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Item 1. Financial Statements

2023-07-26 compared with 2023-04-26 · 250 added, 196 removed, 580 unchanged (43% of the section changed)

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

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

(in millions, except per common share data) 2023 2022 2023 2022

14 unchanged sentences

Operating income 225.6 199.7 345.5 247.1

Other income (expense):

Other (expense) income:

Interest expense, net ( 65.2 ) ( 35.1 ) ( 129.9 ) ( 56.4 )

Equity in income of unconsolidated affiliates 38.8 40.5 77.1 73.0

Gain on sale of Arlington 114.0 —

Gain on sale of assets — 274.6 114.0 274.6

Miscellaneous, net — 0.2 1.4 0.2

Total other income 89.0 11.2

Total other (expense) income ( 26.4 ) 280.2 62.6 291.4

Income from operations before provision for income taxes 199.2 479.9 408.1 538.5

8 unchanged sentences

The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions) March 31, 2023 December 31, 2022

(in millions) June 30, 2023 December 31, 2022

Current assets:

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The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

CHURCHILL DOWNS INCORPORATED

5 unchanged sentences

Net income 155.7 155.7

Repurchase of common stock ( 3.9 ) 3.9 —

Issuance of common stock 0.2 —

Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 8.6 ) ( 2.7 ) ( 11.3 )

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Balance, March 31, 2023 74.9 — 705.1 ( 0.9 ) 704.2

Net income 143.0 143.0

Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 0.1 )

Stock-based compensation 8.1 8.1

Other ( 1.4 ) ( 1.4 )

Balance, June 30, 2023 74.9 $ 8.0 $ 846.7 $ ( 0.9 ) $ 853.8

Common Stock Retained

8 unchanged sentences

Balance, March 31, 2022 76.0 — 318.7 ( 0.9 ) 317.8

Net income 339.3 339.3

Repurchase of common stock ( 0.6 ) ( 7.4 ) ( 54.1 ) ( 61.5 )

Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 0.1 )

Stock-based compensation 7.4 7.4

Balance, June 30, 2022 75.4 $ — $ 603.8 $ ( 0.9 ) $ 602.9

The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2023 2022

9 unchanged sentences

Amortization of operating lease assets 3.5 2.7

Gain on sale of Arlington ( 114.0 ) —

Gain on sale of assets ( 114.0 ) ( 274.6 )

Other 3.6 2.9

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Capital project expenditures ( 282.2 ) ( 144.1 )

Proceeds from sale of Arlington 195.7 —

Proceeds from sale of assets 195.7 279.0

Other ( 2.3 ) ( 7.3 )

Net cash provided by (used in) investing activities 54.5 ( 62.8 )

Net cash (used in) provided by investing activities ( 119.0 ) 104.6

Cash flows from financing activities:

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Other ( 0.8 ) ( 0.2 )

Net cash used in financing activities ( 237.7 ) ( 68.0 )

Net cash (used in) provided by financing activities ( 47.7 ) 1,058.5

Cash flows from discontinued operations:

Operating activities of discontinued operations 0.5 —

Net increase in cash, cash equivalents and restricted cash 236.4 1,543.9

2 unchanged sentences

The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2023 2022

10 unchanged sentences

The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

13 unchanged sentences

We report net revenue and operating expense associated with these reportable segments in the accompanying Condensed Consolidated Statements of Comprehensive Income.

Effective May 22, 2023, the Company's common stock was split two -for-one (the "Stock Split") with a proportionate increase in the number of its authorized shares of common stock.

All share and per-share amounts have been retroactively adjusted to reflect the effects of the Stock Split.

Refer to Note 8, Shareholders' Equity for further information on the Stock Split.

Presque Isle Impairment

During the second quarter, we evaluated economic conditions subsequent to the date of our annual impairment assessment on April 1, 2023, including competition in the market and inflationary pressures, which increased during the second quarter of 2023, and impacted the performance and outlook of Presque Isle Downs and Casino ("Presque Isle").

As a result, the Company concluded that a trigger event for impairment testing occurred related to the Presque Isle gaming rights, trademark, and the reporting unit's goodwill at the end of the second quarter.

Based on the 2023 trigger event, the Company evaluated and subsequently updated the projected cash flows and discount rate to reflect the current environment.

As a result, the Company recognized a non-cash impairment charge of $ 24.5 million in the second quarter of 2023 for the Presque Isle gaming rights and trademark.

Refer to Note 5, Asset Impairments for further information on the impairment.

Arlington Sale

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On November 1, 2022, the Company completed the acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC ("P2E") with a base purchase price of $ 2.75 billion ("P2E Transaction") subject to working capital and other purchase price adjustments.

The P2E assets acquired included Colonial Downs Racetrack ("Colonial Downs") and six Historical Racing Machine ("HRM") entertainment venues in Virginia, del Lago Resort & Casino in New York ("del Lago"), and Hard Rock Hotel & Casino in Iowa ("Hard Rock Sioux City"), as well as the development rights for the Dumfries and Emporia HRM facilities in Virginia, up to five additional HRM entertainment venues in Virginia, and the potential for ONE Casino and Resort in Virginia in collaboration with Urban One.

Refer to Note 3, Acquisitions for further information on the transaction.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Acquisitions of Chasers Poker Room and Ellis Park

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Additional payments will be made once all necessary permits are obtained, and the planned historical racing entertainment venue is opened.

The Company plans to develop an expanded charitable gaming facility in Salem to accommodate HRMs and table games.

The Company plans to develop an expanded charitable gaming facility in New Hampshire to accommodate HRMs and table games.

On September 26, 2022, we completed the acquisition of Ellis Park Racing and Gaming ("Ellis Park") in Henderson, Kentucky, from Enchantment Holdings, LLC, an affiliate of Laguna Development Corporation, for total consideration of $ 79.0 million in cash, subject to certain working capital and other purchase price adjustments (the "Ellis Park Transaction").

Refer to Note 3, Acquisitions for further information on the transaction.

Impact of COVID-19 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.

Refer to Note 3, Acquisitions for further information on the transactions.

Exit of the Direct Online Sports and Casino Business

On February 24, 2022 the Company announced plans to exit the direct online sports and casino business.

The Company has exited the direct online Sports and Casino business in every state except for Arizona.

The Company plans to maintain its retail Sports operations and has monetized two of its online market access licenses.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements - effective in 2023 or thereafter

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, and to simplify the accounting for transitioning from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates.

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The use of LIBOR was phased out at the end of 2021, although the phase-out of U.S.

dollar LIBOR for existing agreements has been delayed until June 2023.

The Company will complete the transition of its financing from LIBOR to the Secured Overnight Financing Rate ("SOFR") by June 30, 2023.

These transition activities will not have a material impact on the Company’s financial statements.

dollar LIBOR for existing agreements was delayed until June 2023.

During the second quarter of 2023, the Company completed the transition of its financing from LIBOR to the Secured Overnight Financing Rate ("SOFR").

These transition activities did not have a material impact on the Company’s financial statements.

Chasers Poker Room

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The gaming rights intangible asset was assigned an indefinite useful life based on the Company's expected use of the asset and determination that no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of the gaming rights.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

On September 26, 2022, the Company completed the Ellis Park Transaction for total consideration of $ 79.0 million in cash, plus $ 3.5 million in working capital and other preliminary purchase price adjustments.

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The Company expects to continue to obtain information to assist in determining fair values of net assets acquired at the acquisition date during the measurement period.

The preliminary fair values of the assets acquired and liabilities assumed, net of cash acquired of $ 1.4 million, at the date of acquisition were as follows:

The preliminary fair values as of June 30, 2023 for the assets acquired and liabilities assumed, net of cash acquired of $ 1.4 million, at the date of acquisition are as follows:

property and equipment of $ 19.3 million, indefinite-lived gaming rights of $ 47.4 million, indefinite-lived trademark of $ 3.6 million, goodwill of $ 9.3 million, and net working capital of $ 1.5 million.

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The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed, net of cash acquired of $ 126.4 million, as of November 1, 2022:

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

(in millions) Total

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Current assets and current liabilities were valued at the existing carrying values, as these items are short term in nature and represent management's estimated fair value of the respective items at November 1, 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

The property and equipment acquired primarily relates to land, buildings, equipment, and furniture and fixtures.

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The goodwill was assigned to the Gaming segment in the amount of $ 129.1 million and to the Live and Historical Racing segment in the amount of $ 218.7 million and is mostly deductible for tax purposes.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period up to one year from the acquisition date.

The preliminary purchase consideration is subject to adjustment upon finalization of customary post-closing adjustments related to working capital.

The primary areas of the preliminary valuation that are not yet finalized relate to the fair values of amounts for income taxes, property and equipment, intangible assets, adjustments to working capital, and the final amount of residual goodwill.

The primary areas of the preliminary valuation that are not yet finalized relate to the fair values of amounts for income taxes, adjustments to working capital, and the final amount of residual goodwill.

The Company expects to continue to obtain information to assist in determining fair values of net assets acquired at the acquisition date during the measurement period.

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The unaudited pro forma financial information is not necessarily indicative of either future results of operations or results of operations that might have been achieved had the acquisition been consummated as of January 1, 2021.

(in millions) Three months ended March 31, 2022

(in millions) Three months ended June 30, 2022 Six months ended June 30, 2022

Net revenue $ 745.9 $ 1,258.8

Net income $ 360.1 $ 401.4

2023 Disposition

2023 Dispositions

Lady Luck Casino Nemacolin

On June 26, 2023, the Company's management agreement for Lady Luck Casino Nemacolin ("Lady Luck") in Farmington, Pennsylvania expired and was not renewed.

The Company completed the sale of substantially all of its assets at Lady Luck for an immaterial amount.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

On February 15, 2023, we closed on the sale of the Arlington property in Arlington Heights, Illinois, to the Chicago Bears for $ 197.2 million.

We received net proceeds of $ 195.7 million for the 326 -acres and recognized a gain of $ 114.0 million on the sale, which is included in other income in the accompanying Condensed Consolidated Statements of Comprehensive Income.

The Company has classified certain assets of Arlington totaling $ 82.0 million as held for sale as of December 31, 2022 on the accompanying Condensed Consolidated Balance Sheets.

Certain assets of Arlington totaling $ 82.0 million were classified held for sale as of December 31, 2022 on the accompanying Condensed Consolidated Balance Sheets.

Arlington’s operations and assets are included in All Other in our consolidated results.

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The Company determined that it is the primary beneficiary of the EAT, thus the property held by the EAT has been consolidated and recorded in property and equipment, net on the Condensed Consolidated Balance Sheets.

As of March 31, 2023, the Company recorded a $ 27.8 million deferred tax liability related to the Arlington sale on the Condensed Consolidated Balance Sheets.

As of June 30, 2023, the Company has a $ 27.8 million deferred tax liability related to the Arlington sale on the Condensed Consolidated Balance Sheets.

ASSET IMPAIRMENTS

Presque Isle Impairment

We performed our annual goodwill and indefinite-lived intangible assets impairment analysis for Presque Isle as of April 1, 2023.

Based on the results of this analysis, no impairments for Presque Isle were identified.

Subsequent to the annual test, we continued to evaluate economic conditions, including competition in the market and inflationary pressures, which increased during the second quarter of 2023, and impacted the performance and outlook of Presque Isle.

Based on the 2023 trigger event, the Company evaluated and subsequently updated the projected cash flows and discount rate to reflect the current environment.

As a result, the Company recognized a non-cash impairment charge of $ 24.5 million in the second quarter of 2023 for the Presque Isle gaming rights and trademark, which are included in the Gaming segment.

The fair value of the Presque Isle gaming rights was determined using the Greenfield Method, an income approach methodology that calculates the present value based on a projected cash flow stream.

The fair values of the trademark was determined by using the relief-from-royalty method of the income approach.

The fair value of the Presque Isle reporting unit's goodwill was determined under the market and income valuation approaches using inputs primarily related to discounted projected cash flows and price multiples of comparable publicly traded companies.

No impairment was recognized for the Presque Isle goodwill in second quarter of 2023.

GOODWILL AND OTHER INTANGIBLE ASSETS

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Adjustments 0.1 — — ( 1.0 ) ( 0.9 )

Balances as of March 31, 2023 $ 280.6 $ 152.2 $ 290.3 $ 1.0 $ 724.1

Balances as of June 30, 2023 $ 280.4 $ 152.2 $ 290.3 $ — $ 722.9

We performed our annual goodwill impairment analysis as of April 1, 2023, and no adjustment to the carrying value of goodwill was required.

We assessed goodwill for impairment by performing qualitative or quantitative analyses for each reporting unit.

We concluded that the fair values of our reporting units exceeded their carrying values, and therefore no impairments were identified.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Other intangible assets are comprised of the following:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

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Total $ 2,364.9 $ 2,391.8

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

The Company’s effective income tax rate for the three months ended March 31, 2023 was higher than the U.S.

We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2023.

We assessed our indefinite-lived intangible assets for impairment by performing qualitative or quantitative analyses for each asset.

Based on the results of these analyses, no indefinite-lived intangible asset impairments were identified in connection with our annual impairment testing.

Refer to Note 5, Asset Impairments, for information regarding the intangible asset impairment recognized during the second quarter of 2023.

The Company’s effective income tax rate for the three and six months ended June 30, 2023 was higher than the U.S.

federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer’s compensation.

The Company’s effective income tax rate for the three months ended March 31, 2022 was higher than the U.S.

The Company’s effective income tax rate for the three and six months ended June 30, 2022 was higher than the U.S.

federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer’s compensation.

This expense was partially offset by tax benefits resulting from year-to-date tax deductions from vesting of restricted stock compensation in excess of book deductions.

SHAREHOLDERS’ EQUITY

Stock Repurchase Programs

On October 30, 2018, the Board of Directors of the Company approved a common stock repurchase program of up to $ 300.0 million ("2018 Stock Repurchase Program").

The 2018 Stock Repurchase Program was in effect until September 29, 2021 and had unused authorization of $ 97.9 million.

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 any unspent amount remaining under the prior 2018 Stock Repurchase 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 approximately $ 270.2 million of repurchase authority remaining under the 2021 Stock Repurchase Program at March 31, 2023, based on trade date.

We had approximately $ 270.2 million of repurchase authority remaining under the 2021 Stock Repurchase Program at June 30, 2023.

We repurchased the following shares under the 2021 Stock Repurchase Program:

Three Months Ended March 31,

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

(in millions, except share data) 2023 2022 2023 2022

Repurchase Program Shares Aggregate Purchase Price Shares Aggregate Purchase Price

Repurchase Program Shares Aggregate Purchase Price Shares Aggregate Purchase Price Shares Aggregate Purchase Price Shares Aggregate Purchase Price

2021 Stock Repurchase Program (1)

— $ — 643,108 $ 61.5 — $ — 876,834 $ 86.5

(1) Number of shares have been adjusted for the Stock Split.

On April 25, 2023, the Company’s Board of Directors approved a two -for-one Stock Split and an amendment to the Company’s Articles of Incorporation to increase the number of shares of common stock the Company is authorized to issue from 150,000,000 shares, no par value, to 300,000,000 shares, no par value.

This amendment to the Company’s Articles of Incorporation became effective on May 19, 2023 and our common stock began trading at the split-adjusted price on May 22, 2023.

All share and per-share amounts in the Company’s consolidated financial statements and related notes have been retroactively adjusted to reflect the effects of the Stock Split.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

STOCK-BASED COMPENSATION PLANS

We have stock-based employee compensation plans with awards outstanding under the Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan (the "2016 Plan") and the Executive Long-Term Incentive Compensation Plan, which was adopted pursuant to the 2016 Plan.

Our total stock-based compensation expense, which includes expenses related to restricted stock awards, restricted stock unit awards ("RSUs"), performance share unit awards ("PSUs"), and stock options associated with our employee stock purchase plan was $ 8.6 million for the three months ended March 31, 2023 and $ 7.0 million for the three months ended March 31, 2022.

During the three months ended March 31, 2023, the Company awarded RSUs to employees, RSUs and PSUs to certain named executive officers ("NEOs"), and RSUs to directors.

Our total stock-based compensation expense, which includes expenses related to restricted stock awards ("RSAs"), restricted stock unit awards ("RSUs"), performance share unit awards ("PSUs"), and stock options associated with our employee stock purchase plan was $ 8.1 million and $ 16.7 million for the three and six months ended June 30, 2023 and $ 7.4 million and $ 14.4 million for the three and six months ended June 30, 2022, respectively.

During the six months ended June 30, 2023, the Company awarded RSUs to employees, RSUs and PSUs to certain named executive officers ("NEOs"), and RSAs and RSUs to directors.

The vesting criteria for the PSU awards granted in 2023 were based on a three-year service period with two performance conditions and a market condition related to relative total shareholder return ("TSR") consistent with prior year grants.

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The PSUs are converted into shares of our common stock at the time the PSU award value is finalized.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

A summary of the RSUs and PSUs granted during 2023 is presented below (units in thousands):

A summary of the RSAs, RSUs and PSUs granted during 2023 is presented below (units in thousands):

Grant Year Award Type Number of Units Awarded (1)(2)

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2023 PSU 62 Three -year performance and service period ending in 2025

2023 RSU 6 One year service period ending in 2024

2023 RSA 4 One year service period ending in 2024

(1) PSUs reflect the target number of units for the original PSU grant.

(2) Number of units awarded have been adjusted for the Stock Split.

The following table presents our total debt outstanding:

(in millions) March 31, 2023 December 31, 2022

(in millions) June 30, 2023 December 31, 2022

Term Loan B due 2024 $ — $ 380.0

5 unchanged sentences

2030 Senior Notes 1,200.0 1,200.0

2031 Senior Notes 600.0 —

Total debt 4,660.8 4,638.8

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Total debt, net of current maturities and costs $ 4,551.4 $ 4,558.7

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

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.

At June 30, 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"), $ 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.

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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 %.

For the period ended June 30, 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.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

As of June 30, 2023, that applicable margin was 150 basis points.

The Term Loan B-1 bears interest at SOFR plus 210 basis points.

The Company completed the transition of its financing from LIBOR to SOFR during the second quarter of 2023.

These transition activities did not have a material impact on the Company’s financial statements.

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 (the "2031 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act of 1933, as amended (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, working capital and other general corporate purposes.

The Company recognized a loss on extinguishment on Term Loan B of $ 1.3 million, which is included in miscellaneous, net in the accompanying Condensed Consolidated Statements of Comprehensive Income.

The Company capitalized $ 10.6 million of debt issuance costs associated with the 2031 Senior Notes which are being amortized as interest expense over the remainder of the 8-year term.

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 1st and November 1st 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 2031 Senior Notes were issued pursuant to an indenture, entered into on April 25, 2023 (the "2031 Indenture"), among the Company, certain subsidiaries of the Company as guarantors, and U.S.

Bank National Association, as trustee.

The Company may redeem some or all of the 2031 Senior Notes at any time at redemption prices set forth in the 2031 Indenture.

The terms of the 2031 Indenture, among other things, limit the ability of the Company to:

(i) incur additional debt and issue preferred stock, (ii) pay dividends or make other restricted payments, (iii) make certain investments, (iv) create liens, (v) allow restrictions on the ability of certain of our subsidiaries to pay dividends or make other payments, (vi) sell assets, (vii) merge or consolidate with other entities, and (viii) enter into transactions with affiliates.

In connection with the issuance of the 2031 Notes, the Company and the guarantors entered into a Registration Rights Agreement to register any notes under the Securities Act for resale that are not freely tradable 366 days from April 25, 2023.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

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.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Performance Obligations

As of March 31, 2023, our Live and Historical Racing segment had remaining performance obligations on contracts with a duration greater than one year relating to television rights, sponsorships, personal seat licenses, and admissions, with an aggregate transaction price of $ 172.7 million.

As of June 30, 2023, our Live and Historical Racing segment had remaining performance obligations on contracts with a duration greater than one year relating to television rights, sponsorships, personal seat licenses, and admissions, with an aggregate transaction price of $ 126.8 million.

The revenue we expect to recognize on these remaining performance obligations is $ 1.5 million for the remainder of 2023, $ 48.9 million in 2024, $ 38.1 million in 2025, and the remainder thereafter.

As of March 31, 2023, our remaining performance obligations on contracts with a duration greater than one year in segments other than Live and Historical Racing were not material.

As of June 30, 2023, our remaining performance obligations on contracts with a duration greater than one year in segments other than Live and Historical Racing were not material.

Contract Assets and Contract Liabilities

As of March 31, 2023 and December 31, 2022, contract assets were not material.

As of March 31, 2023 and December 31, 2022, contract liabilities were $ 140.7 million and $ 58.7 million, respectively, which are included in current deferred revenue, non-current deferred revenue, and accrued expense in the accompanying Condensed Consolidated Balance Sheets.

Contract liabilities primarily relate to the Live and Historical Racing segment and the increase was primarily due to cash payments received for unfulfilled performance obligations.

We recognized $ 3.6 million of revenue during the three months ended March 31, 2023, which was included in the contract liabilities balance at December 31, 2022.

We recognized $ 3.2 million of revenue during the three months ended March 31, 2022, which was included in the contract liabilities balance at December 31, 2021.

As of June 30, 2023 and December 31, 2022, contract assets were not material.

As of June 30, 2023 and December 31, 2022, contract liabilities were $ 43.5 million and $ 58.7 million, respectively, which are included in current deferred revenue, non-current deferred revenue, and accrued expense in the accompanying Condensed Consolidated Balance Sheets.

Contract liabilities primarily relate to the Live and Historical Racing segment and the decrease was primarily due to revenue recognized for fulfilled performance obligations.

We recognized $ 38.8 million and $ 42.4 million of revenue during the three months and six months ended June 30, 2023, respectively, which was included in the contract liabilities balance at December 31, 2022.

We recognized $ 43.6 million and $ 46.8 million of revenue during the three months and six months ended June 30, 2022, respectively, which was included in the contract liabilities balance at December 31, 2021.

Disaggregation of Revenue

2 unchanged sentences

This segment is also disaggregated by location given the geographic economic factors that affect the revenue of service offerings.

Within the Live and

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Historical racing segment, revenue is further disaggregated between live and simulcast racing, historical racing, racing event-related services, and other services.

Within the Live and Historical racing segment, revenue is further disaggregated between live and simulcast racing, historical racing, racing event-related services, and other services.

• For the TwinSpires segment, revenue is disaggregated between live and simulcast racing, gaming, and other services.

3 unchanged sentences

The tables below present net revenue from external customers and intercompany revenue from each of our segments:

Three Months Ended March 31,

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

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

(in millions) 2023 2022 2023 2022

11 unchanged sentences

Florida $ 26.0 $ 27.9 $ 52.1 $ 54.9

Iowa 24.0 — 48.5 —

Louisiana 33.8 37.2 77.9 78.7

14 unchanged sentences

Intercompany net revenue $ — $ — $ — $ —

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

7 unchanged sentences

Total $ 385.0 $ 137.4 $ 245.9 $ 768.3 $ 0.2 $ 768.5

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

8 unchanged sentences

(a) Food and beverage, hotel, and other services furnished to customers for free as an inducement to wager or through the redemption of our customers' loyalty points are recorded at the estimated standalone selling prices in Other revenue with a corresponding offset recorded as a reduction in historical racing pari-mutuel revenue for HRMs or gaming revenue for our casino properties.

These amounts were $ 12.1 million for the three months ended March 31, 2023 and $ 7.0 million for the three months ended March 31, 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

These amounts were $ 12.3 million for the three months ended June 30, 2023 and $ 7.7 million for the three months ended June 30, 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Six Months Ended June 30, 2023

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

Net revenue from external customers

Live and simulcast racing $ 51.2 $ 196.9 $ 14.8 $ 262.9 $ — $ 262.9

Historical racing (a)

369.4 — 13.0 382.4 — 382.4

Racing event-related services 137.7 — 3.4 141.1 — 141.1

5.1 5.6 412.4 423.1 — 423.1

36.0 29.7 52.3 118.0 0.5 118.5

Total $ 599.4 $ 232.2 $ 495.9 $ 1,327.5 $ 0.5 $ 1,328.0

Six Months Ended June 30, 2022

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

Net revenue from external customers

Live and simulcast racing $ 52.1 $ 199.9 $ 18.4 $ 270.4 $ — $ 270.4

Historical racing (a)

152.0 — 1.3 153.3 — 153.3

Racing event-related services 122.4 — 0.6 123.0 — 123.0

— 16.5 309.0 325.5 — 325.5

20.4 20.7 32.3 73.4 1.0 74.4

Total $ 346.9 $ 237.1 $ 361.6 $ 945.6 $ 1.0 $ 946.6

These amounts were $ 24.5 million for the six months ended June 30, 2023 and $ 14.8 million for the six months ended June 30, 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

OTHER BALANCE SHEET ITEMS

1 unchanged sentence

Accounts receivable is comprised of the following:

(in millions) March 31, 2023 December 31, 2022

(in millions) June 30, 2023 December 31, 2022

Trade receivables $ 33.8 $ 12.5

1 unchanged sentence

Other receivables 16.6 20.6

Allowance for doubtful accounts ( 4.9 ) ( 5.7 )

Allowance for credit losses ( 5.5 ) ( 5.7 )

Total $ 79.5 $ 81.5

1 unchanged sentence

Accrued expenses and other current liabilities consisted of the following:

(in millions) March 31, 2023 December 31, 2022

(in millions) June 30, 2023 December 31, 2022

Account wagering deposits liability $ 52.9 $ 57.8

7 unchanged sentences

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Investments in and advances to unconsolidated affiliates as of March 31, 2023 and December 31, 2022 primarily consisted of a 61.3 % interest in Rivers Casino Des Plaines ("Rivers Des Plaines"), a 50 % interest in Miami Valley Gaming and Racing ("MVG"), and other immaterial joint ventures.

Investments in and advances to unconsolidated affiliates as of June 30, 2023 and December 31, 2022 primarily consisted of a 61.3 % interest in Rivers Casino Des Plaines ("Rivers Des Plaines"), a 50 % interest in Miami Valley Gaming and Racing ("MVG"), and other immaterial joint ventures.

Rivers Des Plaines

3 unchanged sentences

As a result, we account for Rivers Des Plaines using the equity method.

As of March 31, 2023 , the net aggregate basis difference between the Company’s investment in Rivers Des Plaines and the amounts of the underlying equity in net assets was $ 832.4 million.

Our investment in Rivers Des Plaines was $ 537.9 million and $ 544.9 million as of March 31, 2023 and December 31, 2022, respectively.

The Company received distributions from Rivers Des Plaines of $ 33.8 million and $ 30.5 million for the three months ended March 31, 2023 and 2022, respectively.

As of June 30, 2023 , the net aggregate basis difference between the Company’s investment in Rivers Des Plaines and the amounts of the underlying equity in net assets was $ 832.5 million.

Our investment in Rivers Des Plaines was $ 531.4 million and $ 544.9 million as of June 30, 2023 and December 31, 2022, respectively.

The Company received distributions from Rivers Des Plaines of $ 68.2 million and $ 61.3 million for the six months ended June 30, 2023 and 2022, respectively.

Miami Valley Gaming

2 unchanged sentences

Since both the Company and DNC have participating rights over MVG, and both must consent to MVG's operating, investing and financing decisions, we account for MVG using the equity method.

Our investment in MVG was $ 113.9 million and $ 114.4 million as of March 31, 2023 and December 31, 2022, respectively.

The Company received distributions from MVG of $ 12.0 million and $ 10.0 million for the three months ended March 31, 2023 and 2022, respectively.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Our investment in MVG was $ 113.3 million and $ 114.4 million as of June 30, 2023 and December 31, 2022, respectively.

The Company received distributions from MVG of $ 23.5 million and $ 16.5 million for the six months ended June 30, 2023 and 2022, respectively.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

2 unchanged sentences

Summarized below are the financial results for our unconsolidated affiliates.

Three Months Ended March 31,

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

(in millions) 2023 2022 2023 2022

6 unchanged sentences

Net income $ 67.1 $ 70.3 $ 133.9 $ 128.1

(in millions) March 31, 2023 December 31, 2022

(in millions) June 30, 2023 December 31, 2022

Current assets $ 86.4 $ 91.0

14 unchanged sentences

Our restricted cash accounts held in money market and interest-bearing accounts qualify for Level 1 in the fair value hierarchy, which includes unadjusted quoted market prices in active markets for identical assets.

The fair value of the Company’s 2030 Senior Notes, 2028 Senior Notes, and 2027 Senior Notes are estimated based on unadjusted quoted prices for identical or similar liabilities in markets that are not active and as such are Level 2 measurements.

The fair value of the Company’s 2031 Senior Notes, 2030 Senior Notes, 2028 Senior Notes, and 2027 Senior Notes are estimated based on unadjusted quoted prices for identical or similar liabilities in markets that are not active and as such are Level 2 measurements.

The fair values of the Company's Term Loan B, Term Loan B-1, Term Loan A, and Revolver under the Credit Agreement approximate the gross carrying value of the variable rate debt and as such are Level 2 measurements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

1 unchanged sentence

The carrying amounts and estimated fair values by input level of the Company's financial instruments are as follows:

March 31, 2023

June 30, 2023

(in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3

3 unchanged sentences

Term Loan B-1 $ 290.4 $ 293.3 $ — $ 293.3 $ —

Term Loan B-1 291.0 294.0 — 294.0 —

Term Loan A 1,260.2 1,267.5 — 1,267.5 —

Revolver — — — — —

2027 Senior Notes 595.9 573.0 — 573.0 —

1 unchanged sentence

2030 Senior Notes 1,184.5 1,119.0 — 1,119.0 —

2031 Senior Notes 589.7 593.6 — 593.6 —

December 31, 2022

11 unchanged sentences

CONTINGENCIES

We are involved in litigation arising in the ordinary course of conducting business.

We may be involved in litigation arising in the ordinary course of conducting business.

We carry insurance for workers' compensation claims from our employees and general liability for claims from independent contractors, customers and guests.

7 unchanged sentences

Legal fees are expensed as incurred.

If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

In the event that a legal proceeding results in a substantial judgment against us, or settlement by us, there can be no assurance that any resulting liability or financial commitment would not have a material adverse impact on our business.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

NET INCOME PER COMMON SHARE COMPUTATIONS

The following is a reconciliation of the numerator and denominator of the net income per common share computations:

Three Months Ended March 31,

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

(in millions, except per share data) 2023 2022 2023 2022

8 unchanged sentences

Diluted net income $ 1.86 $ 4.39 $ 3.90 $ 4.92

All share and per-share amounts have been retroactively adjusted to reflect the effects of the Stock Split.

Refer to Note 8, Shareholders' Equity for further information on the Stock Split.

SEGMENT INFORMATION

2 unchanged sentences

Our operating segments reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources.

• Live and Historical Racing

The Live and Historical Racing segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack and our historical racing properties in Kentucky, Virginia, and New Hampshire.

Our Live and Historical Racing properties earn commissions primarily from pari-mutuel wagering on live and historical races;

simulcast fees earned from other wagering sites, fees from racing event-related services including admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services, and revenue from food and beverage services.

The TwinSpires segment includes the revenue and expenses for TwinSpires Horse Racing, TwinSpires Sports and Casino and United Tote businesses and these businesses are headquartered in Louisville, Kentucky.

TwinSpires Horse Racing operates the online horse racing wagering business for TwinSpires.com, BetAmerica.com, and other white-label platforms;

facilitates high dollar wagering by international customers;

and provides the Bloodstock Research Information Services platform for horse racing statistical data.

TwinSpires Sports and Casino includes retail and online sports betting and online casino operations.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Our TwinSpires Sports and Casino business includes the results of our nine retail sportsbooks at our wholly-owned properties and our casino platform in Pennsylvania.

Rivers Des Plaines retail and online BetRivers sportsbook and MVG sportsbook results are included in the Gaming segment.

The Company exited the direct online Sports and Casino business in every state except Arizona.

United Tote manufactures and operates pari-mutuel wagering systems for racetracks, off-track betting facilities ("OTBs") and other pari-mutuel wagering businesses.

United Tote provides totalisator services which accumulate wagers, calculate payoffs and displays wagering data to patrons who wager on horse races.

United Tote has contracts to provide totalisator services to third-party racetracks, OTBs and other pari-mutuel wagering businesses and also provides these services at our facilities.

The Gaming segment includes revenue and expenses for the casino properties and associated racetrack facilities which support the casino license as applicable.

The Gaming segment has approximately 13,980 slot machines and video lottery terminals ("VLTs") and 358 table games located in ten states.

The Gaming segment revenue and expenses includes the following properties:

• Florida - Calder Casino ("Calder")

▪ Iowa - Hard Rock Hotel & Casino ("Hard Rock Sioux City")

▪ Louisiana - Fair Grounds Slots, Fair Grounds Race Course, and Video Services, LLC ("VSI") (collectively, "Fair Grounds and VSI")

▪ Maryland - Ocean Downs Casino & Racetrack ("Ocean Downs")

▪ Maine - Oxford Casino & Hotel ("Oxford")

▪ Mississippi

• Harlow’s Casino Resort and Spa ("Harlow's")

• Riverwalk Casino Hotel ("Riverwalk")

▪ New York - del Lago Resort & Casino ("del Lago")

▪ Pennsylvania

• Presque Isle Downs & Casino ("Presque Isle")

• Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") management agreement

The Gaming segment also includes net income for our ownership portion of the Company’s equity investments in the following:

• Illinois - 61.3 % equity investment in Midwest Gaming, the parent company of Rivers Des Plaines

• Ohio - 50 % equity investment in MVG

The Gaming segment generates revenue and expenses from slot machines, table games, VLTs, video poker, HRMs, ancillary food and beverage services, hotel services, commission on pari-mutuel wagering, racing event-related services, and other miscellaneous operations.

We have aggregated Arlington as well as certain corporate operations, and other immaterial joint ventures in All Other to reconcile to consolidated results.

8 unchanged sentences

– Direct online Sports and Casino business exit costs;

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

– Other transaction expense, including legal, accounting, and other deal-related expense;

4 unchanged sentences

• Asset impairments;

• Gain on property sales;

• Gain on property and asset sales;

• Legal reserves;

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

• Pre-opening expense;

• Other charges, recoveries, and expenses

On June 26, 2023, the Company's management agreement for Lady Luck expired and was not renewed.

The Company completed the sale of substantially all of its assets at Lady Luck for an immaterial amount.

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 .

Arlington's results and exit costs in 2022 and 2023 are treated as an adjustment to EBITDA.

We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner.

1 unchanged sentence

Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the accompanying Consolidated Statements of Comprehensive Income (Loss).

For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the accompanying Consolidated Statements of Comprehensive Income.

The tables below present net revenue from external customers, Adjusted EBITDA by segment and reconciles comprehensive income to Adjusted EBITDA:

Net revenue by segment is comprised of the following:

Three Months Ended March 31,

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

(in millions) 2023 2022 2023 2022

4 unchanged sentences

Net Revenue $ 768.5 $ 582.5 $ 1,328.0 $ 946.6

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

1 unchanged sentence

Adjusted EBITDA by segment is comprised of the following:

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(in millions) Live and Historical Racing TwinSpires Gaming

8 unchanged sentences

Adjusted EBITDA $ 223.5 $ 33.9 $ 123.4

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(in millions) Live and Historical Racing TwinSpires Gaming

8 unchanged sentences

Adjusted EBITDA $ 163.9 $ 33.9 $ 106.8

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Six Months Ended June 30, 2023

(in millions) Live and Historical Racing TwinSpires Gaming

Revenues $ 623.8 $ 235.5 $ 499.5

Taxes and purses ( 141.9 ) ( 12.0 ) ( 165.3 )

Marketing and advertising ( 20.3 ) ( 6.7 ) ( 17.6 )

Salaries and benefits ( 52.1 ) ( 13.7 ) ( 74.0 )

Content expense ( 3.5 ) ( 111.7 ) ( 4.5 )

Selling, general and administrative expense ( 16.0 ) ( 5.1 ) ( 22.5 )

Other operating expense ( 84.6 ) ( 24.0 ) ( 60.0 )

Other income 0.2 1.0 97.3

Adjusted EBITDA $ 305.6 $ 63.3 $ 252.9

Six Months Ended June 30, 2022

(in millions) Live and Historical Racing TwinSpires Gaming

Revenues $ 363.1 $ 239.9 $ 363.7

Taxes and purses ( 86.4 ) ( 14.7 ) ( 135.5 )

Marketing and advertising ( 9.3 ) ( 10.1 ) ( 7.2 )

Salaries and benefits ( 29.8 ) ( 13.6 ) ( 47.4 )

Content expense ( 1.6 ) ( 111.2 ) ( 3.7 )

Selling, general and administrative expense ( 6.3 ) ( 5.2 ) ( 13.3 )

Other operating expense ( 38.0 ) ( 27.1 ) ( 42.2 )

Other income 0.1 — 83.5

Adjusted EBITDA $ 191.8 $ 58.0 $ 197.9

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Adjusted EBITDA by segment is comprised of the following:

Three Months Ended March 31,

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

(in millions) 2023 2022 2023 2022

2 unchanged sentences

Depreciation and amortization 41.8 26.1 79.7 51.2

Interest expense 64.7 21.3

Interest expense, net 65.2 35.1 129.9 56.4

Income tax provision 56.2 140.6 109.4 157.1

2 unchanged sentences

Stock-based compensation expense $ 8.1 $ 7.4 $ 16.7 $ 14.4

Legal reserve — 3.2 — 3.2

Pre-opening expense 3.2 2.6 6.4 4.7

Arlington exit costs 5.9 1.8 9.3 4.3

Other expenses, net 6.6 — 6.9 —

Asset impairments — 4.9

Transaction expense, net 0.5 1.2 0.3 6.2

Asset impairments 24.5 — 24.5 4.9

Other income, expense:

3 unchanged sentences

Other charges and recoveries, net ( 1.2 ) — ( 0.9 ) 1.0

Gain on sale of Arlington ( 114.0 ) —

Gain on sale of assets — ( 274.6 ) ( 114.0 ) ( 274.6 )

Total adjustments to EBITDA 57.5 ( 249.9 ) ( 31.1 ) ( 226.4 )

7 unchanged sentences

Total Adjusted EBITDA $ 363.7 $ 291.2 $ 586.6 $ 419.7

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Churchill Downs Incorporated

1 unchanged sentence

The table below presents total asset information for each of our segments:

(in millions) March 31, 2023 December 31, 2022

(in millions) June 30, 2023 December 31, 2022

Total assets:

6 unchanged sentences

The table below presents total capital expenditures for each of our segments:

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2023 2022

6 unchanged sentences

Total capital expenditures $ 312.4 $ 167.1

SUBSEQUENT EVENTS

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.

In connection with the issuance of the 2031 Notes, the Company and the guarantors of the 2031 Notes entered into a Registration Rights Agreement to register any 2031 Notes under the Securities Act for resale that are not freely tradable 366 days from April 25, 2023.

Two for One Stock Split

At its regularly scheduled meeting held April 25, 2023, the Board of Directors of the Company approved a two -for-one stock split of the Company's common stock and a proportionate increase in the number of its authorized shares of common.

The Company expects the additional shares to be distributed on May 19, 2023, and the stock to begin trading at the split-adjusted price starting on May 22, 2023.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

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 1. Financial Statements