UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

CHURCHILL DOWNS INCORPORATED

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Dear Fellow Shareholders,

2018 was a strong year for your company.

We started the year by completing the sale of Big Fish Games for $990 million and in February, we completed a Dutch Auction tender offer for $500 million of our shares with a portion of the sale proceeds.

As tradition has it in early May, Churchill Downs hosted the 144^th running of The Kentucky Derby. Despite being the wettest Kentucky Derby ever, Churchill Downs set all-time wagering records for the week and the Oaks and Derby races. Our team also completed two significant capital projects – the addition of the Starting Gate Suites and the new transportation / parking lot upgrade – both of which improved our guests’ experiences and provided additional prime seating capacity. We have exciting plans for additional strategic investments in this iconic asset that will attract guests who want to experience the mystique and magic that only The Kentucky Derby can create.

We also demonstrated our ability to drive organic growth through strategic capital investment projects at our casino properties, which directly benefit our guests. Our expansion into historical racing machine (HRM) facilities in Kentucky is another example of our organic growth efforts. We opened the first HRM facility in Louisville, KY in September 2018 with 900 machines, and we were pleased to be awarded the racing license for Oak Grove, Kentucky, which is an hour north of Nashville, TN. We have started the construction of this $150 million facility which initially will include 1,200 historical racing machines, a 125-room hotel, and a 1,200-person capacity grandstand.

We were also successful in growing our casino portfolio through acquisitions:

With the U.S. Supreme Court’s ruling opening the doors to legal sports betting in May 2018, we began our expansion into sports betting and iGaming with the launch of our retail BetAmerica Sportsbook at our two Mississippi casino properties in August 2018 and our online BetAmerica Sportsbook and Casino Gaming platform in New Jersey in February 2019.

In 2019, we are planning to launch our retail BetAmerica Sportsbook at our Presque Isle facility and our online BetAmercia Sportsbook and Casino gaming platform in Pennsylvania. We hope to expand our sports betting and iGaming offering into additional states in the future. The breadth of experience our team has from running TwinSpires (the industry-leading platform for legal online horse racing wagering) coupled with our online sports betting and iGaming industry experience provides the foundation necessary to lead this exciting expansion.

We are proud that we have returned over $1 billion of capital to shareholders over the last five years, while delivering strong financial results and investing strategically to drive long-term sustainable growth. As we look to 2019 and beyond, we have strong cash flow and a solid balance sheet with capacity to support organic growth, strategic acquisitions, dividends, and share repurchases to create long-term value for our shareholders.

A special thanks to our team members who have demonstrated their capabilities, commitment, and determination to deliver sustainable long-term results in this dynamic environment for you, our shareholders.

R. Alex Rankin Chairman of the Board		William C. Carstanjen Chief Executive Officer

600 N. HURSTBOURNE PARKWAY, STE. 400

LOUISVILLE, KENTUCKY 40222

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

March 13, 2019

                By Order of the Board of Directors.

                BRADLEY K. BLACKWELL

                Senior Vice President,

                General Counsel and Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2019

The Company’s Proxy Statement for the 2019 Annual Meeting of Shareholders and the Annual Report to

Shareholders for the fiscal year ended December 31, 2018 are available at

http://www.churchilldownsincorporated.com/proxy

TABLE OF CONTENTS

600 N. HURSTBOURNE PARKWAY, STE. 400

LOUISVILLE, KENTUCKY 40222

PROXY STATEMENT

Annual Meeting of Shareholders to be held on April 23, 2019

The Board of Directors (the “Board of Directors” or “Board”) of Churchill Downs Incorporated (“Company,” “CDI,” or “CHDN”) is soliciting proxies to be voted at the 2019 Annual Meeting of Shareholders to be held on Tuesday, April 23, 2019, at 9:00 a.m. Central Time (the “Annual Meeting”), at the Four Seasons Hotel, 120 E. Delaware Place, Chicago, Illinois 60611, and any adjournments thereof. Certain officers and directors of the Company and persons acting under their instruction may also solicit proxies on behalf of the Board of Directors by means of telephone calls, personal interviews and mail at no additional expense to the Company. The Notice of Internet Availability of Proxy Materials (the “Notice”) was first mailed on or about March 13, 2019.

Recent Stock Split

On January 25, 2019, the Company effected a three-for-one stock split of the Company’s outstanding shares of Common Stock, and our Common Stock began trading on a split-adjusted basis on January 28, 2019 (the “Stock Split”). All share and per-share information presented in this Proxy Statement has been adjusted to reflect the Stock Split.

Voting Rights

Only holders of record of the Company’s Common Stock, no par value (“Common Stock”), on March 1, 2019 (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting. On that date, 40,321,795 shares of Common Stock were outstanding and entitled to vote. Each shareholder has one vote per share on all matters coming before the Annual Meeting. The shareholders of the Company do not have cumulative voting rights in the election of directors. Abstentions or “withhold” votes, as applicable, and broker non-votes are not counted in determining the number of votes required for the election of a director or passage of any matter submitted to the shareholders. Abstentions or “withhold” votes and broker non-votes are counted for purposes of determining whether a quorum exists. For more information regarding broker non-votes, see “What is a broker non-vote?” below.

Whether or not you plan to attend the Annual Meeting in person, to ensure the presence of a quorum, please vote over the Internet or by telephone as instructed in these materials as promptly as possible. If a shareholder executes and returns a proxy card, but does not specify otherwise, the shares represented by the shareholder’s proxy will be voted: (i) for the election of each of the two director nominees listed below under “Election of Directors”; (ii) for the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2019; (iii) for the advisory approval of the compensation of the Company’s named executive officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (the “SEC”); and (iv) in the discretion of the person or persons voting the proxies, on such other business as may properly come before the Annual Meeting or any adjournments thereof.

Voting Instructions and Information

When and where is our Annual Meeting?

We will hold our Annual Meeting on Tuesday, April 23, 2019 at 9:00 a.m., Central Time, at the Four Seasons Hotel, located at 120 E. Delaware Place, Chicago, Illinois 60611.

How are we distributing our proxy materials?

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

On March 13, 2019, we began mailing a Notice to our shareholders containing instructions on how to access this Proxy Statement and our 2018 Annual Report on Form 10-K and vote online, as well as instructions on how to receive paper copies of these documents for shareholders who so select. This Proxy Statement and the 2018 Annual Report on Form 10-K are also available at http://www.churchilldownsincorporated.com/proxy.

Who can vote at the Annual Meeting?

You are entitled to vote or direct the voting of your shares of CHDN Common Stock if you were a shareholder of record or if you held CHDN Common Stock in “street name” at the close of business on the Record Date (Friday, March 1, 2019). On that date, 40,321,795 shares of CHDN Common Stock were outstanding. Each share of CHDN Common Stock held by you on the Record Date is entitled to one vote.

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

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

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

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

What proposals will be voted on at the Annual Meeting?

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

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

How does the Board of Directors recommend I vote?

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

How do I vote?

You may cast your vote in one of four ways:

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

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

For a Proxy Submitted by Internet or Telephone

For a Proxy Submitted by Mail

What is a broker non-vote?

Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain “routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted to vote shares for a beneficial owner without timely received voting instructions. The only routine matter to be presented at the Annual Meeting is the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2019. The remaining proposals to be presented at the Annual Meeting are considered non-routine.

A broker non-vote occurs when a broker, bank or other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercise their discretionary voting authority on the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2019, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the Annual Meeting. Broker non-votes will have no impact on the voting results of the election of directors or the proposal to approve, on a non-binding advisory basis, the executive compensation of the Company’s named executive officers as disclosed in this Proxy Statement.

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

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

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

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

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information as of the Record Date (except as otherwise indicated below) regarding the beneficial ownership of the Common Stock by the only persons known by the Company to beneficially own more than five percent (5%) of the Common Stock, each director and director nominee of the Company, each named executive officer (as defined in “Executive Compensation—2018 Summary Compensation Table” herein), and the Company’s directors and executive officers as a group. Except as otherwise indicated, the persons named in the table have sole voting and investment power with respect to all of the shares of Common Stock shown as beneficially owned by them. The percentage of beneficial ownership is calculated based on 40,321,795 shares of Common Stock outstanding as of the Record Date. We are not aware of any pledge of our Common Stock or any other arrangements the operation of which may at a subsequent date result in a change in control of our Company.

Executive Officers of the Company

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

ELECTION OF DIRECTORS (Proposal No. 1)

At the Annual Meeting, shareholders will vote to elect the two (2) persons identified below to serve in Class II of the Board of Directors and to hold office for a term of three (3) years expiring at the 2022 annual meeting of shareholders and thereafter until their respective successors shall be duly elected and qualified or until the earlier of their resignation, death or removal.

The Amended and Restated Bylaws of the Company provide that the Board of Directors shall be composed of not fewer than three (3) nor more than fifteen (15) members, the exact number to be established by the Board of Directors, and further provide for the division of the Board of Directors into three (3) approximately equal classes, of which one (1) class is elected annually to a three (3) year term. Currently the Board of Directors is comprised of eight (8) directors, with two (2) directors in Class I, three (3) directors in Class II and three (3) directors in Class III. The Board of Directors has established the size of the Board to be composed of seven (7) members, effective immediately following the Annual Meeting.

Mr. Richard L. Duchossois, currently a Class II director, will not be standing for re-election at the Annual Meeting.

The Nominating and Governance Committee has recommended, and the Board has approved, the nomination of the two (2) persons named in the following table for election as directors in Class II. The nominees currently serve as members of Class II and have agreed to serve if re-elected.

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

Election of Directors

The following table sets forth information relating to the Class II director nominees of the Company who are proposed to the shareholders for election to serve as directors for terms of three (3) years, expiring at the 2022 annual meeting of shareholders, and thereafter until their respective successors shall be duly elected and qualified or until the earlier of their resignation, death or removal.

Class II—Nominated for Terms Expiring in 2022

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

Continuing Directors

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

Class III—Terms Expiring in 2020

Class I—Terms Expiring in 2021

Retirement Age Policy

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

Emeritus Directors

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

Director Compensation for Fiscal Year Ended December 31, 2018

During 2018, each non-employee director of the Board of Directors received the compensation set forth below (all fees shown are annual fees, except for meeting fees), which, other than the implementation of a Chairman fee for the non-employee Chairman of the Board of Directors, did not change from the compensation levels set for 2017.

In 2018, we provided the following compensation to our non-employee directors. Mr. Carstanjen, our Chief Executive Officer (“CEO”), is not separately compensated for his service on our Board. Please see the 2018 Summary Compensation Table for a summary of the compensation paid to our CEO with respect to 2018.

Share Ownership Guidelines

As memorialized in the Corporate Governance Guidelines, the Board expects all directors to display confidence in the Company by ownership and retention of a meaningful amount of the Company’s Common Stock. Pursuant to the Company’s insider trading policy, all directors are subject to the Company’s anti-hedging policy, which prohibits hedging and monetization transactions with respect to the Company’s Common Stock. As a result, each director is expected to own shares with a fair market value equal to five (5) times the director’s annual retainer. Each director appointed or elected to the Board has five (5) years from the date of appointment or election to the Board to meet this requirement. Compliance is measured at the five (5) year anniversary date of the director’s appointment or election. Each director’s continuing compliance with the ownership guidelines will be measured in the year he or she stands for re-election and will be considered as one of the criteria for nomination by the Nominating and Governance Committee. The chart below shows each current director’s compliance with the ownership guidelines calculated as of December 31, 2018, other than with respect to Mr. Carstanjen, who is subject to maintaining holdings of the Company’s Common Stock equal to at least six (6) times his base annual salary, pursuant to the Key Executive Stock Ownership and Retention Guidelines, as further described in the “Executive Stock Ownership Guidelines” section below. Furthermore, deferred shares acquired by directors under the Churchill Downs Incorporated 2005 Deferred Compensation Plan and RSUs granted as director compensation are included for purposes of measuring compliance with the Company’s share ownership guidelines. The share information in the following table has been adjusted to reflect the effect of the Stock Split.

CORPORATE GOVERNANCE

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

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

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

Shareholder Communications

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

Board Leadership Structure

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

Oversight of Company Risk

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

Board Evaluations

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

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

Board Meetings and Committees

Four (4) meetings of the Board of Directors were held during the last fiscal year. During the fiscal year, all incumbent directors attended at least 75% of their Board and committee meetings for the period for which they served. The Company encourages its directors to attend the Annual Meeting each year. Each of the directors then serving on the Board (other than Messrs. Craig J. Duchossois, Robert L. Evans and G. Watts Humphrey, each of whom did not stand for re-election) attended the Company’s annual meeting on April 24, 2018.

The Board has determined that all of the directors of the Company who served during any part of the last completed fiscal year are “independent directors,” as defined under Nasdaq Rule 5605(a)(2), except William C. Carstanjen, due to his position as CEO of the Company.

As required by the Company’s Corporate Governance Guidelines, the Board of Directors currently has four (4) standing committees: the Executive, Audit, Compensation, and the Nominating and Governance Committees.

No Director Emeritus serves on any Board committee. The current composition of the committees is illustrated in the table below, along with the number of meetings held in 2018.

Director Name		Board of Directors		Executive Committee		Audit Committee(1)		Compensation Committee(2)		Nominating and Governance  Committee
Ulysses L. Bridgeman		Member				Member				Member
William C. Carstanjen		Member
Richard L. Duchossois		Member								Member
Robert L. Fealy		Member		Member				Member		Chair
Douglas C. Grissom		Member						Member		Member
Daniel P. Harrington		Member		Member		Chair		Member
Karole F. Lloyd		Member				Member
R. Alex Rankin		Chair		Chair				Chair
Number of meetings in 2018		4		1		4		5		1

		=		Ex-officio Member

Executive Committee

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

Audit Committee

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

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

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

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

Four (4) meetings of the Audit Committee were held during the last fiscal year. The Audit Committee reviews the adequacy of its charter on an annual basis.

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

Compensation Committee

Responsibilities of the Compensation Committee

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

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

Compensation Committee Interlocks and Insider Participation

None of the directors who served on the Compensation Committee at any time during the last fiscal year were officers or employees of the Company or were former officers of the Company. None of the members who served on the Compensation Committee at any time during fiscal 2018 had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. Finally, no executive officer of the Company serves, or in the past fiscal year has served, as a director or member of the compensation committee (or other board committee performing equivalent functions) of any entity that has one or more of its executive officers serving on the Board of Directors or the Compensation Committee.

Compensation Risk Assessment

The Compensation Committee performed an assessment of whether risks arising from the Company’s compensation policies and practices for all employees during 2018, including non-executive officers, are reasonably likely to have a material adverse effect on the Company. Each policy and plan was evaluated based on certain elements of risk, including, but not limited to, (i) the mix of fixed and variable pay, (ii) types of performance metrics, (iii) performance goals and payout curves, (iv) payment timing and adjustments, (v) equity incentives, and (vi) stock ownership requirements and trading policies. Based on this evaluation, an assessment of each plan was created, along with an overall assessment of compensation risk to the Company. After evaluation and discussion, the Committee determined that the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Nominating and Governance Committee

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

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

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

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

PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019 (Proposal No. 2)

On February 26, 2019, the Board of Directors, on recommendation from the Audit Committee, selected PricewaterhouseCoopers LLP (“PwC”) to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2019. PwC has served as the Company’s independent registered public accounting firm since the Company’s 1990 fiscal year.

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

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

INDEPENDENT PUBLIC ACCOUNTANTS

Audit Fees

The audit fees incurred by the Company for services provided by PwC (i) for the year ended December 31, 2018, were $1,718,200 and (ii) for the year ended December 31, 2017, were $2,313,600. Audit fees include services related to the audit of the Company’s consolidated financial statements, the audit of the effectiveness of internal control over financial reporting, involvement with registration statement filings, statutory audits and consultations related to miscellaneous SEC and financial reporting matters.

Audit-Related Fees

During each of 2018 and 2017, the Company incurred $21,700 and $68,600, respectively, in fees for assurance and related services performed by PwC that were reasonably related to the performance of the audit or review of the Company’s financial statements that are not reported in the preceding section.

Tax Fees

Tax fees incurred by the Company for services provided by PwC (i) in 2018, were $130,100 and (ii) in 2017, were $144,039. Tax fees include services related to tax return preparation for a related entity, tax consultation and tax advice.

All Other Fees

All other fees incurred by the Company for services provided by PwC relate to the use of Inform, PwC’s accounting research software, and PwC’s disclosure checklist software, which amounted to $4,500 in each of 2018 and 2017. The Audit Committee has considered whether the provision of non-audit services to the Company is compatible with maintaining PwC’s independence.

The Audit Committee has adopted a policy of evaluating and pre-approving all audit and non-audit services provided by the independent auditors. The Committee may delegate pre-approval authority to a member, provided that decisions of such member shall be presented to the full Committee at its next scheduled meeting. The Audit Committee pre-approved all audit and permissible non-audit services provided by the independent auditors in 2018.

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

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

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

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

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

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

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

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

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

This Compensation Discussion and Analysis describes the Company’s executive compensation policies and programs and how they apply to our NEOs (the senior executives included in the 2018 Summary Compensation Table on page 41). It also describes the actions and decisions of the Compensation Committee of the Board of Directors (the “Compensation Committee” or “Committee”), which oversees the executive compensation program and determines the compensation of the NEOs. A detailed discussion of the Committee’s structure, roles and responsibilities, and related matters can be found under “Compensation Committee” on pages 17-19. As noted above, all share and per-share information presented in this in this Proxy Statement has been adjusted to reflect the Stock Split, including all such figures included in the Compensation Discussion and Analysis and the executive compensation tables that follow.

Our long-term incentive goals are based on operational results that the Committee believes drive Company and shareholder success over multi-year performance periods. Certain metrics the Company uses to determine this success are as follows (see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 10-K for Fiscal Year 2018 for reconciliation of these metrics to the most directly comparable GAAP measures, and the discussion of Long-Term Incentives beginning on page 35):

As illustrated in the following chart, the Company’s stock price increased to $81.31 per share as of December 31, 2018 from $31.77 per share as of December 31, 2014.

CHDN Stock Price

(Year-End)

Similarly, as illustrated in the following chart, Adjusted EBITDA (excluding Big Fish Games, Inc.) has grown steadily, increasing from $252.3 million in 2016 to $328.8 million in 2018 (representing a compound annual growth rate of 14%). While the Company believes its Adjusted EBITDA performance has been very strong over the past five-year period, the Company is only providing Adjusted EBITDA data for the past three years to correspond to the reconciliation provided in the Company’s Form 10-K for the fiscal year ended December 31, 2018, as referenced below.

Adjusted EBITDA

(Excluding Big Fish Games, Inc.)

As reflected in the chart below, the Company’s total net income has also grown steady, with net income from continuing operations increasing from $56.9 million in 2014 to $182.6 million in 2018 (representing a compound annual growth rate of 34% ).

Net Income

(From Continuing Operations)

Big Fish Games

On November 29, 2017, the Company entered into a definitive Stock Purchase Agreement (the “Purchase Agreement”) to sell its mobile gaming subsidiary, Big Fish Games, Inc. and its specified subsidiaries (“Big Fish”), to Aristocrat Technologies, Inc. (the “Transaction”). On January 9, 2018, the Company completed the Transaction for an aggregate purchase price of $990.0 million, subject to adjustments set forth in the Purchase Agreement. In connection with the Transaction, the Company and Mr. Paul Thelen ( then-current President of Big Fish), entered into a separation agreement and release effective as of the closing date of the Transaction. Although Mr. Thelen is no longer an employee of the Company, under SEC executive compensation disclosure rules, Mr. Thelen is considered an NEO. Because of his limited tenure with the Company during 2018 and his unique compensation arrangements for 2018, we have included a discussion of Mr. Thelen’s 2018 compensation arrangements in the section entitled “Compensation Arrangements for President of Big Fish” below rather than throughout the Compensation Discussion and Analysis.

Key 2018 Compensation Actions

The primary elements of our total direct compensation program for the NEOs and a summary of the actions taken by the Compensation Committee during 2018 are set forth below. This summary excludes the October 2018 one-time grants made to Messrs. Carstanjen and Mudd, as described further below, as such grants are not considered part of our annual compensation program.

Executive Compensation Philosophy and Core Principles

The fundamental philosophy of the Compensation Committee is to provide an executive compensation program that links pay to business strategy and performance in a manner that is effective in attracting, motivating and retaining key executives while also aligning the interests of the executives with the interests of shareholders over the long-term. To that

end, the Compensation Committee evaluates the pay practices of its peers and targets the median of the peer group. In order to continue to support the Company’s high-performance culture, the Company’s key principles underlying the executive compensation program are to:

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

CEO 2018 Compensation

The Compensation Committee utilizes the services of an independent executive compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), to conduct an annual Executive Compensation Market Study to identify appropriate gaming-based peer companies and analyze the CEO pay level against the peers of the Company. The Committee reviews each component of cash compensation (base salary and cash bonus), long-term incentives and total direct compensation for its peers’ CEOs, in relation to the Company’s CEO (Mr. William Carstanjen). As discussed above, the Company’s compensation philosophy is to pay at the median of its peer group, and we note that the Company’s net income and market capitalization approximate the median of the selected peer companies.

As discussed in greater detail on page 31, for fiscal year 2018, the peer group was: Aristocrat Leisure Limited (ALL); Boyd Gaming Corporation (BYD); Caesars Entertainment Corp. (CZR); Eldorado Resorts Inc. (ERI); Gaming and Leisure Properties Inc. (GLPI); Madison Square Garden Company (MSG); MGM Resorts International (MGM); Penn National Gaming, Inc. (PENN); Pinnacle Entertainment Inc. (PNK); Red Rock Resorts Inc. (RRR); Scientific Games Corp (SGMS); Tropicana Entertainment Inc. (TPCA); and Wynn Resorts, Limited (WYNN).

The table below summarizes the 2018 peer group’s target compensation data provided by FW Cook, along with Mr. Carstanjen’s 2017 and 2018 compensation:

To compensate Mr. Carstanjen closer to the median pay level for his peer group and with a higher weighting on long-term incentives, the Compensation Committee approved the following pay actions in the first quarter of 2018:

As a result of these actions, Mr. Carstanjen’s target total direct compensation for 2018 moved closer to, but is still below, the median of the CEO peer group as shown in the table above.

Mr. Carstanjen became the CEO of the Company in 2014, and the performance of the Company since his assumption of the CEO role has been outstanding, with a total shareholder return of 183% and over $1 billion returned to the Company’s shareholders through share repurchases and dividends over the past five years. The Company’s outstanding performance is further reflected in the key business metrics summarized in the table below.

In addition to the strong performance of the Company since Mr. Carstanjen became CEO, the Compensation Committee believes that other market factors also increased the market demand for executives with Mr. Carstanjen’s skills and experience. For instance, in May 2018 the Supreme Court of the United States cleared the way for states to legalize sports betting, striking down a federal law that had prohibited sports betting in most states. As a result of this Supreme Court ruling and previous decisions related to internet-based gaming over the last several years, growth opportunities for gaming companies have increased and there have been new entries from across the globe into the sector. In light of these developments and Mr. Carstanjen’s leadership, unique skills and proven success in the field, the Compensation Committee believes that there is high demand for executives such as Mr. Carstanjen and reasonably anticipated that there would be increased solicitation of Mr. Carstanjen for alternative employment opportunities.

In light of the above, on October 30, 2018, the Company approved a one-time, meaningful, performance-oriented and career-focused equity award (the “7-Year Grant”) to Mr. Carstanjen.

The 7-Year Grant is in addition to participation in the Company’s regular annual long-term incentive program and is sized such that it will serve as substantial incentive to keep Mr. Carstanjen focused on shareholder return and the long-term financial success of the Company. As described in more detail below, the earliest vesting date for any of the stock units awarded pursuant to the 7-Year Grant is the fourth anniversary of the grant date, and full vesting cannot occur until the seventh anniversary of the grant date.

There are three key elements in the design of the 7-Year Grant: (1) inclusion of performance goals designed to reinforce the Company’s pay for performance philosophy; (2) linkage to the Company’s share price appreciation and shareholder interests, with threshold performance set above the median of the comparator group (as described below) and target performance set at the 70^th percentile of the comparator group; and (3) appropriate leverage to provide a meaningful compensation opportunity while not promoting excessive risk taking. In addition, the 7-Year Grant is not eligible for full vesting until the seventh-anniversary of the grant date, thereby reinforcing the retentive aspect of this award.

Sixty-seven (67%) of the stock units awarded were in the form of PSUs, with vesting based on the Company’s relative TSR performance versus the Russell 2000 over a three-year performance period (October 30, 2018 through October 29, 2021). The award will be forfeited if the Company does not achieve threshold performance of at least 55^th percentile versus the Russell 2000 during the three-year performance period. To mitigate for spot strike price volatility, the Company will use a 20-day averaging period at the beginning and end of the performance period to calculate TSR. In addition, the calculation of TSR will assume reinvestment of the dividends and exclude companies that are acquired during the performance period and treat bankruptcies as low performers. None of the shares subject to the award will vest if the Company’s performance ranks below the threshold performance goal. Vesting levels for performance between performance levels will be interpolated. Notwithstanding above-target performance, vesting will be limited to 100% if the Company’s TSR is negative. Once the vesting level of the PSUs has been calculated for the three-year performance period, the awards will be subject to

time-based vesting in 25% annual increments over four years beginning on the fourth anniversary of the grant date, totaling seven years to be fully vested. The performance criteria for the PSUs is set forth in the table below:

Mr. Carstanjen was awarded 127,587 PSUs with a grant date fair value equal to $8,040,107 based on a Monte Carlo valuation on October 30, 2018.

The remaining 33% of the stock units awarded pursuant to the 7-Year Grant were in the form of service-based RSUs, which vest in 25% annual increments over four years beginning on the fourth anniversary of the grant date, totaling seven years to be fully vested. Mr. Carstanjen was awarded 48,711 time-based RSUs (grant date fair value of $3,960,204).

7-Year Grant Timeline

2018 “Say-on-Pay” Advisory Vote on Executive Compensation

The Compensation Committee monitors closely the results of the annual advisory “say-on-pay” vote, and considers such results as one of the many factors considered in connection with the discharge of its responsibilities. In 2018, the Company provided shareholders a “say-on-pay” advisory vote on its executive compensation program, as disclosed in the Company’s 2018 proxy statement. At the 2018 annual meeting of shareholders, approximately 97% of our shareholders voting on the proposal expressed support for the compensation of our NEOs as disclosed in the 2018 proxy statement. The Compensation Committee considered the results of the 2018 advisory vote and also considered other factors in evaluating the Company’s executive compensation programs as discussed in this Compensation Discussion and Analysis, including the advice of the Committee’s independent compensation consultant, and did not make any changes to the executive compensation program in response to the 2018 “say-on-pay” vote.

Role of Management and Independent Advisors

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

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

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

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

FW Cook did not provide any services to the Company other than advising the Committee as provided above. All of the decisions with respect to the Company’s executive compensation programs are made by the Committee alone and may reflect factors and considerations other than, or that may differ from, the information and recommendations provided by management or its outside advisor. The Compensation Committee assessed FW Cook’s independence in light of the SEC requirements and NASDAQ listing standards and determined that FW Cook’s work did not raise any conflict of interest or independence concerns.

Factors Used to Evaluate Pay Decisions

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

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

In making executive pay decisions, the Committee relies substantially on the advice and experience of its independent advisor and the CEO to evaluate the reasonableness of executive pay. The CEO does not make recommendations with respect to his own compensation. The Committee determines pay levels and practices based on the talent needs of the organization as defined by our strategy of growing and diversifying revenues and with the guidance of the Committee’s independent advisor.

Nevertheless, the Committee believes that it is important for the Company to stay competitive on compensation and the Committee, with the assistance of the Committee’s independent advisor, conducts periodic reviews of compensation relative to similarly situated businesses, which can lead to adjustments in compensation and program offerings. The compensation peer group was selected to represent a reasonable match to the Company in terms of size and business characteristics. The group consists of public, similarly sized gaming companies (including traditional gaming, casinos, and internet/software gaming to reflect the Company’s diverse operations), where the median net income and market capitalization approximate the Company’s net income and market capitalization. The Company periodically reviews the peer group and makes adjustments, as deemed necessary, for continued appropriateness as a market reference for informing executive compensation levels. Following the sale of Big Fish, the peer group was adjusted to better reflect the Company’s current mix of traditional gaming and horseracing companies. Accordingly, the following companies were (i) removed from the Company’s historical peer group: Activision Blizzard, Inc. (ATVI); Blucora Inc. (BCOR); Choice Hotels International Inc. (CHH); Electronic Arts Inc. (EA); Glu Mobile Inc. (GLUU); ILG Inc. (ILG); Isle of Capri Casinos, Inc. (ISLE); RealNetworks Inc. (RNWK); Take-Two Interactive Software, Inc. (TTWO); and Zynga Inc. (ZNGA) and (ii) added to the Company’s historical peer group: Aristocrat Leisure Limited (ALL); Caesars Entertainment Corp. (CZR); Eldorado Resorts Inc. (ERI); Gaming and Leisure Properties Inc. (GLPI); Madison Square Garden Company (MSG); and Red Rock Resorts Inc. (RRR).    

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

Components of Compensation

During 2018, the Company used multiple components to provide an overall compensation and benefits package designed to attract and retain the needed level of executive talent for the Company and to incentivize their performance. The following table sets forth the principal compensation elements of the Company’s 2018 executive compensation program and how each element fits into the Company’s overall compensation program and is supportive of the Company’s executive compensation objectives.

Base Salary

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

In 2018, the following adjustments were made to the base salaries for the Company’s NEOs:

Executive Annual Incentive Plan

Bonus awards or incentive compensation paid with respect to 2018 were determined by the Committee per the terms of the 2013 Executive Annual Incentive Plan (“EAIP”). Pursuant to the EAIP, the Committee established performance goals for the Company and bonus opportunities for the 2018 performance year. In analyzing proposed awards against target and maximum payouts, the Committee used the goals as its roadmap to determine whether to issue awards above, at, or below each NEO’s target award. As it has done historically, the Committee sets performance goals for 2018, based upon a comprehensive assessment of the Company against its long-term strategic goals and its ability to achieve said goals with its current leadership team and key employees. Therefore, individual performance by the Company’s NEOs (as measured by various factors, including, but not limited to, continued growth and diversification of the Company’s asset portfolio through acquisitions, customer and employee satisfaction, and the completion of certain specified legislative and regulatory outcomes), and unit performance led by some of the Company’s key employees (as measured by, among other things,

increases in sales and revenues) also played a significant role in setting and evaluating the Company’s performance goals, and determining the proper level of compensation deemed necessary to incent the NEOs and key employees to continue to drive growth.

2018 Performance Goals. For 2018, the Committee set the following goals for the EAIP. These goals were used to assess the NEOs’ performance and determine EAIP payouts as disclosed in the 2018 Summary Compensation Table on page 41. The Committee, in setting the goals, considered the challenges to the Company; however, each goal was deemed achievable, but requiring a superior level of performance. The goals are expressed generally as follows, with no specific weighting attributed to any one goal:

Overall

Racing

Gaming

TwinSpires

Historical Horse Racing

Other

Incentive Opportunities. Under the EAIP, the NEOs have target and maximum opportunities that are determined by the Committee based on internal pay equity considerations, market data, impact on total short-term compensation and the expected level of contribution of each NEO to the Company’s performance goals and growth objectives.

The Compensation Committee approves the target and maximum incentive levels, after considering recommendations from the CEO for each NEO (except the CEO), at the beginning of each year. The Committee independently evaluates and approves the target and maximum incentive levels for the CEO at the beginning of each year. During 2018, the target and maximum awards assigned to the CEO and the other NEOs were as follows:

2018 Performance Results. In determining the payouts, the Compensation Committee exercises its discretion to determine whether to payout at, above, or below the target opportunities based upon its review of the outcomes evaluated against Company and individual performance. The Compensation Committee established a minimum corporate Adjusted EBITDA performance threshold for 2018 of $185 million, which was required to be achieved before any incentives were eligible to be paid under the EAIP for 2018. The Compensation Committee certified that actual Adjusted EBITDA for compensation purposes for 2018 exceeded this threshold and that executives were eligible for payouts under the EAIP for 2018.

In evaluating 2018 performance, the Compensation Committee considered (i) revenue from continuing operations ($1.0 billion, an increase of 14%), net income from continuing operations ($182.6 million, an increase of 49%), diluted net income per share from continuing operations ($4.39, an increase of 72%), and Adjusted EBITDA from continuing operations ($328.8, an increase of 15%), each as compared to 2017; (ii) record all sources handle for Kentucky Derby and Oaks week of $311.2 million, up 9% compared to 2017; (iii) strong organic growth from our Calder, Riverwalk, Oxford, Fair Grounds Slots and Video Poker, and Harlow’s casino properties; (iv) capital expenditures of $149 million; and (v) the growth of TwinSpires.com handle to $1.4 billion, up 8% compared to 2017. The Compensation Committee determined that these achievements contributed to benefits being realized by the Company’s shareholders.

The amounts earned by the NEOs for 2018 under the EAIP are reflected in the 2018 Summary Compensation Table on page 41 in the column labeled “Non-Equity Incentive Plan Compensation.” As noted above, the Company exhibited strong overall financial performance in 2018. The NEOs were viewed by the Committee to be the primary parties responsible for the actual performance relative to the performance goals established with respect to 2018. The Compensation Committee, after considering the Company’s overall performance, awarded the NEOs EAIP awards as shown in the table on page 41. As such, the NEOs were awarded an EAIP award at the following percentage of their target incentive award: Mr. Carstanjen 148% ($3,000,000), Mr. Mudd 167% ($1,250,000), Ms. Dall 146% ($775,000), and Mr. Miller 135% ($325,700). The awards for Mr. Carstanjen, Mr. Mudd, Ms. Dall, and Mr. Miller were made pursuant to the EAIP and as a reward for the NEOs respective roles in driving performance during the period ending December 31, 2018.

2019 Executive Annual Incentive Plan

For 2019, the Company implemented a newly designed EAIP for the NEOs, whereby the majority of the annual incentive will be formulaically based on achievement to pre-established goals with defined weightings. Under this design, 75% of the 2019 EAIP award will be determined formulaically, based on corporate or business unit Adjusted EBITDA performance, and the remaining 25% will vest based on the attainment of strategic and individual goals established for each NEO, with payouts under the 2019 EAIP ranging from 0% to 200% of target.

Long-Term Incentives

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

In 2015, the Compensation Committee approved the adoption of the Executive Long-Term Incentive Plan (the “ELTI Plan”), pursuant to which the NEOs may earn variable equity payouts based upon the Company achieving certain key performance metrics. The purpose of the ELTI Plan is to provide participants with a long-term incentive program that is market-competitive and provides long-term incentives on a regular, predictable, and annual basis. Eligible participants (as determined by the Committee) may be members of the Company’s senior executive team and/or such other executives and key contributors as the Committee may designate from time to time. As and to the extent determined by the Committee as part of the annual compensation planning process for participants, the CEO will participate in the ELTI Plan at a rate determined by the Committee. No individual will have an automatic right to participate in the ELTI Plan. A summary of the 2018 terms and applicable award opportunities, granted by the Committee to the NEOs, is provided below.

During the beginning of 2018, the CEO recommended employees (other than with respect to himself) to the Committee for participation in the ELTI Plan for 2018 and their respective specific levels of proposed participation. Awards granted to eligible employees under the ELTI Plan may be in the form of restricted share units (“RSUs”), performance share units (“PSUs”), or both. To pursue the key objective of linking executive compensation with Company performance, the Committee aimed to deliver at least 50% of the 2018 awards as PSUs.

The Committee approved the 2018 RSU awards on February 15, 2018, and the PSU awards (for the 36-month performance period of January 1, 2018 through December 31, 2020) under the ELTI Plan on March 26, 2018. The 2018 awards are as follows: