SECURITIES AND EXCHANGE COMMISSION FORM 10-Q Quarterly report pursuant to sections 13 or 15(d) Filing Date: 2021-07-28 | Period of Report: 2021-06-30 SEC Accession No. 0000020212-21-000056 (HTML Version on secdatabase.com) FILER Churchill Downs Inc Mailing Address Business Address 600 N HURSTBOURNE 600 N HURSTBOURNE CIK:20212| IRS No.: 610156015 | State of Incorp.:KY | Fiscal Year End: 1231 PKWY PKWY Type: 10-Q | Act: 34 | File No.: 001-33998 | Film No.: 211122802 STE 400 STE 400 SIC: 7948 Racing, including track operation LOUISVILLE KY 40222-5389 LOUISVILLE KY 40222-5389 15023941166 Copyright © 2021 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-33998 Churchill Downs Incorporated (Exact name of registrant as specified in its charter) Kentucky 61-0156015 (State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.) organization) 600 North Hurstbourne Parkway, Suite 400 Louisville, Kentucky 40222 (Address of Principal Executive Offices) (Zip Code) (502) 636-4400 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, No Par Value CHDN The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," Copyright © 2021 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The number of shares outstanding of registrant’s common stock at July 14, 2021 was 38,520,048 shares. Copyright © 2021 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document CHURCHILL DOWNS INCORPORATED INDEX TO QUARTERLY REPORT ON FORM 10-Q For the Quarter Ended June 30, 2021 Part I-FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 3 2021 and 2020 Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020 4 Condensed Consolidated Statements of Shareholders' Equity for the three and six months ended June 30, 2021 and 5 2020 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 6 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3. Quantitative and Qualitative Disclosures About Market Risk 42 Item 4. Controls and Procedures 43 Part II-OTHER INFORMATION Item 1. Legal Proceedings 44 Item 1A. Risk Factors 46 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46 Item 3. Defaults Upon Senior Securities 47 Item 4. Mine Safety Disclosures 47 Item 5. Other Information 47 Item 6. Exhibits 47 Signatures 48 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021 2 Copyright © 2021 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Copyright © 2021 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (Unaudited) Copyright © 2021 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Three Months Ended June 30, Six Months Ended June 30, (in millions, except per common share data) 2021 2020 2021 2020 Net revenue: Live and Historical Racing $ 175.9 $ 23.3 $ 239.1 $ 51.4 TwinSpires 135.6 121.3 235.3 190.4 Gaming 186.0 37.3 338.0 183.2 All Other 17.6 3.2 27.0 13.0 Total net revenue 515.1 185.1 839.4 438.0 Operating expense: Live and Historical Racing 100.3 33.1 155.0 66.2 TwinSpires 96.8 74.7 169.8 125.5 Gaming 121.0 45.5 227.3 169.6 All Other 17.0 9.6 30.3 24.2 Selling, general and administrative expense 33.4 22.4 63.6 46.5 Asset impairments 11.2 — 11.2 17.5 Transaction expense, net — 0.2 0.1 0.5 Total operating expense 379.7 185.5 657.3 450.0 Operating income (loss) 135.4 (0.4) 182.1 (12.0) Other income (expense): Interest expense, net (22.0) (20.3) (41.4) (39.6) Equity in income (loss) of unconsolidated affiliates 36.4 (11.1) 61.3 (14.4) Miscellaneous, net 0.1 0.3 0.2 0.3 Total other income (expense) 14.5 (31.1) 20.1 (53.7) Income (loss) from continuing operations before (provision) benefit for income taxes 149.9 (31.5) 202.2 (65.7) Income tax (provision) benefit (41.6) 7.9 (57.8) 19.5 Income (loss) from continuing operations, net of tax 108.3 (23.6) 144.4 (46.2) Loss from discontinued operations, net of tax — (95.2) — (96.1) Net income (loss) 108.3 (118.8) 144.4 (142.3) Net loss attributable to noncontrolling interest — — — (0.1) Net income (loss) and comprehensive income (loss) attributable to Churchill Downs Incorporated $ 108.3 $ (118.8) $ 144.4 $ (142.2) Net income (loss) per common share data - basic: Continuing operations $ 2.80 $ (0.59) $ 3.72 $ (1.16) Discontinued operations $ — $ (2.41) $ — $ (2.43) Net income (loss) per common share data - basic $ 2.80 $ (3.00) $ 3.72 $ (3.59) Net income (loss) per common share data - diluted: Continuing operations $ 2.76 $ (0.59) $ 3.66 $ (1.16) Discontinued operations $ — $ (2.41) $ — $ (2.43) Net income (loss) per common share data - diluted $ 2.76 $ (3.00) $ 3.66 $ (3.59) Weighted average shares outstanding: Copyright © 2021 www.secdatabase.com. All Rights Reserved. Basic Please Consider the Environment Before Printing 38.7This Document 39.5 38.8 39.6 Diluted 39.3 39.5 39.4 39.6 The accompanying notes are an integral part of the condensed consolidated financial statements. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021 3 Copyright © 2021 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS Copyright © 2021 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (Unaudited) (in millions) June 30, 2021 December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 342.2 $ 67.4 Restricted cash 69.2 53.6 Accounts receivable, net 50.4 36.5 Income taxes receivable 39.1 49.4 Other current assets 31.7 28.2 Total current assets 532.6 235.1 Property and equipment, net 1,057.6 1,082.1 Investment in and advances to unconsolidated affiliates 644.6 630.6 Goodwill 366.8 366.8 Other intangible assets, net 348.2 350.6 Other assets 20.8 21.2 Total assets $ 2,970.6 $ 2,686.4 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 124.5 $ 70.7 Accrued expenses and other current liabilities 214.9 167.8 Current deferred revenue 23.1 32.8 Current maturities of long-term debt 7.0 4.0 Dividends payable — 24.9 Current liabilities of discontinued operations — 124.0 Total current liabilities 369.5 424.2 Long-term debt, net of current maturities and loan origination fees 671.4 530.5 Notes payable, net of debt issuance costs 1,291.7 1,087.8 Non-current deferred revenue 14.4 17.1 Deferred income taxes 250.5 213.9 Other liabilities 55.7 45.8 Total liabilities 2,653.2 2,319.3 Commitments and contingencies Shareholders' equity: Preferred stock — — Common stock 8.8 18.2 Retained earnings 309.5 349.8 Accumulated other comprehensive loss (0.9) (0.9) Total shareholders' equity 317.4 367.1 Total liabilities and shareholders' equity $ 2,970.6 $ 2,686.4 Copyright © 2021 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The accompanying notes are an integral part of the condensed consolidated financial statements.