SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from _________________________to______________________
Commission file number 0-1469
CHURCHILL DOWNS INCORPORATED
(Exact name of registrant as specified in its charter)
KENTUCKY 61-0156015
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
700 CENTRAL AVENUE, LOUISVILLE, KY 40208
(Address of principal executive offices)
(Zip Code)
(502) 636-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No______
The number of shares outstanding of registrant's common stock at August 10, 1995
was 3,784,605 shares.
<PAGE>
CHURCHILL DOWNS INCORPORATED
I N D E X
PAGES
PART I. FINANCIAL INFORMATION
ITEM 1.Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets, June 30, 1995,
December 31, 1994 and June 30, 1994 3
Condensed Consolidated Statements of Operations and
Retained Earnings for the six months ended
June 30, 1995 and 1994 4
Condensed Consolidated Statements of Operations and
Retained Earnings for the three months ended
June 30, 1995 and 1994 5
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1995 and 1994 6
Condensed Notes to Consolidated Financial Statements 7-8
ITEM 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-17
PART II. OTHER INFORMATION AND SIGNATURES
ITEM 6.Exhibits and Reports on Form 8-K 18
ITEM 4.Submission of Matters To a Vote of Security Holders 19
Signatures 20
<PAGE>
<TABLE>
<CAPTION>
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31, JUNE 30 ,
ASSETS 1995 1994 1994
------------- ------------- ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 10,272,264 $ 2,521,033 $14,775,328
Accounts receivable 4,302,240 2,277,218 3,451,579
Other current assets 611,205 741,560 362,800
------------ ------------ -----------
Total current assets 15,185,709 5,539,811 18,589,707
Other assets 4,965,548 5,058,524 6,355,601
Racing plant and equipment 95,471,966 89,537,701 74,537,939
Less accumulated depreciation (32,027,423) (29,960,196) (28,351,660)
----------- ----------- -----------
63,444,543 59,577,505 46,186,279
----------- ----------- -----------
$83,595,800 $70,175,840 $71,131,587
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 444,154 $ 722,235 $ 673,973
Accounts payable 13,530,601 4,567,292 10,220,360
Accrued expenses 1,876,711 2,347,668 2,950,827
Dividends payable -- 1,891,759 --
Income taxes payable 5,459,008 -- 4,705,259
Deferred revenue 1,028,579 6,142,111 1,812,317
------------ ------------ -----------
Total current liabilities 22,339,053 15,671,065 20,362,736
Notes payable 4,198,059 7,961,079 1,164,431
Outstanding mutuel tickets (payable to Common-
wealth of Kentucky after one year) 2,480,499 1,523,600 795,395
Deferred compensation 1,082,480 690,178 727,995
Deferred income taxes 2,248,000 2,248,000 2,684,000
Minority interest 163,800 78,771 --
Stockholders' equity:
Preferred stock, no par value;
authorized, 250,000 shares; issued, none
Common stock, no par value; authorized, 10Million
shares, issued 3,784,605 shares, June 30, 1995
and 3,783,318 shares, December 31, 1994 and
3,773,930 shares, June 30, 1994 3,504,388 3,437,911 2,977,911
Retained earnings 48,053,562 39,175,627 43,165,860
Deferred compensation costs (409,041) (545,391) (681,741)
Note receivable for common stock (65,000) (65,000) (65,000)
------------ ------------ ------------
51,083,909 42,003,147 45,397,030
----------- ----------- -----------
$83,595,800 $70,175,840 $71,131,587
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
for the six months ended June 30, 1995 and 1994
(Unaudited)
SIX MONTHS ENDED JUNE 30
1995 1994
<S> <C> <C>
Gross meeting revenues $57,947,743 $42,394,752
Direct meeting expenses 33,157,347 21,139,923
------------ ------------
Gross profit from meetings 24,790,396 21,254,829
Selling, general and administrative 10,007,679 7,854,264
------------ -----------
Operating income 14,782,717 13,400,565
------------ -----------
Other income and expense:
Interest income 96,943 109,633
Interest expense (356,732) (22,914)
Miscellaneous, net 98,007 124,543
------------ ------------
(161,782) 211,262
------------- ------------
Earnings before income taxes 14,620,935 13,611,827
Federal and state income taxes 5,743,000 5,347,000
----------- ------------
Net earnings 8,877,935 8,264,827
Retained earnings, beginning of period 39,175,627 34,901,033
------------ ------------
Retained earnings, end of period $48,053,562 $43,165,860
=========== ===========
Net earnings per share (based on weighted $ 2.34 $ 2.19
====== ======
average shares outstanding of
3,785,180 and 3,778,691,
respectively)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
for the three months ended June 30, 1995 and 1994
(Unaudited)
THREE MONTHS ENDED JUNE 30
1995 1994
<S> <C> <C>
Gross meeting revenues $49,335,136 $39,968,720
Direct meeting expenses 25,766,189 18,551,508
------------ ------------
Gross profit from meetings 23,568,947 21,417,212
Selling, general and administrative 5,923,356 4,288,827
------------ -----------
Operating income 17,645,591 17,128,385
------------ -----------
Other income and expense:
Interest income 66,967 54,207
Interest expense (202,138) (14,490)
Miscellaneous, net 28,792 74,516
------------ ------------
(106,379) 114,233
------------ ------------
Earnings before income taxes 17,539,212 17,242,618
Federal and state income taxes 6,889,000 6,773,000
----------- ------------
Net earnings 10,650,212 10,469,618
Retained earnings, beginning of period 37,403,350 32,696,242
------------ ------------
Retained earnings, end of period $48,053,562 $43,165,860
=========== ===========
Net earnings per share (based on weighted $ 2.81 $ 2.77
====== ======
average shares outstanding of
3,785,525 and 3,778,691,
respectively)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
------------ --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,877,935 $ 8,264,827
Adjustments to reconcile net earning to
net cash provided by operating activities:
Depreciation and amortization 2,225,496 1,604,750
Increase (decrease) in cash resulting from
changes in operating assets and liabilities,
net of effects from acquisitions:
Accounts receivable (2,025,022) 264,623
Other current assets 130,355 319,955
Income taxes payable 5,459,008 3,212,519
Deferred revenue (5,113,532) (6,322,421)
Deferred income taxes -- 1,265,000
Accounts payable and accrued expenses 8,492,251 8,611,666
Other 1,293,684 (2,515,900)
----------- ----------
Net cash provided by
operating activities 19,340,175 14,705,019
----------- ----------
Cash flows from investing activities:
Acquisitions of Anderson Park, net
of note payable of $1.1 Million -- (850,000)
Additions to racing plant and equipment, net (5,934,265) (8,310,442)
Net cash used in investing activities (5,934,265) (9,160,442)
Cash flows from financing activities:
Decrease in bank note payable, net (3,763,020) --
Dividend paid (1,891,659) (1,886,965)
---------- -----------
Net cash (used) in financing activities (5,654,679) (1,886,965)
---------- -----------
Net increase in cash and cash equivalents 7,751,231 3,657,612
Cash and cash equivalents, beginning of period 2,521,033 11,117,716
----------- -----------
Cash and cash equivalents, end of period $10,272,264 $14,775,328
=========== ===========
Supplemental Disclosures of cash flow information:
Cash paid during the period for:
Interest $ 301,451 $ --
Income taxes $ 240,000 $1,260,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO FINANCIAL STATEMENTS
for the six months ended June 30, 1995 and 1994
(Unaudited)
1. Because of the seasonal nature of the Company's business, revenues
and operating results for any interim quarter are not indicative of the revenues
and operating results for the year and are not necessarily comparable with
results for the corresponding period of the previous year. The Company normally
earns a substantial portion of its net income in the second quarter of each year
during which the Kentucky Derby is run. The Kentucky Derby is run on the first
Saturday in May.
2. The accompanying financial statements are presented in accordance
with the requirements of Form 10-Q and consequently do not include all of the
disclosures normally required by generally accepted accounting principles or
those normally made in the Company's annual report on Form 10-K. Accordingly,
the reader of this Form 10-Q may wish to refer to the Company's Form 10-K for
the year ended December 31, 1994 for further information. The accompanying
financial statements have been prepared in accordance with the registrant's
customary accounting practices and have not been audited. In the opinion of
management, all adjustments necessary for a fair presentation of this
information have been made and all such adjustments are of a normal recurring
nature.
3. On January 26, 1994 the Company purchased Anderson Park, Inc. ("API")
for approximately $1,950,000. API owned an Indiana Standardbred racing license
and was in the process of constructing a racing facility in Anderson, Indiana.
Subsequently, the facility was completed and, contemporaneously with the
commencement of operations on September 1, 1994 the net assets of API were
contributed to a newly formed partnership, Hoosier Park, L.P. in return for an
87% general partnership interest.
4. The Company has an unsecured $20,000,000 bank line of credit with
various options for the interest rate, none of which are greater than the bank's
prime rate. The rate in effect at June 30, 1995 was 6.85%. Borrowings are
payable on January 31, 1997. There was $3.0 million outstanding at June 30,
1995. No borrowings were outstanding at June 30, 1994.
The Company also has two non-interest bearing notes payable in the
aggregate face amount of $900,000 relating to the purchase of an intertrack
wagering license from the former owners of the Sports Spectrum property.
Interest has been imputed at 8%. At June 30, 1995, the balance of these notes
was $481,000 net of an unamortized discount of $199,000. The notes require
aggregate annual payments of $110,000 from September, 1993. As described in Note
5 any remediation costs for environmental cleanup can be offset against any
amounts due under these notes payable.
<PAGE>
CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO FINANCIAL STATEMENTS
for the six months ended June 30, 1995 and 1994 (cont'd)
(Unaudited)
5. On January 22, 1992, the Company acquired certain assets of
Louisville Downs for $5,000,000. In conjunction with this purchase, the
Company withheld $1,000,000 from the amount due to the sellers to offset certain
costs related to the remediation of environmental contamination associated with
underground storage tanks at the site. Substantially all of the $1,000,000 hold
back has been utilized as of June 30, 1995.
It is not anticipated that the Company will have any liability as a
result of compliance with environmental laws with respect to the property.
Compliance with environmental laws has not otherwise affected development and
operation the property and the Company is not otherwise subject to any material
compliance costs in connection with federal or state environmental laws.
6. Certain balance sheet and statement of operations items have been
reclassified to conform to current period presentation.
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
For many years, the Company has conducted live Spring and Fall race
meetings for Thoroughbred horses in Kentucky. In 1988, the Company began to
participate in intertrack simulcasting as a host track for all of its live races
except those run on Kentucky Derby Day. In 1989, the Company commenced
operations as a receiving track for intertrack simulcasting. During November
1991, the Company began interstate simulcasting for all of the live races with
the receiving locations participating in the company's mutuel pool. The Kentucky
Derby and Kentucky Oaks, which are run on the first weekend in May of each year,
continue to be the Company's outstanding attractions. In 1995, Derby weekend
accounted for approximately 28% of total on-track pari-mutuel wagering and 32%
of total on-track attendance, for the 1995 Spring Meet. In July 1994, the
Company began to participate in whole card simulcasting, whereby the Company
began importing whole race cards or programs from host tracks located outside
the state for pari-mutual wagering purposes. Whole card simulcasting has created
a major new wagering opportunity for patrons of the Company in both Kentucky and
Indiana.
The Company's principal sources of income are commissions from
on-track pari-mutuel wagers, commissions from intertrack and fees from
interstate simulcast wagers, admissions and seating, concession commissions
(primarily for the sale of food and beverages), and license, rights, broadcast
and sponsorship fees. The Company's primary source of income is pari-mutuel
wagering. The Company retains the following amounts on specific revenue streams
as a percentage of handle:
KENTUCKY INDIANA
On-track pari-mutuel wagers 15% 19%
Intertrack host 9% --
Interstate/simulcast host 5% --
Intertrack/simulcast receiving 7% 18%
In Kentucky, licenses to conduct Thoroughbred race meetings and to
participate in simulcasting are approved annually by the Kentucky Racing
Commission based upon applications submitted by the racetracks in Kentucky,
including the Company. Based on gross figures for on-track pari-mutuel wagering
and attendance, the company is the leading thoroughbred racetrack in Kentucky.
In Indiana, licenses to conduct live Standardbred and Thoroughbred race
meetings and to participate in simulcasting are approved annually by the Indiana
Horse Racing Commission based upon applications submitted by the Company.
Currently, the Company is the only facility in Indiana licensed to conduct live
Standardbred or Thoroughbred race meetings and to participate in simulcasting.
In Kentucky, the Company has been granted a license to conduct live
racing during the period from April 29, 1995 through July 4, 1995, and from
October 29, 1995 through November 25, 1995, for a total of 74 racing days. In
Indiana, the Company commenced live racing on September 1, 1994 and conducted
live racing 54 days during the year ended December 31, 1994. For 1995, the
Company has received a license to conduct live racing for a total of 146 racing
days, including 104 days of Standardbred racing from April 1, 1995 through
August 20, 1995, and 42 days of Thoroughbred racing from September 1, 1995
through October 28, 1995.
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
The Company operated two live racing facilities and conducted
simulcast wagering at four locations during the six month period ended June 30,
1995. The Company began its operations in Indiana September 1, 1994. The chart
below summarizes the results of these operations.
<TABLE>
<CAPTION>
KENTUCKY INDIANA
Six Months Six Months Six Months
Ended June 30, Ended June 30, Increase Ended June 30,
1995 1994 (Decrease) 1995
-------------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
ON-TRACK
Number of Race Days 46 46 0 66
Attendance 686,189 694,404 -1% 90,182
Handle $88,436,906 $93,159,376 -5% $8,798,255
Average daily attendance 14,917 15,096 -1% 1,366
Average daily handle $1,922,541 $2,025,204 -5% $133,307
Per capita handle $128.88 $134.16 -4% $97.56
INTERTRACK/SIMULCAST HOST (SENDING)
Number of Race Days 46 46 0 56
Handle $137,265,922 $106,275,478 29% $1,642,722
Average daily handle $2,984,042 $2,310,336 29% $ 29,334
INTERTRACK/SIMULCAST RECEIVING
Number of Race Days 88 75 13 332*
Attendance 219,065 181,116 21% 157,735
Handle $50,947,048 $34,199,773 49% $44,147,538
Average daily attendance 2,489 2,415 3% 475
Average daily handle $578,944 $455,997 27% $132,975
Per capita handle $232.57 $188.83 23% $279.88
<FN>
* The Company's Indiana operations include three separate simulcast wagering facilities.
</FN>
</TABLE>
The number of receiving days is increasing because of increasing
acceptance of simulcasting by the horse industry and patrons. For 1995, the
Company has been granted a license as a receiving track for any and all possible
dates from January 1 through December 31 and intends to receive simulcasting
on all possible days except when racing live. With the advent of whole card
simulcasting, the Company conducts interstate simulcasting virtually year
around, except when racing live, on multiple racing programs each day from
around the nation. An increase in the number of days is expected to enhance
operating results.
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
Churchill Downs, through its subsidiary, Hoosier Park, L.P., is
majority owner and operator of Indiana's only pari-mutuel racetrack, Hoosier
Park at Anderson. Start-up costs incurred in Indiana during the first half of
1995 include improvements to Hoosier Park in anticipation of the track's
inaugural Thoroughbred meet this Fall. Hoosier park has conducted two Harness
race meets, as well as simulcast wagering, during its first year of operation.
Since January, the Company also has opened off-track wagering facilities in
Merrillville and Fort Wayne, Indiana. A third facility, slated to open in
downtown Indianapolis in the Summer of 1995, will not open until the Fall. The
opening of a fourth Indiana site has now been delayed until the first quarter of
1996 at the earliest.
Because the business of the Company is seasonal, the number of
persons employed will vary throughout the year. Approximately 225 individuals
are employed on a permanent year-round basis. During the live race meetings, as
many as 2,100 persons are employed.
Expenses resulting from the first full year of operation of the
Sports Spectrum training center, a slight decline in profit margins due to a
shift from wagering on live racing to interstate simulcast wagering, and
start-up costs and delays in opening the Company's off-track wagering facilities
in Indiana contributing to lower than expected profits from operations in
Indiana are all expected to impact net income for the second half and full year.
In addition, Churchill Downs will not host the Breeders' Cup this Fall as it did
in 1994.
Accordingly, in spite of strong first half performance, Churchill
Downs currently expects that net income for 1995 will approximate 1994's record
earnings of $1.63 per share.
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995 TO 1994
Gross pari-mutuel revenue during the six months ended June 30,
1995 increased $13,417,193. The Company's new subsidiary Hoosier Park L.P.
generated 69 percent, or $9,232,566 of the increase in pari-mutuel revenue which
combined with admissions, concessions, programs, and other revenue totalled
$10,257,000 in revenues. This is largely due to the live Standardbred race meet
which began April 1, 1995 and continues through August 20, 1995 at Hoosier Park
in Anderson, Indiana. This facility opened September 1, 1994 with live
Standardbred racing for 54 days. Beginning January 1, 1995 at Hoosier Park,
January 25th in Merrillville, Indiana and April 26th in Ft. Wayne, Indiana whole
card simulcasting was conducted for a total of 332 operating days. Simulcasting
has been well received in Indiana with an average daily handle of $132,975.
The advent of whole card simulcasting in the state of Kentucky
helped increase intertrack/simulcast receiving revenue by 68%. Whole card
simulcasting was also largely responsible for the increase in program revenue
due to 2 or more programs and racing forms being sold per day, coupled with 13
additional simulcast receiving days and higher average attendance. The Derby
Expansion Area, referred to as Marquee Village, was up 22% largely due to the
addition of a covered seating area near the racetrack's first turn. Other income
increased primarily due to income from stall rental. The backside of Churchill
Downs racetrack facility was closed during the first quarter of 1994 for
maintenance and repair for the first time in several years.
<TABLE>
<CAPTION>
OPERATING REVENUE SUMMARY
Six Months Six Months 1995 VS 1994
Ended % To Ended % To $ %
June 30, Total June 30, Total
1995 Revenue 1994 Revenue Change Change
-------------- ------- --------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Pari-Mutuel Revenue:
On-track $14,244,632 25% $13,398,802 32% $ 845,830 6%
Intertrack-Host 4,103,517 7% 3,239,418 8% 864,099 27%
Simulcast Receiving 12,458,047 20% 2,930,404 7% 9,527,643 325%
Simulcast Host 6,149,341 11% 3,969,720 9% 2,179,621 55%
------------- --- ------------- --- ---------- -----
36,955,537 63% 23,538,344 56% 13,417,193 57%
Admission & Seat Revenue 10,363,623 18% 9,861,228 23% 502,395 5%
License, Rights, Broadcast
& Sponsorship Fees 5,326,281 9% 4,912,407 12% 413,874 8%
Concession Commission 1,720,339 3% 1,499,241 3% 221,098 15%
Program Revenue 1,574,783 3% 917,789 2% 656,994 72%
Derby Expansion Area 1,015,940 2% 832,050 2% 183,890 22%
Other 991,240 2% 833,693 2% 157,547 19%
------------- ----- ------------- ----- ------------- -----
$57,947,743 100% $42,394,752 100% $15,552,991 37%
=========== ==== =========== ==== =========== ====
</TABLE>
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
Direct meeting expenses increased $12,017,424 during the six
month period. This increase is primarily due to the live and simulcasting
operations at Hoosier Park combined with the opening of the Merrillville and Ft.
Wayne off-track wagering facilities. The largest single increase in meet
expenses are the higher purses which are a direct result of increased handle
from whole card simulcasting in Kentucky and Indiana. Purse expense varies
directly with pari-mutuel revenues and is calculated as a percentage of the
related revenue and may change from year to year pursuant to contract or
statute. Whole card simulcasting and Hoosier Park operations were also primarily
responsible for increased wages, advertising and marketing, audio, video and
signal distribution, program sales and other. Wages and contract labor increased
due to additional days and hours of operation related to whole card simulcasting
at Sports Spectrum and Hoosier Park. The simulcast host fee is the amount paid
to the host track in exchange for receiving the tracks races. This new expense
is based on handle, and is directly related to the $9.6 million increase in
simulcasting revenue. Other meet expense rose by $435,917, due to expenses at
Hoosier Park of $609,572.
<TABLE>
<CAPTION>
MEETING EXPENSE SUMMARY
Six Months Six Months
Ended % To Ended % To 1995 VS. 1994
June 30, Total June 30, Total $ %
1995 Expense 1994 Expense Change Change
---------------- ------- ---------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Purses:
On-track $7,733,485 23% $7,188,636 34% $544,849 8%
Intertrack-Host 2,022,319 6% 1,442,880 7% 579,439 40%
Simulcast- Receiving 4,056, 701 12% 1,289,378 7% 2,767,323 215%
Simulcast-Host 2,860,267 9% 2,021,832 10% 838,435 41%
------------- ---- ------------- --- ------------- -----
$16,672,772 50% $11,942,726 58% $4,730,046 40%
Wages and Contract Labor 8,042,109 24% 4,951,879 24% 3,090,230 62%
Advertising, Marketing
& Publicity 946,973 3% 1,075,477 5% (128,504) -12%
Racing Relations
& Services 587,019 2% 642,073 3% (55,054) -9%
Totalisator Expense 499,823 2% 262,271 1% 237,552 91%
Simulcast Host Fee 2,424,067 7% -- -- 2,424,067 100%
Audio/Video & Signal
Distribution Expense 1,204,849 4% 554,854 3% 649,995 117%
Program Expense 1,053,745 3% 510,843 2% 542,902 106%
Derby expansion area 402,713 1% 312,440 1% 90,273 29%
Other meeting expense 1,323,277 4% 887,360 3% 435,917 49%
------------ ----- ------------- ----- ------------ ----
$33,157,347 100% $21,139,923 100% $12,017,424 57%
=========== ==== =========== ==== =========== ====
</TABLE>
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
Selling, general and administrative expenses rose $2,064,792.
Wages, benefits, payroll taxes and contract labor were higher primarily due to
Hoosier Park and personnel additions principally related to the growth in
simulcast operations. Depreciation and insurance increases are due to the
addition of the Hoosier Park facility. Taxes and license fees have increased
primarily due to property taxes at Hoosier Park. Professional fees are up
$120,794 which is primarily attributable to legal and accounting expenses
incurred at Hoosier Park. In 1994, business development expenses were
principally related to the Company's unsuccessful efforts to obtain a racing
license in Virginia.
<TABLE>
<CAPTION>
SELLING, GENERAL AND ADMINISTRATIVE
Six Months Six Months
Ended % To Ended % To 1995 VS. 1994
June 30, Total June 30, Total $ %
1995 Expense 1994 Expense Change Change
---------------- ------- ----------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Wages, Benefits,
Payroll, Taxes and
Contract Labor $2,910,035 29% $2,502,755 32% $ 407,280 16%
Depreciation and
Amortization 2,225,496 22% 1,468,399 19% 757,097 52%
Insurance 826,701 8% 709,394 9% 117,307 17%
Maintenance 871,338 9% 906,593 11% ( 35,255) -4%
Utilities 957,959 10% 664,911 8% 293,048 44%
Marketing & Community
Relations 609,948 6% 173,644 2% 436,304 251%
Taxes and License Fees 436,329 4% 356,008 4% 80,321 23%
Professional Fees 363,843 4% 243,049 3% 120,794 50%
Business Development 93,657 1% 391,078 5% (297,421) -76%
Other 712,373 7% 527,056 7% 185,317 35%
----------- ---- ------------ ----- ----------- -----
$10,007,679 100% $7,942,887 100% $2,064,792 26%
=========== ==== ========== ==== =========== ====
</TABLE>
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
Other income decreased by $23,467 due primarily to reduced income
on investments resulting from lower average invested cash requirements
associated with the construction of Hoosier Park and the Merrillville and
Ft. Wayne simulcast facilities. Interest expense increased in 1995 as a result
of borrowing against the Company's line of credit after normal cash reserves
were used for the Indiana facilities.
<TABLE>
<CAPTION>
OTHER INCOME AND EXPENSE
Six Months Six Months
Ended % To Ended % To 1995 VS. 1994
June 30, Total June 30, Total $ %
1995 Expense 1994 Expense Change Change
---------- ------- ---------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Interest Income $ 96,943 51% $ 109,633 51% $( 12,690) -12%
Miscellaneous, Other Income 94,535 49% 105,312 49% (10,777) -10%
----------- ----- ---------- ---- ----------- ----
$ 191,478 100% $ 214,945 100% $ (23,467) -11%
=========== ==== ========= ==== ========== ======
Interest Expense $ 356,732 100% $22,914 100% $333,818 1457%
========= ==== ======= ==== ======== =====
</TABLE>
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1995 TO THREE MONTHS ENDED JUNE 30,
1994
Gross revenues from operations increased $9.4 million due mostly
to our new Indiana operations. Hoosier Park and its off-track wagering
facilities generated $6.2 million in revenue in the second quarter. Likewise
Churchill Downs revenues increased by $3.2 million during the quarter due
primarily to record total wagering on Kentucky Derby and Kentucky Oaks Days,
combined with substantial growth in interstate simulcasting of Churchill Downs'
racing. Attendance for the Oaks and Derby was up 10% and wagering for the two
days was up 7% compared to the prior year.
Operating expenses also increased primarily due to purses, which
are directly related to pari-mutuel revenue. Selling, general and administrative
costs increased $1.6 million primarily due to the expenses incurred at Hoosier
Park, including $325,000 in marketing expenses.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1995 TO THREE MONTHS ENDED MARCH 31,
1995
Gross revenues from race meetings increased $49.3 million
primarily due to the live racing at Churchill Downs which accounted for $45.2
million. Churchill Downs second quarter included 46 live racing days versus no
live racing during the three months ended March 31, 1995. Operating expenses
increased $25.8 million also due to the live racing days. These increases were
offset somewhat by 88 fewer intertrack receiving days at the Sports Spectrum
during the quarter.
Selling, general and administrative costs for the second quarter
of 1995 were $5.9 million, up from $4.1 million in the quarter ended March 31,
1995. The largest increases were in the areas of marketing as both the Kentucky
and Indiana operations began their live race meets in April, combined with
higher wages, maintenance and utility costs. Property taxes were also up
significantly due to a partial assessment that occurs in Kentucky during June.
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
SIGNIFICANT CHANGES IN THE BALANCE SHEET DECEMBER 31, 1994 TO JUNE 30, 1995
The cash balances at June 30, 1995 were $7,751,231 higher than
December 31, 1994 due to the cash generated during 46 live race days at
Churchill Downs, principally Kentucky Derby and Oaks weekend, and 66 live race
days at Hoosier Park. Cash balances during May and June are historically at the
highest levels of the year.
Accounts receivable at June 30, 1995 were $2,025,022 higher than
of December 31, 1994 due to the Spring meeting purse supplement due from the
State of Kentucky, Kentucky Derby activity related receivables and interstate
simulcasting settlements which were received in July an August, 1995.
Racing plant & equipment increased during the quarter, primarily
due to continued investment at Hoosier Park in preparation for the 1995
Thoroughbred meet and the opening of the OTB facility in Ft. Wayne, Indiana.
Hoosier Park began its 1994 harness meet on April 1, 1995 and will run Indiana's
first Thoroughbred meet beginning in September 1995.
Accounts payable and accrued expenses at June 30, 1995 were
$8,492,352 higher than at December 31, 1994 due to horsemen's balances for the
live race meeting at Churchill Downs. Such balances for the Fall 1994 race
meeting had been paid by December 31, 1994.
Deferred revenue is lower at June 30, due to the significant
amount of admission and seat revenue that was received in advance and recognized
as income for the May 1995 Kentucky Derby and Oaks.
At December 31, 1994 the Company had dividends payable of
$1,891,759 related to the annual dividend payment payable on January 15, 1995
which was declared at the November 17, 1994 Board of Directors meeting.
Income taxes payable at June 30, 1995 relate to the estimated
expense due for the six month period. Due to the seasonality of the business
related to the Spring race meeting, the second quarter of the year is the
highest in earnings and related taxes.
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
SIGNIFICANT CHANGES IN THE BALANCE SHEET JUNE 30, 1994 TO JUNE 30, 1995
Cash balances at June 30, 1995 are $4,503,064 below June 30, 1994
principally due to payments for construction for the training facility at the
Sports Spectrum property and the wagering facilities in northern and central
Indiana.
Accounts receivable at June 30, 1995 were up due to interstate
simulcasting and the increased number of outlets for the spring race meeting.
Racing plant & equipment increased during the year by
$20,934,027. The Company's Indiana facilities accounted for more than $16
million, the majority at the Hoosier Park race track. In addition, capital
improvements at the Sports Spectrum including new barns and a backside stabling
and training operation were responsible for over $3.5 million.
Accounts payable and accrued expenses increased by $2,067,539
primarily due to the amount payable related to the Hoosier Park construction,
and the settlement liability related to whole card simulcasting.
LIQUIDITY AND CAPITAL RESOURCES
Working capital for the six months ended June 30, 1995 and June
30, 1994 is as follows:
JUNE 30
-------------------------------
1995 1994
---- ----
Working capital deficiency $( 7,153,344) $(1,773,028)
Working capital ratio .68 to 1 .91 to 1
The working capital deficiency is primarily a result from the
nature and seasonality of the Company's business. Cash flows provided (used) by
operations were $19,273,698 for the six months ended June 30, 1995; $11,399,973
for the twelve months ended December 31, 1994; and $14,705,019 for the six
months ended June 30, 1994. Management believes cash flows from operations
during 1995 and funds available under the company's unsecured line of credit
will be sufficient to fund dividend payments and additions and improvements to
the racing plant and equipment which are expected to be between $6,000,000 and
$11,000,000. The primary capital improvement planned for 1995 is the addition of
Thoroughbred racing facilities at Hoosier Park. Hoosier Park will host its first
Thoroughbred race meet for 42 days from September 1, 1995 through October 28,
1995.
Cash flow from operations funded $850,000 of the Anderson Park,
Inc. stock purchase in January 1994. Similarly, cash flow from operations and,
as necessary, funds available under the unsecured line of credit were used to
fund the construction of the Hoosier Park racing facility in Anderson,
Indiana. The Company expects to fund up to $6 million to construct two
additional satellite wagering facility sites approved by the Indiana Horse
Racing Commission and $3.1 million to construct improvements to allow for
Thoroughbred racing at Hoosier Park.
The Company has a $20,000,000 unsecured line-of-credit available
with $17 million available at June 30, 1995 to meet working capital and other
short-term requirements. Management believes that the Company has the ability to
obtain additional long-term financing should the need arise.
<PAGE>
CHURCHILL DOWNS INCORPORATED
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Not applicable
B. During the quarter ending June 30, 1995, no Form 8-K's
were filed by the Company.
<PAGE>
CHURCHILL DOWNS INCORPORATED
PART III. OTHER INFORMATION
Item 4. Submission of Matters To a Vote of Security Holders
The registrant's 1995 Annual Meeting of Shareholders was held on
June 15, 1995. Proxies were solicited by the registrant's board of directors
pursuant to Regulation 14 under the Securities Exchange Act of 1934, there was
no solicitation in opposition to the board's nominees as listed in the proxy
statement, and all nominees were elected by vote of the shareholders. Voting
results for each nominee were as follows:
Votes For Votes Withheld
CLASS II DIRECTORS:
Catesby W. Clay 3,065,885 19,998
J. David Grissom 3,065,742 20,141
Seth W. Hancock 3,065,348 20,535
Frank B. Hower, Jr. 3,062,533 23,350
W. Bruce Lunsford 3,064,872 21,011
CLASS I DIRECTOR:
G. Watts Humphrey, Jr. 3,060,852 25,031
CLASS III DIRECTOR:
Thomas H. Meeker 3,065,298 20,585
A proposal (Proposal No.3) to approve the minutes of the 1994
Annual Meeting of Shareholders was approved by a vote of the majority of the
shares of the registrant's common stock represented at the meeting: 3,059,267
shares were voted in favor of the proposal; 17,922 were voted against; and 8,694
abstained.
A total number of shares of common stock outstanding as of
April 20, 1995, the record date of the Annual Meeting of Shareholders, was
3,783,318.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
May 14, 1995 /S/THOMAS H. MEEKER
Thomas H. Meeker
President
May 14, 1995 /S/VICKI L. BAUMGARDNER
Vicki L. Baumgardner, Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 10,272,264
<SECURITIES> 0
<RECEIVABLES> 4,302,240
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,185,709
<PP&E> 95,471,966
<DEPRECIATION> 32,027,423
<TOTAL-ASSETS> 83,595,800
<CURRENT-LIABILITIES> 22,339,053
<BONDS> 0
<COMMON> 3,504,388
0
0
<OTHER-SE> 47,579,521
<TOTAL-LIABILITY-AND-EQUITY> 83,595,800
<SALES> 57,947,743
<TOTAL-REVENUES> 57,947,743
<CGS> 33,157,347
<TOTAL-COSTS> 43,165,026
<OTHER-EXPENSES> 194,950
<LOSS-PROVISION> 35,000
<INTEREST-EXPENSE> 356,732
<INCOME-PRETAX> (14,620,935)
<INCOME-TAX> (5,743,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,877,935)
<EPS-PRIMARY> $2.34
<EPS-DILUTED> $2.34
</TABLE>
