What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-23 · 170 added, 184 removed, 207 unchanged (63% of the section changed)

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 nine 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 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.

The COVID-19 global pandemic resulted in travel limitations and business and government shutdowns which had a significant negative economic impact in the United States and to our business.

Although vaccines are available, we cannot predict the duration of the COVID-19 global pandemic.

The extent to which the COVID-19 pandemic, including the emergence of variant strains, will continue to impact the Company remains uncertain and will depend on many factors that are not within our control.

In March 2020, as a result of the COVID-19 outbreak, we temporarily suspended operations at our wholly owned and managed gaming properties, announced the temporary furlough of our employees at these properties and certain racing operations and implemented a temporary salary reduction for all remaining non-furloughed salaried 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.

In May 2020, we began to reopen our properties with patron restrictions and gaming limitations.

One property suspended operations again in July 2020 and reopened in August 2020, and three properties suspended operations in December 2020 and reopened in January 2021.

All of our gaming properties have remained open since January 2021.

Although all of our properties are now open to customers, certain locations continue to operate with certain restrictions, and the continued impact of the pandemic could result in further suspension of operations.

The 146th Kentucky Oaks and Derby were held in the third quarter of 2020 without spectators.

During the second quarter of 2021, we held the 147th Kentucky Oaks and Derby with capacity restrictions in compliance with Kentucky venue limitations at that time.

The capacity restrictions limited reserved seating in each area to approximately 40% to 60% capacity and limited general admission tickets.

Due to such restrictions, our revenues from the Kentucky Oaks and Derby in each year were significantly less than we would otherwise expect.

Churchill Downs Incorporated ("CDI" or the "Company") has been creating extraordinary entertainment experiences for nearly 150 years, beginning with the Company’s most iconic and enduring asset, the Kentucky Derby.

Headquartered in Louisville, Kentucky, CDI has expanded through the development of live and historical racing entertainment venues, the growth of the TwinSpires horse racing online wagering business and the operation and development of regional casino gaming properties.

Business Segments

During the first quarter of 2021, we updated our operating segments to reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources.

Our internal management reporting changed primarily due to the continued growth from Oak Grove Racing, Gaming & Hotel ("Oak Grove") and Turfway Park Racing & Gaming (“Turfway Park”), which opened its annex HRM facility, Newport Racing & Gaming ("Newport"), in October 2020, which resulted in our chief operating decision maker's decision to include Oak Grove, Turfway Park and Newport in the new Live and Historical Racing segment.

The Live and Historical Racing segment now includes Churchill Downs Racetrack, Derby City Gaming, Oak Grove, Turfway Park, and Newport.

We also realigned our retail sports betting results at our wholly owned casinos from our Gaming segment to our TwinSpires segment.

As a result of this realignment, our operating segments that meet the requirements to be disclosed separately as reportable segments are:

The Company manages its business through three reportable segments:

Live and Historical Racing, TwinSpires, and Gaming.

Financial information about these segments is set forth in Part II, Item 8.

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.

The prior year results in the accompanying consolidated statements of comprehensive income (loss) were reclassified to conform to this presentation.

In the first quarter of 2022, we updated our operating segments to reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources.

During the first quarter of 2022, our chief operating decision maker decided to include the results of our United Tote business in the TwinSpires segment as we evolve our strategy to integrate the United Tote offering with TwinSpires Horse Racing, which we believe will create additional business-to-business revenue opportunities.

The prior year results in the accompanying Consolidated Statements of Comprehensive Income (Loss) conform to this presentation.

Further discussion of segment financial information, and our planned investments in segment properties, is set forth in Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations contained within this Report.

During the fourth quarter of 2022, we updated our operating segments to reflect the geographies in which we operate.

This change is consistent with the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources.

Our internal management reporting changed primarily due to the continued growth of our business, which resulted in our chief operating decision maker's desire to review the results of the Company on a geographical basis within each reportable segment.

The commentary within Management’s Discussion and Analysis has been updated to conform to this change.

Live and Historical Racing

The Live and Historical Racing segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack, Derby City Gaming, Oak Grove, Turfway Park, and Newport.

Churchill Downs Racetrack is the home of the Kentucky Derby and conducts live racing.

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.

Oak Grove conducts live harness racing and operates an HRM facility under its pari-mutuel racing license.

Turfway Park conducts live racing, and Newport is an ancillary HRM facility that operates under the Turfway Park pari-mutuel racing license.

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

simulcast fees earned from other wagering sites;

admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services (collectively "racing event-related services"), as well as food and beverage services.

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

Our Live and Historical Racing properties earn commissions primarily from pari-mutuel wagering on live and historical races, simulcast fees earned from other wagering sites, fees from racing event-related services including admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services, and revenue from food and beverage services.

Churchill Downs Racetrack

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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 luxury and/or marquee brands.

We conducted 74 live racing days in 2019, 65 live race days in 2020, and 71 live race days in 2021.

We conducted 65 live race days in 2020, 71 live race days in 2021 and 76 live race days in 2022.

In 2023, we anticipate conducting up to 79 live race days.

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 approximately 59,000 of our patrons.

We also own 83 acres of land at our auxiliary training facility, which is five miles from Churchill Downs Racetrack.

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.

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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.

We have 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 safety and supports our long-term international growth strategy.

The Churchill Downs Racetrack facility also includes a simulcast wagering facility.

We also own 83 acres of land at our auxiliary training facility, which is five miles from Churchill Downs Racetrack.

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 reacquire the facility at any time for $1.00 subject to the terms of the lease.

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 July 2021, we announced three major multi-year capital investments to transform key areas of Churchill Downs Racetrack:

The Homestretch Club, the Turn 1 Experience, and the Paddock and Under the Spires projects.

The Company is investing $45.0 million in the Homestretch Club project.

The Homestretch Club will replace the grandstand area below the Jockey Club suites and alongside the Winner’s Circle suites on the homestretch.

The Homestretch Club project will convert 5,200 outdoor bleacher seats into 3,250 premium reserved seats with all-inclusive amenities.

Plans for the new area include 2,610 stadium club seats, 66 covered terraced dining tables for up to 440 guests, 30 Trackside Lounges for up to 200 guests offering a “courtside seat” experience, five private 60-person VIP Hospitality Lounges as upgrades and an 18,600 square-foot indoor hospitality space with a grand staircase and 100-foot feature bar.

The Company is planning to debut the new area in May 2022 for the 148 th Kentucky Derby.

The Company is investing $90.0 million in the Turn 1 Experience project.

The Turn 1 Experience will provide additional permanent stadium seating and a new track-level hospitality club replacing current temporary Oaks and Derby seating at the first turn of the racetrack.

Plans for the new area will replace 3,400 temporary seats with 5,100 permanent covered stadium seats and a new 50,000 square-foot climate-controlled hospitality venue with reserved dining room tables, a trackside viewing terrace, and two new seating concourses to allow for better guest circulation and amenities for an incremental 2,000 reserved seats.

The Company is planning to debut the new area in May 2023 for the 149 th Kentucky Derby.

The Company is also developing a newly designed Paddock and Under the Spires area to enhance the experience for nearly every guest.

The Homestretch Club, the First Turn Experience, and the Paddock Project.

The Company invested $36.0 million in the new Homestretch Club which opened for the 148th Kentucky Derby in May 2022.

The Homestretch Club project converted 5,200 outdoor bleacher seats into 3,250 premium reserved seats with all-inclusive amenities.

The new premium reserved seats include 2,550 stadium club seats, 66 covered terraced dining tables for up to 440 guests, 30 Trackside Lounges for up to 200 guests offering a "courtside seat" experience, five private 60-person VIP Hospitality Lounges as upgrades and an 18,600 square-foot indoor hospitality space with a grand staircase and 95-foot feature bar.

The Company is investing $90.0 million in the First Turn Experience.

The First Turn Experience will provide additional permanent stadium seating and a new track-level hospitality club replacing current temporary Oaks and Derby seating at the first turn of the racetrack.

We plan to replace 3,400 temporary seats with 5,100 permanent covered stadium seats and a new 50,000 square-foot climate-controlled hospitality venue with reserved dining room tables, a trackside viewing terrace, and two new seating concourses to allow for better guest circulation and amenities for an incremental 2,000 reserved seats.

The First Turn Experience is scheduled for completion for the 149 th Kentucky Derby in May 2023.

The Company is also investing up to $200.0 million in a Paddock Project to enhance the experience for nearly every guest.

The redesigned area will improve the flow of guests throughout the paddock.

The project will create a larger paddock walking ring for viewing the horses prior to the races, a new Paddock Club in the area on the first floor under the Twin Spires that will provide views of the paddock and views of the tunnel that the horses walk through, new hospitality and other amenities for guests in certain areas of the 3 rd floor clubhouse seats, and new terraces including a new Turf Club balcony overlooking the Paddock.

The Company is planning to debut these new areas in May 2024 for the 150 th Kentucky Derby.

Derby City Gaming

Derby City Gaming is an 85,000 square-foot, state-of-the-art HRM facility that was opened in September 2018 at the Churchill Downs Racetrack auxiliary training facility in Louisville, Kentucky.

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.

In July 2021, we announced plans to invest $76.0 million at Derby City Gaming to expand our gaming facility for up to 450 additional gaming positions and to build a five-story hotel with 123 rooms including amenities to better serve and attract guests.

Plans for the project will add 135,000 square feet to the facility and the new gaming space will open with 200 additional gaming positions.

The new gaming expansion will include a VIP gaming area, a new sports bar, a stage for live entertainment and an upscale-casual restaurant and bar to create a variety of new food and beverage options for gaming and hotel guests throughout the entire day.

The new gaming space expansion is scheduled for completion in the fourth quarter of 2022 and the hotel is scheduled for completion by second quarter of 2023.

Derby City Gaming Downtown

In September 2021, we announced plans to invest $80.0 million to build a new HRM entertainment venue called Derby City Gaming Downtown ("DCG Downtown") in an existing building in downtown Louisville.

Plans for DCG Downtown will include 500 HRMs, three unique bar concepts and over 200 onsite parking spaces.

The new entertainment venue will provide guests, including locals, tourists, and convention attendees, a main-level sports bar with a stage for music and live entertainment, a premium bourbon library and an elegant wine and charcuterie lounge.

A retail and merchandise store will be located on the street level where guests can shop for Kentucky Derby-themed merchandise.

The Company completed the purchase of the building and property in December 2021 for $5.2 million.

DCG Downtown is anticipated to open in mid-2023.

Oak Grove is a premier state-of-the-art live harness racing and historical racing entertainment venue located on 240 acres approximately one-hour north of Nashville, Tennessee in Oak Grove, Kentucky.

The Paddock Project will create a larger paddock walking ring for viewing the horses prior to the races, a new Paddock Club in the area on the first floor under the Twin Spires that will provide views of the paddock and views of the tunnel that the horses walk through, new hospitality and other amenities for guests in certain areas of the third floor clubhouse seats, and new terraces overlooking the paddock.

The new Paddock Project is scheduled for completion for the 150 th Kentucky Derby in May 2024.

Historical Racing Properties

The following table summarizes key information regarding our current historical racing properties:

State Property City/ Location Floor Space (Sq.

ft.) Historical Racing Machines ("HRMs")

Kentucky Derby City Gaming Louisville, Kentucky 85,000 1,170

Kentucky Turfway Park Northern Kentucky 155,000 850

Kentucky Newport Northern Kentucky 23,000 500

Kentucky Oak Grove Southwestern Kentucky 180,000 1,360

Kentucky Ellis Park Western Kentucky 100,000 320

New Hampshire Chasers (a)

Salem, New Hampshire 4,000 (a)

Virginia Rosie's New Kent Central Virginia 127,000 550

Virginia Rosie's Richmond Central Virginia 54,000 700

Virginia Rosie's Hampton Southeast Virginia 38,000 700

Virginia Rosie's Vinton Southern Virginia 15,000 470

Virginia Rosie's Dumfries Northern Virginia 19,000 150

Virginia Rosie's Collinsville Southern Virginia 2,000 40

Total 802,000 6,810

(a) The Company plans to expand the charitable gaming facility to accommodate HRMs and table games.

The Company owns Derby City Gaming which is a state-of-the-art HRM facility that was opened in September 2018 at the Churchill Downs Racetrack auxiliary training facility.

Derby City Gaming operates under the Churchill Downs Racetrack pari-mutuel racing license and has a simulcast center and a dining facility.

We are investing $80.0 million to add 135,000 square feet to the facility which will hold up to 450 additional HRMs and to build a five-story hotel with 123 rooms including amenities to better serve and attract guests.

The expansion includes a VIP gaming area, a new sports bar, a stage for live entertainment and an upscale-casual restaurant and bar to create a variety of new food and beverage options for gaming and hotel guests.

We recently opened the new gaming space with 200 additional HRMs.

The hotel is scheduled for completion by the end of the second quarter of 2023.

The Company is also building a new $90.0 million HRM entertainment venue called Derby City Gaming Downtown ("DCG Downtown") in an existing building in downtown Louisville which is scheduled for completion in the second half of 2023.

The new entertainment venue will provide an HRM gaming area, a main-level sports bar with a stage for music and live entertainment, a premium bourbon library, and an elegant wine and charcuterie lounge for guests, including locals, tourists, and convention attendees.

The facility has 200 onsite parking spaces, and a retail and merchandise store will be located on the street level where guests can shop for Kentucky Derby-themed merchandise.

Southwestern Kentucky

Oak Grove Racing & Gaming ("Oak Grove") is a premier state-of-the-art live harness racing and HRM venue located on 240 acres approximately one-hour north of Nashville, Tennessee in Oak Grove, Kentucky.

Oak Grove owns and operates a 5/8-mile harness racing track.

In September 2020, the Company opened the simulcast and HRM facility with approximately 1,325 HRMs, event center and food and beverage venues.

In September 2020, the Company opened the simulcast and HRM facility with an event center and food and beverage venues.

The 128-room hotel opened in October 2020.

Oak Grove also has a 1,200-person grandstand, 3,000-person capacity outdoor amphitheater and stage, a state-of-the-art equestrian center, and a recreational vehicle park.

In October 2019, the Company purchased Turfway Park which is located on 197 acres in Florence, Kentucky.

The Company is investing up to $148.0 million to build a 155,000 square foot state-of-the-art live thoroughbred racing and historical racing entertainment venue facility including a grandstand, sports bar, food offerings, and up to 1,200 HRMs, which we plan to open in September 2022.

On October 2, 2020, the Company opened Newport, located in Newport, Kentucky, after investing approximately $33.1 million to create a premier entertainment experience as an extension of Turfway Park.

Newport has a pari-mutuel simulcast area, an approximately 23,000 square-foot gaming floor with approximately 500 HRMs, and a feature bar.

The TwinSpires 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.

Northern Kentucky

The Company opened Newport Racing & Gaming ("Newport") in October 2020.

Newport is an HRM entertainment venue including a simulcast area that operates as an extension of Turfway Park.

Turfway Park opened in September 2022 as a state-of-the-art live thoroughbred racing and historical racing entertainment venue with a sports bar and food and beverage offerings.

Western Kentucky

The Company acquired Ellis Park Racing & Gaming ("Ellis Park") on September 26, 2022 and assumed the opportunity to build an HRM entertainment venue in Owensboro, Kentucky.

We plan to invest approximately $75.0 million at these two facilities in the next year.

The Company acquired Colonial Downs Racetrack ("Colonial Downs") and six historical racing entertainment venues in Virginia as part of the acquisition of substantially all of the ass ets of Peninsula Pacific Entertainment LLC ("P2E") on November 1, 2022 ("P2E Transaction").

Colonial Downs conducts live thoroughbred racing and has a one and one-quarter mile dirt track, the widest turf track oval in North America and two off-track betting facilities ("OTBs").

The Company is investing $400.0 million to construct a large gaming resort and 102-room hotel at the Dumfries, Virginia location with the potential for expansion of up to 1,800 HRMs.

The Dumfries HRM facility and hotel is scheduled for completion in 2024.

The Company is also investing $30.0 million to develop a seventh HRM entertainment venue in Emporia, Virginia with a planned opening in the second half of 2023.

New Hampshire

On September 2, 2022, the Company completed the acquisition of Chasers Poker Room ("Chasers") located in Salem, New Hampshire.

Chasers is a charitable gaming facility located approximately 30 miles from Boston, Massachusetts, that offers poker and a variety of table games.

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

We plan to invest approximately $150.0 million in total in Salem, inclusive of the amount paid to the sellers of Chasers to build the expanded facility.

The TwinSpires segment includes the revenue and expenses for the TwinSpires Horse Racing, the TwinSpires Sports and Casino and the United Tote businesses.

These businesses are headquartered in Louisville, Kentucky.

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

facilitates high dollar wagering by international customers (through Velocity);

facilitates high dollar wagering by certain customers;

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

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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 is licensed as a multi-jurisdictional simulcasting and interactive wagering hub in the state of Oregon and also holds licenses from various other states where applicable.

This business also offers customers streaming video of live horse races, replays, and an assortment of racing and handicapping information.

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Under these arrangements, we typically provide an ADW platform and related operational services while the third party typically provides the brand, marketing, and limited customer functions.

We announced two of these business-to-business agreements in 2022.

On September 8, 2022, we announced a multi-year agreement to enable FanDuel, a sportsbook and mobile betting operator, to create a fully integrated and seamless wagering experience with a single wallet for horse racing and sports with exclusive TV rights to racing content and non-exclusive Kentucky Derby sponsorship rights for sports wagering.

On November 29, 2022, the Company announced a multi-year agreement to provide DraftKings ADW technology and other services.

Sports and Casino

Our TwinSpires Sports and Casino business operates our sports betting platform in multiple states, including Colorado, Indiana, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania, Tennessee, and Arizona.

Our casino iGaming platform is operated in Michigan, New Jersey, and Pennsylvania.

The Sports and Casino business includes the results of mobile sports betting, online sports betting, casino iGaming, and our retail sportsbooks.

We operate eight retail sportsbooks in Colorado, Indiana, Maryland, Michigan, Arizona, Pennsylvania, and Mississippi, four of which operate under a third party’s casino license.

River Casino Des Plaines ("Rivers Des Plaines") retail and online BetRivers sportsbook are included in the Gaming segment.

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 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, ancillary food and beverage services, hotel services, commission on pari-mutuel wagering, racing event-related services, and other miscellaneous operations.

Calder owns and operates a 106,000 square foot casino with approximately 1,100 slot machines and two dining facilities.

Calder also has an entertainment venue, a one-mile dirt track, a 7/8-mile turf track, barns, and stabling facilities for thoroughbred horse racing.

Calder is located on 170 acres of land in Miami Gardens, Florida near Hard Rock Stadium, home of the Miami Dolphins.

On November 22, 2021, the Company announced an agreement to sell 115.7 acres of land near Calder Casino for $291.0 million or approximately $2.5 million per acre to Link Logistics Real Estate, a Blackstone portfolio company.

The closing of the sale of the property is subject to the satisfaction of various closing conditions.

The Company anticipates closing the sale of the property in the first half of 2022.

Fair Grounds and VSI

Fair Grounds Race Course & Slots is 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.

Our TwinSpires Sports and Casino business includes the results of our retail sportsbooks at our wholly-owned gaming properties and through third parties in Michigan and Arizona.

The Company exited the direct online Sports and Casino business during 2022 in every state except Pennsylvania and Arizona.

We executed strategic market access agreements with Bet365 in Pennsylvania and with Golden Nugget in Indiana to monetize our online wagering skins beginning in 2023.

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, calculate payoffs and displays wagering data to patrons who wager on horse races.

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

On August 11, 2022, we entered into an agreement to sell 49% of United Tote, a wholly-owned subsidiary of the Company to NYRA Content Management Solutions, LLC, a subsidiary of the New York Racing Association ("NYRA").

NYRA is a not-for-profit corporation that operates the three largest thoroughbred horse racing tracks in the state of New York.

The transaction is subject to usual and customary closing conditions, including applicable regulatory notices and approvals, and is expected to close during the first half of 2023.

The Gaming segment includes revenue and expenses for the casino properties and associated racetracks which support the casino license.

The Gaming segment generates revenue and expenses from slot machines, table games, video lottery terminals ("VLTs"), video poker, HRM's, ancillary food and beverage services, hotel services, commission on pari-mutuel wagering, racing event-related services, and other miscellaneous operations.

The following table summarizes key information regarding our gaming properties:

State Property Acres Casino Space (Sq.

ft.) Slots and Video Lottery Terminals Table Games Hotel Rooms Retail Sportsbook

Florida Calder Casino 54 106,000 1,090 6 N/A N/A

Iowa Hard Rock Hotel and Casino Sioux City 15 41,000 660 20 54 ü

Louisiana Fair Grounds Race Course and Slots and Video Services LLC 145 33,000 1,620 — N/A ü

Maine Oxford Casino and Hotel 97 27,000 960 28 100 N/A

Maryland Ocean Downs Casino and Racetrack 167 70,000 850 18 N/A ü

Mississippi Harlow's Casino Resort and Spa 85 33,000 670 18 105 ü

Mississippi Riverwalk Casino Hotel 22 25,000 600 11 80 ü

New York del Lago Resort and Casino 83 94,000 1,670 76 205 ü

Pennsylvania Presque Isle Downs and Casino 270 153,000 1,550 35 N/A ü

Pennsylvania Lady Luck Casino Nemacolin — 25,000 600 26 N/A N/A

Equity Investments

Illinois Rivers Casino Des Plaines 21 140,000 1,510 120 N/A ü

Ohio Miami Valley Gaming and Racing 120 190,000 2,200 — N/A ü

Total 937,000 13,980 358 544

Wholly-owned gaming properties

Calder Casino ("Calder") in Miami Gardens, Florida is located near Hard Rock Stadium, home of the Miami Dolphins.

Calder offers two dining facilities and an entertainment venue.

On June 17, 2022, the Company closed on the sale of 115.7 acres of land near Calder for $291.0 million, or approximately $2.5 million per acre, to Link Logistics Real Estate, a Blackstone portfolio company.

The Company may sell 15-20 acres of this land in the future for retail development.

As part of the P2E Transaction, the Company acquired Hard Rock Hotel and Casino Sioux City ("Hard Rock Sioux City"), which is a gaming facility and a hotel.

The Company is investing up to $290.0 million in the development of the Terre Haute Casino Resort ("Terre Haute") in Terre Haute, Indiana.

Terre Haute will be a gaming entertainment venue featuring 400,000 square-feet space with 1,000 slot machines, 34 table games, a 122-room luxury hotel, a retail sportsbook, and several food and beverage offerings.

Terre Haute is scheduled to be completed in early 2024.

Fair Grounds Race Course & Slots ("Fair Grounds") is a gaming facility and race course with a bar, a simulcast facility, a one-mile dirt track, a 7/8-mile turf track, a grandstand, and a stabling area.

Fair Grounds conducts approximately 80 live racing days each year.

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 15 off-track betting facilities ("OTBs") and VSI is the owner and operator of approximately 1,000 video poker machines in 12 OTBs in Louisiana.

In August 2021, Hurricane Ida caused damage to portions of Louisiana, including Fair Grounds Race Course & Slots, and 15 OTBs.

All the Fair Grounds and VSI operations were reopened as of December 31, 2021, except for two OTBs.

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 located on 85 acres of leased land in Greenville, Mississippi.

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, a retail sportsbook, and three dining facilities.

Ocean Downs also conducts approximately 40 live harness racing days each year.

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 located on 97 acres in Oxford, Maine.

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 located on 270 acres in Erie, Pennsylvania.

Presque Isle also conducts 100 live thoroughbred racing days each year.

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 on 22 acres in Vicksburg, Mississippi.

Lady Luck Nemacolin

The Company manages Lady Luck Nemacolin, which is in Farmington, Pennsylvania, approximately one mile from the Nemacolin Woodlands Resort.

Lady Luck Nemacolin has approximately 600 slot machines, 27 table games, and a dining facility.

In November 2021, we announced the Indiana Gaming Commission ("IGC") selected our application for a casino owner's license to develop the Queen of Terre Haute Casino Resort (the "Queen of Terre Haute") in Vigo County, Indiana.

Our up to $260.0 million investment in the Queen of Terre Haute will feature a total of 400,000 square-feet space with 1,000 slot machines, 50 table games, a 125-room luxury hotel, a retail sportsbook, and several food and beverage offerings.

We paid the $5.0 million license fee to the IGC in January 2022.

The expected completion of the Queen of Terre Haute is scheduled for the second half of 2023.

Rivers Des Plaines

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 on 21 acres in Des Plaines, Illinois.

We acquired 61.3% equity ownership in Midwest Gaming Holdings, LLC ("Midwest Gaming"), the parent company of Rivers Des Plaines, in March 2019.

In the third quarter of 2020, Rivers Des Plaines completed the expansion of the parking garage.

Rivers Des Plaines is investing $87.0 million in a 78,000 square-foot expansion between the existing casino building and the recently enlarged parking garage.

Plans for the two-story addition include a new restaurant and an expanded gaming floor on the first floor, as well as a 24-table poker room, a 10,000 square-foot ballroom for private events and live entertainment, and a slot machine gaming area on the second floor.

The expansion will also add approximately 725 additional gaming positions.

The expected completion of the expansion is scheduled for the first half of 2022.

Miami Valley Gaming

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 located on 120 acres in Lebanon, Ohio.

We have a 50% equity investment in MVG.

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

• Arlington International Racecourse ("Arlington")

• United Tote

Fair Grounds also operates pari-mutuel wagering in 15 OTBs and Video Services LLC ("VSI") is the owner and operator of video poker machines in 12 OTBs in Louisiana.

Oxford Casino and Hotel ("Oxford"), located in Oxford, Maine, is a gaming facility with a hotel and one dining facility.

Ocean Downs Casino and Racetrack is a gaming facility with a racetrack that conducts approximately 40 live harness racing days each year.

Harlow’s Casino Resort and Spa is a gaming facility and hotel.

Riverwalk Casino Hotel owns and operates a hotel and two dining facilities.

As part of the P2E Transaction, the Company acquired del Lago Resort and Casino ("del Lago") in Waterloo, New York, which is a gaming facility and a hotel.

Presque Isle Downs and Casino ("Presque Isle") is a gaming facility with a racetrack that conducts 90 live thoroughbred racing days each year.

The Company manages Lady Luck Casino Nemacolin ("Lady Luck Nemacolin"), approximately one mile from the Nemacolin Woodlands Resort under a management agreement that expires in June 2023.

Equity Investments

The Company acquired 61.3% equity ownership in Midwest Gaming Holdings, LLC ("Midwest Gaming"), the parent company of Rivers Casino Des Plaines ("Rivers Des Plaines"), in March 2019.

Rivers Des Plaines is a gaming entertainment venue located on 21 acres and has seven dining and entertainment facilities, and an approximate 5,000 square-foot state-of-the-art BetRivers Sports Bar.

During 2022, Rivers Des Plaines completed a 78,000 square-foot expansion between the existing casino building and the recently enlarged parking garage.

The two-story addition includes a new restaurant and an expanded gaming floor on the first floor, as well as a 24-table poker room, a 10,000 square-foot ballroom for private events and live entertainment, and a slot machine gaming area on the second floor.

The expansion also added approximately 725 additional gaming positions.

The Company has a 50% equity investment in Miami Valley Gaming and Racing ("MVG").

MVG is a gaming entertainment venue with a race course, racing simulcast center, a 5/8-mile harness racetrack, and a retail sportsbook.

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

Arlington is located on 326 acres in Arlington Heights, Illinois.

On September 29, 2021, the Company announced an agreement to sell the property to the Chicago Bears for $197.2 million.

The closing of the sale of the property is subject to the satisfaction of various closing conditions.

The Company anticipates closing the sale of the Arlington Property in early 2023.

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 several third-party racetracks, OTBs and other pari-mutuel wagering businesses and also provides these services at our facilities.

On February 15, 2023, the Company closed on the previously announced agreement to sell the property to the Chicago Bears for $197.2 million.

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

For more information, refer to Note 4, Dispositions and Assets Held For Sale, to the notes to consolidated financial statements included in this Annual Report on Form 10-K.

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

We operate in a highly competitive industry with many 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.

The industry faces competition from a variety of sources for discretionary consumer spending, including spectator sports, sports wagering and other entertainment and gaming options.

Our brick-and-mortar casinos compete with traditional and Native American casinos, VLTs, state-sponsored lotteries, and other forms of legalized gaming in the U.S.

and other jurisdictions.

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Live and Historical Racing

In 2021, approximately 34,000 thoroughbred horse races were conducted in the U.S., which was up 21% compared to 2020 due to the impact of almost all of the racetracks across the U.S.

being closed for a portion of the prior year as a result of the COVID-19 global pandemic.

In 2022 and 2021, approximately 34,000 thoroughbred horse races were conducted in the U.S.

As a racetrack operator, we compete for horses with other racetracks running live racing meets at or near the same time as our races.

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In recent years, competition has increased as more states legalize gaming and allow slot machines at racetracks with mandatory purse contributions.

Derby City Gaming, Oak Grove, Turfway Park, and Newport compete with regional casinos in the area and other forms of legal and illegal gaming.

Our HRM entertainment venues in Kentucky, Virginia, and New Hampshire compete with regional casinos in the area and other forms of legal and illegal gaming.

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.

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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.

We believe our human capital is material to our operations and core to the long-term success of our Company.

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.

As of December 31, 2022, we had a total of approximately 7,000 team members, of which 5,500 are full-time employees.

As of December 31, 2021, the Live and Historical Racing segment had 1,200 team members, the TwinSpires segment had 300 team members;

and the Gaming segment had 3,100 team members.

Nearly one-quarter of the Live and Historical Racing segment team members are full-time employees and nearly all the TwinSpires and Gaming segment team members are full-time employees.

The Company’s corporate staff consists of approximately 200 full-time employees.

As of December 31, 2022, the Live and Historical Racing segment had approximately 2,410 team members, the TwinSpires segment had 410 team members, and the Gaming segment had 3,900 team members.

Nearly three-quarters of the Live and Historical Racing segment team members are full-time employees and nearly all the TwinSpires and Gaming segment team members are full-time employees.

The Company’s corporate staff consists of approximately 270 employees, approximately 260 of which are full-time.

The number of seasonal employees fluctuates significantly through the course of the year primarily due to the seasonal nature of our businesses.

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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 includes diverse individuals based on gender and race and benefit from the diverse experiences of our directors and management that individually and collectively create a high-performance culture focused on executing our strategic priorities to protect and grow our businesses effectively and efficiently.

The Company’s Board of Directors and executive management team includes diverse individuals based on gender and race.

The Company benefits from the diverse experiences of our directors and management that individually and collectively create a high-performance culture focused on executing our strategic priorities to protect and grow our businesses effectively and efficiently.

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.

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We are subject to various federal, state, local, and international laws and regulations that affect our businesses.

The ownership, operation and management of our Live and Historical Racing, TwinSpires, 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.

The ownership, operation, and management of our Live and Historical Racing, TwinSpires, and Gaming segments are subject to regulation under the laws and regulations of each of the jurisdictions in which we operate.

Our businesses and properties are also subject to legislative actions at both the federal and state level.

Live and Historical Racing Regulations

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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").

Under the IHA, racetracks and ADWs can accept interstate off-track wagers if the racetracks and ADWs have approvals from (1) the host horse racetrack including a written agreement with the horsemen’s group, if applicable;

(2) the host racing commission, and (3) the off-track racing commission.

Under the IHA, racetracks and ADWs can accept interstate off-track wagers if the racetracks and ADWs have approvals from (1) the host horse racetrack including a written agreement

with the horsemen’s group, if applicable, (2) the host racing commission, and (3) the off-track racing commission.

If these requirements are met, racetracks can commingle wagers from different racetracks and wagering facilities and broadcast horse racing events to other licensed establishments.

In the U.S., individual states control the operations of racetracks located within their respective jurisdictions with the intent to, among other things, protect the public from unfair and illegal gambling practices, generate tax revenue, license racetracks and operators and prevent organized crime from being involved in the industry.

In the U.S., individual states regulate the operations of racetracks located within their respective jurisdictions with the intent to, among other things, protect the public from unfair and illegal gambling practices, generate tax revenue, license racetracks and operators and prevent 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.

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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 including the presence and placement of specific race officials such as 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 Kentucky, horse racing racetracks 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, Oak Grove, and Newport are subject to extensive state and local laws and to licensing and regulatory control by the KHRC.

The total number of days on which each racetrack conducts live racing may fluctuate annually based on applications and approvals.

In Kentucky, horse racing racetracks and HRM facilities are subject to the licensing and regulation of the Kentucky Horse Racing Commission ("KHRC").

Licenses to conduct live thoroughbred and standardbred racing meets, to participate in simulcasting, to operate HRM facilities, and to accept advance deposit wagers from Kentucky residents are approved annually by the KHRC based upon applications submitted by the racetracks in Kentucky.

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.

During the second quarter of 2021, the Florida Legislature passed a bill to decouple jai alai from gaming activities.

Under this new law, jai alai facilities can operate slots and cardrooms without conducting jai alai games.

The decoupling legislative action went into effect when the U.S.

Department of the Interior approved the compact on August 6, 2021.

This legislative action is expected to have a favorable impact on our business.

In Louisiana, the 2021 Historical Horse Racing Act ("2021 HHR Act") allows OTBs to have up to 50 HRMs.

On October 25, 2022, a number of individual plaintiffs associated with video poker and truckstops, filed a lawsuit in the 19th Judicial District Court in East Baton Rouge, Louisiana against certain racetracks in Louisiana, including Fair Grounds, alleging that the 2021 HHR Act is unconstitutional to the extent it purports to permit historical racing in a parish without a referendum.

As of December 31, 2022, the Company had approximately 340 HRMs in OTBs in Louisiana.

If the 2021 HHR Act is determined to be unconstitutional it could have an adverse impact on our Louisiana HRM results which are reported in our Gaming segment.

TwinSpires Regulations and Potential Legislative Changes

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Each state has different structures for the number of allowable industry participants, license fees, taxes, and other operational requirements.

As of December 31, 2021.

the Company is operational in seven states for retail sports betting, seven states for online sports betting, and three states for iGaming.

As of December 31, 2022, the Company is operational in nine states for retail sports betting, two states for online sports betting, and one state for iGaming.

Gaming Regulations and Potential Legislative Changes

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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 gaming revenue received;

License fees and taxes are based upon such factors as a percentage of

the gaming revenue received;

the number of gambling devices and table games operated;

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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.

Other Specific State Regulations and Potential Legislative Changes

During the second quarter of 2021, the Louisiana State Legislature passed a bill that was signed by Governor Edwards to allow HRMs in off-track betting facilities with oversight from the Louisiana Gaming Commission.

Fair Grounds anticipates adding up to 50 HRMs per facility or approximately 600 HRMs in total across 14 facilities under this new law in 2022.

During the second quarter of 2021, the Maryland Gaming Control Board adopted statutory changes to allow Ocean Downs to build a hotel.

The Company is evaluating the economics and potential timing of building a hotel at Ocean Downs which may have a positive impact on our Company.

Environmental Matters

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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

Marks and Intellectual Property

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business