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, 20212022
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)
Kentucky61-0156015
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
600 North Hurstbourne Parkway, Suite 400
Louisville,Kentucky40222
(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 7, 202113, 2022 was 38,520,52638,025,490 shares.




CHURCHILL DOWNS INCORPORATED
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 20212022
 

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
2


PART I.    FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended March 31,Three Months Ended March 31,
(in millions, except per common share data)(in millions, except per common share data)20212020(in millions, except per common share data)20222021
Net revenue:Net revenue:Net revenue:
Live and Historical RacingLive and Historical Racing$63.2 $28.1 Live and Historical Racing$86.0 $63.2 
TwinSpiresTwinSpires99.7 69.1 TwinSpires100.3 103.5 
GamingGaming152.0 145.9 Gaming177.3 152.0 
All OtherAll Other9.4 9.8 All Other0.5 5.6 
Total net revenueTotal net revenue324.3 252.9 Total net revenue364.1 324.3 
Operating expense:Operating expense:Operating expense:
Live and Historical RacingLive and Historical Racing54.7 33.1 Live and Historical Racing67.7 54.7 
TwinSpiresTwinSpires73.0 50.8 TwinSpires74.9 77.5 
GamingGaming106.3 124.1 Gaming125.2 106.3 
All OtherAll Other13.3 14.6 All Other3.1 8.8 
Selling, general and administrative expenseSelling, general and administrative expense30.2 24.1 Selling, general and administrative expense35.9 30.2 
Impairment of intangible assets17.5 
Asset impairmentsAsset impairments4.9 — 
Transaction expense, netTransaction expense, net0.1 0.3 Transaction expense, net5.0 0.1 
Total operating expenseTotal operating expense277.6 264.5 Total operating expense316.7 277.6 
Operating income (loss)46.7 (11.6)
Operating incomeOperating income47.4 46.7 
Other income (expense):Other income (expense):Other income (expense):
Interest expense, netInterest expense, net(19.4)(19.3)Interest expense, net(21.3)(19.4)
Equity in income (loss) of unconsolidated affiliates24.9 (3.3)
Equity in income of unconsolidated affiliatesEquity in income of unconsolidated affiliates32.5 24.9 
Miscellaneous, netMiscellaneous, net0.1 Miscellaneous, net— 0.1 
Total other income (expense)Total other income (expense)5.6 (22.6)Total other income (expense)11.2 5.6 
Income (loss) from continuing operations before provision for income taxes52.3 (34.2)
Income tax (provision) benefit(16.2)11.6 
Income (loss) from continuing operations, net of tax36.1 (22.6)
Loss from discontinued operations, net of tax(0.9)
Net income (loss)36.1 (23.5)
Net loss attributable to noncontrolling interest(0.1)
Net income (loss) and comprehensive income (loss) attributable to Churchill Downs Incorporated$36.1 $(23.4)
Income from operations before provision for income taxesIncome from operations before provision for income taxes58.6 52.3 
Income tax provisionIncome tax provision(16.5)(16.2)
Net incomeNet income$42.1 $36.1 
Net income (loss) per common share data - basic:
Continuing operations$0.93 $(0.57)
Discontinued operations$$(0.02)
Net income (loss) per common share data - basic$0.93 $(0.59)
Net income per common share data:Net income per common share data:
Basic net incomeBasic net income$1.10 $0.93 
Net income (loss) per common share data - diluted:
Continuing operations$0.91 $(0.57)
Discontinued operations$$(0.02)
Net income (loss) per common share data - diluted$0.91 $(0.59)
Diluted net incomeDiluted net income$1.08 $0.91 
Weighted average shares outstanding:Weighted average shares outstanding:Weighted average shares outstanding:
BasicBasic39.0 39.7 Basic38.3 39.0 
DilutedDiluted39.6 39.7 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, 20212022
3


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions)(in millions)March 31, 2021December 31, 2020(in millions)March 31, 2022December 31, 2021
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$147.7 $67.4 Cash and cash equivalents$294.5 $291.3 
Restricted cashRestricted cash48.0 53.6 Restricted cash65.5 64.3 
Accounts receivable, netAccounts receivable, net45.3 36.5 Accounts receivable, net46.0 42.3 
Income taxes receivableIncome taxes receivable69.4 49.4 Income taxes receivable59.8 66.0 
Other current assetsOther current assets36.4 28.2 Other current assets54.5 37.6 
Total current assetsTotal current assets346.8 235.1 Total current assets520.3 501.5 
Property and equipment, netProperty and equipment, net1,068.7 1,082.1 Property and equipment, net1,035.8 994.9 
Investment in and advances to unconsolidated affiliatesInvestment in and advances to unconsolidated affiliates633.7 630.6 Investment in and advances to unconsolidated affiliates655.5 663.6 
GoodwillGoodwill366.8 366.8 Goodwill366.8 366.8 
Other intangible assets, netOther intangible assets, net349.4 350.6 Other intangible assets, net351.9 348.1 
Other assetsOther assets21.7 21.2 Other assets18.8 18.9 
Long-term assets held for saleLong-term assets held for sale87.8 87.8 
Total assetsTotal assets$2,787.1 $2,686.4 Total assets$3,036.9 $2,981.6 
LIABILITIES AND SHAREHOLDERS' EQUITYLIABILITIES AND SHAREHOLDERS' EQUITYLIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$74.7 $70.7 Accounts payable$96.9 $81.6 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities171.0 167.8 Accrued expenses and other current liabilities224.3 232.6 
Current deferred revenueCurrent deferred revenue52.5 32.8 Current deferred revenue104.0 47.7 
Current maturities of long-term debtCurrent maturities of long-term debt7.0 4.0 Current maturities of long-term debt7.0 7.0 
Dividends payableDividends payable24.9 Dividends payable— 26.1 
Current liabilities of discontinued operations124.0 
Total current liabilitiesTotal current liabilities305.2 424.2 Total current liabilities432.2 395.0 
Long-term debt, net of current maturities and loan origination feesLong-term debt, net of current maturities and loan origination fees672.9 530.5 Long-term debt, net of current maturities and loan origination fees667.2 668.6 
Notes payable, net of debt issuance costsNotes payable, net of debt issuance costs1,291.4 1,087.8 Notes payable, net of debt issuance costs1,292.7 1,292.4 
Non-current deferred revenueNon-current deferred revenue18.4 17.1 Non-current deferred revenue13.3 13.3 
Deferred income taxesDeferred income taxes248.8 213.9 Deferred income taxes263.1 252.9 
Other liabilitiesOther liabilities48.2 45.8 Other liabilities50.6 52.6 
Total liabilitiesTotal liabilities2,584.9 2,319.3 Total liabilities2,719.1 2,674.8 
Commitments and contingenciesCommitments and contingencies00Commitments and contingencies00
Shareholders' equity:Shareholders' equity:Shareholders' equity:
Preferred stockPreferred stockPreferred stock— — 
Common stockCommon stock1.7 18.2 Common stock— — 
Retained earningsRetained earnings201.4 349.8 Retained earnings318.7 307.7 
Accumulated other comprehensive lossAccumulated other comprehensive loss(0.9)(0.9)Accumulated other comprehensive loss(0.9)(0.9)
Total shareholders' equityTotal shareholders' equity202.2 367.1 Total shareholders' equity317.8 306.8 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$2,787.1 $2,686.4 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, 20212022
4


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Three Months Ended March 31, 2021
Common StockRetained
Earnings
Accumulated Other Comprehensive LossNoncontrolling InterestTotal 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 
Three Months Ended March 31, 2020
Common StockRetained
Earnings
Accumulated Other Comprehensive LossNoncontrolling InterestTotal Shareholders' Equity
(in millions, except per common share data)SharesAmount
Balance, December 31, 201939.7$$509.2 $(0.9)$2.7 $511.0 
Net loss(23.4)(0.1)(23.5)
Repurchase of common stock(0.3)(4.3)(23.6)(27.9)
Cash settlement of stock awards(12.7)(12.7)
Taxes paid related to net share settlement of stock awards(15.1)(15.1)
Stock-based compensation4.3 4.3 
Adoption of ASC 326(0.5)(0.5)
Balance, March 31, 202039.4$$433.9 $(0.9)$2.6 $435.6 
Common StockRetained
Earnings
Accumulated Other Comprehensive LossTotal Shareholders' Equity
(in millions, except per common share data)SharesAmount
Balance, December 31, 202138.1$— $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, 20212022
5


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,Three Months Ended March 31,
(in millions)(in millions)20212020(in millions)20222021
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net income (loss)$36.1 $(23.5)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net incomeNet income$42.1 $36.1 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortizationDepreciation and amortization26.0 22.0 Depreciation and amortization25.1 26.0 
Distributions from unconsolidated affiliatesDistributions from unconsolidated affiliates22.0 1.3 Distributions from unconsolidated affiliates40.6 22.0 
Equity in (income) loss of unconsolidated affiliates(24.9)3.3 
Equity in income of unconsolidated affiliatesEquity in income of unconsolidated affiliates(32.5)(24.9)
Stock-based compensationStock-based compensation5.5 4.3 Stock-based compensation7.0 5.5 
Deferred income taxesDeferred income taxes5.7 (1.9)Deferred income taxes10.2 5.7 
Impairment of intangible assets17.5 
Asset impairmentsAsset impairments4.9 — 
Amortization of operating lease assetsAmortization of operating lease assets0.2 1.2 Amortization of operating lease assets1.3 0.2 
OtherOther1.2 0.9 Other1.2 1.2 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Income taxesIncome taxes9.2 (10.7)Income taxes6.4 9.2 
Deferred revenueDeferred revenue21.0 53.4 Deferred revenue56.3 21.0 
Current liabilities of discontinued operations(124.0)
Other assets and liabilitiesOther assets and liabilities2.2 (24.3)Other assets and liabilities(27.4)2.2 
Net cash (used in) provided by operating activities(19.8)43.5 
Net cash provided by operating activitiesNet cash provided by operating activities135.2 104.2 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Capital maintenance expendituresCapital maintenance expenditures(4.7)(9.0)Capital maintenance expenditures(10.0)(4.7)
Capital project expendituresCapital project expenditures(7.6)(39.3)Capital project expenditures(45.5)(7.6)
OtherOther(7.3)— 
Net cash used in investing activitiesNet cash used in investing activities(12.3)(48.3)Net cash used in investing activities(62.8)(12.3)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Proceeds from borrowings under long-term debt obligationsProceeds from borrowings under long-term debt obligations780.8 719.8 Proceeds from borrowings under long-term debt obligations— 780.8 
Repayments of borrowings under long-term debt obligationsRepayments of borrowings under long-term debt obligations(425.7)(32.4)Repayments of borrowings under long-term debt obligations(1.8)(425.7)
Payment of dividendsPayment of dividends(24.8)(23.4)Payment of dividends(25.7)(24.8)
Repurchase of common stockRepurchase of common stock(193.9)(28.4)Repurchase of common stock(24.3)(193.9)
Cash settlement of stock awards(12.7)
Taxes paid related to net share settlement of stock awardsTaxes paid related to net share settlement of stock awards(12.6)(15.1)Taxes paid related to net share settlement of stock awards(13.1)(12.6)
Debt issuance costsDebt issuance costs(5.8)(0.9)Debt issuance costs— (5.8)
Change in bank overdraftChange in bank overdraft(12.8)Change in bank overdraft(3.0)(12.8)
OtherOther1.6 (0.1)Other(0.1)1.6 
Net cash provided by financing activities106.8 606.8 
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities(68.0)106.8 
Cash flows from discontinued operations:Cash flows from discontinued operations:
Operating activities of discontinued operationsOperating activities of discontinued operations— (124.0)
Net increase in cash, cash equivalents and restricted cashNet increase in cash, cash equivalents and restricted cash74.7 602.0 Net increase in cash, cash equivalents and restricted cash4.4 74.7 
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period121.0 142.5 Cash, cash equivalents and restricted cash, beginning of period355.6 121.0 
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period$195.7 $744.5 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, 20212022
6


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Three Months Ended March 31,Three Months Ended March 31,
(in millions)(in millions)20212020(in millions)20222021
Supplemental disclosures of cash flow information:Supplemental disclosures of cash flow information:Supplemental disclosures of cash flow information:
Cash paid during the period for:Cash paid during the period for:Cash paid during the period for:
InterestInterest$15.4 $16.6 Interest$20.7 $15.4 
Income taxesIncome taxes0.1 0.5 Income taxes0.1 0.1 
Schedule of non-cash investing and financing activities:
Schedule of non-cash operating, investing and financing activities:Schedule of non-cash operating, investing and financing activities:
Property and equipment additions included in accounts payable and accrued expensesProperty and equipment additions included in accounts payable and accrued expenses4.2 36.5 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 liabilitiesDebt issuance costs included in accrued expense and other current liabilities3.2— 
Right-of-use assets obtained in exchange for lease obligations in operating leasesRight-of-use assets obtained in exchange for lease obligations in operating leases0.9 — 
Repurchase of common stock included in accrued expense and other current liabilitiesRepurchase 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, 20212022
7

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


1. DESCRIPTION OF BUSINESS
Basis of Presentation
The 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, 20202021 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, 2020.2021.
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 3 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 (loss).income.
Segments
During the first quarter of 2021,2022, 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 internal management reporting changed primarily due to the continued growth from Oak Grove Racing, Gaming & Hotel ("Oak Grove") and Turfway Park, which opened its annex historical racing machine ("HRM") facility, Newport Racing & Gaming ("Newport"), in October 2020, which resulted in our chief operating decision maker's decisionmaker decided to include Oak Grove, Turfway Park and Newportthe results of our United Tote business in the new Live and HistoricalTwinSpires segment as we evolve our strategy to integrate the United Tote offering with TwinSpires Horse Racing, segment. The Live and Historical Racing segment now includes Churchill Downs Racetrack, Derby City Gaming, Oak Grove, Turfway Park, and Newport. We also realignedwhich we believe will create additional business to business revenue opportunities. Results of our retail sports betting results at our wholly-owned casinos from our Gaming segment to our TwinSpires segment. As a result of this realignment, our operating segments that meet the requirements to be disclosed separately as reportable segments are: Live and Historical Racing, TwinSpires, and Gaming. We conduct ourUnited Tote business through these reportable segments and report net revenue and operating expense associated with these reportable segmentswere previously included in our condensed consolidated statements of comprehensive income (loss).All Other segment. The prior year results in the accompanying condensed consolidated statements of comprehensive income (loss) 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, distribution is currently limited and there can be no assurance that these vaccines will be successful in endingwe cannot predict the duration of the COVID-19 global pandemic. The long-termextent to which the COVID-19 pandemic, including the emergence of variant strains, will continue to impact of COVID-19 on the U.S. and world economies and continuing impact on our businessCompany remains uncertain the duration and scope of which cannot currently be predicted.
In responsewill depend on many factors that are not within our control. We will continue to monitor for new developments related to the measures takenpandemic and assess these developments to limit the impact of COVID-19 described above, and for the protection ofmaintain continuity in our employees, customers, and communities, we temporarily suspended operations at our properties in March 2020. On March 25, 2020, as a resultoperations.
Exit of the temporary closuresDirect Online Sports and suspended operations,Casino Business
On February 24, 2022 the Company announced plans to exit the temporary furlough of employees at its wholly-owneddirect online Sports and managed gaming properties and certain racing operations.Casino business. The Company also implemented a temporary salary reduction for all remaining non-furloughed salaried employees based on a percentage that varies dependent upon the amountwill maintain its retail Sports operations and pursue monetization of each employee’s salary. The most senior level of executive management received the largest salary decrease, based on both percentage and dollar amount.
In May 2020, we began to reopen our properties with patron restrictions and gaming limitations. NaN property temporarily suspended operations again in July 2020 and reopened in August 2020, and 3 properties temporarily suspended operations again in December 2020 and reopened in January 2021. As the Company reopened these properties, certain employees have returned to work while others remain on temporary furlough due to the capacity restrictions at these properties. The Company provided health, dental, vision and life insurance benefits to furloughed employees through July 31, 2020 and during the subsequent property closure periods.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
8

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

As of March 31, 2021, all of our properties were reopened with certain operating restrictions.its online market access licenses.
2. RECENT ACCOUNTING PRONOUNCEMENTS
Adopted on January 1, 2021
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying theRecent Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principlesPronouncements - Effective in ASC Topic 740, Income Taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for public business entities for fiscal years and interim periods beginning after December 15, 2020. The adoption of this ASU did not have a material impact on our business.
Effective after 20212022 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, to simplifyand simplifies the accounting for transitioning from the London Interbank Offered Rate (LIBOR), and other interbank offered rates expected to be discontinued, to alternative reference rates. The guidance was effective upon issuance;issuance and if elected, it is towill 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"). NaN 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 November 29, 2017,January 9, 2018, the Company entered into a definitive Stock Purchase Agreement (the "Stock Purchase Agreement") to sellcompleted the sale of its mobile gaming subsidiary, Big Fish Games, Inc. ("Big Fish Games"), a Washington corporation, to Aristocrat Technologies, Inc. ("Aristocrat"), a Nevada corporation, an indirect, wholly-owned subsidiary of Aristocrat Leisure Limited, an Australian corporation (the "Big Fish Transaction"). On January 9, 2018, pursuant to the Stock Purchase Agreement, the Company completed the Big Fish Transaction. Aristocrat paid an aggregate consideration of $990.0 million in cash in connection with the Big Fish Transaction, subject to customary adjustments for working capital and indebtedness and certain other adjustments as set forth in the Stock Purchase Agreement.
The Big Fish Games business and the related Big Fish Transaction meetmet the criteria for discontinued operation presentation. The condensed consolidated statements of comprehensive income (loss) and the notes to condensed consolidated financial statementscash flows reflect Big Fish Games as discontinued operations for all periods presented. Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only. The condensed consolidated statements of cash flows include bothCompany previously reported combined continuing and discontinued operations.
Kater and Thimmegowda Settlementoperations 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. (collectively, the "Kater and Thimmegowda Litigation"). 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 following table presentsclosing of the financial resultssale of Big Fish Games includedthe Arlington Property is subject to the satisfaction of various closing conditions and the Company anticipates closing the sale of the Arlington Property in "loss from discontinued operations, netearly 2023.
The Company has classified certain assets of tax" inArlington 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 statementsbalance 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 comprehensive income (loss):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.
Three Months Ended March 31,
(in millions)20212020
Net revenue$$
Selling, general and administrative expense1.2 
Loss from discontinued operations before provision for income taxes(1.2)
Income tax benefit0.3 
Loss from discontinued operations, net of tax$$(0.9)
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, 20212022
9

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

4. GOODWILL AND OTHER INTANGIBLE ASSETS6. ASSET IMPAIRMENTS
Goodwill was $366.8 million asOn 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 March 31, 2021 and December 31, 2020.
Other intangible assets are comprised of the following:
March 31, 2021December 31, 2020
(in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Definite-lived intangible assets$31.2 $(17.8)$13.4 $31.2 $(16.6)$14.6 
Indefinite-lived intangible assets336.0 336.0 
Total$349.4 $350.6 
Refer to Note 5, Asset Impairment, for information regarding intangible asset impairments recognized during the first quarter of 2020.
5. ASSET IMPAIRMENT
its online market access licenses. During the quarter ended March 31, 2020,2022, the Company evaluated whether events or circumstances changed thatthis planned exit would indicate it is more likely than not that any of the Company'sCompany’s intangible assets, goodwill,long-lived assets, current assets or property and equipment, were impaired ("(“Trigger Event"Event”), or if there were any other than temporary impairments of our equity investments. Factors considered in this evaluation included, among other things, the amount of the fair value over carrying value from the annual impairment testing performed as of April 1, 2019, changes in carrying values, changes in discount rates, and the impact of temporary property closures due to the COVID-19 global pandemic on cash flows. Because Presque Isle Downs and Casino (“Presque Isle”) was acquired in 2019, we did not expect the estimated fair value and the carry value to be significantly different.. Based on the Company'sCompany’s evaluation, the Company concluded that a Trigger Event occurred related to the Presque Isle gaming rights, trademark, and the reporting unit's goodwill due to the impact and uncertainty of the COVID-19 global pandemic.
The initial fair value of Presque Isle gaming rights in the first quarter of 2019 was determined using the Greenfield Method, which is an income approach methodology that calculates the present value based on a projected cash flow stream. This method assumes that the Presque Isle gaming rights provide the opportunity to develop a casino and online wagering platform in a specified region, and that the present value of the projected cash flows are 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 intangiblecertain TwinSpires assets. The estimated future revenue, operating expenses, start-up costs, and discount rate were the primary inputs in the valuation.
Based on the Trigger Event, the Company updated the discount rate to reflect the increased uncertainty of the cash flows and updated the projected cash flow stream. As a result, the $77.6 million carrying value of the Presque Isle gaming rights exceeded the fair value of $62.6 million and the Company recognized an impairment of $15.0 million in first quarter of 2020 for the Presque Isle gaming rights ($12.5 million related to the Gaming segment and $2.5 million related to the TwinSpires segment).
The Presque Isle trademark was initially valued in first quarter of 2019 using the relief-from-royalty method of the income approach, which estimates the fair value of the intangible asset by discounting the fair value of the hypothetical royalty payments a market participant would be willing to pay to enjoy the benefits of the asset. The estimated future revenue, royalty rate, and discount rate were the primary inputs in the valuation of the trademark.
Based on the Trigger Event, the Company updated the discount rate to reflect the increased uncertainty of the cash flows and updated projected cash flow stream. As a result, the Company recognized anrecorded a $4.9 million non-cash impairment of $2.5 millioncharge related to certain assets in the first quarter of 2020TwinSpires segment.
7. INCOME TAXES
The Company’s effective income tax rate for the Presque Isle trademark.
The fair valuethree months ended March 31, 2022 was higher than the U.S. federal statutory rate of the Presque Isle reporting unit's goodwill21.0% primarily resulting from state income taxes and non-deductible officer’s compensation. This expense was determined under the market and income valuation approaches using inputs primarily related to discounted projected cash flows and price multiplespartially offset by tax benefits resulting from year-to-date tax deductions from vesting of publicly traded comparable companies.
In accordance with Accounting Standards Codification 350, Intangibles - Goodwill and Other, the Company performed the impairment testingrestricted stock compensation in excess of the Presque Isle gaming rights and trademark prior to testing Presque Isle goodwill. Based on the Trigger Event, the Company updated the discount rate to reflect the increased uncertainty of the cash flows and updated project cash
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
10

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

flow stream. As a result, the Company did not recognize an impairment for Presque Isle goodwill in the first quarter of 2020 because the fair value exceeded the carrying value.
6. INCOME TAXES
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.
The Company’s effective income tax rate for the three months ended March 31, 2020 reflects a tax benefit on a pretax loss. The income tax rate was higher than the U.S. federal statutory rate of 21.0% primarily resulting from tax benefits recognized during a period of pretax loss related to state income taxes and tax deductions from year-to-date vesting of restricted stock compensation in excess of book deductions.
7.8. 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 havehad approximately $147.1$420.6 million of repurchase authority remaining under this programthe 2021 Stock Repurchase Program at March 31, 2021,2022, based on trade date. There were 0
Three Months Ended March 31,
(in millions, except share data)20222021
Repurchase ProgramSharesAggregate Purchase PriceSharesAggregate Purchase Price
2021 Stock Repurchase Program116,863 $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 under our October 2018 stock repurchase program for the three months endedand no accrual as of March 31, 2021. We repurchased 235,590 shares of our common stock under the October 2018 stock repurchase program at an aggregate purchase price of $27.9 million based on trade date for the three months ended March 31, 2020.
The Duchossois Group Share Repurchase
On February 1, 2021, the Company entered into an agreement (the “Stock"Stock Repurchase Agreement”Agreement") with an affiliate of The Duchossois Group, Inc. (“TDG”("TDG") to repurchase 1,000,000 shares of the Company’s common stock for $193.94 per share in a privately negotiated transaction. Thetransaction for an aggregate purchase price wasof $193.9 million. The Stock Repurchase Agreement contains customary representations, warranties and covenants of the parties.
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. The Company repurchased the shares using available cash and borrowings under the Revolver.
8.9. 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 adopted pursuant to the 2016 Plan. Our total stock-based compensation expense, which includes expenses related to restricted stock awards ("RSAs"), restricted stock unit awards ("RSUs"), performance share unit awards ("PSUs"), and stock options associated with our employee stock purchase plan was $5.5 million for the three months ended March 31, 2021 and $4.3 million for the three months ended March 31, 2020.
During the three months ended March 31, 2021, the Company awarded RSUs to employees and RSUs and PSUs to certain named executive officers ("NEOs"). The vesting criteria for the PSU awards granted in 2021 were based on a three-year service period with 2 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.
On February 12, 2020, the Compensation Committee of the Board of Directors offered, and the NEOs accepted, to settle the 2017 PSU Awards in cash.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
1110

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 and PSUs granted during 20212022 is presented below (units in thousands):
Grant YearAward Type
Number of Units Awarded (1)
Vesting Terms
2021RSU62
Vest equally over three service periods ending in 2024
2021PSU27
Three year performance and service period ending in 2023
(1) PSUs presented are based on the target number of units for the original PSU grant.
Grant YearAward TypeNumber of Units AwardedVesting Terms
2022RSU59
Vest equally over three service periods ending in 2025
9.10. 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 20222024 (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) providesprovided for a financial covenant relief period through the date on which the Company deliversdelivered the Company's quarterly financial statements and compliance certificate for the fiscal quarter endingended June 30, 2021, subject to certain exceptions (the “Financial"Financial Covenant Relief Period”Period"), (ii) amendsamended the definition of “Consolidated EBITDA”"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) extendsextended certain deadlines and makesmade certain other amendments to the Company’s financial reporting obligations, (iv) placesplaced certain restrictions on restricted payments during the Financial Covenant Relief Period, and (v) amendsamended the definitions of “Material"Material Adverse Effect”Effect" and “License Revocation”"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 7,8, 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 $3.4$3.5 million of debt issuance costs associated with the Joinder which are being amortized as interest expense over the 7 year7-year term of the Term Loan B-1.
The interest rate on the Revolver on March 31, 20212022 was LIBOR plus 175137.5 basis points based on the Revolver pricing grid in the Second Amendment and the Company's net leverage ratio as of March 31, 2021.2022. The Term Loan B and Term Loan B-1 bear interest at LIBOR plus 200 basis points.
Although the Company was not required to meet the Company’s financial covenants under the Credit Agreement on March 31, 2021 (as a result of the Second Amendment), theThe Company was compliant with all applicable covenants on March 31, 2021.2022.
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 $3.3$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 of 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
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
12

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

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 prior to January 15, 2023, at a price equal to 100% of the principal amount of the 2028 Senior Notes redeemed plus an applicable make-whole premium. On or after such date, the Company may redeem some or all of the Additional 2028 Notes 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.
10.
11. REVENUE FROM CONTRACTS WITH CUSTOMERS
Performance Obligations
As of March 31, 2021, the2022, our Live and Historical Racing segment had remaining performance obligations on contracts with a duration greater than one year ofrelating to television rights, sponsorships, personal seat licenses, and admissions, with an aggregate transaction price of $136.0$114.3 million. The revenue we expect to recognize on these remaining performance obligations is $32.5$41.6 million for the remainder of 2021, $37.82022, $30.1 million in 2022, $23.32023, $22.0 million in 2023,2024, and the remainder thereafter.
As of March 31, 2021,2022, 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, 20212022 and December 31, 2020,2021, contract assets were not material.
As of March 31, 20212022 and December 31, 2020,2021, contract liabilities were $74.3$121.3 million and $53.7$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, thatwhich was included in the contract liabilities balance at December 31, 2020. We recognized $3.8 million of revenue during the three months ended March 31, 2020 that was included in the contract liabilities balance at December 31, 2019.
Disaggregation of Revenue
In Note 16,17, 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.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
13


11.12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
(in millions)(in millions)March 31, 2021December 31, 2020(in millions)March 31, 2022December 31, 2021
Account wagering deposits liabilityAccount wagering deposits liability$40.9 $38.1 Account wagering deposits liability$55.0 $47.5 
Accrued interest23.8 19.2 
Purses payablePurses payable14.7 18.5 Purses payable26.1 28.6 
Accrued salaries and related benefitsAccrued salaries and related benefits14.1 19.6 Accrued salaries and related benefits19.4 39.9 
Accrued interestAccrued interest23.8 23.9 
OtherOther77.5 72.4 Other100.0 92.7 
TotalTotal$171.0 $167.8 Total$224.3 $232.6 
12.13. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates as of March 31, 20212022 and December 31, 20202021 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 2 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, 2021,2022, 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 $833.1$832.0 million.
Our investment in Rivers Des Plaines was $523.1$547.8 million and $519.0$554.8 million as of March 31, 20212022 and December 31, 2020,2021, respectively. The Company received distributions from Rivers Des Plaines of $12.0$30.5 million and $1.3$12.0 million for the three months ended March 31, 20212022 and 2020,2021, 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 $109.3$107.7 million and $110.7$108.7 million as of March 31, 20212022 and December 31, 2020,2021, respectively. The Company received distributions from MVG of $10.0 million for the three months ended March 31, 2022 and 2021. There were 0 distributions
Summarized Financial Results for our Unconsolidated Affiliates
Summarized below are the three months ended March 31, 2020.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, 20212022
1413

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

Summarized Financial Results for our Unconsolidated Affiliates
Summarized below are the financial results for our unconsolidated affiliates.
Three Months Ended March 31,
(in millions)20212020
Net revenue$138.7 $137.8 
Operating and SG&A expense85.6 100.8 
Depreciation and amortization4.3 4.2 
Total operating expense89.9 105.0 
Operating income48.8 32.8 
Interest and other, net(4.6)(35.8)
Net income (loss)$44.2 $(3.0)
(in millions)March 31, 2021December 31, 2020
Assets
Current assets$87.7 $132.8 
Property and equipment, net265.7 267.5 
Other assets, net246.5 244.9 
Total assets$599.9 $645.2 
Liabilities and Members' Deficit
Current liabilities$122.1 $133.5 
Long-term debt722.0 753.5 
Other liabilities35.6 42.3 
Members' deficit(279.8)(284.1)
Total liabilities and members' deficit$599.9 $645.2 

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
15
(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 

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

13.14. 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 5.500%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, 2021March 31, 2022
(in millions)(in millions)Carrying AmountFair ValueLevel 1Level 2Level 3(in millions)Carrying AmountFair ValueLevel 1Level 2Level 3
Financial assets:Financial assets:Financial assets:
Restricted cashRestricted cash$48.0 $48.0 $48.0 $$Restricted cash$65.5 $65.5 $65.5 $— $— 
Financial liabilities:Financial liabilities:Financial liabilities:
Term Loan BTerm Loan B384.0 387.0 387.0 Term Loan B$380.8 $383.0 $— $383.0 $— 
Term Loan B-1Term Loan B-1295.9 300.0 300.0 Term Loan B-1293.4 297.0 — 297.0 — 
2027 Senior Notes2027 Senior Notes593.4 625.9 625.9 2027 Senior Notes594.5 605.3 — 605.3 — 
2028 Senior Notes2028 Senior Notes698.0 724.4 724.4 2028 Senior Notes698.2 679.0 — 679.0 — 
December 31, 2020
December 31, 2021
(in millions)(in millions)Carrying AmountFair ValueLevel 1Level 2Level 3(in millions)Carrying AmountFair ValueLevel 1Level 2Level 3
Financial assets:Financial assets:Financial assets:
Restricted cashRestricted cash$53.6 $53.6 $53.6 $$Restricted cash$64.3 $64.3 $64.3 $— $— 
Financial liabilities:Financial liabilities:Financial liabilities:
Term Loan BTerm Loan B384.8 388.0 388.0 Term Loan B$381.6 $384.0 $— $384.0 $— 
Revolver149.7 149.7 149.7 
Term Loan B-1Term Loan B-1294.0 297.8 — 297.8 — 
2027 Senior Notes2027 Senior Notes593.2 635.2 635.2 2027 Senior Notes594.3 619.5 — 619.5 — 
2028 Senior Notes2028 Senior Notes494.6 526.9 526.9 2028 Senior Notes698.1 724.5 — 724.5 — 
14.15. 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.
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
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
16

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

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.
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.
15. 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)20212020
Numerator for basic net income (loss) per common share:
Net income (loss) from continuing operations$36.1 $(22.6)
Net loss attributable to noncontrolling interest(0.1)
Net income (loss) from continuing operations, net of loss attributable to noncontrolling interests36.1 (22.5)
Net loss from discontinued operations(0.9)
Numerator for basic net income (loss) per common share$36.1 $(23.4)
Numerator for diluted net income (loss) from continuing operations per common share$36.1 $(22.5)
Numerator for diluted net income (loss) per common share$36.1 $(23.4)
Denominator for net income (loss) per common share:
Basic39.0 39.7 
Plus dilutive effect of stock awards0.6 
Diluted39.6 39.7 
Net income (loss) per common share data:
Basic
Continuing operations$0.93 $(0.57)
Discontinued operations$$(0.02)
Net income (loss) per common share - basic$0.93 $(0.59)
Diluted
Continuing operations$0.91 $(0.57)
Discontinued operations$$(0.02)
Net income (loss) per common share - diluted$0.91 $(0.59)
Anti-dilutive stock awards excluded from the calculation of diluted shares0.5 
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
1715

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 3 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 aan 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 retail sports betting and iGaming wageringCasino business.
TwinSpires Horse Racing operates the online horse racing wagering business 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 sports bettingTwinSpires Sports and iGamingCasino business includes the retail and online TwinSpires sports betting and casino gaming operations.
Our TwinSpires Sports and Casino business operates our sports betting and casino iGaming platform in multiple states. The Company launched its mobile sports betting app in Michigan in January 2021 and Tennessee in March 2021. The TwinSpires Sports and Casino business includes the mobile and online sports betting and casino results and the results of 8 of our 6 retail sportsbooks, which include our wholly-owned properties at Harlow’s Casino Resort and Spa (“Harlow’s”("Harlow’s"), Presque Isle, and 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 8 states.
The Gaming segment revenue and Adjusted EBITDA includes the following properties:
Calder Casino and Racing ("Calder")
Fair Grounds Slots, Fair Grounds Race Course, and Video Services, LLC ("VSI") (collectively, "Fair Grounds and VSI")VSI
Harlow’s
Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") management agreement
Ocean Downs Casino and Racetrack ("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
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
18

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

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 International Racecourse ("Arlington")
United Tote
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 (loss).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 dispositionland 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 (loss).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 (loss) 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 
Riverwalk14.4 14.4 
Harlow’s13.1 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, 20212022
19

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

Three Months Ended March 31,
(in millions)20212020
Net revenue from external customers:
Live and Historical Racing:
Churchill Downs Racetrack$2.0 $1.9 
Derby City Gaming32.9 21.6 
Oak Grove19.4 
Turfway Park4.5 4.6 
Newport4.4 
Total Live and Historical Racing63.2 28.1 
TwinSpires:
Horse Racing92.7 66.6 
Sports and Casino7.0 2.5 
Total TwinSpires99.7 69.1 
Gaming:
Fair Grounds and VSI38.3 31.6 
Presque Isle23.8 27.0 
Calder20.9 21.8 
Oxford15.7 20.1 
Ocean Downs20.0 14.8 
Riverwalk14.4 12.0 
Harlow’s14.0 11.3 
Lady Luck Nemacolin4.9 7.3 
Total Gaming152.0 145.9 
All Other9.4 9.8 
Net revenue from external customers$324.3 $252.9 
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,
(in millions)20212020
Intercompany net revenue:
Live and Historical Racing$1.5 $1.0 
TwinSpires0.4 0.3 
Gaming2.0 1.5 
All Other2.7 2.4 
Eliminations(6.6)(5.2)
Intercompany net revenue$$

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
20

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

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 services0.7 0.7 0.7 
Gaming(a)
7.0 132.5 139.5 139.5 
Other(a)
4.4 3.5 7.1 15.0 4.3 19.3 
Total$63.2 $99.7 $152.0 $314.9 $9.4 $324.3 
Three Months Ended March 31, 2020Three Months Ended March 31, 2021
(in millions)(in millions)Live and Historical RacingTwinSpiresGamingTotal SegmentsAll OtherTotal(in millions)Live and Historical RacingTwinSpiresGamingTotal SegmentsAll OtherTotal
Net revenue from external customersNet revenue from external customersNet revenue from external customers
Pari-mutuel:Pari-mutuel:Pari-mutuel:
Live and simulcast racingLive and simulcast racing$5.2 $63.9 $9.9 $79.0 $5.7 $84.7 Live and simulcast racing$5.9 $89.2 $11.7 $106.8 $5.1 $111.9 
Historical racing(a)
Historical racing(a)
20.4 20.4 20.4 
Historical racing(a)
52.9 — — 52.9 — 52.9 
Racing event-related servicesRacing event-related services1.3 1.3 0.1 1.4 Racing event-related services— — 0.7 0.7 — 0.7 
Gaming(a)
Gaming(a)
2.5 119.8 122.3 122.3 
Gaming(a)
— 7.0 132.5 139.5 — 139.5 
Other(a)
Other(a)
2.5 2.7 14.9 20.1 4.0 24.1 
Other(a)
4.4 7.3 7.1 18.8 0.5 19.3 
TotalTotal$28.1 $69.1 $145.9 $243.1 $9.8 $252.9 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-mutuelPari-mutuel revenue for HRMs or gamingGaming 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 and $7.6 million for the three months ended March 31, 2020.2021.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
2120

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

Adjusted EBITDA by segment is comprised of the following:
Three Months Ended March 31, 2021Three Months Ended March 31, 2022
(in millions)(in millions)Live and Historical RacingTwinSpiresGaming(in millions)Live and Historical RacingTwinSpiresGaming
Net revenueNet revenue$64.7 $100.1 $154.0 Net revenue$87.2 $101.4 $179.2 
Taxes and pursesTaxes and purses(20.0)(6.4)(59.3)Taxes and purses(26.8)(7.5)(67.3)
Marketing and advertisingMarketing and advertising(2.1)(8.5)(1.4)Marketing and advertising(2.9)(5.1)(3.5)
Salaries and benefitsSalaries and benefits(10.0)(3.1)(19.9)Salaries and benefits(10.9)(6.7)(23.9)
Content expenseContent expense(0.6)(46.5)(1.0)Content expense(0.6)(43.1)(1.5)
Selling, general and administrative expenseSelling, general and administrative expense(3.0)(2.2)(6.0)Selling, general and administrative expense(3.3)(2.6)(6.6)
Other operating expenseOther operating expense(10.7)(10.9)(15.5)Other operating expense(14.8)(12.3)(20.0)
Other incomeOther income31.5 Other income— — 34.7 
Adjusted EBITDAAdjusted EBITDA$18.3 $22.5 $82.4 Adjusted EBITDA$27.9 $24.1 $91.1 
Three Months Ended March 31, 2020Three Months Ended March 31, 2021
(in millions)(in millions)Live and Historical RacingTwinSpiresGaming(in millions)Live and Historical RacingTwinSpiresGaming
Net revenueNet revenue$29.1 $69.4 $147.4 Net revenue$64.7 $105.0 $154.0 
Taxes and pursesTaxes and purses(9.5)(4.3)(58.7)Taxes and purses(20.0)(6.4)(59.3)
Marketing and advertisingMarketing and advertising(1.2)(3.5)(5.3)Marketing and advertising(2.1)(8.5)(1.4)
Salaries and benefitsSalaries and benefits(7.2)(3.5)(29.5)Salaries and benefits(10.0)(6.2)(19.9)
Content expenseContent expense(0.7)(32.6)(1.0)Content expense(0.6)(46.5)(1.0)
Selling, general and administrative expenseSelling, general and administrative expense(1.7)(1.4)(6.7)Selling, general and administrative expense(3.0)(2.6)(6.0)
Other operating expenseOther operating expense(7.8)(8.1)(19.5)Other operating expense(10.7)(11.7)(15.5)
Other incomeOther income21.2 Other income— — 31.5 
Adjusted EBITDAAdjusted EBITDA$1.0 $16.0 $47.9 Adjusted EBITDA$18.3 $23.1 $82.4 

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
21

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


Three Months Ended March 31,
(in millions)20222021
Reconciliation of Comprehensive Income to Adjusted EBITDA:
Net income and comprehensive income$42.1 $36.1 
Additions:
Depreciation and amortization25.1 26.0 
Interest expense21.3 19.4 
Income tax provision16.5 16.2 
EBITDA$105.0 $97.7 
Adjustments to EBITDA:
Stock-based compensation expense$7.0 $5.5 
Pre-opening expense2.1 0.6 
Other expenses, net2.5 — 
Asset impairments4.9 — 
Transaction expense, net5.0 0.1 
Other income, expense:
Interest, depreciation and amortization expense related to equity investments11.1 9.6 
Changes in fair value of Rivers Des Plaines' interest rate swaps(10.4)(4.2)
Rivers Des Plaines' legal reserves and transaction costs0.3 1.3 
Other charges1.0 — 
Total adjustments to EBITDA23.5 12.9 
Adjusted EBITDA$128.5 $110.6 
Adjusted EBITDA by segment:
Live and Historical Racing$27.9 $18.3 
TwinSpires24.1 23.1 
Gaming91.1 82.4 
Total segment Adjusted EBITDA143.1 123.8 
All Other(14.6)(13.2)
Total Adjusted EBITDA$128.5 $110.6 
The table below presents information about equity in income of unconsolidated affiliates included in our reported segments:
Three Months Ended March 31,
(in millions)20222021
Gaming$32.5 $24.9 
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
22

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


The table below presents total asset information for each of our segments:
Three Months Ended March 31,
(in millions)20212020
Reconciliation of Comprehensive Income (Loss) to Adjusted EBITDA:
Net income (loss) and comprehensive income (loss) attributable to Churchill Downs Incorporated$36.1 $(23.4)
Net loss attributable to noncontrolling interest0.1 
Net income (loss) before noncontrolling interest36.1 (23.5)
Loss from discontinued operations, net of tax0.9 
Income (loss) from continuing operations, net of tax36.1 (22.6)
Additions:
Depreciation and amortization26.0 22.0 
Interest expense19.4 19.3 
Income tax provision (benefit)16.2 (11.6)
EBITDA$97.7 $7.1 
Adjustments to EBITDA:
Selling, general and administrative:
Stock-based compensation expense$5.5 $4.3 
Pre-opening expense and other expense0.6 1.7 
Impairment of intangible assets17.5 
Transaction expense, net0.1 0.3 
Other income, expense:
Interest, depreciation and amortization expense related to equity investments9.6 9.5 
Changes in fair value of Rivers Des Plaines' interest rate swaps(4.2)14.9 
Rivers Des Plaines' legal reserves and transaction costs1.3 
Total adjustments to EBITDA12.9 48.2 
Adjusted EBITDA$110.6 $55.3 
Adjusted EBITDA by segment:
Live and Historical Racing$18.3 $1.0 
TwinSpires22.5 16.0 
Gaming82.4 47.9 
Total segment Adjusted EBITDA123.2 64.9 
All Other(12.6)(9.6)
Total Adjusted EBITDA$110.6 $55.3 
(in millions)March 31, 2022December 31, 2021
Total assets:
Live and Historical Racing$719.0 $682.7 
TwinSpires286.0 289.6 
Gaming1,003.3 1,003.3 
Total segment assets2,008.3 1,975.6 
All Other1,028.6 1,006.0 
Total assets$3,036.9 $2,981.6 
The table below presents total capital expenditures for each of our segments:
Three Months Ended March 31,
(in millions)20222021
Capital expenditures, net:
Live and Historical Racing$44.5 $7.8 
TwinSpires3.1 2.4 
Gaming7.5 1.6 
Total segment capital expenditures55.1 11.8 
All Other0.4 0.5 
Total capital expenditures$55.5 $12.3 
18. SUBSEQUENT EVENT
April 2022 Financing Transactions
On April 13, 2022, the Company announced an amendment of its senior secured credit agreement (the “Credit Agreement Amendment”) to extend the maturity date of its existing revolving credit facility to 2027 and to increase the commitments under the existing revolving credit facility from $700 million to $1,200 million. The Credit Agreement Amendment also provides for a senior secured delayed draw term loan A credit facility due 2027 in the amount of $800 million (the “Delayed Draw Term Loan A”) and makes certain other changes to its existing credit agreement. The interest rate applicable to borrowings on the Revolver and Delayed Draw Term Loan A will be secured financing overnight rate ("SFOR")-based plus a spread, determined by the Company’s and guarantors' leverage ratio. The Company also successfully closed into escrow the previously announced offering of $1,200 million in aggregate principal amount of 5.750% senior notes due 2030.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
23

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

The table below presents information about equity in income (loss) of unconsolidated affiliates included in our reported segments:
Three Months Ended March 31,
(in millions)20212020
Gaming$24.9 $(3.3)
As noted in Note 1, Description of Business, we updated our segments and moved our Oak Grove, Turfway Park and Newport businesses into the Live and Historical Racing segment with Churchill Downs Racetrack and Derby City Gaming. As a result, we moved $196.4 million of assets from Oak Grove, $52.1 million of assets from Turfway Park, and $37.9 million from Newport from All Other segment assets to the Live and Historical Racing segment at December 31, 2020. As noted in Note 9, Debt, as a result of our proceeds received from the Term Loan B-1 and Additional 2028 Notes, our All Other total assets increased $99.8 million at March 31, 2021 compared to December 31, 2020, which was primarily an increase in cash and cash equivalents. There were no other significant changes in our segment assets at March 31, 2021 compared to December 31, 2020.
The table below presents total capital expenditures for each of our segments:
Three Months Ended March 31,
(in millions)20212020
Capital expenditures, net:
Live and Historical Racing$7.8 $39.7 
TwinSpires2.3 3.5 
Gaming1.6 3.3 
Total segment capital expenditures11.7 46.5 
All Other0.6 1.8 
Total capital expenditures$12.3 $48.3 
17. SUBSEQUENT EVENT
As of the date of this filing, there were no subsequent events that may impact our disclosures in the condensed consolidated financial statements.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
24


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains various “forward-looking statements”"forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”"Act"), which provides certain “safe harbor”"safe harbor" provisions for forward-looking statements. All forward-looking statements made in this report are made pursuant to the Act. The reader is cautioned that such forward-looking statements are based on information available at the time and / or management’s good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Forward-looking statements speak only as of the date that the statement was made. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. Forward-looking statements are typically identified by the use of terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “will,”"believe," "could," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "seek," "should," "will," and similar words, although some forward-looking statements are expressed differently.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from expectations include the following:
the receipt of regulatory approvals on terms desired or anticipated, unanticipated difficulties or expenditures relating to our proposed transactions, including, without limitation, difficulties that result in the failure to realize expected synergies, efficiencies and cost savings from the proposed transactions within the expected time period (if at all), our ability to obtain financing on the anticipated terms and schedule, disruptions of our or Peninsula Pacific Entertainment LLC's ("P2E") current plans, operations and relationships with customers and suppliers caused by the announcement and pendency of the proposed transaction, our and P2E’s ability to consummate a sale-leaseback transaction with respect to the Hard Rock Sioux City on terms desired or anticipated;
the impact of the novel coronavirus (COVID-19) pandemic, including the emergence of variant strains, and related economic matters on our results of operations, financial conditions and prospects;
the occurrence of extraordinary events, such as terrorist attacks, public health threats, civil unrest, and inclement weather;
the effect of economic conditions on our consumers' confidence and discretionary spending or our access to credit;
additional or increased taxes and fees;
the impact of significant competition, and the expectation the competition levels will increase;
changes in consumer preferences, attendance, wagering, and sponsorships;
loss of key or highly skilled personnel;
lack of confidence in the integrity of our core businesses or any deterioration in our reputation;
risks associated with equity investments, strategic alliances and other third-party agreements;
inability to respond to rapid technological changes in a timely manner;
concentration and evolution of slot machine and historical racing machine ("HRM") manufacturing and other technology conditions that could impose additional costs;
inability to negotiate agreements with industry constituents, including horsemen and other racetracks;
inability to successfully expandfocus on market access and retail operations for our TwinSpires Sports and Casino business and effectively compete;
inability to identify, and complete, or fully realize the benefits of, our proposed acquisitions, divestitures, development of new venues or the expansion acquisition or divestiture projects,of existing facilities on time, on budget, or as planned;
difficulty in integrating recent or future acquisitions into our operations;
costs and uncertainties relating to the development of new venues and expansion of existing facilities;
general risks related to real estate ownership and significant expenditures, including fluctuations in market values and environmental regulations;
reliance on our technology services and catastrophic events and system failures disrupting our operations;
online security risk, including cyber-security breaches, or loss or misuse of our stored information as a result of a breach, including customers’ personal information, could lead to government enforcement actions or other litigation;
personal injury litigation related to injuries occurring at our racetracks;
compliance with the Foreign Corrupt Practices Act or applicable money-laundering regulations;
payment-related risks, such as risk associated with fraudulent credit card and debit card use;
work stoppages and labor issues;
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risks related to pending or future legal proceedings and other actions;
highly regulated operations and changes in the regulatory environment could adversely affect our business;
restrictions in our debt facilities limiting our flexibility to operate our business;
failure to comply with the financial ratios and other covenants in our debt facilities and other indebtedness;
disruptions in the credit markets or changes to our credit ratings may adversely affect our business; and
increase in our insurance costs, or obtain similar insurance coverage in the future, and inability to recover under our insurance policies for damages sustained at our properties in the event of inclement weather and casualty events.
The following information is unaudited. Tabular dollars are in millions, except per share amounts. 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, 2020,2021, including Part I - Item 1A, "Risk Factors" of our Form 10-K for a discussion regarding some of the reasons that actual results may be materially different from those we anticipate.
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Our Business
Executive Overview
Churchill Downs Incorporated (the "Company""Company," "we", "us", "our") is an industry-leading racing, online wagering and gaming entertainment company anchored by our iconic flagship event, the Kentucky Derby. We own and operate three pari-mutuel gaming entertainment venues with approximately 3,050 historical racing machines ("HRMs")HRMs in Kentucky. We also own and operate TwinSpires, one of the largest and most profitable online wagering platforms for horse racing sports and iGaming in the U.S. and we have sevennine retail sportsbooks. We are also a leader in brick-and-mortar casino gaming in eight states with approximately 11,000 slot machines and video lottery terminals ("VLTs") and 200 table games. We were organized as a Kentucky corporation in 1928, and our principal executive offices are located in Louisville, Kentucky.
Segments
During the first quarter of 2021,2022, 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 internal management reporting changed primarily due to the continued growth from Oak Grove Racing, Gaming & Hotel ("Oak Grove") and Turfway Park, which opened its annex historical racing machine ("HRM") facility, Newport Racing & Gaming ("Newport"), in October 2020, which resulted in our chief operating decision maker's decisionmaker decided to include Oak Grove, Turfway Park and Newportthe results of our United Tote business in the new Live and HistoricalTwinSpires 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 Live and Historical Racing segment now includes Churchillprior year results were reclassified to conform to this presentation.
P2E Acquisition
On February 18, 2022, the Company entered into a definitive purchase agreement to acquire substantially all of the assets of Peninsula Pacific Entertainment LLC ("P2E") for total consideration of $2.485 billion (the "P2E Purchase Agreement") (collectively, the "P2E Transaction"). The P2E Purchase Agreement contemplates the acquisition by the Company of the following properties: Colonial Downs Racetrack Derbyin New Kent, Virginia ("Colonial Downs"), six historical racing entertainment venues across Virginia, del Lago Resort & Casino ("del Lago") in Waterloo, New York, and the operations of Hard Rock Hotel & Casino in Sioux City, Iowa (“Hard Rock Sioux City”).
The P2E Transaction is dependent on customary closing conditions, including the Company obtaining approvals from the Virginia Racing Commission, the New York State Gaming Oak Grove, Turfway Park,Commission, and Newport. Wethe Iowa Racing and Gaming Commission. The transaction is expected to close by the end of 2022.
Either the Company or P2E may terminate the P2E Purchase Agreement if the closing has not occurred prior to the date that is nine months after signing the P2E Purchase Agreement (such date being November 18, 2022), subject to the ability of either party to elect to extend such date for an additional four months in certain circumstances. If certain required regulatory approvals are not obtained and the P2E Purchase Agreement is terminated, the Company may have to pay a Regulatory Termination Fee of up to $137.5 million.
April 2022 Financing Transactions
On April 13, 2022, the Company announced an amendment of its senior secured credit agreement (the “Credit Agreement Amendment”) to extend the maturity date of its existing revolving credit facility to 2027 and to increase the commitments under the existing revolving credit facility from $700 million to $1,200 million. The Credit Agreement Amendment also realigned our retail sports betting results at our wholly-owned casinosprovides for a senior secured delayed draw term loan A credit facility due 2027 in the amount of $800 million (the “Delayed Draw Term Loan A”) and makes certain other changes to the credit agreement. The interest rate applicable to borrowings on the Revolver and Delayed Draw Term Loan A will be secured financing overnight rate-based plus a spread, determined by the Company’s total net leverage ratio. The Company also successfully closed into escrow the previously announced offering of $1,200 million in aggregate principal amount of 5.750% senior notes due 2030.
Chasers Poker Room Acquisition
On March 22, 2022, the Company entered into a definitive purchase agreement to acquire Chasers Poker Room ("Chasers") in Salem, New Hampshire. Chasers is a charitable gaming facility located approximately 30 miles from our Gaming segmentBoston, Massachusetts, that offers poker and a variety of table games. Following the closing of the acquisition, the Company plans to our TwinSpires segment. As a resultdevelop an expanded charitable gaming facility in Salem to accommodate historical racing machines. The Company expects the total investment in Salem, inclusive of this realignment, our operating segments that meet the requirementsChasers purchase price to be disclosed separately as reportable segments are: Live and Historical Racing, TwinSpires, and Gaming. We conduct our business through these reportable segments and report net revenue and operating expense associated with these reportable segments in our condensed consolidated statementsapproximately $150 million. The transaction is expected to close during the second quarter of comprehensive income (loss).2022.
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
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economic impacts in the United States and in relation to our business. Although vaccines are now available, distribution is currently limited and there can be no assurance that these vaccines will be successful in endingwe cannot predict the duration of the COVID-19 global pandemic. The long-termextent to which the COVID-19 pandemic, including the emergence of variant strains, will continue to impact of COVID-19 on the U.S. and world economies and continuing impact on our businessCompany remains uncertain the duration and scope of which cannot currently be predicted.
In responsewill depend on many factors that are not within our control. We will continue to monitor for new developments related to the measures takenpandemic and assess these developments to limit the impact of COVID-19 described above, and for the protection ofmaintain continuity in our employees, customers, and communities, we temporarily suspended operations at our properties in March 2020. operations.
Asset Impairment
On March 25, 2020, as a result of the temporary closures and suspended operations,February 24, 2022, the Company announced its plans to exit the temporary furloughdirect online sports betting and iGaming business and pursue monetization of employees at its wholly-owned and managed gaming properties and certain racing operations. The Company also implemented a temporary salary reduction for all remaining non-furloughed salaried employees based on a percentage that varies dependent upononline market access licenses. During the amount of each employee’s salary. The most senior level of executive management received the largest salary decrease, based on both percentage and dollar amount.
In May 2020, we began to reopen our properties with patron restrictions and gaming limitations. One property temporarily suspended operations again in July 2020 and reopened in August 2020, and three properties temporarily suspended operations again in December 2020 and reopened in January 2021. Asquarter ended March 31, 2022, the Company reopened these properties,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 employees have returnedTwinSpires assets. As a result, the Company recorded a $4.9 million non-cash impairment charge related to work while others remain on temporary furlough due tocertain assets in the capacity restrictions at these properties. The Company provided health, dental, vision and life insurance benefits to furloughed employees through July 31, 2020 and during the subsequent property closure periods.
As of March 31, 2021, all of our properties were reopened with certain operating restrictions.TwinSpires segment.
Key Indicators to Evaluate Business Results and Financial Condition
Our management monitors a variety of key indicators to evaluate our business results and financial condition. These indicators include changes in net revenue, operating expense, operating income, earnings per share, outstanding debt balance, operating cash flow and capital spend.
Our condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"). We also use non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. We believe that the use of Adjusted EBITDA as a key performance measure of results of operations enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment
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performance, develop strategy and allocate resources. Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA should not be considered as an alternative to or more meaningful than, netoperating income (as determined in accordance with GAAP)as an indicator of performance, as an alternative to cash flows from operating activities as a measure of our operating results.liquidity, or as an alternative to any other measure provided in accordance with GAAP.
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following:
Adjusted EBITDA includes our portion of EBITDA from our equity investments.
Adjusted EBITDA excludes:
Transaction expense, net which includes:
Acquisition, disposition, and dispositionland 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.
For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the accompanying condensed consolidated statements of comprehensive income (loss).income. Refer to the reconciliation of comprehensive income to Adjusted EBITDA included in this section for additional information.
Government
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Governmental Regulations and Legislative ActionsChanges
We are subject to various federal, state and international laws and regulations that affect our businesses. The ownership, operation and management of our Live and Historical Racing, TwinSpires, and Gaming segments, as well as our other operations, are subject to regulation under the laws and regulations of each of the jurisdictions in which we operate. The ownership, operation and management of our businesses and properties are also subject to legislative actions at both the federal and state level. There have been no material changes with respect to our regulatory and legislative activities disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Consolidated Financial Results
The following table reflects our net revenue, operating income, (loss), net income, (loss), Adjusted EBITDA, and certain other financial information:
Three Months Ended March 31,
(in millions)20212020Change
Net revenue$324.3 $252.9 $71.4 
Operating income (loss)46.7 (11.6)58.3 
Operating income (loss) margin14 %(5)%
Net income (loss) from continuing operations$36.1 $(22.6)$58.7 
Net income (loss) attributable to Churchill Downs Incorporated36.1 (23.4)59.5 
Adjusted EBITDA110.6 55.3 55.3 
Three Months Ended March 31,
(in millions)20222021Change
Net revenue$364.1$324.3$39.8 
Operating income47.446.70.7 
Operating income margin13 %14 %
Net income42.136.16.0 
Adjusted EBITDA128.5110.617.9 
Three Months Ended March 31, 2021,2022, Compared to Three Months Ended March 31, 20202021
Net revenue increased $71.4$39.8 million due to a $35.1$25.3 million increase from Gaming primarily due to certain capacity restrictions on patrons and gaming during the prior year quarter; a $22.8 million increase from Live and Historical Racing driven primarily fromdue to capacity restrictions at the Oak Grove HRM facility and Derby City Gaming in the prior year quarter and overall continued growth in the openingbusinesses. Partially offsetting these increases were a $5.1 million decrease in revenue from All Other primarily driven by the cessation of Oak Groveracing and simulcast operations at Arlington at the end of 2021 and a decrease of $3.2 million from TwinSpires driven by a decrease in September 2020,Horse Racing handle partially offset by an increase in Sports and Casino due to our expansion in additional states during 2021.
Operating income increased $0.7 million due to a $30.6$9.8 million increase from TwinSpiresLive and Historical Racing primarily due to an increase in handle, andnet revenue; a $6.1$6.4 million increase from Gaming primarily due to the temporary suspensionincrease in net revenue as a result of capacity restrictions on patrons and gaming during the prior year quarter; and a $0.6 million increase from All Other. Partially offsetting these increases were a $5.7 million increase in selling, general and administrative expenses due to an increase in employee benefits as well as an increase in legal fees, a $4.9 million increase in transaction expenses driven by the P2E Transaction, a $4.9 asset impairment related to TwinSpires Sports and Casino as a result of the decision to exit the direct online Sports and Casino business, and a $0.6 million decrease at TwinSpires.
Net income increased $6.0 million. The following items impacted comparability of the Company's first quarter of 2022 net income compared to the prior year's first quarter: a $6.3 million after-tax increase in expenses related to transaction, pre-opening and other expenses, net, and a $3.5 million after-tax impairment charge driven by the decision to exit the direct online Sports and Casino business, and $0.7 million of other charges primarily related to our equity portion of Miami Valley Gaming's after-tax non-cash impairment charge related to prior expansion plans. Partially offsetting these increases were a $4.5 million after tax benefit increase related to our equity portion of the non-cash change in the fair value of Rivers Des Plaines' interest rate swaps and a $0.7 million after tax decrease in Rivers Des Plaines' legal reserves and transaction costs. Excluding these items, net income increased $11.3 million primarily due to a $12.9 million after-tax increase driven by the results of our operations and equity in March 2020. income from our unconsolidated affiliates, partially offset by a $1.6 million after-tax increase in interest expense associated with higher outstanding debt balances.
Adjusted EBITDA increased $17.9 million driven by a $9.6 million increase from Live and Historical Racing primarily due an increase in net revenue, a $8.7 million increase from Gaming primarily due to certain capacity restrictions on patrons and gaming during the prior year quarter, and a $1.0 million increase from TwinSpires Sports and Casino primarily due to a decrease in marketing and promotional activities, partially offset by a decline in TwinSpires Horse Racing due to decreased handle. Partially offsetting these increases was $0.4a $1.4 million decrease from All Other.
Operating income (loss) increased $58.3 millionOther primarily due to a $23.9 millionan increase from Gaming due to increased operating efficiencies andin Corporate expenses offset by an increase at Arlington, as operations expenses incurred in the temporary closure of our Gaming properties in March 2020; a $17.5 million non-cash intangible asset impairment from the firstprevious year quarter of 2020 that did not recur in the first quarter of 2021; a $13.5 millionrecur.
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increase from Live and Historical Racing primarily related to the Oak Grove HRM facility opening in September 2020 and increased operating efficiencies and the increase in net revenue at Derby City Gaming; an $8.4 million increase from TwinSpires primarily due to the increase in handle; a $0.9 million increase from All Other primarily from increased operating efficiencies at Arlington; and a $0.2 million increase from other sources. Partially offsetting these increases was a $6.1 million increase in selling, general and administrative expenses primarily due to an increase in accrued bonuses in the current quarter due to the temporary suspension of operations in March 2020.
Net income (loss) from continuing operations increased $58.7 million. The following items impacted comparability of the Company's first quarter of 2021 net income from continuing operations compared to the prior year quarter: a $14.0 million after-tax expense decrease related to our equity portion of the non-cash change in the fair value of Rivers Des Plaines' interest rate swaps; a $12.0 million non-cash after-tax impact related to our intangible asset impairment from the first quarter of 2020 that did not recur in the first quarter of 2021; and a $1.0 million after-tax decrease in expenses related to lower transaction, pre-opening and other expenses. Partially offsetting these decreases was a $0.9 million after-tax increase in Rivers Des Plaines' legal reserves and transaction costs. Excluding these items, net income (loss) from continuing operations increased $32.6 million primarily due to a $33.4 million after-tax increase driven by the results of our operations and equity income from our unconsolidated affiliates, partially offset by a $0.8 million after-tax increase in interest expense associated with higher outstanding debt balances.
Net income (loss) attributable to Churchill Downs Incorporated increased $59.5 million due to a $58.7 million increase in net income from continuing operations discussed above and a $0.9 million decrease in net loss from discontinued operations, partially offset by a $0.1 million decrease in net loss attributable to our noncontrolling interest.
Adjusted EBITDA increased $55.3 million driven by a $34.5 million increase from Gaming primarily due to the increased operating efficiencies at our wholly-owned properties and equity investments; a $17.3 million increase from Live and Historical Racing primarily due to the opening of Oak Grove HRM facility in September 2020 and increased operating efficiencies at Derby City Gaming; and a $6.5 million increase from TwinSpires primarily due to the increase in handle. Partially offsetting these increases was a $3.0 million decrease from All Other primarily due to increased accrued bonuses at Corporate.
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Financial Results by Segment
Net Revenue by Segment
The following table presents net revenue for our segments, including intercompany revenue:
Three Months Ended March 31,Three Months Ended March 31,
(in millions)(in millions)20212020Change(in millions)20222021Change
Live and Historical Racing:Live and Historical Racing:Live and Historical Racing:
Churchill Downs RacetrackChurchill Downs Racetrack$2.6 $2.2 $0.4 Churchill Downs Racetrack$2.5 $2.6 $(0.1)
Derby City GamingDerby City Gaming32.9 21.6 11.3 Derby City Gaming42.8 32.9 9.9 
Oak GroveOak Grove19.4 — 19.4 Oak Grove30.4 19.4 11.0 
NewportNewport6.3 4.4 1.9 
Turfway ParkTurfway Park5.4 5.3 0.1 Turfway Park5.2 5.4 (0.2)
Newport4.4 — 4.4 
Total Live and Historical RacingTotal Live and Historical Racing64.7 29.1 35.6 Total Live and Historical Racing87.2 64.7 22.5 
TwinSpires:TwinSpires:TwinSpires:
Horse RacingHorse Racing93.1 67.0 26.1 Horse Racing91.1 98.0 (6.9)
Sports and CasinoSports and Casino7.0 2.4 4.6 Sports and Casino10.3 7.0 3.3 
Total TwinSpiresTotal TwinSpires100.1 69.4 30.7 Total TwinSpires101.4 105.0 (3.6)
Gaming:Gaming:Gaming:
Fair Grounds Slots and VSI40.3 33.0 7.3 
Fair Grounds and VSIFair Grounds and VSI43.4 40.3 3.1 
Presque IslePresque Isle23.8 27.0 (3.2)Presque Isle27.2 23.8 3.4 
CalderCalder20.9 21.8 (0.9)Calder27.0 20.9 6.1 
Ocean DownsOcean Downs20.0 14.8 5.2 Ocean Downs21.3 20.0 1.3 
OxfordOxford15.7 20.1 (4.4)Oxford26.8 15.7 11.1 
RiverwalkRiverwalk14.4 12.0 2.4 Riverwalk14.4 14.4 — 
Harlow'sHarlow's14.0 11.4 2.6 Harlow's13.1 14.0 (0.9)
Lady Luck NemacolinLady Luck Nemacolin4.9 7.3 (2.4)Lady Luck Nemacolin6.0 4.9 1.1 
Total GamingTotal Gaming154.0 147.4 6.6 Total Gaming179.2 154.0 25.2 
All OtherAll Other12.1 12.2 (0.1)All Other0.5 7.2 (6.7)
EliminationsEliminations(6.6)(5.2)(1.4)Eliminations(4.2)(6.6)2.4 
Net RevenueNet Revenue$324.3 $252.9 $71.4 Net Revenue$364.1 $324.3 $39.8 
Three Months Ended March 31, 2021,2022, Compared to Three Months Ended March 31, 20202021
Live and Historical Racing revenue increased $35.6$22.5 million due primarily to a $19.4an $11.0 million increase at Oak Grove, as a result of the opening of the HRM facility in September 2020 and the hotel in October 2020; an $11.3$9.9 million increase atfrom Derby City Gaming, primarily due to the temporary suspension of operations and the completion of their second outdoor patio which added an additional 225 HRMs in September 2020; a $4.4 million increase at Newport due to the opening in October 2020; and a $0.5$1.9 million increase from other sources.Newport. Oak Grove and Derby City Gaming reflected the benefit of the elimination of the operating restrictions that were in place during the first quarter of 2021 and overall continued growth in the businesses.
TwinSpires revenue increased $30.7decreased $3.6 million from the prior year quarter primarily due to a $26.1$6.9 million increasedecrease from Horse Racing andthat was partially offset by a $4.6$3.3 million increase from Sports and Casino. Horse Racing net revenue increaseddecreased as a resultportion of an increase in handle of $113.3 million, or 34.3%, comparedour patrons returned to the prior year quarter due to the continued shift from wagering at brick-and-mortar locations to online wagering.facilities in the current quarter instead of wagering online. Sports and Casino net revenuesrevenue increased as a result of our expansion in additional states since the first quarter of 2020 and marketing and promotional activities.during 2021.
Gaming revenue increased $6.6$25.2 million primarily due to a $7.3 million increase at Fair Groundscertain capacity restrictions on patrons and VSI, a $5.2 million increase at Ocean Downs, and a $5.0 million increase at our Mississippi properties, all of which resulted fromgaming during the temporary suspension of operationsprior year quarter that were no longer in March 2020. Partially offsetting these increases were a $4.4 million decreaseplace at Oxford, Calder, and Presque Isle.
All Other revenue decreased $6.7 million primarily as a $3.2 million decreaseresult of Arlington ceasing racing and simulcast operations at Presque Isle, a $2.4 million decrease at Lady Luck Nemacolin, and a $0.9 million decrease at Calder, allthe end of which resulted from certain operating restrictions.2021.
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Consolidated Operating Expense
The following table is a summary of our consolidated operating expense:
Three Months Ended March 31,Three Months Ended March 31,
(in millions)(in millions)20212020Change(in millions)20222021Change
Taxes and pursesTaxes and purses$88.9 $75.7 $13.2 Taxes and purses$101.6$88.9$12.7 
Salaries and benefitsSalaries and benefits42.337.25.1 
Content expenseContent expense43.1 30.9 12.2 Content expense41.343.1(1.8)
Salaries and benefits37.2 45.4 (8.2)
Selling, general and administrative expenseSelling, general and administrative expense30.2 24.1 6.1 Selling, general and administrative expense35.930.25.7 
Depreciation and amortizationDepreciation and amortization26.0 22.0 4.0 Depreciation and amortization25.126.0(0.9)
Marketing and advertisingMarketing and advertising12.1 9.8 2.3 Marketing and advertising11.512.1(0.6)
Transaction expense, netTransaction expense, net0.1 0.3 (0.2)Transaction expense, net5.00.14.9 
Impairment of intangible assets— 17.5 (17.5)
Asset impairmentsAsset impairments4.94.9 
Other operating expenseOther operating expense40.0 38.8 1.2 Other operating expense49.140.09.1 
Total expenseTotal expense$277.6 $264.5 $13.1 Total expense$316.7$277.6$39.1 
Three Months Ended March 31, 2021,2022, Compared to Three Months Ended March 31, 20202021
Significant items affecting comparability of consolidated operating expense include:
Taxes and purses increased $13.2$12.7 million primarily driven by the opening of the Oak Grove HRM facility in September 2020 and Newport in October 2020, as well as the temporary suspension of operations during March 2020.
Content expense increased $12.2 million primarily due to an increase in certain host feesnet revenue by our wholly-owned gaming and source market fees for the TwinSpires Horse Racing business.HRM properties.
Salaries and benefits expense decreased $8.2increased $5.1 million driven by the capacity restrictions at our gaming properties in the prior year quarter.
Content expense decreased $1.8 million primarily by increased operational efficiencies at certain properties.due to a decrease in online simulcast host fees in the TwinSpires Horse Racing business.
Selling, general and administrative expense increased $6.1$5.7 million driven primarily from an increase in our accrued bonusesemployee benefits as well as an increase in the current year quarter compared to the prior year quarter due to the temporary suspension of operations in March 2020.legal fees.
Depreciation and amortization increased $4.0decreased $0.9 million primarily driven by the opening of the Oak Grove HRM facility in September 2020 and Newport in October 2020.assets held for sale at Arlington.
Marketing and advertising expense decreased $0.6 million primarily due to decreased marketing by our TwinSpires Sports and Casino business due to the decision to exit the direct online Sports and Casino business. This decrease was partially offset by increased $2.3marketing spend at our gaming properties.
Transaction expense, net increased $4.9 million primarily due to increased marketing by our TwinSpires segment, partially offset by reduced marketinglegal and advertising at our Gaming properties.professional expenses related to the P2E Transaction.
Impairment of intangible assets decreased $17.5Asset impairments increased $4.9 million due to a non-cash impairment charge related to the first quarter of 2020 impairment that did not recur inCompany's plan to exit the current year quarter.direct online Sports and Casino business.
Other operating expenses include maintenance, utilities, food and beverage costs, property taxes, insurance, and other operating expenses. Other operating expense increased $1.2$9.1 million primarily driven by significant increases in property insurance, food and beverage costs, and preparation for the temporary suspensionrunning of operations at our properties in March 2020.the 148th Kentucky Oaks and Derby.

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Adjusted EBITDA
We believe that the use of Adjusted EBITDA as a key performance measure of the results of operations enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA is a supplemental measure of our performance that is not required by or presented in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to or more meaningful than, netoperating income (as determined in accordance with GAAP)as an indicator of performance, as an alternative to cash flows from operating activities as a measure of our operating results.liquidity, or as an alternative to any other measure provided in accordance with GAAP.
Three Months Ended March 31,Three Months Ended March 31,
(in millions)(in millions)20212020Change(in millions)20222021Change
Live and Historical RacingLive and Historical Racing$18.3 $1.0 $17.3 Live and Historical Racing$27.9 $18.3 $9.6 
TwinSpiresTwinSpires22.5 16.0 6.5 TwinSpires24.1 23.1 1.0 
GamingGaming82.4 47.9 34.5 Gaming91.1 82.4 8.7 
Total Segment Adjusted EBITDATotal Segment Adjusted EBITDA123.2 64.9 58.3 Total Segment Adjusted EBITDA143.1 123.8 19.3 
All OtherAll Other(12.6)(9.6)(3.0)All Other(14.6)(13.2)(1.4)
Total Adjusted EBITDATotal Adjusted EBITDA$110.6 $55.3 $55.3 Total Adjusted EBITDA$128.5 $110.6 $17.9 
Three Months Ended March 31, 2021,2022, Compared to Three Months Ended March 31, 20202021
Live and Historical Racing Adjusted EBITDA increased $17.3$9.6 million due to a $8.9 million increase from Derby City Gaming due to the increase in revenue, increased operating efficiencies, and the temporary closure of the property in March 2020; a $6.6$5.3 million increase at Oak Grove, due to the opening of the Oak Grove HRM facility in September 2020; a $0.8$5.2 million increase at Turfway Park due to an increase in handle;Derby City Gaming, and a $0.7 million increase at Newport due tofrom the opening of the Newport facilityincrease in October 2020; andnet revenue. Partially offsetting these increases was a $0.3$1.2 million increasedecrease at Churchill Downs Racetrack primarily due to the temporary suspensiontiming of operations in March 2020.Derby Week expenses and a $0.4 million decrease from higher expenses at Turfway Park.
TwinSpires Adjusted EBITDA increased $6.5$1.0 million primarily due to a $9.9$3.7 million increase from Horse Racing due to an increase in handle, partially offset by a $3.4 million increase in the loss from our Sports and Casino business due to increaseddecreased marketing and promotional activities.activities and a $0.6 million increase at United Tote. Partially offsetting these increases was a decrease from Horse Racing of $3.3 million due to the reduction in net revenue.
Gaming Adjusted EBITDA increased $34.5$8.7 million driven by a $24.1$5.6 million increase at our wholly-owned Gaming properties due to increased net revenue and a $10.4$3.1 million increase from our equity investments, both of which were due to increased operating efficienciescertain capacity restrictions on patrons and gaming during the temporary closure of all of our Gaming properties in March 2020.prior year quarter.
All Other Adjusted EBITDA decreased $3.0$1.4 million driven by a $4.4$2.6 million increase in accrued bonuses atlegal fees and the timing of other Corporate expenses that was partially offset by a $1.2 million decrease in the Arlington operating loss in the current year quarter compared to the prior year where accrued bonuses were reducedquarter as a result of Arlington ceasing racing and simulcast operations at the temporary suspensionend of operations in March 2020. Partially offsetting this decrease was a $1.4 million increase2021. We are excluding Arlington's operating results from Arlington due to increased operating efficiencies and the temporary suspension of operations in March 2020.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
31


Reconciliation of Comprehensive Income (Loss) to Adjusted EBITDA
Three Months Ended March 31,
(in millions)20212020Change
Net income (loss) and comprehensive income (loss) attributable to Churchill Downs Incorporated$36.1 $(23.4)$59.5 
Net loss attributable to noncontrolling interest— 0.1 (0.1)
Net income (loss) before noncontrolling interest36.1 (23.5)59.6 
Loss from discontinued operations, net of tax— 0.9 (0.9)
Income (loss) from continuing operations, net of tax36.1 (22.6)58.7 
Additions:
Depreciation and amortization26.0 22.0 4.0 
Interest expense19.4 19.3 0.1 
Income tax provision (benefit)16.2 (11.6)27.8 
EBITDA$97.7 $7.1 $90.6 
Adjustments to EBITDA:
Selling, general and administrative:
Stock-based compensation expense$5.5 $4.3 $1.2 
Pre-opening expense and other expense0.6 1.7 (1.1)
Impairment of intangible assets— 17.5 (17.5)
Transaction expense, net0.1 0.3 (0.2)
Other income, expense:
Interest, depreciation and amortization expense related to equity investments9.6 9.5 0.1 
Changes in fair value of Rivers Des Plaines' interest rate swaps(4.2)14.9 (19.1)
Rivers Des Plaines' legal reserves and transactions costs1.3 — 1.3 
Total adjustments to EBITDA12.9 48.2 (35.3)
Adjusted EBITDA$110.6 $55.3 $55.3 
Consolidated Balance Sheet
The following table is a summary in 2022 pending the sale of our overall financial position:
(in millions)March 31, 2021December 31, 2020Change
Total assets$2,787.1 $2,686.4 $100.7 
Total liabilities$2,584.9 $2,319.3 $265.6 
Total shareholders' equity$202.2 $367.1 $(164.9)
Significant items affecting the comparability of our condensed consolidated balance sheets include:
Total assets increased $100.7 million driven by a $80.3 million increase in cash and cash equivalents primarily dueproperty to the net proceeds from the new Term Loan B-1 and Additional 2028 Notes; a $20.0 million increase in income taxes receivable primarily due to the payment of the Kater and Thimmegowda litigation settlements; an $8.8 million increase in accounts receivable, net primarily due to sponsorships related to the 2021 Kentucky Derby and Oaks; and an $8.2 million increase in other current assets driven by an increase in prepaid insurance related to our annual renewals. Partially offsetting these increases was a $13.4 decrease in property and equipment primarily due to depreciation expense for the current quarter and a $3.2 million decrease in all other assets.Chicago Bears.
Total liabilities increased $265.6 million primarily driven by a $203.6 million increase in notes payable due to proceeds from our Additional 2028 Notes; a $142.4 million increase in long-term debt due to proceeds from the new Term Loan B-1 under our Credit Agreement; a $34.9 million increase in deferred income taxes primarily driven by the payment of the Kater and Thimmegowda litigation settlements; a $19.7 million increase in current deferred revenue primarily due to advance sales associated with the 2021 Kentucky Derby and Oaks tickets and sponsorships; and a $13.9 million increase in all other liabilities. Partially offsetting these increases were a $124.0 million decrease in
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
3231


Reconciliation of Comprehensive Income to Adjusted EBITDA
Three Months Ended March 31,
(in millions)20222021Change
Net income and comprehensive income$42.1 $36.1 $6.0 
Additions:
Depreciation and amortization25.1 26.0 (0.9)
Interest expense21.3 19.4 1.9 
Income tax provision16.5 16.2 0.3 
EBITDA$105.0 $97.7 $7.3 
Adjustments to EBITDA:
Stock-based compensation expense$7.0 $5.5 $1.5 
Pre-opening expense2.1 0.6 1.5 
Other expense, net2.5 — 2.5 
Asset impairments4.9 — 4.9 
Transaction expense, net5.0 0.1 4.9 
Other income, expense:
Interest, depreciation and amortization expense related to equity investments11.1 9.6 1.5 
Changes in fair value of Rivers Des Plaines' interest rate swaps(10.4)(4.2)(6.2)
Rivers Des Plaines' legal reserves and transactions costs0.3 1.3 (1.0)
Other charges1.0 — 1.0 
Total adjustments to EBITDA23.5 12.9 10.6 
Adjusted EBITDA$128.5 $110.6 $17.9 
Consolidated Balance Sheet
The following table is a summary of our overall financial position:
(in millions)March 31, 2022December 31, 2021Change
Total assets$3,036.9 $2,981.6 $55.3 
Total liabilities$2,719.1 $2,674.8 $44.3 
Total shareholders' equity$317.8 $306.8 $11.0 
Significant items affecting the comparability of our condensed consolidated balance sheets include:
Total assets increased $55.3 million driven by a $40.9 million increase in property and equipment driven by capital expenditures at Churchill Downs Racetrack, Turfway Park, and Derby City Gaming; a $16.9 million increase in other current assets driven by an increase in prepaid insurance; and a $11.8 million increase in all other assets. Partially offsetting these increases was an $8.1 million decrease in investments in and advances to unconsolidated affiliates driven by distributions received from Rivers Des Plaines and MVG; and a $6.2 million decrease in income tax receivable driven by the current year quarter income tax provision.
Total liabilities of discontinued operationsincreased $44.3 million primarily driven by a $56.3 million increase in current deferred revenue due to advance sales associated with the payments148th Kentucky Oaks and Derby tickets and sponsorships; a $15.3 million increase in accounts payable driven by timing of the Kater and Thimmegowda litigation settlementspayments; and a $24.9$10.5 increase in all other liabilities. Partially offsetting these increases were a $26.1 million decrease in dividends payable due to the payment of our annual dividendsdividends; and a $11.7 million decrease in January 2020.accrued expenses and other liabilities.
Total shareholders’ equity decreased $164.9increased $11.0 million driven by $193.9a $42.1 million increase from current year net income and $7.0 million from stock-based compensation. Partially offsetting this increase were $25.0 million in repurchases of common stock and $12.6$13.1 million in taxes paid related to net share settlement of stock awards. Partially offsetting these decreases were a $36.1 million increase from current year net income and a $5.5 million increase from stock-based compensation.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
32



Liquidity and Capital Resources
The following table is a summary of our liquidity and cash flows:
(in millions)(in millions)Three Months Ended March 31,(in millions)Three Months Ended March 31,
Cash flows from:Cash flows from:20212020ChangeCash flows from:20222021Change
Operating activitiesOperating activities$(19.8)$43.5 $(63.3)Operating activities$135.2 $104.2 $31.0 
Investing activitiesInvesting activities$(12.3)$(48.3)$36.0 Investing activities$(62.8)$(12.3)$(50.5)
Financing activitiesFinancing activities$106.8 $606.8 $(500.0)Financing activities$(68.0)$106.8 $(174.8)
Three Months Ended March 31, 2022, Compared to the Three Months Ended March 31, 2021
Cash flows from operating activities increased $31.0 million driven by a $35.3 million increase in current deferred revenue mainly due to advance sales associated with the 148th Kentucky Oaks and Derby tickets and sponsorships, an $18.6 million increase in distributions from unconsolidated affiliates, and a $0.7 million increase in operating income. Partially offsetting these increases was a $23.6 million decrease from all other operating activities. We anticipate that cash flows from operations over the next twelve months will be adequate to fund our business operations and capital expenditures.
Cash used in investing activities increased $50.5 million driven by a $37.9 million increase in capital project expenditures at Churchill Downs Racetrack and Turfway Park, a $5.3 million increase in capital maintenance expenditures and a $7.3 million increase from all other investing activities.
Cash provided by financing activities decreased $174.8 million primarily driven by a $356.9 million decrease in net borrowings from long-term debt. Partially offsetting this decrease was a $169.6 million increase in common stock repurchases and a $12.5 million decrease from all other financing activities.
Capital Expenditures
Included in cash flows from investing activities are capital maintenance expenditures and capital project expenditures. Capital maintenance expenditures relate to the replacement of existing fixed assets with a useful life greater than one year that are obsolete, exhausted, or no longer cost effective to repair. Capital project expenditures represent fixed asset additions related to land or building improvements to new or existing assets or purchases of new (non-replacement) equipment or software related to specific projects deemed necessary expenditures.
Three Months EndedWe have announced several project capital investments during the past year, including the following: Churchill Downs Racetrack Homestretch Club and the Turn I Experience, Derby City Gaming Expansion and Hotel, Derby City Gaming Downtown, Turfway Park HRM Facility and Grandstand, the Queen of Terre Haute Casino Resort, and Louisiana HRMs. We currently estimate that we will spend between $300 million and $350 million for project capital in 2022, although this amount may vary significantly based on the timing of work completed, unanticipated delays, and timing of payments to third parties.
Common Stock Repurchase Program
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 the 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 have approximately $420.6 million of repurchase authority remaining under the 2021 Stock Repurchase Program at March 31, 2021, Compared to the Three Months Ended March 31, 2020
Cash flows from operating activities decreased $63.3 million driven by a $124.0 million decrease from the payment of the Kater and Thimmegowda litigation settlements and a $32.4 million decrease in deferred revenue related to advance ticket and sponsorship for the 2021 Kentucky Derby and Oaks. Partially offsetting these decreases were a $58.3 million increase in operating income, a $20.7 million increase in distributions from unconsolidated affiliates, and a $14.1 million increase from all other operating activities.
Cash used in investing activities decreased $36.0 million driven by a $31.7 million decrease in capital project expenditures due to reduced capital project spending in the current year quarter compared to prior year and a $4.3 million decrease in capital maintenance expenditures.
Cash provided by financing activities decreased $500.0 million primarily driven by a $332.3 million decrease in net borrowings from long-term debt, a $165.5 million increase in common stock repurchases, and a $2.2 million decrease from all other financing activities.2022, based on trade date.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
33


Credit Facilities and Indebtedness
The following table presents our debt outstanding:
(in millions)(in millions)March 31, 2021December 31, 2020Change(in millions)March 31, 2022December 31, 2021Change
Term Loan B due 2024Term Loan B due 2024$387.0 $388.0 $(1.0)Term Loan B due 2024$383.0 $384.0 $(1.0)
Term Loan B-1 due 2028Term Loan B-1 due 2028300.0 — 300.0 Term Loan B-1 due 2028297.0 297.8 (0.8)
RevolverRevolver— 149.7 (149.7)Revolver— — — 
2027 Senior Notes2027 Senior Notes600.0 600.0 — 2027 Senior Notes600.0 600.0 — 
2028 Senior Notes2028 Senior Notes700.0 500.0 200.0 2028 Senior Notes700.0 700.0 — 
Total debtTotal debt1,987.0 1,637.7 349.3 Total debt1,980.0 1,981.8 (1.8)
Current maturities of long-term debtCurrent maturities of long-term debt7.0 4.0 3.0 Current maturities of long-term debt7.0 7.0 — 
Total debt, net of current maturitiesTotal debt, net of current maturities1,980.0 1,633.7 346.3 Total debt, net of current maturities1,973.0 1,974.8 (1.8)
Issuance costs, net of premiums and discountsIssuance costs, net of premiums and discounts(15.7)(15.4)(0.3)Issuance costs, net of premiums and discounts(13.1)(13.8)0.7 
Total debt, net of current maturities$1,964.3 $1,618.3 $346.0 
Net debtNet debt$1,959.9 $1,961.0 $(1.1)
Credit Agreement
On December 27, 2017, we entered into a senior secured credit agreement (as amended, the Credit Agreement (as defined below)"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" and together with the Revolver, the "Credit Agreement"). 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 AmendmentAgreement is securedcollateralized 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, which (i) providesprovided for a financial covenant relief period through the date on which the Company deliversdelivered the Company's quarterly financial statements and compliance certificate for the fiscal quarter endingended June 30, 2021, subject to certain exceptions (the “Financial"Financial Covenant Relief Period”Period"), (ii) amendsamended the definition of “Consolidated EBITDA”"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) extendsextended certain deadlines and makes certain other amendments to the Company’s financial reporting obligations, (iv) placesplaced certain restrictions on restricted payments during the Financial Covenant Relief Period, and (v) amendsamended the definitions of “Material"Material Adverse Effect”Effect" and “License Revocation”"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 7,8, Shareholders' Equity, of the Notes to the Condensed Consolidated Financial Statements 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 $300.00$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 2200 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 $3.4$3.5 million of debt issuance costs associated with the Joinder which are being amortized as interest expense over the 7 year7-year term of the Term Loan B-1.
On April 13, 2022, the Company entered into the Credit Agreement Amendment to extend the maturity date of our existing revolving credit facility to 2027 and to increase the commitments under the existing revolving credit facility from $700 million to $1,200 million. The Credit Agreement Amendment also provides for the Delayed Draw Term Loan A credit facility due 2027 in the amount of $800 million. The interest rate applicable to borrowings on the Revolver and Delayed Draw Term Loan A will be SOFR-based plus a spread, determined by the Company’s and the guarantors’ leverage ratio.
The interest rate on the Revolver on March 31, 20212022 was LIBOR plus 2138 basis points based on the Revolver pricing grid in the Second Amendment and the Company's net leverage ratio as of March 31, 2021.2022. The Term Loan B and Term Loan B-1 bear interest at LIBOR plus 2200 basis points.
The Credit Agreement contains certain customary affirmative and negative covenants, which include limitations on liens, investments, indebtedness, dispositions, mergers and acquisitions, the making of restricted payments, changes in the nature of
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
34


business, changes in fiscal year, and transactions with affiliates. The Credit Agreement also contains financial covenants providing for the maintenance of a maximum consolidated secured net leverage ratio and maintenance of a minimum consolidated interest coverage ratio.
Although the Company was not required to meet the Company’s financial covenants under the Credit Agreement on March 31, 2021 (as a result of the Second Amendment), the
ActualRequirement
Interest coverage ratio6.92 to 1.0> 2.5 to 1.0
Consolidated total secured net leverage ratio0.52 to 1.0< 4.0 to 1.0
The Company was compliant with all applicable covenants on March 31, 2021.2022.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
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The Term Loan B requires quarterly payments of 0.25% of the original $400.0 million balance, or $1.0 million per quarter. The Term Loan B may be subject to additional mandatory prepayment from excess cash flow on an annual basis per the provisions of the 2017 Credit Agreement. The Company is required to pay a commitment fee on the unused portion of the Revolver determined by a pricing grid based on the consolidated total net leverage ratio of the Company. For the period ended March 31, 2022, the Company's commitment fee rate was 0.20%.
2027 Senior Notes
On March 25, 2019, we completed an offering of $600.0 million in aggregate principal amount of 5.50% Senior Unsecured Notes that mature on April 1, 2027 (the "2027 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The 2027 Senior Notes were issued at par, with interest payable on April 1st and October 1st of each year, commencing on October 1, 2019. The Company used the net proceeds from the offering to repay our outstanding balance on the Revolver portion of our Credit Agreement. In connection with the offering, we capitalized $8.9 million of debt issuance costs which are being amortized as interest expense over the term of the 2027 Senior Notes.
The 2027 Senior Notes were issued pursuant to an indenture, dated March 25, 2019 (the "2027 Indenture"), among the Company, certain subsidiaries of the Company as guarantors (the "2027 Guarantors"), and U.S. Bank National Association, as trustee. The Company may redeem some or all of the 2027 Senior Notes at any time prior to April 1, 2022, at a price equal to 100% of the principal amount of the 2027 Senior Notes redeemed plus an applicable make-whole premium. On or after such date, the Company may redeem some or all of the 2027 Senior Notes at redemption prices set forth in the 2027 Indenture. In addition, at any time prior to April 1, 2022, the Company may redeem up to 40% of the aggregate principal amount of the 2027 Senior Notes at a redemption price equal to 105.50% of the principal amount thereof with the net cash proceeds of one or more equity offerings provided that certain conditions are met. The terms of the 2027 Indenture, among other things, limit the ability of the Company to: (i) incur additional debt and issue preferred stock; (ii) pay dividends or make other restricted payments; (iii) make certain investments; (iv) create liens; (v) allow restrictions on the ability of certain of our subsidiaries to pay dividends or make other payments; (vi) sell assets; (vii) merge or consolidate with other entities; and (viii) enter into transactions with affiliates.
In connection with the issuance of the 2027 Senior Notes, the Company and the 2027 Guarantors entered into a Registration Rights Agreement to register any 2027 Senior Notes under the Securities Act for resale that are not freely tradable 366 days from March 25, 2019.
2028 Senior Notes
On December 27, 2017, we completed an offering of $500.0 million in aggregate principal amount of 4.75% Senior Unsecured Notes that mature on January 15, 2028 (the "2028"Existing 2028 Senior 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 Existing 2028 Senior Notes were issued at par, with interest payable on January 15th and July 15th of each year, commencing on July 15, 2018. The Company used the net proceeds from the offering to repay a portion of our $600.0 million 5.375% Senior Unsecured Notes. In connection with the offering, we capitalized $7.7 million of debt issuance costs which are being amortized as interest expense over the term of the Existing 2028 Senior Notes.
The Existing 2028 Senior Notes were issued pursuant to an indenture, dated December 27, 2017 (the "2028 Indenture"), among the Company, certain subsidiaries of the Company as guarantors (the "2028 Guarantors"), and U.S. Bank National Association, as trustee. The Company may redeem some or all of the Existing 2028 Senior Notes at any time prior to January 15, 2023, at a price equal to 100% of the principal amount of the 2028 Senior Notes redeemed plus an applicable make-whole premium. On or after such date the Company may redeem some or all of the 2028 Senior Notes at redemption prices set forth in the 2028 Indenture. In addition, at any time prior to January 15, 2021, the Company may redeem up to 40% of the aggregate principal amount of the 2028 Senior Notes at a redemption price equal to 104.75% of the principal amount thereof with the net cash proceeds of one or more equity offerings provided that certain conditions are met. The terms of the 2028 Indenture, among other things, limit the ability of the Company to: (i) incur additional debt and issue preferred stock; (ii) pay dividends or make other restricted payments; (iii) make certain investments; (iv) create liens; (v) allow restrictions on the ability of certain of our subsidiaries to pay dividends or make other payments; (vi) sell assets; (vii) merge or consolidate with other entities; and (viii) enter into transactions with affiliates.
In connection with the issuance of the 2028 Senior 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 December 27, 2017.
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 million aggregate principal amount of 4.75% Senior Unsecured Notes due 2028 ("Existing 2028 Notes")Senior Notes and form a part of the same series for purposes of the indenture. In connection with the offering, we
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
35


capitalized $3.3$3.4 million of debt issuance costs which are being amortized as interest expense over the term of the Additional 2028 Notes. Upon completion of this offering, the aggregate principal amount of
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
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outstanding of the Existing 2028 Notes, together with the Additional 2028 Notes (collectively the "2028 Senior Notes") is $700 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 prior to January 15, 2023, at a price equal to 100% of the principal amount of the 2028 Senior Notes redeemed plus an applicable make-whole premium. On or after such date, the Company may redeem some or all of the Additional 2028 Notes at redemption pricesas 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.
Contractual Obligations
Our commitments to make future payments as of March 31, 2021,2022, are estimated as follows:
(in millions) (in millions)April 1 to December 31, 20212022-20232024-2025ThereafterTotal (in millions)20222023-20242025-2026ThereafterTotal
Term Loan BTerm Loan B$3.0 $8.0 $376.0 $— $387.0 Term Loan B$3.0 $380.0 $— $— $383.0 
Interest on Term Loan B(1)
Interest on Term Loan B(1)
6.2 16.4 8.0 — 30.6 
Interest on Term Loan B(1)
6.1 15.9 — — 22.0 
Term Loan B-1Term Loan B-12.2 6.0 6.0 285.8 300.0 Term Loan B-12.3 6.0 6.0 282.7 297.0 
Interest on Term Loan B-1(1)
Interest on Term Loan B-1(1)
5.1 12.7 12.5 13.4 43.7 
Interest on Term Loan B-1(1)
4.8 12.6 12.3 7.3 37.0 
2027 Senior Notes2027 Senior Notes— — — 600.0 600.0 2027 Senior Notes— — — 600.0 600.0 
2028 Senior Notes2028 Senior Notes— — — 700.0 700.0 2028 Senior Notes— — — 700.0 700.0 
Interest on 2027 Senior NotesInterest on 2027 Senior Notes33.0 66.0 66.0 49.5 214.5 Interest on 2027 Senior Notes33.0 66.0 66.0 16.5 181.5 
Interest on 2028 Senior NotesInterest on 2028 Senior Notes16.6 66.5 66.5 83.1 232.7 Interest on 2028 Senior Notes16.6 66.5 66.5 49.9 199.5 
Operating leases4.5 9.2 8.0 5.7 27.4 
Operating and Finance LeasesOperating and Finance Leases5.3 12.9 11.6 16.0 45.8 
Minimum Guarantees(2)
Minimum Guarantees(2)
4.0 19.0 19.0 13.2 55.2 
Minimum Guarantees(2)
5.1 4.6 3.6 4.7 18.0 
TotalTotal$74.6 $203.8 $562.0 $1,750.7 $2,591.1 Total$76.2 $564.5 $166.0 $1,677.1 $2,483.8 
(1) Interest includes the estimated contractual payments under our Credit Agreement assuming no change in the weighted average borrowing rate of 2.12%2.21% which was the rate in place as of March 31, 2021.2022.
(2) Includes the maximum estimated exposure where we are contractually obligated to make future minimum payments.
As of March 31, 2021,2022, we had approximately $4.6$3.9 million of tax liabilities related to unrecognized tax benefits.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks arising from adverse changes in:
general economic trends; and
interest rate and credit risk.
General economic trends
Our business is sensitive to consumer confidence and reductions in consumers' discretionary spending, which may result from challenging economic conditions, inflation, unemployment levels and other changes in the economy, including the impact of the COVID-19 global pandemic. The pandemic has resulted in and is expected to continue to result in significant disruptions in economic activity and financial markets.economy. Demand for entertainment and leisure activities is sensitive to consumers'consumers’ disposable
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
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incomes, which can be adversely affected by economic conditions and unemployment levels. This could result in fewer patrons visiting our racetracks, gaming and wagering facilities, and our online wagering sites and / and/or may impact our customers’ ability to wager with the same frequency and to maintain wagering levels.
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Interest rate and credit risk
Our primary exposure to market risk relates to changes in interest rates. AtOn March 31, 2021,2022, we had $687.0$680.0 million outstanding under our Credit Agreement related to Term Loans B/B-1, which bearsbear interest at LIBOR based variable rates. We are exposed to market risk on variable rate debt due to potential adverse changes in these rates. Assuming the outstanding balance of the debt facility remains constant, a one-percentage point increase in our variablethe LIBOR rate would reduce net income and cash flows from operating activities by $4.8$4.9 million. LIBOR is anticipated to be phased out by the end of 2023. The Credit Agreement Amendment establishes SOFR as an alternative rate (other than for the Term Loans B/B1, for which a general process for establishing an alternative reference rate is provided). The impact of the use of alternative reference rates is not expected to have a material impact on our exposure to interest rate risk at this time.
ITEM 4.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports that we file under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
As required by the Securities and Exchange Commission Rule 13a-15(e), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021.2022. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20212022
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PART II.    OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following descriptions include updates since the filing of our Annual Report on Form 10-K for the year ended December 31, 2020,2021, relating to the proceedings involving the Company. In addition to the matters described below, we are also involved in ordinary routine litigation matters which are incidental to our business. Refer to Note 14,15, Contingencies, to our condensed consolidated financial statements, for further information.
Kater Class Action Suit
On April 17, 2015, the Cheryl Kater v. Churchill Downs Incorporated class action lawsuit (the "Kater Litigation") was filed in the United District Court for the Western District of Washington (the "Washington District Court") alleging, among other claims, that the Company’s "Big Fish Casino" operated by the Company’s then-wholly owned mobile gaming subsidiary Big Fish Games, Inc. ("Big Fish Games") violated Washington law, including the Washington Consumer Protection Act, by facilitating unlawful gambling through virtual casino games (namely the slots, blackjack, poker, and roulette games offered through Big Fish Casino), and seeking, among other things, return of monies lost, reasonable attorney’s fees, treble damages, and injunctive relief. On January 9, 2018, the Company sold Big Fish Games to Aristocrat Technologies, Inc. ("Aristocrat"), an indirect, wholly owned subsidiary of Aristocrat Leisure Limited, an Australian corporation, pursuant to the Stock Purchase Agreement, dated as of November 29, 2017, by and among the Company, Big Fish Games and Aristocrat (the "Stock Purchase Agreement"). Pursuant to the terms of the Stock Purchase Agreement, the Company agreed to indemnify Aristocrat for the losses and expenses associated with the Kater Litigation for Big Fish Games, which is referred to in the Stock Purchase Agreement as the "Primary Specified Litigation."
After the Washington District Court dismissed the case with prejudice on November 19, 2015, the U.S. Court of Appeals for the Ninth Circuit reversed and remanded the Washington District Court’s dismissal of the complaint on March 28, 2018. The complaint was amended on March 20, 2019, to add Big Fish Games as a party and to assert claims on behalf of an additional plaintiff, Suzie Kelly.
On May 22, 2020, the parties entered into an agreement in principle to settle the Kater litigation and the Thimmegowda litigation (as defined below). Under the terms of the settlement, which has been approved by the court: (i) a total of $155.0 million was paid into a settlement fund. The Company paid $124.0 million of the settlement; Aristocrat paid $31.0 million of the settlement; (ii) all members of the nationwide settlement class who do not exclude themselves will release all claims relating to the subject matter of the lawsuits; and (iii) Aristocrat has agreed to specifically release the Company of any and all indemnification obligations under the Stock Purchase Agreement arising from or related to the Kater Litigation and Thimmegowda Litigation, including any claims of diminution of value of Big Fish Games and any claims by any person who opts out of the proposed class settlement.
On August 31, 2020, the Washington District Court granted the parties' motion for preliminary approval. On December 14, 2020, plaintiffs filed a motion for final approval of class action settlement agreement. The Washington District Court entered an order granting final approval of class action settlement on February 11, 2021. The Company’s settlement contribution was made on March 25, 2021.
Thimmegowda Class Action Suit
On February 11, 2019, the Manasa Thimmegowda v. Big Fish Games, Inc. class action lawsuit (the "Thimmegowda Litigation") was filed in the Washington District Court alleging, among other claims, that “Big Fish Casino,” which is operated by Big Fish Games, violated Washington law, including the Washington Consumer Protection Act, and seeking, among other things, return of monies lost, reasonable attorney’s fees, injunctive relief, and treble and punitive damages.
On May 22, 2020, the parties entered into an agreement in principle to settle the Kater and Thimmegowda Litigations. The agreement in principle with respect to the Thimmegowda Litigation is described above, under the "Kater Class Action Suit." On August 31, 2020, the Washington District Court granted the parties' motion for preliminary approval. On December 14, 2020, plaintiffs filed a motion for final approval of class action settlement agreement. The Washington District Court entered an order granting final approval of class action settlement on February 11, 2021. The Company’s settlement contribution was made on March 25, 2021.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021
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The Kentucky Horse Racing Commission, et al. v. The Family Trust Foundation of Kentucky, Inc.
In 2010, all Kentucky racetracks and the Kentucky Horse Racing Commission (the "KHRC" and together with the Kentucky racetracks, the "Joint Petitioners") sought a declaration from the Franklin Circuit Court (the "Court") that: (i) the KHRC’s historical racing regulations are valid under Kentucky law, and (ii) operating historical racing machines ("HRMs") pursuant to a license issued by KHRC would not run afoul of any criminal gaming statutes. The Family Trust Foundation of Kentucky, Inc. (the "Family Foundation") intervened, and the Court subsequently granted summary judgment to the Joint Petitioners holding that the KHRC's historical racing regulations are valid under Kentucky law. Following an appeal to the Kentucky Court of Appeals, in February 2014 the Supreme Court of Kentucky affirmed the Court’s decision that the regulations are valid under Kentucky law, but remanded the case to the Court to determine whether operation of HRMs that were licensed during the pendency of the litigation constitute pari-mutuel wagering. The Court held a trial during the week of January 8, 2018 to determine whether the games from one of the HRM manufacturers (Encore/Exacta) are pari-mutuel, and the Court set a post-trial briefing schedule for the parties. The Court ordered, on August 24, 2017, that this pending litigation directly involves only the HRMs presently in use and any future HRMs proposed by the Company would not be included in the pending case. On October 24, 2018, the Court ruled that the HRMs in question (Encore/Exacta) are a pari-mutuel system of wagering legally permitted under Kentucky law. In November 2018, the Family Foundation filed a notice of appeal and subsequently filed a motion to transfer the appeal directly to the Kentucky Supreme Court, which was granted in June 2019. On September 24, 2020, the Kentucky Supreme Court issued an opinion reversing the Court’s opinion. On November 9, 2020, the KHRC and certain other defendants filed petitions for rehearing which was rejected by the Court.
On February 22, 2021, the Governor of the Commonwealth of Kentucky signed into law Senate Bill 120 which creates a statutory definition of pari-mutuel wagering that includes historical horse racing approved by the KHRC and addresses the Supreme Court of Kentucky's opinion. On remand, the Court entered final judgment on March 17, 2021, holding that the Exacta system is not a form of pari-mutuel wagering under the laws that were in effect at the time of the Kentucky Supreme Court’s September 24, 2020, opinion. The Court also held that (i) the final judgment would not be applied retroactively because the associations were authorized and permitted to operate the Exacta system by the KHRC, and (ii) any prospective application of the final judgment would be subject to Senate Bill 120. On April 7, 2021, the Court denied various motions challenging the final judgment, including motions to intervene and a motion to alter, amend, or vacate filed by the Family Foundation. The Court reaffirmed its interpretation that the final judgment would not be applied retroactively and also refused to extend the final judgment to apply to games other than the Exacta system. On April 16, 2021, the Family Foundation filed a notice of appeal of the final judgment. The Company does not use the Exacta system in any of its historical racing machine facilities in Kentucky and does not believe that any further rulings in this case will impact its ability to operate HRM facilities in Kentucky.
Lassiter v. Kentucky Downs, LLC, et al.
On December 18, 2020, Robert and Patricia Lassiter filed a complaint against Kentucky Downs, LLC, Keeneland Association, Inc., Turfway Park, LLC, Players Bluegrass Downs, LLC, Appalachian Racing, LLC, Ellis Park Race Course, Inc., The Lexington Trots Breeders Association, Inc., and Churchill Downs Incorporated (“Defendants”). Plaintiffs allege that Defendants’ HRMs constitute illegal gambling and assert that they can recover for their losses and the losses of all patrons at those facilities with HRMs over a five-year period under Kentucky Revised Statutes 372.010. The Company filed a motion to dismiss on March 31, 2021. On August 30, 2021, plaintiffs filed a Chapter 13 Bankruptcy Petition with the Western District of Kentucky, and filed a notice of automatic stay in the matter pending against the Company. The Company’s motion to dismiss was remanded because of the automatic stay, which has ended. On February 9, 2022, the Company filed a motion for oral argument on the motions to dismiss. The court granted that motion and oral argument is scheduled for May 11, 2022. The Company intends to defend this matter vigorously and believes that there are meritorious legal and factual defenses against the plaintiffs' allegations and requests for relief.
Louisiana Horsemen's Purses Class Action Suit
On April 21, 2014, John L. Soileau and other individuals filed a Petition for Declaratory Judgment, Permanent Injunction, and Damages-Class Action styled John L. Soileau, et. al. versus Churchill Downs Louisiana Horseracing, LLC, Churchill Downs Louisiana Video Poker Company, LLC (Suit No. 14-3873) in the Parish of Orleans Civil District Court, State of Louisiana (the "District Court"). The petition defined the "alleged plaintiff class" as quarter horse owners, trainers and jockeys that have won purses at the "Fair Grounds Race Course & Slots" facility in New Orleans, Louisiana ("Fair Grounds") since the first effective date of La. R.S. 27:438 and specifically since 2008. The petition alleged that Churchill Downs Louisiana Horseracing, LLC and Churchill Downs Louisiana Video Poker Company, LLC ("Fair Grounds Defendants") have collected certain monies through video draw poker devices that constitute monies earned for purse supplements and all of those supplemental purse monies have been paid to thoroughbred horsemen during Fair Grounds’ live thoroughbred horse meets. La. R.S. 27:438 requires a portion of those supplemental purse monies to be paid to quarter-horse horsemen during Fair Grounds’ live quarter-horse meets. The petition requested that the District Court declare that Fair Grounds Defendants violated La. R.S. 27:438, issue a permanent and mandatory injunction ordering Fair Grounds Defendants to pay all future supplements due to the plaintiff class pursuant to La. R.S. 27:438, and to pay the plaintiff class such sums as it finds to reasonably represent the value of the sums due to the plaintiff class. On August 14, 2014, the plaintiffs filed an amendment to their petition naming the Horsemen’s Benevolent and
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Protective Association 1993, Inc. ("HBPA") as an additional defendant and alleging that HBPA is also liable to plaintiffs for the disputed purse funds. On October 9, 2014, HBPA and Fair Grounds Defendants filed exceptions to the suit, including an exception of primary jurisdiction seeking referral to the Louisiana Racing Commission. By Judgment dated November 21, 2014, the District Court granted the exception of primary jurisdiction and referred the matter to the Louisiana Racing Commission. On January 26, 2015, theThe Louisiana Fourth Circuit Court of Appeals denied the plaintiffs’ request for supervisory review of the Judgment. On August 24, 2015,reversed the Louisiana Racing Commission ruledCommission's previous ruling that the plaintiffs did not have standing or a right of action to pursue the case. The plaintiffs appealed this decision to the District Court, which affirmed the Louisiana Racing Commission’s ruling. The plaintiffs filed an appeal of the District Court’s decision with the Louisiana Fourth Circuit Court of Appeals, which reversed the Louisiana Racing Commission’s ruling and remanded the matter to the Louisiana Racing Commission for further proceedings on June 13, 2018. The Louisiana Fourth Circuit Court of Appeals denied the Fair Grounds Defendants’ Motion for Rehearing on July 12, 2018 and the Louisiana Supreme Court denied the Fair Grounds Defendants’ Writ of Certiorari seeking review of that decision on November 14, 2018.
The parties had previously attempted to mediate the matter in October 2018 but were unsuccessful. Thereafter, the parties resumed informal settlement discussions, and, as a result, the Company established an accrual for an immaterial amount in the third quarter of 2019. The parties submitted a settlement agreement to the District Court on February 14, 2020, following the Louisiana Racing Commission’s approval to transfer the matter to the District Court for approval and administration of the settlement agreement on February 12, 2020. At a hearing on February 18, 2020, the District Court granted preliminary approval of the settlement agreement and set certain deadlines relating to actions to be taken by class members. The settlement agreement requires, among other items, the Fair Grounds Defendants to (i) pay a certain out-of-pocket amount that is within the amount for which we established an accrual in the third quarter of 2019, and (ii) support legislation that allocates a specified amount of video poker purse funds to quarter horse purses for races at Fair Grounds with maximum annual payout caps that are not deemed material. On June 13, 2020, the legislation addressed in the settlement agreement was passed by the legislature and signed into law by the Governor of Louisiana. The settlement includes a release of claims against the Fair Grounds Defendants in connection with the proceeding, although individual plaintiffs may opt-out. If there are opt-out claims in excess of $50,000, the settlement will be voided, unless the parties agree to stipulate otherwise. The settlement agreement is subject to certain conditions, including court approval. After the parties entered into the settlement, legal counsel for six objecting plaintiffs filed an amended petition with the District Court. After a hearing on July 20, 2020, the District Court dismissed the amended petition. The objecting plaintiffs filed a notice of their intention to seek a writ with the Louisiana Court of Appeals for the Fourth Circuit related to the dismissal of the amended petition, which was denied. The fairness hearing with the District Court relating to the terms of the settlement agreement occurred on October 7, 2020, and November 17, 2020, and the parties have submitted post-trial briefing and proposed final judgments. Objecting plaintiffs have filed a notice of appeal of the February 2020 Order appointing class counsel and certifying a class for settlement purposes. On January 28, 2021, the District Court issued a Final Order and Judgement approving the settlement. The objectors filed a notice of appeal of the January 28, 2021 Final Order and Judgment. That appeal has been consolidated with the earlier-filed appeal of the February 2020 orderOrder appointing class counsel and certifying a class for settlement purposes. On December 22, 2021, the Fourth Circuit Court of Appeal entered an order affirming the orders of the District Court and approving the settlement. On January 7, 2022, the Fourth Circuit Court of Appeal denied the objectors’ motion for remand and application for rehearing. On February 6, 2022, the objectors filed a writ of certiorari with the Louisiana Supreme Court, which was denied on April 12, 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
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Bob Baffert and Bob Baffert Racing Stables, Inc. v. Churchill Downs Incorporated, Bill Carstanjen and Alex Rankin
On February 28, 2022, plaintiffs Bob Baffert and Bob Baffert Racing Stables, Inc. filed a complaint and motion for preliminary injunction against Churchill Downs Incorporated, its Chief Executive Officer Bill Carstanjen, and its Chairman of the Board of Directors Alex Rankin in the U.S. District Court for the Western District of Kentucky, arising out of the Company’s decision to suspend Mr. Baffert from entering horses trained by him at any Company-owned racetrack for a period of two years. The Company’s two-year suspension of Mr. Baffert came after Baffert-trained horse, Medina Spirit, finished first in the 147th running of the Kentucky Derby but subsequently tested positive for betamethasone, a banned race-day substance. Plaintiffs allege that the Company’s decisions to suspend Mr. Baffert from racing at any Company-owned racetrack and to prohibit horses trained by him (or any other suspended trainer) from accumulating Derby-qualifying points were unlawful. Plaintiffs assert claims for (i) violation of the due process clause, (ii) unlawful exclusion, (iii) violations of the federal antitrust laws, (iv) tortious interference with contract, and (v) tortious interference with prospective business advantage.
In addition to and separate from the Company’s suspension of Mr. Baffert, on February 21, 2022, the Kentucky Horse Racing Commission (“KHRC”) Board of Stewards suspended Mr. Baffert from racing in Kentucky for 90 days and issued a fine to him. The KHRC rejected Mr. Baffert’s requests to stay the suspension. Mr. Baffert unsuccessfully sought judicial intervention relieving him from the KHRC suspension. On March 21, 2022, the Franklin County Circuit Court concluded Mr. Baffert was not entitled to a stay of the KHRC suspension and that he had not satisfied a single element required for a temporary injunction of the KHRC suspension. This decision was affirmed by the Kentucky Court of Appeals on April 1, 2022 in an order denying Mr. Baffert’s motion for emergency relief. After the Kentucky Court of Appeals allowed the KHRC’s 90-day suspension of Mr. Baffert to stand, plaintiffs voluntarily withdrew their motion for preliminary injunction against the Company without prejudice.
The Company, Mr. Carstanjen, and Mr. Rankin intend to defend this matter vigorously and believe that there are meritorious legal and factual defenses against plaintiffs' allegations and requests for relief.
ITEM 1A.    RISK FACTORS
There have been no material changes with respect to our risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.

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2021.


ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Common Stock
The following table provides information with respect to shares of common stock that we repurchased during the quarter ended March 31, 2021:2022:
PeriodTotal Number of Shares PurchasedAverage Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions) (1)
01/01/21-01/31/212,442 

$211.90 — $147.1 
02/01/21-02/28/211,056,319 

194.96 — 147.1 
03/01/21-03/31/21176 

236.89 — 147.1 
Total1,058,937 $195.01 — 
PeriodTotal Number of Shares PurchasedAverage Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions) (1)
January 2022— 

$— — $445.6 
February 202258,600 

223.98 — 445.6 
March 2022116,975 

213.91 116,863 420.6 
Total175,575 $217.27 116,863 
(1)On October 30, 2018,September 29, 2021, the Board of Directors of the Company approved a common stock repurchase program of up to $300.0$500.0 million. The 2021 stock repurchase program includes and is not in addition to the unspent amount remaining under the prior 2018 stock purchase program authorization. The repurchase program has no time limit and may be suspended or discontinued at any time.
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5.    OTHER INFORMATION
None.
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ITEM 6.    EXHIBITS
NumberDescription
By Reference To2.1
Purchase Agreement, dated as of February 18, 2022 by and between Peninsula Pacific Entertainment Intermediate Holdings LLC and Churchill Downs IncorporatedExhibit 2.1 to Current Report on Form 8-K filed February 22, 2022
Second Supplemental Indenture, dated as of March 17, 2021, among Churchill Downs Incorporated, the Guarantors party thereto,April 13, 2022, by and between CDI Escrow Issuer, Inc. and U.S. Bank National Association as trustee.trusteeExhibit 4.1 to Current Report on Form 8-K filed March 18, 2021April 14, 2022
Registration Rights Agreement, dated March 17, 2021,April 13, 2022, by and among Churchill Downs Incorporated, the Guarantorsbetween CDI Escrow Issuer, Inc. and the representativesJ.P. Morgan Securities LLC, as representative of the initial purchasers.purchasersExhibit 4.2 to Current Report on Form 8-K filed March 18, 2021April 14, 2022
Incremental Joinder Agreement No. 1 amongMemorandum of Understanding By and Between Austin W. Miller and Churchill Downs Incorporated the credit parties party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as agent, dated March 17, 2021.Exhibit 10.1 to Current Report on Form 8-K filed March 18, 2021
Stock Repurchase Agreement, dated February 1, 2021, between Churchill Downs Incorporated and CDI Holdings, LLC10, 2022Exhibit 10.1 to Current Report on Form 8-K filed February 2, 2021
Third Amendment to Credit Agreement, dated February 1, 2021, among Churchill Downs Incorporated, the subsidiary guarantors and the lenders parties thereto, and JPMorgan Chase Bank, N.A.Exhibit 10.2 to Current Report on Form 8-K filed February 2, 202110, 2022
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Rule 13a – 14(b))**
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded as Inline XBRL and contained in Exhibit 101)
*filed herewith
**furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CHURCHILL DOWNS INCORPORATED
April 21, 202127, 2022/s/ William C. Carstanjen
William C. Carstanjen
Chief Executive Officer
(Principal Executive Officer)
April 21, 202127, 2022/s/ Marcia A. Dall
Marcia A. Dall
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
 
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