 17, 2021, the Company entered into the Incremental Joinder Agreement No. 1 (the "Joinder") to its Credit Agreement which provided $300.0 million in New Term Loan Commitments ("Term Loan B-1") as a new tranche of term loans under the existing Credit Agreement (as conformed to recognize the new loan), and carries a maturity date of March 17, 2028. The Term Loan B-1 bears interest at LIBOR plus 200 basis points and requires quarterly payments of 0.25% of the original $300.0 million balance. The Term Loan B-1 may be subject to additional mandatory prepayment from excess cash flow on an annual basis per the provisions of the Credit Agreement. The Company capitalized $3.5 million of debt issuance costs associated with the Joinder which are being amortized as interest expense over the 7-year term of the Term Loan B-1.
The interest rate on the Revolver on March 31, 2022 was LIBOR plus 137.5 basis points based on the Revolver pricing grid in the Second Amendment and the Company's net leverage ratio as of March 31, 2022. The Term Loan B and Term Loan B-1 bear interest at LIBOR plus 200 basis points.
The Company was compliant with all applicable covenants on March 31, 2022.
2028 Senior Notes Second Supplemental Indenture
On March 17, 2021, the Company completed an offering of $200.0 million in aggregate principal amount of 4.75% Senior Unsecured Notes that mature on January 15, 2028 (the "Additional 2028 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The Additional 2028 Notes were offered under the indenture dated as of December 27, 2017, governing the $500.0 million aggregate principal amount of 4.75% Senior Unsecured Notes due 2028 ("Existing 2028 Notes") and form a part of the same series for purposes of the indenture. In connection with the offering, we capitalized $3.4 million of debt issuance costs which are being amortized as interest expense over the term of the Additional
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
11

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

2028 Notes. Upon completion of this offering, the aggregate principal amount outstanding of the Existing 2028 Notes, together with the Additional 2028 Notes (collectively the "2028 Senior Notes"), is $700.0 million.
The Additional 2028 Notes were issued at 103.25% of the principal amount, plus interest deemed to have accrued from January 15, 2021, with interest payable on January 15th and July 15th of each year, commencing on July 15, 2021. The 2028 Senior Notes will vote as one class under the indenture governing the 2028 Senior Notes. The 3.25% premium will be amortized through interest expense, net over the term of the Additional 2028 Notes.
The Company used the net proceeds from the Additional 2028 Notes and the Term Loan B-1 (i) to repay indebtedness outstanding under our Revolving Credit Facility, (ii) to fund related transaction fees and expenses and (iii) for working capital and other general corporate purposes.
The Company may redeem some or all of the Additional 2028 Notes at any time at redemption prices set forth in the 2028 Offering Memorandum.
In connection with the issuance of the Additional 2028 Notes, the Company and the 2028 Guarantors entered into a Registration Rights Agreement to register any 2028 Senior Notes under the Securities Act for resale that are not freely tradable 366 days from March 17, 2021.
Refer to Note 18, Subsequent Event, for information regarding the Company's April 2022 financing transactions.
11. REVENUE FROM CONTRACTS WITH CUSTOMERS
Performance Obligations
As of March 31, 2022, our Live and Historical Racing segment had remaining performance obligations on contracts with a duration greater than one year relating to television rights, sponsorships, personal seat licenses, and admissions, with an aggregate transaction price of $114.3 million. The revenue we expect to recognize on these remaining performance obligations is $41.6 million for the remainder of 2022, $30.1 million in 2023, $22.0 million in 2024, and the remainder thereafter.
As of March 31, 2022, our remaining performance obligations on contracts with a duration greater than one year in segments other than Live and Historical Racing were not material.
Contract Assets and Contract Liabilities
As of March 31, 2022 and December 31, 2021, contract assets were not material.
As of March 31, 2022 and December 31, 2021, contract liabilities were $121.3 million and $64.9 million, respectively, which are included in current deferred revenue, non-current deferred revenue, and accrued expense in the accompanying condensed consolidated balance sheets. Contract liabilities primarily relate to the Live and Historical Racing segment and the increase was primarily due to cash payments received for unfulfilled performance obligations. We recognized $3.2 million of revenue during the three months ended March 31, 2022, which was included in the contract liabilities balance at December 31, 2021. We recognized $2.6 million of revenue during the three months ended March 31, 2021, which was included in the contract liabilities balance at December 31, 2020.
Disaggregation of Revenue
In Note 17, Segment Information, the Company has included its disaggregated revenue disclosures as follows: 
For the Live and Historical Racing segment, revenue is disaggregated between racing facilities and HRM facilities given that our racing facilities revenues primarily revolve around live racing events while our HRM facilities revenues primarily revolve around historical racing events. This segment is also disaggregated by location given the geographic economic factors that affect the revenue of service offerings. Within the Live and Historical racing segment, revenue is further disaggregated between live and simulcast racing, historical racing, racing event-related services, and other services.
For the TwinSpires segment, revenue is disaggregated between Horse Racing and Sports and Casino given that Horse Racing revenue is primarily related to online pari-mutuel wagering on live race events while Sports and Casino revenue relates to casino gaming service offerings. Within the TwinSpires segment, revenue is further disaggregated between live and simulcast racing, gaming, and other services.
For the Gaming segment, revenue is disaggregated by location given the geographic economic factors that affect the revenue of Gaming service offerings. Within the Gaming segment, revenue is further disaggregated between live and simulcast racing, racing event-related services, gaming, and other services.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
12

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

We believe that these disclosures depict how the amount, nature, timing, and uncertainty of cash flows are affected by economic factors.

12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
(in millions)March 31, 2022December 31, 2021
Account wagering deposits liability$55.0 $47.5 
Purses payable26.1 28.6 
Accrued salaries and related benefits19.4 39.9 
Accrued interest23.8 23.9 
Other100.0 92.7 
Total$224.3 $232.6 
13. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates as of March 31, 2022 and December 31, 2021 primarily consisted of a 61.3% interest in Rivers Casino Des Plaines ("Rivers Des Plaines"), a 50% interest in Miami Valley Gaming and Racing ("MVG"), and other immaterial joint ventures.
Rivers Des Plaines
The ownership of Rivers Des Plaines is comprised of the following: (1) the Company owns 61.3%, (2) High Plaines Gaming, LLC ("High Plaines"), an affiliate of Rush Street Gaming, LLC, owns 36.0%, and (3) Casino Investors, LLC owns 2.7%. Both the Company and High Plaines have participating rights over Rivers Des Plaines, and both must consent to operating, investing and financing decisions. As a result, we account for Rivers Des Plaines using the equity method. As of March 31, 2022, the net aggregate basis difference between the Company’s investment in Rivers Des Plaines and the amounts of the underlying equity in net assets was $832.0 million.
Our investment in Rivers Des Plaines was $547.8 million and $554.8 million as of March 31, 2022 and December 31, 2021, respectively. The Company received distributions from Rivers Des Plaines of $30.5 million and $12.0 million for the three months ended March 31, 2022 and 2021, respectively.
Miami Valley Gaming
Delaware North Companies Gaming & Entertainment Inc. ("DNC") owns the remaining 50% interest in MVG. Since both we and DNC have participating rights over MVG, and both must consent to MVG's operating, investing and financing decisions, we account for MVG using the equity method.
Our investment in MVG was $107.7 million and $108.7 million as of March 31, 2022 and December 31, 2021, respectively. The Company received distributions from MVG of $10.0 million for the three months ended March 31, 2022 and 2021.
Summarized Financial Results for our Unconsolidated Affiliates
Summarized below are the financial results for our unconsolidated affiliates.
Three Months Ended March 31,
(in millions)20222021
Net revenue$177.2 $138.7 
Operating and SG&A expense118.2 85.6 
Depreciation and amortization5.3 4.3 
Total operating expense123.5 89.9 
Operating income53.7 48.8 
Interest and other, net4.1 (4.6)
Net income$57.8 $44.2 
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
13

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(in millions)March 31, 2022December 31, 2021
Assets
Current assets$96.8 $96.0 
Property and equipment, net336.4 312.3 
Other assets, net263.5 264.1 
Total assets$696.7 $672.4 
Liabilities and Members' Deficit
Current liabilities$128.6 $95.3 
Long-term debt807.4 786.9 
Other liabilities3.6 20.6 
Members' deficit(242.9)(230.4)
Total liabilities and members' deficit$696.7 $672.4 
14. FAIR VALUE OF ASSETS AND LIABILITIES
We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. 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.
Restricted Cash
Our restricted cash accounts that are held in interest-bearing accounts qualify for Level 1 in the fair value hierarchy, which includes unadjusted quoted market prices in active markets for identical assets.
Debt
The fair value of the Company’s 2028 Senior Notes and 5.50% Senior Notes due 2027 (the "2027 Senior Notes") are estimated based on unadjusted quoted prices for identical or similar liabilities in markets that are not active and as such are Level 2 measurements. The fair values of the Company's Term Loan B, Term Loan B-1, and Revolver under the Credit Agreement approximate the gross carrying value of the variable rate debt and as such are Level 2 measurements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
14

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The carrying amounts and estimated fair values by input level of the Company's financial instruments are as follows:
March 31, 2022
(in millions)Carrying AmountFair ValueLevel 1Level 2Level 3
Financial assets:
Restricted cash$65.5 $65.5 $65.5 $ $ 
Financial liabilities:
Term Loan B$380.8 $383.0 $ $383.0 $ 
Term Loan B-1293.4 297.0  297.0  
2027 Senior Notes594.5 605.3  605.3  
2028 Senior Notes698.2 679.0  679.0  
December 31, 2021
(in millions)Carrying AmountFair ValueLevel 1Level 2Level 3
Financial assets:
Restricted cash$64.3 $64.3 $64.3 $ $ 
Financial liabilities:
Term Loan B$381.6 $384.0 $ $384.0 $ 
Term Loan B-1294.0 297.8  297.8  
2027 Senior Notes594.3 619.5  619.5  
2028 Senior Notes698.1 724.5  724.5  
15. CONTINGENCIES
We are involved in litigation arising in the ordinary course of conducting business. We carry insurance for workers' compensation claims from our employees and general liability for claims from independent contractors, customers and guests. We are self-insured up to an aggregate stop loss for our general liability and workers' compensation coverages.
We review all litigation on an ongoing basis when making accrual and disclosure decisions. For certain legal proceedings, we cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in the early stages of development or where the plaintiffs seek indeterminate damages. Various factors, including but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated. In accordance with current accounting standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can be reasonably estimated.  When no amount within the range of loss is a better estimate than any other amount, we accrue the minimum amount of the estimable loss. To the extent that such litigation against us may have an exposure to a loss in excess of the amount we have accrued, we believe that such excess would not be material to our consolidated financial condition, results of operations, or cash flows.  Legal fees are expensed as incurred.
If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. In the event that a legal proceeding results in a substantial judgment against us, or settlement by us, there can be no assurance that any resulting liability or financial commitment would not have a material adverse impact on our business.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
15

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

16. NET INCOME PER COMMON SHARE COMPUTATIONS
The following is a reconciliation of the numerator and denominator of the net income per common share computations:
Three Months Ended March 31,
(in millions, except per share data) 20222021
Numerator for basic and diluted net income per common share:
Net income$42.1 $36.1 
Denominator for net income per common share:
Basic38.3 39.0 
Plus dilutive effect of stock awards0.5 0.6 
Diluted38.8 39.6 
Net income per common share data:
Basic net income$1.10 $0.93 
Diluted net income$1.08 $0.91 
17. SEGMENT INFORMATION
We manage our operations through three reportable segments:
Live and Historical Racing
The Live and Historical Racing segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack, Derby City Gaming, Oak Grove, Turfway Park, and Newport.
Churchill Downs Racetrack is the home of the Kentucky Derby and conducts live racing during the year. Derby City Gaming is an historical racing machine ("HRM") facility that operates under the Churchill Downs pari-mutuel racing license at its ancillary training facility in Louisville, Kentucky. Oak Grove conducts live harness racing during the year and operates a HRM facility under its pari-mutuel racing license. Turfway Park conducts live racing during the year, and Newport is an ancillary HRM facility that operates under the Turfway Park pari-mutuel racing license.
Our Live and Historical Racing properties earn commissions primarily from pari-mutuel wagering on live and historical races; simulcast fees earned from other wagering sites; admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services (collectively "racing event-related services"), as well as food and beverage services.
TwinSpires
The TwinSpires segment includes the revenue and expenses for the online horse racing and the retail and online Sports and Casino business.
TwinSpires Horse Racing operates online horse racing wagering for TwinSpires.com, BetAmerica.com, and other white-label platforms; facilitates high dollar wagering by international customers (through Velocity); and provides the Bloodstock Research Information Services platform for horse racing statistical data. Also included in TwinSpires Horse Racing is our United Tote business which provides totalisator services to patrons who wager on horse races.
Our TwinSpires Sports and Casino business includes the retail and online sports and casino gaming operations.
Our TwinSpires Sports and Casino business operates our sports betting and casino iGaming platform in multiple states. The TwinSpires Sports and Casino business includes the mobile and online sports betting and casino results and the results of eight of our retail sportsbooks, which include our wholly-owned properties at Harlow’s Casino Resort and Spa ("Harlow’s"), Presque Isle, Riverwalk Casino Hotel (“Riverwalk”), and Ocean Downs Casino and Racetrack ("Ocean Downs"), as well as in Arizona, Colorado, Indiana and Michigan which utilize a third party's casino license. On February 24, 2022 the Company announced its plans to exit the direct online Sports and Casino business and pursue monetization of its online market access licenses.
Gaming
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
16

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The Gaming segment includes revenue and expenses for the casino properties and associated racetrack or jai alai facilities which support the casino license. The Gaming segment has approximately 11,000 slot machines and video lottery terminals ("VLTs") and 200 table games located in eight states.
The Gaming segment revenue and Adjusted EBITDA includes the following properties:
Calder
Fair Grounds and VSI
Harlow’s
Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") management agreement
Ocean Downs
Oxford Casino and Hotel ("Oxford")
Presque Isle
Riverwalk
The Gaming segment Adjusted EBITDA also includes the Adjusted EBITDA related to the Company’s equity investments in the following:
61.3% equity investment in Rivers Des Plaines
50% equity investment in MVG
The Gaming segment generates revenue and expenses from slot machines, table games, VLTs, video poker, retail sports betting, ancillary food and beverage services, hotel services, commission on pari-mutuel wagering, racing event-related services, and / or other miscellaneous operations.
We have aggregated the following businesses as well as certain corporate operations, and other immaterial joint ventures in "All Other" to reconcile to consolidated results:
Arlington
Corporate
We conduct our business through these reportable segments and report net revenue and operating expense associated with these reportable segments in the accompanying condensed consolidated statements of comprehensive income. Eliminations include the elimination of intersegment transactions. We utilize non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. Adjusted EBITDA includes the following adjustments:
Adjusted EBITDA includes our portion of EBITDA from our equity investments.
Adjusted EBITDA excludes:
Transaction expense, net which includes:
Acquisition, disposition, and land sale related charges;
Direct online Sports and Casino business costs; and
Other transaction expense, including legal, accounting, and other deal-related expense;
Stock-based compensation expense;
Rivers Des Plaines' impact on our investments in unconsolidated affiliates from:
The impact of changes in fair value of interest rate swaps; and
Legal reserves and transaction costs;
Asset impairments;
Legal reserves;
Pre-opening expense; and
Other charges, recoveries and expenses
As of December 31, 2021, Arlington ceased racing and simulcast operations given the pending sale of the property to the Chicago Bears. Arlington's operating loss in the current year quarter was treated as an adjustment to EBITDA and is included in Other expenses, net in the Reconciliation of Comprehensive Income to Adjusted EBITDA.
We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
17

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

measure provided in accordance with GAAP. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited. For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the accompanying condensed consolidated statements of comprehensive income.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
18

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The tables below present net revenue from external customers and intercompany revenue from each of our segments, net revenue from external customers for each group of similar services, Adjusted EBITDA by segment, and a reconciliation of comprehensive income to Adjusted EBITDA:
Three Months Ended March 31,
(in millions)20222021
Net revenue from external customers:
Live and Historical Racing:
Churchill Downs Racetrack$2.0 $2.0 
Derby City Gaming42.8 32.9 
Oak Grove30.4 19.4 
Turfway Park4.5 4.5 
Newport6.3 4.4 
Total Live and Historical Racing86.0 63.2 
TwinSpires:
Horse Racing90.0 96.5 
Sports and Casino10.3 7.0 
Total TwinSpires100.3 103.5 
Gaming:
Fair Grounds and VSI41.5 38.3 
Presque Isle27.2 23.8 
Ocean Downs21.3 20.0 
Calder27.0 20.9 
Oxford26.8 15.7 
Riverwalk 14.4 14.4 
Harlow’s 13.1 14.0 
Lady Luck Nemacolin6.0 4.9 
Total Gaming177.3 152.0 
All Other0.5 5.6 
Net revenue from external customers$364.1 $324.3 
Three Months Ended March 31,
(in millions)20222021
Intercompany net revenue:
Live and Historical Racing$1.2 $1.5 
TwinSpires1.11.5
Gaming1.9 2.0 
All Other 1.6 
Eliminations(4.2)(6.6)
Intercompany net revenue$ $ 
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
19

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Three Months Ended March 31, 2022
(in millions)Live and Historical RacingTwinSpiresGamingTotal SegmentsAll OtherTotal
Net revenue from external customers
Pari-mutuel:
Live and simulcast racing$5.6 $81.5 $12.9 $100.0 $ $100.0 
Historical racing(a)
73.6   73.6  73.6 
Racing event-related services0.5  0.4 0.9  0.9 
Gaming(a)
 10.3 150.9 161.2  161.2 
Other(a)
6.3 8.5 13.1 27.9 0.5 28.4 
Total$86.0 $100.3 $177.3 $363.6 $0.5 $364.1 
Three Months Ended March 31, 2021
(in millions)Live and Historical RacingTwinSpiresGamingTotal SegmentsAll OtherTotal
Net revenue from external customers
Pari-mutuel:
Live and simulcast racing$5.9 $89.2 $11.7 $106.8 $5.1 $111.9 
Historical racing(a)
52.9   52.9  52.9 
Racing event-related services  0.7 0.7  0.7 
Gaming(a)
 7.0 132.5 139.5  139.5 
Other(a)
4.4 7.3 7.1 18.8 0.5 19.3 
Total$63.2 $103.5 $152.0 $318.7 $5.6 $324.3 
(a) Food and beverage, hotel, and other services furnished to customers for free as an inducement to wager or through the redemption of our customers' loyalty points are recorded at the estimated standalone selling prices in Other revenue with a corresponding offset recorded as a reduction in historical Pari-mutuel revenue for HRMs or Gaming revenue for our casino properties. These amounts were $7.0 million for the three months ended March 31, 2022 and $3.7 million for the three months ended March 31, 2021.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
20

Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Adjusted EBITDA by segment is comprised of the following:
Three Months Ended March 31, 2022
(in millions)Live and Historical RacingTwinSpiresGaming
Net revenue$87.2 $101.4 $179.2 
Taxes and purses(26.8)(7.5)(67.3)
Marketing and advertising(2.9)(5.1)(3.5)
Salaries and benefits(10.9)(6.7)(23.9)
Content expense(0.6)(43.1)(1.5)
Selling, general and administrative expense(3.3)(2.6)(6.6)
Other operating expense(14.8)(12.3)(20.0)
Other income   34.7 
Adjusted EBITDA$27.9 $24.1 $91.1 
Three Months Ended March 31, 2021
(in millions)Live and Historical RacingTwinSpiresGaming
Net revenue$64.7 $105.0 $154.0 
Taxes and purses(20.0)(6.4)(59.3)
Marketing and advertising(2.1)(8.5)(1.4)
Salaries and benefits(