Churchill Downs Annual Report 2020

FY2020 Annual Report · Churchill Downs

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Notice of Annual Meeting of Shareholders
2021 Proxy Statement
2020 Annual Report on Form 10-K

Chairman and CEO’s Message

Dear Fellow Shareholders,

Our country faced unprecedented challenges in 2020 stemming from the COVID-19 global pandemic.

Our leadership teams’ quick actions to reduce our cost structure, preserve capital and provide additional financial resources
in response to this crisis reflected the resilience necessary to weather these difficult times. We are proud of how our
leadership team and our team members reacted quickly to the pandemic’s threat to our company and we want to
personally thank each of them for their commitment and dedication. Their actions enabled our properties to reopen safely
for our team members, our guests, and our communities.

In 2020, despite the adversity that our team faced, our portfolio of businesses still generated over $1 billion of revenue and
$287 million of Adjusted EBITDA. Also, we had a total shareholder return in 2020 of 43%—a return that significantly
exceeded the S&P 500, the Russell 2000, and the S&P Midcap 400 Index. We are especially proud of the following 2020
accomplishments:

In a very challenging environment, we safely ran the 146th Kentucky Derby, spectator-free on the first Saturday of
September, generating double digit positive EBITDA. We protected the safety of our community and team members
and also protected the reputation, the brand, and the long-term value of this iconic asset.

Our TwinSpires Horse Racing business delivered record revenue and Adjusted EBITDA.

The margin for our wholly-owned casino properties in the second half of 2020 was up 690 basis points excluding
quarterly results for properties that were closed during this period.

Š We now have three historical racing machine (HRM) facilities that have generated nearly 600 full-time equivalent jobs
for Kentucky and generated substantial purse money for Kentucky’s racetracks which in turn fuels the entire Kentucky
horse industry.

–

Our Derby City Gaming business generated more Adjusted EBITDA in 2020 than in 2019 despite being closed for
approximately 100 days in 2020.

– We opened our Oak Grove Racing, Gaming & Hotel Facility including a hotel in southwest Kentucky, in mid-

September 2020 and we opened our Newport Racing and Gaming Facility in Newport, Kentucky in October 2020.

2021 is a transition year for our company. We have already begun to reinvigorate our organic growth plans:

Š We remain committed to protecting and building our iconic asset—The Kentucky Derby. We will announce an updated

expansion plan for Churchill Downs Racetrack.

Š We are building our Turfway Park HRM facility.

Š We will further invest in and grow our Derby City Gaming, Oak Grove and Newport properties.

Š We are building an expansion at Rivers Casino Des Plaines.

Š We will remain disciplined in growing our TwinSpires Horse Racing business—the most profitable online wagering

platform - and building a long-term profitable TwinSpires Sports and Casino business.

Š We will remain focused on maintaining safety and health protocols as we efficiently grow our gaming properties and

acquire strategic gaming properties at reasonable multiples.

We remain thoughtful stewards of our shareholders’ capital and will invest capital to create long-term shareholder value
while maintaining capacity for dividend growth and opportunistic share repurchases. We are well-positioned to capitalize
on our growth pipeline as we return to lower leverage levels. We look forward to our businesses returning to full throttle,
accelerating the growth from our newer properties, and executing our organic growth opportunities over the coming 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

2018

2019

2020

$ 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

$ 1,054
60
$
13
$
$
0.33
$ 286.5

$ 2,686
$ 1,622
$ 2,319
367
$

$
$

142
23
5.4x

$ 0.622
$
28
$ 194.79
$ 7,690
$ 9,312

TOTAL SHAREHOLDER RETURN(3)

1 Year

3 Year

155%

5 Year

325%

18%

14%

20%

43%

49%

28%

34%

103%

79%

86%

S&P
500

S&P Midcap
400

Russell
2000

CHDN

S&P
500

S&P Midcap
400

Russell
2000

CHD

S&P
500

S&P Midcap
400

Russell
2000

CHDN

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, 2020 filed with the SEC on February 24, 2021 for a
discussion of Adjusted EBITDA, a non-GAAP financial measure, and a reconciliation to the most directly comparable
GAAP measure.

Net leverage ratio is the ratio of total debt (less cash) to Adjusted EBITDA.

Total Shareholder Return (“TSR”) assumes dividends are reinvested. One year TSR is calculated from December 31,
2019 to December 31, 2020. Three year TSR is calculated from December 31, 2017 to December 31, 2020. Five year
TSR is calculated from December 31, 2015 to December 31, 2020.

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

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

DATE AND TIME:

Tuesday, April 20, 2021, at 9:00 a.m. Eastern Time

PLACE:

Via a live audio-only webcast at www.proxydocs.com/CHDN. There is no physical location for
the 2021 Annual Meeting.

AGENDA:

II.

To elect the three (3) Class I 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 2021 (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 1, 2021, 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.

To attend and vote during the Annual Meeting visit www.proxydocs.com/CHDN. All
shareholders, including those who expect to attend the Annual Meeting virtually, are urged
to vote prior to the Annual Meeting by telephone or 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 11, 2021

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 20, 2021

The Company’s Proxy Statement for the 2021 Annual Meeting of Shareholders and the Annual Report to
Shareholders for the fiscal year ended December 31, 2020 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 20, 2021 . . .
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Continuing Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement Age Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Emeritus Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Compensation for Fiscal Year Ended December 31, 2020 . . .
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
2021 (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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of the COVID-19 Pandemic; 2020 Highlights . . . . . . . . . .
Impact of COVID-19 on 2020 Key Compensation Elements . . . . .
Key 2020 Compensation Actions . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation Philosophy and Core Principles . . . . . .

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Table of Contents

2020 “Say-on-Pay” Advisory Vote on Executive Compensation . . . .
Role of Management and Independent Advisors . . . . . . . . . . . . .
Factors Used to Evaluate Pay Decisions . . . . . . . . . . . . . . . . . . . .
Non-Disclosure of Certain Metrics and Targets . . . . . . . . . . . . . .
Components of Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Annual Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Component (75%)
Qualitative Component (25%)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary of 2020 EAIP Awards . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Stock Ownership Guidelines . . . . . . . . . . . . . . . . . . . . .
Anti-Hedging Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clawback Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Compensation and Other Benefits . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Report

2020 Summary Compensation Table

All Other Compensation for Fiscal Year Ended

December 31, 2020

Grants of Plan-Based Awards for Fiscal Year Ended

December 31, 2020

Outstanding Equity Awards at Fiscal Year-End for

Fiscal Year Ended December 31, 2020

Stock Vested for Fiscal Year Ended December 31, 2020

Nonqualified Deferred Compensation for Fiscal Year

Ended December 31, 2020

Potential Payments Upon Termination or Change of

Control

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

Pay Ratio

Identification of Median Employee . . . . . . . . . . . . . . . . . . . . . . . .
Ratio (2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity Compensation Plan Information

Certain Relationships and Related Transactions

Churchill Downs Incorporated Audit Committee

Report

Multiple Shareholders Sharing the Same Address

Proposals by Shareholders

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2021 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 20, 2021

The Board of Directors (the “Board of Directors” or “Board”) of Churchill Downs Incorporated (“Company” “or “CHDN”) is
soliciting proxies to be voted at the 2021 Annual Meeting of Shareholders to be held on Tuesday, April 20, 2021, at
9:00 a.m. Eastern Time (the “Annual Meeting”), and at any adjournment or postponement thereof. In light of the ongoing
COVID-19 pandemic, for the safety of our employees, directors and shareholders, we have determined that the Annual
Meeting will be held in a virtual meeting format only, via the Internet, with no physical in-person meeting. You will be able
to attend and participate in the Annual Meeting online by visiting www.proxydocs.com/CHDN. 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 11, 2021.

Voting Rights

Only holders of record of the Company’s Common Stock, no par value (“Common Stock”), on March 1, 2021 (the “Record
Date”), are entitled to notice of and to vote at the Annual Meeting. On that date, 38,521,617 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.

To ensure the presence of a quorum, please vote over the Internet, by telephone or by mail 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 2021; (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.

2021 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 20, 2021 at 9:00 a.m. Eastern Time online at www.proxydocs.com/CHDN.

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 11, 2021, we began mailing a Notice to our shareholders containing instructions on how to access this Proxy
Statement and our 2020 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 2020 Annual Report on Form 10-K
are also available at http://www.churchilldownsincorporated.com/proxy.

Who can vote and ask questions 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 1, 2021). On
that date, 38,521,617 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.

To vote and ask questions during the Annual Meeting, you must be properly logged into the meeting website, as explained
below under “What do I need to attend, and vote at, the Annual Meeting?” We will respond to questions submitted that
are applicable to our business and otherwise in compliance with the rules of conduct for the meeting.

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 by virtual attendance 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?

In order to attend the Annual Meeting, you must register in advance at www.proxydocs.com/CHDN prior to the deadline of
April 16, 2021 at 5:00 p.m. (Eastern Time). Upon completing your registration, you will receive further instructions via
email, including your unique link that will allow you access to the Annual Meeting and to submit questions prior to the
Annual Meeting. Only CHDN shareholders of record as of the close of business on the Record Date will be permitted to
attend the Annual Meeting. If you hold shares in “street name,” you will also need a valid “legal proxy” in order to vote at
the Annual Meeting, which you can obtain by contacting your account representative at the broker, bank or similar
institution through which you hold your shares. This legal proxy must be submitted with your registration to be able to vote
your shares at the Annual Meeting.

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 I 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 2021 (Proposal No. 2); and

2 | 2021 Proxy Statement

Proxy Statement

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.

How does the Board of Directors recommend I vote?

CHDN’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 2021.

“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 time of 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.

During the Annual Meeting. To vote during the live webcast of the Annual Meeting, you must first register at
www.proxydocs.com/CHDN. Upon completing your registration, you will receive further instructions via email,
including your unique link that will allow you access to the Annual Meeting and to submit questions prior to the Annual
Meeting. Please be sure to follow instructions found on your proxy card and/or voting authorization form and
subsequent instructions that will be delivered to you via email. Shareholders will be able to attend the Annual Meeting
platform with the webcast beginning at 8:45 a.m. (Eastern Time) on April 20, 2021 pursuant to the unique access
instructions they receive following their registration at www.proxydocs.com/CHDN.

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 during the virtual 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;

2021 Proxy Statement | 3

Proxy Statement

Giving written notice of revocation to CHDN’s Secretary at 600 N. Hurstbourne Parkway, Ste. 400, Louisville, Kentucky
40222 that is received by CHDN prior to 11:59 p.m., Eastern Time, on April 19, 2021; or

Voting during the virtual Annual Meeting.

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 2021. 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 2021, 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 2021.

“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 2021; 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 | 2021 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—2020 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 38,521,617 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

4,949,949(1)

12.85

The Vanguard Group, Inc. and affiliates

3,289,869(2)

8.54

100 Vanguard Blvd.
Malvern, PA 19355

FMR LLC and affiliates
245 Summer Street.
Boston, MA 02210

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%.

3,509,049(3)

9.11

2,617,773(4)

6.80

21,840(5)

56, 695(6)

8,198(7)

628,297(8)

14,011(9)

43,288(10)

9,781(11)

544,807(12)

254,403(13)

41,146(14)

27,341(15)

1,649,807(16)

0.15

1.63

0.11

1.41

0.66

0.11

0.07

4.28

(1) Based on a Schedule 13G/A filed with the SEC on January 27, 2021, reporting the beneficial ownership of BlackRock, Inc. and its
subsidiaries specified therein (“BlackRock”) as of December 31, 2020. As reported in such filing, BlackRock has sole voting power
over 4,896,838 shares, sole dispositive power over 4,949,949 shares and no shared voting or dispositive power over any shares.

(2) Based on a Schedule 13G/A filed with the SEC on February 10, 2021, reporting the beneficial ownership of The Vanguard Group and

its subsidiaries specified therein (“Vanguard”) as of December 31, 2020. As reported in such filing, Vanguard has sole voting power
over 0 shares, sole dispositive power over 3,175,819 shares, shared voting power over 86,631 shares and shared dispositive power
over 114,050 shares.

(3) Based on a Schedule 13G/A filed with the SEC on February 8, 2021, reporting the beneficial ownership of FMR LLC and its

subsidiaries specified therein (“FMR”) as of December 31, 2020. As reported in such filing, FMR has sole voting power over 123,317
shares, sole dispositive power over 3,509,049 shares, and no shared voting or dispositive power over any shares.

2021 Proxy Statement | 5

Proxy Statement

(4) Based on a Schedule 13D/A filed with the SEC on February 2, 2021, reporting the beneficial ownership of (i) The Duchossois Group,

Inc. (“TDG”), (ii) Richard L. Duchossois, (iii) CDI Holdings LLC (“Holdings”), and (iv) Craig J. Duchossois, as of February 1, 2021. TDG
and Holdings reported shared dispositive power over 2,000,000 shares. Richard L. Duchossois reported sole voting and dispositive
power over 617,773 shares. Craig J. Duchossois reported sole voting and dispositive power over 120,000 shares. For purposes of
Rule 13d-3, Richard and Craig Duchossois may be deemed to share beneficial ownership of the Holdings shares. Both Richard and
Craig Duchossois disclaim beneficial ownership of the Holdings shares. On February 1, 2021, the Company entered into an
agreement with Holdings to repurchase 1,000,000 shares. See page 52 “Certain Relationships and Related Transactions” for more
information.

(5)

(6)

(7)

Includes 5,740 deferred stock units, which Mr. Bridgeman has elected to defer pursuant to the Company’s deferred compensation
plan. Also includes 16,100 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.

Includes 35,107 deferred stock units, which Mr. Fealy has elected to defer pursuant to the Company’s deferred compensation plan.
Also includes 21,588 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 3,187 deferred stock units, which Mr. Grissom has elected to defer pursuant to the Company’s deferred compensation
plan. Also includes 5,011 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.

(8) Mr. Harrington shares voting and investment power with respect to 572,676 shares held by TVI Corp. He specifically disclaims

beneficial ownership of these shares. Figure illustrated includes 34,033 deferred stock units, which Mr. Harrington has elected to
defer pursuant to the Company’s deferred compensation plan. Also includes 21,588 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.

(9)

Includes 5,011 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.

(10) Includes 21,588 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.

(11) Includes 1,781 restricted stock units awarded by the Company for his board service, over which Mr. Varga has neither voting nor

dispositive power until immediately following his resignation or retirement from the Board.

(12) Excludes 6,864 restricted stock units deferred under the Company’s Deferral Plan. Excludes 88,412 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, 2021, at which time 22,427 units shall vest without
restriction; December 31, 2022, at which time 12,069 units shall vest without restriction; December 31, 2023, at which time 5,205
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 181,898 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, 2021, at which time the performance period ends with regard to 33,719
PSUs; December 31, 2022, at which time the performance period ends with regard to 20,592 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,
2021 through December 31, 2023.

(13) Excludes 48,171 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, 2021, at which time
9,875 units shall vest without restriction; December 31, 2022, at which time 5,486 units shall vest without restriction; December 31,
2023, at which time 2,366 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
103,391 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, 2021, at which time the performance period ends with regard to 14,288 PSUs;
December 31, 2022, at which time the performance period ends with regard to 9,360 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,

6 | 2021 Proxy Statement

Proxy Statement

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, 2021 through December 31, 2023.

(14) Excludes 1,352 restricted stock units deferred under the Company’s Deferral Plan. Excludes 8,185 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, 2021, at which time 4,467 units shall vest without restriction;
December 31, 2022, at which time 2,535 units shall vest without restriction; and December 31, 2023, at which time the remaining
1,183 units shall vest without restriction. Excludes 10,343 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, 2021, at which time the
performance period ends with regard to 6,287 PSUs; and December 31, 2022, at which time the performance period ends with
regard to the remaining 4,056 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, 2021 through December 31, 2023.

(15) Excludes 6,352 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, 2021, at which time
3,576 units shall vest without restriction; December 31, 2022, at which time 1,908 units shall vest without restriction; and
December 31, 2023, at which time the remaining 868 units shall vest without restriction. Excludes 6,549 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, 2021, at which time the performance period ends with regard to 3,429 PSUs; and December 31, 2021, at which time
the performance period ends with regard to the remaining 3,120 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, 2021 through
December 31, 2023.

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

2021 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: 53

William E. Mudd(2)
Age: 49

Marcia A. Dall(3)
Age: 57

Austin W. Miller(4)
Age: 57

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. Mr. 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 | 2021 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 I of the Board
of Directors and to hold office for a term of three (3) years expiring at the 2024 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 I. The nominees currently serve as members of
Class I 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 I named below.

2021 Proxy Statement | 9

Election of Directors (Proposal No. 1)

Election of Directors

The following table sets forth information relating to the Class I director nominees of the Company who are proposed to
the shareholders for election to serve as directors for a term of three (3) years, expiring at the 2024 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 I—Nominated for Terms Expiring in 2024

William C. Carstanjen
Age: 53
Director since 2015

Karole F. Lloyd
Age: 62
Director since 2018

Paul C. Varga
Age: 57
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 the Company’s
President and Chief Operating Officer (2011-2014), the Company’c Chief Operating Officer (2009-
2011) and as Executive Vice President, General Counsel and Chief Development Officer for the
Company (2005-2009). Mr. Carstanjen joined the Company 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 the Company. Throughout his tenure, Mr. Carstanjen has led the
Company’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.
Mrs. Lloyd is the retired Vice Chair and Southeast Regional Managing Partner for Ernst & Young LLP
(“EY”). From 2009 through her retirement in 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, Mrs. 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. Mrs. 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. Mrs. 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.

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 | 2021 Proxy Statement

Continuing Directors

The following tables set forth information relating to the Class II and Class III 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 II—Terms Expiring in 2022

Ulysses L. Bridgeman, Jr.
Age: 67
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, the West End School, and Central Bank and Trust Company as a member of the
Audit Committee. 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: 65
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 3,200 grants totaling over $610 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

5 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.

2021 Proxy Statement | 11

Election of Directors (Proposal No. 1)

Class III—Terms Expiring in 2023

Robert L. Fealy
Age: 69
Director since 2000

Douglas C. Grissom
Age: 53
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 Group, Inc., 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; and Partner, Social Venture Partners.

Mr. Grissom serves as a Managing Director of Madison Dearborn Partners’ (“MDP”). 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, and Fleet Complete. In
addition, he was formerly on the Boards of Directors of @stake, Aderant, Asurion, Cbeyond, Fieldglass,
Great Lakes Dredge and Dock Corporation, Intelsat, LGS Innovations, Lightspeed Systems, LinQuest
Corporation 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: 65
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.

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-two (72) years of
age on the date of election. No director nominees in Class I will have met the mandatory retirement age as of the date of
the Annual Meeting.

12 | 2021 Proxy Statement

Election of Directors (Proposal No. 1)

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.

Director Compensation for Fiscal Year Ended December 31, 2020

During the first quarter of 2020, 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 did not change from the compensation levels set for
2019.

Board of Directors

Compensation Committee

Nominating and Governance Committee

Audit Committee

Original Board Fees
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 also 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) Represents additional fee for serving as non-employee Chairman of the Board of Directors.

Effective as of the second quarter of 2020, due to the worsening trajectory of the COVID-19 global pandemic, the Board of
Directors reduced its compensation as set forth below (all fees shown are annualized fees, except for meeting fees).

Board of Directors

Compensation Committee

Nominating and Governance Committee

Audit Committee

Reduced Board Fees
Retainer
Fee ($)(1)

37,500

Meeting
Fees ($)(2)

Stock
Awards ($)(3)

Chairman
Fee ($)

Non-Chairman
Fee ($)

1,000

155,000

75,000(4)

12,500

10,000

17,500

6,250

5,000

7,500

(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 RSUs, with an aggregate grant date fair value of $155,000.

(4) Represents additional fee for serving as non-employee Chairman of the Board of Directors.

2021 Proxy Statement | 13

Election of Directors (Proposal No. 1)

In accordance with the fees described on the previous page, in 2020, 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 2020 Summary Compensation Table on page 41 for a summary of the compensation paid to
our CEO with respect to 2020.

Name

Ulysses L. Bridgeman, Jr.

Robert L. Fealy

Douglas C. Grissom

Daniel P. Harrington

Karole F. Lloyd

R. Alex Rankin

Paul C. Varga

Fees earned or
paid in cash ($)

Stock
Awards ($)(2)

80,500(1)

155,000

87,188(1)

155,000

80,938(1)

155,000

93,875(1)

155,000

93,000

151,625

66,328

155,000

Total ($)

235,500

242,188

235,938

248,875

248,000

306,625

221,328

(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 2020, Mr. Grissom and Mr. Harrington deferred all of
their 2020 directors’ fees into a deferred share account under the plan, while Mr. Bridgeman deferred 50% of his 2020
directors’ fees into a deferred share account under the plan. As of December 31, 2020, Mr. Bridgeman had 5,723
deferred shares, Mr. Fealy had 35,001 deferred shares, Mr. Grissom had 3,177 deferred shares, and Mr. Harrington
had 33,930 deferred shares under the plan.

(2) On April 21, 2020, each non-employee director 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, 2020, Mr. Bridgeman had 16,052 RSUs, Mr. Fealy had 21,523 RSUs, Mr. Grissom had
4,996 RSUs, Mr. Harrington had 21,523 RSUs, Ms. Lloyd had 4,996 RSUs, Mr. Rankin had 21,523 RSUs, and Mr. Varga
had 1,776 RSUs.

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. 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,
2020, 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

14 | 2021 Proxy Statement

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. Directors are also subject to the same anti-hedging policy as the Company’s officers and employees.

Election of Directors (Proposal No. 1)

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)

21,774

$ 4,241,431

56,524

$ 11,010,392

8,173

$ 1,592,030

628,129

$122,353,285

13,996

$ 2,726,296

41,223

$ 8,029,818

9,776

$ 1,904,207

Met
Guidelines
✓

✓

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

(2)

Calculated as of December 31, 2020 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 $194.79 as of December 31, 2020.

2021 Proxy Statement | 15

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
“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. Enterprise risk management 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, including quarterly reports
on cyber security matters. 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.

16 | 2021 Proxy Statement

Corporate Governance

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
Board with an assessment of the Board’s performance and how its committees are functioning. This is 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

Eight (8) 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 attended the Company’s annual meeting on April 20, 2020.

The Board has determined that all of the directors of the Company who served during any part of the last completed fiscal
year are “independent directors,” as defined under Nasdaq Rule 5605(a)(2), except William C. Carstanjen, due to his
position as CEO of the Company. In making such determination with regard to Mr. Rankin, the Board considered that the
Company employs his son, Hunter Rankin, as Senior Director of Racing. Hunter Rankin is not an executive officer of the
Company. See “Certain Relationships and Related Transactions” for additional details regarding Hunter Rankin’s
employment with the Company.

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 2020.

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

Compensation
Committee

Nominating and
Governance Committee

Member

Member Member

Member

Member Member Member

Chair

Member

Chair

Member

Chair

Member

Number of meetings in 2020

= Ex-officio Member

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.

2021 Proxy Statement | 17

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.

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.

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.

18 | 2021 Proxy Statement

Corporate Governance

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 approve 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 2020 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.

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 2020, 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

2021 Proxy Statement | 19

Corporate Governance

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 and is responsible for identifying,
evaluating and recommending individuals qualified to become members of the Board, overseeing annual performance of
the Board and Committees, and 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
environmental, sustainability and governance efforts and progress and corporate governance policies.

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.

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, including 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 and recommends changes to the Board. It also evaluates the performance of the Board 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 leadership 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.

20 | 2021 Proxy Statement

Proposal to Ratify the Appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public
Accounting Firm for 2021 (Proposal No. 2)

PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR 2021 (Proposal No. 2)

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, 2021. 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 2021.

2021 Proxy Statement | 21

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, 2020, were
$1,650,000 and (ii) for the year ended December 31, 2019, were $2,331,950. 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

The Company incurred fees in the amount of $3,800 for each of 2020 and 2019 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 2020, were $0 and (ii) in 2019, were $125,000. 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 2020 and 2019. 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 2020.

22 | 2021 Proxy Statement

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.

2021 Proxy Statement | 23

Compensation Discussion and Analysis

COMPENSATION DISCUSSION AND ANALYSIS

Table of Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Impact of the COVID-19 Pandemic; 2020 Highlights . . . . . . . . . . . . . . . . . . . . . . 25
Impact of COVID-19 on 2020 Key Compensation Elements . . . . . . . . . . . . . . . . . 27
Key 2020 Compensation Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Executive Compensation Philosophy and Core Principles . . . . . . . . . . . . . . . . . . 29
2020 “Say-on-Pay” Advisory Vote on Executive Compensation . . . . . . . . . . . . . 29
Role of Management and Independent Advisors . . . . . . . . . . . . . . . . . . . . . . . . 29
Factors Used to Evaluate Pay Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Non-Disclosure of Certain Metrics and Targets . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Components of Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Executive Annual Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Long-Term Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Executive Stock Ownership Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Anti-Hedging Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Clawback Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Deferred Compensation and Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

This Compensation Discussion and Analysis (our “CD&A”) provides an overview of our executive compensation program for
2020 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

We believe the executive compensation program for 2020 properly recognized and rewarded our NEOs for the Company’s
strong momentum entering 2020 and their significant contributions and quick shift of focus to mitigate the impact of
COVID-19 on operations.

24 | 2021 Proxy Statement

Compensation Discussion and Analysis

Executive Summary

Churchill Downs Incorporated is an industry-leading racing, gaming, and online wagering and gaming entertainment
company anchored by our iconic flagship event, the Kentucky Derby. We own and operate three gaming entertainment
venues with approximately 3,050 historical racing machines (“HRMs”) in Kentucky. We also own and operate TwinSpires,
one of the largest and most profitable online wagering platforms for horse race, sports, and iGaming in the U.S. and we
have seven retail sportsbooks. We are also a leader in brick-and-mortar casino gaming in eight states with approximately
11,000 slot machines and video lottery terminals and 200 table games.

In 2020, our executive management, leaders, and team members of our Company faced unprecedented challenges as a
result of the COVID-19 global pandemic. Our leadership team and team members demonstrated nimbleness, resilience and
fortitude as they developed and executed action plans to protect the long-term value of our iconic asset - The Kentucky
Derby and to quickly reduce costs and conserve cash flow as the pandemic began to impact our properties. The Company’s
actions protected the long-term value of our assets while successfully managing our liquidity to preserve our ability to
invest in long-term organic growth opportunities and pay dividends. The feedback from our investors confirmed and
supported our actions. As a result, the Company’s total shareholder return was 43% for 2020 compared to 20% for the
Russell 2000 and 18% for the S&P 500. The Company’s five-year total shareholder return for 2020 was 325% compared to
86% for the Russell 2000 and 103% for the S&P 500.

Impact of the COVID-19 Pandemic; 2020 Highlights

The Company reacted quickly to significant threats to the Company’s long-term financial health by taking the following
actions.
Š

Property closures and re-openings

–

Implemented immediate employee, customer, and regulatory communications, safety and health protocols,
return to work protocols, work-from-home practices and other facility actions to protect our team members, our
customers, our communities, and our Company’s assets when governmental authorities ordered the closure and
subsequent reopening of nearly all of our properties.

Furloughed nearly all of our employees at the closed properties during the closure periods and implemented
graduated salary reductions based on the level of pay for executive management and all salaried professionals
who were not furloughed.

Executed immediate operational cost reduction actions to offset the loss of revenue.

Immediately prioritized maintenance and capital projects and stopped all non-priority capital projects.

Negotiated a waiver of our financial covenants for our Credit Agreement while retaining the ability to grow organically,
make acquisitions, and pay dividends.

Š Made the difficult decision – but one that our investors have applauded as the right decision—to run the Kentucky

Oaks and Kentucky Derby without spectators to protect the long-term value of these iconic assets.

Communicated with equity and debt investors and rating agencies on an ongoing basis regarding the status of the
Company’s operations, financial health, and long-term strategy to provide reassurance on the long-term financial
health and strategic direction of the Company.

Churchill Downs Segment
Š

Churchill Downs Racetrack

–

The Governor of the Commonwealth of Kentucky had banned horse racing and other activities for the first
Saturday in May. We negotiated a new date and time frame with NBC on the first weekend in September 2020
and modified our safety protocols to conduct the 146th running of the Kentucky Derby.

The Kentucky Oaks and Kentucky Derby were held on September 4th and 5th without spectators in a challenging
environment and delivered positive Adjusted EBITDA despite the loss of ticket revenue, fewer sponsorships, and
lower wagering during Derby Week.

Our team members implemented extensive COVID-19 testing and processes and procedures to hold a shortened
Spring Meet with no spectators and the September Meet and Fall Meet with restrictions on patron capacity.

The state-of-the-art equine medical center and quarantine barns on the backside area of our track were
completed in April 2020, which reflects our ongoing commitment to equine and jockey safety and supports our
long-term international growth strategy. We also implemented other equine safety initiatives led by our on-staff

2021 Proxy Statement | 25

Compensation Discussion and Analysis

veterinarian, including entry restrictions, medication restrictions, and other actions to improve the safety of the
equine athletes and jockeys and supported federal legislation that resulted in the Horseracing Integrity and Safety
Act being signed into law on December 28, 2020.

Derby City Gaming

–

Derby City Gaming delivered record Adjusted EBITDA in 2020 despite a temporary closure from March 15, 2020 to
June 8, 2020 as a result of the COVID-19 global pandemic.

– We added a second patio to the facility that allows for smoking and provided an additional 8,000 square-feet of

gaming space and 225 HRMs.

–

Our team members developed partnerships with Scientific Games, IGT, and Konami to add their leading game
titles on the HRMs at our Derby City Gaming, Oak Grove, Newport, and future HRM facilities.

Online Wagering Segment

TwinSpires Horse Racing

–

Handle grew from $1.46 billion to $1.98 billion, up $521.0 million, or 35.8%, over 2019 and compared to a decline
in industry handle of 1.0%.

Net revenue grew from $291.0 million to $405.0 million, up $114.0 million, or 39.2%, over 2019.

The business delivered record Adjusted EBITDA of $126.8 million, up $48.4 million, or 61.7%, over 2019.

TwinSpires Sports and Casino

– We signed multi-year agreements with GAN Limited and Kambi Group PLC to provide player account

management, casino platform, sports trading, and risk management services. We also announced the transition
from the BetAmerica brand to the TwinSpires brand.

– We opened a retail sportsbook at Bronco Billy’s Casino in Cripple Creek, Colorado and at Island Resort & Casino in

Harris, Michigan. We have also launched our sportsbook and casino app in Michigan.

Gaming

The Gaming Segment delivered $176.7 million of Adjusted EBITDA, a decrease of $104.2 million, or 37.1% from 2019
despite multiple property closures and ongoing patron capacity restrictions as a result of the COVID-19 global
pandemic.

The team delivered wholly-owned casino margins of 36.6% in the second half of 2020, up 690 basis points from 2019
excluding properties that were closed during part of the second half of 2020.

Our leaders and team members developed and implemented changes to our amenities, modified our gaming floors,
enhanced our cleaning and safety protocols, provided safety equipment and protective gear to our team members,
and conducted extensive training to enable our properties to safely reopen with patron capacity restrictions.

All Other

Oak Grove Racing, Gaming & Hotel (“Oak Grove”) - We opened a simulcast and HRM facility in Oak Grove, Kentucky
with approximately 1,325 HRMs, a 128-room hotel, an event center, and food and beverage venues. The 1,200-person
grandstand, 3,000-person capacity outdoor amphitheater and stage, a state-of-the-art equestrian center, and a
recreational vehicle park will open in early 2021.

Newport Racing and Gaming (“Newport”) - We opened a pari-mutuel simulcast area, a 17,000 square foot gaming floor
with approximately 500 HRMs, and a feature bar in Newport, Kentucky, as an extension of Turfway Park.

Š We entered into an agreement in principle to settle the Kater Litigation and Thimmegowda Litigation where the
Company will pay $124.0 million pre-tax of the settlement and Aristocrat will pay $31.0 million pre-tax of the
settlement. Aristocrat released the Company of any and all indemnification obligations related to Big Fish Games.

On March 16, 2020, we entered into the First Amendment to our Credit Agreement which extended the maturity of
the Company’s Revolver, lowers the pricing schedule for all levels of the pricing grid, and reduces the commitment fee.

26 | 2021 Proxy Statement

Compensation Discussion and Analysis

Š We entered into a Second Amendment to our Credit Agreement to provide financial covenant relief through the
financial reporting date for second quarter 2021 and limited restricted payments to $26.0 million for this period.

Š We formed a Diversity Council and conducted Diversity and Inclusion training for leaders and full-time team members

in our Company.

(1) 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, 2020 for reconciliation of these metrics to the most
directly comparable GAAP measures.

Impact of COVID-19 on 2020 Key Compensation Elements

To address the uncertainty and disruption caused by the pandemic, we took the following actions with respect to the 2020
executive compensation program.

Base Salary: The Company implemented a temporary graduated salary reduction for all non-furloughed employees
based on a percentage that varied dependent upon the amount of each employee’s salary. The most senior level of
executive management received the largest salary decrease, based on both percentage and dollar amount.
Specifically, Bill Carstanjen, Bill Mudd, Marcia Dall, and Austin Miller took voluntary salary reductions of 31.4%, 24.7%,
18.8%, and 15.7%, respectively, for a period of 18 weeks.

Executive Annual Incentive Plan (EAIP): The 2020 financial goals for our annual incentive plan were originally set in
February 2020 before the onset of the pandemic. By the second quarter of 2020, as the trajectory of the pandemic
worsened, it became clear that the pre-pandemic goals were unlikely to be achieved. In ongoing discussions
throughout 2020, the Compensation Committee of the Board (the “Compensation Committee” or “Committee”)
considered various alternatives to adjust the EAIP in recognition of the unforeseeable impact of the pandemic. Rather
than overriding the EAIP financial goal in its entirety and using discretion instead, the Committee determined to retain
the core EAIP design but recalibrate the threshold-to-target performance curve (from the originally established 80% to
100% curve, modified to a 0% to 100% curve) to appropriately incentivize and reward performance in the challenging
COVID-19 operating environment. The Committee viewed this approach as most consistent with its performance-
based compensation philosophy because it balanced the payout benefit provided by the recalibration with its
expectation of accountability for actual performance.

Executive Long-Term Incentive Plan (ELTI): The performance goals for outstanding performance stock units (“PSUs”)
are based on cumulative three year Adjusted EBITDA and cash flow metrics. The 2020 component of these cumulative
goals was rendered obsolete by the pandemic. Because of the difficulty of resetting 3-year cumulative goals under the
current circumstances, the Committee determined, pursuant to the adjustment provisions of the 2016 Omnibus Stock
Incentive Plan, to treat the 2020 performance year in the 2018-2020 PSU award cycle as achieved at the target level of
performance. The Committee viewed this approach as most consistent with its performance-based compensation
philosophy, taking into consideration (i) the Company’s strong performance prior to the pandemic, (ii) the Company’s
strong stock price performance, and (iii) the strong leadership demonstrated by our executive leadership team under
challenging conditions.

2021 Proxy Statement | 27

Compensation Discussion and Analysis

Key 2020 Compensation Actions

The primary elements of our total direct compensation program for the NEOs and a summary of the actions taken by the
Committee during 2020 are set forth below.

Link to Business and Talent Strategies

2020 Compensation Actions

Competitive base salaries help attract and
retain executive talent.

Š Merit and market-based increases for

2020.

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.

2020 annual equity-based awards consist
of performance stock units (PSUs) and
restricted stock units (RSUs).

PSUs vest based on achievement of 3-year
Cumulative Adjusted EBITDA and 3-year
Cumulative 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.

Our NEOs took voluntary salary
reductions ranging from 15.7% to 31.4%
for a period of 18 weeks.

Š Merit and market-based increases to

annual cash incentive target opportunities
for 2020.

Extended the threshold-to-target
performance curve (from the originally
established 80% to 100% curve, modified
to a 0% to 100% curve) to appropriately
incentivize and reward performance in
the challenging COVID-19 operating
environment.

Annual cash incentive awards were
earned below target at 78.3%.
Š Merit and market-based increases to

target value of equity awards for 2020.

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 (2020 -2022) and will be earned
based on Adjusted EBITDA (weighted 50%)
and Cash Flow (weighted 50%) goals, with
a relative TSR modifier of +/-25%.

Š With respect to the 2018-2020 PSU

awards, the Committee determined to
treat the 2020 component as achieved at
target.

The 2018-2020 PSUs were earned at
182.8% of target, reflecting strong
pre-pandemic financial performance and
strong relative TSR performance.

RSUs vest over three years in equal
annual installments on December 31,
2020, December 31, 2021 and
December 31, 2022.

Compensation
Component

Base Salary
(Page 30)

Annual Cash Incentive
Compensation
(Page 38)

Long-Term Equity
Incentive
Compensation
(Page 39)

28 | 2021 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

✗ No service based defined benefit pension plans

✓ 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

✓ Annual say-on-pay vote

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 and entrepreneurial 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.

2020 “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 2020, the Company
provided shareholders a “say-on-pay” advisory vote on its executive compensation program, as disclosed in the Company’s
2020 proxy statement. At the 2020 annual meeting of shareholders, approximately 97% of the votes cast for the
“say-on-pay” proposal were in favor of our executive compensation program. At the 2021 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.

Role of Management and Independent Advisors

The Compensation Committee meetings are regularly attended by the CEO, the Senior Vice President of Human Resources,
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
independent members of the Board.

2021 Proxy Statement | 29

Compensation Discussion and Analysis

The Committee also meets 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;

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.

30 | 2021 Proxy Statement

Compensation Discussion and Analysis

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 FW Cook, 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 independent 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. The following companies were included in the fiscal 2020 peer group:

Fiscal 2020 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)

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, Company and individual performance, and consultation with the Committee’s
independent advisor.

Non-Disclosure of Certain Metrics and Targets

The Company strongly believes in transparency and strives to disclose as much information to shareholders as possible
except in situations where we believe that providing full, or even limited, prospective disclosure would be detrimental to
the interests of shareholders. We believe disclosing either annual or long-term targets in advance could provide our
competitors with insight regarding confidential business strategies without meaningfully adding to shareholders’
understanding of the metric. Although the Compensation Committee sets compensation metrics and targets in advance of
applicable performance periods, we have determined it best to not disclose such metrics and targets in advance due to
potential risk to the interests of our shareholders. We disclose such metrics and targets alongside actual performance in our
annual filings following the completion of the applicable performance periods.

2021 Proxy Statement | 31

Compensation Discussion and Analysis

Components of Compensation

During 2020, 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
Compensation Committee believes that the goals that were set for the executives and executive compensation are aligned
with the interests of our investors to support enhancing long-term shareholder value. The following table sets forth the
principal compensation elements of the Company’s 2020 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. 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.

Peer group market analyses were performed for each of the NEO positions, and adjustments were made to the NEOs’
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.

Based on the above considerations, the following adjustments were made to the 2020 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

2019 Base
Salary ($)(1)

2020 Base
Salary ($)(2)

Percent
Increase

1,350,000 1,500,000

1,000,000 1,100,000

643,750

700,000

11.0%

10.0%

8.7%

500,000

550,000

10.0%

(1) Annual rate of base compensation shown as of December 31, 2019.

(2) Annual rate of base compensation shown as of December 31, 2020. Actual salaries paid in 2020 are shown in the 2020

Summary Compensation Table on page 38.

For an 18 week period beginning in March 2020, Bill Carstanjen, Bill Mudd, Marcia Dall, and Austin Miller took voluntary
salary reductions of 31.4%, 24.7%, 18.8%, and 15.7%, respectively. The amounts reported in the table above do not reflect
the application of these voluntary salary reductions.

32 | 2021 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. 75% of the target EAIP award is determined formulaically
based on corporate Adjusted EBITDA performance, and the remaining 25% is based on a qualitative assessment of the
attainment of other financial, strategic, operational and individual goals established by the Committee.

Base Salary

Target
Percentage

75% Financial
Performance

25% Individual
Performance

Payout: 0% - 200%

The target annual incentive opportunity as a percent of annual base salary for each of our NEOs in 2020 was as follows:

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Target Incentive
Award as a
Percentage of
Salary

175%

125%

100%

80%

Target Incentive
Award in ($)

2,625,000

1,375,000

700,000

440,000

Mr. Carstanjen’s, Ms. Dall’s and Mr. Miller’s target incentive award as a percentage of salary was adjusted in 2020 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.

Financial Component (75%)

As noted above, 75% of the target EAIP payout was determined formulaically based on achievement of the annual Adjusted
EBITDA (as defined in 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, 2020) target (the “Financial Component”). In February 2020, the Committee set
an Adjusted EBITDA target of $473.9 million, which was higher than the actual 2019 Adjusted EBITDA performance of
$451.4 million. The Compensation Committee believed at the time that the performance targets were rigorous yet achievable,
and therefore established the targets so that the targets would be achieved, at the target performance level, if the Company
successfully executed against its operating plan for 2020. Because these targets were set in February 2020, these targets were
set prior to the time when the Company could have anticipated or known the impact of the impending COVID-19 pandemic.

Original 2020 EAIP

Threshold

80%

50%

Target

100%

Maximum

Actual

% of Target
Achieved

Payout
%

120%

200%

Achievement %

Payout %

2020 Adjusted EBITDA

($ millions)

$379.1

$473.9

$568.7

$286.5

-0-

Amounts in between based on interpolation between the points

2021 Proxy Statement | 33

Compensation Discussion and Analysis

By the second quarter of 2020, as the trajectory of the pandemic worsened, it became clear that the pre-pandemic Adjusted
EBITDA goals were unlikely to be achieved. The Compensation Committee considered various alternatives to adjusting the
2020 EAIP. However, rather than overriding the Adjusted EBITDA goals in their entirety and instead using discretion, the
Compensation Committee determined to retain the core EAIP design but recalibrated the threshold-to-target performance
curve in order to mitigate the disruption resulting from the pandemic. The Committee viewed this approach as most
consistent with its performance-based compensation philosophy because it directly linked the payout benefit with
accountability for actual performance.

Recalibrated 2020 EAIP

Threshold-to-Target Performance Curve*

Actual

% of Target
Achieved

Adjusted
EBITDA
Payout
%

Achievement
%

Payout %

Adjusted
EBITDA
($ millions)

20%

12.5%

60%

37.5%

80%

50%

100%

$94.8

$284.3

$379.1

$473.9

$286.5

60.5%

37.8%

Amounts in between based on interpolation between the points

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 2020, 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 NEOs (as measured by various factors, including, but not limited to,
continued growth and diversification of the Company’s asset portfolio, 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, revenue performance) 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 Company’s overall financial goals, strategic
goals, and business segment goals, respectively, with no specific weighting attributed to any one goal. In evaluating 2020
performance, in addition to the factors set forth in the preceding section titled Impact of the COVID-19 Pandemic; 2020
Highlights, some of the accomplishments considered by the Committee included:

Reacted quickly to significant threats to the Company’s long-term financial health as a result of the COVID-19 global
pandemic;

Successfully ran the Kentucky Oaks and Kentucky Derby without spectators to protect the long-term value of these
iconic assets;

Grew TwinSpires handle $521 million, or 35.8%, compared to prior year and nearly 37 points higher than the industry;

Launched retail sports betting in Colorado and Michigan;

Negotiated and executed multi-year agreements with GAN Limited and Kambi Group PLC to provide player accounts
management, casino platform, sports trading and risk management services;

Transitioned retail sportsbooks at the Company’s gaming properties from the BetAmerica brand to the TwinSpires
brand;

Opened its harness racing, simulcast, HRM and hotel facility at Oak Grove;

Purchased the remaining non-controlling interests of WKY Development, LLC, a joint venture that owns Oak Grove,
from Keeneland Association, Inc. for $3.0 million;

Opened Newport as an extension of Turfway Park, offering simulcast and HRM; and

Negotiated and executed an agreement in principle to settle the Kater litigation and obtained a release from Aristocrat
of any and all indemnification obligations.

34 | 2021 Proxy Statement

As illustrated in the following chart, the Company’s stock price increased to $194.79 per share as of December 31, 2020,
from $47.16 per share as of December 31, 2015, and $137.20 as of December 31, 2019 (a 43% year over year increase).

Compensation Discussion and Analysis

$250.00

CHDN Stock Price
(Year-End)

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

$200.00

$150.00

$100.00

$50.00

$0.00

$194.79

$137.20

$47.16

$50.15

$77.57

$81.31

2015

2016

2017

2018

2019

2020

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 in recognition of the NEOs respective roles in navigating the Company
during the COVID-19 pandemic and driving performance during the period ending December 31, 2020.

Summary of 2020 EAIP Awards.

The Committee, after considering the Company’s overall performance, determined that the EAIP awards were earned at
approximately 78.3% of target as shown in the table below and in the 2020 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 ($)

Financial Component
Achievement
(Weighted 75%)

Qualitative
Component
Achievement
(Weighted 25%)

175%

125%

100%

80%

$2,625,000

$1,375,000

$ 700,000

$ 440,000

28.3%

50%

Actual 2020
Incentive
Award in ($)

$2,056,389

$1,077,156

$ 548,370

$ 344,690

In light of the change in financial results from 2019 to 2020 due to the impacts of the COVID-19 global pandemic, the actual
EAIP awards earned by the NEOS in 2020 decreased substantially compared to 2019.

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Actual 2020
Incentive
Award in ($)

Actual 2019
Incentive
Award in ($)

$2,056,389 $3,151,779

$1,077,156 $1,700,000

$ 548,370 $ 800,000

$ 344,690 $ 500,000

Decrease in Actual
Incentive Award

(35%)

(37%)

(31%)

2021 Proxy Statement | 35

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.

The Company maintains 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 2020 terms and applicable award opportunities, granted
by the Committee to the NEOs, is provided below.

During the beginning of 2020, the CEO recommended employees (other than with respect to himself) to the Committee for
participation in the ELTI Plan for 2020 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 2020 awards as PSUs.

The Committee approved the 2020 RSU awards and the PSU awards (for the 36-month performance period of January 1,
2020 through December 31, 2022) on February 12, 2020. The 2020 awards are as follows:

Executive Officer

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

RSUs

PSUs

Total

$(1)

$(2)

$(3)

20,592 $3,300,074

20,592 $3,757,010

41,184 $7,057,084

9,360 $1,500,034

9,360 $1,707,732

18,720 $3,207,766

4,056 $ 650,015

4,056 $ 740,017

8,112 $1,390,032

3,120 $ 500,011

3,120 $ 569,244

6,240 $1,069,255

(1) The grant date fair 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 12, 2020 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) The NEOs’ long-term equity awards were adjusted in 2020 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 NEO adjustments, 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 the NEOs’ 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, 2020 through December 31, 2022 (the “Performance Period”):

3-Year Cumulative 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 derived from the Company’s consolidated financial statements with any necessary

36 | 2021 Proxy Statement

Compensation Discussion and Analysis

adjustments similar to those described further below. The Committee utilized Adjusted EBITDA as elements in both the
Company’s EAIP and ELTI Plan in recognition that Adjusted EBITDA is viewed as a core driver of the Company’s
performance and stockholder value creation;

3-Year Cumulative 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 2020, 2021, and 2022, 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. 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 Compensation Committee believed at the time that the performance targets were established that the goals were
challenging, but achievable with strong management performance. Because these targets were set in February 2020, these
targets were set prior to the time when the Company could have anticipated or known the impact of the impending
COVID-19 pandemic.

With respect to the 2020 component of the 2018-2020 PSUs, the Compensation Committee recognized that the original
2020 component was obsolete and considered various alternatives for adjusting for the unplanned impact of the pandemic
on 2020 Adjusted EBITDA and Cash Flow. Because of the difficulty of resetting 3-year cumulative goals under the current
circumstances, the Committee determined, pursuant to the adjustment provisions of the 2016 Omnibus Stock Incentive
Plan, to treat the 2020 performance year the 2018-2020 PSU cycle as achieved at the target level of performance. The
Committee viewed this approach as most consistent with its performance-based compensation philosophy, taking into
consideration (i) the Company’s strong performance prior to the pandemic, (ii) the Company’s strong stock price
performance, and (iii) the strong leadership demonstrated by our executive leadership team under challenging conditions.

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

With respect to the RSU awards, the RSUs vest in one third (1/3) increments on each of December 31, 2020, December 31,
2021 and December 31, 2022, 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, 2018 through
December 31, 2020, the actual performance was certified by the Compensation Committee at its February 2021 meeting
(with a TSR at 148.92%, in the top 9% of the Russell 2000 over the performance period) as set forth below:

3-year Cumulative
Adjusted EBITDA:

3-year Cumulative Cash
Flow Metric:

Total Weighted Payout:

x TSR Modifier:

Target Multiplier:

Target

Maximum

Actual

% of Target

Projected Payout

$1,018 million $1,221.6 million $1,144.2 million 112.4%

$523.5 million $ 628.2 million $ 603.9 million 115.3%

141.3%

151.1%

Weighted
Payout

70.65%

75.55%

146.2%

125%

182.8%

2021 Proxy Statement | 37

Compensation Discussion and Analysis

Name(1)

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Target PSU
Award

27,852

10,899

6,660

3,633

Target
Multiplier

182.8%

PSUs
Awarded(2)

50,909

19,922

12,174

6,641

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, 2020.

Adj. EBITDA as reported in the 2020 Form 10-K

COVID-19 Adjustment

Adj. EBITDA for Compensation Purposes

2018

$328.8

N/A

$328.8

2019

$451.4

N/A

$451.4

2020

$286.5

$ 77.5

$364.0

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, 2020, 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

COVID-19 Adjustment

Cash Flow Metric

2018

$197.8

$ (29.6)

$ 8.8

N/A

$159.4

2019

$289.6

$ (48.3)

$ 6.3

N/A

$235.0

2020

$141.9

$ (23.0)

$ (7.3)

$ 97.9

$209.5

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, 2018 through December 31, 2020 was 148.92%.

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 2020,
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)

544,807

254,403

41,146

27,539

$106,122,956

$49,555,160

$8,014,829

$5,364,322

(1) Calculated as of December 31, 20120 and represents shares of Common Stock owned outright.

(2) Based on the closing Company stock price of $194.79 as of December 31, 2020.

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

38 | 2021 Proxy Statement

Compensation Discussion and Analysis

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 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.

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. The Deferral Plan replaced
the Company’s Deferred Compensation Plan, which was frozen with respect to future contributions in December 2019.
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. 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.

Please see the 2020 Nonqualified Deferred Compensation Table, on page 45, and the accompanying narrative below for
further information regarding the Deferral Plan and the legacy Nonqualified Deferred Compensation Plan.

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

2021 Proxy Statement | 39

Compensation Discussion and Analysis

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. 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, 2020.

Compensation Committee of the Board of Directors:

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

40 | 2021 Proxy Statement

2020 Summary Compensation Table

2020 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

Senior Vice President,
Gaming Operations

Base
Salary
($)

1,359,952

1,350,000

1,276,154

1,025,337

942,307

726,923

668,510

639,423

607,692

529,760

477,690

399,743

Year

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

Bonus
($)

Stock
Awards
($)(1)

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

All Other
Compensation
($)(3)

-0-

7,057,084

2,056,389

6,082,661

3,151,779

16,827,946

3,000,000

3,207,766

1,077,156

2,577,430

1,700,000

9,389,550

1,250,000

1,390,032

1,134,334

1,155,060

1,069,255

793,634

804,983

548,370

800,000

775,000

344,690

500,000

325,700

17,714

16,854

16,269

15,748

48,662

47,126

18,240

17,077

16,268

17,736

33,930

29,437

Total
($)(4)

10,491,139

10,601,294

21,120,369

5,326,007

5,268,399

11,413,599

2,625,152

2,590,834

2,554,020

1,961,442

1,805,254

1,559,863

(1)

In accordance with the SEC executive compensation disclosure rules, the amounts shown in 2020 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 NEOs in 2020. The amounts included
in the Stock Awards column for the PSUs granted during 2020 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 2020 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—$8,250,185; Mr. Mudd—$3,750,084; Ms. Dall—$1,625,036; and Mr. Miller—$1,250,028. See Note 11 to
Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for a
discussion of the relevant assumptions used in calculating the amounts reported for 2020.

(2) Amounts in this column represent payments for performance under the EAIP. Mr. Carstanjen, Mr. Mudd, Ms. Dall, and Mr. Miller

received their 2020 EAIP awards in February 2021.

(3) The table below shows the components of this column for 2020, which include the Company match for each individual’s defined

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

(4)

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.

2021 Proxy Statement | 41

All Other Compensation for Fiscal Year Ended December 31, 2020

ALL OTHER COMPENSATION FOR FISCAL YEAR
ENDED DECEMBER 31, 2020

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
($)

11,400

4,514

2,847

4,152

4,060

1,800

1,501

2,688

2,276

17,714

15,748

18,240

17,736

(1) This amount consists of Company contributions to 401(k) plans. In accordance with the adoption of the Deferral Plan, no Company

contributions were made to non-qualified deferred compensation plans with respect to 2020.

(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.

42 | 2021 Proxy Statement

Grants of Plan-Based Awards for Fiscal Year Ended December 31, 2020

GRANTS OF PLAN-BASED AWARDS FOR FISCAL
YEAR ENDED DECEMBER 31, 2020

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

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

Grant
Date Fair
Value of
Stock
Awards
($)

20,592

3,300,074

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
(#)

2,625,000 5,250,000

1,375,000 2,750,000

700,000 1,400,000

440,000

880,000

02/12/2020

10,296

20,592 51,480

3,757,010

4,680

9,360 23,400

1,707,732

9,360

1,500,034

2,028

4,056 10,140

740,017

4,056

650,015

1,560

3,120

7,800

569,244

3,120

500,011

(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 2020 are listed under Non-Equity Incentive Plan Compensation in the 2020
Summary Compensation Table on page 41.

(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 2020-2022 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 36-37.

(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, 2020, 2021 and 2022, subject generally to the NEO’s continued employment through the applicable vesting date.

(4) Because the EAIP targets were set in February 2020, prior to the time when the Company could have anticipated or known the
impact of the impending COVID-19 pandemic, the Compensation Committee determined to retain the core EAIP design but
recalibrate the threshold-to-target performance curve in order to directly link the payout benefit with accountability for actual
performance as set forth under Executive Annual Incentive Plan on page 33.

2021 Proxy Statement | 43

Outstanding Equity Awards at Fiscal Year-End for Fiscal Year Ended December 31, 2020

OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END FOR FISCAL YEAR ENDED
DECEMBER 31, 2020

The following table provides information regarding unvested stock awards held by each of the NEOs on December 31, 2020.
As of such date, none of our NEOs held any outstanding option awards.

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)

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)

72,797(2)

41,073(2)

4,636(2)

3,748(2)

14,180,128

8,000,610

903,046

730,073

181,898(3)

103,391(3)

10,343(3)

6,549(3)

35,431,911

20,139,533

2,014,713

1,275,680

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

(1) Based on the December 31, 2020 closing price of CHDN of $194.79 per share.

(2) Represent awards under the ELTI Plan consisting of RSUs for continued employment periods from January 1, 2019 - October

30, 2025. The 72,797 RSUs for Mr. Carstanjen vest as follows: 17,222 units on December 31, 2021; 6,864 on December 31,
2022; 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 41,073 RSUs for Mr. Mudd vest as follows: 7,509 units on December 31, 2021; 3,120 units on December 31, 2022;
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 4,636
RSUs for Ms. Dall vest as follows: 3,284 units on December 31, 2021 and 1,352 units on December 31, 2022. The 3,748 RSUs
for Mr. Miller vest as follows: 2,708 units on December 31, 2021 and 1,040 units on December 31, 2022.

(3) Represent awards under the ELTI Plan consisting of PSUs for certain performance periods from January 1, 2019
through December 31, 2022. The 181,898 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: 33,719 units on
December 31, 2021; 20,592 units on December 31, 2022; 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 103,391 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: 14,288 units on December 31, 2021; 9,360 units on December 31, 2022; 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 10,343 PSUs for Ms. Dall are subject to vesting upon meeting the performance criteria at the
end of the following performance periods: 6,287 units on December 31, 2021 and 4,056 on December 31, 2022. The
6,549 PSUs for Mr. Miller are subject to vesting upon meeting the performance criteria at the end of the following
performance periods: 3,429 on December 31, 2021 and 3,120 on December 31, 2022. For purposes of this table, the
PSUs are reported assuming target performance.

44 | 2021 Proxy Statement

Stock Vested for Fiscal Year Ended December 31, 2020

STOCK VESTED FOR FISCAL YEAR ENDED
DECEMBER 31, 2020

The following table provides information concerning vesting of stock awards during 2020 for each of the NEOs. None of our
NEOs held any stock options during 2020.

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Stock Awards

Number of Shares
Acquired on Vesting (#)

70,051

30,869

16,209

14,227

Value Realized
on Vesting ($)(2)

$15,826,344(1)

$ 6,343,279

$ 3,622,552(1)

$ 2,781,531

(1) Pursuant to the Deferral Plan, Mr. Carstanjen deferred 6,864 shares on vesting and Ms. Dall deferred 1,352 shares on

vesting, which are excluded from these amounts and reported in the table under the “Nonqualified Deferred
Compensation Plan for Fiscal Year Ended December 31, 2020.”

(2) The RSUs vested reflect the market value of the stock on the day the stock vested. The 2018 PSU awards were settled

based upon the closing price of the Company’s common stock on February 10, 2021 ($211.37 per share) after
certification by the Compensation Committee.

2021 Proxy Statement | 45

Nonqualified Deferred Compensation for Fiscal Year Ended December 31, 2020

NONQUALIFIED DEFERRED COMPENSATION FOR
FISCAL YEAR ENDED DECEMBER 31, 2020

The following table provides information regarding the deferred settlement of RSUs granted to certain NEOs pursuant to
the 2016 Omnibus Stock Incentive Plan, in accordance with the Deferral Plan adopted by the Company, effective January 1,
2020 and compensation that had been previously deferred by the NEOs pursuant to the terms of the Company’s legacy
nonqualified deferred compensation plan.

Name

William C. Carstanjen

Deferral Plan

Legacy Nonqualified Deferred Compensation
Plan

William E. Mudd

Deferral Plan

Legacy Nonqualified Deferred Compensation
Plan

Marcia A. Dall

Deferral Plan

Legacy Nonqualified Deferred Compensation
Plan

Austin W. Miller

Deferral Plan

Legacy Nonqualified Deferred Compensation
Plan

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

Registrant
Contributions
in Last Fiscal
Year ($)

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

Aggregate
Withdrawals
Distributions ($)

Aggregate
Balance at Last
Fiscal Year End ($)(1)(2)

1,290,338

-0-

252,176

-0-

127,050

-0-

42,171

-0-

103,474

-0-

1,290,338

-0-

929,734

252,176

293,130

-0-

1,849,001

(1) Amounts in this column represent the market value of RSUs which vested on December 31, 2020 but were elected to

be deferred under the Deferral Plan. For purposes of this disclosure, market value is determined using the
December 31, 2020 closing price of CHDN of $194.79 per share.

(2) Of the totals in this column, the following totals have been reported in the Summary Compensation Table for previous

years:

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

2020
($)(2)

1,290,338

-0-

252,176

Previous Years
($)

-0-

488,359

175,900

-0-

210,590(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.

(2) Amounts in this column represent the market value of RSUs which vested on December 31, 2020 but were elected to

be deferred under the Deferral Plan. For purposes of this disclosure, market value is determined using the
December 31, 2020 closing price of CHDN of $194.79 per share.

46 | 2021 Proxy Statement

Nonqualified Deferred Compensation for Fiscal Year Ended December 31, 2020

The following table provides information regarding elections by the NEOs to defer settlement of RSUs granted to them
pursuant to the 2016 Omnibus Stock Incentive Plan, in accordance with the Deferral Plan adopted by the Company,
effective January 1, 2020.

Name

William C. Carstanjen

William E. Mudd

Marcia A. Dall

Austin W. Miller

Value of Deferred
RSUs(1)(2)

$1,290,338

-0-

$ 252,176

-0-

Deferral Election
on 02/12/2020
Grant

100%

(1)

Includes value of accrued dividends of $3,945 for Mr. Carstanjen, and $702 for Ms. Dall.

(2) Amounts in this column represent the market value of RSUs which vested on December 31, 2020 but were elected to be deferred
under the Deferral Plan. For purposes of this disclosure, market value is determined using the December 31, 2020 closing price of
CHDN of $194.79 per share.

Under the Deferral Plan, an account has been established and maintained for each participant, and each participant’s
account has been 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 Nonqualified Deferred Compensation table above shows information about the Company’s legacy nonqualified
deferred compensation plan. In December 2019, this plan was frozen with respect to future contributions. 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.

2021 Proxy Statement | 47

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, 2020 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

10,880,595

29,560,843(4)

40,441,438

Change in control without termination

Death or Disability

-0-

2,625,000(2)

Involuntary or good reason termination within 2 years CIC

10,880,595

-0-

29,560,843(5)

49,612,039(3)

-0-

32,185,843

60,492,634

William E. Mudd

Involuntary or good reason termination

5,092,736

16,504,459(4)

21,597,195

Change in control without termination

Death or Disability

Involuntary or good reason termination within 2 years CIC

Marcia A. Dall

-0-

1,375,000(2)

6,330,236

-0-

16,504,459(5)

28,140,143(3)

-0-

17,879,459

34,470,379

Involuntary or good reason termination

2,102,447

1,982,832(4)

4,085,279

Change in control without termination

Death or Disability

-0-

700,000(2)

Involuntary or good reason termination within 2 years CIC

2,802,447

-0-

1,982,832(5)

2,917,759(3)

-0-

2,682,832

5,720,206

Austin W. Miller

Involuntary or good reason termination

1,486,736

1,377,944(4)

2,864,680

Change in control without termination

Death or Disability

-0-

440,000(2)

Involuntary or good reason termination within 2 years CIC

1,981,736

-0-

1,377,944(5)

2,005,753(3)

-0-

1,817,944

3,987,489

(1) Represents the market value as of December 31, 2020 of stock awards accelerated or continued in each scenario. For purposes of

this disclosure, market value is determined using the December 31, 2020 closing price of CHDN of $194.79 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 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 purposes 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.

48 | 2021 Proxy Statement

Potential Payments Upon Termination or Change of Control

Non-Solicit Provisions

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 in 2020 and Mr. Miller in 2019 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 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.

2021 Proxy Statement | 49

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 76.5% 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 2020, we elected to use December 24, 2020 as the date on which to determine our median employee, rather than the
December 22nd date that was used for the 2019 pay ratio calculation. This date was chosen because it followed the closing
and administrative processing of the 2020 fall race meets at Churchill Downs Racetrack and Arlington Park Racecourse, 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 24, 2020, we had
approximately 5,498 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 $26,000. We used base cash compensation as our compensation measure as it is the principal form of
compensation delivered to all of our employees and annualized compensation for full-time and part-time employees hired
during 2020 who did not work an entire year. 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 2020 Summary Compensation Table with respect to each of the NEOs.

Ratio (2020)

Median Annual Total Compensation (excluding CEO)

CEO Annual Total Compensation

Pay Ratio

26,000

$10,491,139

404 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.

50 | 2021 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

695,591(3)(4)

-0-

695,591

-0-

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

1,945,164(5)

-0-

1,945,164

(1) This table provides information, as of December 31, 2020, 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 302,181 PSUs and 257,396 RSUs that were outstanding on December 31, 2020 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 2020 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, 2020 and, therefore, none are included in
this total for the Stock Purchase Plan.

(5) Of this total, as of December 31, 2020, 574,653 shares of Common Stock of the Company remained available for future
issuance under the Stock Purchase Plan and 1,370,511 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.

2021 Proxy Statement | 51

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 February 1, 2021, the Company entered into an agreement with CDI Holdings, LLC, an affiliate of The Duchossois Group,
Inc (“TDG”) to repurchase 1,000,000 shares of the Company’s Common Stock from TDG in a privately negotiated
transaction at a price per share equal to $193.94, for an aggregate purchase price of approximately $193.9 million.

On February 11, 2021, Hunter Rankin was hired as the Senior Director of Racing for the Company to focus on supporting
and enhancing the Company’s commitment, position and role in the U.S. thoroughbred racing and breeding industry,
including implementing the standards and processes outlined in the Horse Racing Integrity and Safety Act across all of the
Company’s racing properties and representing the Company’s interests as an advocate for important issues and policies
within the racing and breeding industry. Hunter Rankin is the son of Alex Rankin, Chairman of the Board of the Company
and a director of the Company since 2008. Many candidates were considered for the position and Hunter Rankin was
selected based on his skill set and prior experience in the racing and breeding industries, his familiarity with the recently
enacted Horse Racing Integrity and Safety Act, and the breadth of relationships he has developed with key stakeholders
within the racing and breeding industries. Hunter Rankin’s annual base salary is $165,000 and he is entitled to an annual
bonus and restricted stock awards at the discretion of the Company, as well as employee benefits consistent with
employees in similar positions with the Company.

Other than as described above, since January 1, 2020, no transaction was identified as a related party transaction.

52 | 2021 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 five directors in 2020,
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 23, 2021. 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 2020; 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, 2020.

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 2020 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 2020, the Committee selected PwC to be reappointed as independent auditors for the calendar year 2020.
The Committee also reviewed and approved the estimated 2020 audit fees for services related to the first quarter of
2020 review.

2021 Proxy Statement | 53

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
Paul C. Varga
R. Alex Rankin, ex officio

54 | 2021 Proxy Statement

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.

2021 Proxy Statement | 55

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 2022 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,
2021. Pursuant to the Company’s Amended and Restated Bylaws, proposals of shareholders intended to be presented at
the Company’s 2022 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 2022 annual meeting of shareholders of the Company must be received in writing by the Company at its
principal executive offices no later than January 20, 2022, and no sooner than December 21, 2021. 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 11, 2021

PLEASE VOTE BY TELEPHONE OR OVER THE INTERNET
IF YOU CANNOT ATTEND VIRTUALLY

56 | 2021 Proxy Statement

2020 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, 2020
OR

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

For the transition period from to
Commission file number 001-33998

(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

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

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

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.

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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 a check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☒
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, 2021, 38,476,002 shares of the Registrant’s Common Stock were outstanding. As of June 30, 2020 (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
$4,543,867,580.

Portions of the Registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held on April 20, 2021 are incorporated by reference
herein in response to Items 10, 11, 12, 13 and 14 of Part III of Form 10-K.

101

102

103

104

108

109

110

CHURCHILL DOWNS INCORPORATED
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2020

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 Accountant Fees and Services

Item 15.

Exhibit and Financial Statement Schedule

Part IV

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.

Overview

BUSINESS

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 three pari-mutuel
gaming entertainment venues with approximately 3,050 historical racing machines ("HRMs") in Kentucky. We also own and
operate TwinSpires, one of the largest and most profitable online wagering platforms for horse racing, sports and iGaming in
the U.S and we have seven retail sportsbooks. We are also a leader in brick-and-mortar casino gaming in eight states with
approximately 11,000 slot machines and video lottery terminals ("VLTs") and 200 table games. We were organized as a
Kentucky corporation in 1928, and our principal executive offices are located in Louisville, Kentucky.

Impact of the COVID-19 Global Pandemic

In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. Considerable uncertainty
still surrounds the potential effects of the COVID-19 virus, and the extent of and effectiveness of responses taken on
international, national and local levels. Measures taken to limit the impact of COVID-19, including shelter-in-place orders,
social distancing measures, travel bans and restrictions, and business and government shutdowns, have resulted and continue to
result in significant negative economic impacts in the U.S. and in relation to our business. Although vaccines are now
available, their distribution is currently limited and there can be no assurance that these vaccines will be successful in ending
the COVID-19 global pandemic. The long-term impact of COVID-19 on the U.S. and world economies and continuing impact
on our business remains uncertain, the duration and scope of which cannot currently be predicted.

In response to the measures taken to limit the impact of COVID-19 described above, and for the protection of our employees,
customers, and communities, we temporarily suspended operations at our properties in March 2020. In May 2020, we began to
reopen our properties with patron restrictions and gaming limitations. One property temporarily suspended operations again in
July 2020 and reopened in August 2020, and three properties temporarily suspended operations again in December 2020 and
reopened in January 2021.

We implemented a number of initiatives to facilitate social distancing and enhanced cleaning, such as increased frequency of
cleaning and sanitizing of all high-touch surfaces, mandatory temperature checks of all guests and team members upon entry
and required training for all team members on safety protocols. Certain amenities at our properties have continued to be
suspended, including food buffets and valet services, and certain restaurants and food outlets. A summary of the temporary
closures and the current status of each property is provided in Part II, Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations contained within this Report.

Business Segments

For financial reporting purposes, we aggregate our operating segments into three reportable segments as follows: Churchill
Downs, Online Wagering and Gaming. Our operating segments reflect the internal management reporting used by our chief
operating decision maker to evaluate results of operations and to assess performance and allocate resources. Financial
information about these segments is set forth in Part II, Item 8. Financial Statements and Supplementary Data, Note 21 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, contained within this Report.

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 the auxiliary training facility for
Churchill Downs Racetrack 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 U.S. and is the first race of the annual series of races for 3-year-old thoroughbreds known as the Triple Crown.

The demographic profile of our guests, global television viewership and long-running nature of this iconic event are attractive
to sponsors and corporate partners, especially those with similar luxury and/or marquee brands. The Kentucky Derby Week
generated the tenth consecutive year of earnings growth in 2019. The 2020 Kentucky Derby Week results were severely
impacted by the rescheduling of the 146th Kentucky Derby from the first weekend in May to the first weekend in September
and without spectators due to the COVID-19 global pandemic.

We conducted 70 live race days in 2018, 74 live racing days in 2019 and 65 live race days, including 41 spectator-free live race
days, in 2020. In 2021, we anticipate conducting up to 71 live race days with spectators.

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 April 2020, we completed a state-of-the-art equine medical center and quarantine barns on the backside area of Churchill
Downs Racetrack which reinforces our ongoing commitment to equine and jockey safety and supports our long-term
international growth strategy.

In 2002, 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 as part of the financing of improvements to the Churchill Downs Racetrack facility. We can re-
acquire the facility at any time for $1.00 subject to the terms of the lease.

Derby City Gaming
In September 2018, we opened Derby City Gaming, an 85,000 square-foot, state-of-the-art HRM facility at the Churchill
Downs Racetrack auxiliary training facility in Louisville, Kentucky. On September 3, 2020, Derby City Gaming opened a new
8,000 square-foot outdoor gaming patio on the south side of the property. Derby City Gaming operates under the Churchill
Downs Racetrack pari-mutuel racing license, and has approximately 1,225 HRMs, a simulcast center, and a dining facility.

Online Wagering

The Online Wagering segment includes the revenue and expenses for the TwinSpires Horse Racing and the TwinSpires Sports
and Casino businesses. Both businesses are headquartered in Louisville, Kentucky.

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

TwinSpires is one of the largest and most profitable legal online horse racing wagering platforms 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 these customers may place wagers via telephone, mobile applications or through the Internet.
This business is licensed as a multi-jurisdictional simulcasting and interactive wagering hub in the state of Oregon. This
business also offers customers streaming video of live horse races, as well as replays, and an assortment of racing and
handicapping information.

BetAmerica.com is an online wagering business licensed under TwinSpires and also offers wagering on horse racing
throughout the U.S. 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.

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TwinSpires Sports and Casino
Our TwinSpires Sports and Casino business operates our sports betting and casino iGaming platform in multiple states,
including Colorado, Indiana, Michigan, Mississippi, New Jersey, and Pennsylvania. The TwinSpires Sports and Casino
business includes the mobile and online sports betting and casino iGaming results and the results of our three retail sportsbooks
in Colorado, Indiana and Michigan which utilize a third party's casino license. The results of the two retail sportsbooks at our
Mississippi properties, our retail sportsbook at Presque Isle in Pennsylvania and the retail and online BetRivers sportsbook at
Rivers Des Plaines, are included in the Gaming segment.

In August 2020, the Company announced the entry into multi-year agreements with GAN Limited ("GAN") and Kambi Group
PLC ("Kambi") to provide player account management, casino platform, sports trading and risk management services
(collectively, the "GAN / Kambi Platforms"). The Company has transitioned the Mississippi properties to the new Kambi
platform and has launched in Michigan with the new GAN / Kambi Platforms. We plan to transition the remaining properties
to the new GAN / Kambi Platforms in the first half of 2021.

On September 24, 2020, the Company opened a retail sportsbook at Bronco Billy's Casino in Cripple Creek, Colorado, and on
September 25, 2020, the Company opened a retail sportsbook at Island Resort & Casino in Harris, Michigan. The Company
launched its mobile and online sportsbook and casino app in Michigan on January 22, 2021 and plans to launch its mobile
sportsbook and casino app in Pennsylvania and its mobile sportsbook app in Indiana, subject to regulatory approvals, in the first
half of 2021.

On January 5, 2021, the Company announced the transition from the BetAmerica brand to the TwinSpires brand for the
Company's sports betting and casino platforms. The Company launched the TwinSpires sportsbook and casino app in Michigan
under the TwinSpires brand in January 2021 and the existing Company's sportsbook and casino apps will transition to the
TwinSpires brand in the first half of 2021.

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")
◦ Ocean Downs Casino and Racetrack ("Ocean Downs")
◦ Oxford Casino and Hotel ("Oxford")
◦ Presque Isle Downs and Casino ("Presque Isle")
◦ Riverwalk Casino Hotel ("Riverwalk")
◦ Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") management agreement

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 Casino Des Plaines ("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")
Division of Pari-Mutuel Wagering ("DPW") in Florida. Calder received a jai alai license in May 2018 and conducted live
summer jai alai performances in May and June 2019 for the State of Florida's 2018-2019 fiscal year and in August and
September 2019 for the 2019-2020 fiscal year. In 2021, in order to attract better jai alai players and operate efficiently, Calder

is planning to conduct jai alai performances in the summer 2021 for the 2020-2021 fiscal year and for the 2021-2022 fiscal
year.

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 April 15, 2021 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 dining 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
thirteen 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 700 slot machines, 15 table games, a retail sportsbook, a 105-room hotel, a 5,600 square-foot multi-
functional event center, and four dining facilities.

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 approximately
40 live harness racing days each year.

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
Presque Isle 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 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 sportsbook, a five-story 80-room hotel, and two 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.

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 1,000 slot machines and 69 table games, seven dining and entertainment facilities, and an
approximate 5,000 square-foot state-of-the-art BetRivers Sports Bar. In December 2019, Rivers Des Plaines became the first
land-based casino in Illinois and, in the third quarter of 2020, completed the expansion of the parking garage. We acquired

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61.3% equity ownership in Midwest Gaming Holdings, LLC ("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
1,950 VLTs, four dining facilities, a racing simulcast center, and a 5/8-mile harness racetrack. 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:

•
•
•
•
•
•

Oak Grove Racing, Gaming & Hotel ("Oak Grove")
Newport Racing & Gaming ("Newport")
Turfway Park
Arlington International Racecourse ("Arlington")
United Tote
Corporate

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 the first racing meet in October 2019. On
September 18, 2020, the Company opened the simulcast and HRM facility with approximately 1,325 HRMs, event center and
food and beverage venues. The 128-room hotel opened on October 15, 2020. The 1,200-person grandstand, 3,000-person
capacity outdoor amphitheater and stage, a state-of-the-art equestrian center, and a recreational vehicle park at Oak Grove will
open in early 2021. Effective as of September 11, 2020, the Company purchased the remaining noncontrolling interest in WKY
Development, LLC, a joint venture that owns Oak Grove, from Keeneland Association, Inc. for $3.0 million. The Company no
longer reports a noncontrolling interest associated with Oak Grove in the accompanying consolidated financial statements.

Newport
On October 2, 2020, the Company opened Newport, located in Newport, Kentucky, after investing approximately $32.0 million
to create a premier entertainment experience as an extension of Turfway Park. Newport has a pari-mutuel simulcast area, a
17,000 square-foot gaming floor with approximately 500 HRMs, and a feature bar.

Turfway Park
Turfway Park is located on 197 acres in Florence, Kentucky. In 2020, the Company approved the final design plans for the
HRM and grandstand facility at Turfway Park. The final plans reflect $200 million of project capital, which includes the
Turfway Park Acquisition costs and other previously approved capital. The final plans provide for a 155,000 square foot
facility including a grandstand, sports bar, food offerings, and up to 1,200 historical racing machines. The Company has spent
approximately $58.5 million of the planned project capital as of December 31, 2020 to acquire the business and associated land
and to demolish the existing grandstand, prepare the site for the next phase of the development, and install a new Tapeta
synthetic racetrack.

Arlington
Arlington is located on 326 acres in Arlington Heights, Illinois. Arlington owns and operates a thoroughbred racing operation
with nine 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. On February 23, 2021, we launched a process to sell the 326
acres at Arlington Park. The Company is committed to running Arlington Park's 2021 race dates from April 30, 2021 to
September 25, 2021.

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.

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.

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.

Churchill Downs

In 2020, approximately 28,000 thoroughbred horse races were conducted in the U.S., which was down 24% compared to 2019
due to the impact of almost all of the racetracks across the U.S. being closed for a portion of the year as a result of the
COVID-19 global pandemic. Of these races, Churchill Downs Racetrack hosted approximately 650 races, or 2.4% of the total
thoroughbred horse races in the U.S. 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 is substantially
dependent on the racing calendar, number of horses racing and purse sizes. In recent years, competition has 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 Horse Racing
Our TwinSpires Horse Racing business competes with other ADW businesses for both customers and racing content, as well as
brick-and-mortar racetracks, casinos, OTBs, and other forms of legal and illegal sports betting.

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

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Gaming

Our Gaming properties operate in highly competitive environments and primarily compete for customers with other casinos in
the surrounding regional gaming markets. 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.

Human Capital

We believe our human capital is material to our operations and core to the long-term success of the Company as an industry-
leading racing, online wagering and gaming entertainment company anchored by our iconic flagship event - The Kentucky
Derby. Our focus is on attracting innovative and collaborative team members who want to build their skills in a successful and
growing set of businesses focused on creating unique experiences for our guests.

Our People
As of December 31, 2020, we had a total of approximately 7,000 team members, of which 4,000 are full-time employees. As of
December 31, 2020, the Churchill Downs segment had 1,900 team members, the Online Wagering segment had 240 team
members; and the Gaming segment had 2,200 team members. Nearly one-quarter of the Churchill Downs segment team
members are full-time employees and nearly all of the Online Wagering and Gaming segment team members are full-time
employees. The Company’s corporate staff consists of approximately 180 full-time employees. The number of seasonal
employees fluctuates significantly through the course of the year primarily due to the seasonal nature of our businesses. We
have the highest level of seasonal team members during the second quarter when we run the Kentucky Derby.

As a result of the COVID-19 global pandemic and the closing of our gaming properties, a significant number of our team
members were furloughed beginning in March 2020. The Company provided health, dental, vision and life insurance benefits
to furloughed full-time employees through July 31, 2020 and for an additional three months if a full-time employee was re-
furloughed as a result of a subsequent property closure period or business capacity limitations. As of December 31, 2020,
approximately 500 full-time employees were covered by 16 collective bargaining agreements. We have experienced no material
interruptions of operations due to disputes with our team members.

Diversity and Inclusion
We believe that a diverse workforce fosters innovation and cultivates a high performance culture that leverages the unique
perspectives of every team member to profitably grow our businesses. The Company’s Board of Directors’ and executive
management team is diverse based on gender and race and also have diverse experiences that individually and collectively
create a high-performance culture focused on executing our strategic priorities to effectively and efficiently protect and grow
our businesses.

We believe diversity and inclusion helps the Company attract the best talent to grow our businesses and enables our businesses
to attract and delight customers and consumers. The Kentucky Derby is a pillar of our community that provides the opportunity
for our team members and the community to raise significant funding for charities that support important aspects of our broader
communities including fostering diversity and inclusion, food, shelter, education, and health related non-profits. The Company
also provides donations to non-profit organizations that support these initiatives within our communities.

Talent Acquisition, Development and Retention
We invest in attracting, developing and retaining our team members. Our philosophy is to communicate a clear purpose and
strategy, set challenging goals, drive accountability, continuously assess, develop, and advance talent, and to embrace a
leadership-driven talent strategy. Our Company enables team members to grow in their current roles as well as to have
opportunities to build new skills in other parts of the Company. We review talent and succession plans with our Chief
Executive Officer and Board of Directors periodically throughout the year. The process focuses on accelerating talent
development, strengthening succession pipelines, and advancing diversity in gender, race and experience for our most critical
roles.

Compensation, Benefits, Safety and Wellness
We strive to offer market competitive salaries and wages for our team members and we offer comprehensive health and
retirement benefits to eligible employees. Our core health and welfare benefits are supplemented with specific programs to
manage or improve common health conditions and to provide a variety of voluntary benefits and paid time away from work
programs. We also provide a number of innovative programs designed to promote physical, emotional and financial well-being.
Our commitment to the safety of our employees, customers, and community remains a top priority and we have safety programs
at all of our properties to facilitate identification and implementation of safety practices. Refer to our discussion above under
"Overview", for additional information on actions we have taken to facilitate social distancing and enhanced cleaning in order
to protect our employees, customers, and communities as a result of the COVID-19 global pandemic.

Governmental Regulations and Potential Legislative Changes

We are subject to various federal, state, local, 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 U.S., 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 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 U.S., interstate pari-mutuel wagering on horse racing is subject to the Interstate Horseracing Act of 1978, as amended in
2000 ("IHA"). 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 and HRM facilities 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 laws 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 and the IHA. 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.

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 stated that the Wire Act
applied 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. In June 2019, a federal
district court judge in New Hampshire ruled that the Wire Act applies only to gambling activities on sporting events and does
not prohibit other forms of gambling conducted over the internet, including online casino gaming and in January 2021, the U.S.
Court of Appeals for the First Circuit affirmed this decision.

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,

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•

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
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.

Casino authorities may investigate any subsidiary engaged in casino operations and 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.
Casino authorities have the ability to deny a license, qualification or finding of suitability and 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. Casino authorities may also require us to terminate the employment of any person who refuses to file appropriate
applications.

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 their status when the waiver was granted without once again becoming subject to the foregoing
reporting and application obligations.

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. 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)

(ii)

pay that person any dividend or interest upon our voting securities,

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, 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

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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
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 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.

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 jai alai, 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, as well as jai alai, but does not approve the specific live race days.

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 30, 2020, legislation was signed into law by the Governor of Illinois that provides financial relief to the gaming
industry. The legislation amends the existing law to allow the lower privilege tax on table games for existing casinos effective
as of July 1, 2020 instead of when a newly authorized casino begins operations. The legislation also provides cash flow relief
for existing casinos by extending the payment deadline for new gaming positions from July 1, 2020 to July 1, 2021 and extends
the payment period and waives interest for reconciliation payments related to the new gaming positions. The legislation delays
the payment deadline for the initial sports wagering license from July 1, 2020 to July 1, 2021 and also establishes a lower

privilege tax schedule for a new casino in the Chicago area, which has been authorized but not yet opened. We believe the
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. LSRC also issues licenses required for Fair Grounds to operate slot machines at the racetrack and
video poker devices at their 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 2018 and 2019. In 2020, we obtained
approval from the LSRC to move the 10 days of quarter horse racing to Evangeline Downs. We expect to conduct quarter
horse racing for 10 days in 2021.

Effective July 15, 2020, legislation was signed into law by the Governor of Louisiana that exempts the tax on promotional play
up to $5.0 million for casinos. We believe the legislation will have a positive impact on our business operations.

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.

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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 2021.

Other Specific State Regulations and Potential Legislative Changes

Kentucky
On February 22, 2021, the Governor of the Commonwealth of Kentucky signed into law Senate Bill 120 which creates a
statutory definition of pari-mutuel wagering that includes historical horse racing approved by the KHRC and addresses the
Supreme Court of Kentucky's opinion in The Kentucky Horse Racing Commission, et al v. The Family Trust Foundation of
Kentucky, Inc. regarding the KHRC's historical racing regulations and the validity of operating HRMs pursuant to a license
issued by KHRC. For more information, please refer to Item 3, Legal Proceedings. Following this action, we do not believe
that any further rulings in this litigation will impact our ability to operate HRM facilities in Kentucky.

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 the 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. 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 is included in accrued expense and other current liabilities in our accompanying consolidated balance sheet as of
December 31, 2020.

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 the contamination 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.

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.

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ITEM 1A.

RISK FACTORS

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.

Economic and External Risks

The current novel coronavirus (COVID-19) global pandemic has adversely affected, and could continue to adversely affect
our business, financial condition and financial results. Other major public health issues could adversely affect our
business, financial condition and financial results in the future

In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. Considerable uncertainty
still surrounds the potential effects of the COVID-19 virus, and the extent of and effectiveness of responses taken on
international, national and local levels. Measures taken to limit the impact of COVID-19, including shelter-in-place orders,
social distancing measures, travel bans and restrictions, and business and government shutdowns, have resulted and some
continue to result in significant negative economic impacts in the U.S. and in relation to our business. The long-term impact of
COVID-19 on the U.S. and world economies and continued impact on our business remains uncertain, the duration and scope
of which cannot currently be predicted.

Our operating results depend, in large part, on revenues derived from customers visiting our casinos and racetracks. In March
2020, we announced the temporary suspension of operations of all of our wholly-owned gaming properties, certain wholly-
owned racing operations, and the two casino properties related to our equity investments. Starting in mid-February, U.S. and
international sporting events were cancelled, which reduced our sports betting options for our customers. Horse racing content
for wagering on TwinSpires also decreased, although handle increased as our customers wagered more on the content that was
available. Although vaccines are now available, distribution is currently limited and there can be no assurance that these
vaccines will be successful in ending the COVID-19 global pandemic.

In May 2020, we began to reopen our properties with patron restrictions and gaming limitations. One property temporarily
suspended operations again in July 2020 after reopening and reopened in August 2020, and three properties suspended
operations in December 2020 and reopened in January 2021. We implemented a number of initiatives to facilitate social
distancing and enhanced cleaning, such as increased frequency of cleaning and sanitizing of all high-touch surfaces, mandatory
temperature checks of all guests and team members upon entry and required training for all team members on safety protocols.
Certain amenities at our properties continue to be suspended, including food buffets and valet services, and certain restaurants
and food outlets. We cannot predict how soon our casino and racetrack properties will be able to return to customary
operations. Our ability to return to our customary operations will depend, in part, on the actions of a number of governmental
bodies over which we have no control. Once all restrictions are lifted, it is unclear how quickly customers will return to our
casinos and racetracks, which may be a function of continued concerns over safety and decreased consumer spending due to
economic conditions, including job losses.

Certain non-furloughed employees continue to work remotely. An extended period of remote work arrangements could strain
business continuity plans, introduce operational risk (including but not limited to cybersecurity risks) and may impair our
ability to manage our business. We also outsource certain business activities to third parties. As a result, we rely upon the
successful implementation and execution of the business continuity planning of such entities in the current environment. While
we seek to monitor the business continuity activities of these third parties, successful implementation and execution of their
business continuity strategies are largely outside our control. If one or more of the third parties to whom we outsource certain
business activities experience operational failures or business disruption as a result of the impacts from the spread of
COVID-19, or claim that they cannot perform, it may have negative effects on our business and financial condition.

The Company reduced planned maintenance and project capital expenditures for 2020 as a result of the temporary property and
operations closures and prioritized capital investments based on the highest near-term return opportunities in order to maintain
financial flexibility.

We are currently following the recommendations of local and federal health authorities to minimize exposure risk for our
various stakeholders, including employees. The full extent of the impact of COVID-19 on our business and operating results
will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information
that may emerge concerning COVID-19 and the actions required to contain COVID-19, the duration and spread of COVID-19
within the markets in which we operate, the availability of, use of and effectiveness of vaccines, mandates and directives from
federal, state and local authorities, the effect of COVID-19 on consumer confidence and spending and our ability to maintain a
sufficient workforce. If we do not respond appropriately to the pandemic, or if state and local authorities or customers do not
perceive our response to be adequate, we could suffer damage to our reputation and our brand, which could adversely affect our
business in the future.

Our business could be adversely affected by the occurrence of extraordinary events, such as terrorist attacks, public health
threats, civil unrest, and inclement weather
Our operating results depend, in large part, on revenues derived from customers visiting our casinos and racetracks, which is
subject to the occurrence and threat of extraordinary events that may discourage attendance 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, safety and additional national or local
catastrophic incidents, could result in reduced attendance at Churchill Downs Racetrack and at our other locations. A major
epidemic or pandemic, outbreak of a contagious equine disease, or the threat of such an event, could also adversely affect
attendance and could impact the supply chain for our major construction projects resulting in higher costs and delays of the
projects. The COVID-19 global pandemic resulted in the temporary suspension of operations of all of our wholly-owned
gaming properties, certain wholly-owned racing operations, and the two casino properties related to our equity investments.
Even though our properties have reopened, such properties continue to be subject to operational restrictions that may impact
attendance. Riots, civil insurrection or social unrest could adversely affect attendance. For example, during the second and
third quarters of 2020, certain areas of Louisville, Kentucky, experienced sustained protests and civil unrest. Similar events in
the future could adversely affect attendance at Churchill Downs Racetrack. While we are constantly evaluating our 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.

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. The occurrence or threat of any such extraordinary event at our locations, particularly at Churchill Downs Racetrack
and Kentucky Derby and Oaks week, could have a material negative effect on our business and results of operations.

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.

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Strategic Risks

Our Company faces significant competition, and we expect competition levels to increase
We face an increasingly high degree of competition among a large number of participants operating from physical locations
and/or through online or mobile platforms, including destination casinos, riverboat casinos; dockside casinos; land-based
casinos; video lottery; iGaming; sports betting; gaming at taverns in certain states, such as Illinois; gaming at truck stop
establishments in certain states, such as Louisiana and Pennsylvania; historical horse racing in Kentucky; sweepstakes and
poker machines not located in casinos; fantasy sports; Native American gaming; and other forms of gaming in the U.S.
Furthermore, competition from internet lotteries, sweepstakes, illegal slot machines and skill games, fantasy sports and internet
or mobile-based gaming platforms, which allow their customers to wager on a wide variety of sporting events and/or play Las
Vegas-style casino games from home or in non-casino settings could divert customers from our properties and thus adversely
affect our financial condition, results of operations and cash flows. Currently, there are proposals that would legalize internet
poker, sports betting and other varieties of iGaming in a number of states. Expansion of land-based and iGaming in other
jurisdictions (both regulated and unregulated) could further compete with our traditional and iGaming operations, which could
have an adverse impact on our financial condition, results of operations and cash flows.

Our operations also face competition from other leisure and entertainment activities, including shopping, athletic events,
television and movies, concerts and travel. Legalized gaming is currently permitted in various forms throughout the U.S. and on
various lands taken into trust for the benefit of certain Native Americans in the U.S. and Canada. Other jurisdictions, including
states adjacent to states in which we currently have properties, have recently legalized, implemented and expanded gaming.
Established gaming jurisdictions could award additional gaming licenses or permit the expansion or relocation of existing
gaming operations. Voters and state legislatures may seek to supplement traditional tax revenue sources of state governments
by authorizing or expanding gaming in the states that we operate in or the states that are adjacent to or near our existing
properties. New, relocated or expanded operations by other persons could increase competition for our operations and could
have a material adverse impact on us.

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 4.6% per year from 2008 to 2014 due to a number of
factors, including increased competition from other wagering and entertainment alternatives. From 2015 to 2018, pari-mutuel
handle on horse racing has been relatively stable with average annual growth of 1.7%. In 2019 and 2020, pari-mutuel handle
decreased on average 1.5% per year due to horse race cancellations from safety concerns in California in 2019 and due to the
COVID-19 global pandemic in 2020. If interest in horse racing is lower in the 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 Kentucky Derby. Our ability to retain sponsors,
acquire new sponsors, and compete for sponsorships and advertising dollars could have a material adverse impact on our
business.

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.

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
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.

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 their 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.

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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.

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 U.S. 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.

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., 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 certain
states that may be required to operate such 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.

We intend to expand our TwinSpires Sports and Casino business 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 / or iGaming and additional jurisdictions may do so in the future.
The success of our TwinSpires Sports and Casino business is dependent on potential legislation in various jurisdictions that
affect the sports betting and iGaming industries in the U.S. We continue to engage with state lawmakers in our other
jurisdictions to advocate for the passage of sports betting and iGaming laws with reasonable tax rates and license fees. There
can be no assurances when, or if, regulations enabling sports betting and online casino gaming and poker will be adopted, or the
terms of such regulations, in certain of the jurisdictions in which we operate.

States or the federal government may 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. 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.

If we are unable to obtain, or are otherwise delayed in obtaining, the necessary licenses to operate our TwinSpires Sports and
Casino business in U.S. jurisdictions where online sports betting and iGaming are legalized, our ability to grow our business
could be materially impacted. Our ability to compete may also be impacted by our failure to obtain approval in the applicable
jurisdiction of our technology and service providers in a timely manner and by our failure to efficiently implement and market
our TwinSpires Sports and iGaming platform in a state that legalizes online sports betting and / or iGaming. Such failures
could impair our business growth in these jurisdictions, which could have a material impact on our business.

Our TwinSpires Sports and Casino business competes in a rapidly evolving and highly competitive market against an increasing
number of competitors. The success of our proposed sports betting operations is dependent on a number of factors including
the potential that the market does not develop as we anticipate, our ability to gain market share in a newly developing market,
the competitive landscape and our ability to compete with new entrants in the market, our ability to implement effective,
efficient, and compliant procedures and processes in each jurisdiction, 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.

Operational Risks

We may not be able to identify and complete expansion, acquisition or divestiture projects on time, on budget or as planned
We expect to pursue expansion, acquisition and divestiture opportunities, and we regularly evaluate opportunities for
development, including acquisitions or other strategic corporate transactions which may expand our business operations.

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.

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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,

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.

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.

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.

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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.

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 negative publicity and / or litigation. Negative publicity may lead some customers to avoid the Company’s properties or
could cause horse owners to avoid racing their horses at our racetracks. Any litigation resulting from injuries at our properties
could be costly and time consuming and could divert our management and key personnel from our business operations. We
buy insurance for all of our racetracks; however, our coverage may not be sufficient for all losses. Due to the potential impact
of negative publicity and inherent uncertainty related to the outcome of litigation, there can be no assurance that the resolution
of any particular claim or proceeding would not have a material adverse effect on our results of operations, financial position or
liquidity.

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 U.S., 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 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.

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.

Legal and Regulatory Risks

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. 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.

Judicial actions involving third parties may also indirectly impact our business. For example, as described further in Item 3.
Legal Proceedings, in this Annual Report on Form 10-K, on September 24, 2020, the Kentucky Supreme Court issued an
opinion reversing a prior ruling of the Franklin Circuit Court with respect to the legality of certain Encore/Exacta historical
racing machines in operation in Kentucky as of the January 2018 trial date, and holding that wagers placed through such
machines are not pari-mutuel and are therefore prohibited under Kentucky law. Although we do not use the Encore/Exacta
system in any of our historical racing machine facilities, this opinion, depending on how it is interpreted and enforced or
addressed by the legislature may impact our historical racing machine facilities in Kentucky.

We have also been subject to claims in cases concerning or similar to class action allegations. Plaintiffs in such 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 potential losses we may incur. In many cases, including class action matters, we
may not be able to estimate the potential losses we will incur 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. We may not be able to obtain adequate insurance to protect us from these types
of litigation matters or extraordinary business losses.

Our operations are highly regulated and changes in the regulatory environment could adversely affect our business
We conduct live and historical pari-mutuel wagering, online pari-mutuel wagering through ADWs, casino gaming, online
gaming, and sports betting operations, which are subject to extensive state and for some 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 our operations or prevent another person from
owning an equity interest in the Company. Regulatory authorities have input into our operations, such as hours of operation,
location or relocation of a facility, and numbers and types of machines. Regulators may also levy substantial fines against or
seize our assets, the assets of our subsidiaries or the people involved in violating gaming laws or regulations. Any of these
events could have a material adverse effect on our financial condition, results of operations and cash flows.

We have demonstrated suitability to obtain and have obtained all governmental licenses, registrations, permits and approvals
necessary for us to operate our existing businesses. There can be no assurance that we will be able to retain those existing
licenses or demonstrate suitability to obtain any new licenses, registrations, permits or approvals. 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. As we
expand our operations in our existing jurisdictions or to new areas, we may have to meet additional suitability requirements and
obtain additional licenses, registrations, permits and approvals from authorities in these jurisdictions. The approval process can
be time-consuming and costly, and we cannot be sure that we will be successful.

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.

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.

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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 pari-mutuel wagering vary
from state to state. State attorney generals, regulators, and other law enforcement officials may interpret state laws, federal laws,
constitutional principles, and the related regulations in a different manner than we do which could have an adverse impact on
our business.

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.

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.

Financial Risks

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.

Our insurance costs may increase, we may not be able to obtain similar insurance coverage in the future, and 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, all could adversely affect our business

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 additional exclusions from our coverage. If we are unable to obtain sufficient
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.

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.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

We own the following real property:

•
•
•
•
•
•
•
•
•
•
•

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 in Oxford, Maine
Riverwalk in Vicksburg, Mississippi
Calder in Miami Gardens, Florida
Fair Grounds and certain VSI properties in New Orleans, Louisiana
Ocean Downs 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:

•

•
•
•
•
•
•
•
•

Churchill Downs Racetrack in Louisville, Kentucky - we lease 158 acres under a 30-year lease entered into in 2020
where we transferred title of the facility to the City of Louisville, Kentucky, and retained the right to re-acquire the
facility at any time or $1.00, subject to the terms of the lease as part of the financing of the improvements to the
facility.
Harlow's in Greenville, Mississippi - we lease the land on which the casino and hotel are located
Certain VSI properties in New Orleans, Louisiana
Lady Luck Nemacolin in Farmington, Pennsylvania - 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
Online Wagering office in Vancouver, Canada
Newport Racing and Gaming in Newport, Kentucky

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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, the Cheryl Kater v. Churchill Downs Incorporated class action lawsuit (the "Kater Litigation") was filed in
the United 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 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 January 9, 2018, the Company sold Big Fish Games to Aristocrat Technologies, Inc. ("Aristocrat"), 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 Aristocrat (the "Stock Purchase
Agreement"). Pursuant to the terms of the Stock Purchase Agreement, the Company agreed to indemnify Aristocrat 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."

After the Washington District Court dismissed the case with prejudice on November 19, 2015, the United States Court of
Appeals for the Ninth Circuit reversed and remanded the Washington District Court’s dismissal of the complaint on March 28,
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 22, 2020, the parties entered into an agreement in principle to settle the Kater litigation and the Thimmegowda
litigation (as defined below). The agreement in principle remains contingent on final court approval by the Washington District
Court. Under the terms of the settlement, which will take effect only after final court approval of the proposed class settlement:
(i) a total of $155.0 million will be paid into a settlement fund. The Company will pay $124.0 million of the settlement;
Aristocrat will pay $31.0 million of the settlement; (ii) all members of the nationwide settlement class who do not exclude
themselves will release all claims relating to the subject matter of the lawsuits; and (iii) Aristocrat has agreed to specifically
release the Company of any and all indemnification obligations under the Stock Purchase Agreement arising from or related to
the Kater Litigation and Thimmegowda Litigation, including any claims of diminution of value of Big Fish Games and any
claims by any person who opts out of the proposed class settlement.

On August 31, 2020, the Washington District Court granted the parties' motion for preliminary approval. On December 14,
2020, plaintiffs filed a motion for final approval of class action settlement agreement. The Washington District Court entered
an order granting final approval of class action settlement on February 11, 2021. The Company’s settlement contribution will
be made by March 26, 2021.

Thimmegowda Class Action Suit

On February 11, 2019, the Manasa Thimmegowda v. Big Fish Games, Inc. class action lawsuit (the "Thimmegowda
Litigation") 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 22, 2020, the parties entered into an agreement in principle to settle the Kater and Thimmegowda Litigations. The
agreement in principle with respect to the Thimmegowda Litigation is described above, under the "Kater Class Action Suit."
On August 31, 2020, the Washington District Court granted the parties' motion for preliminary approval. On December 14,
2020, plaintiffs filed a motion for final approval of class action settlement agreement. The Washington District Court entered
an order granting final approval of class action settlement on February 11, 2021. The Company’s settlement contribution will
be made by March 26, 2021.

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

In 2010, all Kentucky racetracks and the Kentucky Horse Racing Commission (the "KHRC" and 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 ("HRMs") 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 HRMs 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 HRM manufacturers (Encore/Exacta) are pari-mutuel, and the Court set a post-
trial briefing schedule for the parties. The Court ordered, on August 24, 2017, that this pending litigation directly involves only
the HRMs presently in use and any future HRMs proposed by the Company would not be included in the pending case. On
October 24, 2018, the Court ruled that the HRMs 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. On September 24,
2020, the Kentucky Supreme Court issued an opinion reversing the Court’s opinion. On November 9, 2020, the KHRC and
certain other defendants filed petitions for rehearing which was rejected by the Court. On February 3, 2021, the Court set a
schedule whereby the parties shall submit proposed judgments for the Court’s consideration on or before February 24, 2021,
and the parties may then submit responses to the opposing proposed judgments on or before March 5, 2021 before the Court
takes the matter under submission and enters a judgment. The Company does not use the Exacta system in any of its historical
racing machine facilities in Kentucky. On February 22, 2021, the Governor of the Commonwealth of Kentucky signed into law
Senate Bill 120 which creates a statutory definition of pari-mutuel wagering that includes historical horse racing approved by
the KHRC and addresses the Supreme Court of Kentucky's opinion. We do not believe that any further rulings in this case will
impact our ability to operate HRM facilities in Kentucky.

Lassiter v. Kentucky Downs, LLC, et al.

On December 18, 2020, Robert and Patricia Lassiter filed a complaint against Kentucky Downs, LLC, Keeneland Association,
Inc., Turfway Park, LLC, Players Bluegrass Downs, LLC, Appalachian Racing, LLC, Ellis Park Race Course, Inc., The
Lexington Trots Breeders Association, Inc., and Churchill Downs Incorporated (“Defendants”). Plaintiffs allege that
Defendants’ HRMs constitute illegal gambling and assert that they can recover for their losses and the losses of all patrons at
those facilities with HRMs over a five-year period under Kentucky Revised Statutes 372.010. After an initial extension of the
deadline to respond agreed to by the parties, the Jefferson County Circuit Court granted a further extension through March 31,
2021. The Company intends to defend this matter vigorously and believes that there are meritorious legal and factual defenses
against the plaintiffs' 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. On September 29, 2020, the EPA filed a complaint and proposed consent decree, which was agreed to by both
parties. Comments were due by January 11, 2021. 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 (loss) income for the year ended December 31, 2019, and accrued expense and other current liabilities in our
accompanying consolidated balance sheets at December 31, 2020 and 2019. The consent decree would also require corrective
measures to ensure compliance with applicable federal laws and regulations.

Louisiana Horsemen's 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, LLC and Churchill
Downs Louisiana Video Poker Company, LLC ("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

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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. 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 allocates a specified
amount of video poker purse funds to quarter horse purses for races at Fair Grounds with maximum annual payout caps that are
not deemed material. On June 13, 2020, the legislation addressed in the settlement agreement was passed by the legislature and
signed into law by the Governor of Louisiana. 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. After the parties entered into the settlement, legal counsel for six objecting plaintiffs filed
an amended petition with the District Court. After a hearing on July 20, 2020, the District Court dismissed the amended
petition. The objecting plaintiffs filed a notice of their intention to seek a writ with the Louisiana Court of Appeals for the
Fourth Circuit related to the dismissal of the amended petition, which was denied. The fairness hearing with the District Court
relating to the terms of the settlement agreement occurred on October 7, 2020, and November 17, 2020, and the parties have
submitted post-trial briefing and proposed final judgments. Objecting plaintiffs have filed a notice of appeal of the February
2020 Order appointing class counsel certifying a class for settlement purposes. On January 28, 2021, the District Court issued a
Final Order and Judgement approving the settlement. The objector’s appellant brief in support of their appeal of the February
2020 preliminary approval was filed on February 9, 2021, and the Fair Grounds Defendants’ brief is due on March 1, 2021.
The objectors have until April 9, 2021, to file a notice of appeal of the January 28, 2021 Final Order and Judgment.

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,
2021, there were approximately 2,420 shareholders of record.

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 $0.622 in December 2020, which was
paid in January 2021, and we declared a dividend of $0.581 in December 2019, which was paid in January 2020.

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, 2020:

Period

10/1/2020-10/31/2020

11/1/2020-11/30/2020

12/1/2020-12/31/2020

Total

Total Number of
Shares Purchased

Average Price
Paid Per Share

— $

17,852 $

—

194.79

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)

— $

—

147.1

(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 repurchase program has $147.1
million of repurchase authorization remaining that can be used to repurchase shares under plans or programs. 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.

12/31/2015

12/31/2016

12/31/2017

12/31/2018

12/31/2019

12/31/2020

Churchill Downs Incorporated

Russell 2000 Index

S&P Midcap 400 Index

S&P 500 Index

100.00 $

107.25 $

166.96 $

176.08 $

298.43 $

100.00 $

121.31 $

139.08 $

123.76 $

155.35 $

100.00 $

120.74 $

140.35 $

124.80 $

157.49 $

100.00 $

111.96 $

136.40 $

130.42 $

171.49 $

425.14

186.36

179.00

203.04

Period EndingDollarsChurchill Downs IncorporatedRussell 2000 IndexS&P Midcap 400 IndexS&P 500 Index12/31/1512/31/1612/31/1712/31/1812/31/1912/31/20$0$50$100$150$200$250$300$350$400$450$500ITEM 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 (loss) income attributable to Churchill
Downs Incorporated

Net income from continuing operations per
common share:

2020(a)(f)

Years Ended December 31,
2018(c)(f)(g)

2019(b)(f)(g)

2017(d)(f)(g)

2016(e)(f)(g)

1,054.0 $

1,329.7 $

1,009.0 $

882.6 $

60.2

215.7

188.8

145.7

13.3

139.6

182.6

122.4

(95.4)

(2.4)

170.2

18.1

822.4

172.5

96.7

11.4

(81.9)

137.5

352.8

140.5

108.1

Basic

Diluted

0.34 $

0.33 $

3.49 $

3.44 $

4.42 $

4.39 $

2.59 $

2.55 $

1.94

1.92

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

2,686.4 $

2,551.0 $

1,725.2 $

2,359.4 $

2,254.4

1,622.3

2,319.3
367.1

9.27 $

1,473.9

2,040.0

511.0
12.80 $

884.3

1,129.2

1,251.9
473.3
11.72 $

1,719.1
640.3
13.85 $

921.7

1,569.4
685.0
13.85

141.9 $

289.6 $

197.8 $

215.1 $

231.4

23.0

211.2

48.3

82.9

29.6

119.8

33.3

83.6

30.9

23.8

0.622 $

0.581 $

0.543 $

0.507 $

0.440

23.4 $

27.9 $

22.2 $

93.0 $

23.7 $

21.5 $

532.0 $

179.5 $

19.1

27.6

The selected financial data presented above is subject to the following information:

(a)

2020 reflects the impact of the closure of certain properties for different portions of the year as a result of the
COVID-19 global pandemic had on the Company's operations. 2020 also includes a $17.5 million impairment of
intangible assets.

(b)

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.

(c)

(d)

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").

2016 includes a $23.7 million gain on Calder land sale.

(e)
(f) Big Fish Games is accounted for as discontinued operations from the date of acquisition on December 16, 2014

through December 31, 2020 as a result of the Big Fish Transaction.

(g) 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 2020 as compared to 2019. Discussion regarding our financial condition and results of
operations for 2019 as compared to 2018 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended
December 31, 2019, filed with the SEC on February 26, 2020.

Our Business

The Company is an industry-leading racing, online wagering and gaming entertainment company anchored by our iconic
flagship event, the Kentucky Derby. We own and operate three pari-mutuel gaming entertainment venues with approximately
3,050 historical racing machines ("HRMs") in Kentucky. We also own and operate TwinSpires, one of the largest and most
profitable online wagering platforms for horse racing, sports and iGaming in the U.S. and we have seven retail sportsbooks.
We are also a leader in brick-and-mortar casino gaming in eight states with approximately 11,000 slot machines and video
lottery terminals ("VLTs") and 200 table games. We were organized as a Kentucky corporation in 1928, and our principal
executive offices are located in Louisville, Kentucky.

For financial reporting purposes, we aggregate our operating segments into three reportable segments as follows: Churchill
Downs, Online Wagering and Gaming. Our operating segments reflect the internal management reporting used by our chief
operating decision maker to evaluate results of operations and to assess performance and allocate resources. For additional
information, refer to Note 21 to the notes to consolidated financial statements included in Item 8. Financial Statements and
Supplementary Data of this Annual Report on Form 10-K.

Impact of the COVID-19 Global Pandemic

For a discussion of the impact of the COVID-19 global pandemic on our Company, refer to "Impact of the COVID-19 Global
Pandemic", in Part I. Item 1. Business section. Below is a summary of the temporary closures and the current status and
restrictions of each property:

Churchill Downs

•

Churchill Downs Racetrack conducted 65 live racing days during 2020, including 41 spectator-free days in the second
and third quarters of 2020, including the 146th Kentucky Oaks and Derby on September 4-5, 2020. Churchill Downs
Racetrack suspended simulcast operations on March 15, 2020 and reopened on October 1, 2020.
Derby City Gaming temporarily suspended operations on March 15, 2020 and reopened on June 8, 2020. Derby City
Gaming is currently restricted to 33% of patron capacity.

Gaming
Wholly-Owned Properties

•

Calder Casino and Racing ("Calder") temporarily suspended operations on March 16, 2020 and reopened on June 12,
2020. Operations were temporarily suspended again on July 2, 2020 and reopened on August 31, 2020. Calder
currently has a temporary ban on food and beverage on the gaming floor and has certain operating hour restrictions.
Fair Grounds Slots, Fair Grounds Race Course and Video Services, LLC ("VSI") (collectively, "Fair Grounds and
VSI"):
◦

Fair Grounds Slots temporarily suspended operations on March 16, 2020 and reopened on June 13, 2020, and
is currently restricted to 50% of patron capacity;
Fair Grounds Race Course conducted 73 live racing days during 2020, including 28 spectator-free days from
March 13, 2020 through December 31, 2020; and
VSI temporarily suspended operations on March 16, 2020 and reopened on May 18, 2020, and is currently
restricted to 50% of patron capacity.

◦

Harlow's Casino Resort and Spa ("Harlow's") temporarily suspended operations on March 16, 2020 and reopened on
May 21, 2020. Harlow’s is currently restricted to 50% of patron capacity.

Ocean Downs Casino and Racetrack ("Ocean Downs") temporarily suspended operations on March 15, 2020 and
reopened on June 19, 2020. Ocean Downs is currently restricted to 50% of patron capacity.

Oxford Casino and Hotel ("Oxford") temporarily suspended operations on March 16, 2020 and reopened on July 9,
2020. Oxford has certain operating hour restrictions and is currently restricted to 200 persons on the gaming floor.

•

Presque Isle Downs and Casino ("Presque Isle") temporarily suspended operations on March 16, 2020 and reopened on
June 26, 2020. Operations were temporarily suspended again on December 12, 2020 and reopened on January 4,
2021. Presque Isle currently has a temporary ban on alcohol and smoking on the gaming floor and is currently
restricted to 50% of patron capacity.

Riverwalk Casino Hotel ("Riverwalk") temporarily suspended operations on March 16, 2020 and reopened on May 21,
2020. Riverwalk is currently restricted to 50% of patron capacity.

Managed Properties

•

Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") temporarily suspended operations on March 16, 2020 and
reopened on June 12, 2020. Operations were temporarily suspended again on December 12, 2020 and reopened on
January 4, 2021. Lady Luck Nemacolin currently has a temporary ban on alcohol and smoking on the gaming floor
and is currently restricted to 50% of patron capacity.

Equity Investments

•

Rivers Casino Des Plaines ("Rivers Des Plaines") temporarily suspended operations on March 15, 2020 and reopened
on July 1, 2020. Operations were temporarily suspended on November 20, 2020 and remained suspended as of
December 31, 2020. Rivers Des Plaines reopened on January 19, 2021. Rivers Des Plaines currently has certain
operating hour restrictions and temporary bans on food and beverage within the facility and is restricted to 50% of
patron capacity.

• Miami Valley Gaming and Racing ("MVG") temporarily suspended operations on March 14, 2020 and reopened on

June 19, 2020. MVG is currently restricted to 63% of patron capacity.

All Other
•

Arlington International Racecourse ("Arlington") temporarily suspended operations of the Company's off-track betting
facilities ("OTBs") and simulcast operations on March 16, 2020. Four OTBs reopened on June 5, 2020 and the
remaining OTBs reopened on various dates in July 2020. Arlington conducted 18 spectator-free live racing days and
12 live racing days with patron restrictions of 300 persons during 2020.

•

Turfway Park conducted nine live racing days in March 2020 and five of these live racing days were run spectator-
free. Live racing was canceled for the remaining three scheduled racing days in March 2020. Turfway Park also ran
13 live racing dates in December 2020.

On March 25, 2020, as a result of the temporary closures and suspended operations described above, the Company announced
the temporary furlough of employees at the Company's wholly-owned and managed gaming properties and certain racing
operations. As the Company has reopened these properties, certain employees have returned to work while others remain on
temporary furlough due to the capacity restrictions at these properties. The Company provided health, dental, vision and life
insurance benefits to furloughed employees through July 31, 2020 and during the subsequent property closure periods.

The Company also implemented a temporary salary reduction for all remaining non-furloughed salaried employees based on a
percentage that varies dependent upon the amount of each employee’s salary. The most senior level of executive management
received the largest salary decrease, based on both percentage and dollar amount. Salaries for non-furloughed employees
resumed at the annual base salary beginning with the start of the employee's first full pay period after July 31, 2020.

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The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") provides an employee retention credit (“CARES
Employee Retention Credit”), which is a refundable tax credit against certain employment taxes of up to $5,000 per employee
for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000
of qualified wages per employee. The Company qualified for the tax credit and received additional tax credits for qualified
wages, and the Company recorded a $2.7 million benefit related to the CARES Employee Retention Credit in operating expense
in the accompanying consolidated statement of comprehensive (loss) income for the year ended December 31, 2020. The
CARES Act also provides for deferred payment of the employer portion of social security taxes through December 31, 2020,
with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. Approximately $5.3
million of deferred payments are recorded as liabilities within accrued expense and other current liabilities and other noncurrent
liabilities in the accompanying consolidated balance sheet as of December 31, 2020.

Financial Status and Outlook
The Company reduced planned maintenance and project capital expenditures for 2020 as a result of the temporary property and
operations closures and prioritized capital investments based on the highest near-term return opportunities in order to maintain
financial flexibility.

Refer to "Credit Facilities and Indebtedness" section within this section for additional detail of the Company's borrowings and
repayments under our Credit Facility during 2020.

On April 28, 2020, the Company entered into a Second Amendment to the Credit Agreement, which (i) provides for a financial
covenant relief period through the date on which the Company delivers the Company's quarterly financial statements and
compliance certificate for the fiscal quarter ending June 30, 2021, subject to certain exceptions (the “Financial Covenant Relief
Period”), (ii) amends the definition of “Consolidated EBITDA” in the Credit Agreement with respect to the calculation of
Consolidated EBITDA for the first two fiscal quarters after the termination of the Financial Covenant Relief Period, (iii)
extends certain deadlines and makes certain other amendments to the Company’s financial reporting obligations, (iv) places
certain restrictions on restricted payments during the Financial Covenant Relief Period, and (v) amends the definitions of
“Material Adverse Effect” and “License Revocation” in the Credit Agreement to take into consideration COVID-19.

During the Financial Covenant Relief Period, the Company will not be required to comply with the consolidated total secured
net leverage ratio financial covenant and the interest coverage ratio financial covenant. The Company has agreed to a minimum
liquidity financial covenant that requires the Company and restricted subsidiaries to maintain liquidity of at least $150.0 million
during the Financial Covenant Relief Period. While the Second Amendment is in effect, the Company agreed to limit
Restricted Payments to $26.0 million.

On February 1, 2021, the Company entered into the Third Amendment to the Credit Agreement to increase the restricted
payments capacity during the Financial Covenant Relief Period, as defined in the Second Amendment, from $26.0 million to
$226.0 million to accommodate a share repurchase from an affiliate of The Duchossois Group, Inc. The Company repurchased
the shares using available cash and borrowings under the Company's Revolver.

We continue to assess the situation at our properties and operations on a daily basis; however, we are unable to determine when
the current restrictions in place for our properties will be removed.

Based on our current projected operating cash flow needs, interest and debt repayments, and revised maintenance and project
capital expenditures, we believe we have adequate cash to fund our business operations, meet all of our financial commitments,
and invest in our prioritized key growth capital projects for well beyond the next twelve months.

Kater and Thimmegowda Settlement

Refer to Part I, Item 3, Legal Proceedings, of this Report for discussion of the settlement agreement with respect to the Kater
Litigation and Thimmegowda Litigation the Company entered into during 2020.

Key Indicators to Evaluate Business Results and Financial Condition
Our management monitors a variety of key indicators to evaluate our business results and financial condition. These indicators
include changes in net revenue, operating expense, operating income, earnings per share, outstanding debt balance, operating
cash flow and capital spend.

Our consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles
("GAAP"). We also use non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and
amortization) and Adjusted EBITDA. We believe that the use of Adjusted EBITDA as a key performance measure of results of
operations enables management and investors to evaluate and compare from period to period our operating performance in a
meaningful and consistent manner. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment
performance, develop strategy and allocate resources. Adjusted EBITDA is a supplemental measure of our performance that is
not required by, or presented in accordance with, GAAP. Adjusted EBITDA should not be considered as an alternative to, or
more meaningful than, net income (as determined in accordance with GAAP) as a measure of our operating results.

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following:

Adjusted EBITDA includes our portion of EBITDA from our equity investments.

Adjusted EBITDA excludes:

•

Transaction expense, net which includes:

– Acquisition 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 (loss) income. See the Reconciliation of Comprehensive (Loss) Income to Adjusted
EBITDA included in this section for additional information.

Business Highlights

In 2020, our executive management, leaders, and team members of our Company faced leadership challenges that were
unprecedented as a result of the COVID-19 global pandemic.

The Company reacted quickly to significant threats to the Company's long-term financial health by taking the following actions:

•

Property closures and re-openings:

–

Implemented immediate employee, customer, and regulatory communications, safety and health protocols,
return to work protocols, work-from-home practices and other facility actions to protect our team members,
our customers, our communities, and our Company’s assets when governmental authorities ordered the closure
and subsequent reopening of nearly all of our properties.

Executed immediate operational cost reduction actions to offset the loss of revenue.

Immediately prioritized maintenance and project capital and stopped all non-priority capital projects.

•

Negotiated a waiver of our financial covenants for our Credit Agreement while retaining the ability to grow
organically, make acquisitions, and pay dividends.

• Made the difficult decision – but one that our investors have applauded as the right decision - to run the Kentucky

Oaks and Derby without spectators to protect the long-term value of this iconic asset.

•

Consistently communicated with equity and debt investors and rating agencies on an ongoing basis regarding the status
of the Company’s operations, financial health, and long-term strategy to provide reassurance on the long-term financial
health and strategic direction of the Company.

Churchill Downs Segment:

•

Churchill Downs Racetrack:

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–

The Governor of the Commonwealth of Kentucky had banned horse racing and other activities for the first
Saturday in May. We negotiated a new date and time frame with NBC on the first weekend in September
2020 and modified our safety protocols to conduct the 146th running of the Kentucky Derby.

The Kentucky Oaks and Derby were held on September 4th and 5th without spectators in a challenging
environment and delivered positive Adjusted EBITDA despite the loss of ticket revenue, fewer sponsorships,
and lower wagering during Derby Week.

– Our team members implemented extensive COVID-19 testing and processes and procedures to hold a
shortened Spring Meet with no spectators and the September Meet and Fall Meet with restrictions on patron
capacity.

–

The state-of-the-art equine medical center and quarantine barns on the backside area of our track were
completed in April 2020 which reinforces our ongoing commitment to equine and jockey safety and supports
our long-term international growth strategy. We also implemented other equine safety initiatives led by our
on-staff veterinarian including entry restrictions, medication restrictions, and other actions to improve the
safety of the equine athletes and jockeys and supported federal legislation that was resulted in the Horseracing
Integrity and Safety Act being signed into law on December 28, 2020.

• Derby City Gaming:

– Derby City Gaming delivered record Adjusted EBITDA in 2020 despite a temporary closure from March 15,

2020 to June 8, 2020 as a result of the COVID-19 global pandemic.

– We added a second patio to the facility that allows for smoking and provided an additional 8,000 square-feet

of gaming space and 225 HRMs.

– Our team members developed partnerships with Scientific Games, IGT, and Konami to add their leading

game titles on the HRMs at our Derby City Gaming, Oak Grove, Newport, and future HRM facilities.

Online Wagering Segment:

•

TwinSpires Horse Racing:

– Handle grew from $1.46 billion to $1.98 billion, up $521.0 million, or 35.8%, over 2019. Industry handle

decreased 1.0%.

– Net revenue grew from $291.0 million to $405.0 million, up $114.0 million, or 39.2%, over 2019.

–

The business delivered record Adjusted EBITDA of $126.8 million, up $48.4 million, or 61.7%, over 2019.

•

TwinSpires Sports and Casino:

– We signed multi-year agreements with GAN Limited and Kambi Group PLC to provide player account
management, casino platform, sports trading, and risk management services. We also announced the
transition from the BetAmerica brand to the TwinSpires brand.

– We opened a retail sportsbook at Bronco Billy's Casino in Cripple Creek, Colorado and at Island Resort &

Casino in Harris, Michigan. We have also launched our sportsbook and casino app in Michigan.

Gaming
•

•

The Gaming Segment delivered $176.7 million of Adjusted EBITDA, a decrease of $104.2 million, 37.1% from 2019
despite multiple property closures and ongoing patron capacity restrictions as a result of the COVID-19 global
pandemic.

The team delivered wholly-owned casino margins of 36.6% in the second half of 2020, up 690 basis points from 2019
excluding properties that were closed during part of the second half of 2020.

Our leaders and team members developed and implemented changes to our amenities, modified our gaming floors,
enhanced our cleaning and safety protocols, provided safety equipment and protective gear to our team members, and
conducted extensive training to enable our properties to safely reopen with patron capacity restrictions.

All Other
•

Oak Grove - We opened a simulcast and HRM facility in Oak Grove, Kentucky with approximately 1,325 HRMs, a
128-room hotel, an event center, and food and beverage venues. The 1,200-person grandstand, 3,000-person capacity
outdoor amphitheater and stage, a state-of-the-art equestrian center, and a recreational vehicle park will open in early
2021.

•

Newport Racing and Gaming - We opened a pari-mutuel simulcast area, a 17,000 square foot gaming floor with
approximately 500 HRMs, and a feature bar in Newport, Kentucky, as an extension of Turfway Park.

• We entered into an agreement in principle to settle the Kater Litigation and Thimmegowda Litigation where the
Company will pay $124.0 million pre-tax of the settlement and Aristocrat will pay $31.0 million pre-tax. Aristocrat
released the Company of any and all indemnification obligations related to Big Fish Games.

•

On March 16, 2020, we entered into the First Amendment to our Credit Agreement which extended the maturity of the
Company’s Revolver, lowers the pricing schedule for all levels of the pricing grid, and reduces the commitment fee.

• We entered into a Second Amendment to our Credit Agreement to provide financial covenant relief through the

financial reporting date for second quarter 2021 and limited restricted payments to $26.0 million for this period.

• We formed a Diversity Council and conducted Diversity and Inclusion training for leaders and full-time team members

in our Company.

•

The Company’s total shareholder return was 43% for 2020 compared to 20% for the Russell 2000 and 18% for the
S&P 500. The Company’s five-year total shareholder return for 2020 was 325% compared to 86% for the Russell
2000 and 103% for the S&P 500. The preceding shareholder return calculations assume dividends are reinvested.

We are committed to delivering strong financial results and long-term sustainable growth. We have strong cash flow and a
solid balance sheet that supports organic growth as well as potential strategic acquisitions 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 (loss) income, Adjusted EBITDA, and certain other
financial information:

(in millions)
Net revenue
Operating income

Operating income margin

Net income from continuing operations
Net (loss) income attributable to Churchill Downs Incorporated
Adjusted EBITDA

Years Ended December 31,

2020

2019

Change

1,054.0
60.2

1,329.7
215.7

5.7 %
13.3
(81.9)

286.5

16.2 %
139.6
137.5

451.4

(275.7)
(155.5)

(126.3)
(219.4)

(164.9)

Year Ended December 31, 2020, Compared to the Year Ended December 31, 2019

•

Net revenue decreased $275.7 million driven by a $251.0 million decrease from Gaming due to the temporary
suspension of operations of all of our Gaming properties; a $131.4 million decrease from Churchill Downs primarily
due to running the 146th Kentucky Oaks and Derby without spectators; and a $11.1 million decrease from All Other
primarily due to the temporary suspension of operations at Arlington partially offset by the opening of Oak Grove in
September 2020. Partially offsetting these decreases was a $117.8 million increase from Online Wagering due to an
increase in handle from higher net revenue per active player and an increase in active players for our TwinSpires Horse
Racing business.

Operating income decreased $155.5 million due to a $109.5 million decrease from Churchill Downs primarily due to
running the 146th Kentucky Oaks and Derby without spectators; a $83.3 million decrease from Gaming due to the
temporary suspension of operations of all of our Gaming properties; a $17.5 million non-cash impairment of the
Presque Isle gaming rights and trademark intangible assets; and a $7.0 million decrease from All Other primarily due
to the temporary suspension of operations at Arlington partially offset by the opening of Oak Grove in September
2020. Partially offsetting these decreases were a $50.3 million increase from Online Wagering due to an increase in
handle and net revenue per active player at TwinSpires; a $7.2 million decrease in selling, general and administrative
expense primarily from a reduction in salaries and associated benefits; and a $4.3 million decrease in transaction
expense, net.

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Net income from continuing operations decreased $126.3 million. The following items impacted comparability of the
Company's net income from continuing operations for the year ended December 31, 2020 compared to the prior year:
$14.4 million of after-tax expenses incurred in 2019 that did not recur in 2020, including the impact of the accelerated
amortization of the purchase and sale agreement rights related to the Turfway Park Acquisition, Midwest Gaming's
recapitalization and transaction costs, and legal reserves; a $13.3 million tax benefit related to our net operating loss in
the current year that the Company intends to offset prior year taxes as a result of the CARES Act; and a $6.4 million
non-cash tax decrease related to the re-measurement of our net deferred tax liabilities based on impact of revenue
related to states with higher tax rates. Partially offsetting these decreases was a $12.0 million non-cash after-tax
impact related to our impairment of the Presque Isle intangible assets; a $1.7 million after-tax increase in expenses
related to higher transaction, pre-opening and other expenses; and a $0.2 million increase from other sources.
Excluding these items, net income from continuing operations decreased $146.5 million primarily due to a $141.0
million after-tax decrease driven by the results of our operations and equity income from our unconsolidated affiliates
and a $5.5 million after-tax increase in interest expense associated with higher outstanding debt balances.
Our net income attributable to Churchill Downs Incorporated decreased $219.4 million due to a $126.3 million
decrease in net income from continuing operations discussed above, a $93.0 million decrease in net loss from
discontinued operations, and a $0.1 million decrease in net loss attributable to noncontrolling interest. During the

second quarter of 2020, we settled the Kater and Thimmegowda litigations for $124.0 million pre-tax ($95.0 million
after-tax) which increased our net loss from discontinued operations compared to the prior year period.

•

Our Adjusted EBITDA decreased $164.9 million driven by a $104.2 million decrease from Gaming due to the
temporary suspension of all Gaming property operations; a $99.4 million decrease from Churchill Downs primarily
due to running the 146th Kentucky Oaks and Derby without spectators; and a $4.3 million decrease from All Other
primarily due to the temporary suspension of operations at Arlington. Partially offsetting these decreases was a $43.0
million increase from Online Wagering due to an increase in handle from higher net revenue per active player and an
increase in active players for our TwinSpires Horse Racing business.

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:

TwinSpires Horse Racing

TwinSpires Sports and Casino
Total Online Wagering

Gaming:

Presque Isle

Fair Grounds Slots and VSI

Oxford

Calder

Ocean Downs

Riverwalk

Harlow's

Lady Luck Nemacolin

Total Gaming

All Other
Eliminations
Net Revenue

Years Ended December 31,

2020

2019

Change

81.0 $

202.8 $

79.5

160.5

405.0

4.9

409.9

75.4

99.8

44.9

51.9

60.3

49.1

41.8

20.7

443.9
74.7

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

(35.0)
1,054.0 $

(30.3)
1,329.7 $

(121.8)

(7.1)

(128.9)

114.0

4.3

118.3

(63.6)

(25.0)

(56.8)

(48.0)

(25.6)

(9.8)

(13.5)

(8.6)

(250.9)
(9.5)

(4.7)
(275.7)

Year Ended December 31, 2020, Compared to the Year Ended December 31, 2019

•

Churchill Downs revenue decreased $128.9 million primarily due to a $121.8 million decrease from Churchill Downs
Racetrack from the loss of ticket revenue, fewer sponsorships, and lower wagering during Derby Week as a result of
running of 146th Kentucky Oaks and Derby without spectators in a challenging environment, and a $7.1 million
decrease at Derby City Gaming due to the temporary suspension of operations.

Online Wagering revenue increased $118.3 million from the prior year primarily due to a $114.0 million increase at
TwinSpires Horse Racing. Although horse racing content for wagering decreased, TwinSpires Horse Racing handle
grew $521.0 million, or 35.8%, compared to prior year, as our customers wagered more on the content that was
available. Our TwinSpires Sports and Casino net revenues increased $4.3 million compared to prior year primarily
due to the launch of the casino platform in Pennsylvania and Indiana in late December 2019.

Gaming revenue decreased $250.9 million primarily due to the temporary suspension of operations at all of our
Gaming properties that reduced the net revenue generated at these properties.

All Other revenue decreased $9.5 million primarily due to a $30.8 million decrease as a result of the temporary
suspension of operations and loss of racing days at Arlington and a $4.2 million decrease as a result of the temporary

suspension of operations at the majority of United Tote customer locations. Partially offsetting these decreases were a
$16.6 million increase at Oak Grove due to the opening of the HRM facility in September 2020 and the hotel in
October 2020, a $5.8 million increase primarily from the increase in Turfway Park handle, and a $3.1 million increase
at Newport due to the opening in October 2020.

Consolidated Operating Expense

The following table is a summary of our consolidated operating expense:

(in millions)

Taxes and purses

Content expense

Salaries and benefits

Selling, general and administrative expense

Depreciation and amortization

Marketing and advertising expense

Impairment expense

Transaction expense, net

Other operating expense

Total expense

Percent of revenue

Years Ended December 31,

2020

2019

Change

268.3

369.7

(101.4)

180.7

140.5

114.8

92.9

31.4

17.5

1.0

146.7

139.6

171.2

122.0

96.4

41.8

—

5.3

168.0

993.8

1,114.0

94 %

84 %

41.1

(30.7)

(7.2)

(3.5)

(10.4)

17.5

(4.3)

(21.3)

(120.2)

Year Ended December 31, 2020, Compared to the Year Ended December 31, 2019

Significant items affecting comparability of consolidated operating expense include:

•

Taxes and purses decreased $101.4 million driven by the temporary suspension of all operations at our Gaming
properties and the related decrease in net revenue and a decrease in purses related to the reduction of horse races from
the temporary closures of our facilities, partially offset by an increase in taxes and purses driven by the opening of Oak
Grove in September 2020 and Newport in October 2020.

Content expense increased $41.1 million primarily due to an increase in certain host fees and source market fees for
TwinSpires as a result of the increase in handle.

Salaries and benefits expense decreased $30.7 million driven primarily by temporary furloughing certain employees
and temporarily reducing salaries for all remaining non-furloughed salaried employees through the end of July 2020,
partially offset by increased expenses due to the opening of Oak Grove in September 2020 and Newport in October
2020.

Selling, general and administrative expense decreased $7.2 million primarily from a temporary reduction in salaries
and associated benefits and a decrease in accrued bonuses compared to prior year.

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Depreciation and amortization expense decreased $3.5 million primarily driven by the amortization of the assignment
of the purchase and sale agreement rights associated with the Turfway Park Acquisition that occurred in 2019 and did
not recur in 2020, partially offset by capital projects placed into service for Churchill Downs Racetrack and Derby City
Gaming, and Turfway Park.

• Marketing and advertising expense decreased $10.4 million primarily due to the temporary suspension of operations at
our brick-and-mortar properties, partially offset by an increase in marketing and advertising spend for TwinSpires
Horse Racing and our TwinSpires Sports and Casino business in the Online Wagering segment.

•

Impairment of intangible assets increased $17.5 million driven by a $15.0 million non-cash impairment charge related
to Presque Isle's gaming rights and a $2.5 million non-cash impairment charge related to Presque Isle's trademark.

Transaction expense, net was nominal for the year ended December 31, 2020. For the year ended December 31, 2019,
transaction expense, net was related to the acquisitions of Presque Isle and Lady Luck Nemacolin.

Other operating expense includes maintenance, utilities, food and beverage costs, property taxes and insurance and
other operating expenses. Other operating expense decreased $21.3 million primarily driven by the temporary
suspension of operations at our brick-and-mortar properties, partially offset by the operating expenses related to

Turfway Park and from the opening of Oak Grove in September 2020 and Newport Racing and Gaming in October
2020.

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,
2019
2020

Change

38.3 $

137.7 $

109.3

176.7

324.3

(37.8)

286.5 $

66.3

280.9

484.9

(33.5)

451.4 $

(99.4)

43.0

(104.2)

(160.6)

(4.3)

(164.9)

Year Ended December 31, 2020, Compared to the Year Ended December 31, 2019

•

Churchill Downs Adjusted EBITDA decreased $99.4 million due to a $101.0 million decrease at Churchill Downs
Racetrack primarily due to the decrease in net revenue as a result of running the 146th Kentucky Oaks and Derby
without spectators, partially offset by a $1.6 million increase from Derby City Gaming due to increased operating
efficiencies which more than offset the impact of the temporary closure of the property and ongoing capacity
restrictions.

Online Wagering Adjusted EBITDA increased $43.0 million primarily due to a $48.4 million increase driven by an
increase in TwinSpires Horse Racing handle, partially offset by a $5.4 million decrease from a higher level of
marketing spend and increased costs associated with the continued build-out of the TwinSpires Sports and Casino
business.

Gaming Adjusted EBITDA decreased $104.2 million driven by an $82.9 million decrease at our wholly-owned
Gaming properties and a $21.3 million decrease from our equity investments, both of which were due to decreases in
net revenue as a result of the temporary suspension of operations during 2020.

All Other Adjusted EBITDA decreased $4.3 million primarily due to a $7.3 million decrease from lower revenue from
Arlington and United Tote, a $1.6 million decrease from higher expenses at Turfway Park as a result of a full year of
operations in 2020, and a $0.5 million decrease from other sources. Partially offsetting these decreases was a $5.1
million increase from the opening of Oak Grove in September 2020.

Reconciliation of Comprehensive (Loss) Income to Adjusted EBITDA

(in millions)
Net (loss) income attributable to Churchill Downs Incorporated $
Net loss attributable to noncontrolling interest

Net (loss) income before noncontrolling interest

Loss from discontinued operations, net of tax

Income from continuing operations, net of tax

Additions:

Depreciation and amortization

Interest expense

Income tax (benefit) provision

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

Transaction expense, net

Impairment of tangible and other intangible assets

Total adjustments to EBITDA

Years Ended December 31,

2020

2019

Change

(81.9) $

0.2

(82.1)

95.4

13.3

92.9

80.0

(5.3)

180.9 $

137.5 $

0.3

137.2

2.4

139.6

96.4

70.9

56.8

363.7 $

23.7 $

23.8 $

—

0.8

11.2

38.5

12.9

—

1.0

17.5

105.6

3.6

0.4

5.1

32.6

12.4

4.7

(0.2)

5.3

—

87.7

(219.4)

(0.1)

(219.3)

93.0

(126.3)

(3.5)

9.1

(62.1)

(182.8)

(0.1)

(3.6)

0.4

6.1

5.9

0.5

(4.7)

0.2

(4.3)

17.5

17.9

Adjusted EBITDA

286.5 $

451.4 $

(164.9)

Consolidated Balance Sheet

The following table is a summary of our overall financial position:

(in millions)
Total assets

Total liabilities

Total shareholders’ equity

As of December 31,

2020

2019

Change

2,686.4 $

2,551.0 $

2,319.3

367.1

2,040.0

511.0

135.4

279.3

(143.9)

•

Total assets increased $135.4 million driven by a $144.8 million increase in property and equipment, net, due to the
construction of Oak Grove and Newport; a $34.9 million increase in income taxes receivable as a result of our current
year income tax benefit; and a $3.7 million increase in all other assets. Partially offsetting these increases was a $28.8
million decrease in cash and cash equivalents primarily driven by our project capital expenditures related to Oak Grove
and Newport; and a $19.2 million decrease in other intangibles primarily due the impairment of Presque Isle gaming
rights and trademark.

Total liabilities increased $279.3 million driven by a $146.5 million increase in long-term debt, non-current, primarily
driven by borrowings from our senior secured revolving credit facility; a $124.0 million increase in current liabilities
of discontinued operations due to the settlement of Kater and Thimmegowda litigations; and a $12.9 million increase

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in accounts payable primarily driven by timing. Partially offsetting these increases was a $4.1 million decrease in all
other liabilities.

•

Total shareholders’ equity decreased $143.9 million driven by a $81.9 million current year net loss attributable to
Churchill Downs Incorporated, $27.9 million in repurchases of common stock, $31.4 million in settlement of stock
awards, $25.1 million from our annual dividend declared in December 2020, and a $1.3 million decrease in other
equity components. Partially offsetting these decreases was a $23.7 million increase resulting from stock-based
compensation.

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,
2019
2020

Change

141.9 $

(239.4)

76.0

289.6 $

(781.2)

460.8

(147.7)

541.8

(384.8)

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, 2020, Compared to the Year Ended December 31, 2019

•

Cash provided by operating activities decreased $147.7 million driven by a $138.0 million decrease in operating
income related to continuing operations, net of the $17.5 million non-cash impairment of Presque Isle's intangible
assets; a $17.9 million increase in cash interest paid; and a $13.7 million decrease from all other operating activities.
Partially offsetting these decreases was a $21.9 million decrease in cash taxes paid. 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 decreased $541.8 million driven by a $648.8 million decrease in cash used for our
investment and acquisitions in 2019 related to the equity investment in Midwest Gaming, the Presque Isle Transaction,
the Turfway Park Acquisition, and other investments in intangible assets, and a $25.3 million decrease in capital
maintenance expenditures. Partially offsetting these decreases were a $128.3 million increase for capital project
expenditures and a $4.0 million increase in funds used in other investing activities.

Cash provided by financing activities decreased $384.8 million driven by a $450.3 million decrease in net borrowings
under our long-term debt obligations primarily related to the issuance of our 2027 Senior Notes in 2019, partially
offset by borrowings from our senior secured revolving credit facility during 2020, and a $19.8 million increase in
cash paid to settle stock awards and pay taxes related to the settlement of stock awards. Partially offsetting these
decreases was a $66.6 million decrease in share repurchases in 2020 and an $18.7 million decrease from other
financing activities.

Credit Facilities and Indebtedness

The following table presents our debt outstanding, bond premium and debt issuance costs:

(in millions)

Term Loan B due 2024

Revolver

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

Credit Agreement

As of December 31,

2020

2019

Change

388.0 $

392.0 $

149.7

600.0

500.0

1,637.7

4.0

1,633.7

—

600.0

500.0

1,492.0

4.0

1,488.0

(15.4)

(18.1)

1,618.3 $

1,469.9 $

(4.0)

149.7

—

145.7

—

145.7

2.7

148.4

On December 27, 2017, we entered into a senior secured credit agreement (as amended, the "Credit Agreement") among the
Company, the subsidiary guarantors party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders and
other financial institutions party thereto. The 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. The Credit Amendment is secured by
substantially all wholly-owned assets of the Company. The Company capitalized $1.6 million of debt issuance costs associated
with the Revolver which is being amortized as interest expense over 5 years. The Company also capitalized $5.1 million of
deferred financing costs associated with the Term Loan B portion of the Credit Agreement which is being amortized as interest
expense over 7 years.

The interest rates applicable to the Company’s borrowings under the Credit Agreement are LIBOR-based plus a spread, as
determined by the Company’s consolidated total net leverage ratio. 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 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, 2020, the Company's commitment fee rate was 0.30%.

The Company had an outstanding balance of $149.7 million and had $545.8 million available on the Revolver on December 31,
2020. The Company had $67.4 million of cash and cash equivalents on December 31, 2020. On March 16, 2020, we
borrowed $675.4 million on the Revolver to provide the Company with additional financial flexibility. On December 31, 2020,
we repaid $545.0 million of the borrowings on the Revolver.

On March 16, 2020, the Company entered into the First Amendment (the “First Amendment”) to the Credit Agreement. The
First Amendment extended the maturity of the Company’s Revolver from December 27, 2022 to at least September 27, 2024,
which is 91 days prior to the latest maturity date of the term loan facility on December 27, 2024. The First Amendment also
lowered the upper limit of the applied spreads with respect to revolving loans from 2.25% to 1.75% and for commitment fees
with respect thereto from 0.35% to 0.30% and provides a reduced pricing schedule for outstanding borrowings and commitment
fees with respect to the Revolver across all other leverage pricing levels. The First Amendment did not alter the Company’s
borrowing capacity. The Company capitalized $2.0 million of debt issuance costs associated with the First Amendment which
are being amortized as interest expense over the remaining duration of the Revolver.

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Although the Company was not required to meet the Company's financial covenants under the Credit Agreement on December
31, 2020 (as a result of the Second Amendment), the Company was compliant with all applicable covenants on December 31,
2020.

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 the Revolver portion of our 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
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.

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, 2020, are estimated as follows:

(in millions)

Dividends

Term Loan B
Interest on Term Loan B (1)
Revolver
Interest on Revolver (2)
2027 Senior Notes

2028 Senior Notes

Interest on 2027 Senior Notes

Interest on 2028 Senior Notes
Operating Leases
Minimum Guarantees (3)
Total
(1)

2021

2022-2023

2024-2025

Thereafter

Total

24.9 $

— $

4.0

8.3

—

2.8
—

—

33.0

23.8

5.5

9.0

8.0

16.6

—

5.7
—

—

66.0

47.5

8.1

19.0

376.0

8.1

149.7

2.8
—

—

66.0

47.5

7.4

19.0

—

—
600.0

500.0

49.5

59.4

5.5

13.2

24.9

388.0

33.0

149.7

11.3
600.0

500.0

214.5

178.2

26.5

60.2

111.3 $

170.9 $

676.5 $

1,227.6 $

2,186.3

Interest includes the estimated contractual payments under our Credit Facility assuming no change in the weighted
average borrowing rate of 2.15%, which was the rate in place as of December 31, 2020.

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(2)

(3)

Assumes no change in the weighted average borrowing rate of 1.90%, which was the rate in place as of December 31,
2020.

Includes the maximum estimated exposure where we are contractually obligated to make future minimum payments.

As of December 31, 2020, we had approximately $3.9 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, capital expenditures, 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 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
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 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 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 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 the reporting unit's 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 quantitative impairment test. If a quantitative impairment test of goodwill is
required, we generally determine the fair value under the market and income valuation approaches using inputs primarily
related to discounted projected cash flows and price multiples of publicly traded comparable companies. If a quantitative
impairment test of our indefinite-lived intangible assets is required, we generally determine the fair value using the Greenfield
method for gaming rights and relief-from-royalty method of the income approach for trademarks. 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 require us to estimate, among other factors, forecasts of future operating
results, revenue growth, operating expense, tax rates, start-up costs, capital expenditures, depreciation, working capital,
discount rates, long-term growth rates, risk premiums, royalty rates, terminal values, and fair values of our reporting units and
assets. The impairment tests for goodwill and indefinite-lived intangible assets are subject to uncertainties arising from such
events as changes in competitive conditions, the current 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 and indefinite-lived intangible assets. Changes in estimates or the application of alternative assumptions could
produce significantly different results.

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. On December 31, 2020, we had $537.6 million
outstanding under our 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 $3.8 million. LIBOR is anticipated to be phased out by the end of 2022. We are unable to predict the use of alternative
reference rates and corresponding interest rate risk at this time.

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ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) 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 intangible assets
Transaction expense, net

Total operating expense

Operating income
Other income (expense):
Interest expense, net
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 benefit (provision)

Income from continuing operations, net of tax

(Loss) income from discontinued operations, net of tax

Net (loss) income

Net loss attributable to noncontrolling interest

Net (loss) income attributable to Churchill Downs Incorporated

Net income (loss) per common share data - basic:

Continuing operations
Discontinued operations
Net (loss) income per common share - basic

Net income (loss) per common share data - diluted:

Continuing operations
Discontinued operations
Net (loss) 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
Comprehensive (loss) income attributable to Churchill Downs
Incorporated

$
$
$

2020

2019

2018

142.8 $
408.3
441.4
61.5
1,054.0

274.2 $
290.5
692.4
72.6
1,329.7

195.8
290.2
449.5
73.5
1,009.0

141.9
273.3
360.4
84.9
114.8
17.5
1.0
993.8
60.2

(80.0)
27.7
—
0.1
(52.2)
8.0
5.3
13.3
(95.4)
(82.1)
(0.2)
(81.9) $

0.34 $
(2.41) $
(2.07) $

0.33 $
(2.41) $
(2.08) $

39.6
40.1

— $
—
—

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

— $
—
—

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

(81.9) $

137.5 $

353.2

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 $4.9 in 2020 and $4.4 in
2019
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
Current liabilities of discontinued operations

Total current liabilities

Long-term debt (net of current maturities and loan origination fees of $3.2 in 2020 and $4.0
in 2019)
Notes payable (net of debt issuance costs of $12.2 in 2020 and $14.1 in 2019)
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; 39.5 shares issued and outstanding
in 2020 and 39.7 shares in 2019
Retained earnings
Accumulated other comprehensive loss

Total Churchill Downs Incorporated shareholders' equity

Noncontrolling interest

Total shareholders' equity

Total liabilities and shareholders' equity

2020

2019

67.4 $
53.6

36.5

49.4
28.2
235.1
1,082.1
630.6
366.8
350.6
21.2
2,686.4 $

70.7 $
167.8
32.8
4.0
24.9
124.0
424.2

530.5

1,087.8
17.1
213.9
45.8
2,319.3

—

18.2

349.8

(0.9)

367.1
—
367.1
2,686.4 $

96.2
46.3

37.3

14.5
26.9
221.2
937.3
634.5
367.1
369.8
21.1
2,551.0

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
2.7
511.0
2,551.0

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

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CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
for the years ended December 31, 2020, 2019 and 2018

(in millions, except per common share data)
Balance, December 31, 2017

Net income

Common Stock

Amount

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Noncontrolling
Interest

Total
Shareholders'
Equity

46.2 $

7.3 $

634.3 $

(1.3) $

— $

352.8

Issuance of common stock
Repurchase of common stock

0.3

1.5

(6.1)

(29.9)

(504.0)

(0.1)

0.1

—

21.1

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
adjustment, net of $(0.1) tax
Change in pension benefits, net of
$(0.1) tax

Balance, December 31, 2018

40.4

—

(15.6)

29.7

(23.0)

474.2

137.5

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)
Balance, December 31, 2019

Net loss
Purchase of noncontrolling interest

Issuance of common stock

Repurchase of common stock
Cash settlement of stock awards

Taxes paid related to net share
settlement of stock awards
Stock-based compensation

Adoption of ASC 326
Cash dividends ($0.622 per share)

0.2

1.9

(0.9)

(25.7)

(67.3)

(0.1)

0.1

—

23.8

39.7

—

0.1

2.4

(0.2)

(4.3)

(11.5)

(0.3)

(23.4)
509.2
(81.9)
(0.5)

(23.6)

(12.7)

(0.1)

(3.6)

(15.1)

23.7

(0.5)

(25.1)

0.6

(0.2)

(0.9)

—

(0.3)

3.0

(0.9)

2.7
(0.2)
(2.5)

Balance, December 31, 2020

39.5 $

18.2 $

349.8 $

(0.9) $

— $

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

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
(82.1)
(3.0)

2.4

(27.9)

(12.7)

(18.7)

23.7

(0.5)

(25.1)

367.1

CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31,

(in millions)
Cash flows from operating activities:

Net (loss) income

2020

2019

2018

(82.1) $

137.2 $

352.8

Adjustments to reconcile net (loss) 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
Impairment of intangible assets
Amortization of operating lease assets
Gain on Ocean Downs/Saratoga transaction
Gain on sale of Big Fish Games
Other

Changes in operating assets and liabilities, net of businesses acquired and dispositions:

Income taxes
Deferred revenue
Current liabilities of discontinued operations
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
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
Cash settlement of stock awards
Taxes paid related to net share settlement of stock awards
Repayment of Ocean Downs debt
Big Fish Games earnout and deferred payments
Debt issuance costs
Change in bank overdraft
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

92.9
(27.7)
30.7
23.7
1.1
17.5
5.0
—
—
4.5

(34.3)
(8.3)
124.0
(5.1)
141.9

(23.0)
(211.2)
—
—
—
—
(5.2)
(239.4)

726.1
(580.4)
(23.4)
(28.4)
(12.7)
(18.7)
—
—
(2.0)
13.4
2.1
76.0
(21.5)
—
142.5
121.0 $

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)
(1.2)

13.8
(10.3)
—
5.7
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)
(4.4)
1.5
(933.3)
88.6
(0.8)
85.5
173.3

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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

2020

2019

2018

79.6 $

1.6

61.7 $

23.5

25.8 $

23.5 $

—

12.9

—

103.2

12.4

3.9

0.5

—

31.1

48.6

22.5

—

6.6

2.5

115.2

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

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

1. DESCRIPTION OF BUSINESS

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 three pari-mutuel
gaming entertainment venues with approximately 3,050 historical racing machines ("HRMs") in Kentucky. We also own and
operate TwinSpires, one of the largest and most profitable online wagering platforms for horse racing, sports and iGaming in
the U.S. and we have seven retail sportsbooks. We are also a leader in brick-and-mortar casino gaming in eight states with
approximately 11,000 slot machines and video lottery terminals ("VLTs") and 200 table games. We were organized as a
Kentucky corporation in 1928, and our principal executive offices are located in Louisville, Kentucky.

Impact of the COVID-19 Global Pandemic

In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. Considerable uncertainty
still surrounds the COVID-19 virus and the potential effects of COVID-19, and the extent of and effectiveness of responses
taken on international, national and local levels. Measures taken to limit the impact of COVID-19, including shelter-in-place
orders, social distancing measures, travel bans and restrictions, and business and government shutdowns, have resulted and
continue to result in significant negative economic impacts in the U.S. and in relation to our business. The long-term impact of
COVID-19 on the U.S. and world economies and continuing impact on our business remains uncertain, the duration and scope
of which cannot currently be predicted.

We implemented a number of initiatives to facilitate social distancing and enhanced cleaning, such as increased frequency of
cleaning and sanitizing of all high-touch surfaces, mandatory temperature checks of all guests and team members upon entry
and required training for all team members on safety protocols. Certain amenities at our properties have continued to be
suspended, including food buffets and valet services, and certain restaurants and food outlets. A summary of the temporary
closures and the current restrictions at each property is provided in Part II, Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations contained within this Report.

On March 25, 2020, as a result of the temporary closures and suspended operations described above, the Company announced
the temporary furlough of employees at the Company's wholly-owned and managed gaming properties and certain racing
operations. As the Company reopened these properties, certain employees have returned to work while others remain on
temporary furlough due to the capacity restrictions at these properties. The Company provided health, dental, vision and life
insurance benefits to furloughed employees through July 31, 2020 and during the subsequent property closure periods.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") provides an employee retention credit (“CARES
Employee Retention Credit”), which is a refundable tax credit against certain employment taxes of up to $5,000 per employee
for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000
of qualified wages per employee. The Company qualified for the tax credit and received additional tax credits for qualified
wages, and the Company recorded a $2.7 million benefit related to the CARES Employee Retention Credit in operating expense
in the accompanying consolidated statement of comprehensive (loss) income for the year ended December 31, 2020. The
CARES Act also provides for deferred payment of the employer portion of social security taxes through December 31, 2020,
with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. Approximately
$5.3 million of deferred payments are recorded as liabilities within accrued expense and other current liabilities and other
noncurrent liabilities in the accompanying consolidated balance sheet as of December 31, 2020.

Refer to Note 12, Total Debt, for discussion of from borrowings and repayments on our revolving credit facility (the
"Revolver") pursuant to the Credit Agreement, and the amendments entered into during 2020.

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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and 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.

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

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 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 the reporting unit's 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 quantitative impairment test. If a quantitative impairment test of goodwill is
required, we generally determine the fair value under the market and income valuation approaches using inputs primarily
related to discounted projected cash flows and price multiples of publicly traded comparable companies. If a quantitative
impairment test of our indefinite-lived intangible assets is required, we generally determine the fair value using the Greenfield
method for gaming rights and relief-from-royalty method of the income approach for trademarks. Qualitative factors include
macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, among others.
These factors require judgments and estimates, and application of alternative assumptions could produce significantly different
results. Evaluations of possible impairment require us to estimate, among other factors, forecasts of future operating results,
revenue growth, operating expense, tax rates, start-up costs, capital expenditures, depreciation, working capital, discount rates,
long-term growth rates, risk premiums, royalty rates, 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

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

flows expected to result from the asset's 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 undiscounted cash flows exceed the carrying value, no impairment is indicated. If the
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 licenses ("PSLs"), television rights,
concessions, programs and parking. Concessions, programs, and parking revenue is recognized once the good or service is
delivered.

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
("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

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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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
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.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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.

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

Restricted cash includes deposits collected from our Online Wagering customers. Other 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.

Allowance for Doubtful Accounts Receivable

Upon our adoption of Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses ("ASC 326")
on January 1, 2020, we maintain an allowance for doubtful accounts for current expected credit losses on our financial assets
measured at amortized cost which are primarily included in accounts receivable, net in the accompanying consolidated balance
sheets. The Company evaluates current expected credit losses on a collective (pool) basis when similar risk characteristics
exist. Write-offs are recognized when the Company concludes that all or a portion of a financial asset is no longer collectible.
Any subsequent recovery is recognized when it occurs.

Prior to adopting ASC 326, we maintained 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.

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Internal Use Software

Internal use software costs for Online Wagering software are 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 the software's estimated
economic useful life, which is generally three years. We capitalized internal use software of approximately $10.5 million in
2020, $9.8 million in 2019, and $9.7 million in 2018. We incurred amortization expense of approximately $9.4 million in 2020,
$8.8 million in 2019, and $7.3 million in 2018, for projects which had been placed in service.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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 (loss) 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 the investment's 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.

Leases

On January 1, 2019, the Company adopted ASU No. 2016-02, Leases, and subsequently issued additional guidance
(collectively, "ASC 842") 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.

Due to the adoption of ASC 842, we recognize operating lease right-of-use assets ("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.

Upon adopting ASC 842, we determine if an arrangement is a lease at inception. Operating and finance 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. These leases do not provide an implicit rate, so therefore 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. The 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.

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 (loss) income. In certain jurisdictions governing our pari-

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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.

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 $31.4 million in 2020, $41.8 million in 2019, and
$28.8 million in 2018 in our accompanying consolidated statements of comprehensive (loss) 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.

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Common Stock Share Repurchases

From time-to-time, we repurchase shares of our common stock under share repurchase programs and privately negotiated
transactions 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 shares of our common stock repurchased over the
past several years, our common stock balance frequently will be zero at the end of any given reporting period. Refer to Note
10, Shareholders' Equity, for additional information on our share repurchases.

Recent Accounting Pronouncements - Adopted on January 1, 2020

In June 2016, the Financial Accounting Standards Board ("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. We adopted ASC 326 on January 1, 2020 using the modified retrospective approach. We recognized the
cumulative effect of applying ASC 326 as an opening balance sheet adjustment on January 1, 2020. The comparative

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

information has not been retrospectively adjusted and continues to be reported under the accounting standards in effect for those
periods. The adoption of ASC 326 did not have a material impact on our business.

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. We adopted this guidance on January 1, 2020. This guidance is consistent with our current accounting policies,
and therefore our adoption of this guidance did not have a material impact on our business.

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 the reporting unit's fair value, an impairment loss
shall be recognized in an amount equal to that excess. We adopted this guidance on January 1, 2020. The new guidance did not
result in a cumulative adjustment upon adoption and there was no impairment recognized under the new guidance for the year
ended December 31, 2020.

Recent Accounting Pronouncements - effective in 2021 or thereafter

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract
modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank
Offered Rate (LIBOR), and other interbank offered rates expected to be discontinued, to alternative reference rates. The
guidance was effective upon issuance; if elected, it is to be applied prospectively through December 31, 2022. We are currently
evaluating the effect the adoption of this new accounting standard will have on our results of operations, financial condition, or
cash flows.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,
which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740,
Income Taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by
clarifying and amending existing guidance. This ASU is effective for public business entities for fiscal years and interim
periods beginning after December 15, 2020. The Company does not expect the adoption of this ASU to have a material impact
on the Company's consolidated financial statements.

3. ACQUISITIONS

Presque Isle
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. The following table summarizes the final 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:

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions)

Gaming rights

Trademark

Total intangible assets

Fair Value
Recognized

Weighted-Average
Useful Life

56.0

15.2

71.2

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 on 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 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, 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 the Company's ability to continue to renew our gaming rights in Pennsylvania.

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.

Refer to Note 8, Asset Impairment, for information regarding intangible asset impairments recognized during the first quarter of
2020 related to the Presque Isle gaming rights and trademark.

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, 2018. 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, 2018. The unaudited pro forma net income giving effect to the Presque Isle
Transaction was not materially different than our historical net income.

F
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(in millions)
Net revenue

Lady Luck Nemacolin

Year Ended December 31,
2018
2019

1,332.9 $

1,150.8

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"). 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.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Turfway Park

On October 9, 2019, the Company completed the acquisition of Turfway Park from Jack Entertainment LLC ("JACK") and
Hard Rock International (“Hard Rock”) for total consideration of $46.0 million in cash ("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.

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 $2.7 million, and current liabilities of $2.3 million.

Ocean Downs

On July 16, 2018, the Company announced the 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 our 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 (loss) income. The fair values of the Company's equity method
investments 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

Total

1.9

57.4

20.4

95.4

(5.2)
(54.7)
115.2

The final fair value of the intangible assets consisted of the following:

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions)

Gaming rights

Trademark

Other

Total intangible assets

Fair Value
Recognized

Weighted-Average
Useful Life

87.0

8.3

0.1

95.4

N/A

1.3 years

Current assets and current liabilities were valued at the existing carrying values due to their short-term nature and represent
management's estimated fair value of the respective items on August 31, 2018. The debt of $54.7 million assumed by the
Company was valued at the Company's outstanding principal balance, which approximated fair value on 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 the Company's ability to continue to renew the Company's 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
Ocean Downs over their respective basis under federal, 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, 2018 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, 2018. The unaudited pro forma net income giving effect to the Ocean Downs/Saratoga
Transaction was not materially different than our historical net income.

F
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(in millions)
Net revenue

Years Ended
December 31,
2018

1,065.4

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

4. DISCONTINUED OPERATIONS

On November 29, 2017, the Company entered into a definitive Stock Purchase Agreement (the "Stock Purchase Agreement") to
sell the Company's 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 (loss) 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 (loss) 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.

Kater and Thimmegowda Settlement

On May 22, 2020, we entered into an agreement in principle to settle Cheryl Kater v. Churchill Downs Incorporated ("Kater
Litigation") and Manasa Thimmegowda v. Big Fish Games, Inc. (the “Thimmegowda Litigation”). The agreement in principle
remains contingent on final court approval by the U.S. District Court for the Western District of Washington (the “District
Court”). Under the terms of the settlement, which will take effect only after final court approval of the proposed class
settlement:

i. A total of $155.0 million will be paid into a settlement fund. The Company will pay $124.0 million pre-tax of the
settlement from the Company's available cash and Aristocrat will pay the remaining $31.0 million pre-tax of the
settlement. The $124.0 million pre-tax settlement related to the Company is included in loss from discontinued
operations, net of tax in the accompanying consolidated statements of comprehensive (loss) income for the year
ended December 31, 2020, and on a pre-tax basis in current liabilities of discontinued operations in the
accompanying consolidated balance sheet as of December 31, 2020.

ii. All members of the nationwide settlement class who do not exclude themselves will release all claims relating to

the subject matter of the lawsuits.

iii. Aristocrat has agreed to specifically release the Company of any and all indemnification obligations under the
Stock Purchase Agreement arising from or related to the Kater Litigation and the Thimmegowda Litigation,
including any claims of diminution of value of Big Fish Games and any claims by any person who opts out of the
proposed class settlement.

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 (loss) income:

(in millions)

Net revenue

Operating expenses

Selling, general and administrative expense

Research and development

Legal settlement

Total operating expense

Operating loss
Other income

Gain on sale of Big Fish Games

Other income

Total other income

(Loss) income from discontinued operations before provision
for income taxes

Income tax benefit (provision)

(Loss) income from discontinued operations, net of tax

Stock-Based Compensation

Years Ended December 31,
2019

2020

2018

— $

—

0.1

—

124.0

124.1

—

3.5

—

3.5

(124.1)

(3.5)

—

(124.1)

28.7

(95.4) $

—

(3.5)

1.1

(2.4) $

13.2

8.4

6.0

0.9

—

15.3

(2.1)

219.5

0.1

219.6

217.5

(47.3)

170.2

As part of the Big Fish Transaction, the vesting dates for all outstanding unvested restricted stock awards, restricted stock unit
awards, and performance share unit 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.

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.

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.

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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

Operating lease right-of-use assets

Total

As of December 31,

2020

2019

785.5 $

477.9

240.7

164.2

89.7

23.3

1,781.3

(721.5)

1,059.8

22.3

1,082.1 $

625.2

406.5

222.3

162.4

79.2

52.3

1,547.9

(635.4)

912.5

24.8

937.3

Depreciation expense was $88.0 million in 2020, $81.4 million in 2019 and $57.6 million in 2018 and is classified in operating
expense in the accompanying consolidated statements of comprehensive (loss) income.

6. GOODWILL

Goodwill, by segment, is comprised of the following:

(in millions)
Balances as of December 31, 2018

Additions

Balances as of December 31, 2019

Adjustments

Churchill
Downs

Online
Wagering

Gaming

All Other

Total

49.7 $

148.2 $

139.1 $

1.0 $

—

49.7

—

148.2

—

26.1

165.2

3.0

4.0

— $

(0.3)

338.0

29.1

367.1

(0.3)

Balances as of December 31, 2020

49.7 $

148.2 $

165.2 $

3.7 $

366.8

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.

We performed our annual goodwill impairment analysis as of April 1, 2020. We assessed goodwill for impairment by
performing qualitative or quantitative analyses for each reporting unit. Based on the results of these analyses, no goodwill
impairments were identified in connection with our annual impairment testing. During 2020, we recorded an immaterial
measurement period adjustment for the Turfway Park Acquisition that impacted the All Other goodwill balance.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

7. OTHER INTANGIBLE ASSETS

Other intangible assets, net is comprised of the following:

(in millions)
Definite-lived intangible assets:

December 31, 2020

December 31, 2019

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Favorable contracts

11.0 $

(8.8) $

2.2 $

11.0 $

(8.1) $

Other

Customer relationships

Gaming licenses

10.4

4.7

5.1

(3.5)

(2.2)

(2.1)

6.9

2.5

3.0

10.5

4.7

5.1

(3.3)

(1.6)

(2.0)

2.9

7.2

3.1

31.2 $

(16.6) $

14.6 $

31.3 $

(15.0) $

16.3

Indefinite-lived intangible assets:

Trademarks

Gaming rights

Other

Total

47.7

288.2

0.1

50.2

303.2

0.1

350.6

369.8

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 $4.9 million in 2020, $15.0 million in 2019, and $6.0 million in
2018, and is classified in operating expense in the accompanying consolidated statements of comprehensive (loss) 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 (loss) income. We submitted payments of $2.3 million in 2020 and
2019 for annual license fees for Calder, which are being amortized to expense over the annual license period.

Indefinite-lived intangible assets consist primarily of trademarks and state gaming rights in Maine, Maryland, Mississippi,
Louisiana, Pennsylvania and Kentucky.

F
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1
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Refer to Note 8, Asset Impairment, for information regarding intangible asset impairments recognized during the first quarter of
2020.

We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2020, 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.

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,

Estimated
Amortization
Expense

2021

2022

2023

2024

2025

3.6

2.5

2.4

1.9

1.2

Future estimated amortization expense does not include additional payments of $2.3 million in 2021 and in each year thereafter
for the ongoing amortization of future expected annual Calder license fees not yet incurred or paid.

8. ASSET IMPAIRMENT

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

During the quarter ended March 31, 2020, the Company evaluated whether events or circumstances changed that would
indicate it is more likely than not that any of the Company's intangible assets, goodwill, or property and equipment, were
impaired ("Trigger Event"), or if there were any other than temporary impairments of our equity investments. Factors
considered in this evaluation included, among other things, the amount of the fair value over carrying value from the annual
impairment testing performed as of April 1, 2019, changes in carrying values, changes in discount rates, and the impact of
temporary property closures due to the COVID-19 global pandemic on cash flows. Because Presque Isle was acquired in
2019, we did not expect the estimated fair value and the carry value to be significantly different. Based on the Company's
evaluation, the Company concluded that a Trigger Event occurred related to the Presque Isle gaming rights, trademark, and
the reporting unit's goodwill due to the impact and uncertainty of the COVID-19 global pandemic.

The initial fair value of Presque Isle gaming rights in the first quarter of 2019 was determined using the Greenfield Method,
which is an income approach methodology that calculates the present value based on a projected cash flow stream. This
method assumes that the Presque Isle gaming rights provide the opportunity to develop a casino and online wagering platform
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,
operating expenses, start-up costs, and discount rate were the primary inputs in the valuation.

Based on the Trigger Event, the Company updated the discount rate to reflect the increased uncertainty of the cash flows and
updated the projected cash flow stream. As a result, the $77.6 million carrying value of the Presque Isle gaming rights
exceeded the fair value of $62.6 million and the Company recognized an impairment of $15.0 million in first quarter of 2020
for the Presque Isle gaming rights ($12.5 million related to the Gaming segment and $2.5 million related to the Online
Wagering segment).

The Presque Isle trademark was initially valued in first quarter of 2019 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.

Based on the Trigger Event, the Company updated the discount rate to reflect the increased uncertainty of the cash flows and
updated projected cash flow stream. As a result, the Company recognized an impairment of $2.5 million in the first quarter
of 2020 for the Presque Isle trademark.

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

In accordance with Accounting Standards Codification 350, Intangibles - Goodwill and Other, the Company performed the
impairment testing of the Presque Isle gaming rights and trademark prior to testing Presque Isle goodwill. Based on the
Trigger Event, the Company updated the discount rate to reflect the increased uncertainty of the cash flows and updated
project cash flow stream. As a result, the Company did not recognize an impairment for Presque Isle goodwill in the first
quarter of 2020 because the fair value exceeded the carrying value.

F
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1
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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

9. INCOME TAXES

Components of the (benefit) provision for income taxes are as follows:

(in millions)
Current (benefit) provision:

Federal

State and local

Foreign

Deferred provision:

Federal

State and local

Foreign

Years Ended December 31,
2019

2018

2020

(38.7) $

19.2 $

3.0

0.1

(35.6)

28.7

1.5

0.1

30.3

6.0

—

25.2

16.1

15.5

—

31.6

Income tax (benefit) provision

(5.3) $

56.8 $

10.1

3.8

—

13.9

35.0

2.5

(0.1)

37.4

51.3

Income from continuing operations before provision for income taxes were as follows:

(in millions)
Domestic

Foreign

Income from continuing operations before provision for
income taxes

Years Ended December 31,
2019

2018

2020

8.2 $

(0.2)

196.4 $

—

234.2

(0.3)

8.0 $

196.4 $

233.9

Our income tax (benefit) 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
Net operating loss carry back - CARES Act
Windfall deduction from equity compensation

Non-deductible officer's compensation

Re-measurement of deferred taxes

Uncertain tax positions

Valuation allowance - state and foreign net operating losses

Other

Years Ended December 31,
2019

2018

2020

1.7 $
(0.6)
(13.3)
(5.1)

7.3

1.9

1.7

1.1

—

41.2 $
8.0
—
(5.2)

5.5

8.3

(1.0)

—

Income tax (benefit) provision

(5.3) $

56.8 $

49.1
5.4
—
(4.7)

2.6

—

(1.1)

51.3

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.

The CARES Act provides, among other things, that any net operating loss arising in a tax year beginning in 2018, 2019 or 2020
may be carried back five years or carried forward indefinitely, offsetting up to 100% of taxable income in tax years beginning

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

before 2021. The Company intends to carry back our 2020 net operating loss to claim a refund of taxes paid in a year before the
statutory corporate tax rate was reduced from 35% to 21% by the Tax Act. Due to the higher statutory rate applied to this net
operating loss, the Company recognized an income tax benefit of $13.3 million for the year ended December 31, 2020.

The Company recognized $1.9 million during 2020 and $8.3 million during 2019 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.

The Company will generate a capital loss associated with the Kater litigation. We have recorded a $29.0 million deferred tax
asset without a valuation allowance for the capital loss in 2020, as we fully expect to be able to offset the capital loss with
previously recognized capital gains.

Components of our deferred tax assets and liabilities were as follows:

(in millions)
Deferred tax assets:

Capital loss
Net operating losses and credit carryforward

Lease liabilities

Deferred compensation plans

Deferred income

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

Property and equipment in excess of tax basis

Intangible assets in excess of tax basis

Right-of-use assets
Other

Deferred tax liabilities

Net deferred tax liability

As of December 31,

2020

2019

29.0 $

9.3

7.7

6.7

5.5

2.8

1.2

62.2

(1.4)

60.8

121.6

77.9

65.6

7.4

2.2

274.7

(213.9) $

—

3.4

6.8

5.9

4.8

2.7

1.0

24.6

(0.2)

24.4

114.8

53.4

60.2

6.8

2.0

237.2

(212.8)

F
o
r
m
1
0
-
K

As of December 31, 2020, 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 of $7.3 million. We have recorded a valuation allowance of $1.1 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 deferred
tax assets.

The Internal Revenue Service has completed audits through 2012. Tax years 2017 and after are open to examination. As of
December 31, 2020, we had approximately $3.9 million of total gross unrecognized tax benefits, excluding interest of $0.2
million. If the total gross unrecognized tax benefits were recognized, there would be a $3.4 million effect to the annual
effective tax rate. We anticipate a decrease in our unrecognized tax positions of approximately $0.8 million during the next
twelve months primarily due to the expiration of statutes of limitation.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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

2020

2019

2018

1.8 $

2.8 $

0.1

2.6

(0.6)

3.9 $

0.1

—

(1.1)

1.8 $

2.9

0.1

(0.3)

2.8

10. SHAREHOLDERS’ EQUITY

Stock Repurchase Program

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. 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, 2020, we repurchased 235,590 shares of our common stock under the October 2018 stock
repurchase program at a total cost of $27.9 million. We had $147.1 million of repurchase authority remaining under this
program at December 31, 2020.

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. As of December 31, 2019, we accrued $0.5 million for the future cash
settlement of executed repurchases of our common stock.

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.

Privately Negotiated Share Repurchase

Refer to Note 23, Subsequent Events, for information regarding the Company's privately negotiated share repurchase on
February 1, 2021.

Stock Split

On October 30, 2018, the Company’s Board of Directors approved a three-for-one stock split (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.

11. 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 $23.7 million in 2020,
$23.8 million in 2019, and $17.7 million in 2018. The income tax benefit related to stock-based employee compensation
expense was $1.9 million in 2020, $2.1 million in 2019, and $2.7 million in 2018. Our stock-based employee compensation
plans are described below.

2016 Omnibus Stock Incentive Plan

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

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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 2016 Incentive Plan permits 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 Plan 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 2016 Plan generally vests 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 2016 Plan generally vests 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 2018, 2019, and 2020, 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 PSU Awards may be adjusted based on the Company’s TSR performance relative to the TSR performance during the
performance period of the Companies remaining in the Russell 2000 index at the end of the performance period 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 a special equity award to two NEOs ("7-Year Grant") consisting of PSU Awards that
may be adjusted up to 200% based on the Company's relative TSR performance versus the Russell 2000 over a three-year
period, and service-based RSU awards, both of which vest 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.

The total compensation cost recognized for 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, with the exception of the 7-Year Grant, which compensation cost 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.

A summary of the 2020 RSUs, and PSUs granted to certain NEOs, employees, and the Board of Directors is presented below
(shares/units in thousands):

F
o
r
m
1
0
-
K

Grant Year
2020

Award Type
RSU

2020
2020

PSU
RSU

Number of
Units
Awarded(1)
82

37
12

Vesting Terms

Vest equally over three service periods ending in 2021, 2022, and 2023

Three-year performance and service period ending in 2022

One year 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):

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in thousands, except grant date values)

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

Granted
Performance adjustment(1)
Vested

Canceled/forfeited

PSUs

RSAs and RSUs

Total

Number of
Shares/
Units

Weighted
Average
Grant Date
Fair Value

Number of
Shares/
Units

Weighted
Average
Grant Date
Fair Value

Number of
Shares/
Units

Weighted
Average
Grant Date
Fair Value

124 $

256 $

70 $

(129) $

— $

321 $

58 $

87 $

(152) $

— $

51.59

68.32

47.01

—

65.77

92.90

55.75

—

314 $

72.84

37 $

182.45

41 $

(90) $

— $

90.73

—

316 $

193 $

— $

(217) $

(17) $

275 $

130 $

— $

(135) $

(5) $

265 $

45.51

84.78

—

46.35

54.49

72.03

94.42

—

68.15

77.59

85.07

94 $

150.12

— $

—

(121) $

90.01

440 $

449 $

70 $

(346) $

(17) $

596 $

188 $

87 $

(287) $

(5) $

579 $

131 $

41 $

(211) $

47.23

75.39

47.01

46.60

54.49

68.66

93.96

55.75

61.57

77.59

78.45

159.3

90.73

90.32

(3) $

121.39

(3) $

121.39

Balance as of December 31, 2020

302 $

83.40

235 $

107.90

537 $

94.14

(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 2020 and 2019, and $32.4 million in 2018.

A summary of total unrecognized stock-based compensation expense related to RSAs, RSUs, and PSUs (based on current
performance estimates), at December 31, 2020 is presented below:

(in millions, except years)

Unrecognized expense:

RSA
RSU
PSU

Total

Employee Stock Purchase Plan

December 31, 2020

Weighted Average
Remaining Vesting
Period (Years)

0.8
9.9
14.2
24.9

1.02
2.29
2.72
2.49

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 (loss) income.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

12. TOTAL DEBT

The following table presents our total debt outstanding:

(in millions)

Term Loan B due 2024

Revolver

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

2027 Senior Notes

2028 Senior Notes

Total debt

Current maturities of long-term debt

Total debt, net of current maturities

Credit Agreement

Outstanding
Principal

As of December 31, 2020
Issuance Costs
and Fees

Long-Term Debt,
Net

388.0 $

3.2 $

149.7

600.0

500.0

1,637.7

4.0

—

6.8

5.4

15.4

—

1,633.7 $

15.4 $

384.8

149.7

593.2

494.6

1,622.3

4.0

1,618.3

Outstanding
Principal

As of December 31, 2019
Issuance Costs
and Fees

Long-Term Debt,
Net

392.0 $

4.0 $

600.0

500.0

1,492.0

4.0

8.0

6.1

18.1

—

1,488.0 $

18.1 $

388.0

592.0

493.9

1,473.9

4.0

1,469.9

F
o
r
m
1
0
-
K

On December 27, 2017, we entered into a senior secured credit agreement (as amended, the "Credit Agreement") with a
syndicate of lenders. The 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. The Credit Agreement is collateralized by substantially all of
the wholly-owned assets of the Company.

The Company capitalized $1.6 million of debt issuance costs associated with the Revolver which is being amortized as interest
expense over the shorter of the respective debt period or 5 years. The Company also capitalized $5.1 million of debt issuance
costs associated with the Term Loan B portion of the Credit Agreement which is being amortized as interest expense over the
shorter of the respective debt period or 7 years.

The interest rates applicable to the Company’s borrowings under the Credit Agreement are LIBOR-based plus a spread, as
determined by the Company's consolidated total net leverage ratio. 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 Credit Agreement. The Company is required to
pay a commitment fee on the unused portion of the Revolver as determined by a pricing grid based on the consolidated total net
secured leverage ratio of the Company. For the period ended December 31, 2020, the Company's commitment fee rate was
0.30%.

The 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 Credit Agreement also contains financial covenants
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.

On March 16, 2020, the Company entered into the First Amendment to the Credit Agreement (the “First Amendment”). The
First Amendment extended the maturity for the Company’s Revolver from December 27, 2022 to at least September 27, 2024,

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

which is 91 days prior to the latest maturity date of the Company’s term loan facility on December 27, 2024. The First
Amendment also lowered the upper limit of the applied spreads with respect to revolving loans from 2.25% to 1.75% and for
commitment fees with respect thereto from 0.35% to 0.30% and provides a reduced pricing schedule for outstanding
borrowings and commitment fees with respect to the Revolver across all other leverage pricing levels. The First Amendment
did not alter the Company’s borrowing capacity. The Company capitalized $2.0 million of debt issuance costs associated with
the First Amendment which will be amortized as interest expense over the remaining duration of the Revolver.

The Company had an outstanding balance of $149.7 million and had $545.8 million available on the Revolver as of December
31, 2020. The Company had $67.4 million of cash and cash equivalents as of December 31, 2020.

On April 28, 2020, the Company entered into a Second Amendment to the Credit Agreement (the “Second Amendment”). The
Second Amendment (i) provides for a financial covenant relief period through the date on which the Company delivers the
Company’s quarterly financial statements and compliance certificate for the fiscal quarter ending June 30, 2021, subject to
certain exceptions (the “Financial Covenant Relief Period”), (ii) amends the definition of “Consolidated EBITDA” in the Credit
Agreement with respect to the calculation of Consolidated EBITDA for the first two fiscal quarters after the termination of the
Financial Covenant Relief Period, (iii) extends certain deadlines and makes certain other amendments to the Company’s
financial reporting obligations, (iv) places certain restrictions on restricted payments during the Financial Covenant Relief
Period, and (v) amends the definitions of “Material Adverse Effect” and “License Revocation” in the Credit Agreement to take
into consideration COVID-19.

The interest rate on the Revolver on December 31, 2020 was LIBOR plus 175 points based on the Revolver pricing grid in the
Second Amendment and the Company's net leverage ratio as of December 31, 2020. The Term Loan B bears interest at LIBOR
plus 200 basis points.

Although the Company was not required to meet the Company’s financial covenants under the Credit Agreement on December
31, 2020 (as a result of the Second Amendment), the Company was compliant with all applicable covenants on December 31,
2020.

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 the 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.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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.

Future aggregate maturities of total debt are as follows (in millions):

Years Ended December 31,

2021

2022

2023

2024

2025
Thereafter
Total

4.0

525.7

—
1,100.0

1,637.7

F
o
r
m
1
0
-
K

13. REVENUE FROM CONTRACTS WITH CUSTOMERS

Performance Obligations

As of December 31, 2020, 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 $131.8 million. The revenue we expect to recognize on these remaining performance obligations is $32.8
million in 2021, $36.6 million in 2022, $23.2 million in 2023, and the remainder thereafter.

As of December 31, 2020, 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

Contract assets were not material as of December 31, 2020 and 2019.

Contract liabilities were $53.7 million as of December 31, 2020 and $63.1 million as of December 31, 2019. Contract liabilities
are included in current deferred revenue, non-current deferred revenue, and accrued expense and other current liabilities in the

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

accompanying consolidated balance sheets. Contract liabilities primarily relate to our Churchill Downs segment and the
decrease was primarily due to revenue recognized for performance obligations related to Churchill Downs Racetrack that were
fulfilled in 2020. We recognized $6.7 million of revenue during the year ended December 31, 2020 that was included in the
contract liabilities balance at December 31, 2019. 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.

Disaggregation of Revenue

In Note 21, 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 Horse Racing business and our
TwinSpires Sports and Casino business given that TwinSpires' Horse Racing revenue is primarily related to online
pari-mutuel wagering on live race events while the TwinSpires Sports and Casino revenue relates to sports and casino
gaming service offerings. 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.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

14. 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,

2020

2019

6.5 $

26.7

8.2

41.4

(4.9)

36.5 $

We recognized bad debt expense of $2.5 million in 2020, $2.1 million in 2019 and $1.7 million in 2018.

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:

(in millions)
Accrued salaries and related benefits

Account wagering deposits liability

Purses payable

Accrued interest

Other

Total

As of December 31,

2020

2019

19.6 $

38.1

18.5

19.2

72.4

167.8 $

12.3

20.9

8.5

41.7

(4.4)

37.3

29.2

28.9

19.9

19.7

75.7

173.4

15. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Investments in and advances to unconsolidated affiliates as of December 31, 2020 and 2019 primarily consisted of 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.

Our investment in MVG was $110.1 million as of December 31, 2020 and $110.8 million as of December 31, 2019. The
Company received distributions from MVG of $20.0 million in 2020, $23.8 million in 2019 and $18.8 million in 2018.

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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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.

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.

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 the Company's 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, 2020, the net aggregate basis difference
between the Company’s investment in Midwest Gaming and the amounts of the underlying equity in net assets was
$833.3 million.

Our investment in Rivers Des Plaines was $519.0 million as of December 31, 2020 and $522.1 million as of December 31,
2019. The Company received distributions from Rivers Des Plaines of $10.7 million in 2020 and $14.2 million in 2019.

Ocean Downs

Ocean Downs was accounted for under the equity method prior to August 31, 2018. On August 31, 2018, the Company
completed 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. As of
August 31, 2018, the Company owns 100% of Ocean Downs and has no equity interest or management involvement in
Saratoga New York or Saratoga Colorado.

Summarized Financial Results for our Unconsolidated Affiliates

The financial results for our unconsolidated affiliates are summarized below. The summarized income statement information
for 2020 and summarized balance sheet information as of December 31, 2020 includes the following equity investments: MVG,
Rivers Des Plaines, and one other immaterial joint venture. 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 ventures. The summarized income statement
information for 2018 includes the following equity investments: MVG, Saratoga New York, Saratoga Colorado, Ocean Downs,

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

and two other immaterial joint ventures. The 2018 summarized income statement information includes the results of Ocean
Downs, Saratoga New York, and Saratoga Colorado through August 31, 2018.

(in millions)

Assets

Current assets

Property and equipment, net

Other assets, net

Total assets

Liabilities and Members' Deficit

Current liabilities

Long-term debt

Other liabilities

Members' deficit

Total liabilities and members' deficit

(in millions)

Net revenue

Operating and SG&A expense

Depreciation and amortization

Operating income

Interest and other expense, net

Net income

16. LEASES

December 31,

2020

2019

132.8 $

267.5

244.9

645.2 $

133.5 $

753.5

42.3

(284.1)

645.2 $

Years Ended December 31,

2020

2019

2018

386.3 $

585.5 $

252.1

17.0

117.2

(63.1)

54.1 $

411.4

13.0

161.1

(67.0)

94.1 $

64.0

256.1

240.1

560.2

73.3

745.0

20.6

(278.7)

560.2

367.2

271.9

22.2

73.1

(6.3)

66.8

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.

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The components of total lease cost were as follows:

(in millions)
Short-term lease cost (a) (b)
Operating lease cost (b)
Finance lease interest expense
Finance lease amortization expense (b)
Total lease cost
(a)
(b)

Includes leases with terms of one month or less
Includes variable lease costs, which were not material

Supplemental cash flow information related to leases are as follows:

Year Ended
December 31, 2020

Year Ended
December 31, 2019
14.3
6.7
—
—
21.0

6.5 $
6.6

0.1

0.2

13.4 $

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions)

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance lease

ROUAs obtained in exchange for lease obligations

Operating leases

Finance leases

Other information related to operating leases was as follows:

Weighted Average Remaining Lease Term

Operating leases

Finance leases

Weighted Average Discount Rate

Operating leases

Finance leases

Year Ended
December 31, 2020

Year Ended
December 31, 2019

6.0 $

0.1 $

2.8 $

5.1 $

5.2

—

3.7

1.5

As of December 31,

2020

2019

5.9 years

18.4 years

6.5 years

14.9 years

3.8%

2.9%

3.9%

As of December 31, 2020, the future undiscounted cash flows associated with the Company's operating and financing lease
liabilities were as follows:

(in millions)

Years Ended December 31,

2021

2022

2023

2024

2025
Thereafter

Total future minimum lease payments

Less: Imputed interest

Present value of lease liabilities

Reported lease liabilities as of December 31, 2020

Accrued expense and other current liabilities (current maturities of
leases)

Other liabilities (non-current maturities of leases)

Present value of lease liabilities

Operating Leases

Finance Leases

5.5 $

4.3

3.8

3.6
5.5
26.5
2.8

23.7 $

4.7 $

19.0

23.7 $

0.4

0.4
6.0
8.0
1.8

6.2

0.2

6.0

6.2

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

17. BOARD OF DIRECTOR AND EMPLOYEE BENEFIT PLANS

Board of Directors and Officers Retirement Plan

We provide eligible executives and members of our Board of 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.

Members of our Board of 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. Members of our Board of Directors may continue to participate in the Deferred Plan.

On December 13, 2019, the Compensation Committee adopted the Churchill Downs Incorporated Restricted Stock Unit
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 for all employees with three months or more of service who are not otherwise participating in an
associated profit-sharing plan. We match contributions made by employees up to 3% of the employee’s annual compensation
and match at 50% any 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 $3.7 million in 2020, $4.1 million in 2019, and
$3.0 million in 2018.

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 $0.3 million in 2020,
$0.6 million in 2019, and $0.7 million in 2018. 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.

18. 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:

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") and the Revolver approximates the gross carrying
value as both are variable rate debt and as such are Level 2 measurements.

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

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions)
Financial assets:

Restricted cash

Financial liabilities:

Term Loan B

Revolver

2027 Senior Notes

2028 Senior Notes

(in millions)
Financial assets:

Restricted cash

Financial liabilities:

Term Loan B

2027 Senior Notes

2028 Senior Notes

December 31, 2020

Carrying
Amount

Fair Value

Level 1

Level 2

Level 3

53.6 $

— $

384.8

149.7

593.2

494.6

388.0

149.7

635.2

526.9

—

388.0

149.7

635.2

526.9

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

—

19. 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
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.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

20. 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 (loss) 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 (loss) income from discontinued operations

Numerator for basic net (loss) income per common share

Numerator for diluted net income from continuing operations
per common share

Numerator for diluted net (loss) income per common share

Denominator for net (loss) income per common share:

Basic

Plus dilutive effect of stock awards

Diluted

Net (loss) income per common share data:

Basic

Continuing operations

Discontinued operations

Net (loss) income per common share - basic

Diluted

Continuing operations
Discontinued operations (1)

Net (loss) income per common share - diluted

Years Ended December 31,
2019

2020

2018

13.3 $

(0.2)

13.5

(95.4)

(81.9) $

13.5 $

(81.9) $

39.6

0.5

40.1

0.34 $

(2.41) $

(2.07) $

0.33 $

(2.41) $

(2.08) $

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

(1) Amounts exclude all potential common equivalent shares for periods when there is a net loss from discontinued operations.

21. SEGMENT INFORMATION

We manage our operations through three reportable segments: Churchill Downs, Online Wagering and Gaming. Our operating
segments reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations
and to assess performance and allocate resources.

•

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 the auxiliary training
facility for Churchill Downs Racetrack 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.

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•

Online Wagering

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

The Online Wagering segment includes the revenue and expenses for the TwinSpires Horse Racing business and the
TwinSpires Sports and Casino business. Both businesses are headquartered in Louisville, Kentucky.

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

Our TwinSpires Sports and Casino business operates our sports betting and casino iGaming platform in multiple states,
including Colorado, Indiana, Michigan, Mississippi, New Jersey, and Pennsylvania. The TwinSpires sports and casino
business includes the mobile and online sports betting and casino results and the results of our three retail sportsbooks
in Colorado, Indiana and Michigan which utilize a third party's casino license.

The results of the two retail sportsbooks at our Mississippi properties, our retail sportsbook at Presque Isle in
Pennsylvania and the retail and online BetRivers sportsbook in Illinois provided by Rivers Des Plaines and managed
by Rush Street Interactive, 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 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")
Harlow’s Casino Resort and Spa ("Harlow's")
Lady Luck Casino Nemacolin management agreement
Ocean Downs Casino and Racetrack ("Ocean Downs")
Oxford Casino and Hotel ("Oxford")
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:

◦

61.3% equity investment in Midwest Gaming, the parent company of Rivers Des Plaines in Des Plaines,
Illinois
50% equity investment in 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:

•
•
•
•
•
•

Oak Grove
Newport
Turfway Park
Arlington International Racecourse ("Arlington")
United Tote
Corporate

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:

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

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
(loss) income.

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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 (loss) 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 Horse Racing
TwinSpires Sports and Casino

Total Online Wagering

Gaming:

Fair Grounds and VSI
Presque Isle

Ocean Downs

Calder

Oxford Casino

Riverwalk Casino

Harlow’s Casino

Lady Luck Nemacolin

Saratoga

Total Gaming

All Other

Years Ended December 31,
2019

2020

2018

63.3 $

187.6 $

79.5

142.8

403.4

4.9

408.3

97.6

75.2

60.3

51.8

44.9

49.1

41.8

20.7

—

441.4

61.5

86.6

274.2

289.9

0.6

290.5

123.0

138.5

85.9

99.8

101.7

58.9

55.3

29.3

—

692.4

72.6

181.0

14.8

195.8

290.2

—

290.2

117.7

—

25.9

98.6

102.0

54.5

50.2

—

0.6

449.5

73.5

Net revenue from external customers

1,054.0 $

1,329.7 $

1,009.0

Intercompany net revenues:

Churchill Downs

Online Wagering

Gaming:

Fair Grounds and VSI
Presque Isle

Calder

Total Gaming

All Other

Eliminations

Intercompany net revenue

17.7 $

15.2 $

1.6

2.2
0.2

0.1

2.5

1.1

1.8
0.5

0.1

2.4

13.2

(35.0)

11.6

(30.3)

— $

12.7

1.3

1.6
—

0.1

1.7

11.2

(26.9)

—

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

Twelve Months Ended December 31, 2020

Churchill
Downs

Online
Wagering

Gaming

Total
Segments

All Other

Total

39.4 $

387.5 $

22.9 $

449.8 $

25.3 $

475.1

76.0

21.0

—

6.4

—

5.1

15.7

—

3.4

387.5

27.6

76.0

24.4

392.6

49.7

17.6

0.3

—

18.3

93.6

24.7

392.6

68.0

142.8 $

408.3 $

441.4 $

992.5 $

61.5 $

1,054.0

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

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54.9 $

278.4 $

27.1 $

360.4 $

43.1 $

13.8

115.2

—

11.9

—

11.8

—

3.9

365.9

52.6

13.8

119.1

365.9

76.3

—

5.8

—

24.6

403.5

13.8

124.9

365.9

100.9

195.8 $

290.2 $

449.5 $

935.5 $

73.5 $

1,009.0

(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

(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 $13.1 million in 2020, $33.4 million in 2019, and
$26.1 million in 2018.

Adjusted EBITDA by segment is comprised of the following:

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(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

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

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

Adjusted EBITDA

Year Ended December 31, 2020

Churchill Downs Online Wagering

Gaming

160.5 $

409.9 $

(54.1)

(4.1)

(26.5)

(1.0)

(7.0)

(29.6)

0.1

(23.7)

(16.5)

(13.0)

(204.9)

(8.9)

(33.7)

0.1

38.3 $

109.3 $

443.9

(173.0)

(7.5)

(75.9)

(3.5)

(25.4)

(60.8)

78.9

176.7

Year Ended December 31, 2019

Churchill Downs Online Wagering

Gaming

289.4 $

291.6 $

(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)

—

137.7 $

66.3 $

Year Ended December 31, 2018

694.8

(270.3)

(21.5)

(103.3)

(6.0)

(29.0)

(84.1)

100.3

280.9

Gaming

451.2

(153.4)
(15.5)

(68.9)

(4.1)

(18.6)

(60.0)

43.3

174.0

Churchill Downs Online Wagering
$

208.5 $

291.5 $

(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 $

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions)
Reconciliation of Comprehensive (Loss) Income to Adjusted EBITDA:

Years Ended December 31,
2019

2020

2018

Comprehensive (loss) income attributable to Churchill Downs
Incorporated

(81.9) $

137.5 $

353.2

Foreign currency translation, net of tax

Change in pension benefits, net of tax

Net (loss) income attributable to Churchill Downs Incorporated

Net loss attributable to noncontrolling interest

Net (loss) 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

Income tax (benefit) provision

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

—

(81.9)

0.2

(82.1)

95.4

13.3

92.9

80.0

(5.3)

—

137.5

0.3

137.2

2.4

139.6

96.4

70.9

56.8

(0.6)

0.2

352.8

—

352.8

(170.2)

182.6

63.6

40.1

51.3

180.9 $

363.7 $

337.6

23.7 $

23.8 $

—

0.8

11.2

38.5

12.9

—

—
1.0

17.5
105.6

3.6

0.4

5.1

32.6

12.4

4.7

(0.2)

—
5.3

—
87.7

286.5 $

451.4 $

38.3 $

137.7 $

109.3

176.7

324.3

66.3

280.9

484.9

(37.8)

286.5 $

(33.5)

451.4 $

17.7

—

(0.6)

4.8

13.9

—

(54.9)
10.3

—
(8.8)

328.8

102.4

79.0

174.0

355.4

(26.6)

328.8

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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,
2019

2020

2018

27.5 $

50.5 $

0.2

0.1

27.7 $

50.6 $

29.4

0.2

29.6

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

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

As of December 31,
2019
2020

377.7 $

249.1

957.4

1,584.2

1,102.2

370.3

241.5

1,030.1

1,641.9

909.1

2,686.4 $

2,551.0

Years Ended December 31,
2019

2020

2018

38.2 $

31.4 $

11.6

6.5

56.3

177.9

9.7

37.1

78.2

53.0

234.2 $

131.2 $

109.6

9.7

20.7

140.0

9.4

149.4

22. 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.

Refer to Note 23, Subsequent Events, for information regarding a related party transaction.

Churchill Downs Incorporated
Notes to Consolidated Financial Statements

23. SUBSEQUENT EVENTS

Stock Repurchase Agreement
On February 1, 2021, the Company entered into an agreement (the “Stock Repurchase Agreement”) with an affiliate of The
Duchossois Group, Inc. (“TDG”) to repurchase 1,000,000 shares of the Company’s common stock for $193.94 per share in a
privately negotiated transaction. The aggregate purchase price was $193.9 million. The Stock Repurchase Agreement contains
customary representations, warranties and covenants of the parties.

The repurchase of shares of common stock from TDG pursuant to the Stock Repurchase Agreement was approved by the
Company's Board of Directors separately from, and will not reduce the authorized amount remaining under, the existing
common stock repurchase program from October 2018. The Company repurchased the shares using available cash and
borrowings under the Revolver.

Amendment to Credit Agreement
Also, on February 1, 2021, the Company entered into an amendment (the “Third Amendment”) to the Credit Agreement. The
Third Amendment increased the amount of certain otherwise restricted payments permitted during the Financial Covenant
Relief Period from $26.0 million to $226.0 million to accommodate the repurchase of shares of common stock from TDG
described above.

Arlington Park

On February 23, 2021, the Company launched a process to sell the 326 acres at Arlington Park.

24. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

(in millions, except per common share data)

First Quarter

Year Ended December 31, 2020
Third Quarter

Second Quarter

Fourth Quarter

Net revenues

Operating (loss) income

(Loss) income from continuing operations, net of
tax

(Loss) income from discontinued operations, net of
tax

Net (loss) income per common share - basic (c):

Continuing operations

Discontinued operations

Net (loss) income per common share - basic

Net (loss) income per common share - diluted (c):

Continuing operations

Discontinued operations

$
Net (loss) income per common share - diluted $

252.9 $

(11.6)

185.1 $

(0.4)

(22.6)

(23.6)

(0.9)

(95.2)

(0.57) $

(0.02) $

(0.59) $

(0.57) $

(0.02) $

(0.59) $

(2.41) $

(3.00) $

(0.59) $

(2.41) $

(3.00) $

337.8 $

49.5

43.1

—

1.09 $

— $

1.09 $

1.08 $

— $

1.08 $

278.2

22.7

16.4

0.7

0.41

0.02

0.43

0.41

0.02

0.43

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Churchill Downs Incorporated
Notes to Consolidated Financial Statements

(in millions, except per common share data)

Year Ended December 31, 2019

First Quarter(a)

Second Quarter

Third Quarter

265.4 $

477.4 $

306.3 $

Fourth Quarter(b)
280.6

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 (c):

Continuing operations

Discontinued operations

Net income per common share - basic

Net income (loss) per common share - diluted (c):

Continuing operations

Discontinued operations

Net income per common share - diluted

28.0

11.9

156.4

108.3

27.8

15.2

(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 $

3.5

4.2

(0.5)

0.11

(0.01)
0.10

0.11

(0.01)
0.10

(a) First quarter of 2019 includes the acquisitions of Presque Isle and Lady Luck Nemacolin, and the 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.

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, 2020 and 2019, and the related consolidated statements of comprehensive (loss) income,
shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, including the related
notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2020
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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2020 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, 2020, 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.

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.

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.

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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.

Impairment Assessment for the Presque Isle Indefinite-Lived Gaming Rights Intangible Asset

As described in Notes 2, 7, and 8 to the consolidated financial statements, the Company’s indefinite-lived gaming rights
intangible assets balance was $288.2 million as of December 31, 2020, of which $62.6 million relates to the Presque Isle
indefinite-lived gaming rights intangible asset. Management performs an annual review for impairment as of April 1 of each
fiscal year for its indefinite-lived intangible assets, or more frequently if events or circumstances indicate that it is more likely
than not the relevant asset may be impaired. During the quarter ended March 31, 2020, management concluded it was more
likely than not that the Presque Isle gaming rights intangible asset may be impaired due to the impact and uncertainty of the
COVID-19 pandemic. Management performed an impairment assessment and recognized an impairment of $15.0 million for
the Presque Isle indefinite-lived gaming rights intangible asset. The fair value of the Presque Isle indefinite-lived gaming
rights intangible asset was determined by management using the Greenfield Method, which is an income approach
methodology that calculates the present value based on a projected cash flow stream. The primary inputs used by
management in the estimation of the fair value of the Presque Isle indefinite-lived gaming rights intangible asset included
estimated future revenue, operating expenses, start-up costs, and discount rate.

The principal considerations for our determination that performing procedures relating to the impairment assessment for the
Presque Isle indefinite-lived gaming rights intangible asset is a critical audit matter are (i) the high degree of auditor
judgment and subjectivity in performing procedures relating to the fair value measurement of the gaming rights indefinite-
lived intangible asset due to the significant judgment by management when developing the fair value estimate; (ii) significant
audit effort in evaluating the significant assumptions related to estimated future revenue, operating expenses, start-up costs,
and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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 intangible asset impairment assessment, including controls over management’s valuation of the Presque Isle indefinite-
lived gaming rights intangible asset. These procedures also included, among others, testing management’s process for
developing the fair value of the Presque Isle indefinite-lived gaming rights intangible asset; evaluating the appropriateness of
the Greenfield Method; testing the completeness and accuracy of underlying data used in the Greenfield Method; and
evaluating the reasonableness of significant assumptions used by management related to estimated future revenue, operating
expenses, start-up costs, and discount rate. Evaluating management’s assumptions related to estimated future revenue,
operating expenses, and start-up costs involved evaluating whether the assumptions used were reasonable considering the
current and past performance of Presque Isle and relevant third-party economic and industry data. Professionals with
specialized skill and knowledge were used to assist in evaluating the appropriateness of the Greenfield Method and
evaluating the reasonableness of the discount rate assumption.

/s/ PricewaterhouseCoopers LLP
Louisville, Kentucky
February 24, 2021

We have served as the Company’s auditor since 1990.

100

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 or submitted 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, 2020. 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, 2020.

/s/ William C. Carstanjen
William C. Carstanjen
Chief Executive Officer
February 24, 2021

/s/ Marcia A. Dall
Marcia A. Dall
Executive Vice President and
Chief Financial Officer

February 24, 2021

/s/ Chad E. Dobson
Chad E. Dobson
Vice President and
Chief Accounting Officer

February 24, 2021

The effectiveness of the Company's internal control over financial reporting as of December 31, 2020 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears
herein.

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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, 2020.

101

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
2/24/2021

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 and
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, 2020; 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, 2020.

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, 2020.

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, 2020.

102

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 2020, 2019 and
2018 are included in Part II, Item 8:

Consolidated Balance Sheets

Consolidated Statements of Comprehensive (Loss) 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

110

104

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103

Numbers

Description

By Reference To

EXHIBIT INDEX

(a)

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 filed
January 17, 2019

(b)

Amended and Restated Bylaws of Churchill Downs
Incorporated, as amended July 3, 2012

Exhibit 3.2 to Current Report on Form 8-K 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 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

Indenture, dated as of March 25, 2019, by and among
Churchill Downs Incorporated, the guarantors party thereto
and U.S. Bank National Association

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 4.1 to Current Report on Form 8-K filed
December 27, 2017

Exhibit 4.1 to Current Report on Form 8-K filed
March 26, 2019

Exhibit 4.2 to Current Report on Form 8-K 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 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*

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 10(a) to Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 filed
March 31, 1999

Exhibit 10(a) to Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2001 filed
May 15, 2001

Exhibit 2.1 to Current Report on Form 8-K filed
January 6, 2003

2005 Churchill Downs Incorporated Deferred Compensation
Plan*

Exhibit 10.1 to Current Report on Form 8-K filed
June 21, 2005

2006 Amendment to 2005 Churchill Downs Incorporated
Deferred Compensation Plan*

Exhibit 10.1 to Current Report on Form 8-K filed
June 8, 2006

Churchill Downs Incorporated 2007 Omnibus Stock
Incentive Plan*

Amendment to Churchill Downs Incorporated 2005
Deferred Compensation Plan Adopted June 28, 2007*

Exhibit A to Schedule 14A filed April 30, 2007

Exhibit 10(b) to Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 2007 filed
August 7, 2007

Third Amendment to the 2005 Churchill Downs
Incorporated Deferred Compensation Plan*

Exhibit 10.2 to Current Report on Form 8-K 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 filed
December 22, 2008

First Amendment to the Churchill Downs Incorporated
Amended and Restated Incentive Compensation Plan (1997),
effective November 14, 2008*

Exhibit 10 (vv) to Annual Report on Form 10-K
for the fiscal year ended December 31, 2008 filed
March 4, 2009

104

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

Numbers

Description

By Reference To

(k)

(l)

(m)

(n)

(o)

(p)

(q)

(r)

(s)

(t)

(u)

(v)

(w)

(x)

(y)

(z)

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)*

Exhibit 10 (ww) to Annual Report on Form 10-K
for the fiscal year ended December 31, 2008 filed
March 4, 2009

Exhibit 10 (xx) to Annual Report on Form 10-K
for the fiscal year ended December 31, 2008 filed
March 4, 2009

Form of Churchill Downs Incorporated Restricted Stock
Agreement pursuant to the 2007 Omnibus Stock Incentive
Plan*

Exhibit 10(LL) to Annual Report on Form 10-K
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 filed May 3, 2012

Amendment to the Churchill Downs Incorporated 2007
Omnibus Stock Incentive Plan*

Exhibit B to Schedule 14A 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*

Form of Churchill Downs Incorporated Restricted Stock
Unit Agreement pursuant to the 2007 Omnibus Stock
Incentive Plan*

Form of Churchill Downs Incorporated Performance Share
Unit Agreement pursuant to the 2007 Omnibus Stock
Incentive Plan*

Stock Repurchase Agreement, dated as of June 9, 2017, by
and between Churchill Downs Incorporated and CDI
Holdings, LLC

Amended and Restated Stockholder’s Agreement, dated as
of June 9, 2017, by and between Churchill Downs
Incorporated and CDI Holdings, LLC

Stock Repurchase Agreement, dated February 1, 2021,
between Churchill Downs Incorporated and CDI Holdings,
LLC

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

First Amendment to Credit Agreement, dated March 16,
2020, among Churchill Downs Incorporated, the subsidiary
guarantors party thereto, the lenders party thereto, JPMorgan
Chase Bank, N.A., and PNC Bank, National Association

Second Amendment to Credit Agreement, dated April 28,
2020, among Churchill Downs Incorporated, the subsidiary
guarantors and the lenders party thereto, and JPMorgan
Chase Bank, N.A., and PNC Bank, National Association

Third Amendment to Credit Agreement, dated February 1,
2021, among Churchill Downs Incorporated, the subsidiary
guarantors and the lenders parties thereto, and JPMorgan
Chase Bank, N.A.

Form of Churchill Downs Incorporated Non-Employee
Director Restricted Share Units Agreement*

Exhibit 10.1 to Current Report on Form 8-K filed
February 12, 2015

Exhibit 10.1A to Current Report on Form 8-K
filed September 28, 2015

Exhibit 10.1B to Current Report on Form 8-K
filed September 28, 2015

Exhibit 10.1 to Current Report on Form 8-K filed
June 12, 2017

Exhibit 10.2 to Current Report on Form 8-K filed
June 12, 2017

Exhibit 10.1 to Current Report on Form 8-K filed
February 2, 2021

Exhibit 4.3 to Current Report on Form 8-K filed
December 27, 2017

Exhibit 10.1 to Current Report on Form 8-K filed
March 16, 2020

Exhibit 10.1 to Current Report on Form 8-K filed
April 29, 2020

Exhibit 10.2 to Current Report on Form 8-K filed
February 2, 2021

Exhibit 10(a) to Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 2016 filed
August 3, 2016

(aa)

Churchill Downs Incorporated 2016 Omnibus Stock
Incentive Plan*

Exhibit 10.1 to Current Report on Form 8-K filed
April 29, 2016

105

F
o
r
m
1
0
-
K

Numbers

Description

By Reference To

(bb)

(cc)

(dd)

(ee)

(ff)

(gg)

(hh)

(ii)

(jj)

(kk)

First Amended and Restated Churchill Downs Incorporated
2000 Employee Stock Purchase Plan*

Exhibit B to Schedule 14A filed March 29, 2016

Churchill Downs Incorporated Restricted Stock Unit
Deferred Compensation Plan*

Exhibit 10.1 to Current Report on Form 8-K filed
December 19, 2019

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 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 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 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 filed
November 5, 2018

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 filed
October 2, 2019

Executive Change in Control, Severance and Indemnity
Agreement, dated as of July 27, 2020, by and between
Churchill Downs Incorporated and Marcia A. Dall*

Exhibit 10.1 to Current Report on Form 8-K filed
July 30, 2020

First amendment to the Churchill Downs Incorporated
Restricted Stock Unit Deferral Plan, dated as of February 12,
2020*

Exhibit 10(ff) to Annual Report on Form 10-K
for the fiscal year ended December 31, 2019 filed
February 26, 2020

Class Action Settlement Agreement, dated as of July 24,
2020, by and between Kater et al. and Churchill Downs
Incorporated et al.**

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**

106

Numbers

Description

By Reference To

101 DEF

Inline XBRL Taxonomy Extension Definition Linkbase
Document**

101 LAB Inline XBRL Taxonomy Extension Label Linkbase

Document**

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.

Filed herewith.

***

Furnished herewith.

F
o
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m
1
0
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K

107

ITEM 16.

FORM 10-K SUMMARY

None.

108

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 the Company's 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 24, 2021

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 24, 2021

/s/ William E. Mudd

William E. Mudd

President and

Chief Operating Officer

(Director and Principal Executive

February 24, 2021

Officer)

/s/ R. Alex Rankin

R. Alex Rankin

February 24, 2021

/s/ Ulysses L. Bridgeman

Ulysses L. Bridgeman

February 24, 2021

(Chairman of the Board)

(Director)

/s/ Daniel P. Harrington
Daniel P. Harrington

February 24, 2021

(Director)

/s/ Douglas C. Grissom

Douglas C. Grissom

February 24, 2021

(Director)

/s/ Paul C. Varga
Paul C. Varga
February 24, 2021

(Director)

/s/ Marcia A. Dall

Marcia A. Dall

Executive Vice President and

Chief Financial Officer

February 24, 2021

(Principal Financial and

Accounting Officer)

/s/ Robert L. Fealy

Robert L. Fealy

February 24, 2021

(Director)

/s/ Karole F. Lloyd

Karole F. Lloyd

February 24, 2021

(Director)

F
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1
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February 24, 2021

109

CHURCHILL DOWNS INCORPORATED
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(in millions)
Allowance for doubtful accounts:

2020
2019
2018

Balance
Beginning
of Year

Change in
Accounting
Standard

Charged
to
Expense

Deductions

Balance
End of
Year

4.4 $
4.0
3.6

0.5 $
—
—

2.5 $
2.1
3.0

(2.5) $
(1.7)
(2.6)

4.9
4.4
4.0

(in millions)
Deferred income tax asset valuation allowance:

2020
2019
2018

Balance
Beginning
of Year

Additions

Deductions

Balance
End of
Year

0.2 $
0.2
0.2

1.2 $
—
—

— $
—
—

1.4
0.2
0.2

110

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 Company,
LLC; 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
Shareholders will attend the Annual
Meeting by visiting
www.proxydocs.com/CHDN at
9:00 a.m. local time Tues., 4/20/2021.

Other Information
Copies of our 2020 Annual Report on
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