Churchill Downs Inc 10-Q

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, 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. Demand for entertainment and leisure activities is sensitive to consumers' disposable 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 / or may impact our customers’ ability to wager with the same frequency and to maintain wagering levels. Interest rate and credit risk Our primary exposure to market risk relates to changes in interest rates. At June 30, 2021, we had $685.3 million outstanding under our Credit Agreement, which bears interest at 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 variable rate would reduce net income and cash flows from operating activities by $4.9 million. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021 42