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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 September 30, 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 October 12, 2022 was 37,403,269 shares.




CHURCHILL DOWNS INCORPORATED
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended September 30, 2022
 
Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
2


PART I.    FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(in millions, except per common share data)2022202120222021
Net revenue:
Live and Historical Racing$92.3 $79.7 $439.2 $318.8 
TwinSpires106.2 107.5 343.3 351.8 
Gaming183.4 185.3 545.0 523.3 
All Other1.2 20.5 2.2 38.5 
Total net revenue383.1 393.0 1,329.7 1,232.4 
Operating expense:
Live and Historical Racing80.1 62.3 269.2 217.3 
TwinSpires64.5 83.0 229.6 262.6 
Gaming133.0 127.7 387.0 355.0 
All Other2.9 14.3 8.8 34.8 
Selling, general and administrative expense38.4 36.1 112.7 99.7 
Asset impairments  4.9 11.2 
Transaction expense, net1.2 2.0 7.4 2.1 
Total operating expense320.1 325.4 1,019.6 982.7 
Operating income63.0 67.6 310.1 249.7 
Other income (expense):
Interest expense, net(36.2)(21.7)(92.6)(63.1)
Equity in income of unconsolidated affiliates42.4 41.7 115.4 103.0 
Gain on Calder land sale   274.6  
Miscellaneous, net4.2 0.1 4.4 0.3 
Total other income10.4 20.1 301.8 40.2 
Income from operations before provision for income taxes73.4 87.7 611.9 289.9 
Income tax provision(16.4)(26.3)(173.5)(84.1)
Net income$57.0 $61.4 $438.4 $205.8 
Net income per common share data:
Basic net income$1.51 $1.59 $11.52 $5.31 
Diluted net income$1.49 $1.57 $11.36 $5.23 
Weighted average shares outstanding:
Basic37.8 38.6 38.1 38.7 
Diluted38.4 39.2 38.6 39.3 
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
3


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions)September 30, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$110.6 $291.3 
Restricted cash
1,582.6 64.3 
Accounts receivable, net
69.4 42.3 
Income taxes receivable
 66.0 
Other current assets
43.7 37.6 
Total current assets1,806.3 501.5 
Property and equipment, net
1,240.9 994.9 
Investment in and advances to unconsolidated affiliates
661.0 663.6 
Goodwill
375.7 366.8 
Other intangible assets, net
485.0 348.1 
Other assets
23.2 18.9 
Long-term assets held for sale82.0 87.8 
Total assets$4,674.1 $2,981.6 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$109.1 $81.6 
Accrued expenses and other current liabilities300.2 231.7 
Income taxes payable60.9 0.9 
Current deferred revenue
14.5 47.7 
Current maturities of long-term debt
7.0 7.0 
Dividends payable
 26.1 
Total current liabilities491.7 395.0 
Long-term debt, net of current maturities and loan origination fees
684.4 668.6 
Notes payable, net of debt issuance costs
2,489.4 1,292.4 
Non-current deferred revenue11.9 13.3 
Deferred income taxes
279.6 252.9 
Other liabilities
104.4 52.6 
Total liabilities4,061.4 2,674.8 
Commitments and contingencies
Shareholders' equity:
Preferred stock  
Common stock  
Retained earnings
613.6 307.7 
Accumulated other comprehensive loss
(0.9)(0.9)
Total shareholders' equity612.7 306.8 
Total liabilities and shareholders' equity$4,674.1 $2,981.6 
    
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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)$306.8 
Net income42.1 42.1 
Issuance of common stock0.1  
Repurchase of common stock(0.1)(7.0)(18.0)(25.0)
Taxes paid related to net share settlement of stock awards(0.1)(13.1)(13.1)
Stock-based compensation7.0 7.0 
Balance, March 31, 202238.0 318.7 (0.9)317.8 
Net income339.3 339.3 
Repurchase of common stock(0.3)(7.4)(54.1)(61.5)
Taxes paid related to net share settlement of stock awards— (0.1)(0.1)
Stock-based compensation7.4 7.4 
Balance, June 30, 202237.7 603.8 (0.9)602.9 
Net income57.057.0 
Issuance of common stock— 2.7 2.7 
Repurchase of common stock(0.3)(11.8)(47.2)(59.0)
Stock-based compensation9.1 9.1 
Balance, September 30, 202237.4$ $613.6 $(0.9)$612.7 
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)$367.1 
Net income36.1 36.1 
Issuance of common stock0.1  
Repurchase of common stock(1.0)(22.0)(171.9)(193.9)
Taxes paid related to net share settlement of stock awards(0.1)(12.6)(12.6)
Stock-based compensation5.5 5.5 
Balance, March 31, 202138.51.7 201.4 (0.9)202.2 
Net income108.3 108.3 
Stock-based compensation7.17.1 
Other(0.2)(0.2)
Balance, June 30, 202138.58.8 309.5 (0.9)317.4 
Net income61.4 61.4 
Issuance of common stock2.5 2.5 
Repurchase of common stock(0.2)(19.1)(30.9)(50.0)
Taxes paid related to net share settlement of stock awards(0.3)(0.3)
Stock-based compensation7.8 7.8 
Balance, September 30, 202138.3$ $339.7 $(0.9)$338.8 
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
5


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
(in millions)20222021
Cash flows from operating activities:
Net income $438.4 $205.8 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization78.7 77.9 
Distributions from unconsolidated affiliates117.9 77.7 
Equity in income of unconsolidated affiliates(115.4)(103.0)
Stock-based compensation23.5 20.4 
Deferred income taxes26.7 12.8 
Asset impairments4.9 11.2 
Amortization of operating lease assets3.9 4.3 
Gain on Calder land sale(274.6) 
Other5.8 5.9 
Changes in operating assets and liabilities:
Income taxes127.3 23.8 
Deferred revenue(34.6)(11.6)
Other assets and liabilities22.0 65.8 
Net cash provided by operating activities424.5 391.0 
Cash flows from investing activities:
Capital maintenance expenditures(37.1)(22.3)
Capital project expenditures(226.6)(29.8)
Acquisition of businesses, net of cash acquired(81.7) 
Acquisition of gaming rights, net of cash acquired(33.3) 
Proceeds from Calder land sale279.0  
Other(7.3)(3.1)
Net cash used in investing activities(107.0)(55.2)
Cash flows from financing activities:
Proceeds from borrowings under long-term debt obligations1,220.0 780.8 
Repayments of borrowings under long-term debt obligations(5.3)(429.2)
Payment of dividends(25.7)(24.8)
Repurchase of common stock(143.5)(242.4)
Taxes paid related to net share settlement of stock awards (13.2)(12.9)
Debt issuance costs(12.8)(6.9)
Change in bank overdraft(1.8)(13.4)
Other2.4 2.3 
Net cash provided by financing activities1,020.1 53.5 
Cash flows from discontinued operations:
Operating activities of discontinued operations  (124.0)
Net increase in cash, cash equivalents and restricted cash1,337.6 265.3 
Cash, cash equivalents and restricted cash, beginning of period355.6 121.0 
Cash, cash equivalents and restricted cash, end of period$1,693.2 $386.3 
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
6


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Nine Months Ended September 30,
(in millions)20222021
Supplemental disclosures of cash flow information:
Cash paid for interest$66.4 $56.8 
Cash paid for income taxes 53.9 47.0 
Cash received from income tax refunds34.2 
Schedule of non-cash operating, investing and financing activities:
Deferred payment on gaming rights included in other liabilities$50.0 $ 
Property and equipment additions included in accounts payable and accrued expenses45.0 6.6 
Right-of-use assets obtained in exchange for lease obligations in operating leases 1.6 9.6 
Right-of-use assets obtained in exchange for lease obligations in finance leases6.2 2.1 
Repurchase of common stock included in accrued expense and other current liabilities2.0 1.5 
The accompanying notes are an integral part of the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
7

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


1. DESCRIPTION OF BUSINESS
Basis of Presentation
Churchill Downs Incorporated (the "Company") 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.
Calder Land Sale
On June 17, 2022, the Company closed on the previously announced sale of 115.7 acres of excess land near Calder Casino for $291.0 million (or approximately $2.5 million per acre) to Link Logistics, a Blackstone portfolio company. The Company received cash proceeds of $279.0 million, which was net of $12.0 million of transaction costs. Refer to Note 5, Calder Land Sale, for further information on the sale.
Acquisitions of Chasers Poker Room and Ellis Park
On September 2, 2022, we completed the previously announced acquisition of Chasers Poker Room ("Chasers") in Salem, New Hampshire (the "Chasers Transaction"). As part of the acquisition, we made an initial payment to the sellers for rights to operate the poker room and to build a historical racing facility. Additional payments will be made once all necessary permits are obtained and the planned historical racing facility is opened.
On September 26, 2022, we completed the acquisition of Ellis Park Racing and Gaming ("Ellis Park") in Henderson, Kentucky, from Enchantment Holdings, LLC, an affiliate of Laguna Development Corporation, for total consideration of $79.0 million in cash, subject to certain working capital and other purchase price adjustments (the "Ellis Park Transaction").
Refer to Note 3, Acquisitions, for further information on the transactions.
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.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
8

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

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. ACQUISITIONS
Chasers Poker Room
On September 2, 2022, the Company completed the Chasers Transaction which was treated as an asset acquisition. The Company made an initial payment at closing and recorded a liability for the remaining due at a future date. In conjunction with the acquisition the Company recorded an $82.2 million gaming rights intangible asset which represented its fair value at the date of acquisition.

The fair value of the gaming rights acquired in the Chasers Transaction was determined using the Greenfield Method, which is an income approach methodology that calculates the present value of the gaming rights intangible asset based on a projected cash flow stream. This method assumes that the gaming rights intangible asset provides the opportunity to develop a gaming facility in a specified region, and that the present value of the projected cash flows is a result of the realization of advantages contained in these rights. Under this methodology, the acquirer is expected to absorb all start-up costs, as well as incur all expenses pertaining to the acquisition and/or the creation of all tangible and intangible assets. The estimated future revenue, future operating expenses, start-up costs, and discount rate were the primary inputs in the valuation. The gaming rights intangible asset was assigned an indefinite useful life based on the Company's expected use of the asset and determination that no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of the gaming rights.
Ellis Park
On September 26, 2022, the Company completed the Ellis Park Transaction for total consideration of $79.0 million in cash, plus $3.5 million in working capital and other preliminary purchase price adjustments. The fair values of the Ellis Park Transaction were based upon preliminary valuations. Estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period up to one year from the acquisition date. The areas of the preliminary valuations that are not yet finalized relate to the amounts for income taxes, intangible assets, working capital adjustments, and the final amount of residual goodwill. The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition date during the measurement period. The preliminary fair values of the assets acquired and liabilities assumed, net of cash acquired of $0.8 million, at the date of acquisition were as follows: property and equipment of $19.3 million, indefinite-lived gaming rights of $47.4 million, indefinite-lived trademark of $3.6 million, goodwill of $8.9 million, right-of-use assets and liabilities of $6.0 million and net working capital of $2.5 million.
The Company has not included other disclosures regarding the Chasers Transaction or Ellis Park Transaction because the acquisitions are immaterial to our business.
4. 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 nine months ended September 30, 2022, the Company incurred $2.3 million of operating expenses related to ongoing recovery and maintenance efforts and received $8.0 million from our insurance carriers. The Company has also recorded an insurance recovery receivable of $1.0 million.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
9

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

In total, the Company has received $10.7 million from our insurance carriers which includes $4.1 million related to business interruption claims. The proceeds from the business interruption claims are included in other income in the Condensed Consolidated Statement of Comprehensive Income. The Company is currently working with its insurance carriers to finalize its claim and we currently do not expect our losses to exceed the applicable insurance recoveries.
5. CALDER LAND SALE
On June 17, 2022, the Company closed on the previously announced sale of 115.7 acres of excess land near Calder Casino for $291.0 million (or approximately $2.5 million per acre) to Link Logistics, a Blackstone portfolio company. The Company received cash proceeds of $279.0 million which was net of $12.0 million of transaction costs. We recognized a gain of $274.6 million on the sale of the land, which is included in other income in the accompanying Condensed Consolidated Statements of Comprehensive Income. The gain consisted of cash proceeds of $279.0 million offset by the carrying value of the assets sold of $4.4 million.
The Company is planning on using certain proceeds of the sale to purchase property as part of the previously announced acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC (the "P2E Transaction") and to invest in other replacement properties that qualify as Internal Revenue Code §1031 transactions to defer the federal income tax on the gain on the Calder land sale. The Company has identified two reverse like-kind transactions for property acquired prior to the sale of the Calder land and a forward like-kind exchange transaction to acquire additional property for the Internal Revenue Code §1031 transactions.
The Company is utilizing a qualified intermediary to facilitate these transactions. The proceeds from the sale have been transferred to the qualified intermediary and are classified as restricted cash on the Condensed Consolidated Balance Sheet. The funds will remain with the qualified intermediary and will be released: (i) if the funds are utilized as part of a like-kind exchange agreement, (ii) if the Company does not identify a suitable replacement property within 45 days after the agreement date, or (iii) when a like-kind exchange agreement is not completed within the allowable time period.
The Company has completed one reverse like-kind exchange in June 2022 involving our $9.9 million investment in real property for the Derby City Gaming Downtown facility in Louisville, Kentucky.
The second reverse like-kind exchange will involve our investment in real property for the Queen of Terre Haute Casino Resort ("Queen of Terre Haute") property in Terre Haute, Indiana. An exchange accommodation titleholder (“EAT”), a type of variable interest entity, was used to facilitate this reverse like-kind exchange. As of September 30, 2022, $22.1 million had been invested in real property for the Queen of Terre Haute which will be held by the EAT until the exchange transaction is complete. The Company determined that it is the primary beneficiary of the EAT, thus the property held by the EAT has been consolidated and recorded in property and equipment, net on the Condensed Consolidated Balance Sheet. The Company plans to make additional investments in real property for the Queen of Terre Haute and expects to complete this reverse like-kind exchange in the fourth quarter of 2022.
The Company is planning on utilizing the remainder of the proceeds from the Calder land sale to execute a forward like-kind exchange transaction by purchasing property as part of the previously announced P2E Transaction. The Company anticipates closing the P2E Transaction prior to the end of 2022. If the acquisition of replacement property is not completed within 180 days of the Calder land sale, the proceeds will be distributed to the Company by the qualified intermediary and reclassified as available cash, and all applicable income taxes will be assessed on the remaining gain that was not deferred by acquiring replacement property.
As of September 30, 2022, the Company recorded $78.0 million in current income taxes payable related to the Calder land sale. Upon completion of the P2E Transaction, the current tax liability will be reclassified as a deferred tax liability on the Condensed Consolidated Balance Sheet.
As of December 31, 2021, the assets sold as part of the Calder land sale were classified as held for sale on the accompanying Condensed Consolidated Balance Sheets. Calder's operations and assets are included in the Gaming segment in our consolidated results.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
10

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

6. 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 the first quarter of 2023.
The Company has classified certain assets of Arlington International Racecourse ("Arlington") as held for sale totaling $82.0 million as of September 30, 2022 and $81.5 million as of December 31, 2021, on the accompanying Condensed Consolidated Balance Sheets. Arlington’s operations and assets are included in All Other in our consolidated results.
7. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill, by segment, is composed of the following:
(in millions)Live and HistoricalTwinSpiresGamingAll OtherTotal
Balances as of December 31, 2021$52.5 $152.2 $161.1 $1.0 $366.8 
Additions8.9    8.9 
Balances as of September 30, 2022$61.4 $152.2 $161.1 $1.0 $375.7 
We established goodwill of $8.9 million related to the Ellis Park Transaction.
We performed our annual goodwill impairment analysis as of April 1, 2022, and no adjustment to the carrying value of goodwill was required. We assessed goodwill for impairment by performing qualitative or quantitative analyses for each reporting unit. We concluded that the fair values of our reporting units exceeded their carrying values, and therefore no impairments were identified.
Other intangible assets are comprised of the following:
September 30, 2022December 31, 2021
(in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Definite-lived intangible assets$31.0 $(20.2)$10.8 $31.2 $(19.1)$12.1 
Indefinite-lived intangible assets474.2 336.0 
Total$485.0 $348.1 
During the third quarter of 2022 we established indefinite-lived intangible assets of $82.2 million for the gaming rights related to the Chasers Transaction and $47.4 million for gaming rights and $3.6 million for trademarks related to the Ellis Park Transaction. We also recorded $5.0 million for gaming rights in Indiana associated with the planned development of the Queen of Terre Haute Casino Resort during the second quarter of 2022.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
11

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

We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2022. We assessed our indefinite-lived intangible assets for impairment by performing qualitative or quantitative analyses for each asset. Based on the results of these analyses, no indefinite-lived intangible asset impairments were identified in connection with our annual impairment testing. The Company continues to monitor the current economic conditions and the impacts on the results of operations. Future economic conditions could have a negative impact on the estimates and assumptions utilized in our indefinite-lived intangible asset impairment assessments. These potential impacts could increase the risk of a future impairment of indefinite-lived intangible assets at Presque Isle Downs and Casino.
8. 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.
During the quarter ended June 30, 2021, the Company recorded an $11.2 million non-cash impairment charge related to certain assets at Churchill Downs Racetrack included in our Live and Historical Racing segment. The impairment was due to a change in the Churchill Downs Racetrack capital plans and the Company's planned usage of these assets.
9. INCOME TAXES
The Company’s effective income tax rate for the three months ended September 30, 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, partially offset by tax benefits resulting from certain tax credits and incentives. The Company's effective income tax rate for the nine months ended September 30, 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.

The Company's effective income tax rate for the three and nine months ended September 30, 2021 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer's compensation.
10. 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 Repurchase 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 $300.2 million of repurchase authority remaining under the 2021 Stock Repurchase Program at September 30, 2022, based on trade date.
We repurchased the following shares under the 2018 and 2021 Stock Repurchase Programs:
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
12

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

Three Months Ended September 30,Nine Months Ended September 30,
(in millions, except share data)2022202120222021
Repurchase Program SharesAggregate Purchase PriceSharesAggregate Purchase PriceSharesAggregate Purchase PriceSharesAggregate Purchase Price
2021 Stock Repurchase Program 288,781 $59.0 3,178 $0.8 727,198 $145.5 3,178 $0.8 
2018 Stock Repurchase Program — — 245,132 $49.2 — — 245,132 $49.2 
Total288,781 $59.0 248,310 $50.0 727,198 $145.5 248,310 $50.0 
As of September 30, 2022, we had $2.0 million accrued for the future cash settlement of executed repurchases of our common stock and a $1.5 million accrual as of September 30, 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.
11. 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 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 $9.1 million for the three months ended September 30, 2022 and $7.8 million for the three months ended September 30, 2021. Stock-based compensation was $23.5 million for the nine months ended September 30, 2022 and $20.4 million for the nine months ended September 30, 2021.
During the nine months ended September 30, 2022, the Company awarded RSUs to employees, RSUs and PSUs to certain named executive officers ("NEOs"), and RSUs to directors. The vesting criteria for the PSU awards granted in 2022 were based on a three-year service period with two performance conditions and a market condition related to relative total shareholder return ("TSR") consistent with prior year grants. The total compensation cost we will recognize under the PSUs is determined using the Monte Carlo valuation methodology, which factors in the value of the TSR market condition when determining the grant date fair value of the PSU. Compensation cost for each PSU is recognized during the performance and service period based on the probable achievement of the two performance criteria. The PSUs are converted into shares of our common stock at the time the PSU award value is finalized.
A summary of the RSUs and PSUs granted during 2022 is presented below (units in thousands):
Grant YearAward Type
Number of Units Awarded(1)
Vesting Terms
2022RSU61
Vest equally over three service periods ending in 2025
2022PSU34
Three-year performance and service period ending in 2024
2022RSU5
One year service period ending in 2023
(1) PSUs reflect the target number of units for the original PSU grant.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
13

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

12. 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 provided 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 was 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 the Second Amendment to the Credit Agreement, 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 10, 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.
On April 13, 2022, the Company entered into the Fourth Amendment to the Credit Agreement (the "Fourth Amendment") to extend the maturity date of its existing revolving credit facility to April 13, 2027, to increase the commitments under the existing revolving credit facility from $700.0 million to $1.2 billion, and to increase the swing line commitment from $50.0 million to $100.0 million. The Fourth Amendment also provides for a senior secured Delayed Draw Term Loan A credit facility due April 13, 2027 in the amount of $800.0 million which is part of the financing for the P2E Transaction. The Company capitalized $2.8 million of debt issuance costs associated with the Revolver commitment increase and $5.8 million of debt issuance costs associated with the Delayed Draw Term Loan A which are being amortized as interest expense over the 5-year term.
The Revolver and Delayed Draw Term Loan A bear interest at SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio. As of September 30, 2022, that applicable margin was 137.5 basis points which was based on the pricing grid in the Fourth Amendment to the Credit Agreement. The Term Loan B and Term Loan B-1 bear interest at LIBOR plus 200 basis points.
On September 26, 2022, we borrowed $20.0 million on our Revolver to provide the Company with financing for the Chasers Transaction and the Ellis Park Transaction.
The Company was compliant with all applicable covenants on September 30, 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 SEPTEMBER 30, 2022
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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.
2030 Senior Notes
On April 13, 2022, CDI Escrow Issuer, Inc. (the "Escrow Issuer"), a wholly-owned subsidiary of the Company, completed an offering of $1.2 billion in aggregate principal amount of 5.75% Senior Unsecured Notes that mature on April 13, 2030 (the "2030 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 offering of the 2030 Notes is part of the financing for the P2E Transaction. The proceeds of the offering were placed in escrow pending satisfaction of certain conditions, including, without limitation, the consummation of the P2E Transaction. In connection with the offering, we capitalized $4.3 million of debt issuance costs which are being amortized as interest expense over the term of the 2030 Notes. Upon completion of this offering, the aggregate principal amount outstanding in escrow of the 2030 Notes is $1.2 billion. The cash held in escrow is invested in money market accounts and included in restricted cash in the Condensed Consolidated Balance Sheet.
The 2030 Notes were issued at 100% of the principal amount, plus interest deemed to have accrued from April 13, 2022, with interest payable in arrears on April 1 and October 1 of each year, commencing on October 1, 2022. The 2030 Notes will vote as one class under the indenture governing the 2030 Senior Notes.
The Escrow Issuer may redeem some or all of the 2030 Notes at any time prior to April 1, 2025, at redemption prices set forth in the 2030 Offering Memorandum.
In connection with the issuance of the 2030 Notes, the Escrow Issuer and the guarantors of the 2030 Notes entered into a Registration Rights Agreement to register any 2030 Notes under the Securities Act for resale that are not freely tradable 366 days from April 13, 2022.
13. REVENUE FROM CONTRACTS WITH CUSTOMERS
Performance Obligations
As of September 30, 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 $79.1 million. The revenue we expect to recognize on these remaining performance obligations is $0.6 million for the remainder of 2022, $33.7 million in 2023, $23.3 million in 2024, and the remainder thereafter.
As of September 30, 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 September 30, 2022 and December 31, 2021, contract assets were not material.
As of September 30, 2022 and December 31, 2021, contract liabilities were $30.4 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 decrease was primarily due to revenue recognized for fulfilled performance obligations. We recognized $1.3 million of revenue during the three months ended September 30, 2022 and $48.1 million of revenue during the nine months ended September 30,
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
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Churchill Downs Incorporated
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2022, which was included in the contract liabilities balance at December 31, 2021. We recognized $1.2 million of revenue during the three months ended September 30, 2021 and $32.6 million of revenue during the nine months ended September 30, 2021, which was included in the contract liabilities balance at December 31, 2020.
Disaggregation of Revenue
In Note 19, 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, historical racing, racing event-related services, gaming, and other services.
We believe that these disclosures depict how the amount, nature, timing, and uncertainty of cash flows are affected by economic factors.
14. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
(in millions)September 30, 2022December 31, 2021
Account wagering deposits liability$53.1 $47.5 
Purses payable41.7 28.6 
Accrued salaries and related benefits29.6 39.9 
Accrued interest57.3 23.9 
Accrued fixed assets37.1 17.1 
Other81.4 74.7 
Total$300.2 $231.7 
15. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates as of September 30, 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 September 30, 2022, the net aggregate basis difference between the Company’s investment in Rivers Des Plaines and the amo