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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
 
 
Filed by the Registrant ☒       Filed by a party other than the Registrant ☐
Check the appropriate box:
 
Preliminary Proxy Statement
 
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material Pursuant to
§240.14a-12
CHURCHILL DOWNS INCORPORATED
(Name of Registrant as Specified in its Charter)
Not applicable.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
  No fee required.
  Fee paid previously with preliminary materials.
  Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules
14a-6(i)(1)
and
0-11.
 
 


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DEAR FELLOW SHAREHOLDERS,

 

Over the past year, Churchill Downs Incorporated’s portfolio of businesses delivered record net revenue of nearly $2.5 billion, $417 million of net income, and over $1.0 billion of Adjusted EBITDA. The Company accomplished several key strategic and operational objectives, firmly positioning us for growth in 2024 and beyond.

Highlights for 2023

 

  Held a very successful Kentucky Derby setting records in virtually every material metric.

 

  Expanded our historical racing machine (HRM) business in Kentucky with the addition of a hotel and larger gaming floor at Derby City Gaming and the opening of Derby City Gaming Downtown.

 

  Expanded our HRM business in Virginia with the opening of Rosie’s Gaming Emporia in Southern Virginia.

 

  Completed the strategic acquisition of Exacta Systems driving operational and economic efficiencies by integrating the central determinate system technology into our HRM operations.

 

  Closed the sale of the Arlington Heights property in Illinois to the Chicago Bears.

Growth Objectives for 2024 and Beyond

 

  Complete the new world-class Paddock Project at Churchill Downs Racetrack to drive the 150th Kentucky Derby to new heights.
  Celebrate the grand opening of the Terre Haute Casino gaming floor in early April 2024 and open the Resort in the middle of May.

 

  Open The Rose Gaming Resort in Northern Virginia in the late third quarter of 2024.

 

  Open Owensboro Racing & Gaming in Western Kentucky in first quarter of 2025.

We have demonstrated over the last several years our ability to build a pipeline of meaningful growth opportunities while effectively integrating transformative acquisitions. We believe we are poised to pursue many growth opportunities in the coming years—developing greenfield and organic opportunities, executing acquisitions within our strategic areas of focus and, of course, continuing to grow the Kentucky Derby.

Our ability to deliver these results is a testament to the dedication and hard work of our experienced group of leaders and talented team members.

CDI’s discipline and commitment to growth while maintaining one of the strongest balance sheets in the industry is how our Company will continue to create and deliver long-term shareholder value to you. Thank you for the investment you place in our Company. We appreciate your support and confidence.

 

 

LOGO

 

 

LOGO

 

R. ALEX RANKIN

CHAIRMAN OF THE BOARD

       LOGO  

 

LOGO

 

 

WILLIAM C. CARSTANJEN

CHIEF EXECUTIVE OFFICER

 

 

LOGO  
  CHURCHILL DOWNS INCORPORATED | 2024 Proxy Statement & 2023 Annual Report
 

 


Table of Contents

 

LOGO

600 N. HURSTBOURNE PARKWAY, STE. 400

LOUISVILLE, KENTUCKY 40222

 

   

NOTICE OF ANNUAL MEETING

OF SHAREHOLDERS

 

 

 

Date:

Tuesday, April 23, 2024

 

Time:

9:00 a.m. Eastern Time

 

Place:

Via a live audio-only webcast at

www.proxydocs.com/CHDN. There   

is no physical location for the 2024

Annual Meeting.

 

   

 

Agenda:

 

I.   To elect the three (3) Class I Directors identified in this Proxy Statement for a term of three (3) years (Proposal No. 1);

 

II.  To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2024 (Proposal No. 2);

 

III.   To conduct an advisory vote to approve executive compensation (Proposal No. 3); and

 

IV.   To transact such other business as may properly come before the meeting or any adjournment thereof, including matters incident to its conduct.

 

Record Date:

The close of business on March 1, 2024, has been fixed as the record date for determining the shareholders entitled to notice of, and to vote at, the Annual Meeting. Only shareholders of record at that time will be entitled to notice of and to vote at the Annual Meeting and at any adjournments thereof.

Voting:

 

To attend and vote during the Annual Meeting, visit www.proxydocs.com/CHDN. All shareholders, including those who expect to attend the Annual Meeting virtually, are urged to vote prior to the Annual Meeting by telephone or Internet or by requesting and promptly signing and returning a proxy card, as more fully described in the Notice of Internet Availability of Proxy Materials.   

 

LOGO

 

   Vote by Telephone
  

 

LOGO

 

   Vote by Internet
  

 

LOGO

 

   Vote by Mail

March 14, 2024

    By Order of the Board of Directors.

    BRADLEY K. BLACKWELL

    Executive Vice President and

    General Counsel,

    Secretary

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2024

The Company’s Proxy Statement for the 2024 Annual Meeting of Shareholders and the Annual Report to

Shareholders for the fiscal year ended December 31, 2023 are available at

http://www.churchilldownsincorporated.com/proxy

 

 


Table of Contents
   

TABLE OF CONTENTS

 

 

Notice of Annual Meeting of Shareholders

  

Proxy Statement

     1  

Annual Meeting of Shareholders to be held on April 23, 2024

     1  

Voting Rights

     1  

Voting Instructions and Information

     2  

Security Ownership of Certain Beneficial Owners and Management

     5  

Information about our Executive Officers

     8  

Election of Directors (Proposal No. 1)

     9  

Election of Directors

     10  

Continuing Directors

     11  

Director Skills and Experience Matrix

     13  

Retirement Age Policy

     14  

Director Compensation for Fiscal Year Ended December 31, 2023

     14  

Director Stock Ownership Guidelines

     15  

Corporate Governance

     16  

Shareholder Communications

     16  

Board Leadership Structure

     16  

Oversight of Company Risk

     16  

Board Evaluations

     17  

Board Meetings and Committees

     17  

Executive Committee

     18  

Audit Committee

     18  

Compensation Committee

     19  

Responsibilities of the Compensation Committee

     19  

Compensation Committee Interlocks and Insider Participation

     20  

Compensation Risk Assessment

     20  

Nominating and Governance Committee

     20  
Proposal to Ratify the Appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accounting Firm for 2024 (Proposal No. 2)      22  

Independent Public Accountants

     23  

Audit Fees

     23  

Audit-Related Fees

     23  

Tax Fees

     23  

All Other Fees

     23  
Churchill Downs Incorporated Audit Committee Report      24  
Advisory Vote to Approve Executive Compensation (Proposal No. 3)      26  

Compensation Discussion and Analysis

     27  

Executive Summary

     28  

2023 Highlights

     29  

Key 2023 Compensation Actions

     31  

Executive Compensation Philosophy and Core Principles

     32  

2023 “Say-on-Pay” Advisory Vote on Executive Compensation

     32  

Role of Management and Independent Advisors

     32  

Factors Used to Evaluate Pay Decisions

     33  

Non-Disclosure of Certain Metrics and Targets

     34  

Components of Compensation

     35  

Base Salary

     35  

Executive Annual Incentive Plan

     36  

Long-Term Incentives

     38  

Executive Stock Ownership Guidelines

     41  

Anti-Hedging Policy

     41  

Clawback Policy

     41  

Deferred Compensation and Other Benefits

     42  

Compensation Committee Report

     43  
2023 Summary Compensation Table      44  
All Other Compensation for Fiscal Year Ended December 31, 2023      45  
Grants of Plan-Based Awards for Fiscal Year Ended December 31, 2023      46  
Outstanding Equity Awards at Fiscal Year-End for Fiscal Year Ended December 31, 2023      47  
Stock Vested for Fiscal Year Ended
December 31, 2023
     48  
Nonqualified Deferred Compensation for
Fiscal Year Ended December 31, 2023
     49  
Potential Payments Upon Termination or
Change of Control
     51  

Non-Solicit Provisions

     52  

Severance Benefits

     52  

Pay Ratio

     53  

Identification of Median Employee

     53  

Ratio (2023)

     53  
Pay Versus Performance      54  

Equity Compensation Plan Information

     60  
Certain Relationships and Related Transactions      61  

Delinquent Section 16(a) Reports

     62  
Multiple Shareholders Sharing the Same Address      63  

Proposals by Shareholders

     64  
 

The letter to shareholders and the accompanying proxy statement contains various “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the use of terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “will,” “scheduled,” and similar words or similar expressions (or negative versions of such words or expressions). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors, that could cause actual results to differ materially from expectations are described under the heading “Risk Factors” in our most recent Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


Table of Contents

Proxy Statement

 

 

LOGO

600 N. HURSTBOURNE PARKWAY, STE. 400

LOUISVILLE, KENTUCKY 40222

 

   

PROXY STATEMENT

 

ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2024

The Board of Directors (the “Board of Directors” or “Board”) of Churchill Downs Incorporated (“Company” “or “CHDN”) is soliciting proxies to be voted at the 2024 Annual Meeting of Shareholders to be held on Tuesday, April 23, 2024, at 9:00 a.m. Eastern Time (the “Annual Meeting”), and at any adjournment or postponement thereof. The Annual Meeting will be held in a virtual meeting format only, via the Internet, with no physical in-person meeting. You will be able to attend and participate in the Annual Meeting online by visiting www.proxydocs.com/CHDN. Certain officers and directors of the Company and persons acting under their instruction may also solicit proxies on behalf of the Board of Directors by means of telephone calls, personal interviews and mail at no additional expense to the Company. The Notice of Internet Availability of Proxy Materials (the “Notice”) was first mailed on or about March 14, 2024.

Voting Rights

Only holders of record of the Company’s Common Stock, no par value (“Common Stock”), on March 1, 2024 (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting. On that date, 73,689,247 shares of Common Stock were outstanding and entitled to vote. Each shareholder has one vote per share on all matters coming before the Annual Meeting. The shareholders of the Company do not have cumulative voting rights in the election of directors. Abstentions or “withhold” votes, as applicable, and broker non-votes are not counted in determining the number of votes required for the election of a director or passage of any matter submitted to the shareholders. Abstentions or “withhold” votes and broker non-votes are counted for purposes of determining whether a quorum exists. For more information regarding broker non-votes, see “What is a broker non-vote?” below.

To ensure the presence of a quorum, please vote over the Internet, by telephone or by mail as instructed in these materials as promptly as possible. If a shareholder executes and returns a proxy card, but does not specify otherwise, the shares represented by the shareholder’s proxy will be voted: (i) for the election of each of the three director nominees listed below under “Election of Directors”; (ii) for the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2024; (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.

 

2024 Proxy Statement

 

LOGO

 

1


Table of Contents

Proxy Statement

 

 

VOTING INSTRUCTIONS AND INFORMATION

When and where is our Annual Meeting?

We will hold our Annual Meeting on Tuesday, April 23, 2024 at 9:00 a.m. Eastern Time online at www.proxydocs.com/CHDN.

How are we distributing our proxy materials?

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

On March 14, 2024, we began mailing a Notice to our shareholders containing instructions on how to access this Proxy Statement and our 2023 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 2023 Annual Report on Form 10-K are also available at http://www.churchilldownsincorporated.com/proxy.

Who can vote and ask questions at the Annual Meeting?

You are entitled to vote or direct the voting of your shares of CHDN Common Stock if you were a shareholder of record or if you held CHDN Common Stock in “street name” at the close of business on the Record Date (Friday, March 1, 2024). On that date, 73,689,247 shares of CHDN Common Stock were outstanding. Each share of CHDN Common Stock held by you on the Record Date is entitled to one vote.

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

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

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

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

In order to attend the Annual Meeting, you must register in advance at www.proxydocs.com/CHDN prior to the deadline of April 21, 2024 at 5:00 p.m. (Eastern Time). Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you access to the Annual Meeting and to submit questions prior to the Annual Meeting. Only CHDN shareholders of record as of the close of business on the Record Date will be permitted to attend the Annual Meeting. If you hold shares in “street name,” you will also need a valid “legal proxy” in order to vote at the Annual Meeting, which you can obtain by contacting your account representative at the broker, bank or similar institution through which you hold your shares. This legal proxy must be submitted with your registration to be able to vote your shares at the Annual Meeting.

If you encounter any technical difficulties accessing the virtual Annual Meeting, please call the technical support number that will be posted on the virtual meeting log-in page.

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:

 

1.

To elect the three (3) Class I Directors identified in this Proxy Statement for a term of three (3) years (Proposal No. 1);

 

2

 

LOGO

 

2024 Proxy Statement


Table of Contents

Proxy Statement

 

 

2.

To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2024 (Proposal No. 2); and

 

3.

To conduct an advisory vote to approve the executive compensation of the Company’s named executive officers as disclosed in this Proxy Statement (Proposal No. 3).

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

How does the Board of Directors recommend I vote?

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

 

1.

FOR” each of the three (3) Class I director nominees identified in this Proxy Statement under “Election of Directors” to the Board of Directors.

 

2.

FOR” the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2024.

 

3.

FOR” the proposal to approve, on a non-binding advisory basis, the executive compensation of the Company’s named executive officers as disclosed in this Proxy Statement.

How do I vote?

You may cast your vote in one of four ways:

 

By Submitting a Proxy by Internet. Go to the following website: www.proxypush.com/CHDN. You may submit a proxy by Internet 24 hours a day. To be valid, your proxy by Internet must be received by the time of the Annual Meeting. When you access the website, follow the instructions to create an electronic voting instruction form.

 

By Submitting a Proxy by Telephone. To submit a proxy using the telephone, call 1-866-284-6863 any time on a touch-tone telephone. There is NO CHARGE to you for the call in the United States or Canada. International calling charges apply outside the United States and Canada. You may submit a proxy by telephone 24 hours a day, 7 days a week. Follow the simple prompts and instructions provided by the recorded message. To be valid, your proxy must be received by the time of the Annual Meeting.

 

By Submitting a Proxy by Mail. If you have requested and received a proxy card by mail, mark your proxy card, sign and date it, and return it in the prepaid envelope that was provided or return it to: Proxy Tabulator for Churchill Downs Incorporated, P.O. Box 8016, Cary, North Carolina 27512-9903. To be valid, your proxy must be received by April 22, 2024.

 

During the Annual Meeting. To vote during the live webcast of the Annual Meeting, you must first register at www.proxydocs.com/CHDN. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you access to the Annual Meeting and to submit questions prior to the Annual Meeting. Please be sure to follow instructions found on your proxy card and/or voting authorization form and subsequent instructions that will be delivered to you via email. Shareholders will be able to attend the Annual Meeting platform with the webcast beginning at 8:45 a.m. (Eastern Time) on April 23, 2024 pursuant to the unique access instructions they receive following their registration at www.proxydocs.com/CHDN.

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

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

For a Proxy Submitted by Internet or Telephone

 

Submitting in a timely manner a new proxy through the Internet or by telephone that is received prior to the time of the Annual Meeting;

 

Requesting, executing and mailing a later-dated proxy card that is received by April 22, 2024; or

 

Voting during the virtual Annual Meeting.

 

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Proxy Statement

 

 

For a Proxy Submitted by Mail

 

Executing and mailing another proxy card bearing a later date that is received by April 22, 2024;

 

Giving written notice of revocation to CHDN’s Secretary at 600 N. Hurstbourne Parkway, Ste. 400, Louisville, Kentucky 40222 that is received by CHDN by April 22, 2024; or

 

Voting during the virtual Annual Meeting.

What is a broker non-vote?

Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain “routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted to vote shares for a beneficial owner without timely received voting instructions. The only routine matter to be presented at the Annual Meeting is the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2024. The remaining proposals to be presented at the Annual Meeting are considered non-routine.

A broker non-vote occurs when a broker, bank or other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercises its discretionary voting authority on the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2024, 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 other proposals to be presented at the Annual Meeting.

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:

 

1.

FOR” each of the three (3) Class I director nominees identified in this Proxy Statement under “Election of Directors” to the Board of Directors.

 

2.

FOR” the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2024.

 

3.

FOR” the proposal to approve, on a non-binding advisory basis, the executive compensation of the Company’s named executive officers as disclosed in this Proxy Statement.

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

 

will be counted as present for purposes of establishing a quorum;

 

will be voted in accordance with the broker’s, bank’s or other nominee’s discretion on “routine” matters, which includes only the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2024; and

 

will not be counted in connection with the election of directors, the proposal to approve, on a non-binding advisory basis, the executive compensation of the Company’s named executive officers as disclosed in this Proxy Statement, or any other non-routine matters that are properly presented at the Annual Meeting. For each of these proposals, your shares will be treated as “broker non-votes.”

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

 

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Proxy Statement

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of the Record Date (except as otherwise indicated below) regarding the beneficial ownership of the Common Stock by the only persons known by the Company to beneficially own more than five percent (5%) of the Common Stock, each director and director nominee of the Company, each named executive officer (as defined in “Executive Compensation—2023 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 73,689,247 shares of Common Stock outstanding as of the Record Date. We are not aware of any pledge of our Common Stock or any other arrangements the operation of which may at a subsequent date result in a change in control of our Company.

 

Name of Beneficial Owner

  Amount and Nature Of
Beneficial Ownership
       Percent of Class     

Capital Research Global Investors

333 South Hope Street, 55th Fl

Los Angeles, CA 90071

    6,814,665 (1)      9.25         

The Vanguard Group, Inc. and affiliates

100 Vanguard Blvd.

Malvern, PA 19355

    6,723,558 (2)      9.12         

BlackRock, Inc. and affiliates

55 East 52nd Street

New York, NY 10055

    6,136,637 (3)      8.33         

FMR LLC and affiliates

245 Summer Street.

Boston, MA 02210

    5,413,696 (4)      7.35         

Ulysses L. Bridgeman, Jr.

    49,985 (5)      *         

Andréa Carter

    2,089 (6)      *         

Robert L. Fealy

    118,687 (7)      0.16         

Douglas C. Grissom

    24,252 (8)      *         

Daniel P. Harrington

    1,145,710 (9)      1.55         

Karole F. Lloyd

    34,367 (10)      *         

R. Alex Rankin

    93,275 (11)      0.13         

Paul C. Varga

    23,847 (12)      *         

William C. Carstanjen

    1,492,269 (13)      2.03         

William E. Mudd

    625,493 (14)      0.85         

Marcia A. Dall

    138,300 (15)      0.19         

Bradley K. Blackwell

    22,167 (16)      *         

Maureen Adams

    11,205 (17)      *         

13 Directors and Executive Officers as a Group

    3,781,646 (18)      5.13         

 

*

Less than 0.1%.

 

(1)

Based on a Schedule 13G filed with the SEC on February 9, 2024, reporting the beneficial ownership of Capital Research Global Investors and its subsidiaries and affiliates specified therein (“CRGI”), as of December 29, 2023. As reported in such filing, CRGI has sole voting power over 6,799,104 shares, sole dispositive power over 6,814,665 shares and no shared voting or dispositive power over any shares.

 

(2)

Based on a Schedule 13G/A filed with the SEC on February 13, 2024, reporting the beneficial ownership of The Vanguard Group and its subsidiaries specified therein (“Vanguard”) as of December 29, 2023. As reported in such filing, Vanguard has sole voting power over no shares, sole dispositive power over 6,629,885 shares, shared voting power over 29,927 shares and shared dispositive power over 93,673 shares.

 

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(3)

Based on a Schedule 13G/A filed with the SEC on January 25, 2024, reporting the beneficial ownership of BlackRock, Inc. and its subsidiaries specified therein (“BlackRock”) as of December 31, 2023. As reported in such filing, BlackRock has sole voting power over 5,925,556 shares, sole dispositive power over 6,136,637 shares and no shared voting or dispositive power over any shares.

 

(4)

Based on a Schedule 13G/A filed with the SEC on February 9, 2024, reporting the beneficial ownership of FMR LLC and its subsidiaries specified therein (“FMR”) as of December 29, 2023. As reported in such filing, FMR has sole voting power over 5,409,572 shares, sole dispositive power over 5,413,696 shares, and no shared voting or dispositive power over any shares.

 

(5)

Includes 13,235 deferred stock units, which Mr. Bridgeman has elected to defer pursuant to the Company’s deferred compensation plan. Also includes 1,225 restricted stock awards that will vest within 60 days of March 1, 2024 and 35,525 restricted stock unit awards, over which Mr. Bridgeman has neither voting nor dispositive power until immediately following his resignation or retirement from the Board.

 

(6)

Includes 864 deferred stock units, which Ms. Carter has elected to defer pursuant to the Company’s deferred compensation plan. Also includes 1,225 restricted stock units awarded by the Company for her board service, over which Ms. Carter has neither voting nor dispositive power until immediately following her resignation or retirement from the Board.

 

(7)

Includes 70,861 deferred stock units, which Mr. Fealy has elected to defer pursuant to the Company’s deferred compensation plan. Also includes 1,225 restricted stock awards that will vest within 60 days of March 1, 2024 and 46,601 restricted stock unit awards, over which Mr. Fealy has neither voting nor dispositive power until immediately following his resignation or retirement from the Board.

 

(8)

Includes 9,885 deferred stock units, which Mr. Grissom has elected to defer pursuant to the Company’s deferred compensation plan. Also includes 14,367 restricted stock units awarded by the Company for his board service, over which Mr. Grissom has neither voting nor dispositive power until immediately following his resignation or retirement from the Board.

 

(9)

Mr. Harrington shares voting and investment power with respect to 1,145,352 shares held by TVI Corp. He specifically disclaims beneficial ownership of these shares. Amount in chart includes 71,570 deferred stock units, which Mr. Harrington has elected to defer pursuant to the Company’s deferred compensation plan. Also includes 47,826 restricted stock units awarded by the Company for his board service, over which Mr. Harrington has neither voting nor dispositive power until immediately following his resignation or retirement from the Board. Amount in chart does not include 195,204 shares held by the Veale Foundation. Mr. Harrington is a member of the Board of Trustees of the Veale Foundation, but Mr. Harrington disclaims beneficial ownership of those shares.

 

(10)

Includes 1,225 restricted stock awards that will vest within 60 days of March 1, 2024 and 13,142 restricted stock unit awards, over which Ms. Lloyd has neither voting nor dispositive power until immediately following her resignation or retirement from the Board.

 

(11)

Includes 47,826 restricted stock units awarded by the Company for his board service, over which Mr. Rankin has neither voting nor dispositive power until immediately following his resignation or retirement from the Board.

 

(12)

Includes 7,847 restricted stock units awarded by the Company for his board service, over which Mr. Varga has neither voting nor dispositive power until immediately following his resignation or retirement from the Board.

 

(13)

Excludes 70,382 restricted stock units deferred under the Company’s Deferral Plan. Excludes 359,479 restricted stock units and 2018 performance stock units, tied to Mr. Carstanjen’s continued service to the Company, awarded under the Company’s 2016 Omnibus Stock Incentive Plan over which Mr. Carstanjen has neither voting nor dispositive power until October 30, 2024, at which time 151,942 units shall vest without restriction; December 31, 2024, at which time 28,091 units shall vest without restriction; October 30, 2025, at which time 151,942 units shall vest without restriction; December 31, 2025, at which time 18,289 units shall vest without restriction; and December 31, 2026, at which 9,215 units shall vest without restriction. Excludes 56,628 performance stock units awarded under the Company’s executive long term incentive compensation plan over which Mr. Carstanjen has neither voting nor dispositive power until December 31, 2024, at which time the performance period ends with regard to 29,406 performance stock units; and December 31, 2025, at which time the performance period ends with regard to 27,222 performance stock units. Further excludes all performance stock units to be awarded to Mr. Carstanjen under the Company’s executive long-term incentive compensation plan for the performance period of January 1, 2024 through December 31, 2026.

 

(14)

Excludes 214,594 restricted stock units and 2018 performance stock units, tied to Mr. Mudd’s continued service to the Company, awarded under the Company’s 2016 Omnibus Stock Incentive Plan over which Mr. Mudd has neither voting nor dispositive power until October 30, 2024, at which time 94,966 units shall vest without restriction; December 31, 2024, at which time 12,526 units shall vest without restriction; October 30, 2025, at which time 94,966 units shall vest without restriction; December 31, 2025, at which time 8,070 units shall vest without restriction; and December 31, 2026, at which 4,066 units shall vest without restriction. Excludes 25,378 performance stock units awarded under the Company’s executive long term incentive compensation plan over which Mr. Mudd has neither voting nor dispositive power until December 31, 2024, at which time the performance period ends with regard to 13,368 performance stock units; and December 31, 2025, at which time the performance period ends with regard to 12,010 performance stock units. Further excludes all performance stock units to be awarded to Mr. Mudd under the Company’s executive long-term incentive compensation plan for the performance period of January 1, 2024 through December 31, 2026.

 

(15)

Excludes 7,838 restricted stock units deferred under the Company’s Deferral Plan. Excludes 18,086 restricted stock units, tied to Ms. Dall’s continued service to the Company, awarded under the Company’s 2016 Omnibus Stock Incentive Plan over which Ms. Dall has neither voting nor dispositive power until December 31, 2024, at which time 9,186 units shall vest without restriction;

 

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Proxy Statement

 

 

  December 31, 2025, at which time 5,918 units shall vest without restriction; and December 31, 2026, at which time 2,982 units shall vest without restriction. Excludes 18,610 performance stock units awarded under the Company’s executive long term incentive compensation plan over which Ms. Dall has neither voting nor dispositive power until December 31, 2024, at which time the performance period ends with regard to 9,802 performance stock units; and December 31, 2025, at which time the performance period ends with regard to 8,808 performance stock units. Further excludes all performance stock units to be awarded to Ms. Dall under the Company’s executive long-term incentive compensation plan for the performance period of January 1, 2024 through December 31, 2026.

 

(16)

Excludes 9,043 restricted stock units, tied to Mr. Blackwell’s continued service to the Company, awarded under the Company’s 2016 Omnibus Stock Incentive Plan over which Mr. Blackwell has neither voting nor dispositive power until December 31, 2024, at which time 2,959 units shall vest without restriction; February 10, 2025, at which time 1,634 units shall vest without restriction; December 31, 2025, at which time 2,959 units shall vest without restriction; and December 31, 2026, at which 1,491 units shall vest without restriction. Excludes 9,306 performance stock units awarded under the Company’s executive long term incentive compensation plan over which Mr. Blackwell has neither voting nor dispositive power until December 31, 2024, at which time the performance period ends with regard to 4,902 performance stock units; and December 31, 2025, at which time the performance period ends with regard to 4,404 performance stock units. Further excludes all performance stock units to be awarded to Mr. Blackwell under the Company’s executive long-term incentive compensation plan for the performance period of January 1, 2024 through December 31, 2026.

 

(17)

Excludes 8,895 restricted stock units, tied to Ms. Adams’ continued service to the Company, awarded under the Company’s 2016 Omnibus Stock Incentive Plan over which Ms. Adams has neither voting nor dispositive power until December 31, 2024, at which time 2,959 units shall vest without restriction; February 10, 2025, at which time 1,486 units shall vest without restriction; December 31, 2025, at which time 2,959 units shall vest without restriction; and December 31, 2026, at which 1,491 units shall vest without restriction. Excludes 8,860 performance stock units awarded under the Company’s executive long term incentive compensation plan over which Ms. Adams has neither voting nor dispositive power until December 31, 2024, at which time the performance period ends with regard to 4,456 performance stock units; and December 31, 2025, at which time the performance period ends with regard to 4,404 performance stock units. Further excludes all performance stock units to be awarded to Ms. Adams under the Company’s executive long-term incentive compensation plan for the performance period of January 1, 2024 through December 31, 2026.

 

(18)

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

 

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Proxy Statement

 

 

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

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

 

Name and Age

  Position(s) With Company and Term of Office

William C. Carstanjen(1)

Age: 56

  Chief Executive Officer since August 2014; President and Chief Operating Officer from March 2011 to August 2014; Chief Operating Officer from January 2009 to March 2011; Executive Vice President and Chief Development Officer from June 2005 to January 2009; General Counsel from June 2005 to December 2006

William E. Mudd(2)

Age: 52

  President and Chief Operating Officer since October 2015; President and Chief Financial Officer from August 2014 to October 2015; Executive Vice President and Chief Financial Officer from October 2007 to August 2014

Marcia A. Dall(3)

Age: 60

  Executive Vice President and Chief Financial Officer since October 2015

Bradley K. Blackwell(4)

Age: 52

  Executive Vice President and General Counsel since February 2023; Senior Vice President and General Counsel from March 2017 to February 2023; Vice President, Operations from February 2015 to March 2017; Vice President, Legal from April 2011 to February 2015; Vice President, Legal and Regulatory Affairs for TwinSpires from January 2007 to April 2011; Corporate Counsel from April 2005 to January 2007

Maureen Adams(5)

Age: 60

  Executive Vice President, Gaming Operations since February 2023; Senior Vice President, Gaming Operations from February 2022 to February 2023; Vice President of Gaming Operations from July 2019 to February 2022; President and General Manager of Calder Casino from August 2013 to July 2019

 

(1)

Prior to joining the Company, Mr. Carstanjen was employed at General Electric Company (“GE”). From 2004 through June 2005, he served as the Managing Director and General Counsel of GE Commercial Finance, Energy Financial Services. From 2002 to 2004, he served as General Counsel of GE Specialty Materials and, from 2000 to 2002, he served as Transactions and Finance Counsel of GE Worldwide Headquarters. Mr. Carstanjen began his career as an attorney with Cravath, Swaine & Moore LLP in New York City, specializing in mergers and acquisitions and other corporate transactions.

 

(2)

Prior to joining the Company, Mr. Mudd was employed at GE. From 2006 through October 2007, he served as Chief Financial Officer, Global Commercial & Americas P&L of GE Infrastructure, Water & Process Technologies. From 2004 to 2006, he served as Chief Financial Officer, Supply Chain, Information Technology and Technology Finance, GE Consumer & Industrial Europe, Middle East, & Africa, Budapest and Hungary and, from 2002 to 2004, he served as Manager, Global Financial Planning & Analysis and Business Development at GE FANUC in Charlottesville, Virginia.

 

(3)

Prior to joining the Company, Ms. Dall was employed at Erie Indemnity Company, a company providing sales, underwriting and administrative services to Erie Insurance Exchange, where from March 2009 through October 2015, she served as Executive Vice President and Chief Financial Officer. From January 2008 until March 2009, she served as Chief Financial Officer of the Healthcare division at CIGNA Corporation. Prior to CIGNA, Ms. Dall was a corporate officer and the Chief Financial Officer for the International and U.S. Mortgage Insurance segments of Genworth Financial, a former subsidiary of GE. Ms. Dall began her career in 1985 in the Financial Management Program at GE and held various leadership roles both in finance and operations over her twenty-plus year tenure with GE. Ms. Dall is a Certified Public Accountant.

 

(4)

Prior to joining the Company, Mr. Blackwell served as Assistant General Counsel and Secretary at Michaels Stores, Inc. (“Michaels”), a NYSE publicly traded specialty retailer with over 1,000 stores across 49 states, Canada, and Puerto Rico. Prior to Michaels, Mr. Blackwell served as an attorney with Jones Day in Dallas, Texas, focusing on mergers and acquisitions and corporate counseling.

 

(5)

Prior to joining the Company, Ms. Adams was employed by Caesars Entertainment for 15 years where she held a variety of senior positions in Finance, Marketing/Sales, and Operations.

 

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  2024 Proxy Statement


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Election of Directors (Proposal No. 1)

 

 

   

ELECTION OF DIRECTORS (Proposal No. 1)

 

At the Annual Meeting, shareholders will vote to elect the three (3) persons identified below to serve in Class I of the Board of Directors and to hold office for a term of three (3) years expiring at the 2027 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 nine (9) directors, with three (3) directors in Class I, three (3) directors in Class II, and three (3) directors in Class III.

The Nominating and Governance Committee has recommended, and the Board has approved, the nomination of the three (3) persons named in the following table for election as directors in Class I. The nominees currently serve as members of Class I and have agreed to serve if re-elected.

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

 

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The Board of Directors recommends a vote “FOR” the

election of the directors in Class I named below.

 

2024 Proxy Statement  

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Election of Directors (Proposal No. 1)

 

 

Election of Directors

The following table sets forth information relating to the Class I director nominees of the Company who are proposed to the shareholders for election to serve as directors for a term of three (3) years, expiring at the 2027 annual meeting of shareholders, and thereafter until their respective successors shall be duly elected and qualified or until the earlier of their resignation, death or removal.

Class I— Nominated for Terms Expiring in 2027

 

 William C. Carstanjen

 

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Age: 56

Director since 2015

  

 

Background, Skills and Experience

 

Mr. Carstanjen was named the Company’s twelfth Chief Executive Officer in August 2014 and appointed to the Board of Directors in July 2015. Mr. Carstanjen served as the Company’s President and Chief Operating Officer (2011-2014), the Company’s Chief Operating Officer (2009-2011) and as Executive Vice President, General Counsel and Chief Development Officer for the Company (2005-2009). Mr. Carstanjen joined the Company in July 2005 after serving as an executive with General Electric Company. Mr. Carstanjen began his career as an attorney with Cravath, Swaine & Moore LLP in New York City, specializing in mergers and acquisitions, corporate finance, and corporate governance. Mr. Carstanjen brings a wealth of experience and knowledge to his leadership role at the Company. Throughout his tenure, Mr. Carstanjen has led the Company’s diversification strategy into its online business lines, historical horse racing operations and regional casino gaming, as well as led the growth of the Kentucky Oaks and Kentucky Derby events. Mr. Carstanjen is a Director of Glenview Trust Company and the American Gaming Association.

 

Key Qualifications and Experience

 

Mr. Carstanjen has many years of leadership, strategy, mergers and acquisition, corporate finance, corporate governance and legal experience. He brings a wealth of experience and knowledge through his leadership roles at the Company.

      
 Karole F. Lloyd

 

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Age: 65

Director since 2018

  

 

Background, Skills and Experience

 

Mrs. Lloyd was elected to the Board of Directors in 2018 and serves as Chair of the Audit Committee. Mrs. Lloyd has served on the Board of Directors of Aflac Inc. since January 2017 and as a member of the Executive Committee and the Finance and Investment Committee of the Aflac Inc. Board of Directors. Mrs. Lloyd is the retired Vice Chair and Southeast Regional Managing Partner for Ernst & Young LLP (“EY”). From 2009 through 2016, she served as a member of the US Executive Board, Americas Operating Executive, and the Global Practice Group for EY. In her 37-year career at EY, Mrs. Lloyd served many of EY’s highest profile clients through mergers, IPOs, acquisitions, divestitures, and across numerous industries including banking, insurance, consumer products, transportation, real estate, manufacturing, and retail. Mrs. Lloyd is active in the Atlanta community, working with the Metro Atlanta Chamber of Commerce and The Rotary Club of Atlanta. She was previously the Chair of the Atlanta Symphony Orchestra Board of Directors. Mrs. Lloyd is active in supporting many colleges and universities throughout the southeast, including serving on the President’s Advisory Council and the Board of Visitors at the University of Alabama. Mrs. Lloyd received her NACD cyber-risk oversight certification in 2022.

 

Key Qualifications and Experience

 

Ms. Lloyd has extensive accounting and advisory experience that includes financial reporting, regulatory compliance, internal audit, and risk management to go along with her leadership skills. She also brings experience from serving as a public company board member and qualifies as an Audit Committee Financial Expert.

      
 Paul C. Varga

 

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Age: 60

Director since 2020

  

 

Background, Skills and Experience

 

Mr. Varga was appointed to the Board of Directors on February 25, 2020. Mr. Varga served as the Chairman and Chief Executive Officer of Brown-Forman Corporation, a public global spirits and wine company, from August 2007 until his retirement in December 2018. He served as President and Chief Executive Officer of Brown-Forman Beverages, a division of Brown-Forman Corporation, from 2003 to 2005, and as Global Chief Marketing Officer for Brown-Forman Spirits from 2000 to 2003. Mr. Varga currently serves on the Board of Directors of Macy’s, Inc. as Lead Independent Director and as a member of both the Compensation and Management Development Committee and Finance Committee. He previously served on the Board of Directors of Brown-Forman Corporation from 2003 until July 2019.

 

Key Qualifications and Experience

 

In addition to Mr. Varga’s many years of leadership experience in the role of chief executive officer and as a public company board member, he also has considerable expertise and experience in corporate finance, strategy, building brand awareness, product development, marketing, distribution, and sales.

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.

 

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Election of Directors (Proposal No. 1)

 

 

Continuing Directors

The following tables set forth information relating to the Class II and Class III directors of the Company who will continue to serve as directors until the expiration of their respective terms of office and until their respective successors are duly elected and qualified.

Class II—Terms Expiring in 2025

 

 Ulysses L. Bridgeman, Jr.

 

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Age: 70

Director since 2012

  

 

Background, Skills and Experience

 

Mr. Bridgeman is the owner and chief executive officer of Heartland Coca-Cola Bottling Company, LLC (“Heartland”), which owns and operates a Coca-Cola production and manufacturing facility in Lenexa, Kansas and seventeen Coca-Cola distribution facilities across various Midwestern states, including Kansas, Missouri, and Illinois. Prior to his February 2017 acquisition of Heartland, Mr. Bridgeman was the owner and chief executive officer of various companies operating over 450 restaurants in 20 states, including 263 Wendy’s restaurants and 123 Chili’s restaurants. From 1975 to 1983, and from 1986 to 1987, Mr. Bridgeman played professional basketball with the Milwaukee Bucks, and from 1983 to 1986, he played for the Los Angeles Clippers. Mr. Bridgeman recently acquired Ebony magazine, and currently serves on the Boards of Directors of Meijer, Inc., Central Bank & Trust Company, the Naismith Basketball Hall of Fame, and the West End School. He is a former Director of the James Graham Brown Foundation and served as past chairman of the Board of Trustees of the University of Louisville. Mr. Bridgeman’s current role as a CEO and extensive leadership experience make him ideally qualified as a member of the Board.

 

Key Qualifications and Experience

 

Mr. Bridgeman has extensive entrepreneurial and leadership experience, including starting and growing his own companies and serving as chief executive officer of multiple companies. Mr. Bridgeman also has years of sports, consumer, sales, acquisition, and international experience.

  
 R. Alex Rankin

 

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Age: 68

Director since 2008

  

 

Background, Skills and Experience

 

Mr. Rankin is the Chairman of the Board of Sterling G. Thompson Company, LLC, a private insurance agency and broker, and the President of Upson Downs Farm, Inc., a thoroughbred breeding and racing operation. He is also Vice Chairman and Director of Glenview Trust Company, a private Trust and Investment Management Company, and a Steward of The Jockey Club. Mr. Rankin is a Trustee and former Chairman of the James Graham Brown Foundation, a private, non-profit foundation that fosters the well-being, quality of life, and image of Louisville and Kentucky by actively supporting and funding projects in the fields of civic affairs, economic development, education, and health and general welfare, which since 1954 has awarded over 3,200 grants totaling over $620 million.

 

Key Qualifications and Experience

 

Mr. Rankin has expertise in finance and risk management. He also has years of experience in, and a deep understanding of, the thoroughbred horseracing industry.

  
 Andréa Carter

 

LOGO

Age: 54

Director since 2022

  

 

Background, Skills and Experience

 

Ms. Carter was appointed to the Board of Directors on December 15, 2022. She has amassed over 20 years of professional experience in the field of human resources across multiple industries and major organizations, and has served since 2017 as Senior Executive Vice President and Chief Human Resources Officer for Global Payments, Inc. in Atlanta, a worldwide provider of payment technology and software solutions. Prior to joining Global Payments, Inc., Ms. Carter was Chief Human Resources Officer for Habitat for Humanity and has held various executive Human Resources roles at Ralph Lauren, Newell Rubbermaid, and The Home Depot. She holds a bachelor’s degree in interdisciplinary studies from Tennessee State University and is a graduate of the Executive Leadership Council Class of 2022. Ms. Carter has been recognized with a number of distinctions and awards in recent years, which include: Atlanta Business Chronicle, “Women who Mean Business,” Atlanta Magazine, “Women Making a Mark,” Savoy Magazine, “Power 300 Most Influential Black Executives,” Women’s Inc., “Most Influential Women Execs in Corporate America,” and is a 2021 recipient of the UNCF MASKED award (Mankind Assisting Students Kindle Educational Dreams).

 

Key Qualifications and Experience

 

Ms. Carter has extensive leadership and human resources experience across multiple public companies.

 

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Class III—Terms Expiring in 2026

 

 Robert L. Fealy

 

LOGO

Age: 72

Director since 2000

  

 

Background, Skills and Experience

 

Mr. Fealy is Managing Director of Limerick Investments, LLC, an investment firm. He previously was co-founder and President of Aluminate, Inc., a provider of data analytics solutions, which was sold in 2021. He retired effective June 30, 2014 as President, Chief Operating Officer and Director of The Duchossois Group, Inc. Mr. Fealy was originally nominated to serve as a director of the Company pursuant to the stockholder’s agreement between the Company and Duchossois Industries, Inc. Prior to Mr. Fealy’s employment with The Duchossois Group, Inc., he was a senior executive at Cummins Inc., serving in various roles including Vice President-Treasurer and Vice President-Global Business Strategy. Mr. Fealy currently holds the following leadership positions with other entities: Board Director, member of the Audit Committee and Chairman of the Nominating and Governance Committee, Panduit, Inc.; Board Director and member of the Compensation Commission, Affinaquest, Inc.; Advisory Board member, Workbox Ventures; Entrepreneur Partner, Advisor and Former Chairman, Chicago Ventures; Board Director and Treasurer, Richard L. Duchossois Memorial Foundation; Member, University of Cincinnati Lindner College of Business Executive Cabinet; Board Member and past Chairman, Uniting Voices Chicago; Trustee and Chair of the Governance Committee, The Morton Arboretum; and, Partner, Social Venture Partners.

 

Key Qualifications and Experience

 

Mr. Fealy has years of finance, entrepreneurial, accounting, strategy, international, human capital, and leadership experience acquired while serving in multiple senior leadership roles with oversight over a diverse group of companies with operations worldwide.

 Douglas C. Grissom

 

LOGO

Age: 56

Director since 2017

  

 

Background, Skills and Experience

 

Mr. Grissom is a Senior Advisor on Madison Dearborn Partners’ (“MDP”) Technology & Government Solutions team. Prior to joining MDP, he was with Bain Capital in private equity, McKinsey & Company, and Goldman Sachs. At MDP, Doug currently serves on the Board of Directors of Fleet Complete. In addition, he was formerly on the Boards of Directors of @stake, Aderant, Asurion, BlueCat Networks, Cbeyond, CoVant Technologies, Fieldglass, Great Lakes Dredge & Dock, Intelsat, LGS Innovations, Lightspeed Systems, LinQuest Corporation, and Neoworld. Outside MDP, he is a Board Member at Amherst College, Endeavor Louisville, Harvard Business School Fund Council, James Graham Brown Foundation, Louisville Collegiate Schools, and MetroSquash.

 

Key Qualifications and Experience

 

Mr. Grissom has extensive financial and board experience within a variety of industries. Mr. Grissom also has extensive private equity, mergers and acquisitions, and finance experience through his years of experience as an investment banker, consultant, and investor.

 Daniel P. Harrington

 

LOGO

Age: 68

Director since 1998

  

 

Background, Skills and Experience

 

Mr. Harrington serves as the President and Chief Executive Officer of HTV Industries, Inc., a private holding company with diversified business interests that include manufacturing, distribution, technology, and banking. Mr. Harrington also serves as a Trustee of The Veale Foundation. Previously, Mr. Harrington has served as a Director of First Guaranty Bank, First State Financial Corporation, and Portec Rail Products, Inc. (serving on its Audit and Compensation Committees).

 

Key Qualifications and Experience

 

Mr. Harrington has extensive financial, accounting, and chief executive experience within a variety of industries. He also has board, compensation, and audit experience, including serving for years as the Audit Chair for the Company and qualifies as an Audit Committee Financial Expert.

 

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DIRECTOR SKILLS AND EXPERIENCE MATRIX

 

               
Experience and Attributes        LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
               

Executive Leadership

 

  LOGO                  
               

Finance / Capital Markets

 

  LOGO                      
               

Mergers & Acquisitions / Business Development /Strategy

 

  LOGO                    
               

Human Capital / Talent Development / Compensation

 

  LOGO                  
               

Risk Management / Regulatory

 

  LOGO                      
               

Industry / Horseracing

 

  LOGO                          
               

Corporate Governance and Diversity

 

  LOGO                  

The table below provides certain diversity information regarding our Board members, with categories as set forth by Nasdaq Listing Rule 5605(f).

 

Background                                                  
               
Age      

70

  56   54   72   56   68   65   68   60
Gender Identity                                                  
               

Male

                         
               

Female

                                   
Race/Ethnicity                                                  
               

Black / African American

                                   
               

White

                         

 

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Retirement Age Policy

The Company has a mandatory retirement age policy in the Corporate Governance Guidelines with regard to directors, which provides that a person is not qualified to serve as a director unless he or she is less than seventy-two (72) years of age on the date of election. No director nominees in Class I will have met the mandatory retirement age as of the date of the Annual Meeting.

Director Compensation for Fiscal Year Ended December 31, 2023

During 2023, 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, after considering market data and the input of the Compensation Committee’s independent compensation consultant, did not change from the compensation levels set for 2022.

 

     Retainer
Fee ($)
(1)
     Meeting
Fees ($)
(2)
     Stock
Awards ($)
(3)
     Chairman
Fee ($)
    Non-Chairman
Fee ($)
 

Board of Directors

     75,000        2,000        155,000        150,000 (4)         

Compensation Committee

              2,000                 25,000       12,500  

Nominating and Governance Committee

              2,000                 20,000       10,000  

Audit Committee

              2,000                 35,000       15,000  

 

(1)

Retainer fee is paid in arrears, in equal quarterly installments.

 

(2)

Directors who do not reside in Louisville, Kentucky may also request reimbursement for travel expenses to and from Board and committee meetings.

 

(3)

Each non-employee director receives a grant of restricted stock units (“RSUs”), with an aggregate grant date fair value of $155,000. Each non-employee director may elect to receive all or a portion of such grant as restricted stock (“RSAs”), which are legally issued common stock at the time of grant, with certain restrictions placed on them.

 

(4)

Represents an additional fee for serving as non-employee Chairman of the Board of Directors.

In accordance with the fees described above, in 2023, 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 2023 Summary Compensation Table on page 44 for a summary of the compensation paid to our CEO with respect to 2023.

 

 Name   

Fees earned or

paid in cash ($)

    Stock
Awards ($)
(2)
     Total ($)  

Ulysses L. Bridgeman, Jr.

     108,750 (1)      155,000        263,750 

Andréa Carter

     111,729 (1)      155,000        266,729 

Robert L. Fealy

     153,000 (1)      155,000        308,000 

Douglas C. Grissom

     129,500 (1)      155,000        284,500 

Daniel P. Harrington

     151,000 (1)      155,000        306,000 

Karole F. Lloyd

     146,000       155,000        301,000 

R. Alex Rankin

     239,000       155,000        394,000 

Paul C. Varga

     138,500       155,000        293,500 

 

(1)

The Churchill Downs Incorporated 2005 Deferred Compensation Plan allows directors to defer receipt of all or part of their retainer and meeting fees in a deferred share account until after their service on the Board has ended. This account allows the director, in effect, to invest all or part of his or her deferred cash compensation in Company Common Stock. Funds in this account are credited as hypothetical shares of Common Stock based on the market price of the stock at the time the compensation would otherwise have been earned. Hypothetical dividends are reinvested in additional shares based on the market price of the stock on the date dividends are paid. All shares in the deferred share accounts are hypothetical and are not issued or transferred until the director ends his or her service on the

 

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  Board. Upon the end of Board service, the shares are issued or transferred to the director. On December 15, 2022, the plan was amended so that effective December 15, 2022, director fees that are payable after January 1, 2023 and deferred may only be notionally invested in Company Common Stock and payout options are limited to either a single lump sum payment or equal annual installments over a term not to exceed ten years. In 2023, Mr. Grissom and Ms. Carter deferred all of their 2023 directors’ fees into a deferred share account under the plan, while Mr. Bridgeman deferred 50% of his 2023 directors’ fees into a deferred share account under the plan. As of December 31, 2023, Mr. Bridgeman had 13,195 deferred shares, Mr. Fealy had 70,649 deferred shares, Mr. Grissom had 9,855 deferred shares, Mr. Harrington had 71,356 deferred shares, and Ms. Carter had 861 deferred shares under the plan.

 

(2)

On April 25, 2023, each then-serving non-employee director received a grant of RSUs or RSAs, valued in the amount of $155,000, calculated based upon the closing price of a share of Common Stock on the date of grant. The RSUs or RSAs vest one year from the date of grant, subject to the director’s continued service through the vesting date. If RSUs are awarded, at the time a director ceases being a director of the Company, the Company will issue one share of Common Stock for each vested RSU held by such director. As of December 31, 2023, Mr. Bridgeman had 35,419 RSUs and 1,221 RSAs, Ms. Carter had 1,221 RSUs, Mr. Fealy had 46,462 RSUs and 1,221 RSAs, Mr. Grissom had 14,324 RSUs, Mr. Harrington had 47,683 RSUs, Ms. Lloyd had 13,103 RSUs and 1,221 RSAs, Mr. Rankin had 47,683 RSUs, and Mr. Varga had 7,824 RSUs.

Director Stock Ownership Guidelines

As memorialized in the Corporate Governance Guidelines, the Board expects all directors to display confidence in the Company by ownership and retention of a meaningful amount of the Company’s Common Stock. Pursuant to the Company’s insider trading policy, all directors are subject to the Company’s anti-hedging policy, which prohibits hedging and monetization transactions with respect to the Company’s Common Stock. Each director is expected to own shares with a fair market value equal to five (5) times the director’s annual retainer. Each director appointed or elected to the Board has five (5) years from the date of appointment or election to the Board to meet this requirement. 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, 2023, 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 annual base 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 and RSAs granted as director compensation are included for purposes of measuring compliance with the Company’s share ownership guidelines.

 

 Director   

Ownership

Guidelines(1)

  

Met

Guidelines

Ulysses L. Bridgeman, Jr.

   5x   

Andréa Carter

   5x     Transition Period(2)

Robert L. Fealy

   5x   

Douglas C. Grissom

   5x   

Daniel P. Harrington

   5x   

Karole F. Lloyd

   5x   

R. Alex Rankin

   5x   

Paul C. Varga

   5x   

 

  =   Met guidelines.

 

(1)

Guidelines adopted per the Company’s Board of Directors.

 

(2)

Ms. Carter became a director in December 2022 and will not be required to satisfy the Director Stock Ownership Guidelines until December 2027.

 

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Corporate Governance

 

 

   

CORPORATE GOVERNANCE

 

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

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

Copies of the current charter, as approved by our Board, for each of our Audit, Compensation and Nominating and Governance Committees and a copy of our Corporate Governance Guidelines, Code of Conduct (along with any amendments or waivers related to the Code of Conduct) are available on our corporate website, http://www.churchilldownsincorporated.com, under the “Governance” subheading under the “Investors” tab. Please note that information available through our website is not incorporated by reference into this Proxy Statement.

Shareholder Communications

Shareholders and other interested parties 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 will review the designation of Lead Independent Director periodically, but in no event less often than every two years. The Board is currently led by an independent Chairman, Mr. Rankin. The Board believes that separating the roles of CEO and Chairman of the Board is the most appropriate structure at this time. Separating the roles of CEO and Chairman of the Board ensures that our CEO is able to more exclusively focus on this role. The Board also believes that an independent Chairman of the Board allows for independent oversight of management, increases management accountability, and encourages an objective evaluation of management’s performance relative to compensation.

The Chairman of the Board has the following responsibilities (in conjunction with the Lead Independent Director, if applicable): (i) preside at all Board meetings and meetings of shareholders, (ii) serve as liaison between the Board and Company management; (iii) work with the CEO to formulate the Company’s business strategies; and (iv) represent the Company, Board and management to the shareholders and the public. Additionally, the Chairman of the Board serves as an ex officio member of each Board committee on which the Chairman does not already serve as a voting member. The duties of the Lead Independent Director, if applicable, are set forth in the Company’s Corporate Governance Guidelines.

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 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 are carried out through the operation of its committees. Each committee oversees risk management within its assigned areas of responsibility, as described below in the discussion of committee responsibilities. Enterprise risk management falls under the leadership of our executive team with oversight from the Audit Committee. The purpose of this program is to promote risk-intelligent decision making and, in turn, increase the likelihood of achieving our operational objectives. Our Board of Directors is regularly advised of potential

 

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organizational risks and supporting mitigating policies, including quarterly reports from management on cyber security matters. The Audit Committee is primarily responsible for overseeing the Company’s risk assessment and risk management practices, as well as its compliance programs. The Audit Committee is also responsible for monitoring the effectiveness of the Company’s information technology security and control, which includes insurance coverage for protection against cyber-attacks. 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, including risks related to environmental and sustainability matters.

Board Evaluations

The Board conducts an annual self-evaluation to assist in determining whether it and its committees are functioning effectively. The Nominating and Governance Committee solicits comments from all directors and reports annually to the Board with an assessment of the Board’s performance and how its committees are functioning. This is discussed with the full Board following the end of each fiscal year. The assessment focuses on the Board’s contribution to the Company and specifically focuses on areas in which the Board or management believes that the Board could improve.

Board Meetings and Committees

Seven (7) meetings of the Board of Directors were held during the last fiscal year. During the fiscal year, all incumbent directors attended at least 75% of their Board and committee meetings for the period for which they served. The Company encourages its directors to attend the annual meeting of shareholders each year. Each of the directors then serving on the Board attended the Company’s annual meeting on April 25, 2023.

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 Nominating and Governance Committees. The current composition of the committees is illustrated in the table below, along with the number of meetings held in 2023.

 

           

Director Name

   Board of
Directors
   Executive
Committee
   Audit
Committee
   Compensation
Committee
   Nominating and
Governance Committee

Ulysses L. Bridgeman

  

Member

                 

Member

William C. Carstanjen

  

Member

                   

Robert L. Fealy

  

Member

  

Member

  

Member

  

Member

  

Chair

Douglas C. Grissom

  

Member

            

Member

  

Member

Daniel P. Harrington

  

Member

  

Member

  

Member

  

Chair

    

Karole F. Lloyd

  

Member

       

Chair

       

Member

R. Alex Rankin

  

Chair

  

Chair

   LOGO    LOGO    LOGO

Paul C. Varga

  

Member

       

Member

  

Member

    

Andréa Carter

  

Member

            

Member

    

Number of meetings in 2023

  

7

  

0

  

4

  

6

  

2

                          

 

LOGO   =   Ex-officio Member

 

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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:

 

To monitor the performance of the Company’s internal audit function.

 

To appoint, compensate, retain and oversee the independent registered public accounting firm employed by the Company for the purpose of preparing or issuing audit opinions on the Company’s financial statements and its internal control over financial reporting.

 

To monitor the Company’s compliance with legal and regulatory requirements as well as the Company’s Code of Conduct and compliance policies.

 

To consider the effectiveness of the company’s internal control system including information technology security and control.

 

Review, at least annually, the adequacy and effectiveness of the Company’s IT general controls, and overall assessment and plan to address IT specific risks, scope and funding related to cyber security, business continuity and disaster recovery initiatives.

 

To inquire of management, including its internal auditor, and the Company’s independent auditors regarding significant risks or exposures, including those related to fraudulent activities, facing the Company; to assess the steps management has taken or proposes to take to minimize such risks to the Company; and to periodically review compliance with such steps.

 

In discharging its oversight role, to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company and to retain outside counsel, auditors or other experts for this purpose.

 

To conduct an annual performance evaluation of the Audit Committee.

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

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

 

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COMPENSATION COMMITTEE

Responsibilities of the Compensation Committee

The Board established the Compensation Committee to assist it in discharging the Board’s responsibilities relating to compensation of the Company’s CEO, each of the Company’s other executive officers, and the Company’s non-employee directors. The Compensation Committee has overall responsibility for decisions relating to all compensation plans, policies and perquisites as they affect the CEO and other executive officers and may form and delegate authority to subcommittees when it deems appropriate.

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

 

To oversee the development and implementation of the Company’s compensation policies and programs for executive officers, including the CEO.

 

To establish the annual goals and objectives relevant to the compensation of the CEO and the executive officers and to present such to the Board annually.

 

To evaluate the performance of the CEO and other executive officers in light of the agreed-upon goals and objectives and to determine and approve the compensation level of the CEO, including the balance of the components of total compensation, based on such evaluation and to present its report to the Board annually.

 

To develop guidelines for the compensation and performance of the Company’s executive officers and to determine and approve the compensation of the Company’s executive officers, including the balance of the components of total compensation.

 

To establish appropriate performance targets, participation and levels of awards with respect to the Company’s incentive compensation plans.

 

To administer the Company’s equity-based compensation plans, including the establishment of criteria for the granting of stock-based awards and the review and approval of such grants in accordance with the criteria.

 

To review and approve hiring, retention and termination agreements and/or deferred compensation arrangements with the Company’s executive officers.

 

To establish and periodically review Company policies relating to senior management perquisites and other non-cash benefits.

 

To review periodically the operation of the Company’s overall compensation program for key employees and evaluate its effectiveness in promoting shareholder value and Company objectives.

 

To review the results of any advisory shareholder votes on executive compensation and consider whether to recommend adjustments to the Company’s compensation policies and programs as a result of such results.

 

To consider, at least annually, whether risks arising from the Company’s compensation policies and practices for all employees, including non-executive officers, are reasonably likely to have a material adverse effect on the Company, including whether the Company’s incentive compensation arrangements encourage excessive or inappropriate risk-taking.

 

To approve any compensation “clawback” policy required by law or otherwise adopted by the Company.

 

To oversee regulatory compliance with respect to matters relating to executive officer compensation.

 

To approve plans for managerial development and succession within the Company and to present such plans to the Board annually.

 

To periodically review the Company’s key human capital management strategies, policies, programs and practices, including those relating to diversity, equity and inclusion, employee engagement and talent recruitment, development and retention.

 

To review, assess and recommend to the Board appropriate compensation for non-employee directors.

 

To oversee the production of and approve the report on executive compensation to be included in the Company’s proxy statement for the annual meeting of shareholders.

 

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To review and discuss with management the compensation discussion and analysis, and based on such discussion, make a recommendation to the Board as to whether or not the compensation discussion and analysis should be included in the proxy statement.

 

To review and reassess the adequacy of its charter annually and recommend any proposed changes to the Board for approval.

 

To conduct an annual performance evaluation of the Compensation Committee.

The Compensation Committee of the Board of Directors operates under a written charter which is reviewed annually and is comprised entirely of directors meeting the independence requirements of Nasdaq and Rule 10C-1(b)(1) under the Exchange Act.

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 2023 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 2023, 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 performed, 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 is responsible for identifying, evaluating, and recommending individuals qualified to become members of the Board, overseeing annual performance of the Board and Committees, and establishing the criteria for and reviewing the effectiveness of the Company’s Board of Directors. In addition, the Nominating and Governance Committee provides oversight regarding the Company’s environmental, sustainability and governance efforts and progress and corporate governance policies.

The Company’s Nominating and Governance Committee operates under a written charter and is comprised entirely of directors meeting the independence requirements of Nasdaq.

Pursuant to the Company’s Corporate Governance Guidelines, 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 regarding 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 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 seeks to include diverse individuals with respect to self-identified characteristics such as gender, race, and ethnicity when conducting a search for qualified candidates for Board membership. The Company’ most recent addition to the Board was Andréa Carter, who was appointed to the Board of Directors in 2022. The Nominating and Governance Committee intends to continue to seek opportunities to increase the Board’s gender diversity in particular with any new appointments made in connection with regular director turnover or vacancies. The Nominating and Governance Committee may employ an outside consultant to identify nominees with the skill sets, experience and backgrounds that suit the Company’s needs. In 2023, the Company continued its practice of conducting diversity, equity and inclusion (“DEI”) training for all employees, with targeted training for managers. DEI training will continue on an annual basis.

 

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Corporate Governance

 

 

A candidate for the Company’s Board of Directors should possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of the Company’s various constituencies. In considering a candidate for nomination as a member of the Board, the Nominating and Governance Committee will consider criteria such as independence; occupational background, including principal occupation (i.e., chief executive officer, attorney, accountant, investment banker, or other pertinent occupation); level and type of business experience (i.e., financial, lending, investment, media, racing industry, technology, etc.); self-identified diversity characteristics; 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, when appropriate, recommends changes to the Board. It also evaluates the performance of the Board and provides feedback to the Board on how the directors, the committees and the Board are functioning. Finally, it evaluates Board of Director practices at the Company and leadership on an annual basis and recommends appropriate changes to the Board and/or its practices.

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

 

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Proposal to Ratify the Appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accounting Firm for 2024 (Proposal No. 2)

 

 

   

PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2024 (Proposal No. 2)

 

The Board of Directors, on recommendation from the Audit Committee, selected PricewaterhouseCoopers LLP (“PwC”) to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024. 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.

 

LOGO    The Board of Directors and the Audit Committee recommend that the shareholders vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accounting Firm for fiscal year 2024.

 

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Independent Public Accountants

 

 

   

INDEPENDENT PUBLIC ACCOUNTANTS

 

Audit Fees

The audit fees incurred by the Company for services provided by PwC (i) for the fiscal year ended December 31, 2023, were $3,330,500 and (ii) for the fiscal year ended December 31, 2022, were $3,524,500. Audit fees include services related to the audit of the Company’s consolidated financial statements, the audit of the effectiveness of internal control over financial reporting, involvement with registration statement filings, statutory audits and consultations related to miscellaneous SEC and financial reporting matters.

Audit-Related Fees

The Company incurred fees in the amount of $4,500 for 2023 and $4,500 for 2022 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

The Company did not incur any tax fees for services provided by PwC in 2023 or 2022. 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 $2,000 in 2023 and $4,500 in 2022. The Audit Committee has considered whether the provision of non-audit services to the Company is compatible with maintaining PwC’s independence.

The Audit Committee has adopted a policy of evaluating and pre-approving all audit and non-audit services provided by the independent auditors. The Audit Committee may delegate pre-approval authority to a member, provided that decisions of such member shall be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee pre-approved all audit and permissible non-audit services provided by the independent auditors in 2023.

 

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Churchill Downs Incorporated Audit Committee Report

 

 

   

CHURCHILL DOWNS INCORPORATED AUDIT COMMITTEE REPORT

 

The following is the report of the Company’s Audit Committee (the “Committee”), which consisted of five directors in 2023, each of whom has been determined by the Board of Directors (the “Board”) to meet the current standards of the SEC and the Nasdaq exchange to be considered an “independent director.” The Board has also determined that two members, Daniel P. Harrington and Karole F. Lloyd, are “audit committee financial experts” as defined by the SEC.

The Committee has an Audit Committee Charter (the “Charter”), which was amended, restated and approved by the Board on February 20, 2024. The Charter sets forth certain responsibilities of the Committee, which include oversight of the integrity of the financial statements of the Company, the systems of internal controls over financial reporting which management has established, the independence and performance of the Company’s internal and independent auditors, the Company’s compliance with financial, accounting, legal and regulatory requirements, and the effectiveness of the Enterprise Risk Management (“ERM”) function. The Committee reviews the work of the Company’s management, the internal audit staff and the independent auditors on behalf of the Board.

Specifically, the Committee:

 

Met four (4) times during the year, during which the Committee reviewed and discussed with management and the independent auditors the Company’s interim and annual financial statements for 2023; at each of such meetings, the Committee met in executive session with the Company’s Vice President of Internal Audit, independent auditors, General Counsel, CFO, and CEO.

 

Discussed with the independent auditors all matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC.

 

Received the written disclosures and letters from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board, regarding the independent auditors’ communications with the Audit Committee concerning independence, and discussed with the independent auditors the independent auditors’ independence.

 

Based on the review and discussions referred to in the first three bullets above, the Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

 

Reviewed and discussed reports from the Company’s internal audit department and reports from the Company’s legal and compliance department.

 

Discussed with management and the independent auditors the quality of the Company’s internal controls.

 

Review the Company’s significant financial, business, and other risk exposures and the steps management has taken to prevent, detect, and monitor such exposures as part of the ERM function.

 

Reviewed and approved all related person transactions, if any.

 

Self-evaluated the effectiveness of the Committee.

 

Evaluated the effectiveness of the Company’s internal audit function.

 

Inquired of management, including its internal auditor, and the Company’s independent auditors regarding significant risks or exposures, including those related to fraudulent activities, facing the Company; assessed the steps management has taken or proposes to take to minimize such risks to the Company; and reviewed compliance with such steps.

 

Reviewed and approved the 2023 audit and non-audit services and related fees provided by the independent auditors, PricewaterhouseCoopers LLP (“PwC”). The non-audit services approved by the Audit Committee were also reviewed to ensure compatibility with maintaining the auditor’s independence.

 

In February 2023, the Committee selected PwC to be reappointed as independent auditors for the calendar year 2023.

 

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Churchill Downs Incorporated Audit Committee Report

 

 

No portion of this Audit Committee Report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), through any general statement incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that the Company specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed to be filed under either the Securities Act or the Exchange Act.

Members of the Audit Committee

Karole F. Lloyd, Chair

Robert L. Fealy

Daniel P. Harrington

Paul C. Varga

R. Alex Rankin, ex officio

 

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Advisory Vote to Approve Executive Compensation (Proposal No. 3)

 

 

   

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

 

Pursuant to Section 14A of the Exchange Act, the Company’s shareholders are entitled to a vote to approve, on an advisory and non-binding basis, the compensation of the Company’s named executive officers (“NEOs”) as disclosed in this Proxy Statement in accordance with SEC rules. In accordance with the preference expressed by shareholders, the Company is holding such advisory votes on an annual basis and the next advisory vote following the Annual Meeting will occur at the 2025 annual meeting of shareholders.

The Company has a “pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of the Company’s NEOs. We believe that 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 deemed necessary to guide the Company successfully during a period of growth and transformation and react quickly to potential threats to the Company’s financial health. 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.

 

LOGO    The Board of Directors recommends a vote “FOR” the approval of the advisory resolution relating to the compensation of the Company’s Named Executive Officers as disclosed in this Proxy Statement.

 

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Compensation Discussion and Analysis

 

 

   

COMPENSATION DISCUSSION AND ANALYSIS

 

This Compensation Discussion and Analysis (our “CD&A”) provides an overview of our executive compensation program for 2023 and our executive compensation philosophies and objectives.

 

Table of Contents

 

Executive Summary

     28  

2023 Highlights

     29  

Key 2023 Compensation Actions

     31  

Executive Compensation Philosophy and Core Principles

     32  

2023 “Say-on-Pay” Advisory Vote on Executive Compensation

     32  

Role of Management and Independent Advisors

     32  

Factors Used to Evaluate Pay Decisions

     33  

Non-Disclosure of Certain Metrics and Targets

     34  

Components of Compensation

     35  

Base Salary

     35  

Executive Annual Incentive Plan

     36  

Long-Term Incentives

     38  

Executive Stock Ownership Guidelines

     41  

Anti-Hedging Policy

     41  

Clawback Policy

     41  

Deferred Compensation and Other Benefits

     42  

Compensation Committee Report

     43  

Our NEOs were:

 

William C. Carstanjen  

Chief Executive Officer 

 

William E. Mudd  

President and 

Chief Operating Officer 

 

Marcia A. Dall  

Executive Vice President 

and Chief Financial Officer 

 

Bradley K. Blackwell  

Executive Vice President 

and General Counsel 

 

Maureen Adams

Executive Vice President,

Gaming Operations

 

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Compensation Discussion and Analysis

 

 

Executive Summary

The Company has been creating extraordinary entertainment experiences for nearly 150 years, beginning with the Company’s most iconic and enduring asset, the Kentucky Derby. Headquartered in Louisville, Kentucky, the Company has expanded through the development of live and historical racing entertainment venues, the growth of the TwinSpires horse racing online wagering business and the operation and development of regional casino gaming properties. 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 NEO reflects each individual’s extensive management experience, high performance and exceptional service to the Company 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 CD&A describes the Company’s executive compensation policies and programs and how these policies and programs apply to our NEOs. It also describes the actions and decisions of the Compensation Committee (or, in this CD&A and related tables, “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 19-20.

Our long-term incentive goals are based on operational results that the Committee believes help drive Company and shareholder success over multi-year performance periods. Certain metrics the Company uses for incentive purposes are as follows (Please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K for the fiscal year ended December 31, 2023 for reconciliation of these metrics to the most directly comparable GAAP measures, and the discussion of the Company’s Executive Annual Incentive Plan (“EAIP”) beginning on page 36 and the Company’s Executive Long-Term Incentive Plan (“ELTI”) beginning on page 38):

 

Adjusted EBITDA—Adjusted EBITDA used for compensation purposes under the EAIP in fiscal year 2023 was $1,023.9 million, which is approximately 98% of the Adjusted EBITDA target of $1,042.6 million under the EAIP;

 

Cash Flow Metric—Cash Flow Metric for compensation purposes for the three-year performance for our 2021 performance stock units (“PSUs”) under the ELTI was $1,580.4 million, exceeding by approximately 57.6% the Cash Flow target of $1,002.8 million under the ELTI; and

 

Total Shareholder Return—Total Shareholder Return from January 1, 2021 to December 31, 2023, the three-year performance period for our 2021 PSUs under the Company’s ELTI, was 29%.

We believe the Company’s outstanding performance is further reflected in the key business metrics summarized in the table below.

 

         
        Fiscal
Year
2018
     Fiscal
Year
2023
       % Increase    

 5-Year Compound 

 Annual Growth 

 Rate (CAGR) 

 

CHDN Stock Price

    

$

40.66

(1) 

  

$

134.93

 

    

 

232

 

 

27

Net Income (from continuing operations, millions)

    

$

182.6

 

  

$

417.3

 

    

 

129

 

 

18

Adjusted EBITDA (from continuing operations, millions)(2)

    

$

328.8

 

  

$

1,023.9

 

    

 

211

 

 

26

Earnings Per Share (from continuing operations, diluted)

    

$

2.20

(1) 

  

$

5.49

 

    

 

150

 

 

20

Dividends Per Share

    

$

0.27

(1) 

  

$

0.38

 

    

 

41

 

 

7

 

(1)

Amounts include adjustment for the 2019 and 2023 stock split of Common Stock.

 

(2)

See Appendix A of this Proxy Statement for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable financial measure calculated in accordance with GAAP.

 

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Compensation Discussion and Analysis

 

 

2023 Highlights

In 2023, we delivered strong performance while continuing the execution of several organic investments. We delivered strong growth in net revenue, operating income, and Adjusted EBITDA compared to fiscal year 2022:

 

 

Net revenue was $2.5 billion, up $651.9 million or 36%.

 

 

Operating income was $564.0 million, up $242.2 million or 75%.

 

 

Net income was $417.3 million, down $22.1 million or 5%.

 

 

Adjusted EBITDA was $1.0 billion, up $260.3 million or 34%.

Live and Historical Racing Segment:

 

 

Adjusted EBITDA was $475.4 million, up $187.9 million or 65% from fiscal year 2022.

 

 

Churchill Downs Racetrack:

 

 

Churchill Downs Racetrack ran the 149th Kentucky Derby with record Derby Week all-sources handle and record Derby Week contribution to Adjusted EBITDA with over 150,000 fans gathered in person to watch the most exciting two minutes in sports on the first Saturday in May.

 

 

We successfully completed the First Turn Experience prior to the 149th Kentucky Derby.

 

 

We continued construction of the Paddock Project which is scheduled to be finished in time for the 150th Kentucky Derby the first weekend in May 2024.

 

 

Kentucky HRMs:

 

 

Derby City Gaming: Delivered record net revenue and Adjusted EBITDA and completed the expansion of the gaming floor and opened a new hotel.

 

 

Derby City Gaming Downtown: Opened in Louisville, Kentucky, on December 6, 2023.

 

 

Oak Grove: Delivered record net revenue and Adjusted EBITDA for a second year in a row.

 

 

Owensboro: Announced plans to invest approximately $100 million in a new HRM entertainment venue on the east side of Owensboro with an expected completion in the first quarter of 2025.

 

 

Virginia HRMs:

 

 

Southern Virginia—Rosie’s Gaming Emporium: Opened in Emporia, Virginia on September 26, 2023.

 

 

Northern Virginia—The Rose Gaming Resort (Dumfries): We continued construction of a $460 million gaming and entertainment resort and hotel in Dumfries, Virginia with a scheduled completion late in the third quarter of 2024.

TwinSpires Segment:

 

 

Adjusted EBITDA was $132.1 million, up $18.0 million or 16% from fiscal year 2022.

 

 

TwinSpires Horse Racing:

 

 

We launched a multi-year agreement with FanDuel to enable FanDuel to create a fully integrated and seamless wagering experience with a single wallet for their customers who want to bet on sports and horse racing with FanDuel.

 

 

We launched a multi-year agreement with DraftKings to provide ADW technology and other services.

 

 

Exacta: We completed the acquisition of Exacta, a leading provider of central determinate system technology in HRMs across the country.

 

 

Sports Betting: We opened seven retail sports books and monetized three of our Kentucky online sports betting licenses upon the authorization of sports betting in Kentucky.

 

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Compensation Discussion and Analysis

 

 

Gaming Segment

 

 

Adjusted EBITDA was a record $488.6 million, up $66.7 million or 16% from fiscal year 2022.

 

 

Terre Haute Casino Resort: We continued construction of a $290 million casino, hotel, and entertainment venue in Terre Haute, Indiana scheduled to open in the second quarter of 2024.

All Other

 

 

We closed the sale of our Arlington Heights, Illinois property to the Chicago Bears for $197.2 million on February 15, 2023.

 

 

We completed the offering of $600.0 million in 6.750% senior notes that mature in 2031.

 

 

We amended our senior secured credit agreement to increase the loans under the existing Term Loan A due 2027 by $500 million.

 

 

Effective May 22, 2023, the Company’s common stock was split two-for-one with a proportionate increase in the number of authorized shares of common stock.

 

 

In December 2023 we announced a repurchase of 1,000,000 shares of our common stock for $123.75 per share from an affiliate of The Duchossois Group, Inc. that closed on January 2, 2024.

The Company’s total shareholder return was 28% for 2023 compared to 26.5% for the Russell 1000 and 26.3% for the S&P 500. The Company’s five-year total shareholder return for 2023 was 237% compared to 106% for the Russell 1000 and 107% for the S&P 500. The preceding shareholder return calculations assume dividends are reinvested.

We delivered strong financial results in 2023 and remain committed to driving long-term sustainable growth. Our company generates strong cash flow and our balance sheet is solid and able to support our organic growth and strategic acquisitions that we believe will create long-term value for our shareholders.

Environmental, Social, and Governance

 

 

We expanded our ESG efforts including the ongoing promotion of responsible gaming; initiatives at our properties to lessen energy and water usage, to decrease carbon emissions, and to responsibly manage waste; increasing investments in the communities in which we operate and supporting our teams through educational and leadership development; and further diversification of our Board of Directors and increasing engagement with our shareholders.

 

 

We also continued our diversity, equity, and inclusion initiatives (DE&I) including the roll-out of our mission, vision, culture statement, and core values company-wide.

 

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Compensation Discussion and Analysis

 

 

Key 2023 Compensation Actions

 

The primary elements of our total direct compensation program for the NEOs and a summary of the actions taken by the Committee during 2023 are set forth below.

 

     

Compensation

Component

   Link to Business and Talent Strategies    2023 Compensation Actions

Base Salary
(Page 35)

  

•  Competitive base salaries help attract and retain executive talent.

  

•  Merit and market-based increases to each NEO and promotion-based increases to Mr. Blackwell and Ms. Adams for 2023.

Annual Cash
Incentive
(Page 36)

  

•  Focus executives on achieving annual financial and non-financial results that are considered key indicators of financial and operational performance.

 

•  Annual cash incentives are earned based on achievement of Adjusted EBITDA and other strategic, operational and financial measures.

  

•  Merit, market-based, and promotion-based increases to Mr. Blackwell’s and Ms. Adams’ annual cash incentive target opportunities for 2023, with the remaining NEOs’ target opportunities remaining the same as compared to 2022.

 

•  Annual cash incentive awards were earned at 122% of target due to strong Company and executive performance.

Long-Term Equity
Incentive Compensation
(Page 38)

  

•  2023 annual equity-based awards consist of PSUs and RSUs.

 

•  2023 PSUs vest based on achievement of 2-year Cumulative Adjusted EBITDA and 3-year Cumulative Cash Flow metrics that are considered key indicators of long-term performance, with vesting adjusted based on relative total shareholder return (“TSR”) performance to additionally incorporate a measure of shareholder value creation over the performance period.

 

•  RSUs provide focus on stock price growth and serve our talent retention objectives.

  

•  Merit and market-based increases to target value of equity awards for Mr. Carstanjen and Ms. Adams for 2023, with the remaining NEOs’ target opportunities remaining the same as compared to 2022.

 

•  The target value of the equity award mix is generally balanced between PSUs (50%) and RSUs (50%).

 

•  2023 PSUs are subject to a multi-year performance period and will be earned based on goals relating to Adjusted EBITDA (weighted 50%) measured over the 2023-2024 performance period and Cash Flow (weighted 50%) measured over the 2023-2025 performance period, with a relative TSR modifier of +/- 25% for TSR performance over the 2023-2025 performance period.

 

•  RSUs vest over three years in equal annual installments.

 

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Compensation Discussion and Analysis

 

 

Executive Compensation Philosophy and Core Principles

 

     

What We Do    

 

 

 

      

What We Don’t Do

 

 

  Generally Target Median Compensation Among Peer Group        

×

   No Employment Agreements  
 

  Executive Stock Ownership Guidelines        

×

   No Re-pricing of SARs or Stock Options  
 

  PSUs Vesting over Multi-year Performance Period        

×

   No Excessive Perquisites  
 

  Capped Bonus Payments under EAIP        

×

   No Service Based Defined Benefit Pension Plans  
 

  Capped PSU Vesting Levels        

×

   No Excise Tax Gross Ups upon Change in Control  
 

  Payouts Tied to Individual and Company Performance, with Majority of Payout Determined by Pre-Established Formula and Goal             
 

  Use of an Independent Compensation Consultant             
 

  Anti-Hedging Policy, Applicable to Directors and Employees             
 

  Annual Say-on-Pay Vote             

The fundamental philosophy of the 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 Committee evaluates the pay practices of its peers and generally considers the median of the peer group. In order to continue to support the Company’s high-performance and entrepreneurial culture, the Company’s key principles underlying the executive compensation program are to:

 

Attract and retain executives with the skills and experience needed to successfully grow the Company and create value for shareholders;

 

Create an entrepreneurial culture and mindset by de-emphasizing fixed pay (primarily salary) and focusing a significant percentage of compensation on at-risk pay elements (annual and long-term incentives); and

 

Motivate and reward executives for achieving exceptional performance supportive of creating value for shareholders over the long-term.

The Committee will continue to evaluate its pay practices and, when it deems appropriate, adjust its pay practices to support these principles over time.

2023 “Say-on-Pay” Advisory Vote on Executive Compensation

The Committee monitors closely the results of the annual advisory “say-on-pay” vote and evaluates such results as one of the many factors considered in connection with the discharge of its responsibilities. In 2023, the Company provided shareholders a “say-on-pay” advisory vote on its executive compensation program, as disclosed in the Company’s 2023 proxy statement. At the 2023 annual meeting of shareholders, approximately 98% of the votes cast for the “say-on-pay” proposal were in favor of our executive compensation program. We believe that this result indicates significant shareholder support for our executive compensation program, and therefore made no changes to our executive compensation program as a result of this vote. At the Annual Meeting, we are again holding an advisory vote on executive compensation and will continue to engage with our shareholders as we constantly consider further improvements to our executive compensation program.

Role of Management and Independent Advisors

The Committee meetings are regularly attended by the CEO, the Senior Vice President of Human Resources, the Vice President of Human Resources, and the General Counsel. The Committee may request the participation of management or outside consultants as it deems necessary or appropriate. The Committee regularly reports to the Board on compensation matters and annually reviews the CEO’s compensation with the independent members of the Board.

The Committee also meets in executive session without any members of management, for the purpose of discussing and approving compensation for the CEO, as well as other topics. The CEO reviews the performance of, and makes

 

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recommendations to, the Committee regarding total compensation to be paid to the Company’s executive officers other than himself, including salary, annual bonus, and long-term incentive awards, as appropriate. Management also develops and presents to the Committee recommendations for the performance measures and targets to be used to evaluate annual performance incentives.

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

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

 

Assisting the Chair of the Committee in establishing appropriate agendas for the Committee meetings;

 

Reviewing management reports and recommendations to the Committee related to executive compensation matters;

 

Attending Committee meetings and providing the Committee with input and advice based on the advisor’s broad experience with market practices, including a perspective regarding the competitive market;

 

Assisting with the review of pay and performance and the evaluation of payouts under the Company’s annual and long-term incentive programs;

 

Assisting with the review and evaluation of non-employee director compensation;

 

Assisting the Committee in identifying similarly-situated peer group companies;

 

Providing the Committee and management with data on market practices for executive pay;

 

On behalf of the Committee, assisting management with disclosures, including this CD&A;

 

Providing updates to the Committee regarding regulatory developments; and

 

Assisting the Committee in evaluating future equity grants and cash compensation for the NEOs, including the CEO.

FW Cook did not provide any services to the Company other than advising the Committee as provided above. The Committee assessed FW Cook’s independence considering the SEC requirements and NASDAQ listing standards and determined that FW Cook’s work did not raise any conflict of interest or independence concerns.

Factors Used to Evaluate Pay Decisions

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

 

The scope and responsibility of the executive’s position and the perceived level of contribution;

 

Internal comparisons among the executive’s peers at the Company;

 

Comparisons among the executive’s peers at the peer group companies, with a target of median among peers;

 

The recruitment and development of talent in a competitive market;

 

Target annual incentive opportunities based on the Company’s annual goals with regard to the executive’s position, as approved by the Committee; and

 

Long-term incentive opportunities driven by the perceived level of contribution expected of the executive toward achieving the Company’s growth objectives.

 

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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 considers the advice and experience of FW Cook, its independent advisor, and the CEO to evaluate the reasonableness of executive pay. While the Committee considers input from its independent advisor and the CEO, all of the decisions with respect to the Company’s executive compensation programs are made by the Committee alone and may reflect factors and considerations other than the information and recommendations provided by management or its independent advisor. In addition, the CEO does not make recommendations with respect to his own compensation. The Committee determines pay levels and practices based on the talent needs of the organization as defined by our strategy of growing and diversifying revenues and with the guidance of the Committee’s independent advisor.

The Committee believes that it is important for the Company to provide a competitive compensation program 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 and entertainment companies, 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 adjusts, as deemed necessary, for continued appropriateness as a market reference for informing executive compensation levels. The Company’s peer group for 2023 was as follows, which did not change as compared to the 2022 peer group:

 

   

Fiscal 2023 Peer Group

   
  Aristocrat Leisure Limited (ALL)  
  Boyd Gaming Corporation (BYD)  
 

Caesars Entertainment, Inc. (CZR)

DraftKings Inc. (DKNG)

 
  Flutter Entertainment PLC (FLTR)  
  Gaming and Leisure Properties Inc. (GLPI)  
  Madison Square Garden Entertainment Corp (MSGE)(1)  
  MGM Resorts International (MGM)  
  PENN Entertainment, Inc., Inc. (PENN)  
  Red Rock Resorts Inc. (RRR)  
  Light & Wonder, Inc. (LNW)  
  Wynn Resorts, Limited (WYNN)  

 

(1)

Subsequent to its selection as part of the peer group, this entity spun-off Sphere Entertainment Co (SPHR) into a stand-alone public company, with Sphere becoming the relevant peer company.

Non-Disclosure of Certain Metrics and Targets

The Company believes in transparency and strives to disclose as much information to shareholders as possible except in situations where we believe that providing full, or even limited, disclosure would be detrimental to the interests of the Company and our shareholders. We believe certain disclosures could provide our competitors with insight regarding confidential business strategies without meaningfully adding to our shareholders’ understanding of the metric. Although we set compensation metrics and targets in advance of applicable performance periods, we do not disclose such metrics and targets in advance due to potential risk to the interests of the Company and our shareholders. We disclose such metrics and targets alongside actual performance in our annual filings following the completion of the applicable performance periods.

 

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Components of Compensation

During 2023, 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 Committee believes that the goals that were set for the executives and executive compensation are aligned with the interests of our investors to support enhancing long-term shareholder value. The following table sets forth the principal compensation elements of the Company’s 2023 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.

 

         
            Motivation            
 Element of Compensation    Attraction    Short-Term    Long-Term    Alignment with
Stockholder Interests
   Retention

Base Salary

                  

Annual Incentive
Compensation

                

Long-Term Incentive
Compensation

                

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. Upon promotion or other adjustment of responsibilities, executives receive base pay increases that are intended to be commensurate with their new role or responsibilities, the pay levels for colleagues at similar levels in the organization and market pay practices, with increases thereafter based on an assessment of performance and the competitive market.

Peer group market analyses were performed for each of the NEO positions, generally targeting the median compensation levels among our peer group.

Based on the above considerations, the Committee set the following base salaries for the Company’s NEOs for 2023:

 

         
 Name   Position   

2022 Base

Salary ($)(1)

    

2023 Base

Salary ($)(2)(3)

     Percent
Increase

William C. Carstanjen

  Chief Executive Officer      1,500,000        1,650,000      10%

William E. Mudd

  President & COO      1,100,000        1,200,000      9%

Marcia A. Dall

  EVP & CFO      850,000        892,500      5%

Bradley K. Blackwell

  EVP & General Counsel      600,000        700,000      17%

Maureen Adams

  EVP, Gaming Operations      575,000        625,000      9%

 

(1)

Annual rate of base compensation shown as of December 31, 2022.

 

(2)

Annual rate of base compensation shown as of December 31, 2023. Actual salaries paid in 2023 are shown in the 2023 Summary Compensation Table on page 44.

 

(3)

Peer group market analyses were performed by FW Cook for each of the NEO positions, and NEO base salary levels were adjusted after considering those analyses. Consistent with the Company’s compensation philosophy, adjustments were made with respect to each NEO to better position their base salary compared to the peer group. The base salary adjustments for Mr. Carstanjen and Mr. Mudd represent the first adjustment to each of their base salaries since 2019. The base salary adjustments for Mr. Blackwell and Ms. Adams also reflect consideration of their promotions to the Executive Vice President role and their responsibilities related thereto.

 

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Executive Annual Incentive Plan

Our executive annual incentive plan is designed to motivate and reward our NEOs for achieving annual performance objectives by tying the majority of the EAIP award to attainment of a pre-established financial goal. We believe this program supports our “pay-for-performance” culture. 75% of the target EAIP award is determined formulaically based on corporate Adjusted EBITDA performance, and the remaining 25% is based on a qualitative assessment of the attainment of other financial, strategic, operational and individual goals established by the Committee.

 

LOGO

The Committee utilized Adjusted EBITDA as elements in both the Company’s EAIP and ELTI in recognition that Adjusted EBITDA is viewed as a core driver of the Company’s performance and shareholder value creation. In designing the Company’s executive compensation program, the Committee supplemented this measure with additional performance measures in order to strike an appropriate balance with respect to incentivizing top-line growth, profitability, non-financial business imperatives and shareholder returns over both the short-term and long-term horizons.

Financial Component (75%)

As noted above, 75% of the target EAIP payout was determined formulaically based on achievement of the annual Adjusted EBITDA (as defined in in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K for the fiscal year ended December 31, 2023) target (the “Financial Component”). In February 2023, the Committee set an Adjusted EBITDA target of $1,042.6 million, which was substantially higher than the actual 2022 Adjusted EBITDA performance of $763.6 million. The Compensation Committee believed at the time that the performance targets were rigorous yet achievable, and therefore established the targets so that the targets would be achieved, at the target performance level, if the Company successfully executed against its operating plan for 2023. Consistent with the 2022 EAIP design, potential EAIP payouts for the Financial Component ranged from 0% to 200% (i.e., 0% to 150% of total target EAIP award) based on the achievement of the pre-established financial goal in accordance with the following table:

 

     
 Percentage of Adjusted
 EBITDA Goal Achieved*
   Percentage of Financial
Component Awarded
   Percentage of Total Target
EAIP Award Awarded

Below 80%

  

0%

  

0%

80%

  

50%

  

37.5%

100%

  

100%

  

75%

110%

  

150%

  

112.5%

120%

  

200%

  

150%

 

*

Amounts in between based on interpolation between the points

In 2023, the actual Company performance was $1,023.9 million in Adjusted EBITDA, which was 98% of the target of $1,042.6 million. This performance resulted in a payout for each NEO at 95.5% of target for the Financial Component (i.e., 71.6% of the target EAIP award) as detailed below.

 

         

2023 Adjusted EBITDA

Target (in millions)

   2023 Actual Adjusted
EBITDA (in millions)
   Actual Performance as a
percentage of Adjusted
EBITDA Target
   Percentage of Financial
Component
   Percentage of Total Target
EAIP Award

$1,042.6

   $1,023.9    98%    95.5%    71.6%

 

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Qualitative Component (25%)

Pursuant to the EAIP, the Committee established secondary performance goals for the Company and its executives to be used to determine the vesting of the qualitative component under the EAIP, weighted 25% (the “Qualitative Component”).

The Committee set performance goals for 2023, based upon a comprehensive assessment of the Company against its long-term strategic plan and its ability to achieve said goals with its current leadership team and key employees.

Individual performance by the NEOs (as measured by various factors, including, but not limited to, continued growth and diversification of the Company’s asset portfolio, customer and employee satisfaction, and the completion of certain specified legislative and regulatory outcomes), and business unit performance led by the Company’s key employees (as measured by, among other things, revenue performance) was also considered in evaluating the Company’s performance, and determining the level of compensation deemed necessary to incent and reward the NEOs and key employees to continue to drive growth. These goals relate to the Company’s overall financial goals, strategic goals, and business segment goals, respectively, with no specific weighting attributed to any one goal.

In evaluating 2023 performance, a few of the accomplishments that were considered to be significantly above target by the Committee included:

 

 

The completion of the acquisition of Exacta Systems, LLC in August 2023 for a purchase price of $250 million, which will provide the Company with the opportunity to realize additional synergies related to our HRM assets in Virginia.

 

 

Churchill Downs Racetrack: The completion of the First Turn Expansion prior to the 149th Kentucky Derby in May 2023 and the construction of the transformative Paddock redevelopment project which will be completed for the 150th Kentucky Derby in May 2024.

 

 

Derby City Gaming: The completion of the Derby City Gaming hotel in June 2023.

 

 

The completion and opening of Derby City Gaming Downtown, a new HRM facility located in downtown Louisville, Kentucky, in December 2023.

 

 

The completion and opening of a new Rosie’s Gaming Emporium, a HRM facility located in Emporia, Virginia, in September 2023.

 

 

The ongoing capital management execution enabling the Company to fund capital projects, grow dividends, and buy back shares while maintaining one of the strongest balance sheets in the industry.

 

 

The strengthening of relationships with investors and analysts that has created substantial support for long-term shareholder value creation.

 

 

The expansion of our ESG efforts including the ongoing promotion of responsible gaming; initiatives at our properties to lessen energy and water usage, to decrease carbon emissions, and to responsibly manage waste; increasing investments in the communities in which we operate and supporting our teams through educational and leadership development; and increasing engagement with our shareholders.

 

 

The ongoing strengthening of CDI’s leadership team and development of team members with varied backgrounds across the Company to support long-term sustainable business growth.

In determining the EAIP payouts for the Qualitative Component, the Compensation Committee exercises its discretion to determine whether to payout at, above, or below the target opportunities based upon its review of the outcomes evaluated against Company and individual performance. The individual Qualitative Component awards for each NEO was equal to 200% of target (50% of total target EAIP award) made pursuant to the EAIP in recognition of the NEOs’ respective roles in driving performance during the period ending December 31, 2023.

 

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Summary of 2023 EAIP Awards

As noted above, the Company set challenging goals for financial performance in 2023 and performed well. 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 2023. The Committee, after considering the Company’s overall performance, awarded the NEOs the total EAIP awards equal to 122% of target as shown in the table below and in the 2023 Summary Compensation Table in the column labeled “Non-Equity Incentive Plan Compensation.”

 

           
 Name   Target Incentive
Award as a
Percentage of
Salary
(1)
    Target Incentive
Award in ($)
   

Maximum
Incentive Award as a
Percentage of

Salary

    Maximum
Incentive
Award in ($)
   

Actual 2023

  Incentive  

Award in ($)

 

William C. Carstanjen

 

 

175

 

 

2,887,500

 

 

 

350

 

 

5,775,000

 

 

 

3,511,979

 

William E. Mudd

 

 

125

 

 

1,500,000

 

 

 

250

 

 

3,000,000

 

 

 

1,824,405

 

Marcia A. Dall

 

 

110

 

 

981,750

 

 

 

220

 

 

1,963,500

 

 

 

1,194,073

 

Bradley K. Blackwell

 

 

100

 

 

700,000

 

 

 

200

 

 

1,400,000

 

 

 

851,389

 

Maureen Adams

 

 

90

 

 

562,500

 

 

 

180

 

 

1,125,000

 

 

 

684,152

 

 

(1)

Mr. Blackwell’s target incentive award as a percentage of salary was adjusted in 2023 from 85% to 100% and Ms. Adams’ target incentive award as a percentage of salary was adjusted in 2023 from 80% to 90%. Consistent with the Company’s compensation philosophy, adjustments were made to better position Mr. Blackwell’s and Ms. Adams’ target incentive compared to the peer group after consideration of the peer group compensation analysis performed by FW Cook. In addition, when evaluating the adjustments for Mr. Blackwell and Ms. Adams, the Committee also considered their individual performance and criticality to the Company as well as their promotions to the Executive Vice President role and their responsibilities related thereto.

Long-Term Incentives

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

The Company maintains the ELTI, pursuant to which the NEOs may earn variable equity payouts based upon the Company achieving certain key performance metrics. The purpose of the ELTI is to provide participants with a long-term incentive program that is designed to be 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 at a rate determined by the Committee. No individual will have an automatic right to participate in the ELTI.

The Committee and senior management monitor the Company’s equity grant practices to evaluate whether such policies comply with governing regulations and are consistent with good corporate practices. When making regular annual equity grants, the Committee’s practice is to approve them at its meeting in February of each year as part of the annual compensation review and after results for the preceding fiscal year become available. In addition, the Committee may make grants at any time during the year it deems appropriate, including with respect to new hires or transitions. A summary of the 2023 terms and applicable award opportunities, granted by the Committee to the NEOs, is provided below.

During the beginning of 2023, the CEO recommended employees (other than with respect to himself) to the Committee for participation in the ELTI for 2023 and their respective specific levels of proposed participation. Awards granted to eligible employees under the ELTI may be in the form of RSUs, PSUs, or both. To pursue the key objective of linking executive compensation with Company performance, the Committee generally aims to deliver at least 50% of the grant value of the 2023 awards as PSUs.

The Committee approved the 2023 RSU awards on February 15, 2023, and the PSU awards (for the 36-month performance period of January 1, 2023 through December 31, 2025) on March 9, 2023. The 2023 awards are as follows, with the share numbers reported below updated to reflect the stock split of the Common Stock that occurred in May 2023. The Committee

 

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approved target LTI awards for the NEOs as follows: Mr. Carstanjen, $6,800,328; Mr. Mudd, $3,000,718; Ms. Dall, $2,200,326; Mr. Blackwell, $1,100,164; and Ms. Adams, $1,100,164. Once the target LTI awards were established, the number of shares subject the 2023 RSU awards and the 2023 PSU awards was determined based on the closing stock price as of February 15, 2023 and based on an allocation of approximately 50% RSUs and 50% PSUs. The table below sets forth the number of shares subject to the RSUs and PSUs granted to each NEO, as well as the grant date fair value for accounting purposes. Because the accounting value for the PSUs is based on the Monte-Carlo simulation model, the grant date fair value of the PSUs for accounting purposes may differ from the target LTI award.

 

       
      RSUs      PSUs      Total  
Executive Officer    #      $(1)      #      $(2)      #      $(3)  

William C. Carstanjen

  

 

27,222

 

  

 

3,400,164

 

  

 

27,222

 

  

 

3,650,879

 

  

 

54,444

 

  

 

7,051,043

 

William E. Mudd

  

 

12,012

 

  

 

1,500,359

 

  

 

12,010

 

  

 

1,610,721

 

  

 

24,022

 

  

 

3,111,080

 

Marcia A. Dall

  

 

8,808

 

  

 

1,100,163

 

  

 

8,808

 

  

 

1,181,285

 

  

 

17,616

 

  

 

2,281,448

 

Bradley K. Blackwell

  

 

4,404

 

  

 

550,082

 

  

 

4,404

 

  

 

590,642

 

  

 

8,808

 

  

 

1,140,724

 

Maureen Adams

  

 

4,404

 

  

 

550,082

 

  

 

4,404

 

  

 

590,642

 

  

 

8,808

 

  

 

1,140,724

 

 

(1)

The grant date fair value of the time-vesting RSUs was calculated utilizing the closing price of the Company’s common stock as of February 15, 2023 multiplied by the total number of time-vesting RSUs granted.

 

(2)

The grant date fair value for the PSUs was calculated based on the probable achievement of the performance goals and a Monte-Carlo simulation model, which factors in the value of the relative TSR modifier (defined below) that is applied to the award before the share-based payment vests. The PSUs represent the target opportunity, and corresponding fair value, available to the grantees should the Company achieve the pre-determined performance metrics. Actual shares that vest pursuant to the PSUs may be more or less given the performance on the selected metrics discussed below.

 

(3)

While the accounting value increased year-over-year due to the impact of the Monte-Carlo simulation model, the target value of the long-term incentive awards for each NEO was consistent with the 2022 target values other than in the case of Mr. Carstanjen and Ms. Adams. With respect to Mr. Carstanjen and Ms. Adams, their 2023 target long-term incentive values increased as compared to the prior year after considering the peer group compensation analysis performed by FW Cook. Consistent with the Company’s compensation philosophy, adjustments were made to better position compensation levels compared to our peer group. In approving the NEOs’ long-term equity award levels, the Committee allocated a significant portion of their total target direct compensation increases to their target long-term equity award levels to be consistent with the Company’s long-standing compensation philosophy of aligning executive officers’ interests with shareholders’ interests through the risks and rewards of equity ownership.

With respect to the PSU awards in the table above, performance will be based on the following three performance measures during the 36-month period from January 1, 2023 through December 31, 2025 (the “Performance Period”):

 

1)

2-Year Cumulative Adjusted Earnings before Interest, Tax, Depreciation and Amortization (“Adjusted EBITDA”) (50% weight). Adjusted EBITDA measured during the two-year period beginning as of the start of the Performance Period relative to the pre-established goals set for such measurement period, will be derived from the Company’s consolidated financial statements with any necessary adjustments similar to those described further below;

 

2)

3-Year Cumulative Cash Flow Metric (“Cash Flow Metric”) (50% weight). Cumulative Cash Flow (i.e. the sum of the free cash flows from the annual periods ending December 31 of each of 2023, 2024, and 2025, respectively, where the Cash Flow Metric goals are set at the beginning of each of those three periods) will also be derived from the Company’s consolidated financial statements with any necessary adjustments similar to those described further below; and

 

3)

Relative Total Shareholder Return Modifier. The Company’s TSR modifier will be determined by ranking the return on the Company’s shares against those of the companies in the Russell 1000 index, in each case, over the Performance Period. The PSU awards determined by the Adjusted EBITDA and Cash Flow Metric performance goals described above will then be adjusted based on the Company’s relative TSR performance, by increasing the PSU awards by 25% if the Company’s TSR is in the top quartile of the Russell 1000 index, decreasing the PSU awards by 25% if the Company’s TSR is in the bottom quartile of the Russell 1000 index, and providing no change to the PSU awards if the Company’s TSR is in the middle two quartiles.

 

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

With respect to the RSU awards, the RSUs vest in one third (1/3) increments on each of December 31, 2023, December 31, 2024, and December 31, 2025 respectively, subject to the executive’s continued employment through the applicable vesting date or as otherwise provided for in the underlying award agreement.

With respect to the performance period and related PSU awards under the ELTI for January 1, 2021 through December 31, 2023, the actual performance was certified by the Committee at its February 2024 meeting (with a TSR at 29%, in the top 33% of the Russell 2000 over the performance period) as set forth below:

 

             
 $ in Millions   Target     Maximum     Actual     % of Target    

Projected

Payout

   

Weighted

Payout

 

3-year Cumulative Adjusted EBITDA:

 

$

1,656.0

 

 

$

1,987.2

 

 

$

2,689.1

 

 

 

162.4

 

 

200

 

 

100

3-year Cumulative Cash Flow Metric:

 

$

1,002.8

 

 

$

1,203.4

 

 

$

1,580.4

 

 

 

157.6

 

 

200

 

 

100

Total Weighted Payout:

         

 

200%

 

                               

TSR Modifier:

         

 

100%

 

                               

Target Multiplier:

         

 

200%

 

                               

 

Adjusted EBITDA—as defined in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K for the fiscal year ended December 31, 2023.

 

       
      2021      2022      2023  

Adj. EBITDA as reported in the 2023 Form 10-K

  

$

627.0

 

  

$

763.6

 

  

$

1,023.9

 

Calder Land Sale Adjustment

  

 

N/A

 

  

$

274.6

 

  

 

N/A

 

Adjusted EBITDA for Compensation Purposes ($ in millions)

  

$

627.0

 

  

$

1,038.2

 

  

$

1,023.9

 

 

Cash Flow Metric—Our cash flow metric is defined as Cash Flows from Operating Activities and Discontinued Operations in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K for the fiscal year ended December 31, 2023, not including the impact from the change in restricted cash, plus distributions of capital from equity investments less capital maintenance expenditures.

 

       
 $ in millions    2021     2022     2023  

Cash Flow from Operating Activities

  

$

459.5

 

 

$

510.8

 

 

$

605.3

 

Operating Activities of Discontinued Operations

  

$

(124.0

 

$

26.0

 

 

$

0.5

 

Capital Maintenance Expenditures

  

$

(39.5

 

$

(50.2

 

$

(77.7

Change in Restricted Cash

  

$

(10.7

 

$

(10.6

 

 

12.0

(1) 

Calder Land Sale Adjustment

  

 

N/A

 

 

$

279.0

 

 

 

N/A

 

Cash Flow Metric

  

$

285.3

 

 

$

755.0

 

 

$

540.1

 

 

(1)

Change in Restricted Cash excludes receipt of proceeds from the pending United Tote Company equity transaction.

 

Total Shareholder Return—defined as the Company’s stock price as of the end of the measurement period, assuming reinvestment of dividends, divided by the Company’s stock price as of the beginning of the measurement period. The Company’s Total Shareholder Return for the period January 1, 2021 through December 31, 2023 was 29%.

 

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Compensation Discussion and Analysis

 

 

Based on the performance achievement as discussed above, the participating NEOs received PSUs as follows:

 

       
 Name(1)   

Target PSU

Award

    

Target

Multiplier

    

PSU

Payout

 

William C. Carstanjen

  

 

28,992

 

  

 

200

  

 

57,984

 

William E. Mudd

  

 

13,180

 

  

 

200

  

 

26,360

 

Marcia A. Dall

  

 

6,590

 

  

 

200

  

 

13,180

 

 

(1)

Mr. Blackwell and Ms. Adams each became an NEO after the 2021 ELTI awards were granted and, accordingly, did not receive a 2021 PSU award.

Executive Stock Ownership Guidelines

Our Board of Directors has adopted minimum stock ownership guidelines for our executive officers. The principal objective of the guidelines is to enhance the linkage between the interests of shareholders and our executive officers by requiring a meaningful, minimum level of stock ownership. The current guidelines provide that, within five (5) years of becoming subject to the stock ownership guidelines, our CEO should own shares valued at an amount equal to at least six times (6x) his base salary, our President & COO should own shares valued at an amount equal to at least four times (4x) his base salary, and our other executive officers should own shares valued at an amount equal to at least three times (3x) the executive’s base salary. As of the Record Date, each NEO met or exceeded the guidelines or were within the five (5) year transition period.

 

     
 Executive Officer  

Ownership

Guidelines

    Met Guidelines

William C. Carstanjen

    6x    

William E. Mudd

    4x    

Marcia A. Dall

    3x    

Bradley K. Blackwell

    3x    

Maureen Adams

    3x     Transition
Period(1)

 

  =   Met guidelines.

 

(1)

Ms. Adams became an NEO in 2022 and will not be required to satisfy the Executive Stock Ownership Guidelines until July 2027.

Anti-Hedging Policy

Under the terms of the Company’s Statement of Company Insider Trading Policy, our directors, officers and other employees are prohibited from engaging in hedging and monetization transactions and transactions that involve exchange-traded options or short sales of the Company’s securities. Because hedging transactions might permit a director, officer or other employee to continue to own our securities without the full rewards and risks of ownership, such hedging transactions are prohibited.

Clawback Policy

Under the terms of the Company’s Policy on Recoupment of Incentive Compensation, the NEOs’ incentive compensation is subject to “clawback” in the event of a restatement of the Company’s financial statements due to material noncompliance, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. Upon any such restatement, the amount to be recovered shall be the excess of the incentive-based compensation received by the NEO during the three fiscal years prior to the

 

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Compensation Discussion and Analysis

 

 

restatement based on the erroneous data and calculated without regard to any taxes paid or withheld, over the incentive-based compensation that would have been received by the NEO had it been calculated based on the restated financial information.

Deferred Compensation and Other Benefits

The Company’s philosophy is to provide retirement and savings benefits to executives which are commonly provided by other public companies. The benefits available to executives include:

401(k). The Company maintains the Churchill Downs Incorporated 401(k) Retirement Plan (the “401(k) Retirement Plan”), which is a profit sharing plan that is intended to be a qualified retirement plan under Section 401(a) of the Internal Revenue Code (the “Code”). The 401(k) Retirement Plan allows all employees who meet the eligibility requirements to become participants. Participants may make salary deferral contributions pursuant to Section 401(k) of the Code up to limits prescribed by the plan and the Code. The Company makes matching contributions with respect to such salary deferrals at a rate of 100% on the first 3% of compensation deferred and 50% on deferrals in excess of 3% of compensation deferred but no more than 5% of compensation deferred. Salary deferral contributions and matching contributions are fully vested at all times. Participants are allowed to direct investment of their accounts under the 401(k) Retirement Plan into as many as 27 investment options. All assets of the 401(k) Retirement Plan are held in a trust that is intended to be qualified under Section 501 of the Code.

Restricted Stock Unit Deferral Plan. The Company maintains the Churchill Downs Incorporated Restricted Stock Unit Deferral Plan (the “Deferral Plan”). Under the Deferral Plan, certain individual employees who are management or highly compensated employees of the Company may elect to defer settlement of RSUs granted to them pursuant to the 2016 Omnibus Stock Incentive Plan that are due to be earned and that would otherwise be settled with respect to a given year pursuant to the terms of an RSU agreement between the Company and such employees. The Company believes that the Deferral Plan further aligns with its overall compensation program objectives by aligning the long-term interests of participants and shareholders through the deferral of RSUs.

Please see the 2023 Nonqualified Deferred Compensation Table, on page 49, and the accompanying narrative below for further information regarding the Deferral Plan.

Allowances and Other Benefits. The Company’s standard, non-cash executive benefits are Company-paid premiums on executive term life insurance and an optional supplemental long-term disability income plan for each NEO. These plans provide benefits which are similar to those provided to eligible employees, but extend the benefit levels to reflect the income of the executive officers. Occasionally, a spouse or other guest may accompany executive officers on corporate aircraft when the aircraft is already scheduled for business purposes and can accommodate additional passengers. In those cases, there is no aggregate incremental cost to the Company and, as a result, no amount is reflected in the 2023 Summary Compensation Table.

Post-Termination Arrangements. The Committee believes that arrangements that provide benefits upon termination or a change in control of the Company support the goals of attracting and retaining qualified executives. Such benefits include clarifying the terms of employment and reducing the risks to the executive where the executive believes that either the Company may undergo a merger or be acquired. In addition, the Committee believes that such agreements align the interests of executives with the interests of shareholders if a qualified offer to acquire the Company is made, in that each of the executives would likely be aware of or involved in any such negotiation and it is to the benefit of shareholders to have the executives negotiating in the best interests of the Company without regard to their personal financial interests. The Committee has adopted forms of Executive Change in Control, Severance and Indemnity Agreements (the “Change in Control Agreements”) applicable to the NEOs. The terms of the Change in Control Agreements were determined after considering market data and the input of the Committee’s independent compensation consultant at the time. The Change in Control Agreements provide, subject to the Company receiving a general release of claims from the executive, severance benefits in the event the executive’s employment is terminated (i) by the Company other than for “Cause” (as defined in the Change in Control Agreements) or due to “Disability” (as defined in the Change in Control Agreements) or death or (ii) by the executive for “Good Reason” (as defined in the Change in Control Agreement), with enhanced benefits for a termination in connection with a “Change in Control” (as defined in the Change in Control Agreement). All equity-based awards in effect at the time of termination for the aforementioned reasons will remain governed by the applicable plan or award agreement. The Change in Control Agreements do not provide for any tax gross-ups for excise taxes payable following a Change in Control.

 

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Please see the “Potential Payments Upon Termination or Change of Control” section for a summary of the severance benefits payable to the NEOs under their applicable Change in Control Agreements.

The Committee has reviewed and discussed the information appearing above under the heading “Compensation Discussion and Analysis” with management and, based on that review and discussion, has recommended to the Board of Directors that the “Compensation Discussion and Analysis” section be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2023.

Compensation Committee of the Board of Directors:

Daniel P. Harrington, Chair

Robert L. Fealy

Douglas C. Grissom

Paul C. Varga

R. Alex Rankin, ex officio

 

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2023 Summary Compensation Table

 

 

   

2023 SUMMARY COMPENSATION TABLE

 

The following table provides information regarding compensation earned by our Chief Executive Officer, President & Chief Operating Officer, Executive Vice President and Chief Financial Officer, Executive Vice President and General Counsel and Executive Vice President, Gaming Operations (sometimes referred to in this proxy statement as the “Named Executive Officers” or “NEOs”) in 2023 and 2022 and, to the extent required by SEC disclosure rules, 2021.

 

Name and Principal Position

   Year      Base
Salary
($)
     Bonus
($)
   Stock
Awards
($)
(1)
     Non-Equity
Incentive Plan
Compensation
($)
(2)
     All Other
Compensation
($)
(3)
     Total
($)
 

William C. Carstanjen

 Chief Executive Officer

     2023        1,626,923      -0-      7,051,043        3,511,979        21,689      12,211,634  
     2022        1,500,000      -0-      6,538,424        4,035,025      19,664      12,093,113  
     2021        1,500,000      -0-      6,986,731        5,250,000      18,552      13,755,283  

William E. Mudd

 President and Chief

 Operating Officer

     2023        1,184,615      -0-      3,111,080        1,824,405      20,175      6,140,275  
     2022        1,100,000      -0-      2,972,375        2,113,585      18,346      6,204,306  
     2021        1,100,000      -0-      3,176,075        2,750,000      16,616        7,042,691  

Marcia A. Dall

 Executive Vice President

 and Chief Financial Officer

     2023        885,961      -0-      2,281,448        1,194,073      22,945      4,384,427  
     2022        826,923      -0-      2,179,699        1,437,238      20,452      4,464,312  
     2021        700,000      -0-      1,588,038        1,400,000      18,935      3,706,973  

Bradley K. Blackwell(4)

 Executive Vice President and

 General Counsel

     2023        684,615      -0-      1,140,724        851,389      18,746      2,695,474  
     2022        584,615      -0-      1,089,960        783,948        16,904        2,475,427  

Maureen Adams(4)

 Executive Vice President,

 Gaming Operations

     2023        617,308      -0-      1,140,724        684,152      21,317      2,463,501  
     2022        538,038      -0-      991,016        707,090        19,774        2,255,918  

 

(1)

In accordance with the SEC executive compensation disclosure rules, the amounts shown in 2023 for stock awards represent the grant date fair value of such awards determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“FASB ASC Topic 718”), but disregarding the estimate of forfeitures, in connection with service-based RSUs and PSUs granted pursuant to the ELTI to each of our NEOs in 2023. The amounts included in the Stock Awards column for the PSUs granted during 2023 are calculated based on the probable satisfaction of the performance conditions for such awards as of the date of grant. Assuming the highest level of performance is achieved for the 2023 PSUs, the maximum value of such PSUs at the grant date would be as follows: Mr. Carstanjen—$8,205,391; Mr. Mudd—$3,620,114; Ms. Dall—$2,654,951; Mr. Blackwell—$1,327,476; and Ms. Adams—$1,327,476. See Note 11 to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for a discussion of the relevant assumptions used in calculating the amounts reported for 2023.

 

(2)

Amounts in this column represent payments for performance under the EAIP. The NEOs received their 2023 EAIP awards in February 2024.

 

(3)

The table below shows the components of this column for 2023, which include the Company match for each individual’s defined contribution plan contributions, life insurance premiums, and supplemental long-term disability insurance premiums.

 

(4)

Mr. Blackwell and Ms. Adams each became an NEO in 2022.

 

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All Other Compensation for Fiscal Year Ended December 31, 2023

 

 

   

ALL OTHER COMPENSATION FOR FISCAL YEAR ENDED DECEMBER 31, 2023

 

 

Name

  

Company
Contributions
Under Defined
Contribution
Plans
(1)

($)

    

Life
Insurance
Premiums
(2)

($)

    

Supplemental
Long-Term
Disability
Insurance
Premiums
(3)

($)

    

Total All Other
Compensation

($)

 

William C. Carstanjen

  

 

13,200

 

  

 

6,689

 

  

 

1,800

 

  

 

21,689

 

William E. Mudd

  

 

13,200

 

  

 

3,715

 

  

 

3,260

 

  

 

20,175

 

Marcia A. Dall

  

 

13,200

 

  

 

4,987

 

  

 

4,758

 

  

 

22,945

 

Bradley K. Blackwell

  

 

13,200

 

  

 

2,209

 

  

 

3,337

 

  

 

18,746

 

Maureen Adams

  

 

13,200

 

  

 

2,025

 

  

 

6,092

 

  

 

21,317

 

 

(1)

This amount consists of Company contributions to 401(k) plans.

 

(2)

The NEOs receive group life coverage equal to two times (2x) base salary with a $3 million maximum. The amounts in this column are the premiums for the NEOs’ coverage.

 

(3)

The NEOs receive long-term disability coverage equal to sixty percent (60%) of their base salary with a $10,000 per month maximum in the event of a long-term disability. The Company offers supplemental long-term disability income insurance to help fill the gap between the executive’s regular monthly net income and the amount that would be paid under the Company’s standard long-term disability insurance policy that is available to other salaried employees. The amounts in this column are the premiums for the NEOs’ supplemental coverage paid by the Company.

 

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Grants of Plan-Based Awards for Fiscal Year Ended December 31, 2023

 

 

   

GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR ENDED DECEMBER 31, 2023

 

The grants in the following table are generally described in the CD&A, beginning on page 28, and reflects the stock split of the Common Stock that occurred in May 2023.

 

            Estimated Future Payout
under
Non-Equity Incentive Plan
Awards
(1)
    Estimated Future Payout
under
Equity Incentive Plan
Awards
(2)
    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#)
(3)
    Grant
Date Fair
Value of
Stock
Awards
($)
 

Name

  Grant
Date
    Threshold
($)
(4)
  Target
($)
    Max
($)
    Threshold
(#)
    Target
(#)
    Max
(#)
 

William C. Carstanjen

          1,082,813     2,887,500       5,775,000                                          
    02/15/2023