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, 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.
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.
We have excluded the properties acquired as part of the Peninsula Pacific Entertainment LLC ("P2E") acquisition and Ellis Park Racing & Gaming ("Ellis Park") from our assessment of internal control over financial reporting as of December 31, 2022, because these properties were acquired by us in business acquisitions during 2022. The total assets excluded were 11.3% and less than 1% of total assets, respectively and approximately 6.1% and less than 1% of total revenues, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.
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, 2022.
/s/ William C. Carstanjen /s/ Marcia A. Dall /s/ Jon E. Rauch
William C. Carstanjen Marcia A. Dall Jon E. Rauch
Chief Executive Officer Executive Vice President and Vice President and
February 22, 2023 Chief Financial Officer Chief Accounting Officer
February 22, 2023 February 22, 2023
The effectiveness of the Company's internal control over financial reporting as of December 31, 2022 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.
89
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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, 2022.
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
Age as of Principal Occupation for the Past Five Years
and Position with Churchill Downs Incorporated
Name 2/22/2023
William C. Carstanjen 55 Chief Executive Officer since August 2014; President and Chief Operating Officer from March 2011 to August 2014.
William E. Mudd 51 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 59 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.
Bradley K. Blackwell 51 Senior Vice President, General Counsel and Secretary since March 2017; Vice President, Operations from February 2015 to March 2017; Vice President, Legal from April 2011 to February 2015; Vice President, Legal and Regulatory Affairs for TwinSpires from January 2007 to May 2011; Corporate Counsel from April 2005 to December 2007.
Maureen Adams 59 Senior Vice President of Gaming Operations since February 2022; Vice President of Gaming Operations from July 2019 to February 2022; President and General Manager of Calder Casino from August 2013 to July 2019.
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, 2022; 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, 2022.
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, 2022.
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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, 2022.
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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 2022, 2021 and 2020 are included in Part II, Item 8:
Consolidated Statements of Comprehensive Income (Loss)
46
Consolidated Balance Sheets
47
Consolidated Statements of Shareholders’ Equity
48
Consolidated Statements of Cash Flows
49
Notes to Consolidated Financial Statements
51
Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )
87
(2) Schedule II—Valuation and Qualifying Accounts
99
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. 93
(b) Exhibits 93
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.
92
EXHIBIT INDEX
Numbers Description By Reference To
2.1
Purchase Agreement, dated as of February 18, 2022, by and between Peninsula Pacific Entertainment Intermediate Holdings LLC and Churchill Downs Incorporated Exhibit 2.1 to Current Report on Form 8-K filed February 22, 2022
2.2
Amendment No. 1 to Purchase Agreement, dated as of September 2, 2022, by and between Peninsula Pacific Entertainment Intermediate Holdings LLC and Churchill Downs Incorporation Exhibit 2.1 to Current Report on Form 8-K filed September 6, 2022
3 .1
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
3.2
Amended and Restated Bylaws of Churchill Downs Incorporated, as amended October 25, 2022 Exhibit 3.1 to Current Report on Form 8-K filed October 25, 2022
4 .1
Rights Agreement, dated as of March 19, 2008 by and between Churchill Downs Incorporated and National City Bank [NC(1)] Exhibit 4.1 to Current Report on Form 8-K filed March 17, 2008
4 .2
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
4.3
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
4.4
Second Supplemental Indenture, dated as of March 17, 2021, 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 18, 2021
4.5
Indenture, dated April 13, 2022, by and between CDI Escrow Issuer, Inc. and U.S. Bank National Association as trustee Exhibit 4.1 to Current Report on Form 8-K filed April 14, 2022
4 .6
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
4.7
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
4.8
Registration Rights Agreement, dated as of March 17, 2021, 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 18, 2021
4.9
Registration Rights Agreement, dated April 13, 2022, by and between CDI Escrow Issuer, Inc. and J.P. Morgan Securities LLC, as representative of the initial purchasers Exhibit 4.2 to Current Report on Form 8-K filed April 14, 2022
4.10
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 Exhibit 4(f) to Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed February 24, 2021
10.1
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
1 0.2
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
10.3
2005 Churchill Downs Incorporated Deferred Compensation Plan† Exhibit 10.1 to Current Report on Form 8-K filed June 21, 2005
93
Numbers Description By Reference To
1 0.4
2006 Amendment to 2005 Churchill Downs Incorporated Deferred Compensation Plan† Exhibit 10.1 to Current Report on Form 8-K filed June 8, 2006
1 0.5
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
1 0.6
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
10.7
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
10.8
Fourth Amendment to the 2005 Churchill Downs Incorporated Deferred Compensation Plan† **
10.9
Fifth Amendment to the 2005 Churchill Downs Incorporated Deferred Compensation Plan† **
10.1 0
Sixth Amendment to the 2005 Churchill Downs Incorporated Deferred Compensation Plan† **
10.11
Churchill Downs Incorporated Restricted Stock Unit Deferred Compensation Plan† Exhibit 10.1 to Current Report on Form 8-K filed December 19, 2019
10.12
Churchill Downs Incorporated 2007 Omnibus Stock Incentive Plan† Exhibit A to Schedule 14A filed April 30, 2007
10.13
Amendment to the Churchill Downs Incorporated 2007 Omnibus Stock Incentive Plan† Exhibit B to Schedule 14A filed May 3, 2012
10.14
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
10.15
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
10.16
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
10.17
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
10.18
Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan† Exhibit 10.1 to Current Report on Form 8-K filed April 29, 2016
10.19
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
10.20
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
10.21
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
10.22
Churchill Downs Incorporated Executive Annual Incentive Plan, effective January 1, 2013† Exhibit A to Schedule 14A filed May 3, 2012
94
Numbers Description By Reference To
10.23
Churchill Downs Incorporated 2022 Executive Annual Incentive Plan, effective as of January 1, 2022† Exhibit 10.1 to Current Report on Form 8-K filed August 4, 2022
10.24
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
10.25
First Amended and Restated Churchill Downs Incorporated 2000 Employee Stock Purchase Plan† Exhibit B to Schedule 14A filed March 29, 2016
10.26
Churchill Downs Incorporated Senior Vice President, Vice President & Other Key Employee Severance Policy (Amended Effective as of December 1, 2015)†**
10.27
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
10.28
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
10.29
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
10.30
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
10.31
Executive Change in Control, Severance and Indemnity Agreement, dated as of July 26, 2022, by and between Churchill Downs Incorporated and Maureen Adams†**
10.32
Executive Change in Control, Severance and Indemnity Agreement, dated as of July 26, 2022, by and between Churchill Downs Incorporated and Brad Blackwell†**
10.33
Memorandum of Understanding by and between Austin W. Miller and Churchill Downs Incorporated dated February 10, 2022† Exhibit 10.1 to Current Report on Form 8-K filed February 10, 2022
10.34
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
10.35
Class Action Settlement Agreement, dated as of July 24, 2020, by and between Kater et al. and Churchill Downs Incorporated et al. Exhibit 10(kk) to Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed February 24, 2021
10.36
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
10.37
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
10.38
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
95
Numbers Description By Reference To
10.39
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
10.40
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
10.41
Incremental Joinder Agreement No. 1, dated March 17, 2021, among Churchill Downs Incorporated, the credit parties thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A Exhibit 10.1 to Current Report on Form 8-K filed March 18, 2021
10.42
Fourth Amendment to Credit Agreement, dated April 13, 2022, by and among Churchill Downs Incorporated, the credit parties party thereto, the Lenders party thereto and JP Morgan Chase Bank N.A., as agent Exhibit 10.01 to Current Report on Form 8-K filed April 14, 2022
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**
3 1 (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**
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.
96
ITEM 16. FORM 10-K SUMMARY
None.
97
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 22, 2023
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 22, 2023 Chief Operating Officer Chief Financial Officer
(Director and Principal Executive February 22, 2023 February 22, 2023
Officer) (Principal Financial and
Accounting Officer)
/s/ R. Alex Rankin /s/ Ulysses L. Bridgeman /s/ Andréa Carter
R. Alex Rankin Ulysses L. Bridgeman Andréa Carter
February 22, 2023 February 22, 2023 February 22, 2023
(Chairman of the Board) (Director) (Director)
/s/ Robert L. Fealy /s/ Douglas C. Grissom /s/ Daniel P. Harrington
Robert L. Fealy Douglas C. Grissom Daniel P. Harrington
February 22, 2023 February 22, 2023 February 22, 2023
(Director) (Director) (Director)
/s/ Karole F. Lloyd /s/ Paul C. Varga
Karole F. Lloyd Paul C. Varga
February 22, 2023 February 22, 2023
(Director) (Director)
98
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:
December 31, 2022 $ 5.4 $ — $ 2.3 $ ( 2.0 ) $ 5.7
December 31, 2021 4.9 — 3.2 ( 2.7 ) 5.4
December 31, 2020 4.4 0.5 2.5 ( 2.5 ) 4.9
(in millions) Balance
Beginning
of Year Additions Deductions Balance
End of
Year
Deferred income tax asset valuation allowance:
December 31, 2022 $ 3.2 $ 2.5 $ — $ 5.7
December 31, 2021 1.4 1.8 — 3.2
December 31, 2020 0.2 1.2 — 1.4
99