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: September 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 November 9,
1995 was 3,784,605 shares.
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CHURCHILL DOWNS INCORPORATED
I N D E X
PAGES
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets,
September 30, 1995, December 31, 1994 and
September 30, 1994 3
Condensed Consolidated Statements of Operations and
Retained Earnings for the nine months ended
September 30, 1995 and 1994 4
Condensed Consolidated Statements of Operations and
Retained Earnings for the three months ended
September 30, 1995 and September 30, 1994 5
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 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 9-18
PART II. OTHER INFORMATION AND SIGNATURES
ITEM 6. Exhibits and Reports on Form 8-K 19
Signatures 20
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<PAGE>
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
ASSETS 1995 1994 1994
------------- ----------- ------------
Current assets:
Cash and cash equivalents $ 3,597,668 $ 2,521,033 $ 6,323,603
Accounts receivable 1,226,462 2,277,218 862,856
Other current assets 814,263 741,560 710,660
----------- ----------- -----------
Total current assets 5,638,393 5,539,811 7,897,119
Other assets 4,821,299 5,058,524 5,920,339
Racing plant and equipment 97,137,205 89,537,701 84,794,379
Less accumulated depreciation (33,121,064)(29,960,196) (29,162,379)
----------- ----------- -----------
64,016,141 59,577,505 55,632,000
----------- ----------- -----------
$74,475,833 $70,175,840 $69,449,458
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 425,213 $ 722,235 $ 6,078,458
Accounts payable 7,358,218 4,567,292 5,684,132
Accrued expenses 1,577,186 2,347,668 1,865,193
Dividends payable -- 1,891,759 --
Income taxes payable 1,636,008 -- 1,015,308
Deferred revenue 1,428,016 6,142,111 3,972,602
------------ ----------- -----------
Total current liabilities 12,424,641 15,671,065 18,615,693
Notes payable 7,088,059 7,961,079 1,105,772
Outstanding mutuel tickets (payable to
Commonwealth of Kentucky after one year) 2,517,399 1,523,600 1,923,794
Deferred compensation 1,056,554 690,178 768,546
Deferred income taxes 2,248,000 2,248,000 2,684,000
Minority interest 163,800 78,771 220,910
Stockholders' equity:
Preferred stock, no par value; authorized,
250,000 shares; issued, none
Common stock, no par value; authorized,
10,000,000 shares, issued 3,784,605
shares, September 30, 1995 and 3,783,318
shares, December 31, 1994 and
September 30, 1994 3,504,388 3,437,911 3,437,911
Retained earnings 45,878,858 39,175,627 41,371,398
Deferred compensation costs (340,866) (545,391) (613,566)
Note receivable for common stock (65,000) (65,000) (65,000)
------------ ----------- -----------
48,977,380 42,003,147 44,130,743
------------ ----------- -----------
$74,475,833 $70,175,840 $69,449,458
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the nine months ended September 30, 1995 and 1994
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30
1995 1994
------------ ------------
Gross meeting revenues $71,169,949 $49,910,373
Direct meeting expenses 45,057,468 28,203,308
------------ ------------
Gross profit from meetings 26,112,481 21,707,065
Selling, general and administrative 14,901,988 11,330,570
------------ ------------
Operating income 11,210,493 10,376,495
------------ ------------
Other income & expense:
Interest income 165,085 188,504
Interest expense (405,801) (125,344)
Miscellaneous, net 203,454 217,710
------------ ------------
Total other income (expense) (37,262) 280,870
------------ ------------
Earnings before income taxes 11,173,231 10,657,365
Federal and state income taxes 4,470,000 4,187,000
------------ ------------
Net earnings 6,703,231 6,470,365
Retained earnings, beginning of period 39,175,627 34,901,033
Retained earnings, end of period $45,878,858 $41,371,398
Net earnings per share (based on =========== ===========
weighted average shares outstanding of
3,785,494 and 3,776,166 respectively) $ 1.77 $ 1.71
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended September 30, 1995 and 1994
(Unaudited)
THREE MONTHS ENDED SEPTEMBER 30
1995 1994
----------- -----------
Gross meeting revenues $13,222,206 $ 7,515,621
Direct meeting expenses 11,900,121 7,063,385
----------- -----------
Gross profit from meetings 1,322,085 452,236
Selling, general and administrative 4,894,309 3,476,306
----------- -----------
Operating loss (3,572,224) (3,024,070)
----------- -----------
Other income and expense:
Interest income 68,142 78,871
Interest expense (49,069) (102,430)
Miscellaneous income 105,447 93,167
----------- -----------
Total other income 124,520 69,608
----------- -----------
Earnings before income taxes (3,447,704) (2,954,462)
Federal and state income taxes (1,273,000) (1,160,000)
----------- -----------
Net loss ( 2,174,704) (1,794,462)
----------- -----------
Retained earnings, beginning of period 48,053,562 43,165,860
----------- -----------
Retained earnings, end of period $45,878,858 $41,371,398
=========== ===========
Net loss per share (based on weighted $(0.57) $(0.48)
====== ======
average shares outstanding of
3,786,119 and 3,777,587
respectively)
The accompanying notes are an integral part of the consolidated financial
statements.
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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1995 and 1994
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
1995 1994
----------- -----------
Cash flows from operating activities:
Net income $ 6,703,231 $ 6,470,365
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,476,628 2,318,000
Increase (decrease) in cash resulting from
changes in operating assets and liabilities:
Accounts receivable 1,050,756 2,853,346
Other current assets (72,703) (27,906)
Income taxes payable 1,636,008 (477,432)
Deferred revenue (4,714,095) (4,162,135)
Accounts payable and accrued expenses 2,020,444 1,102,839
Other 1,637,571 2,032,323
---------- ----------
Net cash provided by operating activities 11,737,840 10,109,400
Cash flows from investing activities:
Sale of investments -- 600,000
Acquisition of Anderson Park, Inc. net of note
payable of $1,100,000 -- (850,000)
Additions to racing plant and equipment, net (7,599,504)(18,566,882)
---------- ----------
Net cash used in investing activities (7,599,504)(18,816,882)
---------- ----------
Cash flows from financing activities:
(Decrease) increase in bank notes payable, net (1,170,042) 5,800,334
Dividends paid (1,891,659) (1,886,965)
---------- ----------
Net cash provided by(used in)financing activities (3,061,701) 3,913,369
---------- ----------
Net increase (decrease) in cash and
cash equivalents 1,076,635 (4,794,113)
Cash and cash equivalents, beginning of period 2,521,033 11,117,716
---------- -----------
Cash and cash equivalents, end of period $3,597,668 $ 6,323,603
========== ===========
Supplemental Disclosures of cash flow information:
Cash paid during the period for:
Interest $ 355,610 $69,051
Income taxes $2,790,000 $3,172,000
The accompanying notes are an integral part of the consolidated financial
statements.
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO FINANCIAL STATEMENTS
for the nine months ended September 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 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 September 30, 1995 was 6.85%. Borrowings are
payable on January 31, 1997. There was $6.0 million outstanding at September 30,
1995 and September 30, 1994.
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 September 30, 1995. The Kentucky Petroleum
Underground Storage Tank Assurance Fund has approved the remediation as one
qualifying for assistance from the fund, thereby making additional funds
available from that service.
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO FINANCIAL STATEMENTS
for the nine months ended September 30, 1995 and 1994
(Unaudited)
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 of 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.
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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. For the first time, the
Derby day races were simulcast in state. 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-mutuel 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% 2%
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.
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
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
compared to 73 racing days in 1994. 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.
The Company operated two live racing facilities and conducted
simulcast wagering at four locations during the nine month period ended
September 30, 1995. The Company began its operations in Indiana on September 1,
1994. The chart below summarizes the results of these operations.
<TABLE>
<CAPTION>
KENTUCKY INDIANA
------------------------------ ----------------------------
Nine Months Nine Months Nine Months Nine Months
Ended Sept 30, Ended Sept 30, Increase Ended Sept 30, Ended Sept 30, Increase
1995 1994 (Decrease) 1995 1994 (Decrease)
------------- -------------- -------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
ON-TRACK
- --------
Number of Race Days 50 49 2% 126 23 448%
Attendance 731,731 729,782 0% 204,114 71,236 187%
Handle $94,879,612 $98,055,351 -3% $20,492,181 $5,638,343 263%
Average daily attendance 14,635 14,894 -2% 1,620 3,097 -48%
Average daily handle $1,897,592 $2,001,130 -5% $162,636 $245,145 -34%
Per capita handle $129.67 $134.36 -3% $100.40 $79.15 27%
INTERTRACK/SIMULCAST HOST (SENDING)*
- -----------------------------------
Number of Race Days 50 49 2% 108 N/A
Handle $149,662,366 $107,272,111 40% $7,802,709
Average daily handle $2,993,247 $2,189,227 37% $72,247
INTERTRACK/SIMULCAST RECEIVING
- -------------------------------
Number of Race Days 163 168 -3 542** N/A
Attendance 377,254 344,013 10% 225,091
Handle $89,630,038 $71,644,350 25% $63,046,805
Average daily attendance 2,314 2,048 13% 415
Average daily handle $549,878 $426,454 29% $116,323
Per capita handle $237.59 $208.36 14% $280.09
<FN>
* Includes common/commingle pools only.
** The Company's operations in Indiana include three separate simulcast
wagering facilities.
</FN>
</TABLE>
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
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. With the advent of whole card simulcasting, the Company
conducts interstate simulcasting virtually year around on multiple racing
programs each day from around the nation. An increase in the number of days is
expected to enhance operating results.
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 nine
months 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 full year of
operation. Since January, the Company also has opened off-track wagering
facilities in Merrillville and Fort Wayne, Indiana. A third facility, in
downtown Indianapolis opened October 25, 1995. Although the Company may apply
for a fourth location, the license for a fourth Indiana site has been
surrendered to the Indiana Horse Racing Commission.
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, start-up
costs and delays in opening the Company's off-track wagering facilities in
Indiana and lower than expected profits from operations in Indiana have impacted
year to date net income. In addition, Churchill Downs will not host the
Breeders' Cup this November as it did in 1994.
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1995 TO 1994
Gross pari-mutuel revenue during the nine months ended September 30,
1995 increased $18,253,778. The Company's subsidiary Hoosier Park L.P. generated
80 percent, or $13,585,798 of the increase in pari-mutuel revenue which when
combined with admissions, concessions, programs, and other revenue totalled
$15,417,933 in increased revenues. This is largely due to the live Standardbred
race meet which ran April 1, 1995 through August 20, 1995 and the live
Thoroughbred meet which began August 26 and continued through October 28, 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 25 in Merrillville, Indiana and April 26 in Ft. Wayne, Indiana
whole card simulcasting was conducted for a total of 542 operating days.
Simulcasting has been well received in Indiana with an average daily handle of
$116,323.
The advent of whole card simulcasting in the state of Kentucky
helped increase intertrack/simulcast receiving revenue by $2,459,000. 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. Revenues from the
Derby Expansion Area, referred to as Marquee Village, were up 20% 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.
OPERATING REVENUE SUMMARY
Nine Months Nine Months
Ended % To Ended % To 1995 VS 1994
Sept. 30, Total Sept. 30, Total $ %
1995 Revenue 1994 Revenue Change Change
----------- ------- ---------- ------- ------ ------
Pari-Mutuel Revenue:
On-track $16,456,238 23% $15,433,760 31% $1,022,478 7%
Intertrack-Host 4,383,123 6% 3,559,638 7% 823,485 23%
Simulcast Receiving 20,800,392 29% 6,039,361 12% 14,761,031 244%
Simulcast Host 5,911,418 8% 4,264,634 9% 1,646,784 39%
----------- --- ------------ --- ---------- ----
47,551,171 66% 29,297,393 59% 18,253,778 62%
Admission & Seat Revenue 11,089,122 16% 10,377,969 21% 711,153 7%
License, Rights, Broadcast
& Sponsorship Fees 5,425,232 8% 4,952,772 10% 472,460 10%
Concession Commission 2,096,468 3% 1,630,049 3% 466,419 29%
Program Revenue 2,257,842 3% 1,200,766 2% 1,057,076 88%
Derby Expansion Area 998,940 2% 832,050 2% 166,890 20%
Other 1,751,174 2% 1,619,374 3% 131,800 8%
----------- ---- ----------- ---- ----------- ----
$71,169,949 100% $49,910,373 100% $21,259,576 43%
=========== ==== ============ ==== =========== ====
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
Direct meeting expenses increased $16,854,160 during the nine 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 $14.8 million increase in
simulcasting revenue. Other meet expense rose by $654,804, primarily due to
expenses at the Indiana operations.
MEETING EXPENSE SUMMARY
Nine Months Nine Months
Ended % To Ended % To 1995 VS. 1994
Sept. 30, Total Sept.30, Total $ %
1995 Expense 1994 Expense Change Change
------------ ------- --------- ------- ------ ------
Purses:
On-track $8,862,830 20% $8,104,826 28% $758,004 9%
Intertrack-Host 2,032,000 5% 1,573,946 5% 458,054 29%
Simulcast-Receiving 6,426,782 14% 2,737,140 10% 3,689,642 135%
Simulcast-Host 3,088,528 7% 2,174,963 8% 913,565 42%
------------ ---- ----------- --- ---------- ----
$20,410,140 46% $14,590,875 51% $5,819,265 40%
Wages and Contract Labor 11,374,990 25% 7,026,077 25% 4,348,913 62%
Advertising, Marketing
& Publicity 1,325,905 3% 1,640,961 6% (315,056) -19%
Racing Relations & Services1,070,354 2% 1,026,906 4% 43,448 4%
Totalisator Expense 707,819 2% 403,079 1% 304,740 76%
Simulcast Host Fee 3,807,240 8% -- -- 3,807,240 --
Audio/Video & Signal
Distribution Expense 1,696,638 4% 813,691 3% 882,947 109%
Program Expense 1,532,121 3% 723,306 3% 808,815 112%
Spectrum Training Center 408,486 1% -- -- 408,486 --
Derby expansion area 404,478 1% 313,920 1% 90,558 29%
Other meeting expense 2,319,297 5% 1,664,493 6% 654,804 39%
----------- ---- ----------- ---- ----------- ---
$45,057,468 100% $28,203,308 100% $16,854,160 60%
=========== ==== =========== ==== =========== ===
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<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 $3,571,418. 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 primarily to the
addition of the Hoosier Park facility. Marketing and community relations expense
has increased due to the extensive promotion efforts surrounding the Dan Patch
Invitational, the feature race of Hoosier Park's Standardbred meet and the
introduction of Indiana's first Thoroughbred meet, featuring the inaugural
Indiana Derby. The Company also incurred various marketing expenses related to
the opening of the downtown Indianapolis off-track wagering facility. Taxes and
license fees have increased primarily due to property taxes at Hoosier Park.
Professional fees are up $197,393 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.
SELLING, GENERAL AND ADMINISTRATIVE
Nine Months Nine Months
Ended % To Ended % To 1995 VS. 1994
Sept. 30, Total Sept. 30, Total $ %
1995 Expense 1994 Expense Change Change
----------- ------- ---------- ------- ------- ------
Wages, Benefits,
Payroll, Taxes and
Contract Labor $ 4,233,365 28% $ 3,548,730 31% $ 684,635 19%
Depreciation and
Amortization 3,401,628 23% 2,240,095 20% 1,161,533 52%
Insurance 1,272,427 9% 1,068,786 9% 203,641 19%
Maintenance 1,128,888 8% 1,226,058 11% ( 97,170) -8%
Utilities 1,544,668 10% 1,183,321 11% 361,347 31%
Marketing & Community
Relations 1,001,570 7% 255,526 2% 746,044 292%
Taxes and License Fees 660,047 4% 246,804 2% 413,243 167%
Professional Fees 525,948 4% 328,555 3% 197,393 60%
Business Development 169,152 1% 576,453 5% (407,301) -71%
Other 964,295 6% 656,242 6% 308,053 47%
----------- ------ ----------- ---- ---------- ----
$14,901,988 100% $11,330,570 100% $3,571,418 32%
=========== ==== =========== ==== ========== ====
14 of 20
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
Other income decreased by $37,675 due 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.
OTHER INCOME AND EXPENSE
Nine Months Nine Months
Ended % To Ended % To 1995 VS. 1994
Sept. 30, Total Sept.30, Total $ %
1995 Expense 1994 Expense Change Change
---------- ------- --------- ------- --------- ------
Interest Income $ 165,085 45% $ 188,504 46% $ (23,419) -12%
Miscellaneous, Net 203,454 55% 217,710 54% $ (14,256) - 7%
---------- ----- --------- ---- ---------- ----
$ 368,539 100% $ 406,214 100% $ (37,675) - 9%
---------- ---- --------- ---- ---------- ----
Interest Expense $ 405,801 100% $125,344 100% $280,457 224%
========= ==== ======== ==== ======== =====
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1995 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1994:
Gross revenues from operations increased $5.7 million due largely to
a full quarter of Indiana operations. Hoosier Park and its off-track wagering
facilities generated a total of $6.6 million in revenue in the third quarter, an
increase of $5.1 million for the period. Likewise, activity at the Sports
Spectrum in Louisville increased by $600,000 for the quarter compared to prior
year.
Operating expenses increased $4.8 million due primarily to wages at
the Indiana operations coupled with higher purses and simulcast host fees, both
of which are directly related to pari-mutuel revenue. These three expenses
totalled $3.7 million of the increase during the quarter.
Selling, and general administrative costs increased $1.5 million primarily due
to the expenses incurred at Hoosier Park, including salaries, taxes,
depreciation and marketing expenses.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1995 TO THREE MONTHS ENDED
JUNE 30, 1995
Revenues and expenses are always lower in the third quarter compared
to the second quarter due to the seasonality of the business. Gross revenues
from race meetings totalled $13.2 million, down $36.1 million primarily due to
no live racing at Churchill Downs. Similarly, direct meet expenses dropped by
$13.9 million during the quarter. Meet expenses remained high as a percent of
revenue due to the continuation of Hoosier Park's live meet throughout the third
quarter. Hoosier Park's margins, being a first year operation, are not as
favorable as those at Churchill Downs.
15 of 20
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
Selling, general and administrative costs for the third quarter of
1995 were $4.9 million, down from $5.9 million in the quarter ended June 30,
1995. The increases in the second quarter were largely due to expenses
associated with the Kentucky Derby, opening of the Ft. Wayne OTB operation and
the start of the Standardbred meet at Hoosier Park. Selling, general and
administrative expenses for the year of $14.9 million are averaging $4.9 million
per quarter.
SIGNIFICANT CHANGES IN THE BALANCE SHEET-DECEMBER 31, 1994 TO SEPTEMBER 30, 1995
The cash balances at September 30,1995 were $1,076,635 higher than
December 31, 1994 due to the cash generated during 50 live race days at
Churchill Downs, principally Kentucky Derby and Oaks weekend, and 126 live race
days at Hoosier Park.
Accounts receivable at September 30, 1995 were $1,050,756 lower than
on December 31, 1994. All Kentucky Oaks and Derby ticket receivables, invoiced
in November and partially outstanding at December 31, had been collected as of
September 30, 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 facilities in Ft. Wayne and downtown
Indianapolis, Indiana. Hoosier Park held its 1995 harness meet between April 1
and August 20, 1995 and began running Indiana's first Thoroughbred meet in
September 1995.
Accounts payable and accrued expenses at September 30, 1995 were
$2,020,444 higher than at December 31, 1994 due to horsemen's balances for the
live race meeting at Hoosier Park and expenses related to the operation and
construction of our Indiana facilities. Additionally, purses payable have
increased due to the increase in whole card simulcasting.
Deferred revenue is lower at September 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 September 30, 1995 relate to the estimated
expense due for the nine 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.
16 of 20
<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-SEPTEMBER 30, 1994 TO SEPTEMBER 30,
1995
Cash balances at September 30, 1995 are $2,725,935 below September
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 September 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 $12,342,826.
The Company's Indiana facilities accounted for the majority of the increase.
Capital improvements at the Sports Spectrum training operation plus improvements
at Churchill Downs were responsible for $2.7 million.
Accounts payable and accrued expenses increased by $1,386,079
primarily due to the amount payable related to the construction and operation of
our Indiana facilities and the settlement liability related to whole card
simulcasting. Deferred revenue is down $2,544,586 to the advance sales of
tickets for the 1994 Breeders' Cup Day, which was held at Churchill Downs last
year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital for the nine months ended September 30, 1995 and
September 30, 1994 is as follows:
SEPTEMBER 30,
1995 1994
---- ----
Working capital $( 6,786,249) $(10,718,574)
Working capital ratio .45 to 1 .42 to 1
The working capital deficiency is primarily a result of nature and
seasonality of the Company's business. Cash flows provided by operations were
$11,737,840 for the nine months ended September 30, 1995; $11,399,973 for the
twelve months ended December, 1994; and $10,109,400 for the nine months ended
September 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 $8,000,000 and
$10,000,000. The primary capital improvement in 1995 has been the addition of
Thoroughbred racing facilities at Hoosier Park. Hoosier Park hosted its first
Thoroughbred race meet for 42 days from September 1, 1995 through October 28,
1995.
17 of 20
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
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 used to fund the
construction of the Hoosier Park racing facility in Anderson, Indiana. The
Company has funded the construction of three additional satellite wagering
facility sites approved by the Indiana Horse Racing Commission and $3.8 million
to construct improvements to allow for Thoroughbred racing at Hoosier Park. The
satellite facilities at Merriville and Ft. Wayne opened in January and April
1995 respectively. The third site, in downtown Indianapolis, opened in October
1995.
The Company has a $20,000,000 unsecured line-of-credit available
with $14 million available at September 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.
18 of 20
<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 September 30, 1994, no Form 8-K's were
filed by the Company.
19 of 20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this admendment to be signed on its behalf by the
undersigned hereunto duly authorized.
November 14, 1995 /S/THOMAS H. MEEKER
Thomas H. Meeker
President
November 14, 1995 /S/VICKI L. BAUMGARDNER
Vicki L. Baumgardner, Treasurer
(Principal Financial and
Accounting Officer)
20 of 20
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,597,668
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0
0
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<INCOME-TAX> (4,470,000)
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