Churchill Downs Inc 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains various "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), which provides certain "safe harbor" provisions for forward-looking statements. All forward-looking statements made in this report are made pursuant to the Act. The reader is cautioned that such forward-looking statements are based on information available at the time and / or management’s good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Forward-looking statements speak only as of the date that the statement was made. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. Forward-looking statements are typically identified by the use of terms such as “anticipate,” "believe," "could," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "seek," "should," "will," and similar words, although some forward-looking statements are expressed differently. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from expectations include the following : • the occurrence of extraordinary events, such as terrorist attacks, public health threats, civil unrest, and inclement weather, including as a result of climate change; • the effect of economic conditions on our consumers' confidence and discretionary spending or our access to credit, including the impact of inflation; • additional or increased taxes and fees; • 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; • lack of confidence in the integrity of our core businesses or any deterioration in our reputation; • loss of key or highly skilled personnel, as well as general disruptions in the general labor market; • inability to successfully focus on market access and retail operations for our TwinSpires Sports and Casino business and effectively compete; • online security risk, including cyber-security breaches, or loss or misuse of our stored information as a result of a breach, including customers’ personal information, could lead to government enforcement actions or other litigation; • the impact of significant competition, and the expectation the competition levels will increase; • changes in consumer preferences, attendance, wagering, and sponsorships; • risks associated with equity investments, strategic alliances and other third-party agreements; • inability to respond to rapid technological changes in a timely manner; • concentration and evolution of slot machine and historical racing machine ("HRM") manufacturing and other technology conditions that could impose additional costs; • failure to enter into or maintain agreements with industry constituents, including horsemen and other racetracks; inability to successfully focus on market access and retail operations for our TwinSpires Sports and Casino business and effectively compete; online security risk, including cyber-security breaches, or loss or misuse of our stored information as a result of a breach; • reliance on our technology services and catastrophic events and system failures disrupting our operations; • inability to identify, complete, or fully realize the benefits of, our proposed acquisitions, divestitures, development of new venues or the expansion of existing facilities on time, on budget, or as planned; • difficulty in integrating recent or future acquisitions into our operations; • cost overruns and other uncertainties associated with the development of new venues and the expansion of existing facilities; • general risks related to real estate ownership and significant expenditures, including risks related to environmental liabilities; FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 26 • personal injury litigation related to injuries occurring at our racetracks; • compliance with the Foreign Corrupt Practices Act or applicable money-laundering regulations; • payment-related risks, such as risk associated with fraudulent credit card and debit card use; • work stoppages and labor issues; • risks related to pending or future legal proceedings and other actions; • highly regulated operations and changes in the regulatory environment could adversely affect our business; • restrictions in our debt facilities limiting our flexibility to operate our business; • failure to comply with the financial ratios and other covenants in our debt facilities and other indebtedness; • increase to interest rates (due to inflation or otherwise); • disruptions in the credit markets or changes to our credit ratings may adversely affect our business; • increase in our insurance costs, or obtain similar insurance coverage in the future, and inability to recover under our insurance policies for damages sustained at our properties in the event of inclement weather and casualty events; and • other factors described in our most recent Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The following information is unaudited. Tabular dollars are in millions, except per share amounts. All per share amounts assume dilution unless otherwise noted. This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022, 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, 2023 27 Our Business Churchill Downs Incorporated ("CDI" or the "Company") has been creating extraordinary entertainment experiences for nearly 150 years, beginning with the Company’s most iconic and enduring asset, the Kentucky Derby. Headquartered in Louisville, Kentucky, CDI has expanded through the development of live and historical racing entertainment venues, the growth of the TwinSpires horse racing online wagering business and the operation and development of regional casino gaming properties. We conduct our business through three reportable segments: Live and Historical Racing, TwinSpires, and Gaming. We aggregate our other businesses as well as certain corporate operations, and other immaterial joint ventures, in All Other. For additional information about our segments, refer to Note 16 - Segment Information, to our Condensed Consolidated Financial Statements. Arlington sale On February 15, 2023, we closed on the sale of the Arlington property in Arlington Heights, Illinois. We sold 326-acres to the Chicago Bears for $197.2 million. The net proceeds of $195.7 million were used to pay down the outstanding balance amount on our Revolver that was drawn on to fund the acquisition of substantially all the assets of Peninsula Pacific Entertainment ("P2E"). Financing Transactions On February 24, 2023, we entered into an incremental joinder to our senior secured credit agreement to increase the loans under the existing Term Loan A credit facility due 2027 by $500.0 million. This joinder increases the existing Term Loan A credit facility due 2027 from $800.0 million to $1.3 billion and makes certain other changes to the existing credit agreement. The Company used the net proceeds from the borrowings under the increased Term Loan A to repay outstanding loans under its senior secured revolving credit facility, pay related transaction fees and expenses and for general corporate purposes. On April 25, 2023, we completed an offering of $600.0 million in aggregate principal amount of 6.750% senior unsecured notes that mature in 2031. The Company used a portion of the net proceeds from the offering to repay indebtedness outstanding under its Term Loan B Facility due 2024 and to fund related transaction fees and expenses, and intends to use the remainder of the proceeds for working capital and other general corporate purposes. Transactions Update On August 11, 2022, we entered into an agreement to sell 49% of United Tote, a wholly-owned subsidiary of the Company to NYRA Content Management Solutions, LLC, a subsidiary of the New York Racing Association. The transaction is subject to usual and customary closing conditions, including applicable regulatory notices and approvals, and is expected to close during the first half of 2023. On December 19, 2022, the Company announced that it entered into a definitive agreement under which we would acquire all the outstanding equity interests of Exacta Systems, LLC ("Exacta") for total consideration of $250.0 million in cash (the "Exacta Transaction"). The Exacta Transaction is subject to certain working capital and other purchase price adjustments and is expected to close during 2023. Impact 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. Key Indicators to Evaluate Business Results and Financial Condition Our management monitors a variety of key indicators to evaluate our business results and financial condition. These indicators include changes in net revenue, operating expense, operating income, earnings per share, outstanding debt balance, operating cash flow and capital spend. Our consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"). We also use non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. We believe that the use of Adjusted EBITDA as a key performance measure of results of operations enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment 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. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 28 Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following: Adjusted EBITDA includes our portion of EBITDA from our equity investments. Adjusted EBITDA excludes: • Transaction expense, net which includes: – Acquisition, disposition, and property sale related charges; – Direct online Sports and Casino business exit costs; and – Other transaction expense, including legal, accounting and other deal-related expense; • Stock-based compensation expense; • Rivers Des Plaines' impact on our investments in unconsolidated affiliates from: – The impact of changes in fair value of interest rate swaps, and – Legal reserves and transaction costs; • Asset impairments; • Gain on property sales; • Legal reserves; • Pre-opening expense; and • Other charges, recoveries and expenses As of December 31, 2021, Arlington ceased racing and simulcast operations and the property was sold on February 15, 2023 to the Chicago Bears. Arlington's results in 2022 and 2023 are treated as an adjustment to EBITDA and are included in other expenses, net in the Reconciliation of Comprehensive Income to Adjusted EBITDA . For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the Condensed Consolidated Statements of Comprehensive Income. See the Reconciliation of Comprehensive Income to Adjusted EBITDA included in this section for additional information. Governmental Regulations and Legislative Changes We are subject to various federal, state and international laws and regulations that affect our businesses. The ownership, operation and management of our Live and Historical Racing, TwinSpires, and Gaming segments, as well as our other operations, are subject to regulation under the laws and regulations of each of the jurisdictions in which we operate. The ownership, operation and management of our businesses and properties are also subject to legislative actions at both the federal and state level. The following update on our regulatory and legislative actions should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022, including Part I - Item 1, "Business" for a discussion of regulatory and legislative changes. Specific State Gaming Regulations Kentucky In 2023, the Kentucky General Assembly passed a bill to authorize the Kentucky Horse Racing Commission to regulate sports betting. Only licensed racetracks and their extensions can operate retail sports betting. Each track is allowed to contract with up to three providers to carryout online or retail sports betting. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 29 Consolidated Financial Results The following table reflects our net revenue, operating income, net income, Adjusted EBITDA, and certain other financial information: Three Months Ended March 31, (in millions) 2023 2022 Change Net revenue $ 559.5 $ 364.1 $ 195.4 Operating income 119.9 47.4 72.5 Operating income margin 21 % 13 % Net income 155.7 42.1 113.6 Adjusted EBITDA 222.9 128.5 94.4 Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022 • Net revenue increased $195.4 million driven by a $128.4 million increase from Live and Historical Racing primarily due to revenue attributable to the properties acquired in the P2E, Ellis Park and Chasers Transactions, the opening of Turfway Park in September 2022 and continued growth at our Oak Grove property and a $72.7 million increase from Gaming primarily due to our New York and Iowa properties acquired in the P2E Transaction. Partially offsetting these increases was a $5.5 million decrease in TwinSpires primarily due to a decrease in Horse Racing as a higher portion of our patrons returned to wagering at brick-and-mortar facilities instead of wagering online, the exit of our direct online Sports and Casino business in the first quarter of 2022 and a decrease in All Other of $0.2 million. • Operating income increased $72.5 million primarily due to a $52.8 million increase in Live and Historical Racing incremental revenue from the P2E properties acquired in Virginia, and a $24.4 million increase in Gaming driven by the P2E acquired properties in New York and Iowa, decreased transaction and impairment costs of $10.1 million, and an increase in TwinSpires of $3.7 million as a result of the exit of our direct online Sports and Casino business. Partially offsetting these increases was a $16.4 million increase in corporate general and administrative expenses driven by the acquisition of P2E and $2.1 million increase in All Other operating income. • Net income increased $113.6 million. The following items impacted comparability of the Company's net income from continuing operations for the three months ended March 31, 2023 compared to three months ended March 31, 2022: a $86.2 million after tax gain on the sale of the Arlington property, partially offset by a $1.2 million after-tax net increase in adjustments related to our unconsolidated affiliates, transaction, pre-opening and other expenses. Excluding these items, net income increased $28.6 million primarily due to a $60.5 million after-tax increase driven by the results of our operations and equity in income from our unconsolidated affiliates, partially offset by a $31.9 million after-tax increase in interest expense associated with higher outstanding debt balances. • Adjusted EBITDA increased $94.4 million driven by a $54.2 million increase from Live and Historical Racing attributable to the properties acquired in the P2E, Ellis Park and Chasers Transactions, a $38.4 million increase from Gaming driven by the P2E properties acquired in New York and Iowa, and a $5.3 million increase from TwinSpires, partially offset by $3.5 million decrease from All Other. Revenue by Segment The following table presents net revenue for our segments, including intercompany revenue: Three Months Ended March 31, Change (in millions) 2023 2022 Live and Historical Racing $ 215.8 $ 87.2 $ 128.6 TwinSpires 96.3 101.4 (5.1) Gaming 251.6 179.2 72.4 All Other 0.3 0.5 (0.2) Eliminations (4.5) (4.2) (0.3) Net Revenue $ 559.5 $ 364.1 $ 195.4 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 30 Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022 • Live and Historical Racing revenue increased $128.6 million due to a $97.7 million increase attributable to the Virginia properties acquired in the P2E Transaction, a $15.6 million increase due to the opening of Turfway Park in Northern Kentucky in September 2022, a $7.5 million increase attributable to properties acquired in the Ellis Park and Chasers Transactions, a $6.2 million increase from our Oak Grove property in Southwestern Kentucky, a $1.2 million increase from our Derby City Gaming property in Louisville, and a $0.4 million increase from Churchill Downs Racetrack. • TwinSpires revenue decreased $5.1 million primarily due to the decision to exit the direct online Sports and Casino business in the first quarter of 2022 which was partially offset by incremental revenue from United Tote. • Gaming revenue increased $72.4 million primarily due to a $69.0 million increase attributable to the New York and Iowa properties acquired in the P2E Transaction. Gaming revenue also increased $5.1 million collectively from our properties in Louisiana, Maryland, and Maine, partially offset by a decline of $1.7 million from our properties in Florida and Pennsylvania. Consolidated Operating Expense The following table is a summary of our consolidated operating expense: Three Months Ended March 31, Change (in millions) 2023 2022 Taxes and purses $ 145.5 $ 101.6 $ 43.9 Salaries and benefits 62.9 42.3 20.6 Content expense 42.4 41.3 1.1 Selling, general and administrative expense 52.3 35.9 16.4 Depreciation and amortization 37.9 25.1 12.8 Marketing and advertising 18.0 11.5 6.5 Transaction expense, net (0.2) 5.0 (5.2) Asset impairments — 4.9 (4.9) Other operating expense 80.8 49.1 31.7 Total expense $ 439.6 $ 316.7 $ 122.9 Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022 Significant items affecting comparability of consolidated operating expense include: • Taxes and purses, salaries and benefits, selling, general and administrative, marketing and advertising, depreciation and amortization, and other operating expenses increased due to the P2E, Ellis Park and Chasers Transactions, as well as the opening of Turfway Park in September of 2022. • Transaction expenses decreased $5.2 million due to the 2022 P2E Transaction. • Asset impairments decreased $4.9 million due to the first quarter 2022 impairment related to the decision to exit the direct online Sports and Casino business which did not recur. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 31 Adjusted EBITDA We believe that the use of Adjusted EBITDA as a key performance measure of the results of operations enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA is a supplemental measure of our performance that is not required by or presented in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to 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. Three Months Ended March 31, Change (in millions) 2023 2022 Live and Historical Racing $ 82.1 $ 27.9 $ 54.2 TwinSpires 29.4 24.1 5.3 Gaming 129.5 91.1 38.4 Total Segment Adjusted EBITDA 241.0 143.1 97.9 All Other (18.1) (14.6) (3.5) Total Adjusted EBITDA $ 222.9 $ 128.5 $ 94.4 Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022 • Live and Historical Racing Adjusted EBITDA increased $54.2 million due to a $46.8 million increase attributable to the Virginia properties acquired in the P2E Transaction, a $4.5 million increase due to continued growth at our Oak Grove property in Southwestern Kentucky, and a $2.5 million increase due to the opening of Turfway Park in Northern Kentucky in September 2022. The remaining properties contributed a $0.4 million increase in Adjusted EBITDA.. • TwinSpires Adjusted EBITDA increased $5.3 million primarily due to the decision to exit the direct online Sports and Casino business in the first quarter of 2022 and incremental revenue from TwinSpires business to business agreements, partially offset by higher content related expenses and advance deposit wagering taxes in certain jurisdictions. • Gaming Adjusted EBITDA increased $38.4 million driven by a $26.5 million increase attributable to the New York and Iowa properties acquired in the P2E Transaction, a $13.5 million increase from our equity investments, and a $0.9 million increase from our properties in Maine, Maryland, and Louisiana. Partially offsetting these increases was a $2.5 million decrease from our properties in Pennsylvania, Florida, and Mississippi. • All Other Adjusted EBITDA decreased $3.5 million driven primarily by increased corporate compensation related expenses and legal fees. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 32 Reconciliation of Comprehensive Income to Adjusted EBITDA Three Months Ended March 31, Change (in millions) 2023 2022 Net income and comprehensive income $ 155.7 $ 42.1 $ 113.6 Additions: Depreciation and amortization 37.9 25.1 12.8 Interest expense 64.7 21.3 43.4 Income tax provision 53.2 16.5 36.7 EBITDA $ 311.5 $ 105.0 $ 206.5 Adjustments to EBITDA: Stock-based compensation expense $ 8.6 $ 7.0 $ 1.6 Pre-opening expense 3.2 2.1 1.1 Other expense, net 3.7 2.5 1.2 Asset impairments — 4.9 (4.9) Transaction expense, net (0.2) 5.0 (5.2) Other income, expense: Interest, depreciation and amortization expense related to equity investments 9.8 11.1 (1.3) Changes in fair value of Rivers Des Plaines' interest rate swaps — (10.4) 10.4 Rivers Des Plaines' legal reserves and transactions costs — 0.3 (0.3) Other charges 0.3 1.0 (0.7) Gain on sale of Arlington (114.0) — (114.0) Total adjustments to EBITDA (88.6) 23.5 (112.1) Adjusted EBITDA $ 222.9 $ 128.5 $ 94.4 Consolidated Balance Sheet The following is a summary of our overall financial position: (in millions) March 31, 2023 December 31, 2022 Change Total assets $ 6,273.5 $ 6,206.8 $ 66.7 Total liabilities 5,569.3 5,655.3 (86.0) Total shareholders' equity 704.2 551.5 152.7 Significant items affecting the comparability of our Condensed Consolidated Balance Sheets include: • Total assets increased $66.7 million primarily driven by capital expenditures, increased cash and cash equivalents and increased other current assets driven by an increase in prepaid insurance, partially offset by the sale of our Arlington property. • Total liabilities decreased $86.0 million primarily driven by net pay down of long-term debt. • Total shareholders’ equity increased $152.7 million driven by increased current year net income and stock-based compensation. Liquidity and Capital Resources The following table is a summary of our liquidity and cash flows: FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 33 (in millions) Three Months Ended March 31, Change Cash flows from: 2023 2022 Operating activities $ 215.9 $ 135.2 $ 80.7 Investing activities 54.5 (62.8) 117.3 Financing activities (237.7) (68.0) (169.7) Three Months Ended March 31, 2023 , Compared to the Three Months Ended March 31, 2022 • Cash flows from operating activities increased $80.7 million driven by a $77.7 million increase in operating income and distributions from unconsolidated affiliates, a $25.5 million increase in deferred revenue due to advanced sales for the 2023 Kentucky Derby, and $12.3 million decrease in cash used for working capital and all other. These were partially offset by $34.8 million increased interest paid in 2023. We anticipate that cash flows from operations over the next twelve months will be adequate to fund our business operations and capital expenditures. • Cash flows from investing activities increased $117.3 million driven by the $195.7 million proceeds from the Arlington sale, partially offset by an increase in capital project expenditures in 2023 primarily at Churchill Downs Racetrack and for the Dumfries project in Virginia. • Cash flows from financing activities decreased $169.7 million primarily driven by a $182.0 million net pay down of long-term debt in 2023, partially offset by stock repurchased during 2022. We have announced several project capital investments, including the following: Churchill Downs Racetrack First Turn Experience and the Paddock Project, the Derby City Gaming Expansion and Hotel, Derby City Gaming Downtown, the Ellis Park HRM facility in Owensboro, Kentucky, the Terre Haute Casino Resort in Virgo County, Indiana, a New Hampshire HRM Facility, the Virginia HRM entertainment venues in Dumfries and Emporia, and HRMs in our Louisiana OTBs. We currently expect our project capital to be approximately $575 to $675 million in 2023, although this amount may vary significantly based on the timing of work completed, unanticipated delays, and timing of payments to third parties. Common Stock Repurchase Program On September 29, 2021, the Board of Directors of the Company approved a common stock repurchase program of up to $500.0 million ("2021 Stock Repurchase Program"). The 2021 Stock Repurchase Program includes and is not in addition to the unspent amount remaining under the prior 2018 Stock Purchase Program authorization. Repurchases may be made at management’s discretion from time to time on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The repurchase program has no time limit and may be suspended or discontinued at any time. We had $270.2 million of repurchase authority remaining under this program on March 31, 2023. Credit Facilities and Indebtedness The following table presents our debt outstanding: (in millions) March 31, 2023 December 31, 2022 Change Revolver $ — $ 664.1 $ (664.1) Term Loan B due 2024 379.0 380.0 (1.0) Term Loan B-1 due 2028 294.0 294.7 (0.7) Term Loan A due 2027 1,283.8 800.0 483.8 2027 Senior Notes 600.0 600.0 — 2028 Senior Notes 700.0 700.0 — 2030 Senior Notes 1,200.0 1,200.0 — Total debt 4,456.8 4,638.8 (182.0) Current maturities of long-term debt (72.0) (47.0) (25.0) Total debt, net of current maturities 4,384.8 4,591.8 (207.0) Issuance costs, net of premiums and discounts (34.1) (33.1) (1.0) Net debt $ 4,350.7 $ 4,558.7 $ (208.0) FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 34 Credit Agreement At March 31, 2023, the Company’s senior secured credit facility (as amended from time to time, the “Credit Agreement") consisted of a $1.2 billion revolving credit facility (the "Revolver"), $400.0 million senior secured term loan B due 2024 (the "Term Loan B"), $300.0 million senior secured term loan B-1 due 2028 (the "Term Loan B-1"), $1.3 billion senior secured term loan A due 2027 (the "Term Loan A"), and $100.0 million swing line commitment. Certain amendments to the Credit Agreement entered into during 2022 and 2023, respectively, are described below. On April 13, 2022, we amended the Credit Agreement to extend the maturity date of its Revolver to April 13, 2027, to increase the commitments under the existing revolving credit facility from $700.0 million to $1.2 billion, and to increase the swing line commitment from $50.0 million to $100.0 million. This amendment also provided for the senior secured Term Loan A due April 13, 2027 in the amount of $800.0 million, which was drawn on November 1, 2022 as part of the financing for the P2E Transaction. Refer to Note 3, Acquisitions to our Condensed Consolidated Financial Statements, for further information regarding the P2E Transaction. The Company capitalized $3.2 million of debt issuance costs associated with the Revolver commitment increase and $6.4 million of debt issuance costs associated with the Term Loan A which are being amortized as interest expense over the 5-year term. On February 24, 2023, we amended our Credit Agreement to increase the loans under the existing Term Loan A due 2027 from $800.0 million to $1.3 billion and made certain other changes to the existing credit agreement. The Company used the net proceeds from the borrowings under the increased Term Loan A to repay outstanding loans under its Revolver, pay related transaction fees and expenses and for general corporate purposes. The Company capitalized $2.5 million of debt issuance costs associated with the increased Term Loan A which are being amortized as interest expense over the remainder of the 5-year term. The Company is required to pay a commitment fee on the unused portion of the Revolver as determined by a pricing grid based on the consolidated total net secured leverage ratio of the Company. For the period ended March 31, 2023, the Company's commitment fee rate was 0.25%. The Revolver and Term Loan A bear interest at SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio. As of March 31, 2023, that applicable margin was 150 basis points. The Term Loan B and Term Loan B-1 bear interest at LIBOR plus 200 basis points. The phase-out of LIBOR in existing debt agreements is set for June 30, 2023. The Credit Agreement includes a general process for establishing an alternative reference rate to the extent LIBOR is phased out. The Company will complete the transition of its financing from LIBOR to SOFR by June 30, 2023. These transition activities will not have a material impact on the Company’s financial statements. 2027 Senior Notes As of March 31, 2023, we had $600.0 million in aggregate principal amount of 5.500% senior unsecured notes that mature on April 1, 2027 (the "2027 Senior Notes"). The 2027 Senior Notes were issued at par in a private offering to qualified institutional buyers, with interest payable in arrears on April 1st and October 1st of each year, commencing on October 1, 2019. The Company may redeem some or all of the 2027 Senior Notes at redemption prices set forth in the 2027 Indenture. 2028 Senior Notes As of March 31, 2023, we had a total of $700.0 million in aggregate principal amount of 4.750% senior unsecured notes (collectively, the “2028 Senior Notes”) maturing on January 15, 2028. The 2028 Senior Notes consist of $500.0 million notes issued at par and $200.0 million notes issued at 103.25%. The 2028 Senior Notes were issued in a private offering to qualified institutional buyers, with interest payable in arrears on January 15th and July 15th of each year, commencing on July 15, 2018. The 3.25% premium is being amortized through interest expense, net over the term of the notes. The Company may redeem some or all the 2028 Senior Notes at redemption prices set forth in the 2028 Indenture. 2030 Senior Notes As of March 31, 2023, we had $1.2 billion in aggregate principal amount of 5.750% senior unsecured notes that mature on April 13, 2030 (the "2030 Senior Notes"). The 2030 Senior Notes were issued at par in a private offering to qualified institutional buyers, with interest payable in arrears on April 1st and October 1st of each year, commencing on October 1, 2022. In connection with the offering, we capitalized $18.3 million of debt issuance costs which are being amortized as interest expense over the term of the 2030 Senior Notes. The Company held the net proceeds of this transaction of $1.2 billion in escrow until the proceeds were utilized to complete the P2E Transaction on November 1, 2022. The Company may redeem some or all the 2030 Senior Notes at redemption prices set forth in the 2030 Indenture. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 35 2031 Senior Notes On April 25, 2023, the Company completed an offering of $600.0 million in aggregate principal amount of 6.750% Senior Unsecured Notes that mature on April 25, 2031 ("2031 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 Company used a portion of the net proceeds from the offering to repay indebtedness outstanding under its Term Loan B Facility due 2024 and to fund related transaction fees and expenses, and intends to use the remainder of the proceeds for working capital and other general corporate purposes. The 2031 Notes were issued at 100% of the principal amount, plus interest deemed to have accrued from April 25, 2023, with interest payable in arrears on May 1 and November 1 of each year, commencing on November 1, 2023. The 2031 Notes will vote as one class under the indenture governing the 2031 Senior Notes. The Company may redeem some or all of the 2031 Notes at any time prior to April 25, 2025, at redemption prices set forth in the 2031 Offering Memorandum. Contractual Obligations Our commitments to make future payments as of March 31, 2023, are estimated as follows: (in millions) 2023 2024-2025 2026-2027 Thereafter Total Term Loan A 48.8 130.0 1,105.0 — $ 1,283.8 Interest on Term Loan A (1) 62.1 153.3 89.3 — 304.7 Term Loan B 3.0 376.0 — — 379.0 Interest on Term Loan B (1) 19.8 25.8 — — 45.6 Term Loan B-1 2.3 6.0 6.0 279.7 294.0 Interest on Term Loan B-1 (1) 15.3 40.2 39.3 4.1 98.9 Revolver — — — — — Interest on Revolver — — — — — 2027 Senior Notes — — 600.0 — 600.0 2028 Senior Notes — — — 700.0 700.0 2030 Senior Notes — — — 1,200.0 1,200.0 Interest on 2027 Senior Notes 33.0 66.0 49.5 — 148.5 Interest on 2028 Senior Notes 16.6 66.5 66.5 16.6 166.2 Interest on 2030 Senior Notes 69.0 138.0 138.0 175.0 520.0 Operating and Finance Leases 4.5 10.7 7.5 7.0 29.7 All other 2.5 5.2 5.0 11.6 24.3 Total $ 276.9 $ 1,017.7 $ 2,106.1 $ 2,394.0 $ 5,794.7 (1) Interest includes the estimated contractual payments under our Credit Agreement assuming no change in the weighted average borrowing rate of 6.56% which was the rate in place as of March 31, 2023. As of March 31, 2023, we had approximately $5.2 million of tax liabilities related to unrecognized tax benefits.