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Churchill Downs rporated(CHDN) - 2022 Q4 - Annual Report
CHDNChurchill Downs rporated(CHDN)2023-02-21 16:00
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Acquisition and Transactions - The Company completed the acquisition of Peninsula Pacific Entertainment LLC for a base purchase price of 2.75billion,whichincludesColonialDownsRacetrackandsixHRMentertainmentvenuesinVirginia[558].−Thecompanyrecognizedagainof2.75 billion, which includes Colonial Downs Racetrack and six HRM entertainment venues in Virginia [558]. - The company recognized a gain of 274.6 million from the sale of 115.7 acres of land near Calder Casino, contributing to other income [579]. - The company completed the sale of the Arlington Property for 197.2milliononSeptember29,2021[580].−TheCompanyestablishedindefinite−livedintangibleassetstotaling197.2 million on September 29, 2021 [580]. - The Company established indefinite-lived intangible assets totaling 1.9 billion for gaming rights related to the P2E Transaction [586]. - Goodwill of 347.8millionwasrecognizedduetotheexpectedcontributionoftheP2ETransactiontothecompany′soverallbusinessstrategy[608].FinancialPerformance−NetrevenuefortheyearendedDecember31,2022,was347.8 million was recognized due to the expected contribution of the P2E Transaction to the company's overall business strategy [608]. Financial Performance - Net revenue for the year ended December 31, 2022, was 2,348.7 million, an increase of 9.1% from 2,153.6millionin2021[579].−Netincomefor2022was2,153.6 million in 2021 [579]. - Net income for 2022 was 535.4 million, significantly up from 205.1millionin2021,reflectingagrowthof160.5205.1 million in 2021, reflecting a growth of 160.5% [579]. - The income tax provision for 2022 was 169.4 million, compared to 94.5millionin2021,reflectinganincreaseintaxpositions[622].−ThebalanceoftaxpositionsasofDecember31,2022,was94.5 million in 2021, reflecting an increase in tax positions [622]. - The balance of tax positions as of December 31, 2022, was 6.4 million, up from 3.9millionin2021[625].RevenueRecognitionandOperations−TheCompanyrecognizedrevenuefrompari−mutuelwagering,sponsorships,admissions,andothersources,withspecificrevenuerecognitionpracticesforon−track,export,andimportrevenue[563].−TheCompany′srevenueisinfluencedbyitsracingcalendar,withthemajorityofliveracingrevenueoccurringinthesecondquarterduringtheKentuckyOaksandDerby[563].−In2022,theCompanyexitedthedirectonlineSportsandCasinobusinessinallstatesexceptPennsylvaniaandArizona,whilemaintainingretailSportsoperations[560].−TheCompanyhasintegrateditsUnitedTotebusinessintotheTwinSpiressegmenttoenhancebusiness−to−businessrevenueopportunities[40].ImpairmentandDepreciation−TheCompanyevaluatesitspropertyandequipmentforimpairmentbasedonestimatedfuturecashflows,withdepreciationcalculatedusingthestraight−linemethod[562].−TheCompanyrecordeda3.9 million in 2021 [625]. Revenue Recognition and Operations - The Company recognized revenue from pari-mutuel wagering, sponsorships, admissions, and other sources, with specific revenue recognition practices for on-track, export, and import revenue [563]. - The Company's revenue is influenced by its racing calendar, with the majority of live racing revenue occurring in the second quarter during the Kentucky Oaks and Derby [563]. - In 2022, the Company exited the direct online Sports and Casino business in all states except Pennsylvania and Arizona, while maintaining retail Sports operations [560]. - The Company has integrated its United Tote business into the TwinSpires segment to enhance business-to-business revenue opportunities [40]. Impairment and Depreciation - The Company evaluates its property and equipment for impairment based on estimated future cash flows, with depreciation calculated using the straight-line method [562]. - The Company recorded a 4.9 million non-cash impairment charge related to certain assets in the TwinSpires segment during 2022 [588]. - The Company recognized an impairment of 33.4millionforthePresqueIslegamingrightsandtrademarkinQ42022duetonegativeeconomictrends[619].−ThefairvalueofthePresqueIslereportingunit′sgoodwillexceededitscarryingvalue,resultinginnoimpairmentrecognizedforgoodwillinQ42022[619].−Depreciationexpenseincreasedto33.4 million for the Presque Isle gaming rights and trademark in Q4 2022 due to negative economic trends [619]. - The fair value of the Presque Isle reporting unit's goodwill exceeded its carrying value, resulting in no impairment recognized for goodwill in Q4 2022 [619]. - Depreciation expense increased to 109.0 million in 2022 from 98.4millionin2021[583].ChallengesandMarketConditions−TheCompanyhasfacedchallengesduetotheCOVID−19pandemic,impactingrevenuesfromeventsliketheKentuckyOaksandDerby,whichwereheldwithoutspectatorsin2020[559].−TheCompanyhasexperiencedsignificantcompetitionandchangingconsumerpreferences,whichmayimpactitsoperationsandfinancialperformance[46].StockandCompensation−TheCompanyrepurchased873,922sharesin2022atanaggregatepurchasepriceof98.4 million in 2021 [583]. Challenges and Market Conditions - The Company has faced challenges due to the COVID-19 pandemic, impacting revenues from events like the Kentucky Oaks and Derby, which were held without spectators in 2020 [559]. - The Company has experienced significant competition and changing consumer preferences, which may impact its operations and financial performance [46]. Stock and Compensation - The Company repurchased 873,922 shares in 2022 at an aggregate purchase price of 175.5 million [627]. - The 2016 Omnibus Stock Incentive Plan includes various forms of stock-based compensation, with a minimum vesting period of one year for awards granted [628]. Other Financial Considerations - The Company maintains an allowance for doubtful accounts for expected credit losses on financial assets, primarily included in accounts receivable [566]. - The Company updated the discount rate for impairment testing to reflect increased uncertainty in cash flows [619]. - The Company filed a refund claim in 2021 for a net operating loss from 2020, resulting in an income tax benefit of $13.3 million [623]. - The Company performed impairment testing for intangible assets and goodwill as of April 1, 2022, prior to the Q4 2022 assessment [619]. - The Company considered changes in carrying values and discount rates in its impairment evaluation [619].