Churchill Downs Annual Report 2019

FY2019 Annual Report · Churchill Downs

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Notice of Annual Meeting of Shareholders
2020 Proxy Statement
2019 Annual Report on Form 10-K

Chairman and CEO’s Message

Dear Fellow Shareholders,

We had a productive year of which we are proud and, equally important, we believe we have positioned the company for
future growth.

With our focus on our three primary segments—Churchill Downs, Online Wagering and Gaming—we have demonstrated
our ability to grow organically, invest capital to grow our existing assets, develop and build greenfields that create
substantial growth over the long term, and acquire strategic assets that we anticipate will provide significant growth
potential at attractive multiples. We have demonstrated this capability while effectively managing our capital and
maintaining a relatively low leverage level.

On the attached page, you will see Financial Highlights, including our Total Shareholder Return. In addition, we returned
over $115 million to our shareholders in 2019 through dividends and share repurchases, and on a cumulative basis, have
returned over $1 billion to our shareholders over the past five years. Some of the highlights of 2019 that drove these results
and we believe set us up for future growth include:

Delivered the 10th consecutive year of record-setting financial performance for Derby week and the Kentucky Derby;

Began construction of the $300 million hotel and 900-unit historical horse racing machine (“HRM”) facility at Churchill
Downs Racetrack;

Completed our equity investment in Rivers Casino Des Plaines and acquired Presque Isle Downs & Casino and Turfway
Park; and

Began the buildout of the Oak Grove Racing and Gaming facility.

We had a total shareholder return in 2019 of 69%—a return that significantly exceeded the S&P500, the Russell 2000, the
S&P Midcap 400 Index and virtually all of our gaming peers.

2019 is now in the past, however, and what matters most is what we deliver in the future. We can assure you—our
shareholders—that we are focused on delivering a combination of organic growth and greenfield opportunities along with
strategic acquisitions at reasonable multiples with the intent of growing our adjusted EBITDA and free cash flow while
continuing to maintain a responsible level of debt.

We plan to execute the following strategies:

Continue to protect and build our iconic asset—the Kentucky Derby—and Derby week at Churchill Downs Racetrack.
The new hotel and HRM facility is planned to open in the 4th quarter of 2021;

Remain focused on growing our TwinSpires business—the most profitable online wagering platform in the country—
and building a long-term profitable sports betting and iGaming business;

Finish the construction of our Oak Grove Racing and Gaming facility which is planned to open in September 2020 and
begin the rebuild of Turfway Park which is planned to open in 2021;

And, last, focus on operating efficiently and growing through smart capital investments our existing regional gaming
assets as well as acquiring strategic gaming properties at reasonable multiples.

We will always remain thoughtful stewards of our shareholders’ capital and intend to continue to invest capital to create
long-term shareholder value while maintaining capacity for dividend growth and opportunistic share repurchases. We
believe we have a significant amount of growth in our pipeline and we—along with all of our employees—are excited about
the potential opportunities to grow our company over the next three to four years.

R. Alex Rankin
Chairman of the Board

William C. Carstanjen
Chief Executive Officer

FINANCIAL HIGHLIGHTS

$ in millions, except per share data

Consolidated Financial Results

Net revenue
Operating income
Net income from continuing operations
Diluted EPS from continuing operations
Adjusted EBITDA1

Consolidated Balance Sheet

Total Assets
Total Debt
Total Liabilities
Shareholders’ Equity

Cash Flow and Liquidity

Cash Flows from Operating Activities
Capital Maintenance Expenditures
Net Leverage Ratio2

Shareholder Data:

Dividends Declared per Common Share
Common Stock Share Repurchases
Year-End Closing Stock Prices
Equity Market Capitalization
Total Capitalization

Financial Highlights

Year Ended December 31,

2017

2018

2019

$ 883
$ 146
$ 122
$ 2.55
$286.2

$2,359
$1,129
$1,719
$ 640

$ 215
33
$
2.9x

$0.507
$ 180
$77.57
$3,586
$4,715

$1,009
$ 189
$ 183
$ 4.39
$328.8

$1,725
$ 884
$1,252
$ 473

$ 198
30
$
2.3x

$0.543
$ 532
$81.31
$3,285
$4,169

$ 1,330
216
$
$
140
$ 3.44
$ 451.4

$ 2,551
$ 1,474
$ 2,040
511
$

$
$

290
48
3.1x

$ 0.581
$
93
$137.20
$ 5,446
$ 6,920

TOTAL SHAREHOLDER RETURN(3)

1 Year

3 Year

178%

5 Year

347%

31%

26%

69%

53%

30%

28%

74%

54%

48%

S&P
500

S&P Midcap
400

Russell
2000

CDI

S&P
500

S&P Midcap
400

Russell
2000

CDI

S&P
500

S&P Midcap
400

Russell
2000

CDI

Net leverage ratio is the ratio of total debt (less cash) to Adjusted EBITDA, which includes Big Fish Games for the 2017
calculation.

Total Shareholder Return (“TSR”) assumes dividends are reinvested. One year TSR is calculated from December 31,
2018 to December 31, 2019. Three year TSR is calculated from December 31, 2016 to December 31, 2019. Five year
TSR is calculated from December 31, 2014 to December 31, 2019.

600 N. HURSTBOURNE PARKWAY, STE. 400
LOUISVILLE, KENTUCKY 40222

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

DATE AND TIME:

Tuesday, April 21, 2020, at 9:00 a.m. Eastern Time

PLACE:

AGENDA:

Nemacolin Woodlands Resort
1001 Lafayette Drive
Farmington, Pennsylvania 15437

II.

To elect the three (3) Class III Directors identified in this Proxy Statement for a term of
three (3) years (Proposal No. 1);

To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent
registered public accounting firm for fiscal year 2020 (Proposal No. 2);

III. To conduct an advisory vote to approve executive compensation (Proposal No. 3); and

IV. To transact such other business as may properly come before the meeting or any

adjournment thereof, including matters incident to its conduct.

RECORD DATE:

The close of business on March 2, 2020, has been fixed as the record date for determining the
shareholders entitled to notice of, and to vote at, the Annual Meeting. Only shareholders of
record at that time will be entitled to notice of and to vote at the Annual Meeting and at any
adjournments thereof.

Shareholders who do not expect to attend the Annual Meeting in person are urged to vote by
telephone or over the Internet, or by requesting and promptly signing and returning a proxy
card, as more fully described in the Notice of Internet Availability of Proxy Materials.

VOTING:

March 10, 2020

By Order of the Board of Directors.

BRADLEY K. BLACKWELL
Senior Vice President,
General Counsel and Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 21, 2020

The Company’s Proxy Statement for the 2020 Annual Meeting of Shareholders and the Annual Report to
Shareholders for the fiscal year ended December 31, 2019 are available at
http://www.churchilldownsincorporated.com/proxy

TABLE OF CONTENTS

Notice of Annual Meeting of Shareholders

Proxy Statement

Annual Meeting of Shareholders to be held on April 21, 2020 . . .
Voting Instructions and Information . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information about our Executive Officers . . . . . . . . . . . . . . . . . .

Election of Directors (Proposal No. 1)

Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement Age Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Emeritus Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Compensation for Fiscal Year Ended December 31, 2019 . .
Director Stock Ownership Guidelines . . . . . . . . . . . . . . . . . . . . . . .

Corporate Governance

Shareholder Communications . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oversight of Company Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Meetings and Committees . . . . . . . . . . . . . . . . . . . . . . . .
Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Responsibilities of the Compensation Committee . . . . . . . . . . . .
Compensation Committee Interlocks and Insider Participation . . .
Compensation Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nominating and Governance Committee . . . . . . . . . . . . . . . . . .

Proposal to Ratify the Appointment of

PricewaterhouseCoopers LLP as the Company’s
Independent Registered Public Accounting Firm for
2020 (Proposal No. 2)

Independent Public Accountants

Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Advisory Vote to Approve Executive Compensation

(Proposal No. 3)

Compensation Discussion and Analysis

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Key 2019 Compensation Actions . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation Philosophy and Core Principles . . . . . .
2019 “Say-on-Pay” Advisory Vote on Executive

Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Role of Management and Independent Advisors . . . . . . . . . . . .
Factors Used to Evaluate Pay Decisions . . . . . . . . . . . . . . . . . . . .

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8

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Table of Contents

Components of Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Annual Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Component (75%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Qualitative Component (25%) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary of EAIP Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Stock Ownership Guidelines . . . . . . . . . . . . . . . . . . . .
Anti-Hedging Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clawback Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Compensation and Other Benefits . . . . . . . . . . . . . . . .
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . .

2019 Summary Compensation Table

All Other Compensation for Fiscal Year Ended

December 31, 2019

Grants of Plan-Based Awards for Fiscal Year Ended

December 31, 2019

Outstanding Equity Awards at Fiscal Year-End for

Fiscal Year Ended December 31, 2019

Stock Vested for Fiscal Year Ended December 31,

2019

Nonqualified Deferred Compensation for Fiscal Year

Ended December 31, 2019

Potential Payments Upon Termination or Change of

Control

Non-Solicit Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pay Ratio

Identification of Median Employee . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio (2019)

Equity Compensation Plan Information

Certain Relationships and Related Transactions

Churchill Downs Incorporated Audit Committee

Report

Delinquent Section 16(a) Reports

Multiple Shareholders Sharing the Same Address

Proposals by Shareholders

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35
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2020 Proxy Statement | i

Proxy Statement

600 N. HURSTBOURNE PARKWAY, STE. 400
LOUISVILLE, KENTUCKY 40222

PROXY STATEMENT

Annual Meeting of Shareholders to be held on April 21, 2020

The Board of Directors (the “Board of Directors” or “Board”) of Churchill Downs Incorporated (“Company,” “CDI,” or
“CHDN”) is soliciting proxies to be voted at the 2020 Annual Meeting of Shareholders to be held on Tuesday, April 21, 2020,
at 9:00 a.m. Eastern Time (the “Annual Meeting”), at Nemacolin Woodlands Resort, 1001 Lafayette Drive, Farmington,
Pennsylvania 15437, and any adjournments thereof. Certain officers and directors of the Company and persons acting
under their instruction may also solicit proxies on behalf of the Board of Directors by means of telephone calls, personal
interviews and mail at no additional expense to the Company. The Notice of Internet Availability of Proxy Materials (the
“Notice”) was first mailed on or about March 10, 2020.

Voting Rights

Only holders of record of the Company’s Common Stock, no par value (“Common Stock”), on March 2, 2020 (the “Record
Date”), are entitled to notice of and to vote at the Annual Meeting. On that date, 39,559,648 shares of Common Stock were
outstanding and entitled to vote. Each shareholder has one vote per share on all matters coming before the Annual
Meeting. The shareholders of the Company do not have cumulative voting rights in the election of directors. Abstentions or
“withhold” votes, as applicable, and broker non-votes are not counted in determining the number of votes required for the
election of a director or passage of any matter submitted to the shareholders. Abstentions or “withhold” votes and broker
non-votes are counted for purposes of determining whether a quorum exists. For more information regarding broker
non-votes, see “What is a broker non-vote?” below.

Whether or not you plan to attend the Annual Meeting in person, to ensure the presence of a quorum, please vote over the
Internet or by telephone as instructed in these materials as promptly as possible. If a shareholder executes and returns a
proxy card, but does not specify otherwise, the shares represented by the shareholder’s proxy will be voted: (i) for the
election of each of the three director nominees listed below under “Election of Directors”; (ii) for the ratification of the
appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal
year 2020; (iii) for the advisory approval of the compensation of the Company’s named executive officers as disclosed in
this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (the
“SEC”); and (iv) in the discretion of the person or persons voting the proxies, on such other business as may properly come
before the Annual Meeting or any adjournments thereof.

2020 Proxy Statement | 1

Proxy Statement

Voting Instructions and Information

When and where is our Annual Meeting?

We will hold our Annual Meeting on Tuesday, April 21, 2020 at 9:00 a.m. Eastern Time at Nemacolin Woodlands Resort,
1001 Lafayette Drive, Farmington, Pennsylvania 15437.

How are we distributing our proxy materials?

In accordance with the “notice and access” rules and regulations adopted by the SEC, instead of mailing a printed copy of
our proxy materials to each shareholder of record (the “full set delivery” option), we are furnishing proxy materials to our
shareholders over the Internet (the “notice only” option). A company may use either option, “notice only” or “full set
delivery,” for all of its shareholders or may use one method for some shareholders and the other method for others. We
believe the “notice only” process expedites shareholders’ receipt of proxy materials and reduces the costs and
environmental impact of our Annual Meeting. The Company will bear the entire cost of the solicitation.

On March 10, 2020, we began mailing a Notice to our shareholders containing instructions on how to access this Proxy
Statement and our 2019 Annual Report on Form 10-K and vote online, as well as instructions on how to receive paper
copies of these documents for shareholders who so select. This Proxy Statement and the 2019 Annual Report on Form 10-K
are also available at http://www.churchilldownsincorporated.com/proxy.

Who can vote at the Annual Meeting?

You are entitled to vote or direct the voting of your shares of CHDN Common Stock if you were a shareholder of record or if
you held CHDN Common Stock in “street name” at the close of business on the Record Date (Monday, March 2, 2020). On
that date, 39,559,648 shares of CHDN Common Stock were outstanding. Each share of CHDN Common Stock held by you on
the Record Date is entitled to one vote.

How many votes must be present to hold the Annual Meeting?

We must have a “quorum” to conduct the Annual Meeting. A majority of the outstanding shares of Common Stock entitled
to vote, represented in person or by proxy, shall constitute a quorum. Once a share is represented for any purpose at the
Annual Meeting, it will be deemed present for quorum purposes for the remainder of the Annual Meeting and for any
adjournment of the Annual Meeting, unless a new record date must be set for the adjourned meeting.

What do I need to attend, and vote at, the Annual Meeting?

If you plan on attending the Annual Meeting, please remember to bring photo identification with you, such as a driver’s
license. In addition, if you hold shares in “street name” and would like to attend the Annual Meeting, you must bring an
account statement or other acceptable evidence of ownership of CHDN Common Stock as of the close of business on the
Record Date. Only CHDN shareholders of record as of the close of business on the Record Date will be permitted to attend
the Annual Meeting. In order to vote at the Annual Meeting if you hold shares in “street name,” you will also need a valid
“legal proxy,” which you can obtain by contacting your account representative at the broker, bank or similar institution
through which you hold your shares.

What proposals will be voted on at the Annual Meeting?

The following proposals from the Company will be considered and voted on at the Annual Meeting:

To elect the three (3) Class III Directors identified in this Proxy Statement for a term of three (3) years (Proposal No. 1);

To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting
firm for fiscal year 2020 (Proposal No. 2); and

To conduct an advisory vote to approve the executive compensation of the Company’s named executive officers as
disclosed in this Proxy Statement (Proposal No. 3).

You may also vote on any other business as may properly come before the Annual Meeting or any adjournment thereof,
including matters incident to the Annual Meeting’s conduct.

2 | 2020 Proxy Statement

Proxy Statement

How does the Board of Directors recommend I vote?

CDI’s Board of Directors unanimously recommends that you vote:

“FOR” each of the three (3) director nominees identified in this Proxy Statement under “Election of Directors” to the
Board of Directors.

“FOR” the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent
registered public accounting firm for fiscal year 2020.

“FOR” the proposal to approve, on a non-binding advisory basis, the executive compensation of the Company’s named
executive officers as disclosed in this Proxy Statement.

How do I vote?

You may cast your vote in one of four ways:

By Submitting a Proxy by Internet. Go to the following website: www.proxypush.com/CHDN. You may submit a proxy
by Internet 24 hours a day. To be valid, your proxy by Internet must be received by the Annual Meeting. When you
access the website, follow the instructions to create an electronic voting instruction form.

By Submitting a Proxy by Telephone. To submit a proxy using the telephone, call 1-866-284-6863 any time on a touch-
tone telephone. There is NO CHARGE to you for the call in the United States or Canada. International calling charges
apply outside the United States and Canada. You may submit a proxy by telephone 24 hours a day, 7 days a week.
Follow the simple prompts and instructions provided by the recorded message. To be valid, your proxy must be
received by the Annual Meeting.

By Submitting a Proxy by Mail. If you have requested and received a proxy card by mail, mark your proxy card, sign
and date it, and return it in the prepaid envelope that was provided or return it to: Proxy Tabulator for Churchill Downs
Incorporated, P.O. Box 8016, Cary, North Carolina 27512-9903. To be valid, your proxy must be received by the Annual
Meeting.

At the Annual Meeting. You can vote your shares in person at the Annual Meeting (see “What do I need to attend, and
vote at, the Annual Meeting?”). If you are a shareholder of record, in order to vote at the Annual Meeting, you must
present an acceptable form of photo identification, such as a driver’s license. If you hold your shares in street name,
you must also obtain and bring to the Annual Meeting a legal proxy and an account statement or other acceptable
evidence of ownership of CHDN Common Stock as of the close of business on the Record Date, as described above
under “What do I need to attend, and vote at, the Annual Meeting?”.

How can I revoke my proxy or substitute a new proxy or change my vote?

You can revoke your proxy or substitute a new proxy by use of any of the following means:

For a Proxy Submitted by Internet or Telephone

Submitting in a timely manner a new proxy through the Internet or by telephone that is received prior to the Annual
Meeting;

Requesting, executing and mailing a later-dated proxy card that is received prior to the Annual Meeting; or

Voting in person at the Annual Meeting.

For a Proxy Submitted by Mail

Executing and mailing another proxy card bearing a later date that is received prior to the Annual Meeting;

Giving written notice of revocation to CDI’s Secretary at 600 N. Hurstbourne Parkway, Ste. 400, Louisville, Kentucky
40222 that is received by CDI prior to 11:59 p.m., Eastern Time, on April 20, 2020; or

Voting in person at the Annual Meeting.

2020 Proxy Statement | 3

Proxy Statement

What is a broker non-vote?

Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion
on certain “routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect
to “non-routine” matters, the broker, bank or other nominee is not permitted to vote shares for a beneficial owner without
timely received voting instructions. The only routine matter to be presented at the Annual Meeting is the proposal to ratify
the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal
year 2020. The remaining proposals to be presented at the Annual Meeting are considered non-routine.

A broker non-vote occurs when a broker, bank or other nominee does not vote on a non-routine matter because the
beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other
nominee exercises its discretionary voting authority on the proposal to ratify the appointment of PricewaterhouseCoopers
LLP as the Company’s independent registered public accounting firm for fiscal year 2020, such shares will be considered
present at the Annual Meeting for quorum purposes and broker non-votes will occur as to each of the other proposals
presented at the Annual Meeting. Broker non-votes will have no impact on the voting results of the election of directors or
the proposal to approve, on a non-binding advisory basis, the executive compensation of the Company’s named executive
officers as disclosed in this Proxy Statement.

How will my shares be voted if I return a blank proxy card or a blank voting instruction card?

If you are a holder of record of shares of our common stock and you sign and return a proxy card without giving specific
voting instructions, your shares will be voted:

“FOR” each of the three (3) director nominees identified in this Proxy Statement under “Election of Directors” to the
Board of Directors.

“FOR” the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent
registered public accounting firm for fiscal year 2020.

“FOR” the proposal to approve, on a non-binding advisory basis, the executive compensation of the Company’s named
executive officers as disclosed in this Proxy Statement.

If you hold your shares in street name via a broker, bank or other nominee and return a signed but blank voting instruction
card (and do not otherwise provide the broker, bank or other nominee with voting instructions), your shares:

will be counted as present for purposes of establishing a quorum;

will be voted in accordance with the broker’s, bank’s or other nominee’s discretion on “routine” matters, which
includes only the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent
registered public accounting firm for fiscal year 2020; and

will not be counted in connection with the election of directors, the proposal to approve, on a non-binding advisory
basis, the executive compensation of the Company’s named executive officers as disclosed in this Proxy Statement, or
any other non-routine matters that are properly presented at the Annual Meeting. For each of these proposals, your
shares will be treated as “broker non-votes.”

Our Board knows of no matter to be presented at the Annual Meeting other than the proposals described above. If any
other matters properly come before the Annual Meeting upon which a vote properly may be taken, shares represented by
all proxies received by us on the proxy card will be voted with respect thereto as permitted and in accordance with the
judgment of the proxy holders.

4 | 2020 Proxy Statement

Proxy Statement

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information as of the Record Date (except as otherwise indicated below) regarding the
beneficial ownership of the Common Stock by the only persons known by the Company to beneficially own more than five
percent (5%) of the Common Stock, each director and director nominee of the Company, each named executive officer (as
defined in “Executive Compensation—2019 Summary Compensation Table” herein), and the Company’s directors and
executive officers as a group. Except as otherwise indicated, the persons named in the table have sole voting and
investment power with respect to all of the shares of Common Stock shown as beneficially owned by them. The percentage
of beneficial ownership is calculated based on 39,559,648 shares of Common Stock outstanding as of the Record Date. We
are not aware of any pledge of our Common Stock or any other arrangements the operation of which may at a subsequent
date result in a change in control of our Company.

Name of Beneficial Owner

BlackRock, Inc. and affiliates

55 East 52nd Street
New York, NY 10055

Amount and Nature Of
Beneficial Ownership

Percent of Class

4,461,170(1)

11.28

The Vanguard Group, Inc. and affiliates

3,191,035(2)

8.07

100 Vanguard Blvd.
Malvern, PA 19355

CDI Holdings LLC

845 Larch Avenue
Elmhurst, IL 60126

Ulysses L. Bridgeman, Jr.

Robert L. Fealy

Douglas C. Grissom

Daniel P. Harrington

Karole F. Lloyd

R. Alex Rankin

Paul C. Varga

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

11 Directors and Executive Officers as a Group

Less than 0.1%.

3,000,000(3)

7.58

19,689(4)

54,749(5)

5,774(6)

647,857(7)

11,220(8)

40,447(9)

534,433(10)

291,692(11)

38,990(12)

46,925(13)

1,691,776(14)

0.14

1.64

0.10

1.35

0.74

0.10

0.12

4.28

(1) Based on a Schedule 13G/A filed with the SEC on February 4, 2020, reporting the beneficial ownership of BlackRock, Inc. and its
subsidiaries specified therein (“BlackRock”) as of December 31, 2019. As reported in such filing, BlackRock has sole voting power
over 4,354,112 shares, sole dispositive power over 4,461,170 shares and no shared voting or dispositive power over any shares.

(2) Based on a Schedule 13G/A filed with the SEC on February 12, 2020, reporting the beneficial ownership of The Vanguard Group and

its subsidiaries specified therein (“Vanguard”) as of December 31, 2019. As reported in such filing, Vanguard has sole voting power
over 73,848 shares, sole dispositive power over 3,116,009 shares, shared voting power over 5,517 shares and shared dispositive
power over 75,026 shares.

(3) CDI Holdings LLC (“CDI Holdings”) is a wholly-owned subsidiary of The Duchossois Group, Inc. These shares are also beneficially

owned by Mr. Richard L. Duchossois. CDI Holdings has sole voting and dispositive power over all 3,000,000 shares.

(4)

Includes 5,413 deferred stock units, which Mr. Bridgeman has elected to defer pursuant to the Company’s deferred compensation
plan. Also includes 14,276 restricted stock units awarded by the Company for his board service, over which Mr. Bridgeman has
neither voting nor dispositive power until immediately following his resignation or retirement from the Board.

2020 Proxy Statement | 5

Proxy Statement

(5)

(6)

Includes 35,001 deferred stock units, which Mr. Fealy has elected to defer pursuant to the Company’s deferred compensation plan.
Also includes 19,747 restricted stock units awarded by the Company for his board service, over which Mr. Fealy has neither voting
nor dispositive power until immediately following his resignation or retirement from the Board.

Includes 2,553 deferred stock units, which Mr. Grissom has elected to defer pursuant to the Company’s deferred compensation
plan. Also includes 3,220 restricted stock units awarded by the Company for his board service, over which Mr. Grissom has neither
voting nor dispositive power until immediately following his resignation or retirement from the Board.

(7) Mr. Harrington shares voting and investment power with respect to 594,900 shares held by TVI Corp. He specifically disclaims

beneficial ownership of these shares. Figure illustrated includes 33,209 deferred stock units, which Mr. Harrington has elected to
defer pursuant to the Company’s deferred compensation plan. Also includes 19,747 restricted stock units awarded by the Company
for his board service, over which Mr. Harrington has neither voting nor dispositive power until immediately following his resignation
or retirement from the Board. Figure illustrated does not include 97,602 shares held by the Veale Foundation. Mr. Harrington is a
member of the Board of Trustees of the Veale Foundation, but Mr. Harrington disclaims beneficial ownership of those shares.

(8)

(9)

Includes 3,220 restricted stock units awarded by the Company for her board service, over which Ms. Lloyd has neither voting nor
dispositive power until immediately following her resignation or retirement from the Board.

Includes 19,747 restricted stock units awarded by the Company for his board service, over which Mr. Rankin has neither voting nor
dispositive power until immediately following his resignation or retirement from the Board.

(10) Excludes 98,803 restricted stock units, tied to Mr. Carstanjen’s continued service to the Company, awarded under the Company’s

2016 Omnibus Stock Incentive Plan over which Mr. Carstanjen has neither voting nor dispositive power until December 31, 2020, at
which time 26,006 units shall vest without restriction; December 31, 2021, at which time 17,222 units shall vest without restriction;
December 31, 2022, at which time 6,864 units shall vest without restriction; October 30, 2022, at which time 12,177 units shall vest
without restriction; October 30, 2023, at which time 12,177 units shall vest without restriction; October 30, 2024, at which time
12,177 units shall vest without restriction; and October 30, 2025, at which time the remaining 12,180 units shall vest without
restriction. Excludes 189,158 performance stock units (“PSUs”) awarded under the Company’s executive long term incentive
compensation plan over which Mr. Carstanjen has neither voting nor dispositive power until December 31, 2020, at which time the
performance period ends with regard to 27,852 PSUs; December 31, 2021, at which time the performance period ends with regard
to 33,719 PSUs, and October 30, 2021, at which time the performance period ends with regard to the remaining 127,587 PSUs,
which shall thereafter vest based upon Mr. Carstanjen’s continued service to the Company according to the following schedule:
31,897 units on October 30th of each of 2022, 2023, and 2024, respectively, and 31,896 units on October 30, 2025. Further excludes
all PSUs to be awarded to Mr. Carstanjen under the Company’s executive long-term incentive compensation plan for the
performance period of January 1, 2020 through December 31, 2022.

(11) Excludes 52,020 restricted stock units, tied to Mr. Mudd’s continued service to the Company, awarded under the Company’s 2016

Omnibus Stock Incentive Plan over which Mr. Mudd has neither voting nor dispositive power until December 31, 2020, at which time
10,947 units shall vest without restriction; December 31, 2021, at which time 7,509 units shall vest without restriction;
December 31, 2022, at which time 3,120 units shall vest without restriction; October 30, 2022, at which time 7,611 units shall vest
without restriction; October 30, 2023, at which time 7,611 units shall vest without restriction; October 30, 2024, at which time
7,611 units shall vest without restriction; and October 30, 2025, at which time the remaining 7,611 units shall vest without
restriction. Excludes 104,930 PSUs awarded under the Company’s executive long term incentive compensation plan over which
Mr. Mudd has neither voting nor dispositive power until December 31, 2020, at which time the performance period ends with
regard to 10,899 PSUs; December 31, 2021, at which time the performance period ends with regard to 14,288 PSUs, and October 30,
2021, at which time the performance period ends with regard to the remaining 79,743 PSUs, which shall thereafter vest based upon
Mr. Mudd’s continued service to the Company according to the following schedule: 19,936 units on October 30th of each of 2022,
2023, and 2024, respectively; and 19,935 units on October 30, 2025. Further excludes all PSUs to be awarded to Mr. Mudd under
the Company’s executive long term incentive compensation plan for the performance period of January 1, 2020 through
December 31, 2022.

(12) Excludes 10,023 restricted stock units, tied to Ms. Dall’s continued service to the Company, awarded under the Company’s 2016

Omnibus Stock Incentive Plan over which Ms. Dall has neither voting nor dispositive power until December 31, 2020, at which time
5,387 units shall vest without restriction; December 31, 2021, at which time 3,284 units shall vest without restriction; and
December 31, 2022, at which time the remaining 1,352 units shall vest without restriction. Excludes 12,947 PSUs awarded under the
Company’s executive long term incentive compensation plan over which Ms. Dall has neither voting nor dispositive power until
December 31, 2020, at which time the performance period ends with regard to 6,660 PSUs; and December 31, 2021, at which time
the performance period ends with regard to the remaining 6,287 PSUs. Further excludes all PSUs to be awarded to Ms. Dall under
the Company’s executive long-term incentive compensation plan for the performance period of January 1, 2020 through
December 31, 2022.

6 | 2020 Proxy Statement

Proxy Statement

(13) Excludes 8,271 restricted stock units, tied to Mr. Miller’s continued service to the Company, awarded under the Company’s 2016

Omnibus Stock Incentive Plan over which Mr. Miller has neither voting nor dispositive power until December 31, 2020, at which time
4,523 units shall vest without restriction; December 31, 2021, at which time 2,708 units shall vest without restriction; and
December 31, 2022, at which time the remaining 1,040 units shall vest without restriction. Excludes 7,062 PSUs awarded under the
Company’s executive long-term incentive compensation plan over which Mr. Miller has neither voting nor dispositive power until
December 31, 2020, at which time the performance period ends with regard to 3,633 PSUs; and December 31, 2021, at which time
the performance period ends with regard to the remaining 3,429 PSUs. Further excludes all PSUs to be awarded to Mr. Miller under
the Company’s executive long-term incentive compensation plan for the performance period of January 1, 2020 through
December 31, 2022.

(14) See table on page 8 and “Information about our Executive Officers”.

2020 Proxy Statement | 7

Proxy Statement

Information about our Executive Officers

The Company’s executive officers, as listed below, are elected annually to their executive offices and serve at the pleasure
of the Board of Directors.

Name and Age

William C. Carstanjen(1)
Age: 52

William E. Mudd(2)
Age: 48

Marcia A. Dall(3)
Age: 56

Austin W. Miller(4)
Age: 56

Position(s) With Company and Term of Office

Chief Executive Officer since August 2014; President and Chief Operating Officer from March 2011 to
August 2014; Chief Operating Officer from January 2009 to March 2011; Executive Vice President and
Chief Development Officer from June 2005 to January 2009; General Counsel from June 2005 to
December 2006

President and Chief Operating Officer since October 2015; President and Chief Financial Officer from
August 2014 to October 2015; Executive Vice President and Chief Financial Officer from October 2007
to August 2014

Executive Vice President and Chief Financial Officer since October 2015

Senior Vice President, Gaming Operations since August 2013; President of Calder Casino & Race Course
from June 2010 to August 2013; President of Fair Grounds Race Course & Slots from October 2008 to
June 2010; Vice President and General Manager of Fair Grounds Race Course & Slots from May 2007 to
October 2008

(1) Prior to joining the Company, Mr. Carstanjen was employed at General Electric Company (“GE”). From 2004 through June 2005, he
served as the Managing Director and General Counsel of GE Commercial Finance, Energy Financial Services. From 2002 to 2004, he
served as General Counsel of GE Specialty Materials and, from 2000 to 2002, he served as Transactions and Finance Counsel of GE
Worldwide Headquarters. Carstanjen began his career as an attorney with Cravath, Swaine & Moore LLP in New York City,
specializing in mergers and acquisitions and other corporate transactions.

(2) Prior to joining the Company, Mr. Mudd was employed at GE. From 2006 through October 2007, he served as Chief Financial Officer,
Global Commercial & Americas P&L of GE Infrastructure, Water & Process Technologies. From 2004 to 2006, he served as Chief
Financial Officer, Supply Chain, Information Technology and Technology Finance, GE Consumer & Industrial Europe, Middle East, &
Africa, Budapest and Hungary and, from 2002 to 2004, he served as Manager, Global Financial Planning & Analysis and Business
Development at GE FANUC in Charlottesville, Virginia.

(3) Prior to joining the Company, Ms. Dall was employed at Erie Indemnity Company, a company providing sales, underwriting and

administrative services to Erie Insurance Exchange, where from March 2009 through October 2015, she served as Executive Vice
President and Chief Financial Officer. From January 2008 until March 2009, she served as Chief Financial Officer of the Healthcare
division at CIGNA Corporation. Prior to CIGNA, Ms. Dall was a corporate officer and the Chief Financial Officer for the International
and U.S. Mortgage Insurance segments of Genworth Financial, a former subsidiary of GE. Ms. Dall began her career in 1985 in the
Financial Management Program at GE and held various leadership roles both in finance and operations over her twenty-plus year
tenure with GE. Ms. Dall is a Certified Public Accountant.

(4) Prior to joining the Company, Mr. Miller was employed by Harrah’s Entertainment, Caesars Entertainment, and Grand Casinos from
1992 to 2007. From 2005 to 2007, he served as the Vice President of Gaming Operations for Harrah’s New Orleans. From 2001 to
2005, he served in a number of senior executive roles including Senior Vice President of Operations for Grand Casino Gulfport. From
2000 to 2001, he served as the Vice President of Guest Services for Grand Casino Tunica. From 1996 to 2000, he served as the
Director of Guest Services for Grand Casino Biloxi. From 1995 to 1996, he served as the Regional Director of the Grand Advantage
Player’s Club for Grand Casino Gulfport & Grand Casino Biloxi. From 1992 to 1995, he served as Corporate Marketing Representative
and Director of Business Relations for Grand Casinos Incorporated. Miller began his gaming career in 1983.

8 | 2020 Proxy Statement

Election of Directors (Proposal No. 1)

ELECTION OF DIRECTORS (Proposal No. 1)

At the Annual Meeting, shareholders will vote to elect the three (3) persons identified below to serve in Class III of the
Board of Directors and to hold office for a term of three (3) years expiring at the 2023 annual meeting of shareholders and
thereafter until their respective successors shall be duly elected and qualified or until the earlier of their resignation, death
or removal.

The Amended and Restated Bylaws of the Company provide that the Board of Directors shall be composed of not fewer
than three (3) nor more than fifteen (15) members, the exact number to be established by the Board of Directors, and
further provide for the division of the Board of Directors into three (3) approximately equal classes, of which one (1) class is
elected annually to a three (3) year term. Currently the Board of Directors is comprised of eight (8) directors, with three
(3) directors in Class I, two (2) directors in Class II and three (3) directors in Class III.

The Nominating and Governance Committee has recommended, and the Board has approved, the nomination of the three
(3) persons named in the following table for election as directors in Class III. The nominees currently serve as members of
Class III and have agreed to serve if re-elected.

Directors are elected by a plurality of votes cast by the shares entitled to vote in the election at a meeting at which a
quorum is present. With each shareholder having one vote per share to cast for each director position, the nominees
receiving the greatest number of votes will be elected. The biographical information for our directors and director
nominees below includes information regarding certain of the experiences, qualifications, attributes and skills that led to
the determination that such individuals are qualified to serve on the Board of Directors.

✓ The Board of Directors recommends a vote “FOR” the election

of the directors in Class III named below.

2020 Proxy Statement | 9

Election of Directors (Proposal No. 1)

Election of Directors

The following table sets forth information relating to the Class III director nominees of the Company who are proposed to
the shareholders for election to serve as directors for terms of three (3) years, expiring at the 2023 annual meeting of
shareholders, and thereafter until their respective successors shall be duly elected and qualified or until the earlier of their
resignation, death or removal.

Class III—Nominated for Terms Expiring in 2023

Robert L. Fealy
Age: 68
Director since 2000

Douglas C. Grissom
Age: 52
Director since 2017

Mr. Fealy currently serves as Managing Director of Limerick Investments, LLC, an investment firm,
and co-founder and President of Aluminate, Inc., which provides data analytics solutions to
universities, colleges and other not-for-profit institutions. He retired effective June 30, 2014 as
President, Chief Operating Officer and Director of The Duchossois Group, Inc. (a family
owned company which held diversified business interests in companies with leading brands in the
residential security, lighting and convenience products markets and the commercial control,
automation and digital media markets). While Mr. Fealy was originally nominated to serve as a
director of the Company pursuant to the stockholder’s agreement between the Company and
Duchossois Industries, Inc., the Company has been and will continue to be well served by
Mr. Fealy’s experience as a certified public accountant and senior executive with oversight of a
diverse group of companies that had over 5,000 employees worldwide with operations located in
over 30 countries as well as proven capabilities in strategic business planning in a variety of
industries. Prior to Mr. Fealy’s employment with Duchossois, he was a senior executive at
Cummins Inc., serving in various roles including Vice President-Treasurer and Vice President-Global
Business Strategy. Mr. Fealy currently holds the following leadership positions with other entities:
Board Director, Panduit, Inc.; Past Chairman and Founding Board Member, Illinois Venture Capital
Association; Entrepreneur Partner and Advisor, Chicago Ventures; Trustee and Past Chairman of
the Board of Trustees, University of Cincinnati Foundation; Member, University of Cincinnati
Business Advisory Council; Board Member and past Chairman, Chicago Children’s Choir; Trustee of
The Morton Arboretum; Partner, Social Venture Partners.

Mr. Grissom serves as the Managing Director and Co-Head of Madison Dearborn Partners’ (“MDP”)
Business & Government Software and Services team. Prior to joining MDP, a Chicago-based private
equity firm focused on buyout and growth equity investments, he was with Bain Capital in private
equity, McKinsey & Company and Goldman Sachs. Mr. Grissom currently serves on the Boards of
Directors of BlueCat Networks, CoVant Technologies, Fleet Complete, Lightspeed Systems, and
LinQuest Corporation. In addition, he was formerly on the Boards of Directors of LGS Innovations,
@stake, Aderant, Asurion, Cbeyond, Fieldglass, Great Lakes Dredge and Dock Corporation, Intelsat,
and Neoworld. Outside of MDP, he is a Board Member at Amherst College, the Harvard Business
School Fund Council, the Lincoln Park Zoo, METROsquash, the Museum of Science and Industry, and
the University of Chicago Laboratory Schools. Mr. Grissom has extensive financial and board
experience within a variety of industries that qualifies him as a member of the Board of Directors.

Daniel P. Harrington
Age: 64
Director since 1998

Mr. Harrington serves as the President and Chief Executive Officer of HTV Industries, Inc. (a private
holding company with diversified business interests that include manufacturing, distribution,
technology and banking). Among other exceptional personal and professional attributes,
Mr. Harrington has extensive financial, accounting and chief executive experience within a variety
of industries that qualifies Mr. Harrington as a member of the Board of Directors. In addition,
Mr. Harrington qualifies as an Audit Committee Financial Expert. Mr. Harrington also serves as a
Trustee of The Veale Foundation. In addition, Mr. Harrington has served as a Director of First
Guaranty Bank, First State Financial Corporation, and Portec Rail Products, Inc. (serving on its
Audit and Compensation Committees).

(1) Summaries above include directorships at any time within the last 5 years in companies with a class of securities registered pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), subject to the requirements of Section 15(d)
of the Exchange Act or companies registered under the Investment Company Act of 1940 and, in the case of certain directors, other
present or former directorships or positions considered significant by them.

The Board of Directors has no reason to believe that any of the nominees will be unavailable to serve as a director. If any
nominee should become unavailable before the Annual Meeting, the persons named in the proxy, or their substitutes,
reserve the right to vote for substitute nominees selected by the Board of Directors.

10 | 2020 Proxy Statement

Continuing Directors

The following tables set forth information relating to the Class I and Class II directors of the Company who will continue to
serve as directors until the expiration of their respective terms of office.

Election of Directors (Proposal No. 1)

Class I—Terms Expiring in 2021

William C. Carstanjen
Age: 52
Director since 2015

Karole F. Lloyd
Age: 61
Director since 2018

Paul C. Varga
Age: 56
Director since 2020

Mr. Carstanjen was named the Company’s twelfth Chief Executive Officer in August 2014 and
appointed to the Board of Directors in July 2015. Mr. Carstanjen served as CDI’s President and
Chief Operating Officer (2011-2014), CDI’s Chief Operating Officer (2009-2011) and as Executive
Vice President, General Counsel and Chief Development Officer for the Company (2005-2009).
Mr. Carstanjen joined CDI in July 2005 after serving as an executive with General Electric
Company. Mr. Carstanjen began his career as an attorney with Cravath, Swaine & Moore LLP in
New York City, specializing in mergers and acquisitions, corporate finance and corporate
governance. Mr. Carstanjen brings a wealth of experience and knowledge to his leadership role at
CDI. Throughout his tenure, Mr. Carstanjen has led CDI’s diversification strategy into online
wagering and regional casino gaming, as well as led the growth of the Kentucky Oaks and Kentucky
Derby events. Mr. Carstanjen is a Director of Glenview Trust Company.

Mrs. Lloyd was elected to the Board of Directors in 2018 and serves as Chair of the Audit
Committee. Mrs. Lloyd has served on the Board of Directors of Aflac Inc. since January 2017 and
currently serves as the Chair of the Audit and Risk Committee and a member of the Executive
Committee and the Finance and Investment Committee of the Aflac Inc., Board of Directors.
Ms. Lloyd is the retired Vice Chair and Southeast Regional Managing Partner for Ernst & Young LLP
(“EY”). From 2009 through 2016, she served as a member of the US Executive Board, Americas
Operating Executive and the Global Practice Group for EY. In her 37-year career at EY, Ms. Lloyd
served many of EY’s highest profile clients through mergers, IPOs, acquisitions, divestitures, and
across numerous industries including banking, insurance, consumer products, transportation, real
estate, manufacturing, and retail. Ms. Lloyd is active in the Atlanta community, working with the
Metro Atlanta Chamber of Commerce and The Rotary Club of Atlanta. She was previously the
Chair of the Atlanta Symphony Orchestra Board of Directors. Ms. Lloyd is active in supporting
many colleges and universities throughout the southeast, including serving on the President’s
Advisory Council and the Board of Visitors at the University of Alabama. Mrs. Lloyd qualifies as an
Audit Committee Financial Expert, which makes her well suited for her current role as the Chair of
the Company’s Audit Committee and as a member of the Board.

Mr. Varga was appointed to the Board of Directors on February 25, 2020. Mr. Varga is the former
Chairman and Chief Executive Officer of Brown-Forman Corporation, a public global spirits and
wine company. Mr. Varga served as Chairman and Chief Executive Officer of Brown-Forman
Corporation from August 2007 until his retirement in December 2018. He served as President and
Chief Executive Officer of Brown-Forman Beverages (a division of Brown-Forman Corporation)
from 2003 to 2005, and as Global Chief Marketing Officer for Brown-Forman Spirits from 2000 to
2003. In addition to Mr. Varga’s many years of leadership experience in the role of Chief Executive
Officer and as a public company board member, he also has considerable expertise and
experience in corporate finance, strategy, building brand awareness, product development,
marketing, distribution and sales. Mr. Varga currently serves on the Board of Directors of Macy’s,
Inc. as Chair of the Compensation and Management Development Committee and as a member of
the Finance Committee. He previously served on the Board of Directors of Brown-Forman
Corporation from 2003 until July 2019.

(1) Summaries above include directorships at any time within the last 5 years in companies with a class of securities registered pursuant

to Section 12 of the Exchange Act, subject to the requirements of Section 15(d) of the Exchange Act or companies registered under
the Investment Company Act of 1940 and, in the case of certain directors, other present or former directorships or positions
considered significant by them.

2020 Proxy Statement | 11

Election of Directors (Proposal No. 1)

Class II—Terms Expiring in 2022

Ulysses L. Bridgeman, Jr.
Age: 66
Director since 2012

Mr. Bridgeman is the owner and chief executive officer of Heartland Coca-Cola Bottling Company,
LLC (“Heartland”), which owns and operates a Coca-Cola production and manufacturing facility in
Lenexa, Kansas and seventeen Coca-Cola distribution facilities across various Midwestern states,
including Kansas, Missouri, and Illinois. Prior to his February 2017 acquisition of Heartland,
Mr. Bridgeman was the owner and chief executive officer of various companies operating over
450 restaurants in 20 states, including 263 Wendy’s restaurants and 123 Chili’s restaurants. From
1975 to 1983, and from 1986 to 1987, Mr. Bridgeman played professional basketball with the
Milwaukee Bucks, and from 1983 to 1986, he played for the Los Angeles Clippers. Mr. Bridgeman
currently serves on the Board of Directors of Meijer, Inc., the Naismith Basketball Hall of Fame,
Simmons College and the West End School. He is a former Director of the James Graham Brown
Foundation and served as past chairman of the Board of Trustees of the University of Louisville.
Mr. Bridgeman’s current role as a CEO and extensive leadership experience make him ideally
qualified as a member of the Board.

R. Alex Rankin
Age: 64
Director since 2008

Mr. Rankin is the Chairman of the Board of Sterling G. Thompson Company, LLC (a private
insurance agency and broker), and the President of Upson Downs Farm, Inc. (a thoroughbred
breeding and racing operation). He is also Vice Chairman and Director of Glenview Trust Company
and a member of The Jockey Club. Mr. Rankin is a Trustee and former Chairman of the James
Graham Brown Foundation (a private, non-profit foundation that fosters the well-being, quality of
life, and image of Louisville and Kentucky by actively supporting and funding projects in the fields
of civic affairs, economic development, education, and health and general welfare, which since
1954 has awarded over 2,680 grants totaling over $450 million). Among other exceptional
personal and professional attributes, Mr. Rankin’s expertise in the areas of finance and risk
management, as well as his experience in the business of thoroughbred horseracing, qualify
Mr. Rankin as a member of the Board of Directors.

(1) Except as noted with respect to Mr. Bridgeman, there has been no change in principal occupation or employment during the past

five years.

(2) Summaries above include directorships at any time within the last 5 years in companies with a class of securities registered pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), subject to the requirements of Section 15(d)
of the Exchange Act or companies registered under the Investment Company Act of 1940 and, in the case of certain nominees, other
present or former directorships or positions considered significant by them.

Retirement Age Policy

The Company has a mandatory retirement age policy in the Corporate Governance Guidelines with regard to directors,
which provides that a person is not qualified to serve as a director unless he or she is less than seventy (70) years of age on
the date of election. The Board believes that it is important to monitor overall Board performance and suitability, and
pursuant to the policy, upon the recommendation of the Nominating and Governance Committee, the Board may waive the
effective date of mandatory retirement. No director nominees in Class III will have met the mandatory retirement age as of
the date of the Annual Meeting.

Emeritus Directors

Pursuant to our Amended and Restated Bylaws, each director shall become a “Director Emeritus” upon the expiration of his or
her current term following the date the director may no longer be qualified for election as a director due to age pursuant to
our retirement age policy, provided the effective date of such mandatory retirement has not been waived. Emeritus Directors
are available for counsel, but do not attend meetings of the Board of Directors and do not vote on matters presented to the
Board. The Emeriti Directors are Charles W. Bidwill, Jr., Catesby W. Clay, Craig J. Duchossois, Richard L. Duchossois, J. David
Grissom, G. Watts Humphrey, Jr., James F. McDonald, Thomas H. Meeker, Carl F. Pollard, and Darrell R. Wells.

12 | 2020 Proxy Statement

Election of Directors (Proposal No. 1)

Director Compensation for Fiscal Year Ended December 31, 2019

During 2019, each non-employee director of the Board of Directors received the compensation set forth below (all fees
shown are annual fees, except for meeting fees), which, other than the retainer fee and the stock award, did not change
from the compensation levels set for 2018. For 2019, the annual retainer fee was increased from $60,000 to $75,000 and
the annual stock award grant value was increased from $125,000 to $155,000 after considering market data and the input
of the Compensation Committee’s independent compensation consultant.

Board of Directors

Compensation Committee

Nominating and Governance Committee

Audit Committee

Retainer
Fee ($)(1)

75,000

Meeting
Fees ($)(2)

Stock
Awards ($)(3)

Chairman
Fee ($)

Non-Chairman
Fee ($)

2,000

155,000

150,000(4)

25,000

20,000

35,000

12,500

10,000

15,000

(1) Retainer fee is paid in arrears, in equal quarterly installments.

(2) Directors who do not reside in Louisville, Kentucky may request reimbursement for travel expenses to and from Board

and committee meetings.

(3) Each non-employee director receives a grant of restricted stock units (“RSUs”), with an aggregate grant date fair value

of $155,000.

(4) For the non-employee Chairman of the Board of Directors.

In 2019, we provided the following compensation to our non-employee directors. Mr. Carstanjen, our Chief Executive
Officer (“CEO”), is not separately compensated for his service on our Board. Please see the 2019 Summary Compensation
Table for a summary of the compensation paid to our CEO with respect to 2019.

Name

Ulysses L. Bridgeman, Jr.

Richard L. Duchossois(3)

Robert L. Fealy

Douglas C. Grissom

Daniel P. Harrington

Karole F. Lloyd

R. Alex Rankin

Paul C. Varga(4)

Fees earned or
paid in cash ($)

Stock
Awards ($)(2)

118,250(1)

155,000

28,871

—

125,750(1)

155,000

115,750(1)

155,000

141,599(1)

155,000

126,854

226,495

155,000

Total ($)

273,250

28,871

280,750

270,750

296,599

281,854

381,495

(1) The Churchill Downs Incorporated 2005 Deferred Compensation Plan allows directors to defer receipt of all or part of
their retainer and meeting fees in a deferred share account until after their service on the Board has ended. This
account allows the director, in effect, to invest all or part of his or her deferred cash compensation in Company
Common Stock. Funds in this account are credited as hypothetical shares of Common Stock based on the market price
of the stock at the time the compensation would otherwise have been earned. Hypothetical dividends are reinvested
in additional shares based on the market price of the stock on the date dividends are paid. All shares in the deferred
share accounts are hypothetical and are not issued or transferred until the director ends his or her service on the
Board. Upon the end of Board service, the shares are issued or transferred to the director. On December 13, 2019, the
plan was amended so that effective January 1, 2020, director fees that are payable after that date and deferred may
only be notionally invested in Company common stock and payout options are limited to either a single lump sum
payment or equal annual installments over five or ten years. In 2019, Mr. Grissom, Mr. Fealy and Mr. Harrington
deferred all of their 2019 directors’ fees into a deferred share account under the plan, while Mr. Bridgeman deferred
50% of his 2019 directors’ fees into a deferred share account under the plan. As of December 31, 2019, Mr. Bridgeman
had 5,390 deferred shares, Mr. Fealy had 34,851 deferred shares, Mr. Grissom had 2,542 deferred shares, and
Mr. Harrington had 33,067 deferred shares under the plan. As of December 31, 2019, Mr. Duchossois had no deferred
shares under the plan.

2020 Proxy Statement | 13

Election of Directors (Proposal No. 1)

(2) On April 23, 2019, each non-employee director (with the exception of Mr. Richard L. Duchossois, who did not stand for
re-election as a member of the Board of Directors at the 2019 annual meeting of shareholders on April 23, 2019)
received a grant of RSUs, valued in the amount of $155,000, calculated based upon the closing price of a share of
Common Stock on the date of grant. The RSUs vest one year from the date of grant, subject to the director’s continued
service through the vesting date. At the time a director ceases being a director of the Company, the Company will issue
one share of Common Stock for each vested RSU held by such director. As of December 31, 2019, Mr. Bridgeman had
14,215 RSUs, Mr. Fealy had 19,663 RSUs, Mr. Grissom had 3,207 RSUs, Mr. Harrington had 19,663 RSUs, Ms. Lloyd had
3,207 RSUs, and Mr. Rankin had 19,663 RSUs.

(3) Mr. Duchossois did not stand for re-election as a member of the Board of Directors at the annual meeting of

shareholders on April 23, 2019.

(4) Mr. Varga joined the Board in February 2020 and therefore received no compensation in 2019.

Director Stock Ownership Guidelines

As memorialized in the Corporate Governance Guidelines, the Board expects all directors to display confidence in the
Company by ownership and retention of a meaningful amount of the Company’s Common Stock. Pursuant to the
Company’s insider trading policy, all directors are subject to the Company’s anti-hedging policy, which prohibits hedging
and monetization transactions with respect to the Company’s Common Stock. As a result, each director is expected to own
shares with a fair market value equal to five (5) times the director’s annual retainer. Each director appointed or elected to
the Board has five (5) years from the date of appointment or election to the Board to meet this requirement. Compliance is
measured at the five (5) year anniversary date of the director’s appointment or election. Each director’s continuing
compliance with the ownership guidelines will be measured in the year he or she stands for re-election and will be
considered as one of the criteria for nomination by the Nominating and Governance Committee. The chart below shows
each current director’s compliance with the ownership guidelines calculated as of December 31, 2019, other than with
respect to Mr. Carstanjen, who is subject to maintaining holdings of the Company’s Common Stock equal to at least six
(6) times his base annual salary, pursuant to the Key Executive Stock Ownership and Retention Guidelines, as further
described in the “Executive Stock Ownership Guidelines” section below. Furthermore, deferred shares acquired by directors
under the Churchill Downs Incorporated 2005 Deferred Compensation Plan and RSUs granted as director compensation are
included for purposes of measuring compliance with the Company’s share ownership guidelines. In addition, the directors
are subject to the same anti-hedging policy as the Company’s officers and employees.

Director

Ulysses L. Bridgeman, Jr.

Robert L. Fealy

Douglas C. Grissom

Daniel P. Harrington

Karole F. Lloyd

R. Alex Rankin

Paul C. Varga

✓ = Met guidelines.

Ownership
Guidelines(1)

Shares
Owned(2)

Value of
Shares(3)

19,605

$ 2,689,799

54,514

$ 7,479,322

5,749

788,741

647,630

$88,854,777

11,207

$ 1,537,543

39,363

$ 5,400,549

Met
Guidelines
✓

✓

* = Mr. Varga joined the Board on February 25, 2020 and did not own any shares of Common Stock as of December 31,

2019. Mr. Varga has five years from the date of appointment to the Board to meet the guidelines.

(1) Guidelines adopted per the Company’s Board of Directors.

(2) Calculated as of December 31, 2019 and represents shares of Common Stock owned outright, hypothetical shares

deferred per the Company’s 2005 Deferred Compensation Plan, and RSUs issued for board service.

(3) Fair market value based on closing price of our Common Stock of $137.20 as of December 31, 2019.

14 | 2020 Proxy Statement

Corporate Governance

CORPORATE GOVERNANCE

The Board of Directors is responsible for providing effective governance over the Company’s affairs. The Company’s
corporate governance practices are designed to align the interests of the Board and management with those of our
shareholders and to promote honesty and integrity throughout the Company.

During the past year, we continued to review our corporate governance policies and practices and compared them to those
suggested by various authorities in corporate governance and the practices of other public companies. We have also
reviewed guidance and interpretations provided by the SEC and Nasdaq.

Copies of the current charter, as approved by our Board, for each of our Audit, Compensation and Nominating and
Governance Committees and a copy of our Corporate Governance Guidelines, Code of Conduct (along with any
amendments or waivers related to the Code of Conduct) are available on our corporate website,
http://www.churchilldownsincorporated.com, under the “Corporate Governance” subheading under the “Investors” tab.

Shareholder Communications

Shareholders may send communications to the Company’s Board of Directors addressed to the Board of Directors or to any
individual director c/o Churchill Downs Incorporated, 600 N. Hurstbourne Parkway, Ste. 400, Louisville, Kentucky 40222.
Any correspondence addressed to the Board of Directors in care of the Company is forwarded to the Board of Directors
without review by management.

Board Leadership Structure

R. Alex Rankin is the Chairman of the Board of Directors. The Board continues to deem it advisable to maintain certain
aspects of its governance structure to assure effective independent oversight. These governance practices include
maintaining executive sessions of the independent directors after each Board meeting, annual performance evaluations of
the CEO by the independent directors, and separate roles for the CEO and Chairman of the Board of Directors. Our
Corporate Governance Guidelines state that the offices of the Chairman of the Board and CEO may be either combined or
separated, in the Board’s discretion; provided, that if the Board designates one individual to serve as the Chairman of the
Board and the CEO, the Board will then designate an independent director to serve as the Lead Independent Director. The
Board is currently led by an independent Chairman, Mr. Rankin. The Board believes that separating the roles of CEO and
Chairman of the Board is the most appropriate structure at this time. Separating the roles of CEO and Chairman of the
Board ensures that our CEO is able to more exclusively focus on this role. The Board also believes that an independent
Chairman of the Board allows for independent oversight of management, increases management accountability, and
encourages an objective evaluation of management’s performance relative to compensation.

Oversight of Company Risk

As part of its responsibility to oversee the management, business and strategy of the Company, the Board of Directors has
overall responsibility for risk oversight. While the Board of Directors as a whole performs certain risk oversight functions
directly, such as its ongoing review, approval and monitoring of the Company’s fundamental business and financial
strategies and major corporate actions, the majority of the Board of Directors’ risk oversight functions is carried out
through the operation of its committees. Each committee oversees risk management within its assigned areas of
responsibility, as described below in the discussion of committee responsibilities. The Audit Committee is primarily
responsible for overseeing the Company’s risk assessment and risk management practices, as well as its compliance
programs. The Compensation Committee’s responsibilities include oversight of the risks associated with the Company’s
compensation policies and practices, as well as its managerial development and succession plans. The Nominating and
Governance Committee oversees the risks related to the Company’s corporate governance structure and processes.

Board Evaluations

The Board conducts an annual self-evaluation to assist in determining whether it and its committees are functioning
effectively. The Nominating and Governance Committee solicits comments from all directors and reports annually to the

2020 Proxy Statement | 15

Corporate Governance

Board with an assessment of the Board’s performance and how its committees are functioning. This will be discussed with
the full Board following the end of each fiscal year. The assessment focuses on the Board’s contribution to the Company
and specifically focuses on areas in which the Board or management believes that the Board could improve.

Board Meetings and Committees

Six (6) meetings of the Board of Directors were held during the last fiscal year. During the fiscal year, all incumbent directors
attended at least 75% of their Board and committee meetings for the period for which they served. The Company
encourages its directors to attend the annual meeting of shareholders each year. Each of the directors then serving on the
Board (other than Mr. Richard L. Duchossois, who did not stand for re-election at the 2019 annual meeting of shareholders
on April 23, 2019) attended the Company’s annual meeting on April 23, 2019.

The Board has determined that all of the directors of the Company who served during any part of the last completed fiscal
year, and Paul C. Varga, who joined the Board in February 2020, are “independent directors,” as defined under Nasdaq
Rule 5605(a)(2), except William C. Carstanjen, due to his position as CEO of the Company. When determining the
independence of Mr. Varga, the Board considered that Mr. Varga was formerly the Chairman and Chief Executive Officer of
Brown-Forman Corporation, a corporate sponsor of the Kentucky Derby. The Board determined that this former
relationship would not interfere with the exercise of Mr. Varga’s independent judgment in carrying out the responsibilities
of a director.

As required by the Company’s Corporate Governance Guidelines, the Board of Directors currently has four (4) standing
committees: the Executive, Audit, Compensation, and Nominating and Governance Committees. No Director Emeritus
serves on any Board committee. The current composition of the committees is illustrated in the table below, along with the
number of meetings held in 2019.

Director Name

Ulysses L. Bridgeman

William C. Carstanjen

Robert L. Fealy

Douglas C. Grissom

Daniel P. Harrington

Karole F. Lloyd

R. Alex Rankin

Paul C. Varga

Board of
Directors

Executive
Committee

Audit
Committee(1)

Compensation
Committee(2)

Nominating and
Governance Committee

Member

Member Member

Member

Member Member

Member

Chair

Member

Chair

Member

Chair

Member

Number of meetings in 2019

= Ex-officio Member

(1) At the conclusion of the 2019 annual meeting of shareholders, Karole F. Lloyd became Chair of the Audit Committee,

with Daniel P. Harrington continuing to serve as a member of the Audit Committee.

(2) At the conclusion of the 2019 annual meeting of shareholders, Daniel P. Harrington became Chair of the Compensation

Committee, with R. Alex Rankin serving as an ex-officio member of the Compensation Committee.

Executive Committee

The Executive Committee is authorized, subject to certain limitations set forth in the Company’s Amended and Restated
Bylaws, to exercise the authority of the Board of Directors between Board meetings. The Executive Committee does not
meet on a regular basis, but instead meets as and when needed.

16 | 2020 Proxy Statement

Corporate Governance

Audit Committee

The primary purposes of the Audit Committee are to assist the Board of Directors in fulfilling its responsibility in monitoring
management’s conduct of the Company’s financial reporting process and overseeing the Company’s risk assessment and
risk management practices. The Audit Committee is generally responsible for monitoring the integrity of the financial
reporting process, systems of internal controls and financial statements and other financial reports provided by the
Company to any governmental or regulatory body, the public or other users thereof, as well as overseeing the processes by
which management assesses the Company’s exposure to cybersecurity and other risks and evaluating the guidelines and
policies governing the Company’s monitoring, control and minimization of such exposures.

The Audit Committee’s responsibilities are as follows, among others:

To monitor the performance of the Company’s internal audit function;

To appoint, compensate, retain and oversee the independent registered public accounting firm employed by the
Company for the purpose of preparing or issuing audit opinions on the Company’s financial statements and its internal
control over financial reporting;

To monitor the Company’s compliance with legal and regulatory requirements as well as the Company’s Code of
Conduct and compliance policies;

To consider the effectiveness of the company’s internal control system including information technology security and
control;

To inquire of management, including its internal auditor, and the Company’s independent auditors regarding
significant risks or exposures, including those related to fraudulent activities, facing the Company; to assess the steps
management has taken or proposes to take to minimize such risks to the Company; and to periodically review
compliance with such steps;

In discharging its oversight role, to investigate any matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and to retain outside counsel, auditors or other experts for this purpose;

To conduct an annual performance evaluation of the Audit Committee.

We have a formal enterprise risk management program that falls under the leadership of our executive team with oversight
from the Audit Committee. The purpose of this program is to promote risk-intelligent decision making and, in turn, increase
the likelihood of achieving our operational objectives. Our Board of Directors is regularly advised of potential organizational
risks and supporting mitigating policies.

The Company’s Board of Directors has determined that all members of the Company’s Audit Committee are independent as
defined under Nasdaq Rule 5605(a)(2) and Rule 10A-3(b)(1) under the Exchange Act.

The Board of Directors has determined that Daniel P. Harrington and Karole F. Lloyd are “audit committee financial experts”
as defined by regulations promulgated by the SEC.

Compensation Committee

Responsibilities of the Compensation Committee

The Compensation Committee of the Board of Directors operates under a written charter and is comprised entirely of
directors meeting the independence requirements of Nasdaq and Rule 10C-1(b)(1) under the Exchange Act. The Board
established the Compensation Committee to assist it in discharging the Board’s responsibilities relating to compensation of
the Company’s CEO, each of the Company’s other executive officers, and the Company’s non-employee directors. The
Compensation Committee has overall responsibility for decisions relating to all compensation plans, policies and perquisites
as they affect the CEO and other executive officers and may form and delegate authority to subcommittees when it deems
appropriate.

2020 Proxy Statement | 17

Corporate Governance

The Compensation Committee’s responsibilities are as follows, among others:

To oversee the development and implementation of the Company’s compensation policies and programs for executive
officers, including the Chairman of the Board and the CEO.

To establish the annual goals and objectives relevant to the compensation of the Chairman of the Board, the CEO and
the executive officers and to present such to the Board annually.

To evaluate the performance of the Chairman of the Board, the CEO and other executive officers in light of the agreed-
upon goals and objectives and to determine and approve the compensation level of the Chairman of the Board and the
CEO, including the balance of the components of total compensation, based on such evaluation and to present its
report to the Board annually.

To develop guidelines for the compensation and performance of the Company’s executive officers and to determine
and approve the compensation of the Company’s executive officers, including the balance of the components of total
compensation.

To establish appropriate performance targets, participations and levels of awards with respect to the Company’s
incentive compensation plans.

To administer the Company’s equity-based compensation plans, including the establishment of criteria for the granting
of stock-based awards and the review and approval of such grants in accordance with the criteria.

To establish and periodically review Company policies relating to senior management perquisites and other non-cash
benefits.

To review periodically the operation of the Company’s overall compensation program for key employees and evaluate
its effectiveness in promoting shareholder value and Company objectives.

To review the results of any advisory shareholder votes on executive compensation and consider whether to
recommend adjustments to the Company’s compensation policies and programs as a result of such results.

To consider, at least annually, whether risks arising from the Company’s compensation policies and practices for all
employees, including non-executive officers, are reasonably likely to have a material adverse effect on the Company,
including whether the Company’s incentive compensation arrangements encourage excessive or inappropriate risk-
taking.

To approve any compensation “clawback” policy required by law or otherwise adopted by the Company.

To oversee regulatory compliance with respect to matters relating to executive officer compensation.

To approve plans for managerial development and succession within the Company and to present such plans to the
Board annually.

To review, assess and recommend to the Board appropriate compensation for outside directors.

To produce the report on executive compensation to be included in the Company’s proxy statement for the annual
meeting of shareholders.

To review and discuss with management the compensation discussion and analysis, and based on such discussion,
make a recommendation to the Board as to whether or not the compensation discussion and analysis should be
included in the proxy statement.

To review and reassess the adequacy of its charter annually and recommend any proposed changes to the Board for
approval.

To conduct an annual performance evaluation of the Compensation Committee.

Compensation Committee Interlocks and Insider Participation

None of the directors who served on the Compensation Committee at any time during the last fiscal year were officers or
employees of the Company or were former officers of the Company. None of the members who served on the
Compensation Committee at any time during fiscal 2019 had any relationship with the Company requiring disclosure under
Item 404 of Regulation S-K. Finally, no executive officer of the Company serves, or in the past fiscal year has served, as a
director or member of the compensation committee (or other board committee performing equivalent functions) of any
entity that has one or more of its executive officers serving on the Board of Directors or the Compensation Committee.

18 | 2020 Proxy Statement

Corporate Governance

Compensation Risk Assessment

The Compensation Committee performed an assessment of whether risks arising from the Company’s compensation
policies and practices for all employees during 2019, including non-executive officers, are reasonably likely to have a
material adverse effect on the Company. Each policy and plan was evaluated based on certain elements of risk, including,
but not limited to, (i) the mix of fixed and variable pay, (ii) types of performance metrics, (iii) performance goals and payout
curves, (iv) payment timing and adjustments, (v) equity incentives, and (vi) stock ownership requirements and trading
policies. Based on this evaluation, an assessment of each plan was created, along with an overall assessment of
compensation risk to the Company. After evaluation and discussion, the Committee determined that the Company’s
compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Nominating and Governance Committee

The Company’s Nominating and Governance Committee operates under a written charter that was amended in 2019, and is
responsible for establishing the criteria for and reviewing the effectiveness of the Company’s Board of Directors. In
addition, the Nominating and Governance Committee provides oversight with regard to the Company’s programs for
dealing with governance issues.

Pursuant to the Company’s Corporate Governance Guidelines and its Policy on Board Composition, the Nominating and
Governance Committee determines criteria regarding personal qualifications needed for Board membership and the
Committee considers, reviews qualifications and recommends qualified candidates for Board membership. In doing so, the
Nominating and Governance Committee reviews the composition of the Board and the Company’s strategic plans to
determine its needs with regard to Board composition and identify candidates with the appropriate skill sets and
qualifications. While the Company does not have a formal policy on diversity for members of the Board of Directors, the
Company’s Corporate Governance Guidelines and its Policy on Board Composition specifically provide that diversity of race
and gender, as well as general diversity of backgrounds and experience represented on the Board of Directors are factors to
consider in evaluating potential directors. The Nominating and Governance Committee sometimes employs an outside
consultant to identify nominees with the skill sets, experience and backgrounds that suit the Company’s needs.
Douglas C. Grissom, who is standing for election by shareholders as a Class III director for the first time, was first identified
as candidate by a non-management director.

A candidate for the Company’s Board of Directors should possess the highest personal and professional ethics, integrity and
values and be committed to representing the long-term interests of the Company’s various constituencies. In considering a
candidate for nomination as a member of the Board, the Nominating and Governance Committee will consider criteria such
as independence; occupational background, including principal occupation (i.e., chief executive officer, attorney,
accountant, investment banker, or other pertinent occupation); level and type of business experience (i.e., financial,
lending, investment, media, racing industry, technology, etc.); diversity in race and gender; number of boards on which the
individual serves; and the general diversity of backgrounds and experience represented on the Board. The Nominating and
Governance Committee periodically reviews the Company’s Corporate Governance Guidelines and its Policy on Board
Composition, which were amended in 2019, and recommends changes to the Board. It also evaluates the performance of
the Board as a whole and provides feedback to the Board on how the directors, the committees and the Board are
functioning. Finally, it evaluates Board of Director practices at the Company and other well-managed companies on an
annual basis and recommends appropriate changes to the Board and/or its practices.

The Nominating and Governance Committee receives and considers issues raised by shareholders or other stakeholders in
the Company and recommends appropriate responses to the Board. The Nominating and Governance Committee will
consider recommendations for director candidates submitted by shareholders. Such questions, comments or
recommendations should be submitted in writing to the Nominating and Governance Committee in care of the Office of the
Secretary at 600 N. Hurstbourne Parkway, Ste. 400, Louisville, Kentucky 40222. The Nominating and Governance
Committee, in having adopted criteria to be considered for membership on its Board, considers such candidates applying
such criteria and follows the recommendation process noted above. Recommendations by shareholders that are made in
accordance with these procedures will receive the same consideration as recommendations from other sources.

2020 Proxy Statement | 19

Proposal to Ratify the Appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public
Accounting Firm for 2020 (Proposal No. 2)

PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR 2020 (Proposal No. 2)

On February 25, 2020, the Board of Directors, on recommendation from the Audit Committee, selected
PricewaterhouseCoopers LLP (“PwC”) to serve as the Company’s independent registered public accounting firm for the year
ending December 31, 2020. PwC has served as the Company’s independent registered public accounting firm since the
Company’s 1990 fiscal year.

Although the Company’s Amended and Restated Bylaws do not require that the Company’s shareholders ratify the
appointment of PwC as the Company’s independent registered public accounting firm, the Board of Directors is submitting
the appointment of PwC to the Company’s shareholders for ratification as a matter of good corporate governance. This
proposal will be approved if the votes cast favoring the action exceed the votes cast opposing the action. If the
appointment is not ratified, the Company’s Audit Committee will consider whether it is appropriate to select another
independent registered public accounting firm. Even if the appointment is ratified, the Company’s Audit Committee, in its
sole discretion, may select a different independent registered public accounting firm at any time during the year if it
determines that such a change would be in the best interests of the Company and its shareholders.

Representatives of PwC are expected to be present at the Annual Meeting and will be available to respond to appropriate
questions and will have the opportunity to make a statement if they desire to do so.

✓

The Board of Directors and the Audit Committee recommend
that the shareholders vote “FOR” the ratification of the
appointment of PricewaterhouseCoopers LLP as the
Company’s Independent Registered Public Accounting Firm for
fiscal year 2020.

20 | 2020 Proxy Statement

Independent Public Accountants

INDEPENDENT PUBLIC ACCOUNTANTS

Audit Fees

The audit fees incurred by the Company for services provided by PwC (i) for the year ended December 31, 2019, were
$2,331,950 and (ii) for the year ended December 31, 2018, were $1,718,200. Audit fees include services related to the audit
of the Company’s consolidated financial statements, the audit of the effectiveness of internal control over financial
reporting, involvement with registration statement filings, statutory audits and consultations related to miscellaneous SEC
and financial reporting matters.

Audit-Related Fees

During each of 2019 and 2018, the Company incurred $3,800 and $21,700, respectively, in fees for assurance and related
services performed by PwC that were reasonably related to the performance of the audit or review of the Company’s
financial statements that are not reported in the preceding section.

Tax Fees

Tax fees incurred by the Company for services provided by PwC (i) in 2019, were $125,000 and (ii) in 2018, were $130,100.
Tax fees include services related to tax return preparation for a related entity, tax consultation and tax advice.

All Other Fees

All other fees incurred by the Company for services provided by PwC relate to the use of Inform, PwC’s accounting research
software, and PwC’s disclosure checklist software, which amounted to $4,500 in each of 2019 and 2018. The Audit
Committee has considered whether the provision of non-audit services to the Company is compatible with maintaining
PwC’s independence.

The Audit Committee has adopted a policy of evaluating and pre-approving all audit and non-audit services provided by the
independent auditors. The Audit Committee may delegate pre-approval authority to a member; provided that decisions of
such member shall be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee
pre-approved all audit and permissible non-audit services provided by the independent auditors in 2019.

2020 Proxy Statement | 21

Advisory Vote to Approve Executive Compensation (Proposal No. 3)

ADVISORY VOTE TO APPROVE EXECUTIVE
COMPENSATION (Proposal No. 3)

Pursuant to Section 14A of the Exchange Act, the Company’s shareholders are entitled to a vote to approve, on an advisory
and non-binding basis, the compensation of the Company’s named executive officers (“NEOs”) as disclosed in this Proxy
Statement in accordance with SEC rules. In accordance with the preference expressed by shareholders, the Company is
holding such advisory votes on an annual basis.

The Company has a “pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of
the Company’s NEOs. This compensation philosophy, and the program structure approved by the Compensation
Committee, is central to the Company’s ability to attract, motivate and retain individuals who can achieve superior financial
results while also aligning the interests of the executives with the interests of shareholders over the long-term. This
approach has resulted in the Company’s ability to attract and retain the executive talent necessary to guide the Company
successfully during a period of growth and transformation. Please refer to “Compensation Discussion and Analysis—
Executive Summary” for an overview of the compensation of the Company’s NEOs.

This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs
and the policies and practices described in this Proxy Statement. At the Annual Meeting, shareholders will be asked to
approve the compensation of the Company’s NEOs by voting FOR the following resolution:

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named
executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC,
including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables
and disclosure in this Proxy Statement.”

This vote is advisory and therefore not binding on the Company. The Board of Directors and Compensation Committee
value the opinions of the Company’s shareholders. Should there be a significant vote against the NEO compensation as
disclosed in this Proxy Statement, the Board will consider those shareholders’ concerns and will evaluate whether any
actions are necessary to address those concerns.

This proposal will be approved if the votes cast favoring the action exceed the votes cast opposing the action.

✓ The Board of Directors recommends a vote “FOR” the approval

of the advisory resolution relating to the compensation of the
Company’s Named Executive Officers as disclosed in this
Proxy Statement.

22 | 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Discussion and Analysis

Table of Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Key 2019 Compensation Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Executive Compensation Philosophy and Core Principles . . . . . . . . . . . . . . . . . . 27
2019 “Say-on-Pay” Advisory Vote on Executive Compensation . . . . . . . . . . . . . 27
Role of Management and Independent Advisors . . . . . . . . . . . . . . . . . . . . . . . . 28
Factors Used to Evaluate Pay Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Components of Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Executive Annual Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Financial Component (75%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Qualitative Component (25%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Summary of 2019 EAIP Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Long-Term Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Executive Stock Ownership Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Anti-Hedging Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Clawback Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Deferred Compensation and Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

This Compensation Discussion and Analysis (our “CD&A”) provides an overview of our executive compensation program for
2019 and our executive compensation philosophies and objectives.

Our named executive officers consist of our Chief Executive Officer, our President and Chief Operating Officer, our Chief
Financial Officer and our Senior Vice President Gaming Operations (“NEOs”). Our NEOs were:

Name:

Title:

William C. Carstanjen
William E. Mudd
Marcia A. Dall
Austin W. Miller

Chief Executive Officer
President and Chief Operating Officer
Chief Financial Officer
Senior Vice President, Gaming Operations

2020 Proxy Statement | 23

Compensation Discussion and Analysis

Executive Summary

Churchill Downs Incorporated is an industry-leading provider of racing, gaming, and online entertainment and wagering. Our
long-term success depends on our ability to attract, engage, motivate and retain highly talented executives and key employees to
achieve our strategic plans and deliver financial returns to shareholders over both the short-term and long-term. One of the key
objectives of our executive compensation program is to link executives’ pay to their performance and their advancement of the
Company’s long-term performance and business strategies. Other objectives include aligning the executives’ interests with those
of shareholders and encouraging high-performing executives to remain with the Company over the course of their careers. We
believe that the amount of compensation for each NEO reflects each individual’s extensive management experience, high
performance and exceptional service to the Company and our shareholders. We also believe that the Company’s compensation
strategies have been effective in attracting executive talent and promoting performance and retention.

This Compensation Discussion and Analysis describes the Company’s executive compensation policies and programs and
how they apply to our NEOs. It also describes the actions and decisions of the Compensation Committee of the Board of
Directors (the “Compensation Committee” or “Committee”), which oversees the executive compensation program and
determines the compensation of the NEOs. A detailed discussion of the Committee’s structure, roles and responsibilities,
and related matters can be found under “Compensation Committee” on pages 17-19.

Our long-term incentive goals are based on operational results that the Committee believes drive Company and
shareholder success over multi-year performance periods. Certain metrics the Company uses for incentive purposes are as
follows (see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 10-K for
Fiscal Year 2019 for reconciliation of these metrics to the most directly comparable GAAP measures, and the discussion of
Long-Term Incentives beginning on page 33):

Adjusted EBITDA—Adjusted EBITDA used for compensation purposes in fiscal year 2019 was $451.4 million, exceeding
by 8.2% the Adjusted EBITDA target of $417.3 under the Executive Annual Incentive Plan;

Cash Flow Metric—Cash Flow Metric for compensation purposes in fiscal year 2019 was $235.0 million, a 47.4%
increase compared to fiscal year 2018 Cash Flow Metric for compensation purposes of $159.4 million; and

Total Shareholder Return—Total Shareholder Return from January 2, 2019 to December 31, 2019 was 71%.

As illustrated in the following chart, the Company’s stock price increased to $137.20 per share as of December 31, 2019
from $31.77 per share as of December 31, 2014.

CHDN Stock Price
(Year-End)

$137.20

$77.57

$81.31

$47.16

$50.15

$160.00

$140.00

$120.00

$100.00

$80.00

$60.00

e
c
i
r
P
k
c
o
t
S
N
D
H
C

$40.00

$31.77

$20.00

$0.00

2014

2015

2016

2017

2018

2019

24 | 2020 Proxy Statement

Similarly, as illustrated in the following chart, a key component of our incentive program, Adjusted EBITDA has grown steadily,
increasing from $286.2 million in 2017 to $451.4 million in 2019 (representing a compound annual growth rate of 26%).

Compensation Discussion and Analysis

Adjusted EBITDA

$451.4

$328.8

$286.2

$500.0

$450.0

$400.0

$350.0

$300.0

$250.0

$200.0

)
s
n
o

i
l
l
i

(
A
D
T
B
E
d
e
t
s
u
d
A

2017

2018

2019

Please refer to “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the
Company’s Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 26, 2020 for a
reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure. The Company is
only providing Adjusted EBITDA data for the past three years to correspond to the reconciliation provided in the
Company’s Form 10-K for the fiscal year ended December 31, 2019.

The Company’s outstanding performance is further reflected in the key business metrics summarized in the table below.

CHDN Stock Price

Net Income attributable to CDI (millions)

Earnings Per Share (from continuing operations, diluted)

Dividends Per Share

Fiscal
Year
2014

Fiscal
Year
2019

$31.77 $137.20

$ 46.4 $ 137.5

$ 1.08 $ 3.44

$0.333 $ 0.581

5-Year Compound
Annual Growth
Rate (CAGR)

% Increase

332%

196%

219%

74%

34%

24%

26%

12%

2020 Proxy Statement | 25

Compensation Discussion and Analysis

Key 2019 Compensation Actions

The primary elements of our total direct compensation program for the NEOs and a summary of the actions taken by the
Compensation Committee during 2019 are set forth below.

Compensation
Component

Base Salary
(Page 30)

Annual Cash Incentive
Compensation
(Page 31)

Long-Term Equity
Incentive
Compensation
(Page 33)

Link to Business and Talent Strategies

2019 Compensation Actions

Competitive base salaries help attract and
retain executive talent.

Focus executives on achieving annual
financial and non-financial results that are
considered key indicators of annual
financial and operational performance.

Annual cash incentives are earned based
on achievement of Adjusted EBITDA and
other strategic, operational and financial
measures.

Š Merit and market-based increases for

2019.

Š Merit and market-based increases to

annual cash incentive target opportunities
for 2019.

Annual cash incentive awards were
earned above target at an average of
143% (ranging from 133% to 156%) due to
strong Company and executive
performance.

Implemented newly designed annual cash
incentive plan for NEOs, whereby the
majority of the annual incentive is
formulaically determined based on the
achievement of a pre-established
financial goal.

2019 annual equity-based awards consist
of PSUs and RSUs.

Š Merit and market-based increases to

target value of equity awards for 2019.

PSUs vest based on achievement of
Adjusted EBITDA and Cash Flow metrics
that are considered key indicators of long-
term performance, with vesting adjusted
based on a relative total shareholder
return (“TSR”) performance to
additionally incorporate creation of
stockholder value over the performance
period.

RSUs provide focus on stock price growth
and serve our talent retention objectives.

The target value of the equity award mix
is generally balanced between PSUs (50%)
and RSUs (50%).

PSUs are subject to a 3-year performance
period (2019 -2021) and will be earned
based on Adjusted EBITDA (weighted
50%) and Cash Flow (weighted 50%)
goals, with a relative TSR modifier of
+/-25%.

RSUs vest over three years in equal
annual installments on December 31,
2019, December 31, 2020 and
December 31, 2021.

26 | 2020 Proxy Statement

Compensation Discussion and Analysis

Executive Compensation Philosophy and Core Principles

What We Do

What We Don’t Do

✓ Target Median Compensation Among Peer Group

✗ No Employment Agreements

✓ Executive Stock Ownership Guidelines

✗ No Re-pricing of SARs or Stock Options

✓ Clawback Policy on Cash Bonus and Equity Incentives

✗ No Excise Tax Gross-ups upon Change in Control

✓ PSUs Vesting over Multi-year Performance Period

✗ No Excessive Perquisites

✓ Capped Bonus Payments under Annual Incentive Plan

✓ Capped PSU Vesting Levels

✓ Payouts Tied to Individual and Company Performance, with
Majority of Payout Determined by Pre-Established Formula
and Goal

✓ Use of an Independent Compensation Consultant

✓ Anti-hedging policy, applicable to directors and employees

The fundamental philosophy of the Compensation Committee is to provide an executive compensation program that links
pay to business strategy and performance in a manner that is effective in attracting, motivating and retaining key
executives while also aligning the interests of the executives with the interests of shareholders over the long-term. To that
end, the Compensation Committee evaluates the pay practices of its peers and targets the median of the peer group. In
order to continue to support the Company’s high-performance culture, the Company’s key principles underlying the
executive compensation program are to:

Attract and retain executives with the skills and experience needed to successfully grow the Company and create value
for shareholders;

Create an entrepreneurial culture and mindset by de-emphasizing fixed pay (primarily salary) and focusing a significant
percentage of compensation on at-risk pay elements (annual and long-term incentives); and

Š Motivate and reward executives for achieving exceptional performance supportive of creating value for shareholders

over the long-term.

The Compensation Committee will continue to adjust its pay practices to support these principles over time.

2019 “Say-on-Pay” Advisory Vote on Executive Compensation

The Compensation Committee monitors closely the results of the annual advisory “say-on-pay” vote, and considers such
results as one of the many factors considered in connection with the discharge of its responsibilities. In 2019, the Company
provided shareholders a “say-on-pay” advisory vote on its executive compensation program, as disclosed in the Company’s
2019 proxy statement. At the 2019 annual meeting of shareholders, approximately 78% of the votes cast for the “say-on-pay”
proposal were in favor of our executive compensation program. Even though this result shows significant shareholder support
for our executive compensation program, it is less than what the Company strives to achieve and represents a decrease in
support from the 97% level of shareholder support we received in 2018. Leading up to this vote, the Company actively
engaged with shareholders owning approximately 50% of our stock to understand their perspectives regarding our executive
compensation program and, in particular, the one-time special performance grants awarded last year. While the special
performance grants were granted to drive performance and support the retentive aspect of the Company’s executive
compensation program, the Compensation Committee does not have any plans to award additional special performance
grants, although award recipients will continue to receive equity awards as part of the Company’s regular annual program.

The Company utilizes shareholder feedback to help guide changes and adjustments to its executive compensation program.
For example, based on shareholder feedback the Company received, the 2019 Executive Annual Incentive Plan
implemented a formulaic approach in which 75% of the annual incentive award was determined formulaically by the
achievement of a pre-established financial goal. At the 2020 Annual Meeting of Shareholders, we are again holding an
advisory vote on executive compensation and will continue to engage with our shareholders as we make further
improvements to our executive compensation program.

2020 Proxy Statement | 27

Compensation Discussion and Analysis

Role of Management and Independent Advisors

The Compensation Committee meetings are regularly attended by the CEO, the Senior Vice President of Human Resources
(who is responsible for leading some of the discussions regarding the Company’s compensation programs as well as being
responsible for recording the minutes of the meeting), the Vice President of Human Resources, and the General Counsel.
The Compensation Committee may request the participation of management or outside consultants as it deems necessary
or appropriate. The Compensation Committee regularly reports to the Board on compensation matters and annually
reviews the CEO’s compensation with the Board.

The Committee may also meet in executive session without any members of management, for the purpose of discussing
and approving compensation for the CEO, as well as other topics. The CEO reviews the performance of, and makes
recommendations to, the Compensation Committee regarding total compensation to be paid to the Company’s executive
officers other than himself, including salary, annual bonus, and long-term incentive awards, as appropriate. Management
also develops and presents to the Committee recommendations for the performance measures and targets to be used to
evaluate annual performance incentives.

After the end of each fiscal year, the Committee conducts a review of the CEO’s performance. As part of this process, the
CEO provides a written assessment of the Company’s performance. The Committee sets the compensation of the CEO in
executive session after considering its assessment of the CEO’s performance, including due consideration of the CEO’s
written assessment of the Company’s performance. Neither the CEO nor any other members of management are present
during this session.

The Committee has sole discretion, at the Company’s expense, to retain and terminate independent advisors, including sole
authority to approve the fees and retention terms for such advisors, if it shall determine the services of such advisors to be
necessary or appropriate. Such advisors are engaged by, and report directly to, the Committee. Since March 2015, the
Committee has retained Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent compensation consultant. The scope
of the engagement of FW Cook includes:

Assisting the Chair of the Committee in establishing appropriate agendas for the Committee meetings;

Reviewing management reports and recommendations to the Committee as related to executive compensation
matters;

Attending Committee meetings and providing the Committee with input and advice based on the advisor’s broad
experience with market practices, including a perspective with regard to the competitive market;

Assisting with the review of pay and performance and the evaluation of payouts under the Company’s annual and
long-term incentive programs;

Assisting in the review and evaluation of non-employee director compensation;

Assisting the Committee in identifying similarly-situated peer group companies;

Providing the Committee and management with data on market practices for executive pay;

On behalf of the Committee, assisting management with disclosures, including this Compensation Discussion and
Analysis;

Providing updates to the Committee with regard to regulatory developments; and

Assisting the Committee in evaluating future equity grants and cash compensation for the NEOs, including the CEO.

FW Cook did not provide any services to the Company other than advising the Committee as provided above. The
Compensation Committee assessed FW Cook’s independence in light of the SEC requirements and NASDAQ listing
standards and determined that FW Cook’s work did not raise any conflict of interest or independence concerns.

Factors Used to Evaluate Pay Decisions

The Company seeks to obtain and retain the services of executives who bring the skills, experience, and motivation deemed
necessary to significantly expand the scope and scale of the Company’s operations. Therefore, compensation decisions for
individual executives are made based on a balance of many subjective factors as evaluated by the CEO in the case of his
direct reports (with Committee review and approval) and the Committee in the case of the CEO. These factors include:

The scope and responsibility of the NEO’s position and the perceived level of contribution;

28 | 2020 Proxy Statement

Compensation Discussion and Analysis

Internal comparisons among the executive’s peers at the Company;

Comparisons among the executive’s peers at the peer group companies, with a target of median among peers;

The recruitment and development of talent in a competitive market;

Target annual incentive opportunities based on Company’s annual goals with regard to NEO’s position, as approved by
the Committee; and

Long-term incentive opportunities driven by the perceived level of contribution expected of the executive toward
achieving the Company’s growth objectives.

Each element of compensation is evaluated independently based on the role of that component in achieving the Company’s
overall compensation objectives, with an emphasis on long-term incentives and retention.

In making executive pay decisions, the Committee relies substantially on the advice and experience of its independent
advisor and the CEO to evaluate the reasonableness of executive pay. While the Committee considers input from its
independent advisor, all of the decisions with respect to the Company’s executive compensation programs are made by the
Committee alone and may reflect factors and considerations other than the information and recommendations provided by
management or its outside advisor. In addition, the CEO does not make recommendations with respect to his own
compensation. The Committee determines pay levels and practices based on the talent needs of the organization as
defined by our strategy of growing and diversifying revenues and with the guidance of the Committee’s independent
advisor.

The Committee believes that it is important for the Company to stay competitive on compensation and the Committee,
with the assistance of the Committee’s independent advisor, conducts periodic reviews of compensation relative to
similarly situated businesses, which can lead to adjustments in compensation and program offerings. The compensation
peer group was selected to represent a reasonable match to the Company in terms of size and business characteristics. The
group consists of public, similarly sized gaming companies (including traditional gaming, casinos, and internet/software
gaming to reflect the Company’s diverse operations), where the median net income and market capitalization approximate
the Company’s net income and market capitalization. The Company periodically reviews the peer group and makes
adjustments, as deemed necessary, for continued appropriateness as a market reference for informing executive
compensation levels. In 2019, the Company’s peer group was adjusted as follows: (i) removed Pinnacle Entertainment, Inc.
(PNK) and Tropicana Entertainment, Inc. (TPCA) from the Company’s historical peer group (due to their acquisition by other
companies); and (ii) added Flutter Entertainment, PLC. (FLTR) to the Company’s 2019 peer group due to the similarities in
size, EBITDA and market capitalization between Flutter and the Company, and because Flutter operates in several of the
Company’s business areas, including sports betting and gaming.

Fiscal 2019 Peer Group
Aristocrat Leisure Limited (ALL)
Boyd Gaming Corporation (BYD)
Caesars Entertainment Corp. (CZR)
Eldorado Resorts Inc. (ERI)
Flutter Entertainment PLC (FLTR)
Gaming and Leisure Properties Inc. (GLPI)
Madison Square Garden Company (MSG)
MGM Resorts International (MGM)
Penn National Gaming, Inc. (PENN)
Red Rock Resorts Inc. (RRR)
Scientific Games Corp (SGMS)
Wynn Resorts, Limited (WYNN)

2020 Proxy Statement | 29

Compensation Discussion and Analysis

It is the opinion of the Committee that the pay decisions made by the Committee are reasonable relative to pay provided to
executives at other similar public companies, based on the Committee’s experience, the performance expectations
established for each element of pay, and consultation with the Committee’s independent advisor.

Components of Compensation

During 2019, the Company used multiple components to provide an overall compensation and benefits package designed to
attract and retain the needed level of executive talent for the Company and to incentivize their performance. The following
table sets forth the principal compensation elements of the Company’s 2019 executive compensation program and how
each element fits into the Company’s overall compensation program and is supportive of the Company’s executive
compensation objectives.

Element of Compensation

Base Salary

Annual Incentive Compensation

Long-Term Incentive Compensation

Base Salary

Attraction
✓

✓

Motivation

Short-Term
✓

✓

Long-Term

✓

Alignment with
Stockholder Interests

✓

Retention
✓

✓

The Committee’s philosophy is that base salaries should meet the objectives of attracting and retaining the executive talent
needed to grow the business and create shareholder value. Therefore, the Committee establishes base salaries at the time
of hire based on the advice of management and its independent advisor regarding reasonable market pay practices, and
comparisons with the executive’s peers at the Company. Upon promotion or other adjustment of responsibilities,
executives receive base pay increases that are intended to be commensurate with their new role or responsibilities and the
pay levels for colleagues at similar levels in the organization and market pay practices, with more modest rates of increase
thereafter.

In 2019, the following adjustments were made to the base salaries for the Company’s NEOs:

Name

Position

William C. Carstanjen

Chief Executive Officer

William E. Mudd

President & COO

Marcia A. Dall

EVP & CFO

Austin W. Miller

SVP, Gaming Operations

(1) Annual rate of base compensation shown as of December 31, 2018.

2018 Base
Salary ($)(1)

2019 Base
Salary ($)(2)

1,350,000 1,350,000

750,000 1,000,000

625,000

643,750

403,322

500,000

(2) Annual rate of base compensation shown as of December 31, 2019. Actual salaries paid in 2019 are shown in the 2019

Summary Compensation Table on page 38.

(3) Peer group market analyses were performed for each of the NEO positions, and adjustments were made to

Mr. Mudd’s, Ms. Dall’s, and Mr. Miller’s salaries in response to those analyses. Consistent with the Company’s
compensation philosophy, adjustments were made to target the median compensation levels among our peer group.
In addition, when evaluating the adjustments for Mr. Mudd and Mr. Miller, the Committee also considered each
executive’s role in, and responsibility for, expanding the Company’s business in new areas, including multiple green
field projects related to historical horse racing. Under Mr. Mudd’s and Mr. Miller’s leadership, the Company has either
opened or is in process with respect to four historical horse racing facilities in Kentucky, including Derby City Gaming
(opened in Q4 2018), Oak Grove Racing & Gaming (under construction and scheduled to open in 2020), Churchill
Downs Racetrack (under construction), and Turfway Park (construction scheduled to begin after completion of
Turfway’s winter 2020 race meet).

30 | 2020 Proxy Statement

Compensation Discussion and Analysis

Executive Annual Incentive Plan

Our Executive Annual Incentive Plan (“EAIP”) is designed to motivate and reward our NEOs for achieving annual
performance objectives by tying the majority of the EAIP award to attainment of a pre-established financial goal. We
believe this program supports our “pay-for-performance” culture. Beginning in 2019, 75% of the target EAIP award was
determined formulaically based on corporate Adjusted EBITDA performance, and the remaining 25% was based on a
qualitative assessment of the attainment of other financial, strategic, operational and individual goals established by the
Committee.

The Committee utilized Adjusted EBITDA as elements in both the Company’s Executive Annual Incentive Plan and Executive
Long-Term Incentive Plan in recognition that Adjusted EBITDA is viewed as a core driver of the Company’s performance and
stockholder value creation. In designing the Company’s executive compensation program, the Committee supplemented
this measure with additional performance measures in order to strike an appropriate balance with respect to incentivizing
top-line growth, profitability, non-financial business imperatives and stockholder returns over both the short-term and
long-term horizons.

Financial Component (75%)

As noted above, 75% of the target EAIP payout was determined formulaically on achievement of the annual Adjusted
EBITDA target (the “Financial Component”). In 2019, the Committee set an Adjusted EBITDA target of $417.3 million,
which was higher than the actual 2018 Adjusted EBITDA performance of $328.8 million (excluding the Big Fish Games
transaction). Potential EAIP payouts for the Financial Component ranged from 0% to 200% (i.e., 0% to 150% of total
target EAIP award) based on the achievement of the pre-established financial goal in accordance with the following
table:

Percentage of Adjusted
EBITDA Goal Achieved*

Below 80%

80%

100%

110%

120%

Percentage of Financial
Component Awarded

Percentage of Total Target
EAIP Award Awarded

50%

100%

150%

200%

37.5%

75%

112.5%

150%

Amounts in between based on interpolation between the points

In 2019, the actual Company performance was $451.4 million in Adjusted EBITDA, which was 8% higher than the target of
$417.3 million. This performance resulted in a payout for each NEO at 140.9% of target for the Financial Component (i.e.
105.7% of the target EAIP award) as detailed below.

2019 Adjusted EBITDA
Target (in millions)

2019 Actual Adjusted
EBITDA (in millions)

Actual Performance
as a percentage of
Adjusted EBITDA Target

Percentage of Financial
Component

Percentage of Total
Target EAIP Award

$417.3

$451.4

108%

140.9%

105.7%

Qualitative Component (25%)

Pursuant to the EAIP, the Committee established secondary performance goals for the Company and its executives to be
used to determine the vesting of the qualitative component under the EAIP, weighted 25% (the “Qualitative Component”).
As it has done historically, the Committee set performance goals for 2019, based upon a comprehensive assessment of the
Company against its long-term strategic plan and its ability to achieve said goals with its current leadership team and key
employees. Therefore, individual performance by the Company’s NEOs (as measured by various factors, including, but not
limited to, continued growth and diversification of the Company’s asset portfolio through acquisitions, customer and
employee satisfaction, and the completion of certain specified legislative and regulatory outcomes), and business unit
performance led by the Company’s key employees (as measured by, among other things, increase in revenues) also played
a significant role in evaluating the Company’s performance, and determining the proper level of compensation deemed
necessary to incent and reward the NEOs and key employees to continue to drive growth. These goals relate to the

2020 Proxy Statement | 31

Compensation Discussion and Analysis

Company’s overall financial goals, strategic goals, and business segment goals, respectively, with no specific weighting
attributed to any one goal. In evaluating 2019 performance, some of the accomplishments considered by the Committee
included:

Delivered record net revenues from continuing operations of $1.32 billion, up $320.7 million (32%) over 2018;

Delivered $451.4 million of Adjusted EBITDA from continuing operations, up $122.6 million (37%) over 2018;

Delivered free cash flow for compensation purposes of $235.0 million, up 47.4% over 2018;

Achieved 10th consecutive year of record-setting financial performance for Derby week and Kentucky Derby;

First full year of operation for Derby City Gaming delivered strong net revenue and Adjusted EBITDA growth, on pace
for ~2-year payback on $65 million investment;

Completed the acquisition of Presque Isle Downs & Casino and the management agreement for Lady Luck Nemacolin,
and the acquisition of Turfway Park;

Completed the 61.3% equity investment in Rivers Casino Des Plaines;

Launched retail sports betting in Pennsylvania and Indiana;

Launched online sports betting in New Jersey, Pennsylvania and Indiana;

Began the buildout of the Oak Grove Racing and Gaming facility, ran the first harness race meet in October /
November 2019 and are on schedule to open the HRM facility and hotel in 2020;

Co-founded a cross-organization racing integrity initiative amongst prominent racing organizations to promote the
adoption of best practices to improve equine and jockey safety; and,

Successfully executed a three-for-one stock split.

In determining the EAIP payouts for the Qualitative Component, the Compensation Committee exercises its discretion to
determine whether to payout at, above, or below the target opportunities based upon its review of the outcomes
evaluated against Company and individual performance. The individual awards for Mr. Carstanjen, Mr. Mudd, Ms. Dall, and
Mr. Miller were made pursuant to the EAIP plan and as a reward for the NEOs respective roles in driving performance
during the period ending December 31, 2019.

Summary of 2019 EAIP Awards.

As noted above, the Company exhibited strong overall financial performance in 2019 and the NEOs were viewed by the
Committee to be the primary parties responsible for the actual performance relative to the performance goals established
with respect to 2019. The Committee, after considering the Company’s overall performance, awarded the NEOs the total
EAIP awards as shown in the table below and in the 2019 Summary Compensation Table in the column labeled “Non-Equity
Incentive Plan Compensation.”

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Target Incentive
Award as a
Percentage of
Salary(1)

Target Incentive
Award in ($)

Maximum Target
Incentive Award as a
Percentage of Salary

Maximum Target
Incentive
Award in ($)

Actual 2019
Incentive
Award in ($)

150%

125%

85%

75%

2,025,000

1,250,000

547,188

375,000

300%

250%

170%

150%

4,050,000

$3,151,779

2,500,000

$1,700,000

1,094,376

$ 800,000

750,000

$ 500,000

(1) Mr. Mudd’s and Mr. Miller’s target incentive award as a percentage of salary was adjusted in 2019 in response to the
peer group compensation analysis performed by FW Cook. Consistent with the Company’s compensation philosophy,
adjustments were made to target the median compensation levels among our peer group. In addition, when
evaluating the adjustments for Mr. Mudd and Mr. Miller, the Committee also considered each executive’s role in, and
responsibility for, expanding the Company’s business in new areas.

32 | 2020 Proxy Statement

Compensation Discussion and Analysis

Long-Term Incentives

The objective of the Company’s long-term incentive compensation program is to support the entrepreneurial mindset
desired of management by the Board of Directors by providing an opportunity to earn significant equity in the Company for
achieving significant performance improvements.

In 2015, the Compensation Committee approved the adoption of the Executive Long-Term Incentive Plan (the “ELTI Plan”),
pursuant to which the NEOs may earn variable equity payouts based upon the Company achieving certain key performance
metrics. The purpose of the ELTI Plan is to provide participants with a long-term incentive program that is market-
competitive and provides long-term incentives on a regular, predictable, and annual basis. Eligible participants (as
determined by the Committee) may be members of the Company’s senior executive team and/or such other executives and
key contributors as the Committee may designate from time to time. As and to the extent determined by the Committee as
part of the annual compensation planning process for participants, the CEO will participate in the ELTI Plan at a rate
determined by the Committee. No individual will have an automatic right to participate in the ELTI Plan. A summary of the
2019 terms and applicable award opportunities, granted by the Committee to the NEOs, is provided below.

During the beginning of 2019, the CEO recommended employees (other than with respect to himself) to the Committee for
participation in the ELTI Plan for 2019 and their respective specific levels of proposed participation. Awards granted to
eligible employees under the ELTI Plan may be in the form of RSUs, PSUs, or both. To pursue the key objective of linking
executive compensation with Company performance, the Committee generally aims to deliver at least 50% of the grant
value of the 2019 awards as PSUs.

The Committee approved the 2019 RSU awards on February 13, 2019, and the PSU awards (for the 36-month performance
period of January 1, 2019 through December 31, 2021) on March 12, 2019. The 2019 awards are as follows:

Executive Officer

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

RSUs

PSUs

Total

$(1)

$(2)

$(3)

31,074

$2,950,166

33,719

$3,132,495

64,793

$6,082,661

13,167

$1,250,075

14,288

$1,327,355

27,455

$2,577,430

5,796

5,004

$ 550,272

$ 475,080

6,287

3,429

$ 584,062

12,083

$1,134,334

$ 318,554

8,433

$ 793,634

(1) The market value of the time-vesting RSUs, in the above table, was calculated utilizing the closing price of the

Company’s common stock as of February 13, 2019 multiplied by the total number of time-vesting RSUs granted.

(2) The grant date fair value for the PSUs in the above table was calculated based on the probable achievement of the
performance goals and a Monte-Carlo simulation model, which factors in the value of the relative TSR modifier
(defined below) that is applied to the award before the share-based payment vests. The PSUs, in the above table,
represent the target opportunity, and corresponding fair value, available to the grantees should the Company achieve
the pre-determined performance metrics. Actual shares that vest pursuant to the PSUs may be more or less given the
performance on the selected metrics discussed below.

(3) Mr. Carstanjen’s and Mr. Mudd’s long-term equity awards were adjusted in 2019 in response to the peer group

compensation analysis performed by FW Cook. Consistent with the Company’s compensation philosophy, adjustments
were made to target the median compensation levels among our peer group. In addition, when evaluating the
adjustments for Mr. Carstanjen and Mr. Mudd, the Committee also considered each executive’s role in, and
responsibility for, expanding the Company’s business in new areas, including historical horse racing and sports
wagering. Finally, in approving Mr. Carstanjen’s and Mr. Mudd’s long-term equity award levels, the Committee
allocated a significant portion of their total target direct compensation increases to their target long-term equity
award levels to be consistent with the Company’s long-standing compensation philosophy of aligning executive
officers’ interests with stockholders through the risks and rewards of equity ownership.

With respect to the PSU awards in the table above, performance will be based on the following three Performance
Measures during the 36-month period from January 1, 2019 through December 31, 2021 (the “Performance Period”):

Adjusted Earnings before Interest, Tax, Depreciation and Amortization (“Adjusted EBITDA”) (50% weight). Adjusted
EBITDA during the Performance Period relative to the pre-established goals set for such measurement period, will be

2020 Proxy Statement | 33

Compensation Discussion and Analysis

derived from the Company’s consolidated financial statements with any necessary adjustments similar to those
described further below;

Cash Flow Metric (“Cash Flow Metric”) (50% weight). Cumulative Cash Flow (i.e. the sum of the free cash flows from
the annual periods ending December 31 of each of 2019, 2020, and 2021, respectively, where the Cash Flow Metric
goals are set at the beginning of each of those three periods) will also be derived from the Company’s consolidated
financial statements with any necessary adjustments similar to those described further below; and

Relative Total Shareholder Return Modifier (“TSR”). The Company’s TSR modifier will be determined by ranking the
return on the Company’s shares against those of the companies in the Russell 2000 index, in each case, over the
Performance Period. The Company’s TSR will be calculated based upon the Company’s relative placement against the
Russell 2000 over the Performance Period. The PSU awards determined by the Adjusted EBITDA and Cash Flow Metric
performance goals described above will then be adjusted based on the Company’s TSR, by increasing the PSU awards
by 25% if the Company’s TSR is in the top quartile, decreasing the PSU awards by 25% if the Company’s TSR is in the
bottom quartile, and providing no change to the PSU awards if the Company’s TSR is in the middle two quartiles.

The maximum number of PSUs that can be earned for the Performance Period is 250% of target. At the end of the
Performance Period, the Committee will review performance achieved on each pre-established Performance Measure. The
goals are intended to be challenging, but achievable with strong management performance. The payout for each
Performance Measure will be determined by a payout curve, as achievement that lies in between two goals will be
interpolated.

With respect to the RSU awards, the RSUs vest in one third (1/3) increments on each of December 31, 2019, December 31,
2020 and December 31, 2021, respectively, generally subject to the executive’s continued employment through the
applicable vesting date.

With respect to the performance period and related PSU awards under the ELTI Plan for January 1, 2017 through
December 31, 2019, the actual performance was certified by the Compensation Committee in its February 2020 meeting
(with a TSR at 181.5%, in the top 5% of the Russell 2000 over the performance period) as set forth below:

Target

Maximum

Actual

% of Target

Projected Payout

Weighted
Payout

Adjusted EBITDA:

$1,069 million $1,282.8 million $1,373.4 million 128.5%

200% (when >120%)

100%

Cash Flow Metric:

$ 494 million $ 592.8 million $ 579.2 million 117.2%

172.5%

86.2%

186.2%

125%

232.8%

Total Weighted Payout:

x TSR Modifier:

Target Multiplier:

Name(1)

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Target PSU
Award

38,685

16,443

10,155

Target
Multiplier

232.8%

PSUs
Awarded(2)

90,056

38,278

23,640

(1) Mr. Miller became an NEO after the 2017 ELTI awards were granted and, accordingly, did not receive a 2017 ELTI

award.

(2)

In 2020, the Committee offered the cash-settlement of the 2017 PSU awards and each NEO accepted the Committee’s
offer to settle the awards in cash. Accordingly, in February 2020, the 2017 PSU awards were settled in cash after
certification by the Committee that the Company achieved the required level of performance. The 2017 PSU awards were
settled based upon the closing price of the Company’s common stock on February 12, 2020 ($160.26 per share).

Adjusted EBITDA—as defined in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations in the Form 10-K for the year ended December 31, 2019.

34 | 2020 Proxy Statement

As reported in the 2019 Form 10-K

Pre-tax gain on Big Fish Transaction

Big Fish Adjusted EBTIDA (discontinued operation)

Changes in Big Fish Deferred Revenue

Adj. EBITDA for Compensation Purposes

Compensation Discussion and Analysis

2017

$286.2

N/A

$ 80.3

$ 3.8

$370.3

2018

$328.8

$219.5

$ 3.4(1)

N/A

$551.7

2019

$451.4

N/A

$451.4

(1) Represents Adjusted EBITDA through January 9, 2018, on which date the Company completed the sale of Big Fish

Games, Inc.

Cash Flow Metric—Our cash flow metric is defined as Cash Flows from Operating Activities in Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K for the year ended
December 31, 2019, not including the impact from the change in restricted cash, plus distributions of capital from
equity investments less capital maintenance expenditures.

Cash Flow from Operating Activities

Distributions of Capital from Equity Investments

Capital Maintenance Expenditures

Change in Restricted Cash

Cash Flow Metric

2017

$215.1

$ (33.3)

$ (3.1)

$184.9

2018

$197.8

$ (29.6)

$ 8.8

$159.4

2019

$289.6

$ (48.3)

$ 6.3

$235.0

Total Shareholder Return—defined as the Company’s stock price as of the end of the measurement period, assuming
reinvestment of dividends, divided by the Company’s stock price as of the beginning of the measurement period. The
Company’s Total Shareholder Return for the period January 1, 2017 through December 31, 2019 was 181.5%.

Executive Stock Ownership Guidelines

Our Board of Directors has adopted minimum stock ownership guidelines for our executive officers. The principal objective
of the guidelines is to enhance the linkage between the interests of shareholders and our executive officers by requiring a
meaningful, minimum level of stock ownership. The current guidelines provide that, within five (5) years of becoming
subject to the stock ownership guidelines, our CEO should own shares valued at an amount equal to six times (6x) his base
salary, our COO should own shares valued at an amount equal to four times (4x) his base salary, and our CFO and other
executive officers should own shares valued at an amount equal to three times (3x) the executive’s base salary.

In 2019, each NEO met or exceeded the guidelines:

Executive Officer

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Ownership
Guidelines

Shares Owned(1)

Value of Shares(2) Multiple of Salary(3)

534,433

291,692

38,990

44,842

$73,324,208

$40,020,142

$5,349,428

$6,152,322

(1) Calculated as of December 31, 2019 and represents shares of Common Stock owned outright.

(2) Based on the closing Company stock price of $137.20 as of December 31, 2019.

(3) Calculated using the base salary information illustrated on page 30.

Anti-Hedging Policy

Under the terms of the Company’s Statement of Company Insider Trading Policy, our directors, officers and other employees
are prohibited from engaging in hedging and monetization transactions and transactions that involve exchange-traded options

2020 Proxy Statement | 35

Compensation Discussion and Analysis

or short sales of the Company’s securities. Because hedging transactions might permit a director, officer or other employee to
continue to own our securities without the full rewards and risks of ownership, such hedging transactions are prohibited.

Clawback Policy

Under the terms of the Company’s Executive Incentive Compensation Recoupment Policy, the NEOs’ incentive
compensation is subject to “clawback” in the event of a material restatement of the Company’s financial statements due to
material noncompliance with any financial reporting requirement under securities laws that would have resulted in less
incentive compensation awarded or paid to the executive had the financial results been properly reported during the three
fiscal years prior to a material restatement. The Committee may require the NEO to repay all or a portion of compensation
paid and cancel unvested or vested incentive compensation awarded during the applicable time-period.

Deferred Compensation and Other Benefits

The Company’s philosophy is to provide retirement and savings benefits to executives which are commonly provided by
other public companies. The benefits available to executives include:

401(k). The Company maintains a 401(k) Retirement Plan, which is a profit sharing plan that is intended to be a qualified
retirement plan under Section 401(a) of the Internal Revenue Code (the “Code”). The 401(k) Retirement Plan allows all
employees who meet the eligibility requirements to become participants. Participants may make salary deferral
contributions pursuant to Section 401(k) of the Code up to limits prescribed by the plan and the Code. The Company makes
matching contributions with respect to such salary deferrals at a rate of 100% on the first 3% of compensation deferred and
50% on deferrals in excess of 3% of compensation deferred but no more than 5% of compensation deferred. Salary deferral
contributions and matching contributions are fully vested at all times. Participants are allowed to direct investment of their
accounts under the 401(k) Retirement Plan into as many as 29 investment options. All assets of the 401(k) Retirement Plan
are held in a trust that is intended to be qualified under Section 501 of the Code.

Deferred Compensation Plan. For 2019, the Company maintained a Deferred Compensation Plan for select executives. The
purpose of the plan was to provide eligible executives of the Company an opportunity to defer to a future date the receipt
of base salary and bonus compensation for services and to receive matching contributions in similar fashion as provided by
the Company’s 401(k) Retirement Plan for any base salary and bonus deferred beyond the limits imposed by the IRS for that
plan.

For purposes of determining earnings under the Deferred Compensation Plan, various hypothetical investment alternatives
consistent with those offered under the Company’s 401(k) Retirement Plan are available. The current hypothetical
investments available under the Deferred Compensation Plan consist of 37 investment return options for determining the
rate of return to be credited on participant deferrals. Participants are allowed to choose among these investment return
options in order to direct the hypothetical investments used to determine earnings under the plan.

On December 13, 2019, the Compensation Committee elected to “freeze” the Deferred Compensation Plan with respect to
employee participant deferrals after the 2019 plan year. Life insurance contracts have been purchased by the Company to
provide some or all of the benefits under the Deferred Compensation Plan. Other details regarding the Deferred
Compensation Plan can be found in the 2019 Nonqualified Deferred Compensation Table, on page 43, and the
accompanying narrative below.

New Restricted Stock Unit Deferral Plan. On December 13, 2019, the Compensation Committee, adopted the Churchill
Downs Incorporated Restricted Stock Unit Deferral Plan (the “Deferral Plan”), effective January 1, 2020. Under the Deferral
Plan, certain individual employees who are management or highly compensated employees of the Company may elect to
defer settlement of RSUs granted to them pursuant to the 2016 Omnibus Stock Incentive Plan that are due to be earned
and that would otherwise be settled with respect to a given year pursuant to the terms of an RSU agreement between the
Company and such employees. An account will be established and maintained for each participant, and each participant’s
account shall be credited with all RSUs and any applicable dividend equivalents allocated to such participant. A participant’s
account under the Deferral Plan will be settled on the earlier of: (i) the participant’s separation from service with the
Company or (ii) the date fixed in such participant’s plan participation agreement. The Company believes that the new
Deferral Plan further aligns with its overall compensation program objectives by aligning the long-term interests of
participants and shareholders through the deferral of RSUs.

36 | 2020 Proxy Statement

Compensation Discussion and Analysis

Allowances and Other Benefits. The Company’s standard, non-cash executive benefits are Company-paid premiums on
executive term life insurance and an optional supplemental long-term disability income plan for each NEO. These plans
provide benefits which are similar to those provided to eligible employees, but extend the benefit levels to be appropriate
to the income of the executive officers. For Company executives, the Company may reimburse spouse’s travel expenses for
travel with the executive on Company business on a case-by-case basis.

Severance Benefits. The Compensation Committee believes that arrangements that provide benefits upon termination or a
change in control of the Company support the goals of attracting and retaining qualified executives. Such benefits include
clarifying the terms of employment and reducing the risks to the executive where the executive believes that either the
Company may undergo a merger or be acquired. In addition, the Compensation Committee believes that such agreements
align the interests of executives with the interests of shareholders if a qualified offer to acquire the Company is made, in
that each of the executives would likely be aware of or involved in any such negotiation and it is to the benefit of
shareholders to have the executives negotiating in the best interests of the Company without regard to their personal
financial interests. The Compensation Committee has adopted forms of Executive Change in Control, Severance and
Indemnity Agreements (the “Change in Control Agreements”) applicable to the NEOs. Prior to 2019, Mr. Miller was not a
party to a Change in Control Agreement. The terms of the Change in Control Agreements were determined after
considering market data and the input of the Committee’s independent compensation consultant at the time.
The Change
in Control Agreements provide, subject to the Company receiving a general release of claims from the executive, severance
benefits in the event the executive’s employment is terminated (i) by the Company other than for “Cause” (as defined in
the Change in Control Agreement), “Disability” (as defined in the Change in Control Agreement) or death or (ii) by the
executive for “Good Reason” (as defined in the Change in Control Agreement), with enhanced benefits for a termination in
connection with a “Change in Control” (as defined in the Change in Control Agreement). All equity-based awards in effect at
the time of termination for the aforementioned reasons shall remain governed by the applicable plan or award agreement.
The Change in Control Agreements do not provide for any tax gross-ups for excise taxes payable following a Change in
Control.

Please see the “Potential Payments Upon Termination or Change of Control” section for a summary of the severance
benefits payable to the NEOs under their applicable Change in Control Agreements.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the information appearing above under the heading
“Compensation Discussion and Analysis” with management and, based on that review and discussion, has recommended to
the Board of Directors that the “Compensation Discussion and Analysis” section be included in this Proxy Statement and the
Company’s Annual Report on Form 10-K for the year ending December 31, 2019.

Compensation Committee of the Board of Directors:

Daniel P. Harrington, Chair
Robert L. Fealy
Douglas C. Grissom
R. Alex Rankin, ex officio

2020 Proxy Statement | 37

2019 Summary Compensation Table

2019 SUMMARY COMPENSATION TABLE

The following table provides information regarding compensation earned by our Chief Executive Officer, President & Chief
Operating Officer, Executive Vice President & Chief Financial Officer, and Senior Vice President, Gaming Operations
(sometimes referred to in this proxy statement as the “Named Executive Officers” or “NEOs”).

Name and Principal Position

William C. Carstanjen

Chief Executive Officer

William E. Mudd

President and Chief
Operating Officer

Marcia A. Dall

Executive Vice President
and Chief Financial Officer

Austin W. Miller(4)

Senior Vice President,
Gaming Operations

Base
Salary
($)

1,350,000

1,276,154

1,023,077

942,307

726,923

642,269

639,423

607,692

544,231

477,690

399,743

Year

2019

2018

2017

2019

2018

2017

2019

2018

2017

2019

2018

Bonus
($)

Stock
Awards
($)(1)

Non-Equity
Incentive Plan
Compensation
($)(2)

All Other
Compensation
($)(3)

-0-

6,082,661

3,151,779

16,827,946

3,000,000

4,157,013

2,250,000

2,577,430

1,700,000

9,389,550

1,250,000

1,766,800

1,134,334

1,155,060

1,091,465

793,634

804,983

900,000

800,000

775,000

675,000

500,000

325,700

16,854

16,269

17,102

48,662

47,126

38,049

17,077

16,268

15,535

33,930

29,437

Total
($)(5)

10,601,294

21,120,369

7,447,192

5,268,399

11,413,599

3,347,118

2,590,834

2,554,020

2,326,231

1,805,254

1,559,863

(1)

In accordance with the SEC executive compensation disclosure rules, the amounts shown in 2019 for stock awards represent the
grant date fair value of such awards determined in accordance with Financial Accounting Standards Board Accounting Standards
Codification Topic 718, Compensation—Stock Compensation (“FASB ASC Topic 718”), but disregarding the estimate of forfeitures, in
connection with service-based RSUs and PSUs granted pursuant to the ELTI Plan to each of our participating NEOs in 2019. The
amounts included in the Stock Awards column for the PSUs granted during 2019 are calculated based on the probable satisfaction of
the performance conditions for such awards as of the date of grant. Assuming the highest level of performance is achieved for the
2019 PSUs subject to the Adjusted EBITDA, Cash Flow metrics as well as the TSR modifier, the maximum value of such PSUs at the
grant date would be as follows: Mr. Carstanjen—$7,375,188; Mr. Mudd—$3,125,143; Ms. Dall—$1,375,124; and Mr. Miller—
$750,008. See Note 10 to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended
December 31, 2019 for a discussion of the relevant assumptions used in calculating the amounts reported for 2019.

(2) Amounts in this column represent payments for performance under the Executive Annual Incentive Plan (“EAIP”). Mr. Carstanjen,
Mr. Mudd, Ms. Dall, and Mr. Miller received their 2019 EAIP awards in February 2020. Typically, payments for each year shown are
made by March 15 of the following year.

(3) The table below shows the components of this column for 2019, which include the Company match for each individual’s defined

contribution plan contributions, life insurance premiums, and supplemental long-term disability insurance premiums.

(4) Mr. Miller became an NEO in 2018.

(5)

In 2018, the Company approved a special, meaningful, equity award (the “7-Year Grant”) to Mr. Carstanjen and Mr. Mudd. The
7-Year Grant was in addition to participation in the Company’s regular annual long-term incentive program for 2018 and was sized
such that it will serve as substantial incentive to retain both executives over the seven-year vesting period and keep both executives
focused on the long-term financial and stock price success of the Company. The stock units awarded in the 7-Year Grants were
primarily in the form of PSUs (127,587 and 79,743 for Mr. Carstanjen and Mr. Mudd, respectively), with vesting based on the
Company’s relative TSR performance versus the Russell 2000 over a three-year performance period (October 30, 2018 through
October 29, 2021), with vesting occurring thereafter in 25% annual increments over four years beginning on the fourth anniversary
of the grant date, totaling seven years to be fully vested. The remaining stock units awarded were in the form of service-based RSUs
(48,711 and 30,444 for Mr. Carstanjen and Mr. Mudd, respectively), which vest in 25% annual increments over four years beginning
on the fourth anniversary of the grant date, totaling seven years to be fully vested.

38 | 2020 Proxy Statement

All Other Compensation for Fiscal Year Ended December 31, 2019

ALL OTHER COMPENSATION FOR FISCAL YEAR
ENDED DECEMBER 31, 2019

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Company
Contributions
Under Defined
Contribution
Plans(1)
($)

Life
Insurance
Premiums(2)
($)

Supplemental
Long-Term
Disability
Insurance
Premiums(3)
($)

Total All Other
Compensation
($)

11,200

44,507

11,200

28,446

3,854

2,654

3,189

3,208

1,800

1,501

2,688

2,276

16,854

48,662

17,077

33,930

(1) This amount includes Company contributions to both 401(k) and deferred compensation plans.

(2) Mr. Carstanjen, Mr. Mudd, Ms. Dall and Mr. Miller receive group life coverage equal to two times base salary with a $3 million

maximum. The amounts in this column are the premiums for the NEOs’ coverage.

(3) Mr. Carstanjen, Mr. Mudd, Ms. Dall and Mr. Miller receive long-term disability coverage equal to sixty percent (60%) of their base
salary with a $10,000 per month maximum in the event of a long-term disability. The Company offers supplemental long-term
disability income insurance to help fill the gap between the executive’s regular monthly net income and the amount that would be
paid under the Company’s standard long-term disability insurance policy that is available to other salaried employees. The amounts
in this column are the premiums for the NEOs’ supplemental coverage paid by the Company.

2020 Proxy Statement | 39

Grants of Plan-Based Awards for Fiscal Year Ended December 31, 2019

GRANTS OF PLAN-BASED AWARDS FOR FISCAL
YEAR ENDED DECEMBER 31, 2019

The grants in the following table are generally described in the Compensation Discussion and Analysis, beginning on
page 23.

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Estimated Future Payout
under
Non-Equity Incentive Plan
Awards(1)

Estimated Future Payout
under
Equity Incentive Plan
Awards(2)

Grant
Date

Threshold
($)(4)

Target
($)

Max
($)

Threshold
(#)

Target
(#)

Max
(#)

759,375 2,025,000 4,050,000

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#)(3)

Grant
Date Fair
Value of
Stock
Awards
($)

31,074

2,950,166

02/13/2019

03/12/2019

02/13/2019

03/12/2019

02/13/2019

03/12/2019

02/13/2019

03/12/2019

468,750 1,250,000 2,500,000

205,196

547,188 1,094,376

140,625

375,000

750,000

16,860

33,719 84,298

3,132,495

7,144

14,288 35,720

1,327,355

13,167

1,250,075

3,144

6,287 15,718

584,062

5,796

550,272

1,715

3,429

8,573

318,554

5,004

475,080

(1) Represents annual incentive bonus opportunities under the EAIP for each of the NEOs. See “Executive Annual Incentive Plan”
beginning on page 31. Actual bonus payments for 2019 are listed under Non-Equity Incentive Plan Compensation in the 2019
Summary Compensation Table on page 38.

(2) Represents the PSUs granted under the ELTI Plan to each of the NEOs, which vest based on the Company’s performance with

respect to Adjusted EBITDA for compensation purposes and the cash flow metric over the 2019-2021 performance period. The
vesting of these awards is also subject to a TSR modifier which could increase or decrease the number of shares earned under an
award by 25%, as more fully explained on pages 33-34.

(3) Represents RSUs granted under the ELTI Plan to each of the NEOs, which are scheduled to vest in 1/3 increments on each of

December 31, 2019, 2020 and 2021, subject generally to the NEO’s continued employment through the applicable vesting date.

(4) The EAIP threshold represents a 50% payout of the pre-established financial performance goal, which constitutes 75% of the target
EAIP payout, based upon achievement of the minimum annual Adjusted EBITDA target. The individual performance goal has a range
0% to 200% payout depending on achievement of goals, which constitutes the remaining 25% of the total EAIP payout and is not
included in the threshold.

40 | 2020 Proxy Statement

Outstanding Equity Awards at Fiscal Year-End for Fiscal Year Ended December 31, 2019

OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END FOR FISCAL YEAR ENDED
DECEMBER 31, 2019

The following table provides information regarding unvested stock awards held by each of the Named Executive Officers on
December 31, 2019. As of such date, none of our Named Executive Officers held any outstanding option awards.

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Stock Awards

Number of Shares
or Units of Stock That
Have Not Vested
(#)

Market Value of
Shares or Units of Stock
That Have Not Vested
($)(1)

78,211(2)

42,660(2)

5,967(2)

5,151(2)

3,063(3)

10,730,549

5,852,952

818,672

706,717

420,244

Equity Incentive Plan
Awards; Number of
Unearned Shares,
Units or Other Rights That
Have Not Vested
(#)

Equity Incentive Plan
Awards; Market or
Payout Value of
Unearned Shares, Units
or Other Rights That
Have Not Vested
($)(1)

189,158(4)

104,930(4)

12,947(4)

7,062(4)

-0-

25,952,478

14,396,396

1,776,328

968,906

-0-

(1) Based on the December 31, 2019 closing price of CHDN of $137.20 per share.

(2) Represent awards under the ELTI Plan consisting of RSUs for continued employment periods from January 1, 2018—
October 30, 2025. The 78,211 RSUs for Mr. Carstanjen vest as follows: 19,142 units on December 31, 2020; 10,358 on
December 31, 2021; 12,177 on October 30, 2022; 12,177 on October 30, 2023; 12,177 on October 30, 2024 and 12,180
on October 30, 2025. The 42,660 RSUs for Mr. Mudd vest as follows: 7,827 units on December 31, 2020; 4,389 units on
December 31, 2021; 7,611 on October 30, 2022; 7,611 on October 30, 2023; 7,611 on October 30, 2024 and 7,611 on
October 30, 2025. The 5,967 RSUs for Ms. Dall vest as follows: 4,035 units on December 31, 2020 and 1,932 units on
December 31, 2021. The 5,151 RSUs for Mr. Miller vest as follows: 3,486 units on December 31, 2020 and 1,668 units
on December 31, 2021.

(3) Represents restricted shares awarded to Mr. Miller under the 2016 Omnibus Stock Incentive Plan in connection with

Mr. Miller’s continued employment. The 3,063 restricted shares vest as follows: 3,063 on February 17, 2020.

(4) Represent awards under the ELTI Plan consisting of PSUs for certain performance periods from January 1, 2018
through December 31, 2021. The 189,158 PSUs for Mr. Carstanjen are subject to vesting on the following dates,
subject to meeting the performance criteria at the end of each applicable performance period: 27,852 units on
December 31, 2020; 33,719 units on December 31, 2021; 31,897 units on October 30, 2022; 31,897 units on
October 30, 2023; 31,897 units on October 30, 2024 and 31,896 units on October 30, 2025. The 104,930 PSUs for
Mr. Mudd are subject to vesting on the following dates, subject to meeting the performance criteria at the end of each
applicable performance period: 10,899 units on December 31, 2020; 14,288 units on December 31, 2021; 19,936 units
on October 30, 2022; 19,936 units on October 30, 2023; 19,936 units on October 30, 2024 and 19,935 units on
October 30, 2025. The 12,947 PSUs for Ms. Dall are subject to vesting upon meeting the performance criteria at the
end of the following performance periods: 6,660 units on December 31, 2020 and 6,287 on December 31, 2020. The
7,062 PSUs for Mr. Miller are subject to vesting upon meeting the performance criteria at the end of the following
performance periods: 3,633 on December 31, 2020 and 3,429 on December 31, 2021. For purposes of this table, the
PSUs are reported assuming target performance.

2020 Proxy Statement | 41

Stock Vested for Fiscal Year Ended December 31, 2019

STOCK VESTED FOR FISCAL YEAR ENDED
DECEMBER 31, 2019

The following table provides information concerning vesting of stock awards during 2019 for each of the Named Executive
Officers. None of our Named Executive Officers held any stock options during 2019.

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Stock Awards

Number of Shares
Acquired on Vesting (#)

122,095(1)

51,586(1)

31,062(1)

9,903

Value Realized
on Vesting ($)(2)

$18,828,125

$ 7,960,290

$ 4,806,845

$ 1,229,770

(1) Shares include PSU vesting for Mr. Carstanjen (90,056), Mr. Mudd (38,278), and Ms. Dall (23,640) for the performance
period January 1, 2017 through December 31, 2019, as more fully explained under Long Term Incentives on page 33. In
2020, the Committee offered the cash-settlement of the 2017 PSU awards and each NEO accepted the Committee’s
offer to settle the awards in cash. Accordingly, in February 2020, the 2017 PSU awards were settled in cash after
certification by the Committee that the Company achieved the required level of performance.

(2) The RSUs vested reflect the market value of the stock on the day the stock vested. The 2017 PSU awards were settled

based upon the closing price of the Company’s common stock on February 12, 2020 ($160.26 per share) after
certification by the Compensation Committee.

42 | 2020 Proxy Statement

Nonqualified Deferred Compensation for Fiscal Year Ended December 31, 2019

NONQUALIFIED DEFERRED COMPENSATION FOR
FISCAL YEAR ENDED DECEMBER 31, 2019

The following table provides information regarding compensation that has been deferred by the Named Executive Officers
pursuant to the terms of the Company’s nonqualified deferred compensation plan.

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Executive
Contributions
in Last Fiscal
Year ($)(1)

Registrant
Contributions
in Last Fiscal
Year ($)(2)

Aggregate
Earnings
(Losses) in Last
Fiscal Year ($)

Aggregate
Withdrawals
Distributions ($)

Aggregate
Balance at Last
Fiscal Year End ($)(3)

-0-

47,115

33,308

155,629

-0-

52,791

119,422

17,246

180,926

-0-

802,684

250,997

1,745,528

(1) The amounts in this column are also included in the 2019 Summary Compensation Table on page 38 in the salary

column or the non-equity incentive plan compensation column.

(2) The amounts in this column are also included in the 2019 Summary Compensation Table on page 38 in the all other

compensation column as a part of the Company contributions under defined contribution plans.

(3) Of the totals in this column, the following totals have previously been reported in the Summary Compensation Table

for this year and for previous years:

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

2019
($)

-0-

80,423

-0-

Previous Years
($)

-0-

407,936

175,900

136,668

73,922(1)

(1) Mr. Miller became an NEO in 2018. Because Mr. Miller’s compensation has not previously been reported in the

Company’s summary compensation tables, deferrals from years prior to 2018 are not reported here.

The Nonqualified Deferred Compensation table above shows information about the Company’s nonqualified deferred
compensation plan. In 2019, executive officers and other executives could defer receipt of all or part of their cash
compensation under this plan. The plan operates in a similar manner as the Company’s 401(k) plan, whereby participants
can manage their self-directed accounts to allocate balances among various investment alternatives, which determine gains
or losses under the plan. A company match was provided for amounts deferred above the qualified plan limits. The plan is
unfunded for ERISA purposes and subject to forfeiture in the event of insolvency or bankruptcy by the Company.
Participants can elect to receive their deferred compensation balance (i) upon termination of employment through a lump
sum payment or (ii) while employed by the Company provided that the initial distribution date is at least five (5) years from
the initial participation date, in which case distributions may be made on a monthly basis or in a lump sum.

2020 Proxy Statement | 43

Potential Payments Upon Termination or Change of Control

POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE OF CONTROL

The Company has entered into certain agreements and maintains certain plans that will require the Company to provide
compensation to the NEOs in the event of a termination of employment. None of our compensation arrangements with our
NEOs provide for single trigger vesting or severance benefit upon a change in control (“CIC”) of the Company without a
related or subsequent qualifying termination of employment. The amount of compensation payable to each NEO in each
situation as of December 31, 2019 is listed in the table below.

Name

William C. Carstanjen

Cash
Severance
Payment ($)

Acceleration &
Continuation
of Equity
Awards ($)(1)

Total Benefits ($)

Involuntary or good reason termination

8,783,031

21,627,636(4)

30,410,667

Change in control without termination

Death or Disability

Involuntary or good reason termination within 2 years CIC

William E. Mudd

-0-

2,025,000(2)

8,783,031

-0-

21,627,636(5)

36,683,027(3)

-0-

23,652,636

45,466,058

Involuntary or good reason termination

4,633,367

11,758,017(4)

16,391,384

Change in control without termination

Death or Disability

Involuntary or good reason termination within 2 years CIC

Marcia A. Dall

-0-

1,250,000(2)

5,758,367

-0-

11,758,017(5)

20,249,348(3)

-0-

13,008,017

26,007,715

Involuntary or good reason termination

1,794,801

1,715,366(4)

3,510,167

Change in control without termination

Death or Disability

-0-

547,188(2)

Involuntary or good reason termination within 2 years CIC

2,390,270

-0-

1,715,366(5)

2,595,001(3)

-0-

2,262,554

4,985,271

Austin W. Miller

Involuntary or good reason termination

1,317,756

1,616,079(4)

2,933,835

Change in control without termination

Death or Disability

-0-

375,000(2)

Involuntary or good reason termination within 2 years CIC

1,755,256

-0-

1,616,079(5)

2,095,867(3)

-0-

1,991,079

3,851,123

(1) Represents the market value as of December 31, 2019 of stock awards accelerated or continued in each scenario. For purposes of

this disclosure, market value is determined using the December 31, 2019 closing price of CHDN of $137.20 per share.

(2) Represents the pro rata bonus for the year of death or disability based on the target bonus the executive was eligible to receive for

that year.

(3) Represents one hundred percent (100%) of all unvested restricted stock awards, RSU and PSU awards (based on to-date
performance as of the termination date) granted under the 2016 Omnibus Stock Incentive Plan and the ELTI Plan.

(4) Represents (i) continued vesting of all unvested RSUs as of the termination date, plus (ii) continued vesting of all PSUs based on

performance through the entire performance period, pro-rated for the time the NEO was employed during that performance
period. For purposed of this table, all PSUs values are based on target performance.

(5) Represents (i) accelerated vesting of all unvested RSUs as of the termination date, plus (ii) continued vesting of all PSUs based on
performance through the entire performance period, pro-rated for the time the NEO was employed during that performance
period. For purposed of this table, all PSUs values are based on target performance.

44 | 2020 Proxy Statement

Potential Payments Upon Termination or Change of Control

Non-Solicit Provisions

Mr. Carstanjen, Mr. Mudd, Ms. Dall and Mr. Miller (the “NEOs”) each entered into an Executive Change in Control,
Severance and Indemnity Agreement (the “Change in Control Agreements”) with the Company, replacing all previously
executed employment agreements, if any, which were mutually terminated by the Company and each NEO. Pursuant to
each of these agreements, each NEO is subject to a two-year non-solicitation period after the termination of their
employment with the Company for any reason, during which they may not solicit any employee of the Company to leave
employment with the Company or solicit any customer of the Company for the purpose of engaging in business with them
that competes with the business engaged in by the Company.

Severance Benefits

The Change in Control Agreements, executed by the NEOs, provide for the following principal severance provisions upon
termination by the Company without cause or by the executive upon constructive termination or for good reason (as
defined in each agreement):

Mr. Carstanjen and Mr. Mudd. The Change in Control Agreement executed by Mr. Carstanjen and Mr. Mudd in 2018
provides that, upon termination by the Company without cause or by the executive upon constructive termination or for
good reason, the executive will be entitled to receive (a) an amount in cash equal to, in the case of Mr. Carstanjen, 2 times
and, in the case of Mr. Mudd, 1.5 times the sum of (x) the executive’s annual base salary and (y) the amount of the
executive’s annual target bonus for the year in which the Executive was terminated, (b) a lump sum amount equal to the
prorated in-cycle bonus of executive’s target bonus for the year in which the executive’s termination of employment
occurs; (c) treatment of all equity-based awards per the terms of the applicable plan, award or agreement; and (d) a lump
sum cash payment equal to the total premiums for medical, dental and vision benefits for a three-month period.

Ms. Dall and Mr. Miller. The Change in Control Agreement executed by Ms. Dall and Mr. Miller provides that, upon
termination by the Company without cause or by the executive upon constructive termination or for good reason, the
executive will be entitled to receive (a) an amount in cash equal to 1.5 times the sum of (x) the executive’s annual base
salary and (y) the amount of the executive’s annual target bonus for the year in which the executive was terminated;
(b) treatment of all equity-based awards per the terms of the applicable plan, award or agreement; and (c) a lump sum cash
payment equal to the total premiums for medical, dental and vision benefits for a three-month period.

Change in Control Benefits. The current agreements for the NEOs also provide for the following change in control
provisions: if the executive is terminated within two years following a change in control, the NEO will receive severance as
provided above, except that the salary and bonus severance multiple shall in each case be 2x.

In the event that any or all payments to any of the NEOs are subject to the excise tax imposed by Section 4999 of the Code,
such payments shall be reduced to one dollar ($1) below the maximum amount of payments that will not be subject to such
tax; provided, however, that the foregoing limitation shall not apply in the event the total payments to the NEO, on an
after-tax basis, would exceed the after-tax benefits to the NEO if such limitation applied. The NEO shall bear the expense of
any and all excise taxes due on any payments that are deemed to be “excess parachute payments” under Section 280G of
the Code.

2020 Proxy Statement | 45

Pay Ratio

PAY RATIO

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the
following disclosure about the relationship of the annual total compensation of our employees to the annual total
compensation of Mr. Carstanjen, our Chief Executive Officer. To understand this disclosure, we think it is important to give
context to our operations. Our business is seasonal and relies heavily on seasonal, part-time and hourly workers. In
addition, our gaming business operation also employs many part time hourly employees. In total, approximately 76.6% of
our workforce consists of hourly employees.

We strive to create a compensation program that is competitive in terms of both the position and the geographic location
in which the employee is located. Accordingly, our pay structures vary among employees based on position and geographic
location.

Identification of Median Employee

For 2019, we elected to use December 22, 2019 (instead of December 15th) as the date on which to determine our median
employee. This date was chosen because it followed the closing and administrative processing of the 2019 fall race meets at
Churchill Downs Racetrack so seasonal employees utilized only during the race meets (i.e., not during the majority of the
year) and not viewed as representative of our general employee base were no longer on the payroll. As of December 22,
2019, we had approximately 5,241 employees. For purposes of identifying the median employee, we ran a report for all
year-to-date taxable compensation for employees as of the selection date, and sorted by the total compensation.

Using this methodology, we determined our median employee was a full-time, hourly employee with an annual total
compensation of $23,670. In determining the annual total compensation of the median employee, we calculated such
employee’s compensation in accordance with Item 402(c)(2)(x) of Regulation S-K as required pursuant to SEC executive
compensation disclosure rules. This calculation is the same calculation used to determine total compensation for purposes
of the 2019 Summary Compensation Table with respect to each of the NEOs.

Ratio (2019)

Median Annual Total Compensation (excluding CEO)

CEO Annual Total Compensation

Pay Ratio

23,670

$10,601,294

447 to 1

SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various
methodologies and assumptions and, as a result, the pay ratio reported by us may not be comparable to the pay ratio
reported by other companies.

46 | 2020 Proxy Statement

Equity Compensation Plan Information

EQUITY COMPENSATION PLAN INFORMATION(1)

Plan Category

Equity compensation plans approved by security
holders(2)

Equity compensation plans not approved by security
holders

Total

(a)
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights

(b)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

725,615(3)(4)

-0-

725,615

-0-

(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))

1,904,539(5)(6)

-0-

1,904,539

(1) This table provides information, as of December 31, 2019, about CHDN Common Stock that may be issued upon the

exercise of options and settlement of other equity awards under all compensation plans under which equity securities
are reserved for issuance.

(2) The equity compensation plans of the Company which have been approved by the shareholders of the Company and
pursuant to which equity securities are authorized for issuance are the Churchill Downs Incorporated 2000 Employee
Stock Purchase Plan (“Stock Purchase Plan”) and the Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan
(“2016 Plan”).

(3)

Includes 314,097 PSUs and 211,605 RSUs that were outstanding on December 31, 2019 under the 2016 Plan. For
purposes of this table, we have included the number of shares issuable under outstanding PSUs assuming performance
targets are achieved. Please see the “Compensation Discussion and Analysis” section of this Proxy Statement for
further information regarding the 2019 PSUs, including performance metrics applicable to such awards.

(4) Because each participant in the Stock Purchase Plan has one option each plan year and that option consists of the
number of shares which can be purchased, through exercise, at the end of the plan year using compensation
deductions made throughout the plan year, no outstanding options, warrants or rights for a specific number of the
Company’s securities to be issued upon exercise existed at December 31, 2019 and, therefore, none are included in
this total for the Stock Purchase Plan.

(5) Of this total, as of December 31, 2019, 597,050 shares of Common Stock of the Company remained available for future
issuance under the Stock Purchase Plan and 1,307,489 shares of Common Stock of the Company remained available
for future issuance under the 2016 Plan. Stock awards under the 2016 Plan will be counted against the maximum
number of shares as to which stock awards may be granted on a ratio of 1-to-1.

(6) Excludes 151,974 PSUs that vested on December 31, 2019 with respect to Mr. Carstanjen, Mr. Mudd, and Ms. Dall, but
were settled in cash in the first quarter of 2020 upon acceptance by the NEOs of the Committees offer to settle in cash
and after certification by the Compensation Committee that the Company achieved the required level of
performance. Shares subject to these PSUs became available for future grant under the 2016 Plan upon cash
settlement in February 2020.

2020 Proxy Statement | 47

Certain Relationships and Related Transactions

CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

The Company has adopted written policies and procedures for identifying and approving or ratifying related person
transactions. The policies and procedures cover all related person transactions required to be disclosed under Item 404
(a) of Regulation S-K. The Audit Committee is responsible for applying the policies and procedures. In evaluating related
person transactions, the Audit Committee considers all factors it deems appropriate, including without limitation, whether
the related person transaction is on terms no less favorable than terms generally available to an unaffiliated third party
under the same or similar circumstances, the extent of the related person’s interest in the transaction, and whether
products or services of a similar nature, quantity, or quality are readily available from alternative sources.

Directors of the Company may from time to time own or have interests in horses racing at the Company’s tracks. All such
races are conducted, as applicable, under the regulations of the Kentucky Horse Racing Commission, the Illinois Racing
Board, the Florida Department of Business and Professional Regulation Division of Pari-Mutuel Wagering, the Louisiana
State Racing Commission, the Ohio State Racing Commission, the Maryland Racing Commission, and the Pennsylvania State
Horse Racing Commission, and no director receives any extra or special benefit with regard to having his or her horses
selected to run in races or in connection with the actual running of races.

In its ordinary course of business, the Company may enter into transactions with certain of its officers and directors for the
sale of personal seat licenses and suite accommodations at its racetracks, and tickets for its live racing events. The Company
believes that each such transaction has been on terms no less favorable for the Company than could have been obtained in
a transaction with a third party and no such person received any extra or special benefit in connection with such
transactions.

On March 6, 2019, The Duchossois Group (“TDG”), through one of its affiliate companies participated in a mezzanine debt
financing transaction entered into by Midwest Gaming Holdings, LLC (“MGH”), a majority-owned subsidiary of the Company
and the parent company of the entity that owns and operates Rivers Casino in Des Plaines, Illinois (the “Mezzanine
Transaction”). The Mezzanine Transaction involved a $200 million term loan facility for MGH as the borrower and bears
interest at LIBOR plus 6.50%, subject to certain exceptions. TDG acquired $20 million of the term loan via a syndication from
the Mezzanine Lender, Canyon Partners. The Company has been advised that TDG’s participation in the Mezzanine
Transaction was on the same terms and conditions as the other participants in the facility. Our former directors, Richard
Duchossois (who retired from the Board effective April 23, 2019), and Craig Duchossois (who retired from the Board
effective April 24, 2018), are equity owners in TDG.

Other than as described above, since January 1, 2019, no transaction was identified as a related party transaction.

48 | 2020 Proxy Statement

Churchill Downs Incorporated Audit Committee Report

CHURCHILL DOWNS INCORPORATED AUDIT
COMMITTEE REPORT

The following is the report of the Company’s Audit Committee (the “Committee”), which consisted of four directors in 2019,
each of whom has been determined by the Board of Directors (the “Board”) to meet the current standards of the SEC and
the Nasdaq exchange to be considered an “independent director.” The Board has also determined that two members,
Daniel P. Harrington and Karole F. Lloyd, are “audit committee financial experts” as defined by the SEC.

The Committee has an Audit Committee Charter (the “Charter”), which was amended, restated and approved by the Board
on February 25, 2020. The Charter sets forth certain responsibilities of the Committee, which include oversight of the
integrity of the financial statements of the Company, the systems of internal controls over financial reporting which
management has established, the independence and performance of the Company’s internal and independent auditors, the
Company’s compliance with financial, accounting, legal and regulatory requirements, and the effectiveness of the
Enterprise Risk Management (“ERM”) function. The Committee reviews the work of the Company’s management, the
internal audit staff and the independent auditors on behalf of the Board.

Specifically, the Committee:

Š Met four (4) times during the year, during which the Committee reviewed and discussed with management and the

independent auditors the Company’s interim and annual financial statements for 2019; at each of such meetings, the
Committee met in executive session with the Company’s Vice President of Internal Audit, independent auditors,
General Counsel, CFO, and CEO.

Discussed with the independent auditors all matters required to be discussed by the applicable requirements of the
Public Company Accounting Oversight Board and the SEC.

Received the written disclosures and letters from the independent auditors required by applicable requirements of the
Public Company Accounting Oversight Board, regarding the independent auditors’ communications with the Audit
Committee concerning independence, and discussed with the independent auditors the independent auditors’
independence.

Based on the review and discussions referred to in the first three bullets above, the Committee recommended to the
Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2019.

Reviewed and discussed reports from the Company’s internal audit department and reports from the Company’s legal
department.

Discussed with management and the independent auditors the quality of the Company’s internal controls.

Reviewed and approved all related person transactions, if any.

Self-evaluated the effectiveness of the Committee.

Evaluated the effectiveness of the Company’s internal audit function.

Inquired of management, including its internal auditor, and the Company’s independent auditors regarding significant
risks or exposures, including those related to fraudulent activities, facing the Company; assessed the steps
management has taken or proposes to take to minimize such risks to the Company; and reviewed compliance with
such steps.

Reviewed and approved the 2019 audit and non-audit services and related fees provided by the independent auditors,
PricewaterhouseCoopers LLP (“PwC”). The non-audit services approved by the Audit Committee were also reviewed to
ensure compatibility with maintaining the auditor’s independence.

In February 2019, the Committee selected PwC to be reappointed as independent auditors for the calendar year 2019.
The Committee also reviewed and approved the estimated 2019 audit fees for services related to the first quarter of
2019 review.

2020 Proxy Statement | 49

Churchill Downs Incorporated Audit Committee Report

No portion of this Audit Committee Report shall be deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), through any general statement incorporating by reference in its entirety the Proxy Statement in which this
report appears, except to the extent that the Company specifically incorporates this report or a portion of it by reference.
In addition, this report shall not be deemed to be filed under either the Securities Act or the Exchange Act.

Members of the Audit Committee

Karole F. Lloyd, Chair
Ulysses L. Bridgeman, Jr.
Daniel P. Harrington
R. Alex Rankin, ex officio

50 | 2020 Proxy Statement

Delinquent Section 16(a) Reports

DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Exchange Act requires that the Company’s directors, executive officers and persons who beneficially
own more than ten percent (10%) of the Company’s Common Stock file certain reports with the SEC with regard to their
beneficial ownership of the Common Stock. The Company is required to disclose in this Proxy Statement any failure to file
or late filings of such reports. Based solely on our review of the forms filed with the SEC or written representations from
certain reporting persons received by us, we believe that our directors, officers and persons who own more than ten
percent (10%) of the Company’s Common Stock have complied with all applicable filing requirements, other than with
respect to the following late filings of Forms 4: (i) on behalf of William C. Carstanjen reporting one instance of a restricted
stock unit award; (ii) on behalf of William E. Mudd reporting one instance of a restricted stock unit award; (iii) on behalf of
Marcia A. Dall reporting one instance of a restricted stock unit award; and (iv) on behalf of Austin W. Miller reporting one
instance of a restricted stock unit award..

2020 Proxy Statement | 51

Multiple Shareholders Sharing the Same Address

MULTIPLE SHAREHOLDERS SHARING THE SAME
ADDRESS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for
proxy statements with respect to two or more shareholders sharing the same address by delivering a single Proxy
Statement or Notice addressed to those shareholders. This process, which is commonly referred to as “householding,”
potentially means extra convenience for shareholders and cost savings for companies.

At this time, one or more brokers with accountholders who are Company shareholders will be “householding” our proxy
materials. A single Proxy Statement or Notice will be delivered to multiple shareholders sharing an address unless contrary
instructions have been received from the affected shareholder. Once you have received notice from your broker that they
will be “householding” communications to your address, “householding” will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to
receive a separate Proxy Statement or Notice, please notify your broker. You may direct your written request for a copy of
the Proxy Statement or Notice to Churchill Downs Incorporated, Attn: Paula Chumbley, 600 N. Hurstbourne Parkway, Ste.
400, Louisville, Kentucky 40222, or at (502) 636-4400. If your broker is not currently “householding” (i.e., you received
multiple copies of the Company’s Proxy Statement or Notice), and you would like to request delivery of a single copy, you
should contact your broker.

52 | 2020 Proxy Statement

Proposals by Shareholders

PROPOSALS BY SHAREHOLDERS

Any shareholder proposal that may be included in the Board of Directors’ Proxy Statement and proxy for presentation at
the annual meeting of shareholders to be held in 2021 must be received by the Company at the principal executive office at
600 N. Hurstbourne Parkway, Ste. 400, Louisville, Kentucky 40222, Attention of the Secretary, no later than November 11,
2020. Pursuant to the Company’s Amended and Restated Bylaws, proposals of shareholders intended to be presented at
the Company’s 2021 annual meeting of shareholders, but not included in the Proxy Statement, must be received by the
Company at the principal executive offices of the Company not less than 90 nor more than 120 days prior to the anniversary
date of the immediately preceding annual meeting of shareholders. Accordingly, any shareholder proposals intended to be
presented at the 2021 annual meeting of shareholders of the Company must be received in writing by the Company at its
principal executive offices no later than January 22, 2021, and no sooner than December 23, 2020. Any proposal submitted
before or after those dates will be considered untimely, and the Chairman shall declare that the business is not properly
brought before the meeting and such business shall not be transacted at the annual meeting.

By Order of the Board of Directors

R. ALEX RANKIN
Chairman

BRADLEY K. BLACKWELL
Senior Vice President,
General Counsel and Secretary

Louisville, Kentucky
March 10, 2020

PLEASE VOTE BY TELEPHONE OR OVER THE INTERNET
IF YOU CANNOT BE PRESENT IN PERSON

2020 Proxy Statement | 53

2019 Annual Report on Form 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

☒

☐

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2019
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from

Commission file number 001-33998

(Exact name of registrant as specified in its charter)

Kentucky
(State or other jurisdiction of incorporation or organization)

600 North Hurstbourne Parkway, Suite 400

Louisville, Kentucky
(Address of principal executive offices)

61-0156015
(IRS Employer Identification No.)

40222
(Zip Code)

(502) 636-4400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, No Par Value
(Title of each class registered)

Trading Symbol(s)
CHDN
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)

The Nasdaq Stock Market LLC
(Name of each exchange on which registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging
growth company" in Rule 12b-2 of the Exchange Act.

F
o
r
m
1
0
-
K

Large accelerated filer

Non-accelerated filer

☒

☐

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 ☒
As of February 10, 2020, 39,622,384 shares of the Registrant’s Common Stock were outstanding. As of June 28, 2019 (based upon the closing
sale price for such date on the Nasdaq Global Select Market), the aggregate market value of the shares held by non-affiliates of the Registrant was
$4,000,887,471.

Portions of the Registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held on April 21, 2020 are incorporated by reference
herein in response to Items 10, 11, 12, 13 and 14 of Part III of Form 10-K.

100

101

102

106

107

108

CHURCHILL DOWNS INCORPORATED
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2019

Part I

Business

Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.

Properties

Item 3.

Item 4.

Item 5.

Item 6.

Item 7.

Legal Proceedings

Mine Safety Disclosures

Part II
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities

Selected Financial Data

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures
Item 9B. Other Information

Item 10.

Item 11.

Item 12.

Item 13.

Item 14.

Directors, Executive Officers and Corporate Governance

Executive Compensation

Part III

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Certain Relationships and Related Transactions, and Director Independence

Principal Accounting Fees and Services

Part IV

Item 15.

Exhibits, Financial Statement Schedule

Exhibit Index

Item 16.

Form 10-K Summary

Signatures

Schedule II—Valuation and Qualifying Accounts

Cautionary Statement Regarding Forward-Looking Information

This Annual Report on Form 10-K ("Report") including the information incorporated by reference herein, contains various
"forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 (the "Act") 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 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 factors described in Item 1A. Risk Factors of this Report.

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PART I

ITEM 1.

BUSINESS

Introduction

Churchill Downs Incorporated (the "Company", "we", "us", "our") is an industry-leading racing, online wagering and gaming
entertainment company anchored by our iconic flagship event - The Kentucky Derby. We own and operate Derby City Gaming,
a historical racing machine ("HRM") facility in Louisville, Kentucky. We also own and operate the largest online horse racing
wagering platform in the U.S., TwinSpires.com, and we operate sports betting and iGaming through our BetAmerica platform
in multiple states. We are also a leader in brick-and-mortar casino gaming with approximately 11,000 slot machines and video
lottery terminals ("VLTs") and 200 table games in eight states. We were organized as a Kentucky corporation in 1928, and our
principal executive offices are located in Louisville, Kentucky.

Acquisitions of Presque Isle Downs and Casino and Lady Luck Casino Nemacolin

On January 11, 2019, we completed the acquisition of Presque Isle Downs and Casino ("Presque Isle") located in Erie,
Pennsylvania from Eldorado Resorts, Inc. ("ERI") for cash consideration of $178.9 million (the "Presque Isle Transaction") and
$1.6 million of working capital and other purchase price adjustments.

On March 8, 2019, the Company assumed management and acquired certain assets related to the management of Lady Luck
Casino Nemacolin ("Lady Luck Nemacolin") in Farmington, Pennsylvania, from ERI for cash consideration of $100,000 (the
"Lady Luck Nemacolin Transaction").

Refer to Part II, Item 8. Financial Statements and Supplementary Data, for additional information on the Presque Isle
Transaction and the Lady Luck Nemacolin Transaction.

Acquisition of Certain Ownership Interests of Rivers Des Plaines

On March 5, 2019, the Company completed the acquisition of certain ownership interests of Midwest Gaming Holdings, LLC
("Midwest Gaming"), the parent company of Rivers Casino Des Plaines ("Rivers Des Plaines") to acquire approximately 42%
of Midwest Gaming from affiliates and co-investors of Clairvest Group Inc. ("Clairvest") and members of High Plaines
Gaming, LLC ("High Plaines"), an affiliate of Rush Street Gaming, LLC, and Casino Investors, LLC ("Casino Investors") for
cash consideration of approximately $406.6 million and $3.5 million of certain transaction costs and working capital
adjustments (the "Sale Transaction"). Following the closing of the Sale Transaction, the parties completed a recapitalization
transaction on March 6, 2019 (the "Recapitalization"), pursuant to which Midwest Gaming used approximately $300.0 million
in proceeds from amended and extended credit facilities to redeem, on a pro rata basis, additional Midwest Gaming units held
by High Plaines and Casino Investors. As a result of the Recapitalization, the Company's ownership of Midwest Gaming
increased to 61.3%. High Plaines retained ownership of 36.0% of Midwest Gaming and Casino Investors retained ownership of
2.7% of Midwest Gaming.

We also recognized a $103.2 million deferred tax liability and a corresponding increase in our investment in unconsolidated
affiliates related to an entity we acquired in conjunction with our acquisition of the Clairvest ownership stake in Midwest
Gaming.

Refer to Part II, Item 8. Financial Statements and Supplementary Data, for additional information on the Sale Transaction and
Recapitalization.

Turfway Park Acquisition

The Company completed the acquisition of Turfway Park from Jack Entertainment LLC ("JACK") and Hard Rock International
("Hard Rock") on October 9, 2019 for total consideration of $46 million in cash ("Turfway Park Acquisition"). Turfway Park
is located on 197 acres in Florence, Kentucky. The Company has announced plans and has begun to invest up to $150.0 million
(including the Turfway Park Acquisition total consideration of $46.0 million) in a state-of-the-art
live and historical
thoroughbred racing facility at Turfway Park.

Of the $46.0 million total consideration, $36.0 million, less $0.9 million of working capital and purchase price adjustments,
was paid to JACK and accounted for as a business combination. The remaining $10.0 million was paid to Hard Rock for the
assignment of the purchase and sale agreement rights and was accounted for separately from the business combination as an
intangible asset and was amortized through expense in the fourth quarter of 2019. Refer to Part II, Item 8. Financial Statements
and Supplementary Data, for additional information on the Turfway Park Acquisition.

Stock Split

On January 25, 2019, the Company distributed the additional shares resulting from a previously announced three-for-one split
(the "Stock Split") of the Company's common stock for shareholders of record as of January 11, 2019. Our common stock
began trading at the split-adjusted price on January 28, 2019. All share and per-share amounts in the Company’s consolidated
financial statements and related notes in Part II. Item 8. Financial Statements and Supplementary Data have been retroactively
adjusted for the prior periods to reflect the effects of the Stock Split.

Business Segments

During the first quarter of 2019, we realigned our operating segments to reflect the internal management reporting used by our
chief operating decision maker to evaluate results of operations and to assess performance and allocate resources. For financial
reporting purposes, we aggregate our operating segments into three reportable segments as follows: Churchill Downs, Online
Wagering and Gaming. Financial information about these segments is set forth in Part II, Item 8. Financial Statements and
Supplementary Data, Note 20 of notes to consolidated financial statements contained within this Report. Further discussion of
financial results by segment is provided in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations contained within this Report.

We conduct our business through these reportable segments and report net revenue and operating expense associated with these
reportable segments in Part II, Item 8. Financial Statements and Supplementary Data. Effective January 1, 2019, the Company
does not allocate corporate and other related expenses to the segments in the accompanying consolidated statements of
comprehensive income included in Part II, Item 8. Financial Statements and Supplementary Data. The prior year results in the
accompanying consolidated statements of comprehensive income were reclassified to conform to this presentation.

Churchill Downs

The Churchill Downs segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs
Racetrack and Derby City Gaming.

Churchill Downs Racetrack is the home of The Kentucky Derby and conducts live racing during the year. Derby City Gaming
is an HRM facility that operates under the Churchill Downs pari-mutuel racing license at its auxiliary training facility in
Louisville, Kentucky.

Churchill Downs Racetrack and Derby City Gaming earn commissions primarily from pari-mutuel wagering on live races at
Churchill Downs and on historical races at Derby City Gaming; simulcast fees earned from other wagering sites; admissions,
personal seat licenses, sponsorships, television rights, and other miscellaneous services (collectively "racing event-related
services"), as well as food and beverage services.

Churchill Downs Racetrack
Churchill Downs Racetrack is located in Louisville, Kentucky and is an internationally known thoroughbred racing operation
best known as the home of our iconic flagship event - The Kentucky Derby. We have conducted thoroughbred racing
continuously at Churchill Downs Racetrack since 1875. The Kentucky Derby is the longest continuously held annual sporting
event in the United States and is the first race of the annual series of races for 3-year old thoroughbreds known as the Triple
Crown.

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Our history of increased wagering, along with the attractive demographic profile of our guests and global television viewership
are attractive to sponsors and corporate partners, especially those with similar luxury and/or marquee brands. As a result, the
Kentucky Derby Week generated the tenth consecutive year of earnings growth in 2019. We conducted 70 live race days in
2017 and 2018; and conducted 74 live racing days in 2019. In 2020, we anticipate conducting up to 72 live race days.

In 2002, as part of the financing of improvements to the Churchill Downs Racetrack facility, we transferred title of the
Churchill Downs Racetrack facility to the City of Louisville, Kentucky and entered into a 30-year lease for the facility. Subject
to the terms of the lease, we can re-acquire the facility at any time for $1.00.

Churchill Downs Racetrack is located on 175 acres and has a one-mile dirt track, a 7/8-mile turf track, a stabling area, and a
variety of areas, structures, and buildings that provide seating for our patrons. We also own 83 acres of land at our auxiliary
training facility, which is five miles from Churchill Downs Racetrack. The facilities at Churchill Downs Racetrack
accommodate seating for approximately 59,000 guests. Churchill Downs Racetrack has one of the largest 4K video boards in
the world sitting 80 feet above the ground and measuring 171 feet wide by 90 feet tall. This video board provides views of the
finish line and the entire race for on-track guests, including those in the infield and guests along the entire front side of the
racetrack. The facility also has permanent lighting in order to accommodate night races. We have a saddling paddock and the
stable area has barns sufficient to accommodate 1,400 horses and a 114-room dormitory for backstretch personnel. The
Churchill Downs Racetrack facility also includes a simulcast wagering facility.

In October 2019, we announced plans to invest $300.0 million to build a hotel and HRM facility and permanent stadium seating
at Churchill Downs Racetrack. The development will transform the area alongside the track at the first turn providing
unparalleled VIP guest experiences. The new 156-room, 7-story hotel will include a state-of-the-art 900-machine HRM gaming
floor, sports bar, VIP lounge and multiple year-round dining venues.

The development will provide upgraded amenities for 6,700 guests and 5,500 new reserved seats. New hospitality services,
including food and beverage services, will be provided to 3,400 guests in the existing Section 111 of the racetrack and to the
existing 3,300 guests in the new permanent outdoor stadium seating that will replace the existing grandstand seating.

The 5,500 new reserved seats will be comprised of permanent outdoor stadium seats for 1,400 additional guests, 2,100 guests in
the new 2nd floor 27,000 square-foot ballroom and meeting space, and 3rd floor balcony, 1,680 guests on the 3rd – 6th floors in
a variety of suites with private balconies, and 320 guests in the 7th floor penthouse suites with balconies that stretch the length
of the building.

Our auxiliary training facility provides additional stabling and training facilities sufficient to accommodate 500 horses and a
3/4-mile dirt track.

Derby City Gaming
In September 2018, we opened Derby City Gaming, our 85,000 square-foot, state-of-the-art HRM facility at our Churchill
Downs Racetrack auxiliary training facility in Louisville, Kentucky. Derby City Gaming operates under our Churchill Downs
Racetrack pari-mutuel racing license, and currently has 1,000 HRMs in service, a simulcast center, and a dining facility.

Online Wagering

The Online Wagering segment includes the revenue and expenses for the TwinSpires business ("TwinSpires") and the online
sports betting and iGaming business. Both businesses are headquartered in Louisville, Kentucky.

TwinSpires Business
TwinSpires operates our online horse racing wagering business on TwinSpires.com, BetAmerica.com, and other white-label
platforms; facilitates high dollar wagering by international customers ("Velocity"); and provides the Bloodstock Research
Information Services ("BRIS") platform for horse racing statistical data.

TwinSpires is the largest legal online horse racing wagering platform in the U.S. TwinSpires accepts pari-mutuel wagers
through advance deposit wagering ("ADW") from customers residing in certain states who establish and fund an account from
which they may place wagers via telephone, mobile device or through the Internet. Our business is licensed as a multi-
jurisdictional simulcasting and interactive wagering hub in the state of Oregon. We offer our customers streaming video of live
horse races, as well as replays, and an assortment of racing and handicapping information. We also provide technology services
to third parties, and we earn commissions from white label ADW products and services. Under these arrangements, we
typically provide an ADW platform and related operational services while the third-party typically provides a brand name,
marketing and limited customer functions.

BetAmerica is an online wagering business licensed under TwinSpires.com, and offers wagering on horse racing throughout the
U.S., as well as our brand for retail and online sports betting and iGaming.

Sports Betting and iGaming
Our sports betting and iGaming business operates the BetAmerica sports betting and casino iGaming platform in multiple
states, including Mississippi, New Jersey, Indiana, Pennsylvania, and Arkansas. The mobile and online BetAmerica sports
betting and casino iGaming results are included in the Online Wagering segment and the retail operations are included in the
Gaming segment.

Gaming

The Gaming segment includes revenue and expenses for the casino properties and associated racetrack or jai alai facilities
which support the casino license. The Gaming segment has approximately 11,000 slot machines and VLTs and 200 table
games located in eight states.

The Gaming segment revenue and Adjusted EBITDA includes the following properties:

◦ Calder Casino and Racing ("Calder")
◦ Fair Grounds Slots, Fair Grounds Race Course, and Video Services, LLC ("VSI") (collectively, "Fair Grounds and

VSI")

◦ Harlow’s Casino Resort and Spa ("Harlow's")
◦ Lady Luck Nemacolin management agreement
◦ Ocean Downs Casino and Racetrack ("Ocean Downs")

◦ Oxford Casino and Hotel ("Oxford")
◦ Presque Isle
◦ Riverwalk Casino Hotel ("Riverwalk")

The Gaming segment Adjusted EBITDA also includes the Adjusted EBITDA related to the Company’s equity investments in
the following:

◦ 61.3% equity investment in Rivers Des Plaines
◦ 50% equity investment in Miami Valley Gaming and Racing ("MVG")

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

Calder
Calder is located on 170 acres of land in Miami Gardens, Florida near Hard Rock Stadium, home of the Miami Dolphins.
Calder owns and operates a 106,000 square-foot casino with approximately 1,100 slot machines and two dining facilities.
Calder also has a fronton for jai alai performances, and a one-mile dirt track, a 7/8-mile turf track, barns and stabling facilities
for thoroughbred horse racing.

In February 2018, Calder was issued a jai alai permit by the Department of Business & Professional Regulation ("DBPR")
In May 2018, Calder received a jai alai license and conducted live
Division of Pari-Mutuel Wagering ("DPW") in Florida.
summer jai alai performances in May and June 2019 for the State of Florida's 2018-2019 and 2019-2020 fiscal years.

In October 2018, the State of Florida DPW issued two separate Final Orders Granting Declaratory Statement in response to two
separate Petitions for Declaratory Statements submitted by Calder regarding jai alai. One of the Declaratory Statements was
appealed, but affirmed by the First District Court of Appeals in September 2019.

There are pending administrative challenges filed by various organizations, including Florida Horsemen's Benevolent and
Protective Association, Inc., the Florida Thoroughbred Breeders’ & Owners’ Association, Ocala Breeders’ Sales, and SCF, Inc.,
related to jai alai and the location of the casino with respect to the racing facility.

We have an agreement with the Stronach Group ("TSG") that expires on December 31, 2020 under which we permit TSG to
operate and manage Calder's racetrack and certain other racing and training facilities and to provide live horse racing under
Calder's racing permits. During the term of the agreement, TSG pays Calder a racing services fee and is responsible for the
direct and indirect costs of maintaining the racing premises, including the training facilities and applicable barns, and TSG
receives the associated revenue from the operation.

Fair Grounds and VSI
Fair Grounds Slots and Fair Grounds Race Course are located on 145 acres in New Orleans, Louisiana. Fair Grounds Slots
owns and operates a 33,000 square-foot slot facility with approximately 600 slot machines, two concession areas, a bar, a
simulcast facility, and other amenities. The Fair Grounds Race Course consists of a one-mile dirt track, a 7/8-mile turf track, a
grandstand, and a stabling area. The facility includes clubhouse and grandstand seating for approximately 5,000 guests, a
general admissions area, and food and beverage facilities. The stable area consists of barns that can accommodate
approximately 1,900 horses and living quarters for approximately 130 people. Fair Grounds Race Course also operates pari-
mutuel wagering in fourteen off-track betting facilities ("OTBs") and VSI is the owner and operator of approximately 1,000
video poker machines in twelve OTBs in Louisiana.

Harlow’s
Harlow’s is located on 85 acres of leased land in Greenville, Mississippi. Harlow’s owns and operates a 33,000 square-foot
casino with approximately 750 slot machines, 15 table games, a retail BetAmerica Sportsbook, a 105-room hotel, a 5,600
square-foot multi-functional event center, and four dining facilities.

Lady Luck Nemacolin
On March 8, 2019, the Company assumed the management of Lady Luck Nemacolin, which is located in Farmington,
Pennsylvania, approximately one mile from the Nemacolin Woodlands Resort. Lady Luck Nemacolin operates the casino with
approximately 600 slot machines, 27 table games, and a dining facility.

Ocean Downs
Ocean Downs is located on 167 acres near Ocean City, Maryland. Ocean Downs owns and operates a 70,000 square-foot
casino with approximately 900 VLTs, 18 table games, and three dining facilities. Ocean Downs also conducts 48 live harness
racing days each year.

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Oxford
Oxford is located on 97 acres in Oxford, Maine. Oxford owns and operates a 27,000 square-foot casino with approximately
950 slot machines, 30 table games, a 100-room hotel, and three dining facilities.

Presque Isle
On January 11, 2019, the Company completed the acquisition of Presque Isle, which is located on 270 acres in Erie,
Pennsylvania. Presque Isle owns and operates a 153,000 square-foot casino with approximately 1,550 slot machines, 34 table
games, a retail BetAmerica Sportsbook, a poker room, and four dining facilities. Presque Isle also conducts 100 live
thoroughbred racing days each year.

Riverwalk
Riverwalk is located on 22 acres in Vicksburg, Mississippi. Riverwalk owns and operates a 25,000 square-foot casino with
approximately 650 slot machines, 15 table games, a retail BetAmerica Sportsbook, a five-story 80-room hotel, and two dining
facilities.

Rivers Des Plaines
Rivers Des Plaines is located on 21 acres in Des Plaines, Illinois. Rivers Des Plaines owns and operates a 140,000 square-foot
casino with approximately 1,050 slot machines and 66 table games, seven dining and entertainment facilities, and an
approximate 5,000 square-foot state-of-the-art BetRivers Sports Bar. Rivers Des Plaines has received approval to become the
first land-based casino in Illinois and has begun the expansion of the parking garage which is expected to be completed by the
third quarter of 2020. Rivers Des Plaines is also expanding the gaming floor to accommodate additional slot machines and
table games authorized under the Illinois expanded gaming legislation signed by the Governor of Illinois in June 2019, which is
discussed further below. We acquired 61.3% equity ownership in Midwest Gaming, the parent company of Rivers Des Plaines,
in March 2019.

Miami Valley Gaming

MVG is located on 120 acres in Lebanon, Ohio. MVG owns and operates a 186,000 square-foot casino with approximately
In October 2019, MVG
1,950 VLTs, four dining facilities, a racing simulcast center, and a 5/8-mile harness racetrack.
announced a $100.0 million expansion plan to build a hotel, parking garage and expanded gaming floor with up to an additional
250 VLTs to be completed in the second quarter of 2021. We have a 50% equity investment in MVG.

All Other

We have aggregated the following businesses as well as certain corporate operations, and other immaterial joint ventures in "All
Other" to reconcile to consolidated results:

•
•
•
•
•

Arlington International Race Course ("Arlington")
United Tote
Oak Grove Racing and Gaming ("Oak Grove")
Turfway Park
Corporate

Arlington
Arlington is located on 336 acres in Arlington Heights, Illinois. Arlington owns and operates a thoroughbred racing operation
with eleven OTBs. Arlington has a 1 1/8-mile synthetic track, a one-mile turf track and a 5/8-mile training track. The facility
includes a grandstand, clubhouse, and suite seating for 7,500 guests, and dining facilities. The stable area consists of barns that
can accommodate 2,200 horses and living quarters for 550 people.

United Tote
United Tote manufactures and operates pari-mutuel wagering systems for racetracks, OTBs and other pari-mutuel wagering
businesses. United Tote provides totalisator services which accumulate wagers, record sales, calculate payoffs and display
wagering data to patrons who wager on horse races. United Tote has contracts to provide totalisator services to a number of
third-party racetracks, OTBs and other pari-mutuel wagering businesses and also provides these services at our facilities.

Oak Grove
Oak Grove is located on 240 acres in Oak Grove, Kentucky, which is approximately one-hour north of Nashville, Tennessee.
Oak Grove owns and operates a 5/8-mile harness racing track and completed its first racing meet in October 2019. Oak Grove
has begun construction of an HRM facility with up to 1,500 HRMs, a 125-room hotel with an event center and food/beverage
venues, a 1,200-person grandstand and event space for indoor events, a 3,000-person capacity outdoor amphitheater and stage,
and a state-of-the-art equestrian center. Oak Grove is owned by a joint venture, WKY Development, LLC (“WKY
Development”), that is 95% owned by the Company and 5% by Keeneland Association, Inc. (“Keeneland”) as of December 31,
2019.

Turfway Park
The Company completed the acquisition of Turfway Park on October 9, 2019. Turfway Park is located on 197 acres in
Florence, Kentucky. The Company has announced plans and has begun to invest up to $150.0 million (including the Turfway
Park Acquisition total consideration of $46.0 million) in a state-of-the-art live and historical thoroughbred racing facility at
Turfway Park.

Corporate
Corporate includes miscellaneous and other revenue, compensation expense, professional fees and other general and
administrative expense not allocated to our segments.

Competition

Overview

We operate in a highly competitive industry with a large number of participants, some of which have financial and other
resources that are greater than ours. The industry faces competition from a variety of sources for discretionary consumer
spending, including spectator sports, fantasy sports and other entertainment and gaming options. Our brick-and-mortar casinos
compete with traditional and Native American casinos, video lottery terminals, state-sponsored lotteries and other forms of
legalized gaming in the U.S. and other jurisdictions.

Legalized gambling is currently permitted in various forms in many states and Canada. Other jurisdictions could legalize
gambling in the future, and established gaming jurisdictions could award additional gaming licenses or permit the expansion of
existing gaming operations. If additional gaming opportunities become available near our racing or gaming operations, such
gaming operations could have a material adverse impact on our business.

Churchill Downs

In 2019, approximately 36,000 thoroughbred horse races were conducted in the United States. Of these races, Churchill Downs
Racetrack hosted approximately 750 races, or 2.1% of the total. As a content provider, we compete for wagering dollars in the
simulcast market with other racetracks conducting races at or near the same times as our races. As a racetrack operator, we also
compete for horses with other racetracks running live racing meets at or near the same time as our races. Our ability to compete
In recent years, competition has
is substantially dependent on the racing calendar, number of horses racing and purse sizes.
increased as more states legalize gaming and allow slot machines at racetracks with mandatory purse contributions. Derby City
Gaming competes with regional casinos in the area and other forms of legal and illegal gaming.

Online Wagering

TwinSpires
TwinSpires competes with other ADW businesses for both customers and racing content, as well as brick-and-mortar
racetracks, casinos, and OTBs.

Sports Betting and iGaming
Our BetAmerica online sports betting and iGaming business competes for customers with retail and online offerings from
commercial brick-and-mortar casinos and racetracks. We also compete with daily fantasy sports gaming companies that are
expanding into sports betting and iGaming, international sports betting businesses looking to expand into the U.S. market, and
illegal sports betting and iGaming operations.

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Gaming

Our Gaming properties operate in highly competitive environments, and our primary competition is other regional casino
properties. Our Gaming properties primarily compete for customers with other casinos in their markets and in surrounding
regional gaming markets, where location is a critical factor to success. Our Gaming properties compete to a lesser extent with
state-sponsored lotteries, off-track wagering, card parlors, online gambling, and other forms of legalized gaming in the U.S.

Governmental Regulations and Potential 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 Churchill Downs, Online Wagering, 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.

Churchill Downs Regulations

Horse racing is a highly regulated industry. In the United States, individual states control the operations of racetracks located
within their respective jurisdictions with the intent of, among other things, protecting the public from unfair and illegal
gambling practices, generating tax revenue, licensing racetracks and operators and preventing organized crime from being
involved in the industry. Although the specific form may vary, states that regulate horse racing generally do so through a horse
racing commission or other gambling regulatory authority. In general, regulatory authorities perform background checks on all
racetrack owners prior to granting them the necessary operating licenses. Horse owners, trainers, jockeys, drivers, stewards,
judges, and backstretch personnel are also subject to licensing by governmental authorities. State regulation of horse races
extends to virtually every aspect of racing and usually extends to details such as the presence and placement of specific race
officials, including timers, placing judges, starters, and patrol judges.

The total number of days on which each racetrack conducts live racing fluctuates annually according to each calendar year and
the determination of applicable regulatory authorities.

In the United States, interstate pari-mutuel wagering on horse racing is subject to the Interstate Horseracing Act of 1978
("IHA"), as amended in 2000. Through the IHA, racetracks can commingle wagers from different racetracks and wagering
facilities and broadcast horse racing events to other licensed establishments.

Kentucky

In Kentucky, horse racing tracks are subject to the licensing and regulation of the Kentucky Horse Racing Commission
("KHRC"), which is responsible for overseeing horse racing and regulating the state equine industry, and overseeing the annual
licensing and operations of HRMs in Kentucky. Licenses to conduct live thoroughbred and standardbred racing meets, to
participate in simulcasting, and to accept advance deposit wagers from Kentucky residents are approved annually by the KHRC
based upon applications submitted by the racetracks in Kentucky.

Derby City Gaming is subject to extensive state and local legislation and is subject to licensing and regulatory control by the
KHRC. Changes in Kentucky laws or regulations may limit or otherwise materially affect the types of HRMs that may be
conducted and such changes, if enacted, could have an adverse impact on our Kentucky HRM operations. The failure to
comply with the rules and regulations of the KHRC could have a material adverse impact on our business.

TwinSpires Regulations and Potential Legislative Changes

TwinSpires is licensed in Oregon under a multi-jurisdictional simulcasting and interactive wagering totalisator hub license
issued by the Oregon Racing Commission and in accordance with Oregon law. We also hold advance deposit wagering
licenses in certain other states where required. Changes in the form of new legislation or regulatory activity at the state or
federal level could adversely impact our mobile and online ADW business.

Illinois

On June 28, 2019, the Governor of Illinois signed legislation into law that removes the sunset date for advance deposit
wagering operations. We believe this legislation will have a positive impact on our business operations.

Sports Betting and iGaming Regulations and Potential Legislative Changes

Federal

In May 2018, the United States Supreme Court struck down the 1992 Professional and Amateur Sports Protection Act, which
had effectively banned sports wagering in most states. Removal of the ban gives states the authority to authorize sports
wagering. States have begun authorizing sports betting, which we believe will have a positive impact on our business.

In January 2019, the Department of Justice’s Office of Legal Counsel ("DJOLC") issued a revised legal opinion regarding the
scope of the Interstate Wire Act of 1961 (the "Wire Act"). Under the 2019 revised opinion, the DJOLC states they now believe

the Wire Act applies to all forms of gaming that crosses state lines, including online gambling and online lottery. The new
opinion overturned a DJOLC opinion from 2011 which stated the Wire Act applied only to sports betting. We believe the
revised DJOLC opinion could have a negative impact on our business operations.

Illinois

On June 28, 2019, the Governor of Illinois signed legislation into law that authorizes sports betting in Illinois. The legislation
provides that certain casinos, racetracks, up to three affiliated OTBs, and sports venues that hold more than 17,000 people are
authorized to operate sports wagering at brick and mortar locations and online for a certain license fee. We believe this
legislation will have a positive impact on our business operations.

Gaming Regulations and Potential Legislative Changes

Casino laws are generally designed to protect casino consumers and the viability and integrity of the casino industry. Casino
laws may also be designed to protect and maximize state and local revenue derived through taxes and licensing fees imposed on
casino industry participants as well as to enhance economic development and tourism. To accomplish these public policy goals,
casino laws establish procedures to ensure that participants in the casino industry meet certain standards of character and
fitness. Casino laws also require casino industry participants to:

•

Ensure that unsuitable individuals and organizations have no role in casino operations;

Establish procedures designed to prevent cheating and fraudulent practices;

Establish and maintain responsible accounting practices and procedures;

• Maintain effective controls over financial practices, including establishment of minimum procedures for internal

fiscal affairs and the safeguarding of assets and revenue;

• Maintain systems for reliable record keeping;

•

File periodic reports with casino regulators;

Ensure that contracts and financial transactions are commercially reasonable, reflect fair market value and are
arms-length transactions;

Establish programs to promote responsible gambling and inform patrons of the availability of help for problem
gambling; and

Enforce minimum age requirements.

Typically, a state regulatory environment is established by statute and administered by a regulatory agency with broad
discretion to regulate the affairs of owners, managers and persons with financial interests in casino operations. Among other
things, casino authorities in the various jurisdictions in which we operate:

•

Adopt rules and regulations under the implementing statutes;

Interpret and enforce casino laws;

Impose disciplinary sanctions for violations, including fines and penalties;

Review the character and fitness of participants in casino operations and make determinations regarding suitability
or qualification for licensure;

Grant licenses for participation in casino operations;

Collect and review reports and information submitted by participants in casino operations;

Review and approve transactions, such as acquisitions or change-of-control transactions of casino industry
participants, securities offerings and debt transactions engaged in by such participants; and

Establish and collect fees and taxes.

Any change in the laws or regulations of a casino jurisdiction could have a material adverse impact on our casino operations.

Licensing and Suitability Determinations

Gaming laws require us, each of our subsidiaries engaged in casino operations, certain of our directors, officers and employees,
and in some cases, certain of our shareholders, to obtain licenses from casino authorities. Licenses typically require a
determination that the applicant qualifies or is suitable to hold the license. Gaming authorities have very broad discretion in
determining whether an applicant qualifies for licensing or should be deemed suitable. Criteria used in determining whether to
grant a license to conduct casino operations, while varying between jurisdictions, generally include consideration of factors

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such as the good character, honesty and integrity of the applicant; the financial stability, integrity and responsibility of the
applicant, including whether the operation is adequately capitalized in the state and exhibits the ability to maintain adequate
insurance levels; the quality of the applicant’s casino facilities; the amount of revenue to be derived by the applicable state from
the operation of the applicant’s casino; the applicant’s practices with respect to minority hiring and training; and the effect on
competition and general impact on the community.

In evaluating individual applicants, casino authorities consider the individual’s business experience and reputation for good
character, the individual’s criminal history and the character of those with whom the individual associates.

Many casino jurisdictions limit the number of licenses granted to operate casinos within the state and some states limit the
number of licenses granted to any one casino operator. Licenses under casino laws are generally not transferable without
approval. Licenses in most of the jurisdictions in which we conduct casino operations are granted for limited durations and
require renewal from time to time. There can be no assurance that any of our licenses will be renewed. The failure to renew
any of our licenses could have a material adverse impact on our casino operations.

In addition to our subsidiaries engaged in casino operations, casino authorities may investigate any individual who has a
material relationship to or material involvement with, any of these entities to determine whether such individual is suitable or
should be licensed as a business associate of a casino licensee. Our officers, directors and certain key employees must file
applications with the casino authorities and may be required to be licensed, qualify or be found suitable in many jurisdictions.
Gaming authorities may deny an application for licensing for any cause that they deem reasonable. Qualification and suitability
determinations require submission of detailed personal and financial information followed by a thorough investigation. The
applicant must pay all the costs of the investigation. Changes in licensed positions must be reported to casino authorities. In
addition to casino authorities' ability to deny a license, qualification or finding of suitability, casino authorities have jurisdiction
to disapprove a change in a corporate position.

If one or more casino authorities were to find that an officer, director or key employee fails to qualify or is unsuitable for
licensing or unsuitable to continue having a relationship with us, we would be required to sever all relationships with such
person.
In addition, casino authorities may require us to terminate the employment of any person who refuses to file
appropriate applications.

Moreover, in many jurisdictions, certain of our shareholders may be required to undergo a suitability investigation similar to
that described above. Many jurisdictions require any person who acquires beneficial ownership of more than a certain
percentage of our voting securities, typically 5%, to report the acquisition to casino authorities, and casino authorities may
require such holders to apply for qualification or a finding of suitability. Most casino authorities, however, allow an
"institutional investor" to apply for a waiver. An "institutional investor" is generally defined as an investor acquiring and
holding voting securities in the ordinary course of business as an institutional investor, and not for the purpose of causing,
directly or indirectly, the election of a member of our board of directors, any change in our corporate charter, bylaws,
management, policies or operations, or those of any of our casino affiliates, or the taking of any other action which casino
authorities find to be inconsistent with holding our voting securities for investment purposes only. Even if a waiver is granted,
an institutional investor generally may not take any action inconsistent with its status when the waiver was granted without
once again becoming subject to the foregoing reporting and application obligations.

Generally, any person who fails or refuses to apply for a finding of suitability or a license within the prescribed period after
being advised it is required by casino authorities may be denied a license or found unsuitable, as applicable. Any shareholder
found unsuitable or denied a license and who holds, directly or indirectly, any beneficial ownership of our voting securities
beyond such period of time as may be prescribed by the applicable casino authorities may be guilty of a criminal offense.
Furthermore, we may be subject to disciplinary action if, after we receive notice that a person is unsuitable to be a shareholder
or to have any other relationship with us or any of our subsidiaries, we: (i) pay that person any dividend or interest upon our
voting securities; (ii) allow that person to exercise, directly or indirectly, any voting right conferred through securities held by
that person; (iii) pay remuneration in any form to that person for services rendered or otherwise; or (iv) fail to pursue all lawful
efforts to require such unsuitable person to relinquish voting securities including, if necessary, the immediate purchase of said
voting securities for cash at fair market value.

Violations of Gaming Laws

If we violate applicable casino laws, our casino licenses could be limited, conditioned, suspended or revoked by casino
authorities, and we and any other persons involved could be subject to substantial fines. A supervisor or conservator can be
appointed by casino authorities to operate our casino properties, or in some jurisdictions, take title to our casino assets in the
jurisdiction, and under certain circumstances, income generated during such appointment could be forfeited to the applicable
state or states. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. As a result,
violations by us of applicable casino laws could have a material adverse impact on our casino operations.

Some casino jurisdictions prohibit certain types of political activity by a casino licensee, its officers, directors and key
employees. A violation of such a prohibition may subject the offender to criminal and/or disciplinary action.

Reporting and Record-keeping Requirements

We are required periodically to submit detailed financial and operating reports and furnish any other information that casino
authorities may require. Under federal law, we are required to record and submit detailed reports of currency transactions
involving greater than $10,000 at our casinos and racetracks as well as any suspicious activity that may occur at such facilities.
Failure to comply with these requirements could result in fines or cessation of operations. We are required to maintain a current
stock ledger that may be examined by casino authorities at any time.
If any securities are held in trust by an agent or by a
nominee, the record holder may be required to disclose the identity of the beneficial owner to casino authorities. A failure to
make such disclosure may be grounds for finding the record holder unsuitable. Gaming authorities may require certificates for
our securities to bear a legend indicating that the securities are subject to specified casino laws.

Review and Approval of Transactions

Substantially all material loans, leases, sales of securities and similar financing transactions must be reported to and in some
cases approved by casino authorities. We may not make a public offering of securities without the prior approval of certain
casino authorities. Changes in control through merger, consolidation, stock or asset acquisitions, management or consulting
agreements, or otherwise are subject to receipt of prior approval of casino authorities. Entities seeking to acquire control of us
or one of our subsidiaries must satisfy casino authorities with respect to a variety of stringent standards prior to assuming
control. Gaming authorities may also require controlling shareholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval
process relating to the transaction.

License Fees and Gaming Taxes

We pay substantial license fees and taxes in many jurisdictions in connection with our casino operations which are computed in
various ways depending on the type of gambling or activity involved. Depending upon the particular fee or tax involved, these
fees and taxes are payable with varying frequency. License fees and taxes are based upon such factors as a percentage of the
gross casino revenue received; the number of gambling devices and table games operated; or a one-time fee payable upon the
initial receipt of license and fees in connection with the renewal of license. In some jurisdictions, casino tax rates are graduated
such that the tax rates increase as gross casino revenue increases. Tax rates are subject to change, sometimes with little notice,
and such changes could have a material adverse impact on our casino operations.

Operational Requirements

In most jurisdictions, we are subject to certain requirements and restrictions on how we must conduct our casino operations. In
certain states, we are required to give preference to local suppliers and include minority and women-owned businesses and
organized labor in construction projects to the maximum extent practicable. We may be required to give employment
preference to minorities, women and in-state residents in certain jurisdictions. Our ability to conduct certain types of games,
introduce new games or move existing games within our facilities may be restricted or subject to regulatory review and
approval. Some of our operations are subject to restrictions on the number of gaming positions we may have and the maximum
wagers allowed to be placed by our customers.

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Specific State Gaming Regulations and Potential Legislative Changes
Florida

The ownership and operation of casino gaming facilities in the State of Florida is subject to extensive state and local regulation,
primarily by the DBPR, within the executive branch of Florida’s state government. The DBPR is charged with the regulation of
Florida’s pari-mutuel, card room and slot gaming industries, as well as collecting and safeguarding associated revenue due to
the state. The DBPR has been designated by the Florida legislature as the state compliance agency with the authority to carry
out the state’s oversight responsibilities in accordance with the provisions outlined in the compact between the Seminole Tribe
of Florida and the State of Florida. Changes in Florida laws or regulations may limit or otherwise materially affect the types of
gaming that may be conducted and such changes, if enacted, could have an adverse impact on our Florida gaming operation.
The laws and regulations of Florida are based on policies of maintaining the health, welfare and safety of the general public and
protecting the gaming industry from elements of organized crime, illegal gambling activities and other harmful elements, as
well as protecting the public from illegal and unscrupulous gaming to ensure the fair play of devices. The failure to comply
with the rules and regulations of the DBPR could have a material adverse impact on our business.

In Florida, licenses to conduct live thoroughbred racing and to participate in simulcast wagering are approved by the DPW,
which is responsible for overseeing the network of state offices located at every pari-mutuel wagering facility, as well as issuing
the permits necessary to operate a pari-mutuel wagering facility. The DPW also issues annual licenses for thoroughbred,
standardbred and quarter horse races but does not approve the specific live race days.

Constitutional Amendment

In November 2018, voters in Florida passed a constitutional amendment which provides any gaming expansion in the state must
be approved by 60% of voters.

Illinois

The ownership and operation of casino gaming facilities in the State of Illinois is subject to extensive state and local regulation
and is subject to licensing and regulatory control by the Illinois Gaming Board (the "IGB"). The IGB assures the integrity of
gambling and gaming in Illinois through regulatory oversight of riverboat and casino gaming, video gaming and sports
wagering in Illinois. Changes in Illinois laws or regulations may limit or otherwise materially affect the types of gaming that
may be conducted and such changes, if enacted, could have an adverse impact on our Illinois gaming operations. The failure to
comply with the rules and regulations of the IGB could have a material adverse impact on our business.

On June 28, 2019, the Governor of Illinois signed legislation into law that expands gaming opportunities in Illinois. The
legislation provides that existing casinos can expand from 1,200 gaming positions to up to 2,000 gaming positions, authorizes
licenses for six new casinos in Illinois, authorizes slots at the Chicago airports, authorizes a certain number of gaming positions
at racetracks in Illinois, and authorizes certain tax credits. We believe this legislation will have a positive impact on our
business operations.

Louisiana

The manufacturing, distribution, servicing and operation of video draw poker devices in Louisiana are subject to the Louisiana
Video Draw Poker Devices Control Law and the rules and regulations promulgated thereunder. The manufacturing,
distribution, servicing and operation of video poker devices and slot machines are governed by the Louisiana Gaming Control
Board (the "Louisiana Board") which oversees all licensing for all forms of legalized gaming in Louisiana. The Video Gaming
Division and the Slots Gaming Division of the Gaming Enforcement Section of the Office of the State Police within the
Department of Public Safety and Corrections performs the video poker and slots gaming investigative functions for the
Louisiana Board. The laws and regulations of Louisiana are based on policies of maintaining the health, welfare and safety of
the general public and protecting the gaming industry from elements of organized crime, illegal gambling activities and other
harmful elements, as well as protecting the public from illegal and unscrupulous gaming to ensure the fair play of devices. The
Louisiana Board also regulates slot machine gaming at racetrack facilities pursuant to the Louisiana Pari-Mutuel Live Racing
Facility Economic Redevelopment and Gaming Control Act. Changes in Louisiana laws or regulations may limit or otherwise
materially affect the types of gaming that may be conducted and such changes, if enacted, could have an adverse impact on our
Louisiana gaming operations. In addition, the LSRC also issues licenses required for Fair Grounds to operate slot machines at
the racetrack and video poker devices at its OTBs. The failure to comply with the rules and regulations of the Louisiana Board
or the LSRC could have a material adverse impact on our business.

In Louisiana, licenses to conduct live thoroughbred and quarter horse racing and to participate in simulcast wagering are
approved by the Louisiana State Racing Commission ("LSRC"). The LSRC is responsible for overseeing the awarding of
licenses for the conduct of live racing meets, the conduct of thoroughbred and quarter horse racing, the types of wagering that
may be offered by pari-mutuel facilities and the disposition of revenue generated from wagering. Off-track wagering is also
regulated by the LSRC. Louisiana law requires live thoroughbred racing at a licensed racetrack for at least 80 days over a 20
week period each year to maintain the license and to conduct slot operations.

Louisiana law requires live quarter horse racing to be conducted at the racetrack with the addition of the slot machines at Fair
Grounds. We conducted quarter horse racing at Fair Grounds for 10 days in each of 2017, 2018, and 2019. We expect to
conduct quarter horse racing for 10 days in 2020.

Maine

The ownership and operation of casino gaming facilities in the State of Maine is subject to extensive state and local regulation
and is subject to licensing and regulatory control by the Maine Gambling Control Board (the "MGCB"). The laws, regulations
and supervisory procedures of the MGCB are based upon declarations of public policy that are concerned with, among other
things: (1) the regulation, supervision and general control over casinos and the ownership and operation of slot machines and
table games; (2) the investigation of complaints made regarding casinos; (3) the establishment and maintenance of responsible
accounting practices and procedures; (4) the maintenance of effective controls over the financial practices of licensees,
including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenue and
providing for reliable record keeping; and (5) the prevention of cheating and fraudulent practices. The regulations are subject to
amendment and interpretation by the MGCB. Changes in Maine laws or regulations may limit or otherwise materially affect
the types of gaming that may be conducted and such changes, if enacted, could have an adverse impact on our Maine gaming
operations. The failure to comply with the rules and regulations of the MGCB could have a material adverse impact on our
business.

Maryland

The ownership and operation of casino gaming facilities in the State of Maryland is subject to extensive state and local
regulation and is subject to licensing and regulatory control by the Maryland Lottery and Gaming Control Commission
(“MLGCC”), with staff assistance from the Maryland Lottery and Gaming Control Agency (“MLGCA”). The MLGCA
oversees all internal controls, auditing, security, surveillance, background investigations, licensing and accounting procedures
for each casino in the State of Maryland, including Ocean Downs. Changes in Maryland laws or regulations may limit or
otherwise materially affect the types of gaming that may be conducted and such changes, if enacted, could have an adverse
impact on our Maryland gaming operations. The failure to comply with the rules and regulations of the MLGCC could have a
material adverse impact on our business.

Mississippi

The ownership and operation of casino gaming facilities in the State of Mississippi is subject to extensive state and local
regulation, including the Mississippi Gaming Commission (the "Mississippi Commission"). The laws, regulations and
supervisory procedures of the Mississippi Commission are based upon declarations of public policy that are concerned with,
among other things: (1) the prevention of unsavory or unsuitable persons from having direct or indirect involvement with
gaming at any time or in any capacity; (2) the establishment and maintenance of responsible accounting practices and
procedures; (3) the maintenance of effective controls over the financial practices of licensees, including the establishment of
minimum procedures for internal fiscal affairs and the safeguarding of assets and revenue, providing for reliable record keeping
and requiring the filing of periodic reports with the Mississippi Commission; (4) the prevention of cheating and fraudulent
practices; (5) providing a source of state and local revenue through taxation and licensing fees; and (6) ensuring that gaming
licensees, to the extent practicable, employ Mississippi residents. The regulations are subject to amendment and interpretation
by the Mississippi Commission. Changes in Mississippi laws or regulations may limit or otherwise materially affect the types
of gaming that may be conducted and such changes, if enacted, could have an adverse impact on our Mississippi gaming
operations. The failure to comply with the rules and regulations of the Mississippi Commission could have a material adverse
impact on our business.

Ohio

In 2012, the Governor of Ohio signed an Executive Order which authorized the Ohio Lottery Commission (the "OLC") to
amend and adopt rules necessary to implement a video lottery program at Ohio’s seven horse racing facilities. The ownership
and operation of VLT facilities in the State of Ohio is subject to extensive state and local regulation. The laws, regulations and
supervisory procedures of the OLC include: (1) regulating the licensing of video lottery sales agents, key gaming employees
and VLT manufacturers; (2) collecting and disbursing VLT revenue; and (3) maintaining compliance in regulatory matters.
Changes in Ohio laws or regulations may limit or otherwise materially affect the types of gaming that may be conducted and
such changes, if enacted, could have an adverse impact on our Ohio gaming operations. The failure to comply with the rules
and regulations of the OLC could have a material adverse impact on our business.

Pennsylvania

The ownership and operation of casino gaming facilities in the Commonwealth of Pennsylvania are subject to extensive state
and local regulation and are subject to licensing and regulatory control by the Pennsylvania Gaming Control Board ("PGCB")
as well as other agencies. The PGCB regulates, oversees and enforces all matters related to gaming activity in Pennsylvania,
including, without limitation, operations, internal controls, accounting procedures, auditing, security, surveillance, licensing,
background investigations and compliance of each casino in the state. Changes in Pennsylvania laws or regulations may limit
or otherwise materially affect the types of gaming that may be conducted and such changes, if enacted, could have an adverse
impact on our Pennsylvania gaming operations. The failure to comply with the rules and regulations of the PGCB could have a
material adverse impact on our business.

In Pennsylvania, licenses to conduct live thoroughbred racing, to participate in simulcast wagering and to accept advance
deposit wagers from Pennsylvania residents are approved by the Pennsylvania State Horse Racing Commission (“PSHRC”).
The PSHRC regulates the operations of horse racing, the conduct of pari-mutuel wagering and the promotion and marketing of
horse racing in Pennsylvania. As a Category 1 slot machine licensee, Presque Isle is required to conduct live racing on at least
100 days each calendar year. The PSHRC approved Presque Isle for 100 live race days in 2019 and 2020.

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Other Specific State Regulations and Potential Legislative Changes

Illinois

In Illinois, licenses to conduct live thoroughbred racing and to participate in simulcast wagering are approved by the Illinois
Racing Board ("IRB"). The IRB appointed Arlington the dark host track for 60 simulcast host days in 2019 and 2020.
Arlington was also awarded 155 live host days in 2019 and 2020.

Environmental Matters

We are subject to various federal, state and local environmental laws and regulations that govern activities that may have
adverse environmental effects, such as discharges to air and water, as well as the management and disposal of solid, animal and
hazardous wastes and exposure to hazardous materials. These laws and regulations, which are complex and subject to change,
include United States Environmental Protection Agency ("EPA") and state laws and regulations that address the impacts of
manure and wastewater generated by Concentrated Animal Feeding Operations ("CAFO") on water quality, including, but not
limited to, storm and sanitary water discharges. CAFO and other water discharge regulations include permit requirements and
water quality discharge standards. Enforcement of these regulations has been receiving increased governmental attention.
Compliance with these and other environmental laws can, in some circumstances, require significant capital expenditures. We
may incur future costs under existing and new laws and regulations pertaining to storm water and wastewater management at
our racetracks. Moreover, violations can result in significant penalties and, in some instances, interruption or cessation of
operations.

In the ordinary course of our business, we may receive notices from regulatory agencies regarding our compliance with CAFO
regulations that may require remediation at our facilities. On December 6, 2013, we received a notice from the EPA regarding
alleged CAFO non-compliance at Fair Grounds Race Course. On October 21, 2019, we reached an agreement in principle,
subject to final agreement and regulatory and court approval. If approved, the agreement will include a $2.8 million penalty,
which has been accrued and is included in selling, general and administrative expense in our accompanying consolidated
statement of comprehensive income for the year ended December 31, 2019, and in accrued expense and other current liabilities
in our accompanying consolidated balance sheet at December 31, 2019.

We also are subject to laws and regulations that create liability and cleanup responsibility for releases of hazardous substances
into the environment. Under certain of these laws and regulations, a current or previous owner or operator of property may be
liable for the costs of remediating hazardous substances or petroleum products on its property, without regard to whether the
owner or operator knew of, or caused, the presence of the contaminants, and regardless of whether the practices that resulted in
the contamination were legal at the time they occurred. The presence of, or failure to remediate properly, such substances may
materially adversely affect the ability to sell or rent such property or to borrow funds using such property as collateral. The
owner of a property may be subject to claims by third parties based on damages and costs resulting from environmental
contamination emanating from the property.

Marks and Internet Properties

We hold numerous state and federal service mark registrations on specific names and designs in various categories including
the entertainment business, apparel, paper goods, printed matter, housewares and glass. We license the use of these service
marks and derive revenue from such license agreements.

Employees

As of December 31, 2019, we employed approximately 5,500 full-time and part-time employees Company-wide. Due to the
seasonal nature of our live racing business, the number of seasonal and part-time persons employed will vary throughout the
year.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and
other Securities and Exchange Commission ("SEC") filings, and any amendments to those reports and any other filings that we
file with or furnish to the SEC under the Securities Exchange Act of 1934 are made available free of charge on our website
(www.churchilldownsincorporated.com) as soon as reasonably practicable after we electronically file the materials with the
SEC and are also available at the SEC’s website at www.sec.gov.

ITEM 1A.

RISK FACTORS

Risks Related to the Company

Our operations and financial results are subject to various risks and uncertainties, including those described below, that could
adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.

Our business is sensitive to economic conditions which may affect consumer confidence, consumers’ discretionary spending,
or our access to credit in a manner that adversely impacts our operations

Economic trends can impact consumer confidence and consumers’ discretionary spending, including:

•

Negative economic conditions and the persistence of elevated levels of unemployment can impact consumers’
disposable incomes and, therefore, impact the demand for entertainment and leisure activities.

Declines in the residential real estate market, increases in individual tax rates and other factors that we cannot
accurately predict may reduce the disposable income of our customers.

Decreases in consumer discretionary spending could affect us even if such decreases occur in other markets. For
example, reduced wagering levels and profitability at racetracks from which we carry racing content could cause
certain racetracks to cancel races or cease operations and therefore reduce the content we could provide to our
customers.

Lower consumer confidence or reductions in consumers’ discretionary spending could result in fewer patrons spending money
at our racetracks, our online wagering sites and gaming and wagering facilities, and reduced consumer spending overall.

Our access to and the cost of credit may be impacted to the extent global and U.S. credit markets are affected by downward
economic trends. Economic trends can also impact the financial viability of other industry constituents, making collection of
amounts owed to us uncertain. Our ability to respond to periods of economic contraction may be limited, as certain of our costs
remain fixed or even increase when revenue declines.

We are vulnerable to additional or increased taxes and fees

We believe that the prospect of raising significant additional revenue through taxes and fees is one of the primary reasons that
certain jurisdictions permit legalized gaming. As a result, gaming companies are typically subject to significant taxes and fees
in addition to the normal federal, state, provincial and local income taxes and such taxes and fees may be increased at any time.
From time to time, legislators and officials have proposed changes in tax laws or in the administration of laws affecting the
horse racing, online wagering and casino industries. Many states and municipalities, including ones in which we operate, are
currently experiencing budgetary pressures that may make it more likely they would seek to impose additional taxes and fees on
our operations. We are subject to tax in multiple U.S. tax jurisdictions and judgment is required in determining our provision
for income taxes, deferred tax assets or liabilities and in evaluating our tax positions.
It is not possible to determine the
likelihood, extent or impact of any future changes in tax laws or fees, or changes in the administration of such laws; however, if
enacted, such changes could have a material adverse impact on our business.

A lack of confidence in the integrity of our core businesses or any deterioration in our reputation could affect our ability to
retain our customers and engage with new customers

Horse racing, pari-mutuel wagering and casino gaming businesses depend on the public perception of integrity and fairness in
their operations. To prevent cheating or erroneous payouts, necessary oversight processes must be in place to ensure that such
activities cannot be manipulated. A lack or loss of confidence in the fairness of our industries could have a material adverse
impact on our business.

Acts of fraud or cheating in our gaming businesses through the use of counterfeit chips, covert schemes and other tactics,
possibly in collusion with our employees, may be attempted or committed by our gaming customers with the aim of increasing
their winnings. Our gaming customers, visitors and employees may also commit crimes such as theft in order to obtain chips
not belonging to them. We have taken measures to safeguard our interests including the implementation of systems, processes
and technologies to mitigate against these risks, extensive employee training, surveillance, security and investigation operations
and adoption of appropriate security features on our chips such as embedded radio frequency identification tags. Despite our
efforts, we may not be successful in preventing or detecting such culpable behavior and schemes in a timely manner and the
relevant insurance we have obtained may not be sufficient to cover our losses depending on the incident, which could result in
losses to our gaming operations and generate negative publicity, both of which could have an adverse effect on our reputation,
business, results of operations and cash flows.

Other factors that could influence our reputation include the quality of the services we offer and our actions with regard to
social issues such as diversity, human rights and support for local communities. Broad access to social media makes it easy for
anyone to provide public feedback that can influence perceptions of us or our properties. It may be difficult to control or
effectively manage negative publicity, regardless of whether it is accurate. Negative events and publicity could quickly and

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materially damage perceptions of us, our properties, or our industries, which, in turn, could adversely impact our business,
financial condition or results of operations through loss of customers, loss of business opportunities, lack of acceptance of our
company to operate in host communities, employee retention or recruiting difficulties or other difficulties.

An inability to attract and retain key and highly-qualified and skilled personnel could impact our ability to successfully
develop, operate, and grow our business

We believe that our success depends in part on our ability to hire, develop, motivate and retain highly-qualified and skilled
employees throughout our organization.
If we do not successfully hire, develop, motivate and retain highly qualified and
skilled employees, it is likely that we could experience significant disruptions in our operations and our ability to successfully
develop, operate, and grow our business could be impacted.

Competition for the type of talent we seek to hire is increasingly intense in the geographic areas in which we operate. As a
result, we may incur significant costs to attract and retain highly skilled employees. We may be unable to attract and retain the
personnel necessary to sustain our business or support future growth.

Certain of our key employees are required to file applications with the gaming authorities in each of the jurisdictions in which
we operate and are required to be licensed or found suitable by these gaming authorities. If the gaming authorities were to find
a key employee unsuitable for licensing, we may be required to sever the employee relationship, or the gaming authorities may
require us to terminate the employment of any person who refuses to file appropriate applications. Either result could
significantly impact our operations.

Our debt facilities contain restrictions that limit our flexibility in operating our business

Our debt facilities contain a number of covenants that impose significant operating and financial restrictions on our business,
including restrictions on our ability to, among other things, take the following actions:

•

incur additional debt or issue certain preferred shares;

pay dividends on or make distributions in respect of our capital stock, repurchase common shares or make other
restricted payments;

• make certain investments;

•

sell certain assets or consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

create liens on certain assets;

enter into certain transactions with our affiliates; and

designate our subsidiaries as unrestricted subsidiaries.

As a result of these covenants, we are limited in the manner in which we conduct our business and we may be unable to engage
in favorable business activities or finance future operations or capital needs.

Any failure to comply with the financial ratios and other covenants in our debt facilities and other indebtedness could have a
material adverse impact on our business

Under our debt facilities, we are required to satisfy and maintain specified financial ratios. Our ability to meet those financial
ratios can be affected by events beyond our control, and as a result, we may be unable to meet those ratios. A failure to comply
with the financial ratios and other covenants contained in our debt facilities or our other indebtedness could result in an event of
default which, if not cured or waived, could have a material adverse impact on our business and financial condition.
In the
event of any default under our debt facilities or our other indebtedness, the lenders thereunder:

•

will not be required to lend any additional amounts to us;

could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and
payable and could terminate all commitments to extend further credit; or

could require us to apply all of our available cash to repay these borrowings.

We have pledged a significant portion of our assets as collateral under our debt facilities. If any of these lenders accelerate the
repayment of borrowings, we may not have sufficient assets to repay our indebtedness and our lenders could exercise their
rights against the collateral we have granted them.

Ownership and development of our real estate requires significant expenditures and ownership of such properties is subject
to risk, including risks related to environmental liabilities

We own extensive real estate holdings and make significant capital investments to grow our operations. All real estate
investments are subject to risks including the following: general economic conditions, such as the availability and cost of
financing; local and national real estate conditions, such as an oversupply of residential, office, retail or warehousing space, or a
reduction in demand for real estate in the area; governmental regulation, including taxation of property and environmental
legislation; and the attractiveness of properties to potential purchasers or tenants. Significant expenditures, including property
taxes, debt repayments, maintenance costs, insurance costs and related charges, must be made throughout the period of
ownership of real property. Such expenditures may negatively impact our operating results.

We are subject to a variety of federal, state and local governmental laws and regulations relating to the use, storage, discharge,
emission and disposal of hazardous materials. Environmental laws and regulations could hold us responsible for the cost of
cleaning up hazardous materials contaminating real property that we own or operate (or previously owned or operated) or
properties at which we have disposed of hazardous materials, even if we did not cause the contamination. Some of our facilities
are subject to CAFO regulations.
If we fail to comply with environmental laws or if contamination is discovered, a court or
government agency could impose severe penalties or restrictions on our operations or assess us with the costs of taking
remedial actions. We recently incurred such a penalty in connection with alleged CAFO non-compliance at Fair Grounds Race
Course, as further discussed in Item 3, Legal Proceedings. Enforcement of such regulations have been receiving increased
governmental attention and compliance with these and other environmental laws can, in some circumstances, require significant
capital expenditures (including with respect to fines).

Our operations rely heavily on technology services, and catastrophic events and system failures with respect to these
technology services could cause a significant and continued disruption to our operations

We rely on information technology and other systems to manage our business. A disruption or failure in our technology
systems or operations in the event of a cyber-attack, major earthquake, weather event, terrorist attack or other catastrophic event
could interrupt our operations, damage our properties and reduce the number of customers who visit our facilities in the affected
areas. Security breaches could expose the Company to a risk of loss or misuse of our or our customers’ information, litigation
and potential liability. In addition, cyber incidents that impact the availability, reliability, speed, accuracy or other proper
functioning of our technology systems could impact our operations. A significant cyber incident, including system failure,
security breach, disruption by malware or other damage could interrupt or delay our operations, result in a violation of
applicable privacy and other laws, damage our reputation, subject us to litigation, cause a loss of customers or give rise to
remediation costs, monetary fines and other penalties, which could be significant.

Our online wagering, HRM and brick-and-mortar casino businesses depend upon our communications hardware and our
computer hardware. We have built certain redundancies into our systems to attempt to avoid downtime in the event of outages,
system failures or damage. Our systems also remain vulnerable to damage or interruption from floods, fires, power loss,
telecommunication failures, terrorist cyber-attacks, hardware or software error, computer viruses, computer denial-of-service
attacks and similar events. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated
problems could result in lengthy interruptions in our services. Any unscheduled interruption in the availability of our websites
and our services could result in an immediate, and possibly substantial, loss of revenue.

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Our business is subject to online security risk, including cyber-security breaches. Loss or misuse of our stored information
as a result of such a breach, including customers’ personal information, could lead to government enforcement actions or
other litigation, potential liability, or otherwise harm our business

We receive, process, store and use personal information and other customer and employee data by maintaining and transmitting
customers’ personal and financial information, credit card settlements, credit card funds transmissions, mailing lists and
reservations information. Our collection of such data is subject to extensive regulation by private groups, such as the payment
card industry, as well as governmental authorities, including gaming authorities.

There are numerous federal, state and local laws regarding privacy and the storing, sharing, use, processing, disclosure and
protection of personal information and other data, and such privacy laws and regulations continue to evolve. Many states have
passed laws requiring notification to customers when there is a security breach for personal data, such as the 2002 amendment
to California’s Information Practices Act, or requiring the adoption of minimum information security standards that are often
vaguely defined and difficult to implement. California has adopted the California Consumer Privacy Act of 2018 (the
"CCPA"), which went into effect on January 1, 2020, providing California consumers greater control of the information
collected, stored, and sold, and other states are considering similar legislation. The CCPA provides a private right of action (in
addition to statutory damages) for California residents whose sensitive personal information was breached as a result of a
business’s violation of its duty to reasonably secure such information. The costs of compliance with these laws may increase as
a result of changes in interpretation or changes in law. Any failure on our part to comply with these laws or our privacy
policies may subject us to significant liabilities, including governmental enforcement actions or litigation.

Our systems and processes that are designed to protect customer information and prevent data loss and other security breaches,
including systems and processes designed to reduce the impact of a security breach at a third-party vendor, may not be
successful. Interruptions in our services or a breach of a customer’s secure data could cause current or potential users to believe
that our systems are unreliable, which could permanently harm our reputation and brand. These interruptions could also
increase the burden on our engineering staff, which, in turn, could delay our introduction of new features and services on our
websites and in our casinos. Such incidents could give rise to remediation costs, monetary fines and other penalties, which
could be significant. We attempt to protect against this risk with our property and business interruption insurance, which covers
damage or interruption of our systems, although there is no assurance that such insurance will be adequate to cover all potential
losses.

Third-parties we work with, such as vendors, may violate applicable laws or our privacy policies, and such violations may also
put our customers’ information at risk and could in turn have an adverse impact on our business. We are also subject to
payment card association rules and obligations under each association’s contracts with payment card processors. Under these
rules and obligations, if information is compromised, we could be liable to payment card issuers for the associated expense and
penalties. If we fail to follow payment card industry security standards, even if no customer information is compromised, we
could incur significant fines or experience a significant increase in payment card transaction costs.

Security breaches, computer malware and computer hacking attacks have become more prevalent in our industry, and hackers
and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks. Many companies,
including ours, have been the targets of such attacks. Any security breach caused by hacking which involves efforts to gain
unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software,
hardware or other computer equipment, and the inadvertent transmission of computer viruses could harm our business. Though
it is difficult to determine what harm may directly result from any specific interruption or breach, any failure to maintain
performance, reliability, security and availability of our network infrastructure to the satisfaction of our players may harm our
reputation and our ability to retain existing players and attract new players.

The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident could be
significant. Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service, and
loss of existing or potential suppliers or customers. As threats related to cyber-attacks develop and grow, we may also find it
necessary to make further investments to protect our data and infrastructure, which may impact our results of operations. We
have insurance coverage for protection against cyber-attacks, which is designed to cover expenses around notification, credit
monitoring, investigation, crisis management, public relations, and legal advice. This insurance coverage may not be sufficient
to cover all possible claims, and we could suffer losses that could have a material adverse effect on our business.

Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, change frequently
and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement
adequate preventative measures.

The extent to which we can recover under our insurance policies for damages sustained at our operating properties in the
event of inclement weather and casualty events could adversely affect our business

Flooding, blizzards, windstorms, earthquakes, hurricanes or other weather conditions could adversely affect our casino and
horse racing locations. We maintain insurance coverage that may cover certain costs that we incur as a result of some natural
disasters, which coverage is subject to deductibles, exclusions and limits on maximum benefits. We may not be able to fully
collect, if at all, on any claims resulting from extreme weather conditions or other disasters.
If any of our properties are
damaged or if our operations are disrupted or face prolonged closure as a result of weather conditions in the future, or if
weather conditions adversely impact general economic or other conditions in the areas in which our properties are located or
from which we draw our patrons, the disruption could have a material adverse impact on our business.

We have "all risk" property insurance coverage for our operating properties which covers damage caused by a casualty loss
(such as fire, natural disasters, acts of war, or terrorism). Our level of property insurance coverage, which is subject to policy
maximum limits and certain exclusions, may not be adequate to cover all losses in the event of a major casualty. In addition,
certain casualty events may not be covered at all under our policies. Therefore, certain acts could expose us to substantial
uninsured losses. Any losses we incur that are not adequately covered by insurance may decrease our future operating income,
require us to fund replacements or repairs for destroyed property and reduce the funds available for payment of our obligations.

Our insurance costs may increase and we may not be able to obtain similar insurance coverage in the future

We renew our insurance policies on an annual basis. The cost of coverage may become so high that we may need to further
If we are unable to obtain sufficient
reduce our policy limits or agree to certain additional exclusions from our coverage.
insurance coverage, we could be at risk for increased potential losses, which could be substantial.
In addition, our debt
instruments and other material agreements require us to meet certain standards related to insurance coverage. If we are unable
to obtain sufficient insurance coverage to satisfy these requirements, an event of default could result under these debt
instruments or material agreements.
Furthermore, portions of our business are difficult or impracticable to insure. Therefore, after carefully weighing the costs,
risks, and benefits of retaining versus insuring various risks, as well as the availability of certain types of insurance coverage,
we may opt to retain certain risks not covered by our insurance policies. Retained risks are associated with deductible limits or
self-insured retentions, partial self-insurance programs and insurance policy coverage ceilings.

We may not be able to identify and complete expansion, acquisition or divestiture projects on time, on budget or as planned

We expect
development, including acquisitions or other strategic corporate transactions which may expand our business operations.

to pursue expansion, acquisition and divestiture opportunities, and we regularly evaluate opportunities for

We could face challenges in identifying development projects that fit our strategic objectives, identifying potential acquisition
or divestiture candidates and/or development partners, finding buyers, negotiating projects on acceptable terms, and managing
and integrating such acquisition or development projects. As described in further detail below, new developments or
acquisitions may not be completed or integrated successfully. The divestiture of existing businesses may be affected by our
ability to identify potential buyers. Current or future regulation may postpone a divestiture pending certain resolutions to
federal, state or local legislative issues. New properties or developments may not be completed or integrated successfully.

We may experience difficulty in integrating recent or future acquisitions into our operations

We have completed acquisition transactions in the past, and we may pursue acquisitions from time to time in the future. The
successful
integration of newly acquired businesses into our operations has required and will continue to require the
expenditure of substantial managerial, operating, financial and other resources and may also lead to a diversion of our attention
from our ongoing business concerns. We may not be able to successfully integrate new businesses, manage the combined
operations or realize projected revenue gains, cost savings and synergies in connection with those acquisitions on the timetable
contemplated, if at all. Management of the new business operations, especially those in new lines of business or different
geographic areas, may require that we increase our managerial resources. The process of integrating new operations may also
interrupt the activities of those businesses, which could have a material adverse impact on our business. The costs of
integrating businesses we acquire could significantly impact our short-term operating results. These costs could include the
following:

•

restructuring charges associated with the acquisitions;

non-recurring transaction costs, including accounting and legal fees, investment banking fees and recognition of
transaction-related costs or liabilities; and

costs of imposing financial and management controls and operating, administrative and information systems.

We perform financial, operational and legal diligence on the businesses we purchase; however, an unavoidable level of risk
remains regarding the actual condition of these businesses and our ability to continue to operate them successfully and integrate
them into our existing operations. In any acquisition we make, we face risks that include the following:

•

the risk that the acquired business may not further our business strategy or that we paid more than the business
was worth;

the risk that the financial performance of the acquired business declines or fails to meet our expectations from and
after the date of acquisition;

the potential adverse impact on our relationships with partner companies or third-party providers of technology or
products;

the possibility that we have acquired substantial undisclosed liabilities for which we may have no recourse against
the sellers or third-party insurers;

costs and complications in maintaining required regulatory approvals or obtaining further regulatory approvals
necessary to implement the acquisition in accordance with our strategy;

the risks of acquiring businesses and/or entering markets in which we have limited or no prior experience;

the potential loss of key employees or customers;

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•

the possibility that we may be unable to retain or recruit managers with the necessary skills to manage the
acquired businesses; and

changes to legal and regulatory guidelines which may negatively affect acquisitions.

If we are unsuccessful in overcoming these risks, it could have a material adverse impact on our business.

The development of new venues and the expansion of existing facilities is costly and susceptible to delays, cost overruns and
other uncertainties

We may decide to develop, construct and open hotels, casinos, other gaming venues, or racetracks in response to opportunities
that may arise. Future development projects may require significant capital commitments and the incurrence of additional debt,
which could have a material adverse impact on our business.

We are subject to significant risks associated with our equity investments, strategic alliances and other third-party
agreements

We pursue certain license opportunities, development projects and other strategic business opportunities through equity
investments, joint ventures, license arrangements and other alliances with third-parties.

Our equity investments are governed by mutually established agreements that we entered into with our co-investors and
therefore, we do not unilaterally control the applicable entity or other initiatives. The terms of the equity investments and the
rights of our co-investors may preclude us from taking actions that we believe to be in the best interests of the Company.
Disagreements with our co-investors could result in delays in project development, including construction delays, and ultimate
failure of the project. Our co-investors also may not be able to provide capital to the applicable entity on the terms agreed to or
at all, and the applicable entity may be unable to obtain external financing to finance its operations. Also, our ability to exit the
equity investments may be subject to contractual and other limitations.

With any third-party arrangement, there is a risk that our partners’ economic, business or legal interests or objectives may not
be aligned with ours, leading to potential disagreements and/or failure of the applicable project or initiative. We are also
subject to risks relating to our co-investors’ failure to satisfy contractual obligations, conflicts arising between us and any of our
partners and changes in the ownership of any of our co-investors.

Any of these risks could have a material adverse impact on our business.

We may not be able to respond to rapid technological changes in a timely manner, which may cause customer dissatisfaction

Our Online Wagering and Gaming segments are characterized by the rapid development of new technologies and the
continuous introduction of new products. Our main technological advantage versus potential competitors is our software lead-
time in the market and our experience in operating an Internet-based wagering network.
It may be difficult to maintain our
competitive technological position against current and potential competitors, especially those with greater financial resources.
Our success depends upon new product development and technological advancements, including the development of new
wagering platforms and features. While we expend resources on research and development and product enhancement, we may
not be able to continue to improve and market our existing products or technologies or develop and market new products in a
timely manner.
Further technological developments may cause our products or technologies to become obsolete or
noncompetitive.

We may inadvertently infringe on the intellectual property rights of others

In the course of our business, we may become aware of potentially relevant patents or other intellectual property rights held by
other parties, and such other parties may allege that we are infringing, misappropriating or otherwise violating their intellectual
property rights. Many of our competitors as well as other companies and individuals have obtained, and may obtain in the
future, patents or other intellectual property rights that concern products or services related to the types of products and services
we currently offer or may plan to offer in the future.

We evaluate the validity and applicability of these intellectual property rights and determine in each case whether we must
negotiate licenses to incorporate or use the proprietary technologies in our products.

We may be unable to adequately protect our own intellectual property rights, which could adversely affect our business and
results of operations

Our results of operations may be affected by the outcome of litigation within our industry and the protection and validity of our
intellectual property rights. Any litigation regarding patents or other intellectual property used in our products, including in the
areas of advance deposit wagering could be costly and time consuming and could divert our management and key personnel
from our business operations.

Some of our businesses are based upon the creation, acquisition, use and protection of intellectual property. Some of this
intellectual property is in the form of software code, patented and other technologies and trade secrets that we use to develop
and market our businesses. We rely on trademark, copyright and patent law, trade secret protection and contracts to protect our
intellectual property rights. If we are not successful in protecting these rights, the value of our brands and our business could be
adversely impacted.

If unauthorized disclosure of our
We take significant measures to protect the secrecy of large portions of our source code.
source code occurs, we could potentially lose future trade secret protection for that source code. This could make it easier for
third parties to compete with our products by copying functionality which could adversely affect our revenue and operating
margins. Unauthorized disclosure of source code also could increase security risks.

Competitors may devise new methods of competing with us which may not be covered by our patents or patent applications.
Our patent applications may not be approved, the patents we have may not adequately protect our intellectual property or
ongoing business strategies and our patents may be challenged by third parties or found to be invalid or unenforceable.

Effective trademark, service mark, copyright and trade secret protection may not be available in every country.

The laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States; therefore, we
may be unable to protect our intellectual property and proprietary technologies adequately against unauthorized copying or use
in certain jurisdictions.

We have licensed in the past, and expect to license in the future, certain of our proprietary rights, such as trademarks or
copyrighted material to third parties. These licensees may take actions that could diminish the value of our proprietary rights or
harm our reputation, even if we have agreements prohibiting such activity. To the extent third parties are obligated to
indemnify us for breaches of our intellectual property rights, these third parties may be unable to meet these obligations. Any of
these events could harm our business and results of operations.

We are subject to payment-related risks, such as risk associated with the fraudulent use of credit or debit cards which could
have adverse effects on our business due to chargebacks from customers

We allow funding and payments to accounts using a variety of methods, including electronic funds transfer ("EFT") and credit
and debit cards. As we continue to introduce new funding or payment options to our players, we may be subject to additional
regulatory and compliance requirements. We also may be subject to the risk of fraudulent use of credit or debit cards, or other
funding and/or payment options. For certain funding or payment options, including credit and debit cards, we may pay
interchange and other fees which may increase over time and, therefore, raise operating costs and reduce profitability. We rely
on third parties to provide payment-processing services and it could disrupt our business if these companies become unwilling
or unable to provide these services to us. We are also subject to rules and requirements governing EFT which could change or
be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we
may be subject to fines and higher transaction fees or possibly lose our ability to accept credit or debit cards, or other forms of
payment from customers which could have a material adverse impact on our business.

Chargebacks occur when customers seek to void credit card or other payment transactions. Cardholders are intended to be able
to reverse card transactions only if there has been unauthorized use of the card or the services contracted for have not been
provided.
In our business, customers occasionally seek to reverse online gaming losses through chargebacks. Our control
procedures to protect from chargebacks may not be sufficient to protect us from adverse effects on our business or results of
operations.

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Any violation of the Foreign Corrupt Practices Act, other similar laws and regulations, or applicable anti-money laundering
regulations could have a negative impact on us

We are subject to risks associated with doing business outside of the United States, including exposure to complex foreign and
U.S. regulations such as the Foreign Corrupt Practices Act (the "FCPA") and other anti-corruption laws which generally
prohibit U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of
obtaining or retaining business. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil
sanctions and other penalties. It may be difficult to oversee the conduct of any contractors, third-party partners, representatives
or agents who are not our employees, potentially exposing us to greater risk from their actions. If our employees or agents fail
to comply with applicable laws or company policies governing our international operations, we may face legal proceedings and
actions which could result in civil penalties, administration actions and criminal sanctions.

Any determination that we have violated any anti-corruption laws could have a material adverse impact on our business. We
also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering
regulations. Any violation of anti-money laundering laws or regulations by any of our properties could have a material adverse
impact on our business.

We face risks related to pending or future legal proceedings and other actions

From time to time, we are a party in various lawsuits and judicial and governmental actions in the ordinary course of business.
No assurance can be provided as to the outcome of these lawsuits and actions which can be expensive and time consuming. We
may not be successful in the defense or prosecution of these lawsuits or actions, which could result in settlements, costs or
damages that could have a material adverse impact on our business, financial condition, results of operations, and reputation.
Such matters may include investigations or litigation from various parties, including vendors, customers, state and federal
agencies, stockholders and employees relating to intellectual property, employment, consumer, personal injury, corporate
governance, commercial or other matters arising in the ordinary course of business. We have been subject to claims in cases
concerning class action allegations. Plaintiffs in class action lawsuits often seek recovery of very large or indeterminate
amounts, and the magnitude of the potential loss and defense costs relating to such lawsuits may not be accurately estimated.
We evaluate all of the claims and proceedings involving us to assess the expected outcome, and where possible, we estimate the
amount of potential losses to us. In many cases, including class action matters, we may not be able to estimate the amount of
potential losses and/or our estimates may prove to be insufficient. These assessments are made by management based on the
information available at the time made and require the use of a significant amount of judgment, and actual outcomes or losses
may materially differ. Regardless of whether any claims against us are valid, or whether we are ultimately held liable, such
litigation may be expensive to defend and may divert resources away from our operations and negatively impact earnings.
Further, we may not be able to obtain adequate insurance to protect us from these types of litigation matters or extraordinary
business losses.

Our operations in certain jurisdictions depend on agreements with industry constituents including horsemen and other
racetracks, and the failure to enter into or maintain these agreements on terms acceptable to us could have a material
adverse effect on our business, results of operations and financial condition

Our operations in certain jurisdictions depend on agreements with third parties. If we are unable to renew these agreements on
satisfactory terms as they expire, our business may be disrupted. For example, the Interstate Horseracing Act, as well as
various state racing laws, require that we have written agreements with the horsemen at our racetracks in order to simulcast
races, and, in some cases, conduct live racing. Certain industry groups negotiate these agreements on behalf of the horsemen
(the "Horsemen’s Groups"). These agreements provide that we must receive the consent of the Horsemen’s Groups at the
racetrack conducting live races before we may allow third parties to accept wagers on those races. We currently negotiate
formal agreements with the applicable Horsemen’s Groups at our racetracks on an annual basis. The failure to maintain
agreements with, or obtain consents from, the Horsemen's Groups on satisfactory terms or the refusal by a Horsemen’s Group
to consent to third parties accepting wagers on our races or our accepting wagers on third-parties’ races could have a material
adverse impact on our business, as such failure will result in our inability to conduct live racing and export and import
simulcasting.

From time to time, the Thoroughbred Owners of California, the Horsemen’s Group representing horsemen in California, the
Florida Horsemen’s Benevolent and Protective Association, Inc. (the "FHBPA"), which represents horsemen in Florida, and the
Kentucky Horsemen’s Benevolent and Protective Association have withheld their consent to send or receive racing signals
among racetracks. Failure to receive the consent of these Horsemen’s Groups for new and renewing simulcast agreements
could have a material adverse impact on our business.

We also have written agreements with certain Horsemen’s Groups with regards to the proceeds of gaming machines in
Louisiana, Florida, and Kentucky. Florida law requires Calder to have an agreement with the FHBPA governing the
contribution of a portion of revenue from slot machine gaming to purses on live thoroughbred races conducted by TSG at
Calder and an agreement with the Florida Thoroughbred Breeders and Owners Association governing the contribution of a
portion of revenue from slot machine gaming to breeders’ stallion and special racing awards on live thoroughbred races
conducted by Calder before receiving a license to conduct slot machine gaming.

We have agreements with other racetracks for the distribution of racing content through both the import of other racetracks’
signals for wagering at our properties and the export of our racing signal for wagering at other racetracks’ facilities, OTBs, and
ADWs. From time to time, we may be unable to reach agreements on terms acceptable to us. As a result, we may be unable to
distribute our racing content to other locations or to receive other racetracks’ racing content for wagering at our racetracks. The
inability to distribute our racing content could have a material adverse impact on our business, results of operations and
financial condition.

Work stoppages and other labor problems could negatively impact our future plans and limit our operational flexibility

Some of our employees are represented by labor unions. A strike or other work stoppage at one of our properties could have an
adverse impact on our business and results of operations. From time to time, we have also experienced attempts to unionize
certain of our non-union employees. We may experience additional union activity in the future. Any such union organization
efforts could cause disruptions in our business and result in significant costs.

Risks Related to Our Churchill Downs Segment

Our Churchill Downs Racetrack and the Kentucky Derby may be adversely affected by changes in consumer preferences,
attendance, wagering, and sponsorships

Our Churchill Downs Racetrack is dependent upon the number of people attending and wagering on live horse races.
According to industry sources, pari-mutuel handle declined on average 3% per year from 2008 to 2016 due to a number of
factors, including increased competition from other wagering and entertainment alternatives. From 2016 to 2019, pari-mutuel
If interest in horse racing is lower in the
handle on horse racing has been relatively stable with average annual growth of 2%.
future, it may have a negative impact on revenue and profitability in our Churchill Downs segment.
If attendance at and
wagering on live horse racing declines, it could have a material adverse impact on our business.

The number and level of sponsorships are important to the success of the the Kentucky Derby. Our ability to retain sponsors,
acquire new sponsors, and complete for sponsorships and advertising dollars could have a material adverse impact on our
business.

Horse racing is an inherently dangerous sport and our racetracks are subject to personal injury litigation

Personal injuries and injuries to horses have occurred during races or workouts, and may continue to occur, which could subject
us to litigation. We carry insurance at Churchill Downs Racetrack and each of our other racetracks; however, there are certain
exclusions. We renew our insurance policies on an annual basis. The cost of coverage may become so high that we may need
to further reduce our policy limits or agree to certain exclusions from our coverage. Our results of operations may be affected
by the outcome of litigation, as it could be costly and time consuming and could divert our management and key personnel from
our business operations.

Inclement weather and other conditions may affect our ability to conduct live racing

We have a limited number of live racing days at Churchill Downs Racetrack, and the number of live racing days could vary
from year to year. A significant portion of our racing revenue is generated during the Kentucky Derby and Oaks week. If a
business interruption were to occur and continue for a significant length of time, particularly one occurring at Churchill Downs
Racetrack at a time that would affect the Kentucky Derby and Oaks week, it could have a material adverse impact on our
business.

Since horse racing is conducted outdoors, unfavorable weather conditions, including extremely high and low temperatures,
heavy rains, high winds, storms, tornadoes and hurricanes, could cause events to be canceled and/or attendance to be lower,
resulting in reduced wagering. Climate change could have an impact on longer-term natural weather trends. Extreme weather
events that are linked to rising temperatures, changing global weather patterns, sea, land and air temperatures, as well as sea
levels, rain and snow could result in increased occurrence and severity of adverse weather events. Our operations are subject to
reduced patronage, disruptions or complete cessation of operations due to weather conditions, natural disasters and other
casualties.
If a business interruption were to occur due to inclement weather and continue for a significant length of time, it
could have a material adverse impact on our business.

Our business could be adversely affected by the occurrence of extraordinary events, such as terrorist attacks and public
health threats

The success of the Kentucky Derby and Oaks week is dependent upon the willingness and ability of patrons to attend events at
Churchill Downs Racetrack, which is subject to the occurrence and threat of extraordinary events that may discourage
attendance, decrease revenue, or expose us to substantial liability. Terrorist activity, including acts of domestic terrorism, or
other actions that discourage attendance at other locations, or even the threat of such activity, including public concerns
regarding air travel, military actions and additional national or local catastrophic incidents, could result in reduced attendance at
Churchill Downs Racetrack. A major epidemic or pandemic, or the threat of such an event, could also adversely affect
attendance at Churchill Downs Racetrack and could impact the supply chain for our major construction projects resulting in
higher costs and delays of the projects. While we are constantly evaluating the security precautions in an effort to ensure the
safety of the public, no security measures can guarantee safety and there can be no assurances of avoiding potential liabilities.
The occurrence or threat of any such extraordinary event at Churchill Downs Racetrack could result in a material negative
effect on our business and results of operations.

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Our Churchill Downs segment operations are highly regulated and changes in the regulatory environment could adversely
affect our business

Our Churchill Downs segment is subject to extensive state and local regulation, and we depend on continued state approval of
legalized pari-mutuel wagering in states where we operate. Our wagering and racing (including HRM) facilities must meet the
licensing requirements of various regulatory authorities. To date, we have obtained all governmental licenses, registrations,
permits and approvals necessary for operation. However, we may be unable to maintain our existing licenses. The failure to
obtain such licenses in the future or the loss of or material change in our business licenses, registrations, permits or approvals
may materially limit the number of races we conduct or our racing (including HRM) operations, and could have a material
adverse impact on our business. In addition, the loss of a license in one jurisdiction could trigger the loss of a license or affect
our eligibility for a license in another jurisdiction.

We are also subject to a variety of other rules and regulations, including zoning, environmental, construction and land-use laws
and regulations governing the serving of alcoholic beverages.
If we are not in compliance with these laws, it could have a
material adverse impact on our business.

Regulatory authorities also have input into important aspects of our operations, including hours of operation, location or
relocation of a facility, and numbers and types of HRMs. Regulators may also levy substantial fines against or seize our assets
or the assets of our subsidiaries or the people involved in violating pari-mutuel laws or regulations. Any of these events could
have an adverse impact on our business.

Our Churchill Downs segment faces significant competition, and we expect competition levels to increase

Churchill Downs Racetrack and Derby City Gaming face competition from a variety of sources, including spectator sports and
other entertainment and gaming options. Competitive gaming activities include traditional and Native American casinos,
VLTs, state-sponsored lotteries, sports wagering, and other forms of legalized and non-legalized gaming in the U.S. and other
jurisdictions.

We also face increased competition for horses and trainers from racetracks that are licensed to operate slot machines and other
electronic gaming machines that provide these racetracks an advantage in generating new additional revenue for race purses and
capital improvements.

Competition from web-based businesses presents additional challenges. Unlike most online and web-based gaming companies,
Churchill Downs and our other racetracks require significant and ongoing capital expenditures for both continued operations
and expansion. Churchill Downs Racetrack also faces significantly greater operating costs compared to costs borne by online
and web-based gaming companies. Our racing business cannot offer the same number of gaming options as online and
Internet-based gaming companies. These companies may divert wagering dollars from pari-mutuel wagering venues, such as
our racetracks. Our inability to compete successfully with these competitors could have a material adverse impact on our
business.

We may not be able to attract a sufficient number of horses and trainers to achieve full field horse races

We believe that patrons prefer to wager on races with a large number of horses, commonly referred to as full fields. A failure to
offer races with full fields results in less wagering on our horse races. Our ability to attract full fields depends on several
factors, including our ability to offer and fund competitive purses and the overall horse population available for racing. Various
factors have led to declines in the horse population in certain areas of the country, including competition from racetracks in
other areas, increased costs and changing economic returns for owners and breeders, and the spread of various debilitating and
contagious equine diseases. If Churchill Downs Racetrack is faced with a sustained outbreak of a contagious equine disease, it
could have a material impact on our profitability. If we are unable to attract horse owners to stable and race their horses at our
racetracks by offering a competitive environment, including improved facilities, well-maintained racetracks, better conditions
for backstretch personnel involved in the care and training of horses stabled at our racetracks and a competitive purse structure,
our profitability could also decrease.

Our business depends on utilizing and providing totalisator services

Our customers utilize information provided by United Tote and other totalisator companies that accumulates wagers, records
sales, calculates payoffs and displays wagering data in a secure manner to patrons who wager on our horse races. The failure to
keep technology current could limit our ability to serve patrons effectively, limit our ability to develop new forms of wagering
and/or affect the security of the wagering process, thus affecting patron confidence in our product. A perceived lack of integrity
in the wagering systems could result in a decline in bettor confidence and could lead to a decline in the amount wagered on
horse racing. A totalisator system failure could cause a considerable loss of revenue if wagering is unavailable for a significant
period of time or during an event with high betting volume.

United Tote also has licenses and contracts to provide totalisator services to a significant number of racetracks, OTBs and other
pari-mutuel wagering businesses. Its totalisator systems provide wagering data to the industry in a secure manner. Errors by
United Tote technology or personnel may subject us to liabilities, including financial penalties under our totalisator service
contracts which could have a material adverse impact on our business.

Risks Related to Our TwinSpires Business

Our online horse racing wagering business is highly regulated and changes in the regulatory environment could adversely
affect our business

TwinSpires accepts ADWs from customers of certain states who set up and fund accounts from which they may place wagers
via telephone, mobile device or through the Internet pursuant to the Interstate Horseracing Act and relevant licenses and
consents. The online horse racing wagering business is heavily regulated, and laws governing ADW vary from state to state.
Some states have expressly authorized ADW by residents, some states have expressly prohibited pari-mutuel wagering and/or
ADW and other states have expressly authorized pari-mutuel wagering but have neither expressly authorized nor expressly
prohibited residents of the state from placing wagers through ADW hubs located in different states. We believe that an online
horse racing wagering business may open accounts on behalf of and accept wagering instructions from residents of states where
pari-mutuel wagering is legal and where providing wagering instructions to ADW businesses in other states is not prohibited by
statute, regulations, or other governmental restrictions. However, state attorneys general, regulators, and other law enforcement
officials may interpret state laws, federal statutes, constitutional principles, and doctrines, and the related regulations in a
different manner than we do.
In the past, certain state attorneys general and other law enforcement officials have expressed
concern over the legality of interstate ADW.

Our expansion opportunities with respect to ADW may be limited unless more states amend their laws or regulations to permit
ADW. Conversely, if states take affirmative action to make ADW expressly unlawful, this could have a material adverse
impact on our business. For example, we ceased accepting wagers from Texas residents in September 2013 due to the
enforcement of a Texas law prohibiting ADW. Legal challenges and regulatory and legislative processes can be lengthy, costly
and uncertain. We may not be successful in lobbying state legislatures or regulatory bodies to obtain or renew required
legislation, licenses, registrations, permits and approvals necessary to facilitate the operation or expansion of our online horse
racing wagering business or in any legal challenge to the validity of any restrictions on ADW. From time to time, Congress has
considered legislation that would either inhibit or restrict Internet gambling in general or inhibit or restrict the use of certain
financial instruments, including credit cards, to provide funds for ADW.

Many states have considered and are considering interactive and Internet gaming legislation and regulations which may inhibit
our ability to do business in such states or increase competition for online wagering. Anti-gaming conclusions and
recommendations of other governmental or quasi-governmental bodies could form the basis for new laws, regulations, and
enforcement policies that could have a material adverse impact on our business. The extensive regulation by both state and
federal authorities of gaming activities also can be significantly affected by changes in the political climate and changes in
economic and regulatory policies. Such effects could have a material adverse impact to the success of our ADW operations.

Our TwinSpires business may be adversely affected by the number of people wagering on live horse races

Our TwinSpires business is dependent on wagering on live horse races at our racetracks and third-party racetracks. According
to industry sources, pari-mutuel handle declined on average 3% per year from 2008 to 2016 due to a number of factors,
including increased competition from other wagering and entertainment alternatives. From 2016 to 2019, pari-mutuel handle
on horse racing has been relatively stable with average annual growth of 2%. If interest in horse racing is lower in the future, it
may have a negative impact on revenue and profitability in our Online Wagering segment. If attendance at and wagering on
live horse racing declines, it could have a material adverse impact on our business.

Our TwinSpires business faces strong competition and we expect competition to increase

Our TwinSpires business is sensitive to changes and improvements to technology and new products and faces strong
competition from other web-based interactive gaming and wagering businesses. Our ability to develop, implement and react to
new technology and products for our mobile and online wagering business is a key factor in our ability to compete with other
ADW businesses. Some of our competitors may have greater resources than we do. We may also be unable to retain our core
customer base if we fail to continue to offer robust content offerings and other popular features. We anticipate increased
competition in our mobile and online business from various other forms of online gaming, and our potential inability to retain
customers or our failure to attract new customers could adversely affect our business.

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Our TwinSpires business is subject to a variety of laws, many of which are unsettled and still developing and which could
subject us to claims or otherwise harm our business

We are subject to a variety of laws, including laws regarding gaming, consumer protection and intellectual property that are
continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often
uncertain and may be conflicting. Laws relating to the liability of providers of online services for activities of users and other
third parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts,
unfair competition, copyright and trademark infringement, and other theories. It is also likely that as our business grows and
evolves we will become subject to laws and regulations in additional jurisdictions.

If we are not able to comply with these laws or regulations or if we become liable under these or new laws or regulations, we
could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may
require us to expend substantial resources or to modify our online services which could harm our business. The increased
attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise
impact the growth of our business.

Risks Related to Our Sports Betting and iGaming Business

Our ability to predict and capitalize on the legalization of online sports betting and iGaming in the United States may impact
our business, and we expect that competition will continue to grow and intensify

A number of states have passed or are currently considering passing online sports betting and iGaming legislation. If a large
number of additional states or the federal government enact online sports betting or iGaming legislation and we are unable to
obtain, or are otherwise delayed in obtaining, the necessary licenses to operate online sports betting or iGaming websites in
United States jurisdictions where such games are legalized, our future growth in online sports betting and iGaming could be
materially impaired.

States or the federal government may prevent online sports betting and iGaming or legalize online sports betting and iGaming
in a manner that is unfavorable to us.
If, like Nevada and New Jersey, state jurisdictions enact legislation legalizing online
sports betting and iGaming subject to a brick-and-mortar requirement, we may be unable to offer online sports betting and
iGaming in such jurisdictions if we are unable to establish an affiliation with a brick-and-mortar casino in such jurisdiction on
acceptable terms.

We expect that we will face increased competition for online sports betting and iGaming as the potential for legalized online
In the online sports betting and iGaming industry, a "first mover" advantage
sports betting and iGaming continues to grow.
exists. Our ability to compete effectively in respect of a particular style of online sports betting and iGaming in the United
States may be premised on introducing a style of gaming before our competitors. Failing to do so could materially impair our
ability to grow in the online sports betting and iGaming space. We may fail to accurately predict when online sports betting
and iGaming will be legalized in significant jurisdictions. The legislative process in each state and at the federal level is unique
and capable of rapid, often unpredictable change. If we fail to accurately forecast when and how, if at all, online sports betting
and iGaming will be legalized in additional state jurisdictions, such failure could impair our readiness to introduce online sports
betting and iGaming offerings in such jurisdictions, which could have a material impact on our business.

We intend to expand our sports betting operations and there can be no assurance that we will be able to compete effectively,
that our expansion initiatives will be successful, or that we will generate sufficient returns on our investment

During the second quarter of 2018, the U.S. Supreme Court overturned the federal ban on sports betting. As a result, several
jurisdictions in which we operate legalized sports betting and additional jurisdictions may do so in the future. Our ability to be
successful with our proposed sports betting operations is dependent on potential legislation in various jurisdictions that affect
the sports betting industry in the United States. We continue to engage with state lawmakers in our other jurisdictions to
advocate for the passage of sports betting laws with reasonable tax rates and license fees.

Our sports betting operations will compete in a rapidly evolving and highly competitive market against an increasing number of
competitors. In order to compete successfully, we may need to enter into agreements with strategic partners and other third-
party vendors and we may not be able to do so on terms that are favorable to us. There can be no assurances when, or if,
regulations enabling sports betting and online sportsbooks, casino gaming and poker will be adopted, or the terms of such
regulations, in certain of the jurisdictions in which we operate. The success of our proposed sports betting operations is
dependent on a number of additional factors that are beyond our control, including the ultimate tax rates and license fees
charged by jurisdictions across the United States, our ability to gain market share in a newly developing market, the potential
that the market does not develop as we anticipate, the competitive landscape, and our ability to compete with new entrants in
the market, changes in consumer demographics and public tastes and preferences, the performance of and licensing of third-
party vendors, and the availability and popularity of other forms of entertainment.

Failure to manage risks associated with sports betting may impact profitability

Sports betting operators serve as the house for wagers and must manage the risks of balancing wagers on specific events and
markets unlike pari-mutuel wagering, where the operator takes a percentage of each wager. Sports wagering operators must
manage risk and protect against the expertise of well-informed and sophisticated customers that may be unprofitable. We use
automated risk management processes and an experienced team to manage this risk; however, our inability to manage the
inherent risks associated with sports wagering could have a material adverse impact on our sports wagering business.

Failure to comply with laws requiring us to block access to certain individuals, based upon geographic location, may result
in legal penalties or impairment to our ability to offer our online wagering products, in general

Individuals in jurisdictions in which online gaming is illegal may nonetheless seek to engage our online gaming products.
While we take steps to block access by individuals in such jurisdictions, those steps may be unsuccessful.
In the event that
individuals in jurisdictions in which online gaming is illegal engage our online gaming systems, we may be subject to criminal
sanctions, regulatory penalties, or the loss of existing or future licenses necessary to offer online gaming or other legal
liabilities, any one of which could have a material adverse impact on our businesses. Gambling laws and regulations in many
If we are
jurisdictions require gaming industry participants to maintain strict compliance with various laws and regulations.
unsuccessful in blocking access to our online gaming products by individuals in a jurisdiction where such products are illegal,
we could lose or be prevented from obtaining a license necessary to offer online gaming in a jurisdiction in which such products
are legal.

Risks Related to Our Gaming Business

Our gaming business faces significant competition from brick-and-mortar casinos and other gaming and entertainment
alternatives, and we expect competition levels to increase

Our casinos operate in a highly competitive industry with a large number of participants, some of which have financial and
other resources that are greater than our resources. Our casino operations face competition from land-based casinos, dockside
casinos, riverboat casinos, casinos located on racetracks, Native American casinos, VLTs, state-sponsored lotteries, iGaming,
and other forms of legalized gaming in the U.S. and other jurisdictions. There has been significant competition in our markets
as a result of the expansion of facilities by existing market participants, the entrance of new gaming participants into a market,
and legislative changes. We do not have the same access to the gaming public or possess the advertising resources that are
available to state-sponsored lotteries or other competitors which may adversely affect our ability to compete effectively with
them. In some instances, particularly in the case of Native American casinos, our competitors may pay lower taxes or no taxes.
These factors could create challenges for us in competing for customers and accessing cash flow for our casino products that
enable us to remain competitive. Legislators in Florida continue to debate the expansion of Florida gaming to include Las
Vegas-style destination resort casinos. Such casinos may be subject to taxation rates lower than the current gaming taxation
structure. Should such legislation be enacted, it could have a material adverse impact on our business.

The gaming industry also faces competition from a variety of sources for discretionary consumer spending, including spectator
sports and other entertainment and gaming options. Online and mobile interactive gaming and wagering is growing rapidly and
affecting competition in our industry as federal regulations on online and mobile activities are clarified. We anticipate that
competition will continue to grow in the web-based interactive gaming and wagering channels because of ease of entry and
such increased competition may have an adverse impact on our business.

Our gaming business is highly regulated and changes in the regulatory environment could adversely affect our business

Our gaming operations exist at the discretion of the states in which we conduct business, and are subject to extensive state and
local regulation. These regulatory authorities have broad discretion and may, for any reason set forth in the applicable
legislation, rules and regulations, limit, condition, suspend, fail to renew or revoke a license or registration to conduct gaming
operations. Like all gaming operators in the jurisdictions in which we operate, we must periodically apply to renew our gaming
licenses or registrations and have the suitability of certain of our directors, officers and employees approved. While we have
obtained all governmental licenses, registrations, permits and approvals currently necessary for the operation of our gaming
facilities, we cannot be certain that we will be able to obtain such renewals or approvals in the future, or that we will be able to
obtain future approvals that would allow us to expand our gaming operations. The loss of a license in one jurisdiction could
trigger the loss of a license or affect or eligibility for a license in another jurisdiction. Also, the gaming and other laws and
regulations to which we are subject could change or could be interpreted differently in the future, or new laws and regulations
could be enacted. For example, in 2018, the U.S. Department of Justice (“DOJ”) reversed its previously-issued opinion
published in 2011, which stated that interstate transmissions of wire communications that do not relate to a “sporting event or
contest” fall outside the purview of the Wire Act of 1961 (the “Wire Act”). The DOJ’s updated opinion concluded instead that
the Wire Act was not uniformly limited to gaming relating to sporting events or contests and that certain of its provisions apply
to non-sports-related wagering activity but a federal judge ordered in 2019 that the Wire Act applies only to wagers on a

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sporting event or contest. The DOJ is currently appealing this decision. Any such material changes, new laws or regulations,
or material differences in interpretations by courts or governmental authorities could adversely affect our business and
operating results.

The Bank Secrecy Act, enforced by the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Treasury Department,
requires us to report currency transactions in excess of $10,000 occurring within a gaming day, including identification of the
guest by name and social security number, to the IRS. This regulation also requires us to report certain suspicious activity,
including any transaction that exceeds $5,000 that we know, suspect or have reason to believe involves funds from illegal
activity or is designed to evade federal regulations or reporting requirements and to verify sources of funds, in response to
which we have implemented Know Your Customer Processes. Periodic audits by the IRS and our internal audit department
assess compliance with the Bank Secrecy Act, and substantial penalties can be imposed against us if we fail to comply with this
regulation. In recent years the U.S. Treasury Department has increased its focus on Bank Secrecy Act compliance throughout
the gaming industry, and public comments by FinCEN suggest that casinos should obtain information on each customer’s
sources of income. This could impact our ability to attract and retain casino guests.

Regulatory authorities also have input into important aspects of our operations, including hours of operation, location or
relocation of a facility, numbers and types of machines. Regulators may also levy substantial fines against or seize our assets or
the assets of our subsidiaries or the people involved in violating gaming laws or regulations. Any of these events could have an
adverse impact on our business. The high degree of regulation in the gaming industry is a significant obstacle to our growth
strategy.

The concentration and evolution of the slot machine manufacturing industry or other technological conditions could impose
additional costs on us

The majority of our gaming revenue is attributable to slot, VLTs, and video poker machines operated by us at our casinos and
wagering facilities, and there are a limited number of slot machine manufacturers servicing the gaming industry. It is important
for competitive reasons that we offer the most popular and up-to-date machine games with the latest technology to our guests.
A substantial majority of the slot machines sold in the United States in recent years were manufactured by a few select
companies, and there has been extensive consolidation activity within the gaming equipment sector. Recently, the prices of
new machines have escalated faster than the rate of inflation and slot machine manufacturers have occasionally refused to sell
slot machines featuring the most popular games, instead requiring participating lease arrangements in order to acquire the
machines. Participation slot machine leasing arrangements typically require the payment of a fixed daily rental. Such
agreements may also include a percentage payment of coin-in or net win. Generally, a participating lease is substantially more
expensive over the long term than the cost to purchase a new machine. For competitive reasons, we may be forced to purchase
new slot machines or enter into participating lease arrangements that are more expensive than the costs associated with the
continued operation of our existing slot machines. If the newer slot machines do not result in sufficient incremental revenue to
offset the increased investment, it could adversely affect our operations and profitability.

We rely on a variety of hardware and software products to maximize revenue and efficiency in our operations. Technology in
the gaming industry is developing rapidly, and we may need to invest substantial amounts to acquire the most current gaming
and hotel technology and equipment in order to remain competitive in the markets in which we operate. We rely on a limited
number of vendors to provide video poker and slot machines and any loss of our equipment suppliers could impact our
operations. Ensuring the successful implementation and maintenance of any new technology acquired is an additional risk.

We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit
customers

We conduct our gaming activities on a credit and cash basis at many of our properties. Any such credit we extend is unsecured.
Table games players typically are extended more credit than slot players, and high-stakes players typically are extended more
credit than customers who tend to wager lower amounts. High-end gaming is more volatile than other forms of gaming, and
variances in win-loss results attributable to high-end gaming may have a significant positive or negative impact on cash flow
and earnings in a particular quarter. We extend credit to those customers whose level of play and financial resources warrant, in
the opinion of management, an extension of credit. These large receivables could have a significant impact on our results of
operations if deemed uncollectible. Gaming debts evidenced by a credit instrument, including what is commonly referred to as
a “marker,” and judgments on gaming debts are enforceable under the current laws of the jurisdictions in which we allow play
on a credit basis, and judgments on gaming debts in such jurisdictions are enforceable in all U.S. states under the Full Faith and
Credit Clause of the U.S. Constitution. However, other jurisdictions may determine that enforcement of gaming debts is against
public policy. Although courts of some foreign nations will enforce gaming debts directly and the assets in the U.S. of foreign
debtors may be reached to satisfy a judgment, judgments on gaming debts from U.S. courts are not binding on the courts of
many foreign nations.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

We own the following real property:

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100 acres at Churchill Downs and our auxiliary training facility at Derby City Gaming in Louisville, Kentucky
Arlington International Race Course in Arlington Heights, Illinois
Oxford Casino in Oxford, Maine
Riverwalk Casino in Vicksburg, Mississippi
Calder in Miami Gardens, Florida
Fair Grounds Race Course, Fair Grounds Slots and VSI in New Orleans, Louisiana
Ocean Downs Casino and Racetrack in Ocean City, Maryland
Derby City Gaming in Louisville, Kentucky
Presque Isle in Erie, Pennsylvania
Oak Grove Racing and Gaming in Oak Grove, Kentucky
Turfway Park in Florence, Kentucky

We lease the following real property:

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158 acres at Churchill Downs Racetrack in Louisville, Kentucky
Harlow's Casino in Greenville, Mississippi - we lease the land on which the casino and hotel are located
Lady Luck Nemacolin - we lease the building as part of the management agreement
TwinSpires.com and Brisnet in Lexington, Kentucky
United Tote in Louisville, Kentucky; San Diego, California; and Portland, Oregon
Corporate and Online Wagering headquarters in Louisville, Kentucky

In 2002, as part of financing improvements to the Churchill Downs facility, we transferred title of the Churchill Downs facility
to the City of Louisville, Kentucky and leased back the facility. Subject to the terms of the lease, we can re-acquire the facility
at any time for $1.00.

ITEM 3.

LEGAL PROCEEDINGS

In addition to the matters described below, we are also involved in ordinary routine litigation matters which are incidental to our
business.

Kater Class Action Suit

On April 17, 2015, a purported class action styled Cheryl Kater v. Churchill Downs Incorporated (the "Kater litigation") was
filed in the United States District Court for the Western District of Washington (the "Washington District Court") alleging,
among other claims, that the Company’s "Big Fish Casino" operated by the Company’s then-wholly owned mobile gaming
subsidiary Big Fish Games, Inc. ("Big Fish Games") violated Washington law, including the Washington Consumer Protection
Act, by facilitating unlawful gambling through its virtual casino games (namely the slots, blackjack, poker, and roulette games
offered through Big Fish Casino), and seeking, among other things, return of monies lost, reasonable attorney’s fees, treble
damages, and injunctive relief. On November 19, 2015, the Washington District Court dismissed the case with prejudice and,
on December 7, 2015, the plaintiff’s motion for reconsideration was denied. The plaintiff filed a notice of appeal on January 5,
2016 to the United States Court of Appeals for the Ninth Circuit.

As previously disclosed, on January 9, 2018, the Company sold Big Fish Games to Aristocrat Technologies, Inc., a Nevada
corporation ("Purchaser"), an indirect, wholly owned subsidiary of Aristocrat Leisure Limited, an Australian corporation,
pursuant to the Stock Purchase Agreement, dated as of November 29, 2017, by and among the Company, Big Fish Games and
the Purchaser. Pursuant to the terms of the Stock Purchase Agreement, the Company agreed to indemnify the Purchaser for the
losses and expenses associated with the Kater litigation for Big Fish Games, which is referred to in the Stock Purchase
Agreement as the "Primary Specified Litigation."

On March 28, 2018, the United States Court of Appeals for the Ninth Circuit reversed and remanded the Washington District
Court’s dismissal of the complaint against the Company. On June 12, 2018, the United States Court of Appeals for the Ninth
Circuit denied the Company’s Petition for Rehearing En Banc filed by the Company on May 11, 2018. On July 20, 2018, the
Company filed a Motion to Compel Arbitration in the Washington District Court, which was denied on November 2, 2018.
The complaint was amended on March 20, 2019, to add Big Fish Games as a party and to assert claims on behalf of an
additional plaintiff, Suzie Kelly. On May 10, 2019, the Company filed an answer as to the claims asserted by plaintiff Kater,
and joined Big Fish Games in moving to compel arbitration as to all claims asserted by plaintiff Kelly. Big Fish Games also

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moved to compel arbitration against plaintiff Kater. On June 13, 2019, defendants moved to stay discovery pending resolution
of the motion to compel arbitration. On August 21, 2019, the Washington District Court partially granted the motion and stayed
discovery pending a ruling on the motions to compel arbitration against plaintiffs Kater and Kelly, except as to discovery
requests plaintiff Kater served on the Company before amending the complaint. On September 12, 2019, the Washington
District Court ordered that the case would be stayed entirely (except for the aforementioned discovery requests), pending the
United States Court of Appeals for the Ninth Circuit’s ruling on arbitration issues raised in other cases which may be relevant to
the arguments raised in the pending motions to compel arbitration.

After the case was stayed, a dispute arose regarding communication between Big Fish Games and its users related to revised
terms of use. On November 19, 2019, the District Court granted plaintiffs' motion relating to the communications pursuant to
Federal Rule of Civil Procedure 23(d), and on December 19, 2019, the District Court approved a revised communication
proposed by defendants. Both parties have appealed issues related to the communication orders to the Ninth Circuit. On
February 20, 2020, while the case was stayed, and before completing discovery and before resolution of motions to compel
arbitration, plaintiffs filed a motion with the District Court to certify a class for injunctive relief only and for a preliminary
injunction prohibiting the sale of virtual casino chips or coins or other virtual tokens or credits from within Washington or to
individuals located in Washington. In accordance with the terms of the Stock Purchase Agreement, the Company is working
closely with the Purchaser to vigorously defend this matter in both the Washington District Court and in any further appellate
proceedings, and the Company believes that there are meritorious legal and factual defenses against the plaintiffs' allegations
and requests for relief.

Thimmegowda Class Action Suit

On February 11, 2019, a purported class action styled Manasa Thimmegowda v. Big Fish Games, Purchaser, Aristocrat Leisure
Limited, and the Company, was filed in the Washington District Court alleging, among other claims, that “Big Fish Casino,”
which is operated by Big Fish Games, violated Washington law, including the Washington Consumer Protection Act, and
seeking, among other things, return of monies lost, reasonable attorney’s fees, injunctive relief, and treble and punitive
damages. On May 10, 2019, all of the defendants moved to compel arbitration of the claims, and the Company, the Purchaser
and Aristocrat Leisure Limited also moved to dismiss the action for lack of personal jurisdiction. On June 13, 2019, defendants
moved to stay discovery pending resolution of those motions. On September 12, 2019, the Washington District Court ordered
that the case would be stayed entirely, pending the United States Court of Appeals for the Ninth Circuit’s ruling on arbitration
issues raised in other cases which may be relevant to the arguments raised in the pending motion to compel arbitration.

After the case was stayed, a dispute arose regarding communication between Big Fish Games and its users related to revised
terms of use. On November 19, 2019, the District Court granted plaintiffs' motion relating to the communications pursuant to
Federal Rule of Civil Procedure 23(d), and on December 19, 2019, the District Court approved a revised communication
proposed by defendants. Both parties have appealed issues related to the communication orders to the Ninth Circuit. On
February 20, 2020, while the case was stayed, and before completing discovery and before resolution of motions to compel
arbitration, plaintiffs filed a motion with the District Court to certify a class for injunctive relief only and for a preliminary
injunction prohibiting the sale of virtual casino chips or coins or other virtual tokens or credits from within Washington or to
individuals located in Washington. The Company is working to vigorously defend this matter, and believes that there are
meritorious legal and factual defenses against plaintiff’s allegations and requests for relief.

The Kentucky Horse Racing Commission, et al. v. The Family Trust Foundation of Kentucky, Inc.

In 2010, all Kentucky racetracks and the KHRC (together with the Kentucky racetracks, the "Joint Petitioners") sought a
declaration from the Franklin Circuit Court (the "Court") that: (i) the KHRC’s historical racing regulations are valid under
Kentucky law, and (ii) operating historical racing machines pursuant to a license issued by KHRC would not run afoul of any
criminal gaming statutes. The Family Trust Foundation of Kentucky, Inc. (the "Family Foundation") intervened, and the Court
subsequently granted summary judgment to the Joint Petitioners holding that the KHRC's historical racing regulations are valid
under Kentucky law. Following an appeal to the Kentucky Court of Appeals, in February 2014 the Supreme Court of Kentucky
affirmed the Court’s decision that the regulations are valid under Kentucky law, but remanded the case to the Court to
determine whether operation of historical racing machines that were licensed during the pendency of the litigation constitute
pari-mutuel wagering. The Court held a trial during the week of January 8, 2018 to determine whether the games from one of
the historical racing machine manufacturers (Encore/Exacta) are pari-mutuel, and the Court set a post-trial briefing schedule for
the parties. Although the Court ordered, on August 24, 2017, that this pending litigation only directly involves the historical
racing machine games presently in use, and any future historical racing machine games proposed by the Company would not be
included in the pending case, the ruling could impact how we design our future games and could affect the underlying
economics and technology of historical racing machines. On October 24, 2018, the Court ruled that the historical racing
machines in question (Encore/Exacta) are a pari-mutuel system of wagering legally permitted under Kentucky law. In
November 2018, the Family Foundation filed a notice of appeal and subsequently filed a motion to transfer the appeal directly

to the Kentucky Supreme Court, which was granted in June 2019. The case is fully briefed and pending before the Kentucky
Supreme Court.

Kentucky Downs, LLC, et al. v. Commonwealth of Kentucky, Public Protection Cabinet, Kentucky Horse Racing
Commission, et al.

On January 4, 2019, Kentucky Downs, LLC and Kentucky Racing Acquisition, LLC (collectively, "Petitioners") filed a Petition
for Review and Appeal of Approval of WKY Development, LLC License Application and Denial of Kentucky Downs, LLC
License Application styled Kentucky Downs, LLC, et al. v. Commonwealth of Kentucky, Public Protection Cabinet, Kentucky
Horse Racing Commission, et al. in the Franklin Circuit Court, Commonwealth of Kentucky. Petitioners are appealing the vote
of the Kentucky Horse Racing Commission, which awarded WKY Development, LLC, our joint venture with Keeneland, a
license to conduct live racing and pari-mutuel wagering in Christian County, Kentucky and denied Petitioners’ application for a
license to conduct live racing and pari-mutuel wagering in Christian County, Kentucky. WKY Development, LLC is a joint
venture owned 95% by the Company and 5% by Keeneland. On March 29, 2019, WKY Development, LLC filed an Answer to
the Petition for Review and Appeal. A hearing on threshold legal issues is scheduled for February 27, 2020. The Company is
vigorously defending this matter and believes that there are meritorious legal and factual defenses against Petitioners’
allegations and requests for relief.

Louisiana Environmental Protection Agency Non-Compliance Issue

On December 6, 2013, we received a notice from the EPA regarding alleged CAFO non-compliance at Fair Grounds Race
Course. On October 21, 2019, we reached an agreement in principle, subject to final agreement and regulatory and court
approval.
If approved, the agreement will include a $2.8 million penalty, which has been accrued and is included in selling,
general and administrative expense in our accompanying consolidated statement of comprehensive income for the year ended
December 31, 2019, and accrued expense and other current liabilities in our accompanying consolidated balance sheet at
December 31, 2019.

Louisiana Horsemens' Purses Class Action Suit

On April 21, 2014, John L. Soileau and other individuals filed a Petition for Declaratory Judgment, Permanent Injunction, and
Damages-Class Action styled John L. Soileau, et. al. versus Churchill Downs Louisiana Horseracing, LLC, Churchill Downs
Louisiana Video Poker Company, LLC (Suit No. 14-3873) in the Parish of Orleans Civil District Court, State of Louisiana (the
"District Court"). The petition defined the "alleged plaintiff class" as quarter horse owners, trainers and jockeys that have won
purses at the "Fair Grounds Race Course & Slots" facility in New Orleans, Louisiana since the first effective date of La. R.S.
27:438 and specifically since 2008. The petition alleged that Churchill Downs Louisiana Horseracing, L.L.C. and Churchill
Downs Louisiana Video Poker Company, L.L.C. ("Fair Grounds Defendants") have collected certain monies through video
draw poker devices that constitute monies earned for purse supplements and all of those supplemental purse monies have been
paid to thoroughbred horsemen during Fair Grounds’ live thoroughbred horse meets. La. R.S. 27:438 requires a portion of those
supplemental purse monies to be paid to quarter-horse horsemen during Fair Grounds’ live quarter-horse meets. The petition
requested that the District Court declare that Fair Grounds Defendants violated La. R.S. 27:438, issue a permanent and
mandatory injunction ordering Fair Grounds Defendants to pay all future supplements due to the plaintiff class pursuant to
La.R.S. 27:438, and to pay the plaintiff class such sums as it finds to reasonably represent the value of the sums due to the
plaintiff class. On August 14, 2014, the plaintiffs filed an amendment to their petition naming the Horsemen’s Benevolent and
Protective Association 1993, Inc. ("HBPA") as an additional defendant and alleging that HBPA is also liable to plaintiffs for the
disputed purse funds. On October 9, 2014, HBPA and Fair Grounds Defendants filed exceptions to the suit, including an
exception of primary jurisdiction seeking referral to the Louisiana Racing Commission. By Judgment dated November 21,
2014, the District Court granted the exception of primary jurisdiction and referred the matter to the Louisiana Racing
Commission. On January 26, 2015, the Louisiana Fourth Circuit Court of Appeals denied the plaintiffs’ request for supervisory
review of the Judgment. On August 24, 2015, the Louisiana Racing Commission ruled that the plaintiffs did not have standing
or a right of action to pursue the case. The plaintiffs appealed this decision to the District Court, which affirmed the Louisiana
Racing Commission’s ruling. The plaintiffs filed an appeal of the District Court’s decision with the Louisiana Fourth Circuit
Court of Appeals, which reversed the Louisiana Racing Commission’s ruling and remanded the matter to the Louisiana Racing
Commission for further proceedings on June 13, 2018. The Louisiana Fourth Circuit Court of Appeals denied the Fair Grounds
Defendants’ Motion for Rehearing on July 12, 2018 and the Louisiana Supreme Court denied the Fair Grounds Defendants’
Writ of Certiorari seeking review of that decision on November 14, 2018. The parties had previously attempted to mediate the
matter in October 2018, but were unsuccessful. Thereafter, the parties resumed informal settlement discussions, and, as a result,
the Company established an accrual for an immaterial amount in the third quarter of 2019. The parties submitted a settlement
agreement to the District Court on February 14, 2020, following the Louisiana Racing Commission’s approval to transfer the
matter to the District Court for approval and administration of the settlement agreement on February 12, 2020. At a hearing on
February 18, 2020, the District Court granted preliminary approval of the settlement agreement and set certain deadlines
relating to actions to be taken by class members. A fairness hearing with the District Court relating to the terms of the
settlement agreement is set for April 27, 2020. The settlement agreement requires, among other items, the Fair Grounds
Defendants to (i) pay a certain out-of-pocket amount that is within the amount for which we established an accrual in the third
quarter of 2019, and (ii) support legislation that would allocate a specified amount of video poker purse funds to quarter horse

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purses for races at Fair Grounds with maximum annual payout caps that are not deemed material. The settlement includes a
release of claims against the Fair Grounds Defendants in connection with the proceeding, although individual plaintiffs may
opt-out. If there are opt-out claims in excess of $50,000, the settlement will be voided, unless the parties agree to stipulate
otherwise. The settlement agreement is subject to certain conditions, including court approval and the passage of certain
legislation.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Stock

The Company's common stock is traded on the Nasdaq Global Select Market under the symbol CHDN. As of February 10,
2020, there were approximately 2,520 shareholders of record. All share and per share amounts presented were retroactively
adjusted to reflect the Stock Split for shareholders of record on January 11, 2019 and with an effective date of January 25, 2019.
The Company's stock began trading at the split adjusted price on January 28, 2019.

Dividends

Since joining The Nasdaq Global Select Market in 1993, we have declared and paid cash dividends on an annual basis at the
discretion of our Board of Directors. The payment and amount of future dividends will be determined by the Board of
Directors and will depend upon, among other things, our operating results, financial condition, cash requirements and general
business conditions at the time such payment is considered. We declared a dividend of $0.581 in December 2019, which was
paid in January 2020, and we declared a dividend of $0.543 in December 2018, which was paid in January 2019.

Issuer Purchases of Common Stock

The following table provides information with respect to shares of common stock that we repurchased during the quarter ended
December 31, 2019:

Total Number of
Shares Purchased

Average Price
Paid Per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

Approximate Dollar
Value of Shares That
May Yet Be
Purchased under the
Plans or Programs
(in millions) (1)

80,303

64,947

74,787

220,037

130.97

127.28

134.92

131.22

80,303

64,820

46,637

191,760

189.5

181.2

175.0

Period

10/1/19-10/31/2019

11/1/19-11/30/2019

12/1/19-12/31/2019

Total

(1)

On October 30, 2018, the Board of Directors of the Company approved a new common stock repurchase program of up
to $300.0 million inclusive of any remaining authorization under the prior program. The prior $250.0 million program
was authorized in April 2017 and had unused authorization of $78.3 million. 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.

Shareholder Return Performance Graph
The following performance graph and related information shall not be deemed "soliciting material" nor to be "filed" with the
SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the
Securities Exchange Act of 1934, each as amended, except to the extent we specifically incorporate it by reference into such
filing.

The following graph depicts the cumulative total shareholder return, assuming reinvestment of dividends, for the periods
indicated for our Common Stock compared to the Russell 2000 Index, S&P Midcap 400 Index, and the S&P 500 Index. We
consider the Russell 2000 Index to be our most comparable peer group index. We added the S&P Midcap 400 Index as a
comparison beginning in our Annual Report on Form 10-K for the year ended December 31, 2018. The S&P Midcap 400 Index

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includes the Company's results and also reflects companies which have a more comparable market capitalization than the S&P
500 Index.

s
r
a
l
l
o
D

$500

$450

$400

$350

$300

$250

$200

$150

$100

$50

12/31/14

12/31/15

12/31/16

12/31/17

12/31/18

12/31/19

Period Ending

Churchill Downs Incorporated
S&P Midcap 400 Index

Russell 2000 Index
S&P 500 Index

Churchill Downs Incorporated
Russell 2000 Index

S&P Midcap 400 Index
S&P 500 Index

12/31/2014
100.00
$
100.00
$
100.00
$
100.00
$

12/31/2015
149.64
$
95.59
$
97.82
$
101.38
$

12/31/2016
160.49
$
115.95
$
118.11
$
113.51
$

12/31/2017
249.83
$
132.94
$
137.30
$
138.29
$

12/31/2018
263.49
$
118.30
$
122.08
$
132.23
$

12/31/2019
446.58
$
148.49
$
154.07
$
173.86
$

ITEM 6.

SELECTED FINANCIAL DATA

(In millions, except per common share data)
Operations:
Net revenue
Operating income

Income from continuing operations, net of
tax
(Loss) income from discontinued operations,
net of tax
Net income attributable to CDI

Net income from continuing operations per
common share:

Basic
Diluted

Balance sheet data at period end:
Total assets
Total debt, net

Total liabilities
Shareholders’ equity
Shareholders’ equity per common share

Other data:

Cash flows from operating activities
Capital maintenance expenditures

Capital project expenditures
Dividends declared per common share

Cash dividends paid
Common stock repurchases

2019(a)(e)

Years Ended December 31,
2017(c)(e)(f)

2016(d)(e)(f)

2018(b)(e)(f)

2015(e)(f)

1,329.7
215.7

1,009.0
188.8

882.6
145.7

822.4
172.5

798.6
126.3

139.6

(2.4)
137.5

182.6

170.2
352.8

122.4

18.1
140.5

96.7

11.4
108.1

70.8

(5.6)
65.2

$
$

3.49

3.44

4.42

4.39

2.59

2.55

1.94

1.92

1.36

1.34

2,551.0

1,725.2

2,359.4

2,254.4

1,473.9
2,040.0
508.3
12.80

884.3
1,251.9
473.3
11.72

1,129.2
1,719.1
640.3
13.85

921.7
1,569.4
685.0
13.85

2,277.4

781.8
1,660.2
617.2
12.39

289.6

197.8

215.1

231.4

48.3
82.9

0.581
22.2

93.0

$
$

29.6
119.8

0.543
23.7

532.0

$
$

33.3
83.6

0.507
21.5

179.5

$
$

30.9
23.8

0.440
19.1

27.6

$
$

264.5

31.1
12.4

0.383
17.4

138.1

The selected financial data presented above is subject to the following information:

(a)

2019 includes:

–

the results from the dates of acquisition through December 31, 2019 for Presque Isle, Lady Luck Nemacolin,
Turfway Park, and the equity investment in Rivers Des Plaines; and

$10.0 million accelerated amortization of the purchase and sale rights related to the Turfway Park
Acquisition.

(b)

(c)

2018 includes the $54.9 million pre-tax gain on the Ocean Downs/Saratoga Transaction and the consolidated results of
Ocean Downs after August 31, 2018.

2017 includes a $21.7 million impairment of tangible and intangible assets and a $20.7 million loss on extinguishment
of debt. 2017 also includes a $57.7 million income tax benefit resulting primarily from the re-measurement of our net
deferred tax liabilities as a result of the Tax Cuts and Jobs Acts ("Tax Act").

(d)

2016 includes a $23.7 million gain on Calder land sale.

(e) Big Fish Games is accounted for as discontinued operations from the date of acquisition on December 16, 2014

through December 31, 2019 as a result of the Big Fish Transaction.

(f) All per share amounts presented were retroactively adjusted to reflect the Stock Split for shareholders of record on
January 11, 2019 and with an effective date of January 25, 2019. CHDN stock began trading at the split adjusted price
on January 28, 2019.

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis of our consolidated financial condition and results of operations should be read in
conjunction with our audited consolidated financial statements and related notes included in Part II, Item 8. Financial
Statements and Supplementary Data. The following discussion provides an analysis of our results of operations and reasons
for material changes therein for 2019 as compared to 2018. Discussion regarding our financial condition and results of
operations for 2018 as compared to 2017 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended
December 31, 2018, filed with the SEC on February 27, 2019.

Our Business

We are an industry-leading racing, online wagering and gaming entertainment company anchored by our iconic flagship event -
The Kentucky Derby. We own and operate Derby City Gaming, a historical racing machine ("HRM") facility in Louisville,
Kentucky. We also own and operate the largest online horse racing wagering platform in the U.S., TwinSpires.com, and we
operate sports betting and iGaming through our BetAmerica platform in multiple states. We are also a leader in brick-and-
mortar casino gaming with approximately 11,000 slot machines and video lottery terminals ("VLTs") and 200 table games in
eight states. We were organized as a Kentucky corporation in 1928, and our principal executive offices are located in
Louisville, Kentucky.

Segments

During the first quarter of 2019, we realigned our operating segments to reflect the internal management reporting used by our
chief operating decision maker to evaluate results of operations and to assess performance and allocate resources. For
additional information, refer to Note 20 to the notes to consolidated financial statements included in Item 8. Financial
Statements and Supplementary Data of this Annual Report on Form 10-K. For financial reporting purposes, we aggregate our
operating segments into three reportable segments as follows:

•

Churchill Downs

The Churchill Downs segment includes live and historical pari-mutuel racing related revenue and expenses at
Churchill Downs Racetrack and Derby City Gaming.

Churchill Downs Racetrack is the home of The Kentucky Derby and conducts live racing during the year. Derby City
Gaming is an HRM facility that operates under the Churchill Downs pari-mutuel racing license at its auxiliary training
facility in Louisville, Kentucky.

Churchill Downs Racetrack and Derby City Gaming earn commissions primarily from pari-mutuel wagering on live
races at Churchill Downs and on historical races at Derby City Gaming; simulcast fees earned from other wagering
sites; admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services (collectively
"racing event-related services"), as well as food and beverage services.

•

Online Wagering

The Online Wagering segment includes the revenue and expenses for our TwinSpires business ("TwinSpires") and our
online sports betting and iGaming business.

TwinSpires operates our online horse racing wagering business on TwinSpires.com, BetAmerica.com, and other
white-label platforms; facilitates high dollar wagering by international customers ("Velocity"); and provides the
Bloodstock Research Information Services ("BRIS") platform for horse racing statistical data.

Our sports betting and iGaming business operates the BetAmerica sports betting and casino iGaming platform in
multiple states, including Mississippi, New Jersey, Indiana, Pennsylvania, and Arkansas. The mobile and online
BetAmerica sports betting and casino iGaming results are included in the Online Wagering segment and the retail
operations are included in the Gaming segment.

•

Gaming

The Gaming segment includes revenue and expenses for the casino properties and associated racetrack or jai alai
facilities which support the casino license. The Gaming segment has approximately 11,000 slot machines and VLTs
and 200 table games located in eight states.

The Gaming segment revenue and Adjusted EBITDA includes the following properties:

◦
◦

◦

Calder Casino and Racing ("Calder")
Fair Grounds Slots, Fair Grounds Race Course, and Video Services, LLC ("VSI") (collectively, "Fair
Grounds and VSI")
Harlow’s Casino Resort and Spa ("Harlow's")

◦
◦
◦
◦
◦

Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") management agreement
Ocean Downs Casino and Racetrack ("Ocean Downs")
Oxford Casino and Hotel ("Oxford")
Presque Isle Downs and Casino ("Presque Isle")
Riverwalk Casino Hotel ("Riverwalk")

The Gaming segment Adjusted EBITDA also includes the Adjusted EBITDA related to the Company’s equity
investments in the following:

◦

61.3% equity investment in Midwest Gaming Holdings, LLC ("Midwest Gaming"), the parent company of
Rivers Casino Des Plaines in Des Plaines, Illinois ("Rivers Des Plaines")
50% equity investment in Miami Valley Gaming and Racing ("MVG")

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

We have aggregated the following businesses as well as certain corporate operations, and other immaterial joint ventures in "All
Other" to reconcile to consolidated results:

•
•
•
•
•

Arlington International Race Course ("Arlington")
United Tote
Oak Grove Racing and Gaming ("Oak Grove")
Turfway Park
Corporate

We conduct our business through these reportable segments and report net revenue and operating expense associated with these
reportable segments in the accompanying consolidated statements of comprehensive income. The prior year results were
reclassified to conform to this presentation.

Effective January 1, 2019, the Company does not allocate corporate and other related expenses to our segments in the
accompanying consolidated statements of comprehensive income. The prior year results in the accompanying consolidated
statements of comprehensive income were reclassified to conform to this presentation.

Key 2019 Transactions

Acquisitions of Presque Isle and Lady Luck Nemacolin

On January 11, 2019, we completed the acquisition of Presque Isle located in Erie, Pennsylvania from Eldorado Resorts, Inc.
("ERI") for cash consideration of $178.9 million (the "Presque Isle Transaction") and $1.6 million of working capital and other
purchase price adjustments.

On March 8, 2019, the Company assumed management and acquired certain assets related to the management of Lady Luck
Nemacolin in Farmington, Pennsylvania, from ERI for cash consideration of $100,000 (the "Lady Luck Nemacolin
Transaction").

For additional information on the Presque Isle Transaction and the Lady Luck Nemacolin Transactions, refer to Note 3 to the
notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual
Report on Form 10-K.

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Acquisition of Certain Ownership Interests of Rivers Des Plaines

On March 5, 2019, the Company completed the acquisition of certain ownership interests of Midwest Gaming, the parent
company of Rivers Des Plaines, to acquire approximately 42% of Midwest Gaming from affiliates and co-investors of Clairvest
Group Inc. ("Clairvest") and members of High Plaines Gaming, LLC ("High Plaines"), an affiliate of Rush Street Gaming,
LLC, and Casino Investors, LLC ("Casino Investors") for cash consideration of approximately $406.6 million and $3.5 million
of certain transaction costs and working capital adjustments (the "Sale Transaction"). Following the closing of the Sale
Transaction, the parties completed a recapitalization transaction on March 6, 2019 (the "Recapitalization"), pursuant to which
Midwest Gaming used approximately $300.0 million in proceeds from amended and extended credit facilities to redeem, on a
pro rata basis, additional Midwest Gaming units held by High Plaines and Casino Investors. As a result of the Recapitalization,
the Company's ownership of Midwest Gaming increased to 61.3%. High Plaines retained ownership of 36.0% of Midwest
Gaming and Casino Investors retained ownership of 2.7% of Midwest Gaming.

For additional
Supplementary Data.

information on the Sale Transaction and Recapitalization, refer to Item 8. Financial Statements and

Turfway Park Acquisition

Of the $46.0 million total consideration, $36.0 million, less $0.9 million of working capital and purchase price adjustments, was
accounted for as a business combination. The remaining $10.0 million was paid to Hard Rock for the assignment of the
purchase and sale agreement rights and was accounted for separately from the business combination as an intangible asset and
was amortized through expense in the fourth quarter of 2019. Refer to Item 8. Financial Statements and Supplementary Data,
for additional information on the Turfway Park Acquisition.

Stock Split

On January 25, 2019, the Company distributed the additional shares resulting from a previously announced three-for-one split
(the "Stock Split") of the Company's common stock for shareholders of record as of January 11, 2019. Our common stock
began trading at the split-adjusted price on January 28, 2019. All share and per-share amounts in the Company’s consolidated
financial statements and related notes in Item 8. Financial Statements and Supplementary Data have been retroactively adjusted
for prior periods to reflect the effects of the Stock Split.

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,
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.

including EBITDA (earnings before interest,

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following:

Adjusted EBITDA includes our portion of the EBITDA from our equity investments.

Adjusted EBITDA excludes:

•

Transaction expense, net which includes:

◦

◦
◦

Acquisition and disposition related charges, including fair value adjustments related to earnouts and
deferred payments;
Calder racing exit costs; and
Other transaction expense, including legal, accounting and other deal-related expense;

Stock-based compensation expense;

•
• Midwest Gaming's impact on our investments in unconsolidated affiliates from:

◦
◦

The impact of changes in fair value of interest rate swaps; and
Recapitalization and transaction costs;

•

Asset impairments;

Gain on Ocean Downs/Saratoga Transaction;

Loss on extinguishment of debt;

Legal reserves;

Pre-opening expense; and

•

Other charges, recoveries and expenses

For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the
consolidated statements of comprehensive income. See the Reconciliation of Comprehensive Income to Adjusted EBITDA
included in this section for additional information.

Business Highlights

In 2019, we delivered another year of strong performance while beginning the execution of a number of organic investments
that we believe will provide long-term sustainable value creation.

• We delivered strong growth in net revenue and net income, operating income, and Adjusted EBITDA in 2019.

– Net revenue was $1.3 billion, up $320.7 million, or 31.8%;

– Operating income was $215.7 million, up $26.9 million, or 14.2%; and

– Adjusted EBITDA was $451.4 million, up $122.6 million, or 37.3%.

•

Churchill Downs Segment:

– Derby Week generated an incremental $5.4 million of Adjusted EBITDA in 2019 and set all-time wagering
records from all sources handle on the Kentucky Oaks Day, the Kentucky Derby Day, and the Kentucky
Derby Race. In October 2019, we announced plans to invest $300.0 million to build a hotel and HRM facility
and permanent stadium seating.

– Derby City Gaming outperformed expectations for 2019, contributing significant increases in both revenue

and Adjusted EBITDA.

•

Online Wagering Segment:

–

TwinSpires handle grew to $1.5 billion, up 4.8% compared to 2018 as we outpaced the industry growth by
6.8 percentage points.

– We launched our online sports betting and iGaming operations in New Jersey in the first quarter of 2019 and

in Pennsylvania and Indiana in the fourth quarter of 2019.

•

Gaming Segment:

– Our wholly-owned Gaming properties delivered strong organic growth from successful marketing and
promotional activities, and we were able to successfully integrate our Presque Isle and Lady Luck Nemacolin
transactions during 2019.

–

In March 2019, we closed on our 61.3% equity investment in Rivers Des Plaines which contributed strong
Adjusted EBITDA results for the year. Rivers Des Plaines is well positioned to grow as a result of an
expanded gaming bill in Illinois. Rivers Des Plaines has opened a new sports bar, received approval to
become the first land-based casino in Illinois, is in process of building a parking garage, and is adding 800
additional positions. MVG announced a $100 million investment in a hotel that will open by the third quarter
of 2021. Both of these investments are positioned well to provide strong growth in the coming years.

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As we look to 2020 and beyond, we remain committed to delivering strong financial results and long-term sustainable growth
for our shareholders. We have strong cash flow and a solid balance sheet that supports organic growth as well as other strategic
acquisitions and organic investment opportunities that we believe will create long-term value for our shareholders.

Our Operations

We manage our operations through three reportable segments: Churchill Downs, Online Wagering, and Gaming.

Refer to Part I, Item 1. Business, of this Annual Report on Form 10-K for more information on our segments and a description
of our competition and government regulations and potential legislative changes that affect our business.

Consolidated Financial Results

The following table reflects our net revenue, operating income, net income, Adjusted EBITDA, and certain other financial
information:

(in millions)
Net revenue
Operating income

Operating income margin
Net income from continuing operations
Net income attributable to Churchill Downs Incorporated
Adjusted EBITDA

Years Ended December 31,

2019

2018

Change

1,329.7
215.7
16.2 %
139.6
137.5
451.4

1,009.0
188.8
18.7 %
182.6
352.8
328.8

320.7
26.9

(43.0)
(215.3)
122.6

Year Ended December 31, 2019, Compared to the Year Ended December 31, 2018

•

Net revenue increased $320.7 million driven by a $242.9 million increase from the Gaming segment primarily due to
the Presque Isle, Lady Luck Nemacolin and Ocean Downs/Saratoga Transactions, as well as growth at our other
gaming properties, a $78.4 million increase from Churchill Downs primarily due to Derby City Gaming's continued
growth and a full year of results compared to the prior year with the September 2018 opening, and a $0.3 million
increase in our Online Wagering segment. Partially offsetting these increases was a $0.9 million decrease in All Other,
primarily related to a decrease in handle at Arlington.

Operating income increased $26.9 million due to a $45.8 million increase from Gaming primarily driven by the
increase in net revenue; a $30.9 million increase from Churchill Downs primarily due to Derby City Gaming's
continued growth and a full year of results compared to the prior year with the September 2018 opening; and a $5.0
million decrease in transaction expense, net. Partially offsetting these increases were a $31.4 million increase in
selling, general and administrative expenses driven by the Presque Isle, Lady Luck Nemacolin and Ocean Downs/
Saratoga Transactions, and a full year of results for Derby City Gaming compared to the prior year with the September
2018 opening, as well as an increase in stock-based compensation; a $14.0 million decrease in All Other primarily due
to an increase in salaries and related benefits at the corporate level and a decrease in handle and lower attendance at
Arlington; and a $9.4 million decrease primarily from the Online Wagering segment for costs associated with the
continued build-out of our online sports betting and iGaming operations and increased marketing spend.

Net income from continuing operations decreased $43.0 million. The following items impacted comparability of the
Company's year ended December 31, 2019 net income from continuing operations: a $42.3 million after-tax gain on
the Ocean Downs/Saratoga Transaction in 2018 which did not recur in 2019; a $9.3 million after-tax impact of our
equity portion of Midwest Gaming's non-cash change in fair value related to interest rate swaps in 2019; an $8.3
million non-cash tax impact related to the re-measurement of our net deferred tax liabilities based on an increase in
revenue related to states with higher tax rates compared to the prior year period; a $7.5 million after-tax impact for the
accelerated amortization of the purchase and sale agreement rights related to the Turfway Park Acquisition in 2019; a
$3.5 million after-tax impact of our equity portion of Midwest Gaming's recapitalization and transaction costs in 2019;
and a $3.4 million after-tax increase in expenses due to legal reserves in 2019 compared to 2018. Partially offsetting
these increases was a $3.0 million after-tax decrease in expenses related to lower transaction, pre-opening and other
expenses. Excluding these items, net income from continuing operations increased $28.3 million primarily due to a
$55.8 million after-tax increase driven by the results of our operations and equity income from our unconsolidated
affiliates, partially offset by a $22.1 million after-tax increase in interest expense associated with higher outstanding
debt balances and a $5.4 million tax expense related to a higher effective tax rate compared to the prior year period due
to an increase in income attributable to states with higher tax rates.
Our net income attributable to Churchill Downs Incorporated decreased $215.3 million due to a $43.0 million decrease
in net income from continuing operations discussed above and a $172.6 million decrease in net income from
discontinued operations driven by the after-tax gain on the sale of Big Fish Games in January 2018, partially offset by
a $0.3 million decrease from our net loss attributable to our noncontrolling interest.

Our Adjusted EBITDA increased $122.6 million driven by a $106.9 million increase from the Gaming segment
primarily due to the Presque Isle, Midwest Gaming, and Ocean Downs/Saratoga Transactions, as well as strong
performances of our wholly-owned Gaming properties and our equity investment in MVG, and a $35.3 million
increase from the Churchill Downs segment primarily due to Derby City Gaming's continued growth and a full year of
results compared to the prior year with the September 2018 opening. Partially offsetting these increases were a $12.7

million decrease from the Online Wagering segment for costs associated with the continued build-out of our online
sports betting and iGaming operations and increased marketing spend, and a $6.9 million decrease from All Other
mainly due to increased salaries and related benefits at the corporate level and a decrease in handle at Arlington.

Financial Results by Segment

Net Revenue by Segment

The following table presents net revenue for our segments, including intercompany revenue:

(in millions)
Churchill Downs:

Churchill Downs Racetrack
Derby City Gaming

Total Churchill Downs

Online Wagering:
Twin Spires
Online Sports Betting and iGaming

Total Online Wagering

Gaming:

Presque Isle

Fair Grounds Slots and VSI

Oxford

Calder

Ocean Downs

Riverwalk

Harlow's

Lady Luck Nemacolin

Saratoga

Total Gaming

All Other

Eliminations
Net Revenue

Years Ended December 31,

2019

2018

Change

202.8
86.6
289.4

291.0
0.6

291.6

139.0

124.8

101.7

99.9

85.9

58.9

55.3

29.3

—

694.8

84.2

(30.3)

193.7
14.8
208.5

291.5
—

291.5

—

119.3

102.0

98.7

25.9

54.5

50.2

—

0.6

451.2

84.7

(26.9)

1,329.7

1,009.0

9.1
71.8
80.9

(0.5)
0.6

0.1

139.0

5.5

(0.3)

1.2

60.0

4.4

5.1

29.3

(0.6)

243.6

(0.5)

(3.4)

320.7

Year Ended December 31, 2019, Compared to the Year Ended December 31, 2018

•

Churchill Downs revenue increased $80.9 million primarily due to a $71.8 million increase from a full year of results
at Derby City Gaming due to the September 2018 opening and a $9.1 million increase at Churchill Downs Racetrack
primarily due to a successful Kentucky Derby and Oaks week driven by increased ticket sales for reserved seating,
sponsorship growth, and record handle.
Online Wagering revenue increased $0.1 million from the prior year. TwinSpires revenue decreased $0.5 million from
the prior year primarily due to the exit of certain existing high volume with low margin customers in the Velocity
group within TwinSpires net revenue. TwinSpires handle, which does not include handle from customers in the
Velocity group, grew 4.8% during 2019 compared to the prior year and compared favorably to a 2.0% decrease in U.S.
thoroughbred industry handle. Active players increased 16.8% for the year compared to the prior year while net
revenue per active player declined 14.2%. Our online sports betting and iGaming net revenues increased $0.6 million
due to the launch in New Jersey in the first quarter of 2019 and Pennsylvania and Indiana in the fourth quarter of 2019.

Gaming revenue increased $243.6 million driven by a $139.0 million increase due to the Presque Isle Transaction, a
$60.0 million increase due a full year of results in 2019 from the Ocean Downs/Saratoga Transaction, a $29.3 million
increase due to the Lady Luck Nemacolin Transaction, a $9.5 million increase from our Mississippi properties
primarily due to higher attendance driven by our retail BetAmerica Sportsbooks which opened in August 2018, a $5.5
million increase at Fair Grounds and VSI primarily due to two additional off-track betting and video poker facilities
and successful marketing and promotional activities, and a $1.2 million increase from Calder, primarily due to

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successful marketing and promotional activities. Partially offsetting these increases were $0.9 million decrease from
other sources.

•

All Other revenue decreased $0.5 million primarily due to a decrease in handle at Arlington.

Consolidated Operating Expense

The following table is a summary of our consolidated operating expense:

(in millions)

Taxes and purses
Salaries and benefits
Content expense
Selling, general and administrative expense
Depreciation and amortization
Marketing and advertising expense
Transaction expense, net
Other operating expense
Total expense

Years Ended December 31,

2019

2018

Change

369.7
171.2
139.6
122.0
96.4
41.8
5.3
168.0
1,114.0

226.7
127.5
142.1
90.6
63.6
28.8
10.3
130.6
820.2

143.0
43.7
(2.5)
31.4
32.8
13.0
(5.0)
37.4
293.8

Percent of revenue

84 %

81 %

Year Ended December 31, 2019, Compared to the Year Ended December 31, 2018

Significant items affecting comparability of consolidated operating expense include:

•

Taxes and purses increased $143.0 million driven by the Presque Isle, Ocean Downs/Saratoga, and Lady Luck
Nemacolin Transactions, a full year of operations at Derby City Gaming due to the September 2018 opening, an
increase in purse amounts at Churchill Downs Racetrack, the Turfway Park Acquisition, and the first racing meet at
Oak Grove during the fourth quarter of 2019.

Salaries and benefits expense increased $43.7 million driven by the Presque Isle, Ocean Downs/Saratoga, and Lady
Luck Nemacolin Transactions, a full year operations at Derby City Gaming due to the September 2018 opening, an
increase at Churchill Downs Racetrack consistent with the growth in revenue and Adjusted EBITDA, and an increase
with our online sports betting and iGaming business due to the launches in New Jersey, Pennsylvania, and Indiana
during 2019.

Content expense decreased $2.5 million primarily due to a decrease in certain host fees.

Selling, general and administrative expense increased $31.4 million primarily from an increase in salaries and related
benefits, stock-based compensation, legal reserves, and legal and professional fees.

Depreciation and amortization expense increased $32.8 million primarily driven by the amortization of the assignment
of the purchase and sale agreement rights associated with the Turfway Park Acquisition, the Presque Isle Transaction,
a full year operations at Derby City Gaming due to the September 2018 opening, the Ocean Downs/Saratoga
Transaction, and capital expenditures placed into service for Churchill Downs Racetrack.

• Marketing and advertising expense increased $13.0 million primarily due to our online sports betting and iGaming
operations, the Presque Isle, Lady Luck Nemacolin, and Ocean Downs/Saratoga Transactions, and a full year of
operations at Derby City Gaming due to the September 2018 opening.

•

Transaction expense, net decreased $5.0 million primarily due to increased expenses associated with announced
transactions in 2018 that did not recur in 2019.

Other operating expense includes maintenance, utilities, food and beverage costs, property taxes and insurance and
other operating expenses. Other operating expense increased $37.4 million primarily driven by the Presque Isle, Lady
Luck Nemacolin, and Ocean Downs/Saratoga Transactions, a full year of operations at Derby City Gaming due to the
September 2018 opening, our online sports betting and iGaming operations, and the Turfway Park Acquisition.

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, or more meaningful than, net income (as determined
in accordance with GAAP) as a measure of our operating results.

(in millions)

Churchill Downs
Online Wagering
Gaming

Total segment Adjusted EBITDA

All Other

Total Adjusted EBITDA

Year Ended December 31,
2018
2019

Change

137.7
66.3
280.9
484.9
(33.5)
451.4

102.4
79.0
174.0
355.4
(26.6)
328.8

35.3
(12.7)
106.9
129.5
(6.9)
122.6

Year Ended December 31, 2019, Compared to the Year Ended December 31, 2018

•

Churchill Downs Adjusted EBITDA increased $35.3 million due to a $32.9 million increase from Derby City
Gaming's continued growth and a full year of results compared to the prior year with the September 2018 opening and
a $2.4 million increase at Churchill Downs Racetrack, primarily due to a successful Kentucky Derby and Oaks week
driven by increased ticket sales for reserved seating, sponsorship growth, and record handle.

Online Wagering Adjusted EBITDA decreased $12.7 million driven by a $12.1 million decrease due to costs
associated with the continued build-out of our online sports betting and iGaming operations and increased marketing
spend. TwinSpires Adjusted EBITDA decreased $0.6 million primarily due the decrease in net revenue.

Gaming Adjusted EBITDA increased $106.9 million driven by a $94.3 million increase from our equity investment in
Midwest Gaming and the Presque Isle and Lady Luck Nemacolin Transactions; a $4.9 million increase from our
Mississippi properties primarily due to higher attendance driven by the opening of our retail BetAmerica Sportsbooks;
a $3.7 million increase from our equity investment at MVG; a $2.7 million increase from Ocean Downs due to the
acquisition of the remaining 37.5% of Ocean Downs partially offset by the liquidation of our equity investments in
Saratoga as a result of the Ocean Downs/Saratoga Transaction; and a $2.7 million increase from Fair Grounds and VSI
primarily due to two additional off-track betting facilities ("OTBs") and video poker facilities and successful
marketing and promotional activities. Partially offsetting these increases were a $1.4 million decrease at Calder
associated with the May 2019 opening of the jai alai operation and favorable insurance reserve adjustments in the prior
year that did not recur in 2019.

All Other Adjusted EBITDA decreased $6.9 million primarily from a $4.2 million increase in salaries and related
benefits at the corporate level, a $2.0 million decrease at Arlington due to decreased handle and lower attendance
primarily related to inclement weather, a $1.6 million decrease from our initial operations due to the first live racing
meet at Oak Grove in the fourth quarter of 2019, and a $0.5 million decrease as a result of the Turfway Park
Acquisition. Partially offsetting these decreases was a $1.4 million increase from United Tote primarily due to
increased equipment sales and higher totalisator fees from new customers.

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Reconciliation of Comprehensive Income to Adjusted EBITDA

(in millions)

Comprehensive income attributable to CDI

Foreign currency translation, net of tax
Change in pension benefits, net of tax
Net income attributable to CDI

Net loss attributable to noncontrolling interest

Net income before noncontrolling interest

Loss (income) from discontinued operations, net of tax

Income from continuing operations, net of tax
Additions:

Depreciation and amortization
Interest expense
Loss on extinguishment of debt

Income tax provision (benefit)

EBITDA

Adjustments to EBITDA:

Selling, general and administrative:

Stock-based compensation expense

Legal reserves

Other, net

Pre-opening expense
Other income, expense:

Interest, depreciation and amortization expense related to
equity investments
Changes in fair value of Midwest Gaming's interest rate
swaps
Midwest Gaming's recapitalization and transactions costs

Other charges and recoveries, net

Gain on Ocean Downs/Saratoga transaction
Transaction expense, net

Total adjustments to EBITDA

Adjusted EBITDA

Consolidated Balance Sheet

The following table is a summary of our overall financial position:

(in millions)
Total assets
Total liabilities

Total shareholders’ equity

Years Ended December 31,

2019

2018

Change

137.5
—
—
137.5

0.3
137.2
2.4
139.6

96.4
70.9
—

56.8

353.2
(0.6)
0.2
352.8

—
352.8
(170.2)
182.6

63.6
40.1
—

51.3

363.7

337.6

23.8

17.7

3.6

0.4

5.1

32.6

12.4

4.7

(0.2)

—

5.3
87.7
451.4

—

(0.6)

4.8

13.9

—

(54.9)

10.3
(8.8)
328.8

As of December 31,

2019

2018

2,551.0
2,040.0

511.0

1,725.2
1,251.9

473.3

(215.7)
0.6
(0.2)
(215.3)

0.3
(215.6)
172.6
(43.0)

32.8
30.8
—

5.5

26.1

6.1

3.6

1.0

0.3

18.7

12.4

4.7

(0.2)

54.9

(5.0)
96.5
122.6

Change

825.8
788.1

37.7

•

Total assets increased $825.8 million driven by a $526.4 million increase in investment
in and advances to
unconsolidated affiliates due to our equity investment in Midwest Gaming; a $179.8 million increase in property and
equipment, net due to the Presque Isle Transaction, the construction of Oak Grove, and the implementation of the new
leasing standard; a $105.8 million increase in other intangibles and a $29.1 million increase in goodwill both of which
were due to the Presque Isle Transaction and Turfway Park Acquisition; an $8.5 million increase in accounts

receivable driven by Churchill Downs Racetrack and the Presque Isle Transaction; and a $13.3 million increase in all
other assets. Partially offsetting these increases was a $37.1 million decrease in cash and cash equivalents primarily
due to our equity investment in Midwest Gaming, the Presque Isle Transaction, and the Turfway Park Acquisition.

•

Total liabilities increased $788.1 million driven by a $592.9 million increase in notes payable, net of debt issuance
costs due to the issuance of the 2027 Senior Notes (as defined below); a $134.6 increase in deferred income taxes
primarily due to our equity investment in Midwest Gaming; a $38.2 million increase in accrued expense and other
current liabilities primarily driven by the Presque Isle Transaction, the construction of Oak Grove, and an increase in
interest payable due to the increase in outstanding debt; and a $23.7 million increase in other liabilities primarily as a
result of the implementation of the new leasing standard. Partially offsetting these increases was a $1.3 million
decrease in all other liabilities.

Total shareholders’ equity increased $37.7 million driven by $137.5 million current year net income attributable to
Churchill Downs Incorporated and a $23.8 million increase resulting from stock-based compensation. Partially
offsetting these increases were $93.0 million in repurchases of common stock, $23.4 million from our annual dividend
declared in December 2019, and a $7.2 million decrease in other equity components.

Liquidity and Capital Resources

The following table is a summary of our liquidity and cash flows:

(in millions)

Cash Flows from:

Operating activities
Investing activities

Financing activities

Year Ended December 31,
2018
2019

Change

289.6
(781.2)

460.8

197.8
824.1

(933.3)

91.8
(1,605.3)

1,394.1

Included in cash flows from investing activities are capital maintenance expenditures and capital project expenditures. Capital
maintenance expenditures relate to the replacement of existing fixed assets with a useful life greater than one year that are
obsolete, exhausted, or no longer cost effective to repair. Capital project expenditures represent fixed asset additions related to
land or building improvements to new or existing assets or purchases of new (non-replacement) equipment or software related
to specific projects deemed necessary expenditures.

Year Ended December 31, 2019, Compared to the Year Ended December 31, 2018

•

Cash provided by operating activities increased $91.8 million driven by a $59.7 million increase in operating income
net of depreciation and amortization related to continuing operations, a $25.1 million decrease in cash taxes paid, an
$18.3 million increase in distributed earnings from equity investments primarily related to Midwest Gaming, and a
$19.3 million increase from all other operating activities. Partially offsetting this increase was a $30.6 million increase
in cash paid for interest as a result of higher outstanding debt balances. We anticipate that cash flows from operations
over the next twelve months will be adequate to fund our business operations and capital expenditures.

Cash used in investing activities increased $1,605.3 million driven by a $970.7 million decrease in cash proceeds as a
result of the Big Fish Transaction occurring in 2018, a $410.1 million increase in cash used for the equity investment
in Midwest Gaming, a $219.7 million increase in cash used to complete the Presque Isle Transaction and the Turfway
Park Acquisition, and a $32.1 million increase in the use of funds for other intangible assets. Partially offsetting these
increases was an $18.2 million decrease in capital project expenditures and $9.1 million decrease in funds used in
other investing activities.

Cash provided by financing activities increased $1,394.1 million driven by a $842.0 million increase in net borrowings
under our long-term debt obligations primarily related to the issuance of our 2027 Senior Notes and acquisition of
businesses, a $436.4 million decrease in share repurchases primarily related to the Dutch Auction repurchase in 2018,
a $58.2 million decrease in Big Fish Games earnout and deferred payments from 2018 that did not recur in 2019, a
$54.7 million decrease related to the repayment of the Ocean Downs debt in 2018 that did not recur in 2019, and a
$2.8 million decrease from other financing activities.

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Credit Facilities and Indebtedness

The following table presents our debt outstanding, bond premium and debt issuance costs:

(in millions)

Term Loan B due 2024
2027 Senior Notes
2028 Senior Notes
Total Debt

Current maturities of long-term debt

Total debt, net of current maturities

Issuance cost and fees

Net debt

2017 Credit Agreement

As of December 31,

2019

2018

Change

392.0
600.0
500.0
1,492.0
4.0
1,488.0
(18.1)
1,469.9

396.0
—
500.0
896.0
4.0
892.0
(11.7)
880.3

(4.0)
600.0
—
596.0
—
596.0
(6.4)
589.6

On December 27, 2017, we entered into a senior secured credit agreement (the "2017 Credit Agreement") with a syndicate of
lenders. The 2017 Credit Agreement replaced our 2014 senior secured credit agreement (the "2014 Credit Agreement"). The
2017 Credit Agreement provides for a $700.0 million senior secured revolving credit facility due 2022 (the "Revolver") and a
$400.0 million senior secured term loan B due 2024 (the "Term Loan B").
Included in the maximum borrowing of $700.0
million under the Revolver is a letter of credit sub facility not to exceed $50.0 million and a swing line commitment up to a
maximum principal amount of $50.0 million. We had $694.4 million of available borrowing capacity, after consideration of
$5.6 million in outstanding letters of credit, under the Revolver as of December 31, 2019. The 2017 Credit Amendment is
secured by substantially all wholly-owned assets of the Company.

The Revolver bears interest at LIBOR plus a spread as determined by the Company's consolidated total net leverage ratio and
the Term Loan B bears interest at LIBOR plus 200 basis points.

The 2017 Credit Agreement contains certain customary affirmative and negative covenants, which include limitations on liens,
investments, indebtedness, dispositions, mergers and acquisitions, the making of restricted payments, changes in the nature of
business, changes in fiscal year, and transactions with affiliates. The 2017 Credit Agreement also contains financial covenants
providing for the maintenance of a maximum consolidated secured net leverage ratio and the maintenance of a minimum
consolidated interest coverage ratio. The Company was in compliance with all applicable covenants in the 2017 Credit
Agreement at December 31, 2019. At December 31, 2019, the financial ratios under our 2017 Credit Agreement were as
follows:

Interest coverage ratio

Consolidated total secured net leverage ratio

Actual
5.6 to 1.0

0.6 to 1.0

Requirement
> 2.5 to 1.0

< 4.0 to 1.0

The Term Loan B requires quarterly payments of 0.25% of the original $400.0 million balance, or $1.0 million per quarter. The
Term Loan B may be subject to additional mandatory prepayment from excess cash flow on an annual basis per the provisions
of the 2017 Credit Agreement. The Company is required to pay a commitment fee on the unused portion of the Revolver
determined by a pricing grid based on the consolidated total net leverage ratio of the Company. For the period ended December
31, 2019, the Company's commitment fee rate was 0.30%.

As a result of the Company's 2017 Credit Agreement, the Company capitalized $1.6 million of debt issuance costs associated
with the Revolver which will be amortized as interest expense over 5 years. The Company also capitalized $5.1 million of
deferred financing costs associated with the Term Loan B which will be amortized as interest expense over 7 years.

2027 Senior Notes

proceeds from the offering to repay our outstanding balance on the Revolver portion of our 2017 Credit Agreement.
In
connection with the offering, we capitalized $8.9 million of debt issuance costs which are being amortized as interest expense
over the term of the 2027 Senior Notes.

The 2027 Senior Notes were issued pursuant to an indenture, dated March 25, 2019 (the "2027 Indenture"), among the
Company, certain subsidiaries of the Company as guarantors (the "2027 Guarantors"), and U.S. Bank National Association, as
trustee. The Company may redeem some or all of the 2027 Senior Notes at any time prior to April 1, 2022, at a price equal to
100% of the principal amount of the 2027 Senior Notes redeemed plus an applicable make-whole premium. On or after such
date, the Company may redeem some or all of the 2027 Senior Notes at redemption prices set forth in the 2027 Indenture. In
addition, at any time prior to April 1, 2022, the Company may redeem up to 40% of the aggregate principal amount of the 2027
Senior Notes at a redemption price equal to 105.50% of the principal amount thereof with the net cash proceeds of one or more
equity offerings provided that certain conditions are met. The terms of the 2027 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 2027 Senior Notes, the Company and the 2027 Guarantors entered into a Registration
Rights Agreement to register any 2027 Senior Notes under the Securities Act for resale that are not freely tradable 366 days
from March 25, 2019.

2028 Senior Notes

On December 27, 2017, we completed an offering of $500.0 million in aggregate principal amount of 4.75% Senior Unsecured
Notes that mature on January 15, 2028 (the "2028 Senior 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 2028 Senior Notes were issued at par, with interest payable on January 15th and July
15th of each year, commencing on July 15, 2018. The Company used the net proceeds from the 2028 Senior Notes and the 2017
Credit Agreement to repay the remaining outstanding amount of our $600.0 million 5.375% Senior Unsecured Notes that were
scheduled to mature on December 15, 2021. In connection with the offering, we capitalized $7.7 million of debt issuance costs
which are being amortized as interest expense over the term of the 2028 Senior Notes.

The 2028 Senior Notes were issued pursuant to an indenture, dated December 27, 2017 (the "2028 Indenture"), among the
Company, certain subsidiaries of the Company as guarantors (the "2028 Guarantors"), and U.S. Bank National Association, as
trustee. The Company may redeem some or all of the 2028 Senior Notes at any time prior to January 15, 2023, at a price equal
to 100% of the principal amount of the 2028 Senior Notes redeemed plus an applicable make-whole premium. On or after such
date the Company may redeem some or all of the 2028 Senior Notes at redemption prices set forth in the 2028 Indenture. In
addition, at any time prior to January 15, 2021, the Company may redeem up to 40% of the aggregate principal amount of the
2028 Senior Notes at a redemption price equal to 104.75% of the principal amount thereof with the net cash proceeds of one or
more equity offerings provided that certain conditions are met. The terms of the 2028 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.

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In connection with the issuance of the 2028 Senior Notes, the Company and the 2028 Guarantors entered into a Registration
Rights Agreement to register any 2028 Senior Notes under the Securities Act for resale that are not freely tradable 366 days
from December 27, 2017.

Contractual Obligations

Our commitments to make future payments as of December 31, 2019, are estimated as follows:

(in millions)

Dividends
Term Loan B
Interest on Term Loan B (1)
2027 Senior Notes
2028 Senior Notes
Interest on 2027 Senior Notes
Interest on 2028 Senior Notes
Operating leases
Total

2020

2021-2022

2023-2024

Thereafter

Total

23.5
4.0

15.1
—
—
33.0
23.8
5.6
105.0

— $
8.0

29.6
—
—
66.0
47.5
9.1
160.2

— $

380.0

28.9
—
—
66.0
47.5
6.7
529.1

— $
—

—
600.0
500.0
82.5
83.1
8.3
1,273.9

23.5
392.0

73.6
600.0
500.0
247.5
201.9
29.7
2,068.2

(1)

Interest includes the estimated contractual payments under our 2017 Credit Facility assuming no change in the
weighted average borrowing rate of 3.80%, which was the rate in place as of December 31, 2019.

As of December 31, 2019, we had approximately $1.8 million of unrecognized tax benefits.

Critical Accounting Policies and Estimates

Our significant accounting policies and recently adopted accounting policies are more fully described in Note 2 to the notes to
consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on
Form 10-K.

Our consolidated financial statements have been prepared in conformity with GAAP, which requires management to make
estimates, judgments and assumptions that we believe are reasonable based on our historical experience, contract terms,
observance of known trends in our Company and the industry as a whole and information available from other outside sources.
Our estimates affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results
may differ from those initial estimates.

Our critical accounting estimates relate to goodwill and certain indefinite-lived intangible assets.

Goodwill and certain indefinite-lived intangible assets

Acquisition of certain identifiable indefinite-lived intangible assets

In conjunction with the acquisition of a business, the Company records identifiable indefinite-lived intangible assets acquired at
their respective fair values as of the date of acquisition. Our indefinite-lived intangible assets primarily consist of gaming rights
and trademarks. Gaming rights and trademarks are considered indefinite-lived intangible assets that do not require amortization
based on our future expectations to operate our gaming facilities and use the trademarks indefinitely, and our historical
experience in renewing these intangible assets at minimal cost with various state gaming commissions.
We use various valuation methods to determine initial fair value of our indefinite-lived intangible assets, including the
Greenfield method and relief-from-royalty method of the income approach, all of which use significant unobservable inputs, or
Level 3 inputs, as defined by the fair value hierarchy. The use of these valuation methods requires us to make significant
estimates and assumptions about future revenue and operating expenses, expected start-up costs, royalty rate and the discount
rate. The fair values of gaming rights are generally determined using the Greenfield method, which is an income approach
methodology that calculates the present value of the overall business enterprise based on a projected cash flow stream. This
method assumes that the gaming rights provides the opportunity to develop a casino in a specified region, and that the present
value of the projected cash flows are a result of the realization of advantages contained in these rights. Under this methodology,
the acquirer is expected to absorb all start-up costs, as well as incur all expenses pertaining to the acquisition and/or the creation
of all tangible and intangible assets. The estimated future revenue and operating expenses, start-up costs of the acquired
business, and the discount rate are the primary assumptions and estimates used in these valuations. The fair values of
trademarks are generally determined using the relief-from-royalty method of the income approach, which estimates the fair
value of the intangible asset by discounting the fair value of the hypothetical royalty payments a market participant would be
willing to pay to enjoy the benefits of the trademarks. The estimated future revenue, royalty rate, and the discount rate are the
primary assumptions and estimates used in these valuations. The discount rates used to discount expected future cash flows to
present value are generally derived from the weighted average cost of capital analysis and adjusted for the size and/or risk of the
asset.

Assessments of goodwill and indefinite-lived intangible assets

Goodwill and indefinite-lived intangible assets are required to be tested annually or more frequently if events or changes in
circumstances indicate that it is more likely than not that an asset is impaired. An entity may first assess qualitative factors to
determine whether it is necessary to complete the two-step impairment test using a more likely than not criteria. If an entity
believes it is more likely than not that the fair value of a reporting unit is greater than its carrying value, including goodwill, the
quantitative impairment test can be bypassed. Alternatively, an entity has an unconditional option to bypass the qualitative
assessment and proceed directly to performing the two-step quantitative impairment
test. Qualitative factors include
macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, among others.
These factors require significant judgments and estimates, and application of alternative assumptions could produce materially
different results. Evaluations of possible impairment utilizing the two-step approach require us to estimate, among other
factors, forecasts of future operating results, revenue growth, EBITDA margin, tax rates, capital expenditures, depreciation,
working capital, weighted average cost of capital, long-term growth rates, risk premiums, terminal values, and fair values of our
reporting units and assets. The goodwill impairment test is subject to uncertainties arising from such events as changes in
competitive conditions, the current general economic environment, material changes in growth rate assumptions that could
positively or negatively impact anticipated future operating conditions and cash flows, changes in the discount rate, and the
impact of strategic decisions. If any of these factors were to materially change, such change may require a reevaluation of our
goodwill. Changes in estimates or the application of alternative assumptions could produce significantly different results.

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ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks arising from adverse changes in:

•

general economic trends; and

interest rate and credit risk.

General economic trends

Our business is sensitive to consumer confidence and reductions in consumers' discretionary spending, which may result from
challenging economic conditions, unemployment levels and other changes in the economy. Demand for entertainment and
leisure activities is sensitive to consumers’ disposable incomes, which can be adversely affected by economic conditions and
unemployment levels. This could result in fewer patrons visiting our racetracks, gaming and wagering facilities, and online
wagering sites and/or may impact our customers’ ability to wager with the same frequency and to maintain wagering levels.

Interest rate and credit risk

Our primary exposure to market risk relates to changes in interest rates. At December 31, 2019, we had $392.0 million
outstanding under our 2017 Credit Agreement, which bears interest at LIBOR based variable rates. We are exposed to market
risk on variable rate debt due to potential adverse changes in these rates. Assuming the outstanding balance of the debt facility
remains constant, a one-percentage point increase in the LIBOR rate would reduce net income and cash flows from operating
activities by $2.8 million. As was announced in July 2017, LIBOR is anticipated to be phased out by the end of 2021. We are
unable to predict the use of alternative reference rates and corresponding interest rate risk at this time.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the years ended December 31,

(in millions, except per common share data)
Net revenue:

Churchill Downs
Online Wagering
Gaming
All Other

Total net revenue

Operating expense:
Churchill Downs
Online Wagering
Gaming
All Other
Selling, general and administrative expense
Impairment of tangible and other intangible assets
Transaction expense, net

Total operating expense

Operating income
Other income (expense):
Interest expense, net
Loss on extinguishment of debt
Equity in income of unconsolidated investments
Gain on Ocean Downs/Saratoga transaction
Miscellaneous, net

Total other (expense) income

Income from continuing operations before provision for income taxes
Income tax (provision) benefit

Income from continuing operations, net of tax

(Loss) income from discontinued operations, net of tax

Net income

Net loss attributable to noncontrolling interest

Net income attributable to Churchill Downs Incorporated

Net income (loss) per common share data - basic:

Continuing operations
Discontinued operations
Net income per common share - basic

Net income (loss) per common share data - diluted:

Continuing operations
Discontinued operations
Net income per common share - diluted

Weighted average shares outstanding:

Basic
Diluted

Other comprehensive income (loss):

Foreign currency translation, net of tax
Change in pension benefits, net of tax

Other comprehensive income (loss)
Comprehensive income attributable to Churchill Downs Incorporated

2019

2018

2017

$
$
$

274.2
290.5
692.4
72.6
1,329.7

163.8
205.8
528.1
89.0
122.0
—
5.3
1,114.0
215.7

(70.9)
—
50.6
—
1.0
(19.3)
196.4
(56.8)
139.6
(2.4)
137.2
(0.3)
137.5

3.49
$
(0.06) $
$
3.43

3.44
$
(0.06) $
$
3.38

40.1
40.6

— $
—
—
137.5

195.8
290.2
449.5
73.5
1,009.0

116.3
196.1
331.0
75.9
90.6
—
10.3
820.2
188.8

(40.1)
—
29.6
54.9
0.7
45.1
233.9
(51.3)
182.6
170.2
352.8
—
352.8

4.42
4.12
8.54

4.39
4.09
8.48

41.3
41.6

0.6
(0.2)
0.4
353.2

$
$
$

161.3
255.6
389.3
76.4
882.6

89.5
170.2
293.8
75.9
83.5
21.7
2.3
736.9
145.7

(49.3)
(20.7)
25.5
—
1.3
(43.2)
102.5
19.9
122.4
18.1
140.5
—
140.5

2.59
0.38
2.97

2.55
0.37
2.92

47.2
48.0

(0.1)
—
(0.1)
140.4

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

CHURCHILL DOWNS INCORPORATED
CONSOLIDATED BALANCE SHEETS
December 31,

(in millions)

Current assets:

ASSETS

Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance for doubtful accounts of $4.4 in 2019 and $4.0 in
2018
Income taxes receivable
Other current assets

Total current assets

Property and equipment, net
Investment in and advances to unconsolidated affiliates
Goodwill
Other intangible assets, net
Other assets

Total assets

Current liabilities:

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable
Accrued expenses and other current liabilities

Current deferred revenue
Current maturities of long-term debt

Dividends payable

Total current liabilities

Long-term debt (net of current maturities and loan origination fees of $4.0 in 2019 and $4.7
in 2018)
Notes payable (net of debt issuance costs of $14.1 in 2019 and $7.0 in 2018)

Non-current deferred revenue
Deferred income taxes

Other liabilities

Total liabilities

Commitments and contingencies
Shareholders' equity:

Preferred stock, no par value; 0.3 shares authorized; no shares issued or outstanding
Common stock, no par value; 150.0 shares authorized; 39.7 shares issued and outstanding
in 2019 and 40.4 in 2018
Retained earnings
Accumulated other comprehensive loss

Total Churchill Downs Incorporated shareholders' equity

2019

2018

96.2
46.3

37.3

14.5
26.9
221.2
937.3
634.5
367.1
369.8
21.1

133.3
40.0

28.8

17.0
22.4
241.5
757.5
108.1
338.0
264.0
16.1

2,551.0

1,725.2

57.8
173.4

42.5
4.0

23.5
301.2

384.0

1,085.9

16.7
212.8

39.4
2,040.0

—

509.2
(0.9)
508.3

47.0
135.2

47.9
4.0

22.5
256.6

387.3

493.0

21.1
78.2

15.7
1,251.9

—

474.2
(0.9)
473.3

—
473.3
1,725.2

Noncontrolling interest

Total shareholders' equity

Total liabilities and shareholders' equity

2.7
511.0
2,551.0

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

CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
for the years ended December 31, 2019, 2018 and 2017

Accumulated
Other
Comprehensive
Loss

Retained
Earnings

Noncontrolling
Interest

Total
Shareholders'
Equity

Common Stock

(in millions, except per common share data)
Balance, December 31, 2016

Amount

49.5 $ 116.5 $

Net income

Issuance of common stock
Repurchase of common stock
Taxes paid related to net share
settlement of stock awards
Issuance of restricted stock awards,
net of forfeitures
Stock-based compensation
Cash dividends $0.507 per share)
Foreign currency translation
adjustment, net of $(0.1) tax

0.1
(3.4)

(0.2)

0.2

2.1
(138.4)

—
27.1

Balance, December 31, 2017

46.2

7.3

0.3

(6.1)

(0.1)

0.1

1.5

(29.9)

—

21.1

Net income

Issuance of common stock
Repurchase of common stock

Taxes paid related to net share
settlement of stock awards
Issuance of restricted stock awards,
net of forfeitures
Stock-based compensation

Adoption of ASC 606
Cash dividends ($0.543 per share)

Foreign currency translation, net of
$(0.1) tax
Change in pension benefits, net of
$(0.1) tax

Balance, December 31, 2018

40.4

—

Net income

Contributions from noncontrolling
interest
Issuance of common stock
Repurchase of common stock
Taxes paid related to net share
settlement of stock awards
Issuance of restricted stock awards,
net of forfeitures
Stock-based compensation

Adoption of ASC 842
Cash dividends ($0.581 per share)

0.2
(0.9)

(0.1)

0.1

1.9
(25.7)

—
23.8

(1.2) $

— $

(0.1)
(1.3)

—

0.6

(0.2)

(0.9)

—

(0.3)

3.0

569.7 $
140.5

(42.5)

(10.0)

(23.4)

634.3

352.8

(504.0)

(15.6)

29.7

(23.0)

474.2

137.5

(67.3)

(11.5)

(0.3)
(23.4)

Balance, December 31, 2019

39.7 $

— $

509.2 $

(0.9) $

2.7 $

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

685.0
140.5
2.1
(180.9)

(10.0)

—
27.1
(23.4)

(0.1)
640.3

352.8

1.5

(533.9)

(15.6)

—

21.1
29.7

(23.0)

0.6

(0.2)

473.3

137.2

3.0
1.9
(93.0)

(11.5)

—
23.8
(0.3)
(23.4)

511.0

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CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31,

(in millions)
Cash flows from operating activities:

Net income

2019

2018

2017

137.2

352.8

140.5

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
Equity in income of unconsolidated affiliates
Distributions from unconsolidated affiliates
Stock-based compensation
Deferred income taxes
Amortization of operating lease assets
Loss on impairment of assets
Loss on extinguishment of debt
Gain on Ocean Downs/Saratoga transaction
Gain on sale of Big Fish Games
Game software development amortization
Other

Changes in operating assets and liabilities, net of businesses acquired and dispositions:

Game software development
Income taxes
Deferred revenue
Other assets and liabilities

Net cash provided by operating activities

Cash flows from investing activities:
Capital maintenance expenditures
Capital project expenditures
Acquisition of businesses, net of cash acquired
Investments in and advances to unconsolidated affiliates
Acquisition of other intangible assets
Proceeds from sale of Big Fish Games
Receivable from escrow
Other

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from borrowings under long-term debt obligations
Repayments of borrowings under long-term debt obligations
Payment of dividends
Repurchase of common stock
Taxes paid related to net share settlement of stock awards
Repayment of Ocean Downs debt
Big Fish Games earnout and deferred payments
Call premium on 2021 Senior Notes
Debt issuance costs
Other

Net cash provided by (used in) financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash
Effect of exchange rate changes on cash
Cash, cash equivalents and restricted cash, beginning of year
Cash, cash equivalents and restricted cash, end of year

96.4
(50.6)
38.1
23.8
31.5
4.6
—
—
—
—
—
2.8

—
2.5
(9.3)
12.6
289.6

(48.3)
(82.9)
(206.6)
(410.1)
(32.1)
—
—
(1.2)
(781.2)

1,236.3
(640.3)
(22.2)
(95.0)
(11.5)
—
—
—
(8.9)
2.4
460.8
(30.8)
—
173.3
142.5

63.6
(29.6)
19.8
21.1
36.5
—
—
—
(54.9)
(219.5)
0.4
(1.6)

(0.3)
13.8
(10.3)
6.0
197.8

(29.6)
(119.8)
13.1
—
—
970.7
—
(10.3)
824.1

135.0
(381.0)
(23.7)
(531.4)
(15.6)
(54.7)
(58.2)
—
(0.8)
(2.9)
(933.3)
88.6
(0.8)
85.5
173.3

97.1
(25.5)
18.0
27.1
(65.0)
—
21.7
20.7
—
—
17.5
(0.6)

(22.1)
(27.4)
17.2
(4.1)
215.1

(33.3)
(83.6)
(24.2)
(24.0)
—
—
13.6
(2.1)
(153.6)

2,050.4
(1,835.8)
(21.5)
(180.9)
(10.0)
—
(31.8)
(16.1)
(14.4)
0.6
(59.5)
2.0
0.5
83.0
85.5

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

CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the years ended December 31,

(in millions)
Supplemental disclosures of cash flow information:
Cash paid during the period for:

Interest
Income taxes

Schedule of non-cash investing and financing activities:

Dividends payable
Deferred tax liability assumed from equity investment
Property and equipment additions included in accounts payable and accrued
expense and other current liabilities
Repurchase of common stock in payment of income taxes on stock-based
compensation included in accrued expense and other current liabilities
Repurchase of common stock included in accrued expense and other current
liabilities

Acquisition of Ocean Downs, net of cash acquired

2019

2018

2017

61.7
23.5

23.5
103.2

12.4

3.9

0.5

—

31.1
48.6

22.5
—

6.6

2.5

115.2

47.5
75.9

23.7
—

9.6

1.3

—

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

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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

1. DESCRIPTION OF BUSINESS

Segments

During the first quarter of 2019, we realigned our operating segments to reflect the internal management reporting used by our
chief operating decision maker to evaluate results of operations and to assess performance and allocate resources. Our internal
management reporting changed primarily due to the continued growth in our Churchill Downs Racetrack and Derby City
Gaming business and our casino and associated racing businesses, which resulted in our chief operating decision maker's
decision to realign our operating segments primarily based on the regulatory licenses governing each business. Since each of
these individual businesses operates under single or interdependent licenses, each of these businesses represents an operating
segment. As our TwinSpires business and online sports betting and iGaming businesses are managed together, these businesses
represent an operating segment. For financial reporting purposes, we aggregate our operating segments that are similar into
three reportable segments as follows:

•

Churchill Downs
The Churchill Downs segment includes live and historical pari-mutuel racing related revenue and expenses at
Churchill Downs Racetrack and Derby City Gaming.

Churchill Downs Racetrack is the home of The Kentucky Derby and conducts live racing during the year. Derby City
Gaming is an HRM facility that operates under the Churchill Downs pari-mutuel racing license at its auxiliary training
facility in Louisville, Kentucky.

Churchill Downs Racetrack and Derby City Gaming earn commissions primarily from pari-mutuel wagering on live
races at Churchill Downs and on historical races at Derby City Gaming; simulcast fees earned from other wagering
sites; admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services (collectively
"racing event-related services"), as well as food and beverage services.

•

Online Wagering

The Online Wagering segment includes the revenue and expenses for the TwinSpires business ("TwinSpires") and the
online sports betting and iGaming business.

TwinSpires operates our online horse racing wagering business on TwinSpires.com, BetAmerica.com and other white-
label platforms; facilitates high dollar wagering by international customers ("Velocity"); and provides the Bloodstock
Research Information Services ("BRIS") platform for horse racing statistical data.

•

Gaming

The Gaming segment includes revenue and expenses for the casino properties and associated racetrack or jai alai
facilities which support the casino license as applicable. The Gaming segment has approximately 11,000 slot
machines and video lottery terminals ("VLTs") and 200 table games located in eight states.

The Gaming segment revenue and expenses includes the following properties:

◦
◦

Calder Casino and Racing ("Calder")
Fair Grounds Slots, Fair Grounds Race Course, and Video Services, LLC ("VSI") (collectively, "Fair
Grounds and VSI")

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

◦
◦
◦
◦
◦
◦

Harlow’s Casino Resort and Spa ("Harlow's")
Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") management agreement
Ocean Downs Casino and Racetrack ("Ocean Downs")
Oxford Casino and Hotel ("Oxford")
Presque Isle Downs and Casino ("Presque Isle")
Riverwalk Casino Hotel ("Riverwalk")

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

◦

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

We have aggregated the following businesses as well as certain corporate operations, and other immaterial joint ventures in "All
Other" to reconcile to consolidated results:

•
•
•
•
•

Arlington International Racecourse ("Arlington")
United Tote
Oak Grove Racing and Gaming ("Oak Grove")
Turfway Park
Corporate

Effective January 1, 2019, the Company does not allocate corporate and other related expenses to the reportable segments in the
accompanying consolidated statements of comprehensive income. The prior year results in the accompanying consolidated
statements of comprehensive income were reclassified to conform to this presentation.

Acquisitions of Presque Isle and Lady Luck Nemacolin

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For additional information on the Presque Isle Transaction and the Lady Luck Nemacolin Transaction, refer to Note 3,
Acquisitions.

Acquisition of Certain Ownership Interests of Rivers Des Plaines

On March 5, 2019, the Company completed the acquisition of certain ownership interests of Midwest Gaming, the parent
company of Rivers Des Plaines to acquire approximately 42% of Midwest Gaming from affiliates and co-investors of Clairvest
Group Inc. ("Clairvest") and members of High Plaines Gaming, LLC ("High Plaines"), an affiliate of Rush Street Gaming, LLC
and Casino Investors, LLC ("Casino Investors") for cash consideration of approximately $406.6 million and $3.5 million of
certain transaction costs and working capital adjustments (the "Sale Transaction"). Following the closing of the Sale
Transaction, the parties completed a recapitalization transaction on March 6, 2019 (the "Recapitalization"), pursuant to which
Midwest Gaming used approximately $300.0 million in proceeds from amended and extended credit facilities to redeem, on a
pro rata basis, additional Midwest Gaming units held by High Plaines and Casino Investors. As a result of the Recapitalization,
the Company's ownership of Midwest Gaming increased to 61.3%. High Plaines retained ownership of 36.0% of Midwest
Gaming and Casino Investors retained ownership of 2.7% of Midwest Gaming.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

For additional information on the Sale Transaction, refer to Note 14, Investments in and Advances to Unconsolidated Affiliates.

Turfway Park Acquisition

The Company completed the acquisition of Turfway Park from Jack Entertainment LLC ("JACK") and Hard Rock International
(“Hard Rock”) on October 9, 2019 for total consideration of $46.0 million in cash ("Turfway Park Acquisition"). Turfway Park
is located on 197 acres in Florence, Kentucky. The Company has announced plans and has begun to invest up to $150.0 million
(including the Turfway Park Acquisition total consideration of $46.0 million) in a state-of-the-art
live and historical
thoroughbred racing facility at Turfway Park.

Of the $46.0 million total consideration, $36.0 million, less $0.9 million of working capital and purchase price adjustments, was
accounted for as a business combination. The remaining $10.0 million was paid to Hard Rock for the assignment of the
purchase and sale agreement rights and was accounted for separately from the business combination as an intangible asset and
was amortized through expense in the fourth quarter of 2019. Refer to Note 3, Acquisitions, for additional information on the
Turfway Park Acquisition.

Stock Split

On January 25, 2019, the Company distributed the additional shares resulting from a previously announced three-for-one split
(the "Stock Split") of the Company's common stock for shareholders of record as of January 11, 2019. Our common stock
began trading at the split-adjusted price on January 28, 2019. All share and per-share amounts in the Company’s consolidated
financial statements and related notes have been retroactively adjusted for prior periods to reflect the effects of the Stock Split.

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.

We consolidate all subsidiaries in which we have a controlling financial interest and variable interest entities (“VIEs”) for
which we or one of our consolidated subsidiaries is the primary beneficiary. We consolidate a VIE when we have both the
power to direct the activities that most significantly impact the results of the VIE and the right to receive benefits or the
obligation to absorb losses of the entity that could be potentially significant to the VIE. WKY Development, LLC, a joint
venture owned 95% by the Company, owns Oak Grove, and is consolidated in our accompanying consolidated financial
statements. As of December 31, 2019, on a consolidated basis Oak Grove had total assets of $62.1 million, primarily related to
property and equipment, net, and total liabilities of $9.3 million, primarily related to accrued expenses and other current
liabilities.

Use of Estimates

Our financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"),
which requires management to make estimates, judgments and assumptions that we believe are reasonable based on our
historical experience, contract terms, observance of known trends in our Company and the industry as a whole and information
available from other outside sources. Our estimates affect the reported amounts of assets and liabilities and related disclosures
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results may differ from those initial estimates.

Goodwill and Indefinite-Lived Intangible Assets

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

forecasts of future operating results, revenue growth, EBITDA margin, tax rates, capital expenditures, depreciation, working
capital, weighted average cost of capital, long-term growth rates, risk premiums, terminal values and fair market values of our
reporting units and assets. Changes in estimates or the application of alternative assumptions could produce significantly
different results.

We perform our annual review for impairment of goodwill and indefinite-lived intangible assets on April 1 of each fiscal year,
or more frequently if events or changes in circumstances indicate that it is more likely than not the relevant asset is impaired.
Adverse industry or economic trends, lower projections of profitability, or a sustained decline in our market capitalization,
among other items, may be indications of potential impairment issues, which are triggering events requiring the testing of an
asset’s carrying value for recoverability. Goodwill is allocated and evaluated for impairment at the reporting unit level, which
is defined as an operating segment or one level below an operating segment, referred to as a component. We are required to
aggregate the components of an operating segment into one reporting unit if they have similar economic characteristics.

Our gaming rights and trademarks are considered indefinite-lived intangible assets that do not require amortization based on our
future expectations to operate our gaming facilities and use the trademarks indefinitely and our historical experience in
renewing these intangible assets at minimal cost with various state gaming commissions. The indefinite lived-intangible assets
carrying value are tested annually, or more frequently, if indicators of impairment exist, by comparing the fair value of the
recorded assets to the associated carrying amount. If the carrying amount of the gaming rights and trademark intangible assets
exceed fair value, an impairment loss is recognized.

Property and Equipment

We review the carrying value of our property and equipment to be held and used in our operations whenever events or changes
in circumstances indicate that the carrying value of an asset may not be recoverable from estimated future undiscounted cash
flows expected to result from its use and eventual disposition. Adverse industry or economic trends, lower projections of
profitability, or a significant adverse change in legal factors or in the business climate, among other items, may be indications of
potential impairment issues.
If the
If the undiscounted cash flows exceed the carrying value, no impairment is indicated.
undiscounted cash flows do not exceed the carrying value, an impairment is recorded based on the fair value of the asset.

Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets as follows: 10 to 40
years for grandstands and buildings, 2 to 10 years for equipment, 2 to 10 years for furniture and fixtures and 10 to 20 years for
tracks and other improvements.

Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with
Customers ("ASC 606") using the modified retrospective method. The adoption of ASC 606 had no impact on cash provided
by or used in operating, financing, or investing activities on our accompanying consolidated statements of cash flows. Due to
the adoption of ASC 606, we made certain modifications to the classification of net revenue and operating expenses in the
Online Wagering segment primarily due to the fact that under ASC 606, we are the principal in all import revenue contracts.
Under ASC 606, in circumstances where we make advance sales and advance billings to customers, we recognize a receivable
and deferred revenue when we have an unconditional right to receive payment. Previously, we recognized a receivable and
deferred revenue at the time of the advance sale and billing if it was probable we would collect the receivable and recognize
revenue.

We generate revenue from pari-mutuel wagering transactions with customers related to live races, simulcast races, and
historical races as well as simulcast host fees earned from other wagering sites. Our racetracks that host live races also generate
revenue through sponsorships, admissions (including luxury suites), personal seat
television rights,
concessions, programs and parking. Concessions, programs, and parking revenue is recognized once the good or service is
delivered.

licenses ("PSLs"),

Our live racetracks' revenue and income are influenced by our racing calendar. Similarly, Online Wagering horse racing
revenue and income is influenced by racing calendars. Therefore, revenue and operating results for any interim quarter are not
generally indicative of the revenue and operating results for the year and may not be comparable with results for the
corresponding period of the previous year. We historically have had fewer live racing days during the first quarter of each year,
and the majority of our live racing revenue occurs during the second quarter with the running of the Kentucky Oaks and
Kentucky Derby.

For live races we present at our racetracks, we recognize revenue on wagers we accept from customers at our racetrack ("on-
track revenue") and revenue we earn from exporting our live racing signals to other race tracks, off-track betting facilities

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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

("OTBs"), and advance deposit wagering providers ("export revenue"). For simulcast races we display at our racetracks, OTBs,
and Online Wagering platforms, we recognize revenue we earn from providing a wagering service to our customers on these
imported live races ("import revenue"). Online Wagering import revenue is generated through advance deposit wagering which
consists of patrons wagering through an advance deposit account. Each wagering contract for on-track revenue, and import
revenue contains a single performance obligation and our export revenue contracts contain a series of distinct services that form
a single performance obligation. The transaction price for on-track revenue and import revenue is fixed based on the
established commission rate we are entitled to retain. The transaction price for export revenue is variable based on the
simulcast host fee we charge our customers for exporting our signal. We may provide cash incentives in conjunction with
wagering transactions we accept from Online Wagering customers. These cash incentives represent consideration payable to a
customer and therefore are treated as a reduction of the transaction price for the wagering transaction. Our export revenue
contracts generally have a duration of one year or less. These arrangements are licenses of intellectual property containing a
usage based royalty. As a result, we have elected to use the practical expedient to omit disclosure related to remaining
performance obligations for our export revenue contracts. We recognize on-track revenue, export revenue, and import revenue
once the live race event is made official by the relevant racing regulatory body.

We recognize revenue we earn from providing a wagering service to our customers on historical races at our HRM facilities.
The transaction price for HRM revenue is based on the established commission rate we are entitled to retain for each wager on
the HRM. We recognize HRM revenue once the historical race has been completed on the historical racing machine, net of the
liability to the pool.

We evaluate our on-track revenue, export revenue, import revenue, and HRM revenue contracts in order to determine whether
we are acting as the principal or as the agent when providing services, which we consider in determining if revenue should be
reported gross or net. An entity is a principal if it controls the specified service before that service is transferred to a customer.

The revenue we recognize for on-track revenue, import revenue, and HRM revenue is the commission we are entitled to retain
for providing a wagering service to our customers. For these arrangements, we are the principal as we control the wagering
service; therefore, any charges, including any applicable simulcast fees, we incur for delivering the wagering service are
presented as operating expenses.

For export revenue, our customer is the third-party wagering site such as a racetrack, OTB, or advance deposit wagering
provider. Therefore, the revenue we recognize for export revenue is the simulcast host fee we earn for exporting our racing
signal to the third-party wagering site.

Our admission contracts are either for a single live racing event day or multiple days. Our PSLs, sponsorships, and television
rights contracts generally relate to multiple live racing event days. Multiple day admission, PSLs, sponsorships, and television
rights contracts contain a distinct series of services that form single performance obligations. Sponsorships contracts generally
include performance obligations related to admissions and advertising rights at our racetracks. Television rights contracts
contain a performance obligation related to the rights to distribute certain live racing events on media platforms. The
transaction prices for our admissions, PSLs, sponsorships, and television rights contracts are fixed. We allocate the transaction
price to our sponsorship contract performance obligations based on the estimated relative standalone selling price of each
distinct service.

The revenue we recognize for admissions to a live racing event day is recognized once the related event is complete. For
admissions, PSLs, sponsorships, and television rights contracts that relate to multiple live racing event days, we recognize
revenue over time using an output method of each completed live racing event day as our measure of progress. Each completed
live racing event day corresponds with the transfer of the relevant service to a customer and therefore is considered a faithful
depiction of our efforts to satisfy the promises in these contracts. This output method results in measuring the value transferred
to date to the customer relative to the remaining services promised under the contracts. Certain premium live racing event days
such as the Kentucky Derby and Oaks result in a higher value of revenue allocated relative to other live racing event days due
to, among other things, the quality of thoroughbreds racing, higher levels of on-track attendance, national broadcast audience,
local and national media coverage, and overall entertainment value of the event. While these performance obligations are
satisfied over time, the timing of when this revenue is recognized is directly associated with the occurrence of our live racing
events, which is when the majority of our revenues recognized at a point in time are also recognized.

Timing of revenue recognition may differ from the timing of invoicing to customers for our long-term contracts for racing
event-related services. We generally invoice customers prior to delivery of services for our admissions, PSLs, sponsorships,
and television rights contracts. We recognize a receivable and a contract liability at the time we have an unconditional right to
receive payment. When cash is received in advance of delivering services under our contracts, we defer revenue and recognize
it in accordance with our policies for that type of contract. In situations where the timing of revenue recognition differs from

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

the timing of invoicing, we have determined our contracts do not include a significant financing component. The primary
purpose of our invoicing terms is to allow our customers to secure the right to the specific services provided under our
contracts, not to receive financing from our customers.

Gaming revenue primarily consists of gaming wager transactions. Other operating revenue, such as food and beverage or hotel
revenue, is recognized once delivery of the product or service has occurred.

The transaction price for gaming wager transactions is the difference between gaming wins and losses. Gaming wager revenue
is recognized when the wager settles.

The majority of our HRM facilities and casinos offer loyalty programs that enable customers to earn loyalty points based on
their play. Gaming and HRM wager transactions involve two performance obligations for those customers earning loyalty
points under the Company’s loyalty programs and a single performance obligation for customers who do not participate in the
program. Loyalty points are primarily redeemable for free wagering activities and food and beverage. For purposes of
allocating the transaction price in a gaming or HRM wagering transaction between the wagering performance obligation and the
obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability
based on the stand-alone selling price of the points earned, which is determined by the value of a loyalty point that can be
redeemed for wagering activities or food and beverage. For gaming wagering transactions, an amount is allocated to the
gaming wager performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no
set established price exists for such wagers. For HRM wagering transactions, the amount allocated to the HRM wager
performance obligation is the commission rate we are entitled to retain. The loyalty point contract liability amount is deferred
and recognized as revenue when the customer redeems the points for a wagering transaction or food and beverage and such
goods or services are delivered to the customer.

Income Taxes

We use estimates and judgments for financial reporting to determine our current tax liability and deferred taxes. In accordance
with the liability method of accounting for income taxes, we recognize the amount of taxes payable or refundable for the current
year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the
consolidated financial statements or tax returns.

Adjustments to deferred taxes are determined based upon the changes in differences between the book basis and tax basis of our
assets and liabilities and measured using enacted tax rates we estimate will be applicable when these differences are expected to
reverse. Changes in current tax laws, enacted tax rates or the estimated level of taxable income or non-deductible expense
could change the valuation of deferred tax assets and liabilities and affect the overall effective tax rate and tax provision.

When tax returns are filed, it is highly certain that some positions taken will be sustained upon examination by the taxing
authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that will
be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based
on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other
positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax
benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of
the benefits associated with the tax positions taken that exceeds the amount measured as described above is reflected as a
liability for unrecognized tax benefits in the accompanying consolidated balance sheets, along with any associated interest and
penalties that would be payable to the taxing authorities upon examination.

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Cash and Cash Equivalents

We consider investments with original maturities of three months or less that are readily convertible to cash to be cash
equivalents. We have, from time to time, cash in the bank in excess of federally insured limits. Under our cash management
system, checks issued but not yet presented to banks that would result in negative bank balances when presented are classified
as a current liability in the accompanying consolidated balance sheets.

Restricted Cash and Account Wagering Deposit Liabilities

Amounts included in restricted cash represent amounts due to horsemen for purses, stakes and awards that are paid in
accordance with the terms of our contractual agreements or statutory requirements. Restricted cash also includes deposits
collected from our Online Wagering customers.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Allowance for Doubtful Accounts Receivable

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make
required payments. The allowance is maintained at a level considered appropriate based on historical experience and other
factors that affect our expectation of future collectability. Uncollectible accounts receivable are written off against the
allowance for doubtful accounts receivable when management determines that the probability of payment is remote and
collection efforts have ceased.

Internal Use Software

Internal use software costs for Online Wagering software is capitalized in property and equipment, net in the accompanying
consolidated balance sheets, in accordance with accounting guidance governing computer software developed or obtained for
internal use. Once the software is placed in operation, we amortize the capitalized software over its estimated economic useful
life, which is generally three years. We capitalized internal use software of approximately $9.8 million in 2019, $9.7 million in
2018, and $7.2 million in 2017. We incurred amortization expense of approximately $8.8 million in 2019, $7.3 million in 2018,
and $6.3 million in 2017, for projects which had been placed in service.

Fair Value of Assets and Liabilities

We adhere to a hierarchy for ranking the quality and reliability of the information used to determine fair values. Assets and
liabilities that are carried at fair value are classified and disclosed in one of the following three categories: Level 1: Unadjusted
quoted market prices in active markets for identical assets or liabilities; Level 2: Unadjusted quoted prices in active markets for
similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
inputs other than quoted prices that are observable for the asset or liability; and Level 3: Unobservable inputs for the asset or
liability. We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are
classified based on the lowest level of input that is significant to the fair value measurement.

Investments in and Advances to Unconsolidated Affiliates

We have investments in unconsolidated affiliates accounted for under the equity method. Under the equity method, carrying
value is adjusted for our share of the investees' income and losses, amortization of certain basis differences as well as capital
contributions to and distributions from these companies. We use the cumulative earnings approach to present distributions
received from equity method investees. Distributions in excess of equity method income are recognized as a return of
investment and recorded as investing cash inflows in the accompanying consolidated statements of cash flows. We classify
income and losses as well as gains and impairments related to our investments in unconsolidated affiliates as a component of
other income (expense) in the accompanying consolidated statements of comprehensive income.

We evaluate our investments in unconsolidated affiliates for impairment whenever events or changes in circumstances indicate
that the carrying value of the investment may have experienced an "other-than-temporary" decline in value. If such conditions
exist, we compare the estimated fair value of the investment to its carrying value to determine if an impairment is indicated and
determine whether the impairment is "other-than-temporary" based on an assessment of all relevant factors, including
consideration of our intent and ability to retain our investment until the recovery of the unrealized loss. We estimate fair value
using a discounted cash flow analysis based on estimated future results of the investee.

Debt Issuance Costs and Loan Origination Fees

Debt issuance costs and loan origination fees associated with our term debt, revolver, and notes payable are amortized as
interest expense over the term of each respective financial instrument. Debt issuance costs and loan origination fees associated
with our term debt and notes payable are presented as a direct deduction from the carrying amount of the related liability. Debt
issuance costs and loan origination fees associated with our revolver are presented as an asset.

Casino and Pari-mutuel Taxes

We recognize casino and pari-mutuel tax expense based on the statutory requirements of the federal, state, and local
jurisdictions in which we conduct business. All of our casino taxes and the majority of our pari-mutuel taxes are gross receipts
taxes levied on the gaming entity. We recognize these taxes as Churchill Downs, Online Wagering, Gaming, and All Other
operating expenses in our consolidated statements of comprehensive income. In certain jurisdictions governing our pari-mutuel
contracts with customers, there are specific pari-mutuel taxes that are assessed on winning wagers from our customers, which
we collect and remit to the government. These taxes are presented on a net basis.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Purse Expense

We recognize purse expense based on the statutorily or contractually determined amount that is required to be paid out in the
form of purses to the qualifying finishers of horse races run at our racetracks in the period in which wagering occurs. We incur
a liability for all unpaid purses that will be paid out on a future live race event.

Self-insurance Accruals

We are self-insured up to certain limits for costs associated with general liability, workers’ compensation and employee health
coverage, and we purchase insurance for claims that exceed our self-insurance retention or deductible levels. We record self-
insurance reserves that include accruals of estimated settlements for known claims ("Case Reserves"), as well as accruals of
third-party actuarial estimates for claims incurred but not yet reported ("IBNR"). Case Reserves represent estimated liabilities
for unpaid losses, based on a claims administrator's estimates of future payments on individual reported claims, including
allocated loss adjustment expense, which generally include claims settlement costs such as legal fees.
IBNR includes the
provision for unreported claims, changes in case reserves and future payments on reopened claims.

Key variables and assumptions include, but are not limited to, loss development factors and trend factors such as changes in
workers' compensation laws, medical care costs and wages. These loss development factors and trend factors are developed
using our actual historical losses. It is possible that reasonable alternative selections would produce different reserve estimates.

Advertising and Marketing

We expense the costs of general advertising, marketing and associated promotional expenditures at the time the costs are
incurred. We incurred advertising and marketing expense of approximately $41.8 million in 2019, $28.8 million in 2018, and
$24.8 million in 2017 in our accompanying consolidated statements of comprehensive income.

Stock-Based Compensation

All stock-based payments to employees and directors, including grants of performance share units and restricted stock, are
recognized as compensation expense over the service period based on the fair value on the date of grant. For awards that have a
graded vesting schedule, we recognize expense on a straight-line basis for each separately vesting portion of the award. We
recognize forfeitures of awards as incurred.

Computation of Net Income per Common Share

Net income per common share is presented for both basic earnings per common share ("Basic EPS") and diluted earnings per
common share ("Diluted EPS"). Basic EPS is based upon the weighted average number of common shares outstanding,
excluding unvested stock awards, during the period plus vested common stock equivalents that have not yet been converted to
common shares. Diluted EPS is based upon the weighted average number of shares used to calculate Basic EPS and potentially
dilutive common shares outstanding during the period. Potentially dilutive common shares result from applying the treasury
stock method to unvested stock awards.

Common Stock Share Repurchases

From time-to-time, we repurchase shares of our common stock under share repurchase programs authorized by our Board of
Directors. Share repurchases constitute authorized but unissued shares under the Kentucky laws under which we are
incorporated. Our common stock has no par or stated value. We record the full value of share repurchases, upon the trade date,
against common stock on our consolidated balance sheets except when to do so would result in a negative balance in such
common stock account.
In such instances, we record the cost of any further share repurchases as a reduction to retained
earnings. Due to the large number of share repurchases of our common stock over the past several years our common stock
balance frequently will be zero at the end of any given reporting period. Refer to Note 9, Shareholders' Equity, for additional
information on our share repurchases.

Recent Accounting Pronouncements - Adopted on January 1, 2019

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-02, Leases, and subsequently
issued additional guidance (collectively, "ASC 842"), which requires companies to generally recognize operating and financing
lease liabilities and corresponding right-of-use assets ("ROUAs") on the balance sheet. We adopted ASC 842 on January 1,
2019 using the modified transition method. As part of the transition to ASC 842, we elected the package of practical expedients
that allowed us to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification of any
expired or existing leases and (3) initial direct costs of any expired or existing leases. We recognized the cumulative effect of
applying ASC 842 as an opening balance sheet adjustment at January 1, 2019. The comparative information has not been
retrospectively adjusted and continues to be reported under the accounting standards in effect for those periods.

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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

The adoption of ASC 842 had no impact on our accompanying consolidated statements of comprehensive income or statements
of cash flows. Due to the adoption of ASC 842, we recognized operating lease ROUAs and lease liabilities for our operating
leases with lease terms greater than one year. We do not have any material finance leases or any material operating leases
where we are the lessor.

The cumulative effects of the changes made to our accompanying consolidated balance sheets as of January 1, 2019 for the
adoption of ASC 842 were as follows:

(in millions)

ASSETS

Other current assets
Property and equipment, net

LIABILITIES

Accrued expense and other current liabilities
Other liabilities

SHAREHOLDERS' EQUITY

Retained earnings

As Reported at
December 31,
2018

Adoption of ASC
842

Balance at
January 1, 2019

22.4
757.5

(0.3) $
25.3

89.8
15.7

474.2

3.8
21.5

(0.3)

22.1
782.8

93.6
37.2

473.9

Upon adopting ASC 842, we determine if an arrangement is a lease at inception. Operating leases are included in property and
equipment, net; accrued expense and other current liabilities; and other liabilities on our consolidated balance sheets. We
generally do not separate lease and non-lease components for our lease contracts. We do not apply the ROUA and leases
liability recognition requirements to short-term leases.

Operating lease ROUAs and lease liabilities are recognized based on the present value of the future minimum lease payments
over the lease term at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing
rate based on the information available at the commencement date in determining the present value of future lease payments.
The operating lease ROUAs also include any lease payments made prior to commencement and exclude lease incentives and
initial direct costs incurred. Our lease terms include all non-cancelable periods and may include options to extend or terminate
the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is
recognized on a straight-line basis over the lease term.

Recent Accounting Pronouncements - effective in 2020 or thereafter

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses, which introduces a new model for
recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new model will
apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan
commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair
value through other comprehensive income, and (4) beneficial interests in securitized financial assets. The guidance will
become effective in 2020, and is to be applied through a modified retrospective approach during the year of adoption. The
Company's implementation activities, which remain in progress, include identifying the financial assets in the scope of the new
standard, developing methods to estimate current expected credit losses associated with these financial assets, and determining
changes needed to control activities. We do not expect our future adoption of such guidance to have a material impact on our
results of operations, financial condition, or cash flows.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other: Internal-Use Software, which aligns the
requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance also
requires an entity to expense the capitalized implementation costs of a hosting arrangement over the term of the hosting
arrangement. The guidance is effective in 2020 with early adoption permitted and may be applied prospectively or
retrospectively. As this new guidance is consistent with our current accounting policies, we do not expect our future adoption
of such guidance to have a material impact on our results of operations, financial condition, or cash flows.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill
Impairment. This new guidance simplifies the accounting for goodwill impairments by removing step two from the goodwill
impairment test.
Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be
recognized in an amount equal to that excess. The new guidance is effective in 2020 with early adoption permitted for any

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

goodwill impairment test performed between January 1, 2017 and January 1, 2020, and is to be applied prospectively. The new
guidance will not result in a cumulative adjustment upon adoption and will only be applicable in the event a reporting unit's
carrying amount exceeds its fair value when testing goodwill for impairment. As a result, we do not expect our future adoption
of such guidance to have a material impact on our results of operations, financial condition, or cash flows.

3. ACQUISITIONS

Presque Isle

On January 11, 2019, the Company completed the Presque Isle Transaction for a cash purchase price of $178.9 million and $1.6
million of working capital and other purchase price adjustments. The following table summarizes the fair values of the assets
acquired and liabilities assumed, net of cash acquired of $8.4 million, at the date of the acquisition.

(in millions)

Current assets
Property and equipment
Goodwill
Intangible assets
Current liabilities
Non-current liabilities

Total

2.1
78.5
26.1
71.2
(5.2)
(0.6)

172.1

The fair value of the intangible assets consists of the following:

(in millions)

Gaming rights
Trademark

Total intangible assets

Fair Value
Recognized

Weighted-Average
Useful Life

56.0
15.2

71.2

N/A
N/A

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 January 11, 2019.

The property and equipment acquired primarily relates to land, buildings, equipment, and furniture and fixtures. The fair value
of the land was determined using the market approach and the fair values of the remaining property and equipment were
primarily determined using the cost replacement method which is based on replacement or reproduction costs of the assets.

The fair value of the Presque Isle gaming rights was determined using the Greenfield Method, which is an income approach
methodology that calculates the present value of the overall business enterprise based on a projected cash flow stream. This
method assumes that the gaming rights intangible asset provides the opportunity to develop a casino in a specified region, and
that the present value of the projected cash flows are a result of the realization of advantages contained in these rights. Under
this methodology, the acquirer is expected to absorb all start-up costs, as well as incur all expenses pertaining to the acquisition
and/or the creation of all tangible and intangible assets. The estimated future revenue, future operating expenses, start-up costs,
and discount rate were the primary inputs in the valuation. 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. The renewal of the gaming rights in Pennsylvania is
subject to various legal requirements. However, the Company's historical experience has not indicated, nor does the Company
expect, any limitations regarding its ability to continue to renew its gaming rights in Pennsylvania.

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The trademark intangible asset was valued using the relief-from-royalty method of the income approach, which estimates the
fair value of the intangible asset by discounting the fair value of the hypothetical royalty payments a market participant would
be willing to pay to enjoy the benefits of the asset. The estimated future revenue, royalty rate, and discount rate were the
primary inputs in the valuation of the trademark. The trademark was assigned an indefinite useful life based on the Company’s
intention to keep the Presque Isle name for an indefinite period of time.

Goodwill of $26.1 million was recognized due to the expected contribution of Presque Isle to the Company's overall business
strategy. The goodwill was assigned to the Gaming segment and is deductible for tax purposes.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

For the period from the Presque Isle Transaction on January 11, 2019 through December 31, 2019, net revenue was
$138.5 million and net income was not material.

The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the
Company's acquisition of Presque Isle occurred as of January 1, 2017. 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, 2017. The unaudited pro forma net income giving effect to the Presque Isle
Transaction was not materially different than our historical net income.

(in millions)
Net revenue

Lady Luck Nemacolin

2019

Year Ended December 31,
2018

2017

1,332.9

1,150.8

1,020.5

On March 8, 2019, the Company completed the Lady Luck Nemacolin Transaction, pursuant to which the Company assumed
management and acquired certain assets related to the management of Lady Luck Nemacolin from ERI for cash consideration
of $100,000. The Lady Luck Nemacolin Transaction did not meet the definition of a business and therefore was accounted for
as an asset acquisition. The net assets acquired in conjunction with the Lady Luck Nemacolin Transaction were not material.

Turfway Park

On October 9, 2019, the Company completed the Turfway Park Acquisition for total consideration of $46.0 million. Of the
total consideration paid, $36.0 million was allocated to JACK and accounted for as a business combination. The remaining
$10.0 million was paid to Hard Rock for the assignment of the purchase and sale agreement rights and was accounted for
separately from the business combination as an intangible asset and amortized through expense in the fourth quarter of 2019.

The cash purchase price paid to JACK was $36.0 million, less $0.9 million of working capital and purchase price adjustments.
The preliminary fair values of the assets acquired and liabilities assumed, net of cash acquired of $0.6 million, at the date of
acquisition were as follows: property and equipment (primarily land) of $18.8 million, indefinite-lived gaming rights of
$9.8 million, indefinite-lived trademark of $5.5 million, goodwill of $3.0 million, and current liabilities of $2.6 million.

The Company has not included other disclosures regarding the Turfway Park Acquisition because the acquisition is immaterial
to our business.

Ocean Downs

On July 16, 2018, the Company announced its entry into a tax-efficient partial liquidation agreement (the "Liquidation
Agreement") for the remaining 50% ownership of the Casino at Ocean Downs and Ocean Downs Racetrack located in Berlin,
Maryland ("Ocean Downs") owned by Saratoga Casino Holdings LLC ("SCH") in exchange for the Company's 25% equity
interest in SCH, which is the parent company of Saratoga Casino Hotel in Saratoga Springs, New York ("Saratoga New York")
and Saratoga Casino Black Hawk in Black Hawk, Colorado ("Saratoga Colorado") (collectively, the "Ocean Downs/Saratoga
Transaction"). On August 31, 2018, the Company closed the Ocean Downs/Saratoga Transaction, which resulted in the
Company owning 100% of Ocean Downs and having no further equity interest or management involvement in Saratoga New
York or Saratoga Colorado.

As part of the Ocean Downs/Saratoga Transaction, Saratoga Harness Racing, Inc. ("SHRI") has agreed to grant the Company
and its affiliates exclusive rights to operate online sports betting and iGaming on behalf of SHRI in New York and Colorado for
a period of fifteen years from the date of the Liquidation Agreement, should such states permit SHRI to engage in sports betting
and iGaming, subject to payment of commercially reasonable royalties to SHRI.

We consolidated Ocean Downs upon closing of the Ocean Downs/Saratoga Transaction on August 31, 2018. Prior to the
Ocean Downs/Saratoga Transaction, the Company held an effective 62.5% ownership interest in Ocean Downs, and a 25%
ownership interest in Saratoga New York and Saratoga Colorado, all of which were accounted for under the equity method.
The consideration transferred to SCH to acquire the remaining interest in Ocean Downs was the Company's equity investments
in Saratoga New York and Saratoga Colorado, which had an aggregate fair value of $47.8 million at the acquisition date.
Under the acquisition method, the fair values of the consideration transferred and the Company's equity method investment in
Ocean Downs, which had a fair value of $80.5 million at the acquisition date, were allocated to the assets acquired and
liabilities assumed in the Ocean Downs/Saratoga Transaction. The Company's carrying values in these equity method
investments were significantly less than their fair values, resulting in a pre-tax gain of $54.9 million, which is included in the
accompanying consolidated statements of comprehensive income. The fair values of the Company's equity method investments

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

in Ocean Downs, Saratoga New York, and Saratoga Colorado were determined under the market and income valuation
approaches using inputs primarily related to discounted projected cash flows and price multiples of publicly traded comparable
companies.

The following table summarizes the final fair values of the assets acquired and liabilities assumed, net of cash acquired of $13.1
million, at the acquisition date.

(in millions)

Current assets
Property and equipment
Goodwill
Intangible assets
Current liabilities
Debt

The final fair value of the intangible assets consisted of the following:

(in millions)

Gaming rights

Trademark
Other

Total intangible assets

Total

1.9
57.4
20.4
95.4
(5.2)
(54.7)
115.2

Fair Value
Recognized

Weighted-Average
Useful Life

87.0

8.3
0.1

95.4

N/A

N/A
1.3 years

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Current assets and current liabilities were valued at the existing carrying values due to their short term nature and represented
management's estimated fair value of the respective items at August 31, 2018. The debt of $54.7 million assumed by the
Company was valued at its outstanding principal balance, which approximated fair value at August 31, 2018. The Company
subsequently paid off the debt in full on September 4, 2018.

The property and equipment acquired primarily relates to land, buildings, equipment, and furniture and fixtures. The fair values
of the property and equipment were primarily determined using the cost replacement method, which is based on replacement or
reproduction costs of the assets.

The fair value of the Ocean Downs gaming rights was determined using the Greenfield method, which is an income approach
methodology that calculates the present value of the overall business enterprise based on a projected cash flow stream. This
method assumes that the gaming rights intangible asset provides the opportunity to develop a casino in a specified region, and
that the present value of the projected cash flows is a result of the realization of advantages contained in these rights. Under
this methodology, the acquirer is expected to absorb all start-up costs, as well as incur all expenses pertaining to the acquisition
and/or the creation of all tangible and intangible assets. The estimated future revenue and operating expenses and start-up costs
of Ocean Downs were the primary inputs in the valuation. 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. The renewal of the gaming rights in Maryland is subject to
various legal requirements. However, the Company's historical experience has not indicated, nor does the Company expect,
any limitations regarding its ability to continue to renew its gaming rights in Maryland.

The trademark intangible asset was valued using the relief-from-royalty method of the income approach, which estimates the
fair value of the intangible asset by discounting the fair value of the hypothetical royalty payments a market participant would
be willing to pay to enjoy the benefits of the asset. The trademark was assigned an indefinite useful life based on the
Company’s intention to keep the Ocean Downs name for an indefinite period of time.

Goodwill of $20.4 million was recognized due to the expected contribution of Ocean Downs to the Company's overall business
strategy. The goodwill was assigned to the Gaming segment and is not deductible for tax purposes.

In connection with the Ocean Downs/Saratoga Transaction, the Company recorded a deferred tax liability and income tax
expense of $12.6 million. The deferred tax liability represents the excess of the financial reporting amounts of the net assets of

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Ocean Downs over their respective basis under U.S., state, and local tax law expected to be applied to taxable income in the
periods such differences are expected to be realized.

After the closing of the Ocean Downs/Saratoga Transaction, for the period from September 1, 2018 through December 31,
2018, net revenue for Ocean Downs was $25.9 million, and net income was not material.

The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the
Company's acquisition of the remaining 50% interest in Ocean Downs occurred as of January 1, 2017 and excludes the gain
recognized from the Ocean Downs/Saratoga Transaction. 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, 2017. The unaudited pro forma net income giving effect to the Ocean Downs/Saratoga
Transaction was not materially different than our historical net income.

(in millions)
Net revenue

4. DISCONTINUED OPERATIONS

Years Ended December 31,
2017
2018

1,065.4

947.2

On November 29, 2017, the Company entered into a definitive Stock Purchase Agreement (the "Stock Purchase Agreement") to
sell its mobile gaming subsidiary, Big Fish Games, Inc. ("Big Fish Games"), a Washington corporation, to Aristocrat
Technologies, Inc. (the "Purchaser"), a Nevada corporation, an indirect, wholly owned subsidiary of Aristocrat Leisure Limited,
an Australian corporation (the "Big Fish Transaction"). On January 9, 2018, pursuant to the Stock Purchase Agreement, the
Company completed the Big Fish Transaction. The Purchaser paid an aggregate consideration of $990.0 million in cash in
connection with the Big Fish Transaction, subject to customary adjustments for working capital and indebtedness and certain
other adjustments as set forth in the Stock Purchase Agreement.

The Big Fish Games segment and related Big Fish Transaction meet the criteria for held for sale and discontinued operation
presentation. The consolidated statements of comprehensive income and the notes to consolidated financial statements reflect
the Big Fish Games segment as discontinued operations for all periods presented. Unless otherwise specified, disclosures in
these consolidated financial statements reflect continuing operations only. The consolidated statements of cash flows includes
both continuing and discontinued operations.

The Company received cash proceeds of $970.7 million which was net of $5.2 million of working capital adjustments and
$14.1 million of transaction costs. The Company recognized a gain of $219.5 million upon the sale recorded in income from
discontinued operations in the accompanying consolidated statements of comprehensive income in 2018. The gain consisted of
cash proceeds of $970.7 million offset by the carrying value of Big Fish Games of $751.2 million. The income tax provision on
the gain was $51.2 million, resulting in an after tax gain of $168.3 million.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

The following table presents the financial results of Big Fish Games included in "Income from discontinued operations, net of
tax" in the accompanying consolidated statements of comprehensive income:

(in millions)

Net revenue

Operating expenses
Selling, general and administrative expense
Research and development
Transaction expense, net

Total operating expense

Operating (loss) income
Other income (expense)

Gain on sale of Big Fish Games
Other expense

Total other income (loss)

Years Ended December 31,
2018

2017

2019

— $

13.2

—
3.5
—
—
3.5
(3.5)

—
—
—

8.4
6.0
0.9
—
15.3
(2.1)

219.5
0.1
219.6

(Loss) income from discontinued operations before provision
for income taxes

Income tax benefit (provision)
(Loss) income from discontinued operations, net of tax

(3.5)

1.1
(2.4) $

217.5

(47.3)
170.2

466.0

369.0
27.8
39.6
4.7
441.1
24.9

—
(1.7)
(1.7)

23.2

(5.1)
18.1

Stock-Based Compensation

As part of the Big Fish Transaction, the vesting dates for all outstanding unvested restricted stock awards, restricted stock unit
awards, and performance share units awards (collectively the "Stock Awards") for certain Big Fish Games' employees were
accelerated to vest on the closing date. Most of these Stock Awards would not have vested prior to the closing date of the Big
Fish Transaction. Therefore, the related stock-based compensation expense previously recognized through the modification
date was reduced to zero and a new fair value of the Stock Awards was established on the date of the announcement of the Big
Fish Transaction. The expense was amortized during the period from the date of the announcement to the closing of the Big
Fish Transaction. The incremental stock-based compensation expense recognized during 2017 due to the acceleration of
vesting was $3.4 million, which is included in income from discontinued operations, net of tax in the accompanying
consolidated statements of comprehensive income.

Total stock-based compensation expense related to Big Fish Games, which includes the accelerated vesting of the Stock
Awards and stock options associated with the Company's employee stock purchase plan, was $3.4 million in 2018 and $11.1
million in 2017.

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Earnout Liabilities

As of December 31, 2017, we had $34.2 million of deferred earnout consideration and $28.4 million of deferred payments due
to the founder of Big Fish Games, both of which were paid on January 3, 2018.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

5. PROPERTY AND EQUIPMENT

Property and equipment, net is comprised of the following:

(in millions)
Grandstands and buildings
Equipment
Tracks and other improvements
Land
Furniture and fixtures
Construction in progress

Accumulated depreciation

Subtotal

Right-of-use assets

Total

As of December 31,

2019

2018

625.2
406.5
222.3
162.4
79.2
52.3
1,547.9
(635.4)
912.5
24.8

937.3

532.8
356.3
207.3
140.5
73.3
7.0
1,317.2
(559.7)
757.5
—

757.5

Depreciation expense was $81.4 million in 2019, $57.6 million in 2018 and $49.1 million in 2017 and is classified in operating
expense in the accompanying consolidated statements of comprehensive income.

During the fourth quarter of 2017, the Company recorded a $13.7 million non-cash impairment charge related to certain
iGaming assets included in our Online Wagering segment. The impairment was due to a change in the Company's planned
usage of these assets.

6. GOODWILL

In the first quarter of 2019, we realigned our segments as described in Note 1, Description of Business. This change resulted in
the allocation of the previous Racing segment goodwill balance of $51.7 million as follows: $49.7 million to the Churchill
Downs segment, $1.0 million to the Gaming segment, and $1.0 million to All Other, based on the relative fair value approach.
The Company evaluated whether an interim goodwill impairment test should be performed as a result of our segment changes.
Based on this evaluation, the Company determined this event did not indicate it was more likely than not that a goodwill
impairment exists.

Goodwill, by segment, is comprised of the following:

(in millions)
Balances as of December 31, 2017

Additions

Balances as of December 31, 2018

Additions

Balances as of December 31, 2019

Churchill
Downs

49.7
—
49.7
—
49.7

Online
Wagering
148.2
—
148.2
—
148.2

Gaming

All Other

Total

118.7
20.4
139.1
26.1
165.2

1.0 $
—
1.0
3.0
4.0 $

317.6
20.4
338.0
29.1
367.1

In 2019, we established goodwill of $26.1 million related to the Presque Isle Transaction, and $3.0 million related to the
Turfway Park Acquisition.
In 2018, we established goodwill of $20.4 million related to the Ocean Downs/Saratoga
Transaction.

We performed our annual goodwill impairment analysis as of April 1, 2019 and no adjustment to the carrying value of goodwill
was required. We elected to bypass the qualitative assessment and proceeded directly to perform step one fair value
calculations on a quantitative basis for each reporting unit. We concluded that the fair values of our reporting units exceeded
their carrying value and therefore step two of the assessment was not required.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

7. OTHER INTANGIBLE ASSETS

Other intangible assets, net are comprised of the following:

(in millions)
Definite-lived intangible assets:

Favorable contracts
Other
Customer relationships
Gaming licenses

Indefinite-lived intangible assets:

Trademarks

Gaming rights
Other

Total

December 31, 2019

December 31, 2018

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

11.0
10.5
4.7
5.1
31.3

(8.1) $
(3.3)
(1.6)
(2.0)
(15.0) $

2.9
7.2
3.1
3.1
16.3

11.0
9.5
6.4
5.2
32.1

(7.5) $
(2.3)
(2.5)
(1.8)
(14.1) $

50.2

303.2
0.1

369.8

3.5
7.2
3.9
3.4
18.0

29.5

216.4
0.1

264.0

In 2019, we established indefinite-lived intangible assets of $56.0 million for gaming rights and $15.2 million for trademarks
related to the Presque Isle Transaction. We also acquired indefinite-lived intangible assets of $8.0 million for online gaming
rights in Pennsylvania related to our Online Wagering operations, $10.0 million for retail sports betting gaming rights at
Presque Isle and online sports betting gaming rights in Pennsylvania, as well as $3.0 million for other gaming rights at Presque
Isle. We also established indefinite-lived intangible assets of $5.5 million for trademarks and $9.8 million for gaming rights
related to the Turfway Park acquisition.

In 2018, we established indefinite-lived intangible assets of $87.0 million for gaming rights and $8.3 million for trademarks
related to the Ocean Downs/Saratoga Transaction. We also established definite-lived intangible assets of $2.3 million relating
to the opening of Derby City Gaming and $0.1 million relating to the Ocean Downs/Saratoga Transaction for other intangibles.

Amortization expense for definite-lived intangible assets was $15.0 million in 2019, $6.0 million in 2018, and $6.8 million in
2017 and is classified in operating expense in the accompanying consolidated statements of comprehensive income. As
described further in Note 3, Acquisitions, we accelerated the amortization for the assignment of the Turfway Park Acquisition
purchase and sale agreement rights of $10.0 million in the fourth quarter of 2019, which is included in All Other in the
accompanying consolidated statements of comprehensive income. We submitted payments of $2.3 million in 2019 and 2018
for annual license fees for Calder, which are being amortized to expense over the annual license period.

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Indefinite-lived intangible assets consist primarily of trademarks and state gaming rights in Maine, Maryland, Mississippi,
Louisiana, Pennsylvania and Kentucky.

We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2019, which included an
assessment of qualitative and quantitative factors to determine whether it is more likely than not that the fair values of the
indefinite-lived intangible assets are less than the carrying amount. We concluded that the fair values of our indefinite-lived
intangible assets exceeded their carrying value, and therefore step two of the assessment was not required.

During 2017, the Company recorded a $4.7 million non-cash impairment charge related to our Bluff operations ($4.5 million
for a trademark and $0.2 million related to customer relationships), which is included in our Online Wagering segment, and a
$3.3 million non-cash impairment charge related to our Illinois Horseracing Equity Trust, which is included in All Other in the
accompanying consolidated statements of comprehensive income. These impairments were due to changes in the business
climate in 2017 that resulted in projected future cash flows being less than carrying value.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Future estimated aggregate amortization expense on existing definite-lived intangible assets for each of the next five fiscal years
is as follows (in millions):

Years Ended
December 31,
2020
2021
2022
2023
2024

Estimated
Amortization
Expense

5.2
2.2
2.2
1.7
1.1

Future estimated amortization expense does not include additional payments of $2.3 million in 2020 and in each year thereafter
for the ongoing amortization of future expected annual Calder license fees not yet incurred or paid.

8. INCOME TAXES

Components of the provision for income taxes are as follows:

(in millions)
Current provision:

Federal

State and local

Deferred provision (benefit):

Federal

State and local

Foreign

Years Ended December 31,
2018

2017

2019

19.2

6.0
25.2

16.1

15.5

—
31.6

56.8

10.1

3.8
13.9

35.0

2.5

(0.1)
37.4

51.3

29.5

3.0
32.5

(53.0)

0.8

(0.2)
(52.4)

(19.9)

Income from continuing operations before provision for income taxes were as follows:

(in millions)
Domestic
Foreign

Years Ended December 31,
2018

2017

2019

196.4
—
196.4

234.2
(0.3)
233.9

102.2
0.3
102.5

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Our income tax expense is different from the amount computed by applying the federal statutory income tax rate to income
from continuing operations before taxes as follows:

(in millions)
Federal statutory tax on earnings before income taxes
State income taxes, net of federal income tax benefit
Non-deductible officer's compensation
Re-measurement of deferred taxes
Windfall deduction from equity compensation
Other

Years Ended December 31,
2018

2017

2019

41.2
8.0
5.5
8.3
(5.2)
(1.0)
56.8

49.1
5.4
2.6
—
(4.7)
(1.1)
51.3

35.9
2.5
4.7
(57.7)
(5.2)
(0.1)
(19.9)

During 2019, the Company recognized $8.3 million of income tax expense from the re-measurement of our net deferred tax
liabilities based on an increase in income attributable to states with higher tax rates compared to the prior period.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was signed into law. The Tax Act significantly revised the
U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating
certain deductions, imposing a one-time tax on accumulated earnings of foreign subsidiaries as of 2017, introducing new tax
regimes, and changing how foreign earnings are subject to U.S. tax. The Tax Act also enhanced and extended through 2026 the
option to claim accelerated depreciation deductions on qualified property.

In 2017, the Company recognized $56.9 million of future tax benefits from the re-measurement of its deferred tax assets and
liabilities at December 22, 2017, using the maximum U.S. federal tax rate of 21%, and $0.8 million of tax benefits in relation to
the mandatory deemed repatriation of its foreign earnings and profits pursuant to the Tax Act in combination with the reversal
of deferred tax liabilities that had been maintained on foreign earnings. In 2018 and 2019, the Company's federal income tax
expense was based on the new 21% corporate tax rate.

In accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), the Company recorded provisional tax expense of $5.6
million in 2017 related to non-deductible officer’s compensation and the tax consequences of mandatory deemed repatriation
required by the Tax Act. The Company also recorded a provisional tax benefit of $19.7 million for the accelerated cost recovery
allowance granted by the Tax Act, effective September 27, 2017. In the fourth quarter of 2018, the Company finalized its
accounting for these estimates and recorded immaterial adjustments as of December 31, 2018, including any subsequent impact
to the re-measurement of deferred taxes at a reduced tax rate of 21%.

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Components of our deferred tax assets and liabilities were as follows:

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions)
Deferred tax assets:
Lease liabilities
Deferred compensation plans
Deferred income
Net operating losses and credit carryforward
Deferred liabilities
Allowance for uncollectible receivables

Deferred tax assets
Valuation allowance
Net deferred tax asset
Deferred tax liabilities:

Equity investments in excess of tax basis

Intangible assets in excess of tax basis

Property and equipment in excess of tax basis

Right-of-use assets
Other

Deferred tax liabilities

Net deferred tax liability

As of December 31,

2019

2018

6.8
5.9
4.8
3.4
2.7
1.0
24.6
(0.2)
24.4

114.8

60.2

53.4
6.8

2.0

237.2

—
5.8
5.6
3.7
2.2
0.9
18.2
(0.2)
18.0

6.9

49.3

38.7
—

1.3

96.2

(212.8) $

(78.2)

As of December 31, 2019, we had federal net operating losses of $3.2 million which were acquired in conjunction with the
2010 acquisition of Youbet.com. The utilization of these losses, which expire in 2025 and 2026, is limited on an annual basis
pursuant to Internal Revenue Code § 382. We believe that we will be able to fully utilize all of these losses. We also have state
net operating losses valued at $0.7 million. We have recorded a valuation allowance of $0.2 million against the state net
operating losses due to the fact that it is unlikely that we will generate income in certain states which is necessary to utilize the
assets.

The Internal Revenue Service has completed audits through 2012. Tax years 2016 and after are open to examination. State and
local tax years open for examination vary by jurisdiction.

As of December 31, 2019, we had approximately $1.8 million of total gross unrecognized tax benefits, excluding interest of
$0.1 million. If the total gross unrecognized tax benefits were recognized, there would be a $1.8 million effect to the annual
effective tax rate. We anticipate a decrease in our unrecognized tax positions of approximately $0.6 million during the next
twelve months primarily due to the expiration of statutes of limitation.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in millions)
Balance as of January 1

Additions for tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years

Balance as of December 31

2019

2018

2017

2.8
0.1
—
(1.1)
1.8

2.9
0.1
0.1
(0.3)
2.8

2.3
0.5
0.3
(0.2)
2.9

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

9. SHAREHOLDERS’ EQUITY

Stock Repurchase Program

On April 25, 2017, the Board of Directors of the Company approved a new common stock repurchase program of up to $250.0
million. The program replaced the prior $150.0 million program that was authorized in February 2016 and had unused
authorization of $114.6 million. The authorized amount included and was not in addition to any unspent amount remaining
under the prior authorization in February 2016. Repurchases could 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. Share repurchases resulted
in the shares being retired, and the cost of the shares acquired were treated as a reduction from common stock and retained
earnings. The repurchase program had no time limit and could be suspended or discontinued at any time.

On June 9, 2017, we entered into an agreement with a related party, The Duchossois Group ("TDG"), to repurchase 3,000,000
shares of the Company's common stock for $52.93 per share in a privately negotiated transaction. The aggregate purchase price
was $158.8 million.

For the year ended December 31, 2017, including the repurchase of 3,000,000 shares from TDG, we repurchased 3,231,087
shares of our common stock under the April 2017 stock repurchase program at a total cost of $171.7 million. We had
approximately $78.3 million of repurchase authority remaining under this program at December 31, 2017.

On November 29, 2017, the Board of Directors of the Company authorized a $500.0 million share repurchase program in a
"modified Dutch auction" tender offer (the "Tender Offer") utilizing a portion of the proceeds from the Big Fish Transaction.
The Company completed the Tender Offer on February 12, 2018, and repurchased 5,660,376 shares of the Company's common
stock at a purchase price of $88.33 per share with an aggregate cost of $500.0 million, excluding fees and expenses related to
the Tender Offer.

On October 30, 2018, the Board of Directors of the Company approved a new common stock repurchase program of up
to $300.0 million. The new program replaced the prior $250.0 million program that was authorized in April 2017 and had
unused authorization of $78.3 million. The new authorized amount includes and is not in addition to any unspent amount
remaining under the prior 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.

For the year ended December 31, 2019, we repurchased 864,233 shares of our common stock under the October 2018 stock
repurchase program at a total cost of $93.0 million. We had $175.0 million of repurchase authority remaining under this
program at December 31, 2019. As of December 31, 2019, we accrued $0.5 million for the future cash settlement of executed
repurchases of our common stock compared to $2.5 million as of December 31, 2018.

For the year ended December 31, 2018, excluding the shares purchased under the Tender Offer, we repurchased 372,282 shares
of our common stock under the October 2018 stock repurchase program at a total cost of $32.0 million.

Stock Split

On October 30, 2018, the Company’s Board of Directors approved the 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
50,000,000 shares, no par value, to 150,000,000 shares, no par value. This amendment to the Company’s Articles of
Incorporation became effective on January 25, 2019 and our common stock began trading at the split-adjusted price on January
28, 2019. 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.

10. STOCK-BASED COMPENSATION PLANS

Our total compensation expense, which includes expense related to restricted stock awards, restricted stock unit awards,
performance share unit awards, and stock options associated with our employee stock purchase plan, was $23.8 million in 2019,
$17.7 million in 2018, and $16.0 million in 2017. The income tax benefit related to stock-based employee compensation
expense was $2.1 million in 2019, $2.7 million in 2018, and $5.5 million in 2017. Our stock-based employee compensation
plans are described below.

2016 Omnibus Stock Incentive Plan

On February 24, 2016, we replaced our previous stock compensation program, the Churchill Downs Incorporated 2007
Omnibus Stock Incentive Plan (the "2007 Incentive Plan") with a new program, the Churchill Downs Incorporated 2016

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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Omnibus Stock Incentive Plan (the "2016 Incentive Plan"). The 2016 Incentive Plan is intended to advance our long-term
success by encouraging stock ownership among key employees and the Board of Directors. Awards may be in the form of
stock options, stock appreciation rights, restricted stock ("RSA"), restricted stock units ("RSU"), performance share units
("PSU"), performance units, or performance cash. The 2016 Incentive Plan has a minimum vesting period of one year for
awards granted.

Restricted Stock, Restricted Stock Units, and Performance Share Units

The 2007 Incentive Plan and the 2016 Incentive Plan (collectively "the 2007 and 2016 Plans") permit the award of RSAs,
RSUs, or PSUs to directors and key employees responsible for the management, growth and protection of our business. The
fair value of RSAs and RSUs that vest solely based on continued service under the 2007 and 2016 Plans is determined by the
product of the number of shares granted and the grant date market price of our common stock.

RSAs and RSUs granted to employees under the 2007 and 2016 Plans generally vest either in full upon three years from the
date of grant or on a pro rata basis over a three-year term. RSAs are legally issued common stock at the time of grant, with
certain restrictions placed on them. RSUs granted to employees are converted into shares of our common stock at vesting. The
RSUs granted to directors under the 2007 and 2016 Plans generally vest in full upon one year from the date of grant. RSUs
granted to directors are converted into shares of our common stock at the time of the director's retirement.

In 2017, 2018, and 2019, the Company granted three-year performance and total shareholder return ("TSR") PSU awards (the
"PSU Awards") to certain named executive officers ("NEOs"). The two performance criteria for the PSU Awards are: (1) a
cumulative Adjusted EBITDA target that was set at the beginning of the plan performance period for the three year period; and
(2) a cash flow metric that is the aggregate of the cash flow targets for the three individual years that is set annually at the
beginning of each year. The cash flow metric is defined as cash flow from operating activities, excluding the change in
restricted cash, plus distributions of capital from equity investments less capital maintenance expenditures. The Compensation
Committee of the Board of Directors (the "Compensation Committee") can make adjustments as it may deem appropriate to
these metrics. Measurement against these criteria will be determined against a payout curve which provides up to 200% of
performance share units based on the original award.

The TSR criteria for the PSU Awards is related to the Company’s TSR relative to the TSR of companies in the Russell 2000
index during the performance period. The PSU Awards may be adjusted based on the Company’s relative TSR performance as
follows:

The PSU Awards will increase by 25% if the Company’s TSR is in the top quartile;

The PSU Awards will decrease by 25% if the Company’s TSR is in the bottom quartile; and

The PSU Awards will not change if the Company’s TSR is in the middle two quartiles.

The maximum number of PSU Awards, including the impact of the TSR performance, that can be earned for a performance
period is 250% of the original award.

On February 12, 2020, the Compensation Committee offered, and the NEOs accepted, to settle the 2017 PSU Awards in cash.

In October 2018, the Company granted RSU awards (the "2018 RSU Awards") and TSR PSU awards (the "2018 TSR PSU
Awards") to certain NEOs. The 2018 RSU Awards contain a seven year service period and vest on a pro rata basis over a four
year period beginning on the fourth anniversary of the award. The total number of 2018 TSR PSU Awards earned will vary
between 0% to 200% of the award amount depending on the Company's TSR relative to the TSR of companies in the Russell
2000 index over a three-year performance period. At the end of the three year performance period, the 2018 TSR PSU Awards
will vest on a pro rata basis over the remaining four year service period beginning on the fourth anniversary of the award.

The total compensation cost recognized for PSU Awards and 2018 TSR PSU Awards is determined using the Monte Carlo
valuation methodology, which factors in the value of the TSR when determining the grant date fair value of the award.
Compensation cost for the PSU Awards is recognized during the three year performance and service period based on the
probable achievement of the two performance criteria. Compensation cost for the TSR PSU Awards is recognized during the
seven year service period. All PSUs awards are converted into shares of our common stock at the time the award value is
finalized.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

A summary of the 2019 RSAs, RSUs, and PSUs granted to certain NEOs, employees, and directors is presented below (shares/
units in thousands):

Grant Year
2019

Award Type
RSA

2019

2019
2019

RSU

RSU
PSU

Number of
Shares/Units
Awarded(1)
65

10
58

Vesting Terms
Vest equally over three service periods ending in 2020, 2021 and 2022
Vest equally over three service periods ending in 2019, 2020, and
2021

One year service period ending in 2020
Three year performance and service period ending in 2021

(1) PSUs presented are based on the target number of units for the original PSU grant.

Activity for our RSAs, RSUs, and PSUs is presented below (shares/units in thousands):

PSUs

RSAs and RSUs

Total

(in thousands, except grant date values)

Balance as of December 31, 2016

Granted
Performance adjustment(1)
Vested
Canceled/forfeited

Balance as of December 31, 2017

Granted
Performance adjustment(1)
Vested
Canceled/forfeited

Balance as of December 31, 2018

Granted
Performance adjustment(1)
Vested
Canceled/forfeited

Balance as of December 31, 2019

Number of
Shares/
Units

110

65
45

Weighted
Average
Grant Date
Fair Value
48.86
$

Number of
Shares/
Units

480

Weighted
Average
Grant Date
Fair Value
36.90
$

$
$

(96) $
— $

124
256

$
$

(129) $
— $

321

$
58 $

87 $

(152) $
— $
314 $

55.75
51.00

51.00
—

51.59
68.32

47.01

47.01
—

65.77
92.90

55.75

55.75
—
72.84

173

$
— $

(334) $
(3) $

316
193

$
$

— $

(217) $
(17) $

275
$
130 $

— $

(135) $
(5) $
265 $

52.31
—

36.79
41.92

45.51
84.78

—

46.35
54.49

72.03
94.42

—

68.15
77.59
85.07

Weighted
Average
Grant Date
Fair Value
37.23
$

Number of
Shares/
Units

590

238
45

$
$

(430) $
(3) $

440
449

$
$

(346) $
(17) $

596
$
188 $

87 $

(287) $
(5) $
579 $

53.25
51.00

39.98
41.92

47.23
75.39

47.01

46.60
54.49

68.66
93.96

55.75

61.57
77.59
78.45

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(1) Adjustment to number of target units awarded for PSUs based on achievement of performance and TSR goals.

The fair value of shares and units vested was $36.9 million in 2019, $32.4 million in 2018, and $29.6 million in 2017.

A summary of total unrecognized stock-based compensation expense related to RSAs, RSUs, and PSUs (based on current
performance estimates), at December 31, 2019 is presented below:

(in millions, except years)

Unrecognized expense:

RSA

RSU

PSU

Total

December 31, 2019

Weighted Average
Remaining Vesting
Period (Years)

3.3

7.8

16.7

27.8

1.47

3.38

3.36

3.14

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan (the "ESP Plan"), we are authorized to sell, pursuant to short-term stock options,
shares of our common stock to our full-time and qualifying part-time employees at a discount from our common stock’s fair
market value. The ESP Plan operates on the basis of recurring, consecutive one-year periods. Each period commences on
August 1 and ends on the following July 31. Compensation expense related to the ESP Plan was not material for any year
included in our accompanying consolidated statements of comprehensive income.

11. TOTAL DEBT

The following table presents our total debt outstanding:

(in millions)

Term Loan B due 2024
2027 Senior Notes
2028 Senior Notes
Total debt

Current maturities of long-term debt

Total debt, net of current maturities

(in millions)

Term Loan B due 2024

2028 Senior Notes
Total debt

Current maturities of long-term debt

Total debt, net of current maturities

2017 Credit Agreement

Outstanding
Principal

As of December 31, 2019
Issuance Costs
and Fees

Long-Term Debt,
Net

392.0
600.0
500.0
1,492.0
4.0

1,488.0

4.0
8.0
6.1
18.1
—

18.1

388.0
592.0
493.9
1,473.9
4.0

1,469.9

Outstanding
Principal

As of December 31, 2018
Issuance Costs
and Fees

Long-Term Debt,
Net

396.0

4.7

500.0
896.0

4.0
892.0

7.0
11.7

—
11.7

391.3

493.0
884.3

4.0
880.3

On December 27, 2017, we entered into a senior secured credit agreement (the "2017 Credit Agreement") with a syndicate of
lenders. The 2017 Credit Agreement replaced our 2014 senior secured credit agreement (the "2014 Credit Agreement"). The
2017 Credit Agreement provides for a $700.0 million senior secured revolving credit facility due 2022 (the "Revolver") and a
$400.0 million senior secured term loan B due 2024 (the "Term Loan B").
Included in the maximum borrowing of $700.0
million under the Revolver is a letter of credit sub facility not to exceed $50.0 million and a swing line commitment up to a
maximum principal amount of $50.0 million. We had $694.4 million of available borrowing capacity, after consideration of
$5.6 million in outstanding letters of credit, under the Revolver as of December 31, 2019. The 2017 Credit Agreement is
collateralized by substantially all of the wholly-owned assets of the Company.

The Term Loan B requires quarterly payments of 0.25% of the original $400.0 million balance, or $1.0 million per quarter. The
Term Loan B may be subject to additional mandatory prepayment from excess cash flow on an annual basis per the provisions
of the 2017 Credit Agreement. The Company is required to pay a commitment fee on the unused portion of the Revolver
determined by a pricing grid based on the consolidated total net secured leverage ratio of the Company. For the period ended
December 31, 2019, the Company's commitment fee rate was 0.30%.

The Revolver bears interest at LIBOR plus a spread as determined by the Company's net leverage ratio, which was LIBOR plus
150 points at December 31, 2019. The Term Loan B bears interest at LIBOR plus 200 basis points.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

providing for the maintenance of a maximum consolidated secured net leverage ratio (4.0 to 1.0 or 4.5 to 1.0 for the year
following any permitted acquisition greater than $100.0 million) and the maintenance of a minimum consolidated interest
coverage ratio of 2.5 to 1.0. The Company was in compliance with all applicable covenants in the 2017 Credit Agreement at
December 31, 2019.

The Company utilized borrowings from the Revolver to fund a portion of the purchase price related to the closing of the
Presque Isle Transaction on January 11, 2019.

As a result of the Company's 2017 Credit Agreement, $5.1 million of debt issuance costs were capitalized associated with the
Term Loan B and are amortized as interest expense over the shorter of the respective debt period or 7 years. The Company also
capitalized $1.6 million of debt issuance costs associated with the Revolver which are amortized as interest expense over the
shorter of the respective debt period or 5 years.

2027 Senior Notes

On March 25, 2019, we completed an offering of $600.0 million in aggregate principal amount of 5.50% Senior Unsecured
Notes that mature on April 1, 2027 (the "2027 Senior 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 2027 Senior Notes were issued at par, with
interest payable on April 1st and October 1st of each year, commencing on October 1, 2019. The Company used the net
proceeds from the offering to repay our outstanding balance on our 2017 Senior Secured credit agreement (the "2017 Credit
Agreement"). In connection with the offering, we capitalized $8.9 million of debt issuance costs which are being amortized as
interest expense over the term of the 2027 Senior Notes.

The 2027 Senior Notes were issued pursuant to an indenture, dated March 25, 2019 (the "2027 Indenture"), among the
Company, certain subsidiaries of the Company as guarantors (the "2027 Guarantors"), and U.S. Bank National Association, as
trustee. The Company may redeem some or all of the 2027 Senior Notes at any time prior to April 1, 2022, at a price equal to
100% of the principal amount of the 2027 Senior Notes redeemed plus an applicable make-whole premium. On or after such
date, the Company may redeem some or all of the 2027 Senior Notes at redemption prices set forth in the 2027 Indenture. At
any time prior to April 1, 2022, the Company may redeem up to 40% of the aggregate principal amount of the 2027 Senior
Notes at a redemption price equal to 105.5% of the principal amount thereof with the net cash proceeds of one or more equity
offerings provided that certain conditions are met. The terms of the 2027 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.

2028 Senior Notes

On December 27, 2017, we completed an offering of $500.0 million in aggregate principal amount of 4.75% Senior Unsecured
Notes that mature on January 15, 2028 (the "2028 Senior 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 2028 Senior Notes were issued at par, with interest payable on January 15th and July
15th of each year, commencing on July 15, 2018. The Company used the net proceeds from the offering to repay a portion of
our $600.0 million 5.375% Senior Unsecured Notes (the "2021 Senior Notes"). In connection with the offering, we capitalized
$7.7 million of debt issuance costs which are being amortized as interest expense over the term of the 2028 Senior Notes.

The 2028 Senior Notes were issued pursuant to an indenture, dated December 27, 2017 (the "2028 Indenture"), among the
Company, certain subsidiaries of the Company as guarantors (the "2028 Guarantors"), and U.S Bank National Association, as
trustee. The Company may redeem some or all of the 2028 Senior Notes at any time prior to January 15, 2023, at a price equal
to 100% of the principal amount of the 2028 Senior Notes redeemed plus an applicable make-whole premium. On or after such
date, the Company may redeem some or all of the 2028 Senior Notes at redemption prices set forth in the 2028 Indenture. At
any time prior to January 15, 2021, the Company may redeem up to 40% of the aggregate principal amount of the 2028 Senior
Notes at a redemption price equal to 104.75% of the principal amount thereof with the net cash proceeds of one or more equity
offerings provided that certain conditions are met. The terms of the 2028 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.

F
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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

2021 Senior Notes

The 2021 Senior Notes were comprised of 5.375% Senior Unsecured Notes that were scheduled to mature on December 15,
2021, which were issued in an initial offering of $300.0 million in aggregate principal amount at par, completed on December
16, 2013, and an additional offering of $300.0 million in aggregate principal amount at 101% completed on December 16,
2015. Interest on the 2021 Senior Notes was payable on June 15th and December 15th of each year.

The Company used the proceeds from the 2017 Credit Agreement and 2028 Senior Notes to redeem the 2021 Senior Notes and
to pay related fees and expenses. The 2021 Senior Notes were redeemed at a price equal to the principal amount thereof and the
applicable "make-whole" premium, $16.1 million, which is included in loss on extinguishment of debt in the accompanying
consolidated statements of comprehensive income in 2017. The Company accounted for the redemption of the 2021 Senior
Notes as an extinguishment and wrote off $6.3 million of unamortized debt issuance costs and incurred a benefit of $2.0 million
related to the unamortized bond premium, both of which are included in loss on extinguishment of debt in the accompanying
consolidated statements of comprehensive income.

The Company also expensed approximately $0.4 million of debt issuance costs relating to our 2014 Credit Agreement in the
fourth quarter of 2017, which is included in loss on extinguishment of debt in the accompanying consolidated statements of
comprehensive income.

Future aggregate maturities of total debt are as follows (in millions):

Years Ended December 31,

2020

2021
2022

2023
2024
Thereafter

Total

4.0

4.0
4.0

4.0
376.0

1,100.0

1,492.0

12. REVENUE FROM CONTRACTS WITH CUSTOMERS

Performance Obligations

As of December 31, 2019, our Churchill Downs 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 $166.8 million. The revenue we expect to recognize on these remaining performance obligations is $47.0
million in 2020, $36.9 million in 2021, $31.7 million in 2022, and the remainder thereafter.

As of December 31, 2019, our remaining performance obligations on contracts with a duration greater than one year in
segments other than Churchill Downs were not material.

Contract Assets and Contract Liabilities

As of December 31, 2019 and 2018, contract assets were not material.

As of December 31, 2019 and 2018, contract liabilities were $63.1 million and $69.9 million, respectively, which are included
in current deferred revenue, non-current deferred revenue, and accrued expense and other current
liabilities in the
accompanying consolidated balance sheets. Contract liabilities primarily relate to our Churchill Downs segment and the
decrease was primarily due to revenue recognized for fulfilled performance obligations. We recognized $51.2 million of
revenue during the year ended December 31, 2019 that was included in the contract liabilities balance at December 31, 2018.
We recognized $53.7 million of revenue during the year ended December 31, 2018 that was included in the contract liabilities
balance at January 1, 2018.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Disaggregation of Revenue

In Note 20, Segment Information, the Company has included its disaggregated revenue disclosures as follows:

•

For the Churchill Downs segment, revenue is disaggregated between Churchill Downs Racetrack and Derby City
Gaming given that Churchill Downs Racetrack's revenues primarily revolve around live racing events while Derby
City Gaming's revenues primarily revolve around historical racing events. Within the Churchill Downs segment,
revenue is further disaggregated between live and simulcast racing, historical racing, racing event-related services, and
other services.

For the Online Wagering segment, revenue is disaggregated between the TwinSpires business and online sports
betting and iGaming business given that TwinSpires' revenue is primarily related to online pari-mutuel wagering on
live race events while online sports betting and iGaming revenue relates to casino gaming service offerings. Online
sports betting and iGaming service offerings are currently nominal. Within the Online Wagering segment, revenue is
further disaggregated between live and simulcast racing, gaming, and other services.

For the Gaming segment, revenue is disaggregated by location given the geographic economic factors that affect the
revenue of Gaming service offerings. Within the Gaming segment, revenue is further disaggregated between live and
simulcast racing, racing event-related services, gaming, and other services.

We believe that these disclosures depict how the amount, nature, timing, and uncertainty of cash flows are affected by
economic factors.

13. OTHER BALANCE SHEET ITEMS

Accounts receivable

Accounts receivable is comprised of the following:

(in millions)
Trade receivables

Simulcast and online wagering receivables

Other receivables

Allowance for doubtful accounts

Total

As of December 31,

2019

2018

12.3

20.9

8.5
41.7

(4.4)

37.3

We recognized bad debt expense of $2.1 million in 2019, $1.7 million in 2018 and $1.2 million in 2017.

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:

7.7

19.9

5.2
32.8

(4.0)

28.8

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(in millions)
Accrued salaries and related benefits
Account wagering deposits liability
Purses payable
Accrued interest
Other

Total

As of December 31,

2019

2018

29.2
28.9
19.9
19.7
75.7

173.4

24.1
29.6
15.8
11.4
54.3

135.2

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

14. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

The Company owns a 50% interest in MVG, a 61.3% interest in Rivers Des Plaines (as described further below), and two other
immaterial joint ventures.

Miami Valley Gaming

Delaware North Companies Gaming & Entertainment Inc. ("DNC") owns the remaining 50% interest in MVG. Since both we
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.

Rivers Des Plaines

On March 5, 2019, the Company completed the Sale Transaction to acquire approximately 42% of Midwest Gaming, the parent
company of Rivers Des Plaines, for cash consideration of approximately $406.6 million and $3.5 million of certain transaction
the parties completed the
costs and working capital adjustments.
Recapitalization pursuant to which Midwest Gaming used approximately $300.0 million in proceeds from amended and
extended credit facilities to redeem, on a pro rata basis, additional Midwest Gaming units held by High Plaines and Casino
Investors. As a result of the Recapitalization, the Company's ownership of Midwest Gaming increased to 61.3%. High Plaines
retained ownership of 36.0% of Midwest Gaming and Casino Investors retained ownership of 2.7% of Midwest Gaming.

Following the closing of the Sale Transaction,

A new limited liability company agreement was entered into by the members of Midwest Gaming as a result of the change in
ownership structure. Under the new limited liability company agreement, both the Company and High Plaines have
participating rights over Midwest Gaming, and both must consent to Midwest Gaming's operating, investing and financing
decisions. As a result, we account for Midwest Gaming using the equity method.

The Company’s investment in Midwest Gaming is presented at our initial cost of investment plus its accumulated proportional
share of income or loss, including depreciation/accretion of the difference in the historical basis of the Company’s contribution,
less any distributions it has received. Following the Sale Transaction and Recapitalization, the carrying value of the Company’s
investment in Midwest Gaming was $835.0 million higher than the Company’s underlying equity in the net assets of Midwest
Gaming. This equity method basis difference was comprised of $853.7 million related to goodwill and indefinite-lived
intangible assets, $(13.7) million related to non-depreciable land, $(9.5) million related to buildings that will be accreted into
income over a weighted average useful life of 35.3 years, and $4.5 million related to personal property that will be depreciated
over a weighted average useful life of 3.7 years. As of December 31, 2019, the net aggregate basis difference between the
Company’s investment in Midwest Gaming and the amounts of the underlying equity in net assets was $834.2 million.

Ocean Downs

On August 31, 2018, the Company closed the acquisition of the remaining 50% ownership of Ocean Downs owned by SCH in
exchange for liquidating the Company's 25% equity interest in SCH, which is the parent company of Saratoga New York and
Saratoga Colorado. Upon the closing of the Ocean Downs/Saratoga Transaction, the Company owns 100% of Ocean Downs
and has no equity interest or management involvement in Saratoga New York or Saratoga Colorado. Prior to August 31, 2018,
Ocean Downs was accounted for under the equity method.

Summarized Financial Results for our Unconsolidated Affiliates

The financial results for our unconsolidated affiliates are summarized below. The summarized income statement information
for 2019 and summarized balance sheet information as of December 31, 2019 includes the following equity investments: MVG,
Rivers Des Plaines from the transaction date of March 5, 2019, and two other immaterial joint venture. The summarized
income statement information for 2018 includes the following equity investments: MVG, Saratoga New York, Saratoga
Colorado, Ocean Downs, and two other immaterial joint ventures. As noted above, on August 31, 2018, the Company
completed the Ocean Downs/Saratoga Transaction. As such, the 2018 summarized income statement information includes the
results of Ocean Downs, Saratoga New York, and Saratoga Colorado through August 31, 2018. Summarized balance sheet
information as of December 31, 2018 included MVG and two other immaterial joint ventures. The summarized income

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

statement for 2017 includes the following equity investments: MVG, Saratoga New York, Saratoga Colorado, Ocean Downs,
and two other immaterial joint ventures.

(in millions)

Assets
Current assets
Property and equipment, net
Other assets, net
Total assets

Liabilities and Members' (Deficit) Equity
Current liabilities
Long-term debt
Other liabilities
Members' (deficit) equity

Total liabilities and members' (deficit) equity

(in millions)

Net revenue
Operating and SG&A expense

Depreciation and amortization

Operating income

Interest and other expense, net

Net income

December 31,

2019

2018

64.0
256.1
240.1
560.2

73.3
745.0
20.6
(278.7)
560.2

Years Ended December 31,
2018

2017

2019

585.5
411.4

13.0
161.1

(67.0)
94.1

367.2
271.9

22.2
73.1

(6.3)
66.8

24.0
95.7
106.7
226.4

21.2
—
—
205.2
226.4

443.7
345.3

25.9
72.5

(8.5)
64.0

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15. LEASES

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Our operating leases with terms greater than one year are primarily related to buildings and land. Our operating leases with
terms less than one year are primarily related to equipment. Most of our building and land leases have terms of 2 to 10 years
and include one or more options to renew, with renewal terms that can extend the lease term from 1 to 5 years or more. Certain
of our lease agreements include lease payments based on a percentage of net gaming revenue and others include rental payment
adjustments periodically for inflation. The estimated discount rate for each of our leases is determined based on adjustments
made to our secured debt borrowing rate.

The components of total lease cost were as follows:

(in millions)
Short-term lease cost (a) (b)
Operating lease cost (b)
Total lease cost

(a)
(b)

Includes leases with terms of one month or less
Includes variable lease costs, which were not material

Other information related to operating leases was as follows:

(in millions)
Supplemental Cash Flow Information

Cash paid for amounts included in the measurement of lease liabilities
ROUAs obtained in exchange for lease obligations

Lease Term and Discount Rate

Weighted average remaining lease term
Weighted average discount rate

Twelve Months Ended
December 31, 2019

14.3
6.7
21.0

Twelve Months Ended
December 31, 2019

$
$

5.2
3.7

December 31, 2019

6.5 years
3.9%

As of December 31, 2019, the future undiscounted cash flows associated with the Company's operating lease liabilities were as
follows:

(in millions)

Years Ended December 31,

2020
2021
2022
2023
2024
Thereafter

Total future minimum lease payments

Less: Imputed interest

Present value of lease liabilities

Reported lease liabilities as of December 31, 2019

Accrued expense and other current liabilities (current maturities of leases)

Other liabilities (non-current maturities of leases)

Present value of lease liabilities

Totals

5.6
5.1
4.0
3.4
3.3
8.3
29.7
3.5
26.2

5.0

21.2

26.2

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

As required by ASC 842, the future minimum operating lease payments on non-cancelable leases as of December 31, 2018
under the accounting standards in effect as of that period were as follows:

Years Ended December 31,

2019
2020
2021
2022
2023
Thereafter
Total

5.0
4.5
3.8
3.1
3.0
11.2
30.6

16. DIRECTOR AND EMPLOYEE BENEFIT PLANS

Directors and Officers Retirement Plan

We provide eligible executives and directors an opportunity to defer to a future date the receipt of base and bonus compensation
for services as well as director’s fees through the 2005 Deferred Compensation Plan (the "Deferred Plan"). Our matching
contribution on base compensation deferral of executives equals the matching contribution of our profit-sharing plan with
certain limits.

Our directors may elect to invest the deferred director fee compensation into our common stock within the Deferred Plan.
Investments in our common stock are credited as hypothetical shares of common stock based on the market price of the stock at
the time the compensation was earned. Upon the end of the director's service, common stock shares are issued to the director.

On December 13, 2019, the Compensation Committee elected to freeze the Deferred Plan with respect to employee participant
deferrals after the 2019 plan year, although directors will continue to participate in the Deferred Plan.

On December 13, 2019, the Compensation Committee adopted the Churchill Downs Incorporated Restricted Stock Unit
Deferral Plan (the "RSU Deferral Plan"), effective January 1, 2020. Certain individual employees who are management or
highly compensated employees of the Company may elect to defer settlement of RSUs granted pursuant to the 2016 Incentive
Plan.

Other Retirement Plans

We have a profit-sharing plan that covers all employees not otherwise participating in an associated profit-sharing plan, with
three months or more of service. We match contributions made by employees up to 3% of the employee’s annual compensation
and match at 50% contributions made by the employee up to an additional 2% of compensation with certain limits. We may
also contribute a discretionary amount determined annually by the Board of Directors as well as a year-end discretionary match
not to exceed 4% of compensation. Our cash contribution to the plan was $4.1 million in 2019, $3.0 million in 2018, and
$2.7 million in 2017.

We are a member of a noncontributory defined benefit multi-employer retirement plan for all members of the Pari-mutuel
Clerk’s Union of Kentucky and several other collectively bargained retirement plans, which are administered by unions. Cash
contributions are made in accordance with negotiated labor contracts. Retirement plan expense was $0.6 million in 2019, and
$0.7 million in both 2018 and 2017. Our policy is to fund this expense as accrued, and we currently estimate that future
contributions to these plans will not increase significantly from prior years.

17. FAIR VALUE OF ASSETS AND LIABILITIES

We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified
based on the lowest level of input that is significant to the fair value measurement.

The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is
practicable to estimate:

F
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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Restricted Cash

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

Debt

The fair value of the Company’s 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 Senior Secured Term Loan B due 2024 (the "Term Loan B") approximates its gross carrying value as it is variable
rate debt and as such is a Level 2 measurement.

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

December 31, 2019

Carrying
Amount

Fair Value

Level 1

Level 2

Level 3

46.3

— $

388.0

592.0
493.9

392.0

636.0
515.2

—

392.0

636.0
515.2

December 31, 2018

Carrying
Amount

Fair Value

Level 1

Level 2

Level 3

40.0

— $

391.3
493.0

396.0
452.4

—
—

396.0
452.4

—

—
—

(in millions)
Financial assets:
Restricted cash

Financial liabilities:

Term Loan B

2027 Senior Notes
2028 Senior Notes

(in millions)
Financial assets:
Restricted cash

Financial liabilities:

Term Loan B
2028 Senior Notes

18. CONTINGENCIES

We are 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.
We are self-insured up to an aggregate stop loss for our general liability and workers' compensation coverages.

We review all litigation on an ongoing basis when making accrual and disclosure decisions. For certain legal proceedings, we
cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in the early stages of
development or where the plaintiffs seek indeterminate damages. Various factors, including but not limited to, the outcome of
potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability
can be established or before a loss or range of loss can be reasonably estimated.
In accordance with current accounting
standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it
is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can
be reasonably estimated. When no amount within the range of loss is a better estimate than any other amount, we accrue the
minimum amount of the estimable loss. To the extent that such litigation against us may have an exposure to a loss in excess of
the amount we have accrued, we believe that such excess would not be material to our consolidated financial condition, results
of operations, or cash flows. 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

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

estimable. In the event that a legal proceeding results in a substantial judgment against, 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.

Louisiana Environmental Protection Agency Non-Compliance Issue

On December 6, 2013, we received a notice from the United States Environmental Protection Agency ("EPA") regarding
alleged CAFO non-compliance at Fair Grounds Race Course. On October 21, 2019, we reached an agreement in principle,
subject to final regulatory and court approval. If approved, the agreement will include a $2.8 million penalty, which has been
accrued and is included in selling, general and administrative expense in our accompanying consolidated statement of
comprehensive income for the year ended December 31, 2019, and accrued expense and other current liabilities in our
accompanying consolidated balance sheet at December 31, 2019.

19. NET INCOME PER COMMON SHARE COMPUTATIONS

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

(in millions, except per share data)

Numerator for basic net income per common share:

Net income from continuing operations

Net loss attributable to noncontrolling interest
Net income from continuing operations, net of loss attributable
to noncontrolling interests
Net income from continuing operations allocated to
participating securities

Net (loss) income from discontinued operations
Numerator for basic net income per common share

Numerator for diluted net income from continuing operations
per common share

Numerator for diluted net income per common share

Denominator for net income per common share:

Basic

Plus dilutive effect of stock awards

Plus dilutive effect of participating securities

Diluted

Net income (loss) per common share data:

Basic

Continuing operations
Discontinued operations

Net income per common share - basic

Diluted

Continuing operations
Discontinued operations

Net income per common share - diluted

20. SEGMENT INFORMATION

$
$
$

Years Ended December 31,
2018

2017

2019

139.6

(0.3)

139.9

—

(2.4)
137.5

139.9

137.5

40.1

0.5

—

40.6

3.49
$
(0.06) $
$
3.43

3.44
$
(0.06) $
$
3.38

182.6

—

182.6

—

170.2
352.8

182.6

352.8

41.3

0.3

—

41.6

4.42
4.12
8.54

4.39
4.09
8.48

$
$
$

122.4

—

122.4

(0.1)

18.1
140.4

122.4

140.5

47.2

0.6

0.2

48.0

2.59
0.38
2.97

2.55
0.37
2.92

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We manage our operations through three reportable segments: Churchill Downs, Online Wagering and Gaming. Refer to Note
1, Description of Business, for additional information regarding the changes we made to our segments during the first quarter of
2019. Prior year amounts have been reclassified to conform to this presentation.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Eliminations include the elimination of intersegment transactions. We utilize non-GAAP measures, including EBITDA
(earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. Our chief operating decision maker
utilizes Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. Adjusted EBITDA
includes the following adjustments:

Adjusted EBITDA includes our portion of EBITDA from our equity investments.

Adjusted EBITDA excludes:

•

Transaction expense, net which includes:

◦

Acquisition and disposition related charges, including fair value adjustments related to earnouts and
deferred payments;

Calder racing exit costs; and

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

•

Stock-based compensation expense;

• Midwest Gaming's impact on our investments in unconsolidated affiliates from:

◦

The impact of changes in fair value of interest rate swaps; and

Recapitalization and transaction costs;

•

Asset impairments;

Gain on Ocean Downs/Saratoga Transaction;

Loss on extinguishment of debt;

Legal reserves;

Pre-opening expense; and

Other charges, recoveries and expenses

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. 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. 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.

Effective January 1, 2019, the Company does not allocate corporate and other related expenses to our segments in the
accompanying consolidated statements of comprehensive income. The prior year amounts in the accompanying consolidated
statements of comprehensive income were reclassified to conform to this presentation.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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

(in millions)
Net revenue from external customers:

Churchill Downs:

Churchill Downs Racetrack
Derby City Gaming

Total Churchill Downs

Online Wagering:

TwinSpires
Online Sports Betting and iGaming

Total Online Wagering

Gaming:

Presque Isle

Fair Grounds and VSI

Oxford Casino

Calder

Ocean Downs

Riverwalk Casino

Harlow’s Casino

Lady Luck Nemacolin

Saratoga

Total Gaming

All Other

Net revenue from external customers

Intercompany net revenues:

Churchill Downs
Online Wagering

Gaming:

Fair Grounds and VSI
Calder
Presque Isle

Total Gaming

All Other
Eliminations

Intercompany net revenue

Years Ended December 31,
2018

2017

2019

187.6
86.6
274.2

289.9
0.6
290.5

138.5

123.0

101.7

99.8

85.9

58.9

55.3

29.3

—

692.4

72.6

181.0
14.8
195.8

290.2
—
290.2

—

117.7

102.0

98.6

25.9

54.5

50.2

—

0.6

449.5

73.5

1,329.7

1,009.0

15.2
1.1

12.7
1.3

1.8
0.1
0.5
2.4
11.6
(30.3)

1.6
0.1
—
1.7
11.2
(26.9)

— $

161.3
—
161.3

255.6
—
255.6

—

111.1

90.8

87.9

—

48.2

50.0

—

1.3

389.3

76.4

882.6

11.4
1.1

1.6
—
—
1.6
10.8
(24.9)
—

F
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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions)

Net revenue from external customers

Pari-mutuel:

Live and simulcast racing
Historical racing(a)

Racing event-related services
Gaming(a)
Other(a)
Total

(in millions)

Net revenue from external customers

Pari-mutuel:

Live and simulcast racing
Historical racing(a)

Racing event-related services
Gaming(a)
Other(a)
Total

(in millions)

Net revenue from external customers

Pari-mutuel:

Live and simulcast racing
Historical racing(a)

Racing event-related services
Gaming(a)
Other(a)
Total

Twelve Months Ended December 31, 2019

Churchill
Downs

Online
Wagering

Gaming

Total
Segments

All Other

Total

59.0 $

277.1 $

30.7 $

366.8 $

41.1 $

81.6

118.7

—

14.9

—

0.6

12.8

—

4.1

585.2

72.4

81.6

122.8

585.8

100.1

—

5.6

—

25.9

407.9

81.6

128.4

585.8

126.0

274.2 $

290.5 $

692.4 $

1,257.1 $

72.6 $

1,329.7

Twelve Months Ended December 31, 2018

Churchill
Downs

Online
Wagering

Gaming

Total
Segments

All Other

Total

54.9 $

278.4 $

27.1 $

360.4 $

43.1 $

13.8

115.2
—

—

—
—

—

3.9
365.9

13.8

119.1
365.9

—

5.8
—

403.5

13.8

124.9
365.9

11.9
195.8 $

11.8
290.2 $

52.6
449.5 $

76.3
935.5 $

24.6
73.5 $

100.9
1,009.0

Twelve Months Ended December 31, 2017

Churchill
Downs

Online
Wagering

Gaming

Total
Segments

All Other

Total

52.0 $
—
100.5

—

8.8
161.3 $

239.6 $
—
—

—

16.0
255.6 $

27.1 $
—
4.2

315.6

42.4
389.3 $

318.7 $
—
104.7

315.6

67.2
806.2 $

44.8 $
—
6.4

—

25.2
76.4 $

363.5
—
111.1

315.6

92.4
882.6

(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 $33.4 million in 2019, $26.1 million in 2018, and
$21.5 million in 2017.

Adjusted EBITDA by segment is comprised of the following:

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Year Ended December 31, 2019

(in millions)

Net revenue

Taxes and purses
Marketing and advertising
Salaries and benefits
Content expense
Selling, general and administrative expense
Other operating expense
Other income

Churchill Downs Online Wagering
291.6
$

289.4

(66.5)
(7.1)
(32.0)
(2.4)
(8.0)
(35.9)
0.2

(15.3)
(12.2)
(11.4)
(152.8)
(7.2)
(26.4)
—

Adjusted EBITDA

137.7

66.3

Gaming

694.8

(270.3)
(21.5)
(103.3)
(6.0)
(29.0)
(84.1)
100.3

280.9

Year Ended December 31, 2018

(in millions)

Net revenue

Taxes and purses

Marketing and advertising
Salaries & benefits

Content expense
Selling, general and administrative expense

Other operating expense
Other income

Adjusted EBITDA

(in millions)

Net revenue

Taxes and purses
Marketing and advertising
Salaries & benefits
Content expense
Selling, general and administrative expense
Other operating expense
Other income

Churchill Downs Online Wagering
291.5
$

208.5

(41.3)

(5.7)
(23.7)

(2.2)
(5.3)

(28.0)
0.1

(15.2)

(6.0)
(9.2)

(152.0)
(5.9)

(24.2)
—

102.4

79.0

Gaming

451.2

(153.4)

(15.5)
(68.9)

(4.1)
(18.6)

(60.0)
43.3

174.0

Year Ended December 31, 2017

Churchill Downs Online Wagering

Gaming

F
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172.7

256.7

(34.1)
(2.7)
(19.3)
(2.4)
(4.0)
(21.3)
0.1

(14.7)
(8.2)
(9.9)
(125.0)
(6.9)
(22.1)
—

390.9

(130.7)
(13.0)
(63.4)
(4.0)
(17.1)
(56.1)
42.0

148.6

Adjusted EBITDA

89.0

69.9

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions)
Reconciliation of Comprehensive Income to Adjusted EBITDA:

Comprehensive income attributable to CDI
Foreign currency translation, net of tax
Change in pension benefits, net of tax
Net income attributable to CDI

Net loss attributable to noncontrolling interest
Net income before noncontrolling interest
Loss (income) from discontinued operations, net of tax

Income from continuing operations, net of tax

Additions:

Depreciation and amortization
Interest expense

Loss on extinguishment of debt

Income tax provision (benefit)

EBITDA

Adjustments to EBITDA:

Selling, general and administrative:

Stock-based compensation expense

Legal reserves

Other, net

Pre-opening expense
Other income, expense:

Interest, depreciation and amortization expense related to equity
investments
Changes in fair value of Midwest Gaming's interest rate swaps

Midwest Gaming's recapitalization and transactions costs

Other charges and recoveries, net

Gain on Ocean Downs/Saratoga transaction
Transaction expense, net

Impairment of tangible and other intangible assets

Total adjustments to EBITDA

Adjusted EBITDA

Adjusted EBITDA by segment:

Churchill Downs

Online Wagering

Gaming

Total segment Adjusted EBITDA

All Other

Total Adjusted EBITDA

Years Ended December 31,
2018

2017

2019

137.5
—
—
137.5
0.3
137.2
2.4
139.6

96.4
70.9

—

56.8

353.2
(0.6)
0.2
352.8
—
352.8
(170.2)
182.6

63.6
40.1

—

51.3

363.7

337.6

23.8

17.7

3.6

0.4

5.1

32.6

12.4

4.7

(0.2)
—

5.3

—
87.7
451.4

—

(0.6)

4.8

13.9

—

—
(54.9)

10.3

—
(8.8)
328.8

137.7

102.4

66.3

280.9

484.9

79.0

174.0

355.4

(33.5)
451.4

(26.6)
328.8

140.4
0.1
—
140.5
—
140.5
(18.1)
122.4

56.0
49.3

20.7

(19.9)

228.5

16.0

—

0.5

16.7

—

—
—

2.3

21.7
57.7
286.2

89.0

69.9

148.6

307.5

(21.3)
286.2

The table below presents information about equity in income of unconsolidated affiliates included in our reported segments:

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions)

Gaming
All Other

Years Ended December 31,
2018

2019

2017

50.5
0.1
50.6

29.4
0.2
29.6

25.3
0.2
25.5

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

(in millions)
Total assets:

Churchill Downs

Online Wagering
Gaming

Total segment assets

All Other

As of December 31,
2018
2019

370.3

241.5
1,030.1

1,641.9
909.1

2,551.0

359.6

222.8
877.1

1,459.5
265.7

1,725.2

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

(in millions)

Capital expenditures:

Churchill Downs
Online Wagering

Gaming

Total segment capital expenditures

All Other

Total capital expenditures

Years Ended December 31,
2018

2017

2019

31.4
9.7

37.1
78.2

53.0

109.6
9.7

20.7
140.0

9.4

131.2

149.4

54.1
9.0

39.7
102.8

6.2

109.0

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21. RELATED PARTY TRANSACTIONS

Directors and employees may from time to time own or have interests in horses racing at our racetracks. All such races are
conducted under the regulations of each state’s respective regulatory agency, as applicable, and no director or employee
receives any extra or special benefit with regard to having his or her horses selected to run in races or in connection with the
actual running of races. There is no material financial statement impact attributable to directors or employees who may have
interests in horses racing at our racetracks.

In the ordinary course of business, we may enter into transactions with certain of our officers and directors for the sale of
personal seat licenses, suite accommodations, and tickets for our live racing events. We believe that each such transaction has
been on terms no less favorable for us than could have been obtained in a transaction with a third party, and no officer or
director received any extra or special benefit in connection with such transactions.

On June 9, 2017, we entered into an agreement with a related party, TDG, to repurchase 3,000,000 shares of the Company's
common stock for $52.93 per share in a privately negotiated transaction. The aggregate purchase price was $158.8 million.

Refer to Note 9, Shareholders' Equity, for additional information related to the repurchases.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

22. SUBSEQUENT EVENTS

As of the date of this filing, there were no subsequent events.

23. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

(in millions, except per common share data)

Net revenues

Operating income

Income from continuing operations, net of tax

Income (loss) from discontinued operations, net of
tax
Net income (loss) per common share - basic (e):

Continuing operations

Discontinued operations

Net income per common share - basic

Net income (loss) per common share - diluted (e):

Continuing operations

Discontinued operations

Net income per common share - diluted

Year Ended December 31, 2019
First Quarter(a) Second Quarter Third Quarter Fourth Quarter(b)
280.6
$
$
3.5
4.2

306.3
27.8
15.2

477.4
156.4
108.3

265.4
28.0
11.9

(0.3)

(1.2)

(0.4)

$
$
$

$
$

0.30
$
(0.01) $
$
0.29

0.30
$
(0.01) $

0.29

2.70
$
(0.03) $
$
2.67

2.66
$
(0.03) $

2.63

0.38
$
(0.01) $
$
0.37

0.37
$
(0.01) $

0.36

(0.5)

0.11
(0.01)
0.10

0.11
(0.01)

0.10

(in millions, except per common share data)

Year Ended December 31, 2018

First Quarter(c)
189.3
$

Second Quarter Third Quarter(d) Fourth Quarter
219.0
$

379.4

221.3

Net revenues

Operating income

Income from continuing operations, net of tax

Income (loss) from discontinued operations, net of
tax

Net income (loss) per common share - basic (e):

Continuing operations

Discontinued operations

Net income per common share - basic

Net income (loss) per common share - diluted (e):

Continuing operations

Discontinued operations

Net income per common share - diluted

19.7
14.1

167.9

0.33

3.88
4.21

0.32

3.86
4.18

136.6
103.2

(0.1)

2.54

—
2.54

2.52

—
2.52

20.5
58.0

(1.7)

1.43

(0.04)
1.39

1.42

(0.04)
1.38

12.0
7.3

4.1

0.18

0.10
0.28

0.18

0.10
0.28

(a) First quarter of 2019 includes the acquisitions of Presque Isle and Lady Luck Nemacolin, and equity investment in

Midwest Gaming.

(b) Fourth quarter of 2019 includes the acquisition of Turfway Park and $10.0 million accelerated amortization of the

purchase and sale rights related to the Turfway Park Acquisition.

discontinued operation.

(d) Third quarter of 2018 includes a $54.9 million gain on the Ocean Downs/Saratoga Transaction.
(e) Net income per common share calculations for each quarter are based on the weighted average number of shares
outstanding during the respective period. The sum of the quarters may not equal the full-year income (loss) per share.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Churchill Downs Incorporated

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Churchill Downs Incorporated and its subsidiaries (the
“Company”) as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive income,
shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, including the related
notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2019
listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also
have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases in 2019 and the manner in which it accounts for revenue from contracts with customers in 2018.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility
is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in
all material respects.

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Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Presque Isle
Downs and Casino (“Presque Isle”) and Turfway Park from its assessment of internal control over financial reporting as of
December 31, 2019 because they were acquired by the Company in purchase business combinations during 2019. We have
also excluded Presque Isle and Turfway Park from our audit of internal control over financial reporting. Presque Isle and
Turfway Park are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment
and our audit of internal control over financial reporting collectively represent 9.3% and 10.7%, respectively, of the related
consolidated financial statement amounts as of and for the year ended December 31, 2019.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of the Presque Isle Indefinite-Lived Gaming Rights Intangible Asset

As described in Notes 1 and 3 to the consolidated financial statements, in 2019 the Company completed the acquisition of
Presque Isle for cash consideration of $178.9 million, which resulted in a $56.0 million indefinite-lived gaming rights
intangible asset being recorded. The fair value of the gaming rights intangible asset was determined by management using the
Greenfield Method, which is an income approach methodology that calculates the present value of the overall business
enterprise based on a projected cash flow stream. The primary inputs used by management in the estimation of the fair value
of the gaming rights intangible asset included estimated future revenue and operating expenses, start-up costs, and discount
rate.

The principal considerations for our determination that performing procedures relating to the valuation of the Presque Isle
indefinite-lived gaming rights intangible asset is a critical audit matter are (i) there was a high degree of auditor judgment and
subjectivity in applying procedures relating to the fair value measurement of the gaming rights intangible asset acquired due
to the significant amount of judgment by management when developing the fair value estimate, (ii) significant audit effort
was required in evaluating the estimated future revenue, and (iii) the audit effort involved the use of professionals with
specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
the acquisition accounting, including controls over management’s valuation of the gaming rights intangible asset and controls
over the development of the estimated future revenue assumption. These procedures also included, among others, reading the
purchase agreement, testing management’s process for estimating the fair value of the gaming rights intangible asset, and
testing management’s projected cash flows used to estimate the fair value of the gaming rights intangible asset. Testing
management’s process included evaluating the appropriateness of the Greenfield Method and the reasonableness of the
estimated future revenue significant assumption. Evaluating the reasonableness of the estimated future revenue involved
considering the past performance of Presque Isle, as well as economic and industry forecasts. Professionals with specialized
skill and knowledge were used to assist in the evaluation of the Company's Greenfield Method.

/s/ PricewaterhouseCoopers LLP
Louisville, Kentucky
February 26, 2020

We have served as the Company’s auditor since 1990.

ITEM 9.

None.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports
that we filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures.

As required by the Securities and Exchange Commission Rule 13a-15(e), we carried out an evaluation, under the supervision
and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2019. Based upon the
foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures
were effective.

Changes in Internal Control over Financial Reporting

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our process for
evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of
established controls and procedures.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting of Churchill
Downs Incorporated, as defined in Rules 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934, as amended.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of Churchill Downs Incorporated's internal control over
financial reporting based upon the framework in the Integrated Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based upon our evaluation under the framework in
the Internal Control-Integrated Framework (2013) management has concluded that Churchill Downs Incorporated's internal
control over financial reporting was effective as of December 31, 2019.

In January 2019, we completed the Presque Isle Transaction, and in October 2019, we completed the Turfway Park
Acquisition, and have not fully incorporated the internal controls and procedures with respect to these transactions as the
integration activities are ongoing. Accordingly, management excluded Presque Isle and Turfway Park from its assessment of
the effectiveness of our internal control over financial reporting as of December 31, 2019. Presque Isle and Turfway Park
represented approximately 10.7% of consolidated net revenues of the Company for the year ended December 31, 2019, and
approximately 9.3% of consolidated total assets as of December 31, 2019.

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/s/ William C. Carstanjen
William C. Carstanjen
Chief Executive Officer
February 26, 2020

/s/ Marcia A. Dall
Marcia A. Dall
Executive Vice President and
Chief Financial Officer
February 26, 2020

/s/ Chad E. Dobson
Chad E. Dobson
Vice President and
Chief Accounting Officer
February 26, 2020

The effectiveness of the Company's internal control over financial reporting as of December 31, 2019 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears
herein.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information with respect to our directors and audit committee is incorporated by reference to the definitive proxy
statement on Schedule 14A to be filed with the Securities and Exchange Commission no later than 120 days after
December 31, 2019.

We have adopted a Code of Conduct that applies to all directors, employees, and officers, including our Chief Executive
Officer, Chief Financial Officer and principal financial officers. This Code of Conduct is available on our corporate website,
www.churchilldownsincorporated.com, under the "Corporate Governance" subheading of the "Investors" heading and is also
available to shareholders upon request.

Information about our Executive Officers

Name

Age as of
2/26/2020

Principal Occupation for the Past Five Years
and Position with Churchill Downs Incorporated

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Chief Executive Officer since August 2014; President and Chief Operating Officer
from March 2011 to August 2014.

President and Chief Operating Officer since October 2015; President and Chief
Financial Officer from August 2014 to October 2015; Executive Vice President
and Chief Financial Officer from October 2007 to August 2014.

Executive Vice President and Chief Financial Officer since October 2015;
Executive Vice President and Chief Financial Officer of Erie Insurance Group /
Erie Indemnity Company, a public corporation (Nasdaq: ERIE), from March 2009
through October 2015.

Austin W. Miller

Senior Vice President of Gaming Operations since August 2013.

ITEM 11.

EXECUTIVE COMPENSATION

The information required by this item with respect to executive compensation is incorporated by reference to the definitive
proxy statement on Schedule 14(a) to be filed with the Securities and Exchange Commission no later than 120 days after
December 31, 2019; provided, that the Compensation Committee Report will not be deemed to be "filed" with this Report.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS

The information required by this item with respect to security ownership of certain beneficial owners and management and
related shareholder matters is with respect to securities authorized for issuance under equity compensation plans incorporated
by reference to the definitive proxy statement on Schedule 14A to be filed with the Securities and Exchange Commission no
later than 120 days after December 31, 2019.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required by this item with respect to transactions with related persons and director independence matters is
incorporated by reference to the definitive proxy statement on Schedule 14A to be filed with the Securities and Exchange
Commission no later than 120 days after December 31, 2019.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item with respect to principal accounting fees and services is incorporated by reference to
the definitive proxy statement on Schedule 14A to be filed with the Securities and Exchange Commission no later than 120
days after December 31, 2019.

100

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULE

(a) (1) Consolidated Financial Statements

The following financial statements of Churchill Downs Incorporated for the years ended 2019, 2018 and
2017 are included in Part II, Item 8:

Consolidated Balance Sheets

Consolidated Statements of Comprehensive Income

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

(2) Schedule II—Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable, not significant or not required, or because
the required information is included in the consolidated financial statements or notes thereto.

(b)

(c)

(3) For the list of required exhibits, see exhibit index.

Exhibits

See exhibit index.

All financial statements and schedules except those items listed under Items 15(a)(1) and (2) above are
omitted because they are not applicable or not required, or because the required information is included in
the consolidated financial statements or notes thereto.

Pages

108

102

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101

Numbers

Description

By Reference To

EXHIBIT INDEX

(a)

(b)

Stock Purchase Agreement, dated as of November 29, 2017,
by and among Aristocrat Technologies, Inc., Churchill
Downs Incorporated and Big Fish Games, Inc.

Exhibit 2.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed on
November 30, 2017**

Amended and Restated Articles of Incorporation of
Churchill Downs Incorporated, as amended and restated on
January 25, 2019

Exhibit 3.2 to Current Report on Form 8-K
(Commission file number 001-33998) filed
January 17, 2019

Amended and Restated Bylaws of Churchill Downs
Incorporated, as amended July 3, 2012

Exhibit 3.2 to Current Report on Form 8-K
(Commission file number 001-33998) filed July
10, 2012

(a)

Rights Agreement, dated as of March 19, 2008 by and
between Churchill Downs Incorporated and National City
Bank

Exhibit 4.1 to Current Report on Form 8-K
(Commission file number 000-01469) filed
March 17, 2008

(b)

(c)

(d)

(e)

(f)

Indenture, dated as of December 27, 2017, by and among
Churchill Downs Incorporated, the guarantors party thereto
and U.S. Bank National Association

Exhibit 4.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed
December 27, 2017

Indenture, dated as of March 25, 2019, by and among
Churchill Downs Incorporated, the guarantors party thereto
and U.S. Bank National Association

Exhibit 4.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed
March 26, 2019

Registration Rights Agreement, dated as of December 27,
2017, by and among Churchill Downs Incorporated, the
guarantors party thereto and J.P. Morgan Securities LLC

Exhibit 4.2 to Current Report on Form 8-K
(Commission file number 001-33998) filed
December 27, 2017

Registration Rights Agreement, dated as of March 25, 2019,
by and among Churchill Downs Incorporated, the guarantors
party thereto and J.P. Morgan Securities, LLC

Exhibit 4.2 to Current Report on Form 8-K
(Commission file number 001-33998) filed
March 26, 2019

Description of the Registrant’s Securities Registered
Pursuant to Section 12 of the Securities Exchange Act of
1934***

(a)

Churchill Downs Incorporated Amended and Restated
Supplemental Benefit Plan effective December 1, 1998*

(b)

(c)

(d)

(e)

(f)

(g)

Exhibit 10(a) to Annual Report on Form 10-K
(Commission file number 000-01469) for the
fiscal year ended December 31, 1998 filed March
31, 1999

Exhibit 10(a) to Quarterly Report on Form 10-Q
(Commission file number 000-01469) for the
fiscal quarter ended March 31, 2001 filed May
15, 2001

Churchill Downs Incorporated Amended and Restated
Deferred Compensation Plan for Employees and Directors*

Lease Agreement, dated as of January 1, 2002, by and
between the City of Louisville, Kentucky and Churchill
Downs Incorporated

Exhibit 2.1 to Current Report on Form 8-K
(Commission file number 000-01469) filed
January 6, 2003

2005 Churchill Downs Incorporated Deferred Compensation
Plan*

2006 Amendment to 2005 Churchill Downs Incorporated
Deferred Compensation Plan*

Exhibit 10.1 to Current Report on Form 8-K
(Commission file number 000-01469) filed June
21, 2005

Exhibit 10.1 to Current Report on Form 8-K
(Commission file number 000-01469) filed June
8, 2006

Churchill Downs Incorporated 2007 Omnibus Stock
Incentive Plan*

Exhibit A to Schedule 14A (Commission file
number 000-01469) filed April 30, 2007

Amendment to Churchill Downs Incorporated 2005
Deferred Compensation Plan Adopted June 28, 2007*

Exhibit 10(b) to Quarterly Report on Form 10-Q
(Commission file number 000-01469) for the
fiscal quarter ended June 30, 2007 filed August
7, 2007

102

(i)

(j)

(k)

(l)

(n)

(o)

(p)

(q)

(r)

(s)

(t)

(u)

(v)

Numbers

Description

(h)

Third Amendment to the 2005 Churchill Downs
Incorporated Deferred Compensation Plan*

By Reference To

Exhibit 10.2 to Current Report on Form 8-K
(Commission file number 001-33998) filed
December 19, 2019

Amended and Restated Terms and Conditions of
Performance Stock Awards Issued Pursuant to the Churchill
Downs Incorporated 2007 Omnibus Stock Incentive Plan,
dated as of December 19, 2008*

Exhibit 10.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed
December 22, 2008

First Amendment to the Churchill Downs Incorporated
Amended and Restated Incentive Compensation Plan (1997),
effective November 14, 2008*

2005 Churchill Downs Incorporated Deferred Compensation
Plan (As Amended as of December 1, 2008)*

Churchill Downs Incorporated Executive Severance Policy
(Amended Effective as of November 12, 2008)*

(m)

Form of Churchill Downs Incorporated Restricted Stock
Agreement pursuant to the 2007 Omnibus Stock Incentive
Plan*

Exhibit 10 (vv) to Annual Report on Form 10-K
(Commission file number 001-33998) for the
fiscal year ended December 31, 2008 filed March
4, 2009

Exhibit 10 (ww) to Annual Report on Form 10-K
(Commission file number 001-33998) for the
fiscal year ended December 31, 2008 filed March
4, 2009

Exhibit 10 (xx) to Annual Report on Form 10-K
(Commission file number 001-33998) for the
fiscal year ended December 31, 2008 filed March
4, 2009

Exhibit 10(LL) to Annual Report on Form 10-K
(Commission file number 001-33998) for the
fiscal year ended December 31, 2011 filed March
12, 2012

Churchill Downs Incorporated Executive Annual Incentive
Plan, effective January 1, 2013*

Exhibit A to Schedule 14A (Commission file
number 001-33998) filed May 3, 2012

Amendment to the Churchill Downs Incorporated 2007
Omnibus Stock Incentive Plan*

Exhibit B to Schedule 14A (Commission file
number 001-33998) filed May 3, 2012

Form of Restricted Stock Agreement pursuant to the 2007
Omnibus Stock Incentive Plan, dated as of February 9, 2015,
by and between Churchill Downs Incorporated and each of
William C. Carstanjen and William E. Mudd*

Exhibit 10.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed
February 12, 2015

Form of Churchill Downs Incorporated Restricted Stock
Unit Agreement pursuant to the 2007 Omnibus Stock
Incentive Plan*

Exhibit 10.1A to Current Report on Form 8-K
(Commission file number 001-33998) filed
September 28, 2015

Form of Churchill Downs Incorporated Performance Share
Unit Agreement pursuant to the 2007 Omnibus Stock
Incentive Plan*

Exhibit 10.1B to Current Report on Form 8-K
(Commission file number 001-33998) filed
September 28, 2015

Stock Repurchase Agreement, dated as of June 9, 2017, by
and between Churchill Downs Incorporated and CDI
Holdings, LLC

Exhibit 10.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed June
12, 2017

Amended and Restated Stockholder’s Agreement, dated as
of June 9, 2017, by and between Churchill Downs
Incorporated and CDI Holdings, LLC

Exhibit 10.2 to Current Report on Form 8-K
(Commission file number 001-33998) filed June
12, 2017

Credit Agreement, dated as of December 27, 2017, by and
among Churchill Downs Incorporated, the subsidiary
guarantors party thereto, the lenders party thereto, JPMorgan
Chase Bank, N.A. and PNC Bank, National Association

Exhibit 4.3 to Current Report on Form 8-K
(Commission file number 001-33998) filed
December 27, 2017

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Form of Churchill Downs Incorporated Non-Employee
Director Restricted Share Units Agreement*

(w)

Churchill Downs Incorporated 2016 Omnibus Stock
Incentive Plan*

103

Exhibit 10(a) to Quarterly Report on Form 10-Q
(Commission file number 001-33998) for the
fiscal quarter ended June 30, 2016 filed August
3, 2016

Exhibit 10.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed April
29, 2016

Numbers

Description

By Reference To

(x)

(y)

(z)

(aa)

(bb)

(cc)

(dd)

(ee)

(ff)

First Amended and Restated Churchill Downs Incorporated
2000 Employee Stock Purchase Plan*

Exhibit B to Schedule 14A (Commission file
number 001-33998) filed March 29, 2016

Churchill Downs Incorporated Restricted Stock Unit
Deferred Compensation Plan*

Form of Performance Share Unit Agreement pursuant to the
2016 Omnibus Stock Incentive Plan by and between
Churchill Downs Incorporated and each of William C.
Carstanjen and William E. Mudd*

Exhibit 10.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed
December 19, 2019

Exhibit 10.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed
November 5, 2018

Form of Restricted Stock Unit Agreement pursuant to the
2016 Omnibus Stock Incentive Plan by and between
Churchill Downs Incorporated and each of William C.
Carstanjen and William E. Mudd*

Exhibit 10.2 to Current Report on Form 8-K
(Commission file number 001-33998) filed
November 5, 2018

Executive Change in Control, Severance and Indemnity
Agreement, dated as of October 30, 2018, by and between
Churchill Downs Incorporated and William C. Carstanjen*

Exhibit 10.3 to Current Report on Form 8-K
(Commission file number 001-33998) filed
November 5, 2018

Executive Change in Control, Severance and Indemnity
Agreement, dated as of October 30, 2018, by and between
Churchill Downs Incorporated and William E. Mudd*

Exhibit 10.4 to Current Report on Form 8-K
(Commission file number 001-33998) filed
November 5, 2018

Executive Change in Control, Severance and Indemnity
Agreement, dated as of October 12, 2015, by and between
Churchill Downs Incorporated and Marcia A. Dall*

Exhibit 10(ee) to Annual Report on Form 10-K
(Commission file number 001-33998) for the
fiscal year ended December 31, 2018 filed
February 27, 2019

Change in Control, Severance, and Indemnity Agreement,
dated as of October 1, 2019, by and between Churchill
Downs Incorporated and Austin W. Miller*

Exhibit 10.1 to Current Report on Form 8-K
(Commission file number 001-33998) filed
October 2, 2019

First amendment to the Churchill Downs Incorporated
Restricted Stock Unit Deferral Plan, dated as of February 12,
2020***

Subsidiaries of the Registrant***

Consent of PricewaterhouseCoopers LLP, Independent
Registered Public Accounting Firm***

(a)

Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002***

(b)

Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002***

Certification of Chief Executive Officer and Principal
Financial Officer Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (furnished pursuant to Rule 13a-14(b))* ***

101 INS

Inline XBRL Instance Document***

101 SCH Inline XBRL Taxonomy Extension Schema Document***

101 CAL

Inline XBRL Taxonomy Extension Calculation Linkbase
Document***

101 DEF

Inline XBRL Taxonomy Extension Definition Linkbase
Document***

101 LAB Inline XBRL Taxonomy Extension Label Linkbase

Document***

104

Numbers

Description

By Reference To

101 PRE

Inline XBRL Taxonomy Extension Presentation Linkbase
Document***

104

Cover Page Interactive Data File (formatted in inline XBRL
and contained in Exhibit 101)

Management contract or compensatory plan or arrangement.

Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish
supplementally a copy of any omitted schedules to the SEC upon request.

***

Filed herewith.

****

Furnished herewith.

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105

ITEM 16.

FORM 10-K SUMMARY

None.

106

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHURCHILL DOWNS INCORPORATED

SIGNATURES

/s/ William C. Carstanjen

William C. Carstanjen
Chief Executive Officer
(Principal Executive Officer)
February 26, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ William C. Carstanjen
William C. Carstanjen
Chief Executive Officer
February 26, 2020

(Director and Principal Executive
Officer)

/s/ William E. Mudd
William E. Mudd
President and
Chief Operating Officer

February 26, 2020

/s/ R. Alex Rankin
R. Alex Rankin

February 26, 2020
(Chairman of the Board)

/s/ Douglas C. Grissom

Douglas C. Grissom
February 26, 2020

(Director)

/s/ Ulysses L. Bridgeman
Ulysses L. Bridgeman

February 26, 2020
(Director)

/s/ Daniel P. Harrington
Daniel P. Harrington

February 26, 2020

(Director)

/s/ Marcia A. Dall
Marcia A. Dall
Executive Vice President and
Chief Financial Officer

February 26, 2020
(Principal Financial and

Accounting Officer)

/s/ Robert L. Fealy
Robert L. Fealy

February 26, 2020
(Director)

/s/ Karole F. Lloyd

Karole F. Lloyd
February 26, 2020

(Director)

February 26, 2020

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107

CHURCHILL DOWNS INCORPORATED
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(in millions)
Allowance for doubtful accounts:

2019
2018
2017

(in millions)
Deferred income tax asset valuation allowance:

2019
2018
2017

Balance
Beginning
of Year

Charged
to
Expense

Deductions

Balance
End of
Year

4.0
3.6
3.5

2.1
3.0
1.8

(1.7) $
(2.6)
(1.7)

4.4
4.0
3.6

Balance
Beginning
of Year

Additions

Deductions

Balance
End of
Year

0.2
0.2
0.4

— $
—
—

— $
—
(0.2)

0.2
0.2
0.2

108

DIRECTORS AND EXECUTIVE OFFICERS

Directors and Executive Officers

Executive Officers

William C. Carstanjen
Chief Executive Officer

William E. Mudd
President & Chief Operating Officer

Marcia A. Dall
Executive Vice President &
Chief Financial Officer

Austin W. Miller
Senior Vice President, Gaming Operations

Directors Emeriti

Charles W. Bidwill, Jr.
Catesby W. Clay
Craig J. Duchossois
Richard L. Duchossois
J. David Grissom
G. Watts Humphrey, Jr.
James F. McDonald
Thomas H. Meeker
Carl F. Pollard
Darrell R. Wells

Directors

Ulysses L. Bridgeman, Jr.
Owner & CEO
Heartland Coca-Cola Bottling
Company, LLC

William C. Carstanjen
Chief Executive Officer
Churchill Downs Incorporated

Robert L. Fealy
Managing Director
Limerick Investments, LLC

Douglas C. Grissom
Managing Director
Madison Dearborn Partners

Daniel P. Harrington
President & CEO
HTV Industries, Inc.

Karole F. Lloyd
Former Vice Chair and Southeast
Regional Managing Partner,
Ernst & Young, LLC

R. Alex Rankin
Chairman of the Board,
Churchill Downs Incorporated
Chairman, Sterling G. Thompson Co.
President, Upson Downs Farm, Inc.

Paul C. Varga
Former Chairman and CEO
Brown-Forman Corporation

Corporate Office
Churchill Downs Incorporated
600 N. Hurstbourne Parkway
Suite 400
Louisville, KY 40222

Annual Meeting
The Annual Meeting of Shareholders will
convene at 9:00 a.m. local time Tues.,
4/21/20 at the Nemacolin Woodlands
Resort, 1001 Lafayette Drive, Farmington,
Pennsylvania 15437.

Other Information
Copies of our 2019 Form 10-K and other
filings with the Securities and Exchange
Commission may be obtained without
charge by contacting our corporate office or
through our website:
www.churchilldownsincorporated.com

Stock Information
Churchill Downs Incorporated is
traded on the NASDAQ Global
Market under the ticker symbol
“CHDN.”

Transfer Agent and Registrar
American Stock Transfer & Trust
Company, LLC
59 Maiden Lane, Plaza Level
New York, NY 10038
Tel: (877) 715-0510

600 N. Hurstbourne Parkway, Ste. 400
Louisville, Kentucky 40222
Telephone: 502.636.4400
www.churchilldownsincorporated.com