What changed in this filing

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Item 1A. Risk Factors

2023-02-22 compared with 2022-02-23 · 44 added, 37 removed, 341 unchanged (19% of the section changed)

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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 continued effects of the COVID-19 virus, including the emergence of variant strains, and the extent of and effectiveness of responses taken on international, national and local levels.

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.

The COVID-19 pandemic and the measures taken by national, state, and local authorities in response have adversely affected and could in the future materially adversely impact the Company's business, results of operations, and financial condition.

Our operating results depend, in large part, on revenues derived from customers visiting our casinos and racetracks.

The introduction of vaccine and facemask mandates in certain locations may further impact the number of customers visiting our properties.

During the course of the pandemic, we experienced 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.

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

The Company continues to monitor the COVID-19 situation and take appropriate actions in accordance with the recommendations and requirements of relevant authorities.

The extent to which the COVID-19 pandemic may impact the Company's operational and financial performance remains uncertain and will depend on many factors outside the Company's control, including the timing, extent, trajectory, and duration of the pandemic, the emergence of new variants, the development, availability, distribution, and effectiveness of vaccines and treatments, the imposition of protective public safety measures, and the impact of the pandemic on the global economy.

Our business could be adversely affected by the occurrence of extraordinary events, such as terrorist attacks, public health threats, civil unrest, and inclement weather, including as a result of climate change

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• 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.

• Inflationary periods negatively impact consumers' discretionary income and could reduce the amount of income previously used for gaming and entertainment.

• 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.

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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.

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.

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.

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.

The introduction of vaccine and facemask mandates in certain locations also impacted the number of customers visiting our properties.

The Company continues to monitor the COVID-19 situation and take appropriate actions in accordance with the recommendations and requirements of relevant authorities.

The extent to which the COVID-19 pandemic may impact the Company's long-term operational and financial performance remains uncertain and will depend on many factors outside the Company's control, including the timing, extent, trajectory, and duration of the pandemic, the emergence of new variants, the development, availability, distribution, and effectiveness of vaccines and treatments, the imposition of protective public safety measures, and the impact of the pandemic on the global economy.

Strategic Risks

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If interest in horse racing is lower in the future, it may have a negative impact on revenue and profitability in our Live and Historical Racing segment.

In addition, accidents and adverse events that may occur at our race track and any reputational damage as a result may negatively impact attendance at our live horse races.

In addition, accidents and adverse events that may occur at our racetrack and any reputational damage as a result may negatively impact attendance at our live horse races.

If attendance at and wagering on live horse racing declines, it could have a material adverse impact on our business.

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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.

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.

We are also subject to risks relating to our co-investors’ failure to satisfy contractual obligations, conflicts arising between us and any of our partners and changes in the ownership of any of our co-investors.

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

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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.

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.

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-party 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, certain Horsemen’s Groups have withheld their consent to send or receive racing signals among racetracks.

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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.

inability to distribute our racing content could have a material adverse impact on our business, results of operations and financial condition.

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 focus on market access and our retail operations for our TwinSpires Sports and Casino business and there can be no assurance that we will be able to compete effectively or that we will generate sufficient returns on our investment

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Supreme Court overturned the federal ban on sports betting.

As a result, several jurisdictions in which we operate legalized sports betting and additional jurisdictions may do so in the future.

Thirty-three states have authorized sports betting and thirty of these states have sports betting operational as of December 31, 2022.

Additional states may legalize sports betting in the future.

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

The market for sports betting and online gaming is rapidly evolving and highly competitive with an increasing number of competitors.

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• the availability and popularity of other forms of entertainment.

There can be no assurance as to the returns that we will receive from our current and anticipated retail and online sports betting and online casino operations.

There can be no assurance as to the returns that we will receive from TwinSpires Sports and Casino business.

Operational Risks

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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.

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.

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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

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.

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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.

Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated

problems could result in lengthy interruptions in our services.

Any unscheduled interruption in the availability of our websites and our services could result in an immediate, and possibly substantial, loss of revenue.

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These projects also have risks associated with managing and integrating the acquisition or expansion project.

We signed a definitive agreement to acquire substantially all of the assets of Peninsula Pacific Entertainment LLC ("P2E") for total consideration of $2.485 billion.

Important factors for the proposed P2E transaction include the receipt of regulatory approvals on terms desired or anticipated, unanticipated difficulties or expenditures relating to the proposed transaction, including, without limitation, difficulties that result in the failure to realize expected synergies, efficiencies and cost savings from the proposed transaction within the expected time period (if at all), our ability to obtain financing on the anticipated terms and schedule, disruptions of our or P2E’s current plans, operations and relationships with customers and suppliers caused by the announcement and pendency of the proposed transaction, and our and P2E’s ability to consummate a sale-leaseback transaction with respect to the Hard Rock Sioux City on terms desired or anticipated.

Supply chain disruptions and inflationary pressure related to these projects could lead to delays and higher project costs.

The acquisition or divestiture of businesses may be delayed by external factors beyond our control including federal, state, and local issues.

The impact of these risks may cause us to realize the intended benefits of these capital investments which could have a material adverse impact on our business.

The impact of these risks may cause us not to realize the intended benefits of these capital investments which could have a material adverse impact on our business.

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

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We may decide to develop, construct and open hotels, casinos, other gaming venues, or racetracks in response to opportunities that may arise.

For example, 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.

Future development projects may require significant capital commitments and the incurrence of additional debt, which could

have a material adverse impact on our business.

For example, we've announced multiple major multi-year capital investments to transform key areas of Churchill Downs Racetrack, as well as other capital investments such as the build out of Derby City Gaming Downtown, Rosie's Emporia and Dumfries, the Ellis Park Owensboro Annex, a charitable gaming facility in New Hampshire and the Terre Haute Casino Resort.

Future development projects may require significant capital commitments and the incurrence of additional debt, which could have a material adverse impact on our business.

In addition, we may not receive the intended benefits of such capital investments.

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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.

There can be no assurance that we will be able to retain our existing governmental licenses, registrations, permits or approvals necessary to operate our existing businesses or demonstrate suitability to obtain any licenses, registrations, permits, or approvals.

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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.

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.

For example, individual plaintiffs associated with video poker and truck stops in Louisiana are challenging the constitutionality of the Louisiana 2021 HHR Act which may adversely impact Fair Ground’s historical racing operations.

TwinSpires accepts ADW wagers 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.

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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

Disruptions in the credit markets or changes to our credit ratings may adversely affect our business.

While we currently generate significant cash flows from ongoing operations and have access to global credit markets through our various financing activities, a disruption in the credit markets, interest rate increases, changes that may result from the implementation of new benchmark rates that replace the London Interbank Offered Rate (LIBOR) or changes to our credit

ratings could negatively impact the availability or cost of funding.

Increases to interest rates (due to inflation or otherwise), disruptions in the credit markets, or changes to our credit ratings may adversely affect our business.

While we currently generate significant cash flows from ongoing operations and have access to global credit markets through our various financing activities, interest rate increases, disruption in the credit markets, changes that may result from the implementation of new benchmark rates that replace the London Interbank Offered Rate ("LIBOR"), or changes to our credit ratings could negatively impact the availability or cost of funding.

During inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense of our borrowings.

In particular, primarily in response to concerns about inflation, the U.S.

Federal Reserve has significantly raised its benchmark federal funds rate, which has led to increases in interest rates in the credit markets.

Federal Reserve may continue to raise the federal funds rate, which will likely lead to higher interest rates in the credit markets and the possibility of lower asset values, slowing economic growth and/or possibly leading to a recession.

We are exposed to increases in interest rates on our variable-rate borrowings, which consist of borrowings under our credit facility and our term loans.

Therefore, interest rate increases, due to inflation or otherwise, could, increase our interest expense under these variable-rate facilities in the short-term and increase our financing costs as we refinance our existing variable-rate and fixed-rate long-term borrowings in the long term, or we could incur additional interest expense related to the issuance of incremental debt.

These increased costs could reduce our profitability, impair our ability to meet our debt obligations, negatively impact our ability to maintain compliance with the financial covenants in our Credit Agreement, or increase the cost of financing our acquisition, investment, and development activity .

Reduced access to credit or increased costs could adversely affect our liquidity and capital resources or significantly increase our cost of capital.

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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 1A. Risk Factors