What changed in this filing

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Item 1A. Risk Factors

2024-02-21 compared with 2023-02-22 · 40 added, 50 removed, 335 unchanged (21% of the section changed)

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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.

For example, 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.

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.

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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.

The occurrence or threat of any such extraordinary event at our locations, particularly at Churchill Downs Racetrack during 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

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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.

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.

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.

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.

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.

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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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.

Acts of fraud or cheating in our gaming businesses using 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 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.

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gaming at taverns in certain states, such as Illinois;

gaming at truck stop establishments in certain states, such as Louisiana and Pennsylvania;

gaming at truck stops, gas stations, and other establishments in certain states, such as Louisiana, Pennsylvania, Virginia, and Kentucky;

historical horse racing in Kentucky;

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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.

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.

Expansion of land-based and iGaming in other jurisdictions (both regulated and unregulated) could further compete with our operations, which could have an adverse impact on our financial condition, results of operations, and cash flows.

Legalized gaming is currently permitted in various forms throughout the U.S.

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

Our TwinSpires and Gaming segments are characterized by the rapid development of new technologies and the continuous introduction of new products.

Our TwinSpires segment and gaming and historical racing properties 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.

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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.

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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.

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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

We intend to focus on market access and our retail operations for our TwinSpires sports betting 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

During the second quarter of 2018, the U.S.

Supreme Court overturned the federal ban on sports betting.

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

Sports betting has been authorized and is operational in thirty-eight states and the District of Columbia as of December 31, 2023.

Additional states may legalize sports betting in the future.

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

The success of our retail and online sportsbook and online casino operations are dependent on a number of factors that are beyond our control, including:

The success of our retail and online sports books is dependent on several factors that are beyond our control, including:

• the timing of adoption of regulations authorizing betting and gaming activities,

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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 TwinSpires Sports and Casino business.

There can be no assurance as to the returns that we will receive from TwinSpires sports betting business.

Operational Risks

Our business is subject to online security risk, including cyber-security breaches.

Our business is subject to online security risk, including cybersecurity 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

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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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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.

We have experienced cyber attacks in the past.

While these attacks did not have a significant impact to the Company, we may continue to experience such attacks.

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.

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Many companies, including ours, have been the targets of such attacks.

Moreover, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.

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.

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.

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

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.

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 The Rose Dumfries, Owensboro Racing & Gaming, 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.

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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;

We buy insurance for all 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.

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 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

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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.

In our business, customers occasionally seek to reverse online gaming and other wagering losses through chargebacks.

Our control procedures to protect from chargebacks may not be sufficient to protect us from adverse effects on our business or results of operations.

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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.

Such matters may include investigations or litigation from various parties, including vendors, customers, state, and federal agencies, stockholders, and

employees relating to intellectual property, employment, consumer, personal injury, corporate governance, commercial, or other matters arising in the ordinary course of business.

We have 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.

We evaluate all 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.

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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.

We conduct live and historical pari-mutuel wagering, online pari-mutuel wagering through ADWs, casino 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.

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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:

Our debt facilities contain several 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,

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• make certain investments,

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

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

• create liens on certain assets,

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• 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.

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

We have pledged a significant portion of our assets as collateral under our debt facilities.

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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.

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, 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.

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.

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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.

UNRESOLVED STAFF COMMENTS

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