What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-07-28 compared with 2021-04-21 · 213 added, 127 removed, 270 unchanged (56% of the section changed)

8 unchanged sentences

Important factors that could cause actual results to differ materially from expectations include the following:

• the impact of the novel coronavirus (COVID-19) pandemic and related economic matters on our results of operations, financial conditions and prospects;

• 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;

29 unchanged sentences

This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, 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.

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

Executive Overview

Churchill Downs Incorporated (the "Company") is an industry-leading racing, online wagering and gaming entertainment company anchored by our iconic flagship event, the Kentucky Derby.

Churchill Downs Incorporated (the "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") in Kentucky.

13 unchanged sentences

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 ending the COVID-19 global pandemic.

The long-term impact of COVID-19 on the U.S.

and world economies and continuing impact on our business remains uncertain, the duration and scope of which cannot currently be predicted.

In response to the measures taken to limit the impact of COVID-19 described above, and for the protection of our employees, customers, and communities, we temporarily suspended operations at our properties in March 2020.

On March 25, 2020, as a result of the temporary closures and suspended operations, the Company announced the temporary furlough 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 upon the amount of each employee’s salary.

Although vaccines are now available, we cannot predict the duration of the COVID-19 global pandemic.

The extent to which the COVID-19 pandemic, including the emergence of variant strains, will continue to impact the Company remains uncertain and will depend on many factors that are not within our control.

We will continue to monitor for new developments related to the pandemic and assess these developments to maintain continuity in our operations.

In March 2020, as a result of the COVID-19 outbreak, we temporarily suspended operations at our wholly-owned and managed and gaming properties, announced the temporary furlough of our employees at these properties and certain racing operations, and implemented a temporary salary reduction for all remaining non-furloughed salaried employees based on a percentage that varied dependent upon 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.

1 unchanged sentence

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.

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.

As of March 31, 2021, all of our properties were reopened with certain operating restrictions.

During the second quarter of 2021, we held the 147 th Kentucky Oaks and Derby with capacity restrictions in compliance with Kentucky venue limitations at that time.

The capacity restrictions limited reserved seating in each area to approximately 40% to 60% capacity and also limited general admission tickets.

The 146 th Kentucky Oaks and Derby was held in the third quarter of 2020.

Asset Impairment

During the quarter ended June 30, 2021, the Company recorded an $11.2 million non-cash impairment charge related to certain assets at Churchill Downs Racetrack included in our Live and Historical Racing segment.

The impairment was due to a change in the Churchill Downs Racetrack capital plans and the Company's planned usage of these assets.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

Key Indicators to Evaluate Business Results and Financial Condition

5 unchanged sentences

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

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

performance, develop strategy and allocate resources.

Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment 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, net income (as determined in accordance with GAAP) as a measure of our operating results.

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 measure provided in accordance with GAAP.

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following:

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Refer to the reconciliation of comprehensive income to Adjusted EBITDA included in this section for additional information.

Government Regulations and Legislative Actions

We are subject to various federal, state and international laws and regulations that affect our businesses.

Governmental Regulations and Legislative Changes

We are subject to various federal, state, local, 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.

The following update on our regulatory and legislative activities should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, including Part I – Item 1, “Business” for a discussion of regulatory and legislative changes.

Specific State Gaming Regulations and Potential Legislative Changes

During the second quarter of 2021, the Florida Legislature passed multiple pieces of legislation, along with a 30-year tribal gaming compact, both of which will have an impact on Calder.

The tribal gaming compact enables certain tribes to conduct sports betting.

The tribe can have contracts with pari-mutuel facilities to operate retail and online sports betting with a revenue share for the tribe.

Separately, a bill to decouple certain pari-mutuel activities, including jai alai, from gaming activities also passed.

Previously, pari-mutuel facilities, including horse racing and jai alai, were required to race or conduct jai alai to retain their ability to operate slots and cardrooms.

However, under this new law, jai alai facilities can operate slots and cardrooms without conducting jai alai games.

The requirement to conduct racing still applies to thoroughbred race tracks if their slot or cardroom licenses are connected to their racing permits.

Both the tribal sports betting and decoupling legislative actions can only go into effect if the U.S.

Department of the Interior approves the compact, which could happen as soon as the third quarter

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

The Company is evaluating the impact of the decoupling legislation on our Calder operations and alternative uses, including a sale of the excess Calder land.

During the second quarter of 2021, the Louisiana State Legislature passed a bill that was signed by Governor Edwards to allow HRMs in off-track betting facilities.

There are at least a dozen facilities operated by Fair Grounds that will be able to add up to 50 machines per location under this new law.

The Louisiana Racing Commission will oversee historical horse racing.

In 2020, the Louisiana State Legislature passed a bill to allow citizens to approve sports betting on a parish-by-parish basis.

Sports betting was approved in 55 of the 64 parishes.

During the second quarter of 2021, the Louisiana State Legislature defined the landscape for sports betting and approved casino and racino operators to conduct retail and online sports betting in 55 parishes.

The Louisiana Gaming Control Board will oversee sports betting.

The tax rate is 10% on retail and 15% on mobile operations.

In 2020, the Maryland General Assembly passed a bill to allow citizens to approve sports betting, which was approved statewide by a 67% majority during the November 2020 elections.

During the second quarter of 2021, the Maryland General Assembly defined the landscape for sports betting and approved casino and racino operators to conduct retail sports betting.

Other retail sports betting outlets can apply, but not within 15 miles of Ocean Downs.

Ocean Downs is required to submit a bid for one of 60 online licenses.

The Maryland Gaming Control Board will oversee sports betting, with a tax rate of 15%.

In 2020, local zoning changes were adopted, and in the second quarter of 2021 statutory changes were made to allow Ocean Downs to build a hotel, which had previously been obstructed.

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) 2021 2020 Change

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2021 2020 Change 2021 2020 Change

Net revenue $ 515.1 $ 185.1 $ 330.0 $ 839.4 $ 438.0 $ 401.4

4 unchanged sentences

Adjusted EBITDA 233.3 30.1 203.2 343.9 85.4 258.5

Three Months Ended March 31, 2021, Compared to Three Months Ended March 31, 2020

• Net revenue increased $71.4 million due to a $35.1 million increase from Live and Historical Racing driven primarily from Derby City Gaming and the opening of Oak Grove in September 2020, a $30.6 million increase from TwinSpires due to an increase in handle, and a $6.1 million increase from Gaming due to the temporary suspension of operations in March 2020.

Partially offsetting these increases was $0.4 million from All Other.

• Operating income (loss) increased $58.3 million due to a $23.9 million increase from Gaming due to increased operating efficiencies and the temporary closure of our Gaming properties in March 2020;

a $17.5 million non-cash intangible asset impairment from the first quarter of 2020 that did not recur in the first quarter of 2021;

a $13.5 million

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

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;

Three Months Ended June 30, 2021, Compared to Three Months Ended June 30, 2020

• Net revenue increased $330.0 million due to a $152.6 million increase from Live and Historical Racing driven primarily from the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020, the temporary suspension of operations at Derby City Gaming during the prior year quarter, and the opening of Oak Grove in September 2020;

a $148.7 million increase from Gaming due to the temporary suspension of operations in the prior year quarter;

a $14.4 million increase from All Other primarily due the temporary suspension of operations in the prior year quarter at Arlington and United Tote;

and a $14.3 million increase from TwinSpires due to an increase in handle in Horse Racing and our expansion in additional states related to our Sports and Casino business.

• Operating income (loss) increased $135.8 million due to an $85.4 million increase from Live and Historical Racing primarily due to the increase in net revenue;

a $73.2 million increase from Gaming due to increased operating efficiencies and the temporary suspension of operations at our Gaming properties in the prior year quarter;

a $7.0 million increase from All Other due to the temporary suspension of operations at Arlington and United Tote in the prior year quarter;

and $0.2 million from other sources.

Partially offsetting these increases were an $11.2 million asset impairment at Churchill Downs Racetrack related to revised capital plans associated with the first turn project, an $11.0 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 the prior year quarter, and a $7.8 million decrease from TwinSpires due to additional marketing spend related to the Sports and Casino business.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

• Net income (loss) from continuing operations increased $131.9 million.

The following items impacted comparability of the Company's second quarter of 2021 net income from continuing operations compared to the prior year quarter:

an $8.1 million non-cash after-tax impact related to our asset impairment at Churchill Downs Racetrack related to revised capital plans associated with the first turn project and a $4.8 million after-tax increase in Rivers Des Plaines' legal reserves and transaction costs.

Partially offsetting these increases were a $2.3 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 and a $0.3 million after-tax decrease in expenses related to lower transaction, pre-opening and other expenses.

Excluding these items, net income (loss) from continuing operations increased $142.2 million primarily due to a $142.9 million after-tax increase driven by the results of our operations and equity in income from our unconsolidated affiliates, partially offset by a $0.7 million after-tax increase in interest expense associated with higher outstanding debt balances.

• Net income (loss) attributable to Churchill Downs Incorporated increased $227.1 million due to a $131.9 million increase in net income from continuing operations discussed above and a $95.2 million decrease in net loss from discontinued operations related to the settlement of the Kater and Thimmegowda litigations during the second quarter of 2020.

• Adjusted EBITDA increased $203.2 million driven by a $121.6 million increase from Gaming primarily due to the increased operating efficiencies at our wholly-owned properties and equity investments and temporary suspension of operations in the prior year quarter;

a $94.8 million increase from Live and Historical Racing primarily due to the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020, the temporary suspension of operations at Derby City Gaming in the prior year quarter, and the opening of Oak Grove HRM facility in September 2020;

and a $2.4 million increase from All Other primarily due to the temporary suspension of operations at Arlington and United Tote in the prior year quarter.

Partially offsetting these increases was a $15.6 million decrease from TwinSpires primarily due to increased marketing and promotional activities for both the Horse Racing and Sports and Casino businesses.

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

• Net revenue increased $401.4 million due to a $187.7 million increase from Live and Historical Racing driven primarily from the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020, the temporary suspension of operations at Derby City Gaming during the prior year, and the opening of Oak Grove in September 2020;

a $154.8 million increase from Gaming due to the temporary suspension of operations in the prior year;

a $44.9 million increase from TwinSpires due to an increase in handle in Horse Racing and our expansion in additional states related to our Sports and Casino business;

and a $14.0 million increase from All Other primarily due the temporary suspension of operations in the prior year at Arlington and United Tote.

• Operating income (loss) increased $194.1 million due to a $98.9 million increase from Live and Historical Racing primarily due to the increase in net revenue;

a $97.1 million increase from Gaming due to increased operating efficiencies and the temporary suspension of operations at our Gaming properties in the prior year;

a $7.9 million increase from All Other due to the temporary suspension of operations at Arlington and United Tote in the prior year;

a $6.3 million decrease in asset impairments due to the $11.2 million non-cash related to our asset impairment at Churchill Downs Racetrack related to revised capital plans associated with the first turn project during the current year quarter, offset by the $17.5 million non-cash intangible asset impairment in the first quarter of 2020;

a $0.6 million increase from TwinSpires primarily due to the increase in handle from Horse Racing partially offset by additional marketing spend related to the Sports and Casino business;

and a $0.4 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.

Partially offsetting these increases was a $17.1 million increase in selling, general and administrative expenses primarily due to an increase in accrued bonuses in the current year.

• Net income (loss) from continuing operations increased $190.6 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:

The following items impacted comparability of the Company's net income from continuing operations during the six months ended June 30, 2021 compared to the prior year period:

a $16.3 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;

a $4.0 million non-cash after-tax decrease related to asset impairments;

and a $1.3 million after-tax decrease in expenses related to lower transaction, pre-opening and other expenses.

Partially offsetting these decreases was a $5.7 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.

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

Excluding these items, net income (loss) from continuing operations increased $174.7 million primarily due to a $174.8 million after-tax increase driven by the results of our operations and equity in income from

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

our unconsolidated affiliates, partially offset by a $0.1 million after-tax increase in interest expense associated with higher outstanding debt balances.

• Net income (loss) attributable to Churchill Downs Incorporated increased $286.6 million due to a $190.6 million increase in net income from continuing operations discussed above and a $96.1 million decrease in net loss from discontinued operations related to the settlement of the Kater and Thimmegowda litigations during the second quarter of 2020, partially offset by a $0.1 million decrease in net loss attributable to our noncontrolling interest.

• Adjusted EBITDA increased $258.5 million driven by a $156.1 million increase from Gaming primarily due to the increased operating efficiencies at our wholly-owned properties and equity investments and temporary suspension of operations in the prior year and a $112.1 million increase from Live and Historical Racing primarily due to the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020, increased operating efficiencies and the temporary suspension of operations at Derby City Gaming in the prior year, and the opening of Oak Grove HRM facility in September 2020.

Partially offsetting these increases was a $9.1 million decrease from TwinSpires primarily due to increased marketing and promotional activities for the Sports and Casino business and a $0.6 million decrease from All Other.

Financial Results by Segment

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The following table presents net revenue for our segments, including intercompany revenue:

Three Months Ended March 31,

(in millions) 2021 2020 Change

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2021 2020 Change 2021 2020 Change

Live and Historical Racing:

2 unchanged sentences

Oak Grove 25.6 — 25.6 45.0 — 45.0

Turfway Park 5.4 5.3 0.1

Newport 4.6 — 4.6 9.0 — 9.0

Turfway Park 0.8 0.1 0.7 6.2 5.4 0.8

Total Live and Historical Racing 190.5 30.3 160.2 255.2 59.4 195.8

2 unchanged sentences

Total TwinSpires 135.9 121.7 14.2 236.0 191.1 44.9

Fair Grounds Slots and VSI 40.3 33.0 7.3

Fair Grounds and VSI 35.1 11.2 23.9 75.4 44.2 31.2

Presque Isle 30.5 1.9 28.6 54.3 28.9 25.4

9 unchanged sentences

Net Revenue $ 515.1 $ 185.1 $ 330.0 $ 839.4 $ 438.0 $ 401.4

Three Months Ended March 31, 2021, Compared to Three Months Ended March 31, 2020

• Live and Historical Racing revenue increased $35.6 million due to a $19.4 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 million increase at 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;

Three Months Ended June 30, 2021, Compared to Three Months Ended June 30, 2020

• Live and Historical Racing revenue increased $160.2 million due to a $97.1 million increase at Churchill Downs Racetrack primarily due to the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020;

a $32.2 million increase at Derby City Gaming primarily due to the temporary suspension of operations during the prior year quarter and the completion of their second outdoor patio which added an additional 225 HRMs in September 2020;

a $25.6 million increase at Oak Grove as a result of the opening of the HRM facility in September 2020 and the hotel in October 2020;

a $4.6 million increase at Newport due to the opening of the facility in October 2020;

and a $0.7 million increase at Turfway Park primarily due to the temporary suspension of operations during the prior year quarter.

• TwinSpires revenue increased $14.2 million from the prior year quarter primarily due to a $7.2 million increase from Horse Racing and a $7.0 million increase from Sports and Casino.

Horse Racing net revenue increased as a result of an increase in handle of $50.9 million, or 8.9%, compared to the prior year quarter primarily due to the running of the 147th Kentucky Oaks and Derby in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020.

Sports and Casino net revenues increased as a result of our expansion in additional states and marketing and promotional activities.

• Gaming revenue increased $148.7 million primarily due to the temporary suspension of operations of all of our Gaming properties and the loss of revenue at each property during the prior year quarter.

• All Other revenue increased $15.5 million primarily due to an $11.5 million increase at Arlington and a $3.8 million increase at United Tote, both of which were due to the temporary suspension of operations in the prior year quarter, and a $0.2 million increase from other sources.

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

• Live and Historical Racing revenue increased $195.8 million due to a $97.5 million increase at Churchill Downs Racetrack primarily due to the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020;

a $45.0 million increase at Oak Grove as a result of the opening of the HRM facility in September 2020 and the hotel in October 2020;

a $43.5 million increase at Derby City Gaming primarily due to the temporary suspension of operations during the prior year period and the completion of their second outdoor patio which added an additional 225 HRMs in September 2020;

a $9.0 million increase at Newport due to the opening in October 2020;

and a $0.5 million increase from other sources.

and a $0.8 million increase at Turfway Park primarily due to the temporary suspension of operations during the prior year period.

• TwinSpires revenue increased $44.9 million from the prior year quarter primarily due to a $33.3 million increase from Horse Racing and a $11.6 million increase from Sports and Casino.

Horse Racing net revenue increased as a result of an increase in handle of $113.3 million, or 34.3%, compared to the prior year quarter due to the continued shift from wagering at brick-and-mortar locations to online wagering.

Sports and Casino net revenues increased as a result of our expansion in additional states since the first quarter of 2020 and marketing and promotional activities.

• Gaming revenue increased $6.6 million primarily due to a $7.3 million increase at Fair Grounds and VSI, a $5.2 million increase at Ocean Downs, and a $5.0 million increase at our Mississippi properties, all of which resulted from the temporary suspension of operations in March 2020.

Partially offsetting these increases were a $4.4 million decrease at Oxford, a $3.2 million decrease at Presque Isle, a $2.4 million decrease at Lady Luck Nemacolin, and a $0.9 million decrease at Calder, all of which resulted from certain operating restrictions.

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

Horse Racing net revenue increased as a result of an increase in handle of $164.2 million, or 18.3%, compared to the prior year due to the continued shift from wagering at brick-and-mortar locations to online wagering and the running of the 147th Kentucky Oaks and Derby in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020.

Sports and Casino net revenues increased as a result of our expansion in additional states and marketing and promotional activities.

• Gaming revenue increased $155.3 million primarily due to the temporary suspension of operations of all of our Gaming properties and the loss of revenue at each property during the prior year.

• All Other revenue increased $15.4 million primarily due to an $11.5 million increase at Arlington and a $3.6 million increase at United Tote, both of which were due to the temporary suspension of operations in the prior year quarter, and a $0.3 million increase from other sources.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

Consolidated Operating Expense

The following table is a summary of our consolidated operating expense:

Three Months Ended March 31,

(in millions) 2021 2020 Change

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2021 2020 Change 2021 2020 Change

Taxes and purses $ 132.9 $ 36.6 $ 96.3 $ 221.8 $ 112.3 $ 109.5

4 unchanged sentences

Marketing and advertising 24.1 3.8 20.3 36.2 13.6 22.6

Asset impairments 11.2 — 11.2 11.2 17.5 (6.3)

Transaction expense, net — 0.2 (0.2) 0.1 0.5 (0.4)

Impairment of intangible assets — 17.5 (17.5)

Other operating expense 52.8 29.6 23.2 92.8 68.4 24.4

Total expense $ 379.7 $ 185.5 $ 194.2 $ 657.3 $ 450.0 $ 207.3

Three Months Ended March 31, 2021, Compared to Three Months Ended March 31, 2020

Three Months Ended June 30, 2021, Compared to Three Months Ended June 30, 2020

Significant items affecting comparability of consolidated operating expense include:

• Taxes and purses increased $13.2 million 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.

• Taxes and purses increased $96.3 million driven by the temporary suspension of operations in the prior year quarter, the opening of the Oak Grove HRM facility in September 2020 and Newport in October 2020, and the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020.

• Content expense increased $4.1 million primarily due to an increase in certain host fees and source market fees for the TwinSpires Horse Racing business.

• Salaries and benefits expense decreased $8.2 million driven primarily by increased operational efficiencies at certain properties.

• Selling, general and administrative expense increased $6.1 million driven primarily from an increase in our accrued bonuses in the current year quarter compared to the prior year quarter due to the temporary suspension of operations in March 2020.

• Salaries and benefits expense increased $24.4 million driven by the temporary suspension of operations in the prior year quarter, the opening of the Oak Grove HRM facility in September 2020 and Newport in October 2020, and the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020.

• Selling, general and administrative expense increased $11.0 million driven primarily from an increase in our accrued bonuses in the current year quarter compared to the prior year quarter.

• Depreciation and amortization increased $3.9 million primarily driven by the opening of the Oak Grove HRM facility in September 2020 and Newport in October 2020.

• Marketing and advertising expense increased $2.3 million primarily due to increased marketing by our TwinSpires segment, partially offset by reduced marketing and advertising at our Gaming properties.

• Impairment of intangible assets decreased $17.5 million due to the first quarter of 2020 impairment that did not recur in the current year quarter.

• Marketing and advertising expense increased $20.3 million primarily due to increased marketing by our TwinSpires Horse Racing and Sports and Casino businesses, the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020, and the temporary suspension of operations in the prior year quarter.

• Asset impairments increased $11.2 million due to a non-cash impairment charge due to a change in the Churchill Downs Racetrack first turn capital plans and the Company's planned usage of these assets.

• Other operating expenses include maintenance, utilities, food and beverage costs, property taxes, insurance, and other operating expenses.

Other operating expense increased $1.2 million primarily driven by the temporary suspension of operations at our properties in March 2020.

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

Other operating expense increased $23.2 million primarily driven by the temporary suspension of operations at our properties during the prior year quarter and the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020.

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

Significant items affecting comparability of consolidated operating expense include:

• Taxes and purses increased $109.5 million driven by the temporary suspension of operations in the prior year, the opening of the Oak Grove HRM facility in September 2020 and Newport in October 2020, and the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

the 146th Kentucky Oaks and Derby in the third quarter of 2020.

• Content expense increased $16.3 million primarily due to an increase in certain host fees and source market fees for the TwinSpires Horse Racing business.

• Salaries and benefits expense increased $16.2 million driven by the temporary suspension of operations in the prior year, the opening of the Oak Grove HRM facility in September 2020 and Newport in October 2020, and the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020.

• Selling, general and administrative expense increased $17.1 million driven primarily from an increase in our accrued bonuses in the current year compared to the prior year due to the temporary suspension of operations in the second quarter of 2020.

• Depreciation and amortization increased $7.9 million primarily driven by the opening of the Oak Grove HRM facility in September 2020 and Newport in October 2020.

• Marketing and advertising expense increased $22.6 million primarily due to increased marketing by our TwinSpires Horse Racing and Sports and Casino businesses, the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020, and the temporary suspension of operations in the prior year quarter.

• Asset impairments decreased $6.3 million due to an $11.2 million non-cash impairment charge relating to the change in the Churchill Downs Racetrack first turn capital plans and the Company's planned usage of these assets, compared to a $17.5 million non-cash intangibles impairment recognized during the first quarter of 2020 that did not recur in the current year.

• Other operating expenses include maintenance, utilities, food and beverage costs, property taxes, insurance, and other operating expenses.

Other operating expense increased $24.4 million primarily driven by the temporary suspension of operations at our properties during the prior year and the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

Adjusted EBITDA

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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, net income (as determined in accordance with GAAP) as a measure of our operating results.

Three Months Ended March 31,

(in millions) 2021 2020 Change

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2021 2020 Change 2021 2020 Change

Live and Historical Racing $ 98.4 $ 3.6 $ 94.8 $ 116.7 $ 4.6 $ 112.1

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Total Adjusted EBITDA $ 233.3 $ 30.1 $ 203.2 $ 343.9 $ 85.4 $ 258.5

Three Months Ended March 31, 2021, Compared to Three Months Ended March 31, 2020

• Live and Historical Racing Adjusted EBITDA increased $17.3 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;

Three Months Ended June 30, 2021, Compared to Three Months Ended June 30, 2020

• Live and Historical Racing Adjusted EBITDA increased $94.8 million due to a $65.2 million increase from Churchill Downs Racetrack primarily due to the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020;

a $19.3 million increase from Derby City Gaming due to the increase in net revenue, increased operating efficiencies, and the temporary suspension of operations during the prior year quarter;

a $9.4 million increase at Oak Grove due to the opening of the Oak Grove HRM facility in September 2020;

a $0.8 million increase at Turfway Park due to an increase in handle;

a $0.6 million increase at Newport due to the opening of the Newport facility in October 2020;

and a $0.3 million increase at Churchill Downs Racetrack primarily due to the temporary suspension of operations in March 2020.

• TwinSpires Adjusted EBITDA increased $6.5 million primarily due to a $9.9 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 increased marketing and promotional activities.

• Gaming Adjusted EBITDA increased $34.5 million driven by a $24.1 million increase at our wholly-owned Gaming properties and a $10.4 million increase from our equity investments, both of which were due to increased operating efficiencies and the temporary closure of all of our Gaming properties in March 2020.

• All Other Adjusted EBITDA decreased $3.0 million driven by a $4.4 million increase in accrued bonuses at Corporate compared to prior year where accrued bonuses were reduced as a result of the temporary suspension of operations in March 2020.

Partially offsetting this decrease was a $1.4 million increase 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

and a $0.3 million increase from other sources.

• TwinSpires Adjusted EBITDA decreased $15.6 million primarily due to a $8.2 million decrease from Horse Racing due to an increase in marketing and advertising expense associated with the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020, partially offset by an increase in net revenue;

and a $7.4 million increase in the loss from our Sports and Casino business due to increased marketing and promotional activities.

• Gaming Adjusted EBITDA increased $121.6 million driven by a $69.8 million increase at our wholly-owned Gaming properties and a $51.8 million increase from our equity investments, both of which were due to increased operating efficiencies and the temporary closure of all of our Gaming properties in the prior year quarter.

• All Other Adjusted EBITDA increased $2.4 million driven by a $4.9 million increase at Arlington and a $1.8 million increase at United Tote, both of which primarily resulted from the temporary suspension of operations in the prior year quarter.

Partially offsetting this increase was a $4.3 million decrease from Corporate primarily due to an increase in accrued bonuses compared to the prior year quarter.

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

• Live and Historical Racing Adjusted EBITDA increased $112.1 million due to a $65.5 million increase from Churchill Downs Racetrack primarily due to the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020;

a $28.2 million increase from Derby City Gaming due to the increase in net revenue, increased operating efficiencies, and the temporary suspension of operations during the prior year;

a $16.1 million increase at Oak Grove due to the opening of the Oak Grove HRM facility in September 2020;

a $1.3 million increase at Newport due to the opening of the Newport facility in October 2020;

and a $1.0 million increase at Turfway Park primarily due to an increase in handle and the temporary suspension of operations in the prior year.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

• TwinSpires Adjusted EBITDA decreased $9.1 million primarily due to a $10.8 million increase in the loss from our Sports and Casino business due to increased marketing and promotional activities, partially offset by a $1.7 million increase in Horse Racing primarily due to the increase in handle partially offset by an increase in marketing and advertising expense associated with the running of the 147th Kentucky Oaks and Derby with capacity restrictions in the second quarter of 2021 compared to the running of the 146th Kentucky Oaks and Derby in the third quarter of 2020.

• Gaming Adjusted EBITDA increased $156.1 million driven by a $93.9 million increase at our wholly-owned Gaming properties and a $62.2 million increase from our equity investments, both of which were due to increased operating efficiencies and the temporary closure of all of our Gaming properties in the prior year.

• All Other Adjusted EBITDA decreased $0.6 million driven by a $8.6 million increase in accrued bonuses at Corporate compared to the prior year period.

Partially offsetting this decrease was a $6.2 million increase from Arlington due to increased operating efficiencies and the temporary suspension of operations in the prior year and a $1.8 million increase at United Tote due to the temporary suspension of operations during the prior year.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

Reconciliation of Comprehensive Income (Loss) to Adjusted EBITDA

Three Months Ended March 31,

(in millions) 2021 2020 Change

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2021 2020 Change 2021 2020 Change

Net income (loss) and comprehensive income (loss) attributable to Churchill Downs Incorporated $ 108.3 $ (118.8) $ 227.1 $ 144.4 $ (142.2) $ 286.6

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Stock-based compensation expense $ 7.1 $ 6.1 $ 1.0 $ 12.6 $ 10.4 $ 2.2

Other charges 0.2 (0.1) 0.3 0.2 (0.1) 0.3

Pre-opening expense and other expense 1.5 1.9 (0.4) 2.1 3.6 (1.5)

Impairment of intangible assets — 17.5 (17.5)

Asset impairments 11.2 — 11.2 11.2 17.5 (6.3)

Transaction expense, net — 0.2 (0.2) 0.1 0.5 (0.4)

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The following table is a summary of our overall financial position:

(in millions) March 31, 2021 December 31, 2020 Change

(in millions) June 30, 2021 December 31, 2020 Change

Total assets $ 2,970.6 $ 2,686.4 $ 284.2

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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 due 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 milli on 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.

• Total assets increased $284.2 million driven by a $274.8 million increase in cash and cash equivalents primarily due to the net proceeds from the new Term Loan B-1 and Additional 2028 Notes and the increase in operating income for the six months ended June 30, 2021 ;

a $15.6 million increase in restricted cash due to increased account wagering

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

a $14.0 million increase in investment in and advances to unconsolidated affiliates due to the Company's interest in Rivers and MVG;

a $13.9 million increase in accounts receivable, net primarily due to timing;

and a $0.7 milli on increase in all other assets.

Partially offsetting these increases was a $24.5 decrease in property and equipment primarily due to depreciation expense for the current quarter and the asset impairment at Churchill Downs Racetrack and a $10.3 million decrease in income taxes receivable due to the current year income tax expense partially offset by the payment of the Kater and Thimmegowda litigation settlements.

• Total liabilities increased $333.9 million primarily driven by a $203.9 million increase in notes payable due to proceeds from our Additional 2028 Notes;

a $143.9 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, 2021

current liabilities of discontinued operations due to the payments of the Kater and Thimmegowda litigation settlements and a $24.9 million decrease in dividends payable due to the payment of our annual dividends in January 2020.

• Total shareholders’ equity decreased $164.9 million driven by $193.9 million in repurchases of common stock and $12.6 million in taxes paid related to net share settlement of stock awards.

a $53.8 million increase in accounts payable driven by timing of payments;

a $47.1 million increase in accrued expenses and other current liabilities driven by an increase in purses payable due to timing, increased account wagering deposits with TwinSpires and increased accrued interest payable related to our senior notes;

and a $36.6 million increase in deferred income taxes primarily driven by the payment of the Kater and Thimmegowda litigation settlements.

Partially offsetting these increases were a $124.0 million decrease in current liabilities of discontinued operations due to the payments of the Kater and Thimmegowda litigation settlements;

a $24.9 million decrease in dividends payable due to the payment of our annual dividends;

and a $2.5 million decrease in all other liabilities.

• Total shareholders’ equity decreased $49.7 million driven by $193.9 million in repurchases of common stock, a $12.6 million decrease in taxes paid related to net share settlement of stock awards, and a $0.2 million decrease from other sources.

Partially offsetting these decreases were a $144.4 million increase from current year net income and a $12.6 million increase from stock-based compensation.

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The following table is a summary of our liquidity and cash flows:

(in millions) Three Months Ended March 31,

(in millions) Six Months Ended June 30,

Cash flows from:

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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 Ended 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.

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

Six Months Ended June 30, 2021, Compared to the Six Months Ended June 30, 2020

• Cash flows from operating activities increased $133.4 million driven by a $194.1 million increase in operating income, a $42.7 million increase in distributions from unconsolidated affiliates, and a $20.6 million increase from all other operating activities.

Partially offsetting these increases were a $124.0 million decrease from the payment of the Kater and Thimmegowda litigation settlements.

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 decreased $101.3 million driven by a $102.2 million decrease in capital project expenditures due to reduced capital project spending in the current year compared to prior year.

Partially offsetting this decrease was a $0.9 million increase from all other investing activities.

• Cash provided by financing activities decreased $500.8 million primarily driven by a $339.3 million decrease in net borrowings from long-term debt and a $165.5 million increase in common stock repurchases.

Partially offsetting these decreases was a $4.0 million increase from all other financing activities.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

Credit Facilities and Indebtedness

The following table presents our debt outstanding:

(in millions) March 31, 2021 December 31, 2020 Change

(in millions) June 30, 2021 December 31, 2020 Change

Term Loan B due 2024 $ 386.0 $ 388.0 $ (2.0)

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Issuance costs, net of premiums and discounts (15.2) (15.4) 0.2

Total debt, net of current maturities $ 1,964.3 $ 1,618.3 $ 346.0

Net debt $ 1,963.1 $ 1,618.3 $ 344.8

Credit Agreement

On December 27, 2017, we entered into the Credit Agreement (as defined below) with a syndicate of lenders.

The Credit Agreement provides for a $700.0 million senior secured revolving credit facility (the "Revolver") and a $400.0 million Senior Secured Term Loan B (the "Term Loan B" and together with the Revolver, the "Credit Agreement").

The Credit Agreement provides for a $700.0 million senior secured revolving credit facility (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.

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The Company capitalized $3.5 million of debt issuance costs associated with the Joinder which are being amortized as interest expense over the 7-year term of the Term Loan B-1.

The interest rate on the Revolver on March 31, 2021 was LIBOR plus 2 points based on the Revolver pricing grid in the Second Amendment and the Company's net leverage ratio as of March 31, 2021.

The interest rate on the Revolver on June 30, 2021 was LIBOR plus 175 basis points based on the Revolver pricing grid in the Second Amendment and the Company's net leverage ratio as of June 30, 2021.

The Term Loan B and Term Loan B-1 bear interest at LIBOR plus 200 basis points.

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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 Company was compliant with all applicable covenants on March 31, 2021.

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

Although the Company was not required to meet the Company’s financial covenants under the Credit Agreement on June 30, 2021 (as a result of the Second Amendment), the Company was compliant with all applicable covenants on June 30, 2021.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

2027 Senior Notes

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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 Company may redeem some or all of the 2027 Senior Notes at any time at redemption prices set forth in the 2027 Indenture.

The terms of the 2027 Indenture, among other things, limit the ability of the Company to:

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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 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.

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 "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 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 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 2028 Senior Notes.

The 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.

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 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 Company may redeem some or all of the Existing 2028 Senior Notes at any time at redemption prices set forth in the 2028 Indenture.

The terms of the 2028 Indenture, among other things, limit the ability of the Company to:

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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.

In connection with the issuance of the Existing 2028 Senior Notes, the Company and the 2028 Guarantors entered into a Registration Rights Agreement to register any Existing 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") 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

capitalized $3.3 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 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 offered under the indenture dated as of December 27, 2017, governing the Existing 2028 Senior Notes and form a part of the same series for purposes of the indenture.

In connection with the offering, we capitalized $3.4 million of debt issuance costs which are being amortized as interest expense over the term of the Additional 2028 Notes.

Upon completion of this offering, the aggregate principal amount outstanding of the Existing 2028 Notes, together with the Additional 2028 Notes (collectively the "2028 Senior Notes") is $700 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.

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The 3.25% premium will be amortized through interest expense, net over the term of the Additional 2028 Notes.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

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.

The Company may redeem some or all of the Additional 2028 Notes at any time as 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, are estimated as follows:

(in millions) April 1 to December 31, 2021 2022-2023 2024-2025 Thereafter Total

Our commitments to make future payments as of June 30, 2021, are estimated as follows:

(in millions) July 1 to December 31, 2021 2022-2023 2024-2025 Thereafter Total

Term Loan B $ 2.0 $ 8.0 $ 376.0 $ — $ 386.0

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Total $ 50.0 $ 205.3 $ 563.7 $ 1,754.9 $ 2,573.9

(1) Interest includes the estimated contractual payments under our Credit Agreement assuming no change in the weighted average borrowing rate of 2.12% which was the rate in place as of March 31, 2021.

(1) Interest includes the estimated contractual payments under our Credit Agreement assuming no change in the weighted average borrowing rate of 2.10% which was the rate in place as of June 30, 2021.

(2) Includes the maximum estimated exposure where we are contractually obligated to make future minimum payments.

As of March 31, 2021, we had approximately $4.6 million of tax liabilities related to unrecognized tax benefits.

As of June 30, 2021, we had approximately $4.4 million of tax liabilities related to unrecognized tax benefits.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis