Item 9A. Controls and Procedures
ITEM 9A. 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 filed or submitted 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 December 31, 2020. 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.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting of Churchill Downs Incorporated, as defined in Rules 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of Churchill Downs Incorporated's internal control over financial reporting based upon the framework in the Integrated Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon our evaluation under the framework in the Internal Control-Integrated Framework (2013) management has concluded that Churchill Downs Incorporated's internal control over financial reporting was effective as of December 31, 2020.
/s/ William C. Carstanjen /s/ Marcia A. Dall /s/ Chad E. Dobson
William C. Carstanjen Marcia A. Dall Chad E. Dobson
Chief Executive Officer Executive Vice President and Vice President and
February 24, 2021 Chief Financial Officer Chief Accounting Officer
February 24, 2021 February 24, 2021
The effectiveness of the Company's internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information with respect to our directors and audit committee is incorporated by reference to the definitive proxy statement on Schedule 14A to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020.
101
We have adopted a Code of Conduct that applies to all directors, employees, and officers, including our Chief Executive Officer, Chief Financial Officer and principal financial officers. This Code of Conduct is available on our corporate website, www.churchilldownsincorporated.com , under the "Corporate Governance" subheading of the "Investors" heading and is also available to shareholders upon request.
Information about our Executive Officers
Name Age as of 2/24/2021 Principal Occupation for the Past Five Years
and Position with Churchill Downs Incorporated
William C. Carstanjen 53 Chief Executive Officer since August 2014; President and Chief Operating Officer from March 2011 to August 2014.
William E. Mudd 49 President and Chief Operating Officer since October 2015; President and Chief Financial Officer from August 2014 to October 2015; Executive Vice President and Chief Financial Officer from October 2007 to August 2014.
Marcia A. Dall 57 Executive Vice President and Chief Financial Officer since October 2015; Executive Vice President and Chief Financial Officer of Erie Insurance Group and Erie Indemnity Company, a public corporation (Nasdaq: ERIE), from March 2009 through October 2015.
Austin W. Miller 57 Senior Vice President of Gaming Operations since August 2013.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item with respect to executive compensation is incorporated by reference to the definitive proxy statement on Schedule 14(a) to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020; provided, that the Compensation Committee Report will not be deemed to be "filed" with this Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The information required by this item with respect to security ownership of certain beneficial owners and management and related shareholder matters is with respect to securities authorized for issuance under equity compensation plans incorporated by reference to the definitive proxy statement on Schedule 14A to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item with respect to transactions with related persons and director independence matters is incorporated by reference to the definitive proxy statement on Schedule 14A to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item with respect to principal accounting fees and services is incorporated by reference to the definitive proxy statement on Schedule 14A to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE
Pages
(a) (1) Consolidated Financial Statements
The following financial statements of Churchill Downs Incorporated for the years ended 2020, 2019 and 2018 are included in Part II, Item 8:
Consolidated Balance Sheets
53
Consolidated Statements of Comprehensive (Loss) Income
52
Consolidated Statements of Shareholders’ Equity
54
Consolidated Statements of Cash Flows
55
Notes to Consolidated Financial Statements
57
Report of Independent Registered Public Accounting Firm
99
(2) Schedule II—Valuation and Qualifying Accounts
110
All other schedules are omitted because they are not applicable, not significant or not required, or because the required information is included in the consolidated financial statements or notes thereto.
(3) For the list of required exhibits, see exhibit index. 104
(b) Exhibits 104
See exhibit index.
(c) All financial statements and schedules except those items listed under Items 15(a)(1) and (2) above are omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto.
103
EXHIBIT INDEX
Numbers Description By Reference To
3
(a)
Amended and Restated Articles of Incorporation of Churchill Downs Incorporated, as amended and restated on January 25, 2019 Exhibit 3.2 to Current Report on Form 8-K filed January 17, 2019
(b)
Amended and Restated Bylaws of Churchill Downs Incorporated, as amended July 3, 2012 Exhibit 3.2 to Current Report on Form 8-K filed July 10, 2012
4 (a)
Rights Agreement, dated as of March 19, 2008 by and between Churchill Downs Incorporated and National City Bank Exhibit 4.1 to Current Report on Form 8-K filed March 17, 2008
(b)
Indenture, dated as of December 27, 2017, by and among Churchill Downs Incorporated, the guarantors party thereto and U.S. Bank National Association Exhibit 4.1 to Current Report on Form 8-K filed December 27, 2017
(c)
Indenture, dated as of March 25, 2019, by and among Churchill Downs Incorporated, the guarantors party thereto and U.S. Bank National Association Exhibit 4.1 to Current Report on Form 8-K filed March 26, 2019
( d )
Registration Rights Agreement, dated as of December 27, 2017, by and among Churchill Downs Incorporated, the guarantors party thereto and J.P. Morgan Securities LLC Exhibit 4.2 to Current Report on Form 8-K filed December 27, 2017
(e)
Registration Rights Agreement, dated as of March 25, 2019, by and among Churchill Downs Incorporated, the guarantors party thereto and J.P. Morgan Securities, LLC Exhibit 4.2 to Current Report on Form 8-K filed March 26, 2019
(f)
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934***
10 (a) Churchill Downs Incorporated Amended and Restated Supplemental Benefit Plan effective December 1, 1998* Exhibit 10(a) to Annual Report on Form 10-K for the fiscal year ended December 31, 1998 filed March 31, 1999
(b)
Churchill Downs Incorporated Amended and Restated Deferred Compensation Plan for Employees and Directors* Exhibit 10(a) to Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2001 filed May 15, 2001
(c)
Lease Agreement, dated as of January 1, 2002, by and between the City of Louisville, Kentucky and Churchill Downs Incorporated Exhibit 2.1 to Current Report on Form 8-K filed January 6, 2003
(d)
2005 Churchill Downs Incorporated Deferred Compensation Plan* Exhibit 10.1 to Current Report on Form 8-K filed June 21, 2005
(e)
2006 Amendment to 2005 Churchill Downs Incorporated Deferred Compensation Plan* Exhibit 10.1 to Current Report on Form 8-K filed June 8, 2006
(f)
Churchill Downs Incorporated 2007 Omnibus Stock Incentive Plan* Exhibit A to Schedule 14A filed April 30, 2007
(g)
Amendment to Churchill Downs Incorporated 2005 Deferred Compensation Plan Adopted June 28, 2007* Exhibit 10(b) to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007 filed August 7, 2007
(h)
Third Amendment to the 2005 Churchill Downs Incorporated Deferred Compensation Plan* Exhibit 10.2 to Current Report on Form 8-K filed December 19, 2019
( i )
Amended and Restated Terms and Conditions of Performance Stock Awards Issued Pursuant to the Churchill Downs Incorporated 2007 Omnibus Stock Incentive Plan, dated as of December 19, 2008* Exhibit 10.1 to Current Report on Form 8-K filed December 22, 2008
( j )
First Amendment to the Churchill Downs Incorporated Amended and Restated Incentive Compensation Plan (1997), effective November 14, 2008* Exhibit 10 (vv) to Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed March 4, 2009
104
Numbers Description By Reference To
( k )
2005 Churchill Downs Incorporated Deferred Compensation Plan (As Amended as of December 1, 2008)* Exhibit 10 (ww) to Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed March 4, 2009
( l )
Churchill Downs Incorporated Executive Severance Policy (Amended Effective as of November 12, 2008)* Exhibit 10 (xx) to Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed March 4, 2009
( m )
Form of Churchill Downs Incorporated Restricted Stock Agreement pursuant to the 2007 Omnibus Stock Incentive Plan* Exhibit 10(LL) to Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed March 12, 2012
( n )
Churchill Downs Incorporated Executive Annual Incentive Plan, effective January 1, 2013* Exhibit A to Schedule 14A filed May 3, 2012
( o )
Amendment to the Churchill Downs Incorporated 2007 Omnibus Stock Incentive Plan* Exhibit B to Schedule 14A filed May 3, 2012
( p )
Form of Restricted Stock Agreement pursuant to the 2007 Omnibus Stock Incentive Plan, dated as of February 9, 2015, by and between Churchill Downs Incorporated and each of William C. Carstanjen and William E. Mudd* Exhibit 10.1 to Current Report on Form 8-K filed February 12, 2015
( q )
Form of Churchill Downs Incorporated Restricted Stock Unit Agreement pursuant to the 2007 Omnibus Stock Incentive Plan* Exhibit 10.1A to Current Report on Form 8-K filed September 28, 2015
( r )
Form of Churchill Downs Incorporated Performance Share Unit Agreement pursuant to the 2007 Omnibus Stock Incentive Plan* Exhibit 10.1B to Current Report on Form 8-K filed September 28, 2015
( s )
Stock Repurchase Agreement, dated as of June 9, 2017, by and between Churchill Downs Incorporated and CDI Holdings, LLC Exhibit 10.1 to Current Report on Form 8-K filed June 12, 2017
( t )
Amended and Restated Stockholder’s Agreement, dated as of June 9, 2017, by and between Churchill Downs Incorporated and CDI Holdings, LLC Exhibit 10.2 to Current Report on Form 8-K filed June 12, 2017
(u)
Stock Repurchase Agreement, dated February 1, 2021, between Churchill Downs Incorporated and CDI Holdings, LLC Exhibit 10.1 to Current Report on Form 8-K filed February 2, 2021
(v)
Credit Agreement, dated as of December 27, 2017, by and among Churchill Downs Incorporated, the subsidiary guarantors party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A. and PNC Bank, National Association Exhibit 4.3 to Current Report on Form 8-K filed December 27, 2017
(w)
First Amendment to Credit Agreement, dated March 16, 2020, among Churchill Downs Incorporated, the subsidiary guarantors party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., and PNC Bank, National Association Exhibit 10.1 to Current Report on Form 8-K filed March 16, 2020
(x)
Second Amendment to Credit Agreement, dated April 28, 2020, among Churchill Downs Incorporated, the subsidiary guarantors and the lenders party thereto, and JPMorgan Chase Bank, N.A., and PNC Bank, National Association Exhibit 10.1 to Current Report on Form 8-K filed April 29, 2020
(y)
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, 2021
(z)
Form of Churchill Downs Incorporated Non-Employee Director Restricted Share Units Agreement* Exhibit 10(a) to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2016 filed August 3, 2016
( aa )
Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan* Exhibit 10.1 to Current Report on Form 8-K filed April 29, 2016
105
Numbers Description By Reference To
( bb )
First Amended and Restated Churchill Downs Incorporated 2000 Employee Stock Purchase Plan* Exhibit B to Schedule 14A filed March 29, 2016
( cc )
Churchill Downs Incorporated Restricted Stock Unit Deferred Compensation Plan* Exhibit 10.1 to Current Report on Form 8-K filed December 19, 2019
( dd )
Form of Performance Share Unit Agreement pursuant to the 2016 Omnibus Stock Incentive Plan by and between Churchill Downs Incorporated and each of William C. Carstanjen and William E. Mudd*
Exhibit 10.1 to Current Report on Form 8-K filed November 5, 2018
( ee )
Form of Restricted Stock Unit Agreement pursuant to the 2016 Omnibus Stock Incentive Plan by and between Churchill Downs Incorporated and each of William C. Carstanjen and William E. Mudd*
Exhibit 10.2 to Current Report on Form 8-K filed November 5, 2018
( ff )
Executive Change in Control, Severance and Indemnity Agreement, dated as of October 30, 2018, by and between Churchill Downs Incorporated and William C. Carstanjen*
Exhibit 10.3 to Current Report on Form 8-K filed November 5, 2018
( gg)
Executive Change in Control, Severance and Indemnity Agreement, dated as of October 30, 2018, by and between Churchill Downs Incorporated and William E. Mudd*
Exhibit 10.4 to Current Report on Form 8-K filed November 5, 2018
( hh )
Change in Control, Severance, and Indemnity Agreement, dated as of October 1, 2019, by and between Churchill Downs Incorporated and Austin W. Miller* Exhibit 10.1 to Current Report on Form 8-K filed October 2, 2019
(ii)
Executive Change in Control, Severance and Indemnity Agreement, dated as of July 27, 2020, by and between Churchill Downs Incorporated and Marcia A. Dall*
Exhibit 10.1 to Current Report on Form 8-K filed July 30, 2020
( jj )
First amendment to the Churchill Downs Incorporated Restricted Stock Unit Deferral Plan, dated as of February 12, 2020*
Exhibit 10(ff) to Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed February 26, 2020
(kk)
Class Action Settlement Agreement, dated as of July 24, 2020, by and between Kater et al. and Churchill Downs Incorporated et al.**
21
Subsidiaries of the Registrant**
23
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm**
31 (a)
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**
(b)
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**
32
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 INS Inline XBRL Instance Document**
101 SCH Inline XBRL Taxonomy Extension Schema Document**
101 CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document**
106
Numbers Description By Reference To
101 DEF Inline XBRL Taxonomy Extension Definition Linkbase Document**
101 LAB Inline XBRL Taxonomy Extension Label Linkbase Document**
101 PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document**
104 Cover Page Interactive Data File (formatted in inline XBRL and contained in Exhibit 101)
* Management contract or compensatory plan or arrangement.
** Filed herewith.
*** Furnished herewith.
107
ITEM 16. FORM 10-K SUMMARY
None.
108
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on the Company's behalf by the undersigned, thereunto duly authorized.
CHURCHILL DOWNS INCORPORATED
/s/ William C. Carstanjen
William C. Carstanjen
Chief Executive Officer
(Principal Executive Officer)
February 24, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ William C. Carstanjen /s/ William E. Mudd /s/ Marcia A. Dall
William C. Carstanjen William E. Mudd Marcia A. Dall
Chief Executive Officer President and Executive Vice President and
February 24, 2021 Chief Operating Officer Chief Financial Officer
(Director and Principal Executive February 24, 2021 February 24, 2021
Officer) (Principal Financial and
Accounting Officer)
/s/ R. Alex Rankin /s/ Ulysses L. Bridgeman /s/ Robert L. Fealy
R. Alex Rankin Ulysses L. Bridgeman Robert L. Fealy
February 24, 2021 February 24, 2021 February 24, 2021
(Chairman of the Board) (Director) (Director)
/s/ Douglas C. Grissom /s/ Daniel P. Harrington /s/ Karole F. Lloyd
Douglas C. Grissom Daniel P. Harrington Karole F. Lloyd
February 24, 2021 February 24, 2021 February 24, 2021
(Director) (Director) (Director)
/s/ Paul C. Varga
Paul C. Varga
February 24, 2021 February 24, 2021 February 24, 2021
(Director)
109
CHURCHILL DOWNS INCORPORATED
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(in millions) Balance
Beginning
of Year Change in Accounting Standard Charged
to
Expense Deductions Balance
End of
Year
Allowance for doubtful accounts:
2020 $ 4.4 $ 0.5 $ 2.5 $ ( 2.5 ) $ 4.9
2019 4.0 — 2.1 ( 1.7 ) 4.4
2018 3.6 — 3.0 ( 2.6 ) 4.0
(in millions) Balance
Beginning
of Year Additions Deductions Balance
End of
Year
Deferred income tax asset valuation allowance:
2020 $ 0.2 $ 1.2 $ — $ 1.4
2019 0.2 — — 0.2
2018 0.2 — — 0.2
110