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: March 31, 1996
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 May 10, 1996
was 3,784,605 shares.
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<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, March 31, 1996,
December 31, 1995 and March 31, 1995 3
Condensed Consolidated Statements of Operations and Changes in
Retained Earnings for the three months ended March 31, 1996
and 1995 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 5
Condensed Notes to Consolidated Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-14
PART II. OTHER INFORMATION AND SIGNATURES
ITEM 6. Exhibits and Reports on Form 8-K 15
Signatures 16
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<PAGE>
<TABLE>
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31 December 31 March 31
ASSETS 1996 1995 1995
----------- ------------ -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 7,305,232 $ 5,856,188 $ 4,347,999
Refundable income taxes 1,186,350 -- 1,189,992
Accounts receivable 957,397 2,098,901 1,014,082
Prepaid expenses and other current assets 675,686 549,820 948,899
------------- ------------- -------------
Total current assets 10,124,665 8,504,909 7,500,972
Other assets 4,498,318 4,632,044 5,002,391
Plant and equipment 98,144,122 97,451,463 92,466,674
Less accumulated depreciation (34,115,683) (33,101,934) (30,984,865)
----------- ----------- -----------
64,028,439 64,349,529 61,481,809
$78,651,422 $77,486,482 $73,985,172
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 5,070,097 $ 70,097 $ 9,343,121
Accounts payable 8,715,251 6,517,508 7,202,391
Accrued expenses 3,358,596 3,310,882 1,189,927
Dividends payable -- 1,892,302 --
Income Taxes Payable -- 1,049,508 --
Deferred revenue 10,796,479 6,098,541 9,769,565
----------- ----------- -----------
Total current liabilities 27,940,423 18,938,838 27,505,004
Notes payable 351,079 6,351,079 1,198,059
Outstanding mutuel tickets (payable to Common-
wealth of Kentucky after one year) 2,413,548 2,256,696 1,522,658
Deferred compensation 882,762 871,212 1,041,929
Deferred income taxes 2,415,500 2,415,500 2,248,000
Minority interest -- -- 104,000
Stockholders' equity:
Preferred stock, no par value;
authorized, 250,000 shares; issued, none
Common stock, no par value; authorized, 10MM
shares, issued 3,784,605 shares, March 31, 1996
and 3,783,318 shares, December 31, 1995 and
3,773,930 shares, March 31, 1995 3,504,388 3,504,388 3,504,388
Retained earnings 41,413,247 43,486,460 37,403,350
Deferred compensation costs (204,525) (272,691) (477,216)
Note receivable for common stock (65,000) (65,000) (65,000)
----------- ----------- -----------
44,648,110 46,653,157 40,365,522
----------- ----------- -----------
$78,651,422 $77,486,482 $73,985,172
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
CHANGES IN RETAINED EARNINGS
for the three months ended March 31, 1996 and 1995
(Unaudited)
THREE MONTHS ENDED MARCH 31
1996 1995
------------ ------------
Net revenues $11,550,753 $ 8,612,607
Operating expenses 13,220,218 9,945,737
----------- -----------
Gross profit (loss) (1,669,465) (1,333,130)
Selling, general and administrative expenses 1,773,867 1,529,744
Operating loss (3,443,332) (2,862,874)
Other income and expense:
Interest income 44,003 29,976
Interest expense (96,198) (154,594)
Miscellaneous, net 47,314 69,215
----------- -----------
(4,881) (55,403)
Loss before income tax benefit (3,448,213) (2,918,277)
Federal and state income taxes 1,375,000 1,146,000
----------- -----------
Net loss $(2,073,213) $(1,772,277)
Retained earnings, beginning of period 43,486,460 39,175,627
Retained earnings, end of period $41,413,247 $37,403,350
=========== ===========
Net loss per share (based on weighted $ (.55) $ (.47)
====== ======
average shares outstanding of
3,786,062 and 3,784,832,
respectively)
The accompanying notes are an integral part of the financial statements.
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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
------------ ------------
Cash flows from operating activities:
Net loss $(2,073,213) $( 1,772,277)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,147,680 1,100,444
Increase (decrease) in cash resulting from
changes in operating assets and liabilities:
Prepaid income taxes (1,186,350) (1,189,992)
Accounts receivable 1,141,504 1,263,137
Prepaid expenses and other current
assets (125,866) (207,339)
Deferred revenue 4,697,938 3,979,205
Accounts payable, accrued expenses,
and other 1,432,516 1,476,316
Other assets (204) (238,876)
---------- ----------
Net cash provided (used) by
operating activities 5,034,005 4,410,618
Cash flows from investing activities:
Additions to racing plant and equipment, net (692,659) (2,928,973)
Net cash used in investing activities (692,659) (2,928,973)
Cash flows from financing activities:
Increase (decrease) in bank notes
payable, net (1,000,000) 2,236,980
Dividend paid (1,892,302) (1,891,659)
Net cash provided (used) in financing
activities (2,892,302) 345,321
---------- -----------
Net increase (decrease) in cash and
cash equivalents 1,449,044 1,826,966
Cash and cash equivalents, beginning of period 5,856,188 2,521,033
---------- -----------
Cash and cash equivalents, end of period $7,305,232 $4,347,999
========== ==========
Supplemental Disclosures of cash flow information:
Cash paid during the period for:
Interest $ 168,700 $ 121,965
Income taxes $ 500,000 $ --
The accompanying notes are an integral part of the financial statements.
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO FINANCIAL STATEMENTS
for the three months ended March 31, 1996 and 1995
(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.
During the three months ended March 31, 1996 the Company conducted
simulcast receiving wagering for 367 location days. The Company operated
simulcast wagering at its Sports Spectrum site for 67 days during the quarter,
compared to 68 days in 1995. Through its subsidiary, Hoosier Park L.P., the
Company conducted simulcast wagering at its racetrack in Anderson, Indiana and
at three simulcast wagering facilities located in Merriville, Ft. Wayne and
Indianapolis for a total of 300 days compared to 134 days in 1995 when only two
facilities were operating.
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. The year end
condensed balance sheet data was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. Accordingly, the reader of this Form 10-Q may wish to refer to the
Company's Form 10-K for the period ended December 31, 1995 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 through its wholly owned subsidiary
Churchill Downs Management Company (CDMC) 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.
(HPLP) in return for an 87% general partnership interest.
In December 1995, the Company entered into a Partnership Interest Purchase
Agreement with Conseco HPLP, L.L.C. ("Conseco") for the sale of 10% of the
Company's partnership interest in HPLP to Conseco. The purchase price for the
10% partnership interest will be $218,000 and the transaction also includes the
acquisition of a 10% interest in the debt owed by HPLP to CDMC at face value of
debt at the date of the closing (approximately $2,530,000). The purchase is
subject to the approval of the Indiana Horse Racing Commission (IHRC). Following
the purchase, Conseco and Pegasus will be limited partners of HPLP and Anderson
will continue to be the sole general partner of HPLP. Such a sale is not
anticipated to have any material effect on operations in 1996.
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO FINANCIAL STATEMENTS
for the three months ended March 31, 1996 and 1995 (cont'd)
(Unaudited)
From the date of the closing of the initial option transaction through
December 31, 1998, Conseco will have an option to purchase from Anderson an
additional 47% partnership interest in HPLP. The purchase price of the
additional partnership interest will be $22,156,000 of which approximately
$6,222,000 will be allocated to the purchase of the partnership interest and
approximately $15,934,000 will be allocated to the acquisition of debt owed by
HPLP to CDMC. This purchase is also subject to the approval of the IHRC.
Following this purchase, Conseco will be the sole general partner of HPLP, and
Anderson and Pegasus, a 13% limited partner, will be limited partners of HPLP.
CDMC will continue to have a long-term management agreement with HPLP pursuant
to which CDMC has operational control of the day-to-day affairs of Hoosier Park
and its related simulcast operations.
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 March 31, 1996 was 6.375%. Borrowings are
payable on January 31, 1997. There was $5.0 million outstanding at March 31,
1996 and $9.0 million outstanding at March 31, 1995.
5. On January 22, 1992, the Company acquired certain assets of Louisville
Downs, Incorporated 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. All of the $1,000,000 hold back has been
utilized as of December 31, 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 in the prior year 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
This discussion and analysis contains both historical and forward
looking information. The forward looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward looking statements may be significantly impacted by certain risks and
uncertainties described herein, and in the Company's annual report on form 10-K
for the year ended December 31, 1995.
For many years, the Company has conducted live Spring and Fall race
meetings for Thoroughbred horses in Kentucky. 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 21% of total on-track pari-mutuel wagering and 25% of total
on-track attendance for the Company's Kentucky operations. For the first time in
1995, the Derby day races were simulcast to all racetracks and simulcast
facilities in the state of 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. 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% 3%
Intertrack/simulcast receiving 7% 18%
In Kentucky, licenses to conduct Thoroughbred race meetings and to
participate in intertrack 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 Kentucky, the Company has been granted a license to conduct live
racing during the period from April 27, 1996, through June 30, 1996, and from
October 27, 1996, through November 30, 1996, for a total of 78 racing days.
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 Indiana, the Company has received a license to conduct live
racing for a total of 133 racing days, including 80 days of Standardbred racing
from April 25, 1996 through September 2, 1996, and 53 days of Thoroughbred
racing from September 20, 1996 through November 30, 1996.
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued)
The company operated as a receiving track for intertrack/simulcast-
ing as follows:
<TABLE>
INTERTRACK/SIMULCAST RECEIVING
<CAPTION>
Three Months Three Months Increase
1996 1995 (DECREASE)
------------ ------------ ----------
<S> <C> <C> <C>
KENTUCKY 67 SIMULCAST DAYS 68 SIMULCAST DAYS (1) DAY
- -------- ----------------- ----------------- -------
Attendance 152,310 167,010 (14,700)
Handle $40,332,802 $38,371,523 $1,961,279
Average daily attendance 2,273 2,456 (183)
Average daily handle $601,982 $564,287 $37,695
Per capita handle $264.81 $229.76 $35.05
INDIANA 300 SIMULCAST DAYS 134 SIMULCAST DAYS 166 DAYS
- ------- ------------------ ------------------ --------
Attendance 102,169 75,733 26,436
Handle $35,242,965 $22,059,377 $13,183,588
Average daily attendance 341 565 (224)
Average daily handle $117,810 $164,622 $(46,812)
Per capita handle $344.95 $291.28 $ 53.67
</TABLE>
The number of receiving days is increasing because of additional
off-track wagering facilities being opened in Indiana. During the first quarter
1995, simulcast wagering was only being conducted at Hoosier Park in Anderson,
Indiana and beginning January 25, 1995 at Merrillville, Indiana. Two additional
simulcast facilities were opened during 1995, one in Ft. Wayne on April 25,
1995, and the other in Indianapolis, Indiana in October 1995. Simulcast wagering
was conducted at all four facilities throughout the first quarter of 1996. For
1996, 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-round on multiple
racing programs each day from around the nation. An increase in the number of
days is expected to enhance operating results. Hoosier Park will ultimately be
supported by four simulcast facilities operating year-round showing races
originating from Hoosier Park's facility in Anderson, Indiana and conducting
whole card simulcasting similar to that conducted at the Churchill Downs Sports
Spectrum in Louisville.
Because the business of the Company is seasonal, the number of
persons employed will vary throughout the year. Approximately 600 individuals
are employed on a permanent year-round basis. During the live race meetings, as
many as 2,600 persons are employed.
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued)
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 TO 1995
Net revenue during the three months ended March 31, 1996 increased
$2,938,146. Indiana operations contributed 86%, or $2,537,368 to the total
increase, with simulcast receiving showing the largest increase at $2,257,736.
During this period, all of the Indiana OTB facilities were operational as
compared to two facilities during the same period in 1995.
Concession commission and program revenue both show increases due
largely to the Indiana operations. Indiana had four simulcast facilities
operating in 1996 compared to only two in 1995. The increase in other revenue is
due to the portion of Indiana riverboat admissions tax that is payable to horse
racing per Indiana state law.
<TABLE>
<CAPTION>
NET REVENUE SUMMARY
Three Months Three Months 1996 VS 1995
Ended % To Ended % To $ %
March 31, Total March 31, Total
1996 REVENUE 1995 Revenue Change Change
---------------- ------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Pari-Mutuel Revenue
Intertrack/Simulcast-
Receiving $10,152,396 88% $7,544,404 88% $2,607,992 35%
Admission & Seat Revenue 344,704 3% 308,763 4% 35,941 12%
License, Rights, Broadcast
& Sponsorship Fees 113,736 1% 106,068 1% 7,668 7%
Concession Commission 201,849 2% 128,825 1% 73,024 57%
Program Revenue 533,374 4% 368,080 4% 165,294 45%
Other 204,694 2% 156,467 2% 48,227 31%
----------- ---- ---------- ---- ---------- ------
$11,550,753 100% $8,612,607 100% $2,938,146 34%
=========== ==== ========== ==== ========== ======
</TABLE>
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued)
Operating expenses increased $3,274,481 during the quarter. The
negative gross margin which is typical for the first quarter of the year
improved in percentage terms by 1% to (14.5%) in 1996 from (15.5%) in 1995. This
is principally due to revenue increases at the Sports Spectrum. These revenues,
although at lower margins, have leveraged some of the operating expenses which
do not vary directly with handle. Changes in specific expense categories follow.
Purse expense increased $755,708 as a direct result of the increased
handle from whole card simulcasting with Indiana increasing $664,179. 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.
Wages increased $409,625 primarily due to Indiana operations
increasing $252,650. The increase in Indiana is the result of two additional
off-track betting parlors in operation during the quarter when compared to last
year. The majority of the $348,972 increase in Advertising, Marketing and
Publicity can also be attributed to the marketing of the additional wagering
facilities. Approximately $300,000 was spent as part of an intensive marketing
campaign in Indiana with approximately $150,000 being spent in each of the Fort
Wayne and Hoosier Park (Anderson, Indiana) areas. Response to the marketing
efforts was positive and the goal is to maintain increased handle as marketing
support is reduced.
Audio, Video and Signal Distribution expense increased $58,324 due
primarily to the two additional facilities in Indiana. Totalisator and Simulcast
Host Fee expenses increased for the quarter $131,238 and $586,374, respectively.
These expenses are related to the operation of the off-track wagering facilities
in both Kentucky and Indiana. Totalisator expense is generated based on total
wagers taken at the facilities. Simulcast Host Fees are paid to the track whose
live races are being simulcast at the facilities. As total wagers increase,
these expenses, along with purses, increase accordingly. In Kentucky simulcast
host fees increased relative to combined handle as a result of a shift in
wagering from in-state to out-of-state racing cards. This was primarily the
result of winter weather conditions in Kentucky which required racing in
Kentucky to be canceled several times throughout the quarter. This shift
translates to slimmer margins because no simulcast fees are paid on in-state
racing, and in-state purses are calculated at a lower rate.
Program expenses increased $137,223 for the quarter. This is
primarily attributed to higher paper cost in Kentucky which resulted in an
increase of $65,180 and the addition of two Indiana facilities as compared to
the same period in 1995. Indiana margins on programs have improved somewhat from
the prior year while Kentucky margins have declined.
Maintenance and Utilities increased $198,946 and $246,030,
respectively. Maintenance at the Kentucky facilities represents $172,642 of the
increase due to additional maintenance in the areas of pest control, fire
protection and general maintenance. These expenses are normally incurred prior
to the beginning of a race meeting and are considered by management to be a
timing fluctuation. General maintenance at the Indiana Facilities increased
approximately $26,000. Utilities increased overall due to the unseasonably cold
winter temperatures and the additional two facilities in Indiana.
The decrease in Insurance, Taxes and License Fees can be attributed
to savings generated in Kentucky by a change in insurance carriers partially
offset by the insurance requirements for the two additional OTB facilities in
Indiana. Facility rent in 1996 is attributable to the Indianapolis simulcast
facility. Other meet expenses are primarily due to expense related to the
additional Indiana facilities and partly due to the timing of expenses related
to the preparations for live racing in both Kentucky and Indiana.
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<TABLE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued)
<CAPTION>
OPERATING EXPENSE SUMMARY
Three Months Three Months
Ended % To Ended % To 1996 VS. 1995
March 31, Total March 31, Total $ %
1996 Expense 1995 Expense Change Change
---------- --------- ---------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Purses Intertrack and
Simulcast-Receiving $3,258,188 25% $2,502,480 25% $ 755,708 30%
Wages, Contract Labor, Taxes
and Benefits 2,611,589 20% 2,201,964 22% 409,625 19%
Advertising, Marketing
& Publicity 514,439 4% 165,467 2% 348,972 211%
Racing Relations & Services 45,723 0% 68,579 1% (22,856) -33%
Totalizator Expense 266,379 2% 135,141 1% 131,238 97%
Simulcast Host Fee 2,086,009 16% 1,499,635 15% 586,374 39%
Audio/Video & Signal
Distribution Expense 273,855 2% 215,531 2% 58,324 27%
Program Expense 429,467 3% 292,244 3% 137,223 47%
Depreciation & Amortization 1,147,680 9% 1,100,444 11% 47,236 4%
Insurance, Taxes & License
Fees 517,892 4% 535,482 5% (17,590) -3%
Maintenance 419,931 3% 220,985 2% 198,946 90%
Utilities 640,644 5% 394,614 4% 246,030 62%
Derby Expansion Area 199,431 1% 172,224 2% 27,207 16%
Facility Rent 190,554 1% -- 0% 190,554 100%
Other meeting expense 618,437 5% 440,947 5% 177,490 40%
----------- ---- ----------- ---- ---------- ----
$13,220,218 100% $ 9,945,737 100% $3,274,481 33%
=========== ==== =========== ==== ========== ====
</TABLE>
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued)
Selling, general and administrative expenses rose $244,123. Wages,
benefits, payroll taxes, and contract labor increased by $135,000 in Indiana
primarily due to increased staffing in marketing, public relations, operations
and finance plus general wage and benefit increases in both Kentucky and
Indiana. Other overhead expenses, which include professional fees, business
development, meals and travel increased marginally over 1995.
Interest expense is down $58,396 as positive cash flow from
operations has allowed the Company to continue paying down its line of credit.
As of May 7, 1996 $5,000,000 outstanding balance on the line of credit has been
completely retired.
SIGNIFICANT CHANGES IN THE BALANCE SHEET DECEMBER 31, 1995 TO MARCH 31, 1996
The increase in cash balances reflect the collection of advance
ticket sales for the Kentucky Derby and Oaks, as well as cash balances
maintained for operations at the Company's Indiana locations.
Accounts receivable at December 31, 1995 were $1,141,504 higher than
at March 31, 1996 due to the Fall meeting purse supplement due from the State
and simulcasting receivables which were received in early January, 1996,
partially offset by collection of advance ticket sales for the Kentucky Derby.
Plant and equipment increased $692,659 as a result of routine
capital spending throughout the Company. There were no major capital projects
during the quarter.
Accounts payable and accrued expenses were higher at March 31, 1996,
due primarily to the purse liability related to whole card simulcasting.
Deferred revenue is higher at March 31, due to the significant
amount of admission and seat revenue that had been received in advance for the
May 1996 Kentucky Derby and Oaks.
Notes payable are $1,000,000 lower at March 31, 1996 as positive
cash flow has allowed the Company to reduce its outstanding amount of credit.
13 of 16
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CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued)
SIGNIFICANT CHANGES IN THE BALANCE SHEET MARCH 31, 1995 TO MARCH 31, 1996
Cash and cash equivalents increased from March 31, 1995 to March 31,
1996 by $2,957,233 due to the declining need for cash to finance Indiana
operations and the lack of any major construction projects.
Plant & equipment increased during the year by $2,546,630, net of
depreciation. The Company's Indiana off-track wagering facilities and
Thoroughbred improvements at Hoosier Park accounted for the majority of these
additions.
Accounts payable and accrued expenses increased by $3,681,529
primarily due to the settlement liability related to whole card simulcasting,
and the purses payable related to the overall increase in simulcast wagering
plus purses and trade payables for the two additional off-track wagering
facilities in Indiana.
Notes payable have decreased by $5,120,004 due to the Company's
receipt of ticket revenue related to the 1996 Kentucky Derby and Kentucky Oaks
which has been applied, in part, to the outstanding line of credit.
LIQUIDITY AND CAPITAL RESOURCES
Working capital for the three months ended March 31, 1996 and March
31, 1995 is as follows:
MARCH 31
1996 1995
------------------------------
Working capital (deficiency) $(17,815,758) $(20,004,032)
Working capital ratio .36 to 1 .27 to 1
Working capital is primarily a result of the nature and seasonality
of the Company's business. Cash flows provided by operations were $5,034,005 for
the three months ended March 31, 1996, $16,540,123 for the twelve months ended
December 31, 1995, and $4,410,618 for the three months ended March 31, 1995.
Management believes cash flows from operations during 1996 and funds available
under the Company's unsecured line of credit will be sufficient to fund dividend
payments (historically about $1,900,000) and additions and improvements to the
racing plant and equipment which are expected to be approximately $3,000,000.
The Company has a $20,000,000 unsecured line of credit available
with $15 million available at March 31, 1996 to meet working capital and other
short-term requirements. As of May 7, 1996 the full $20,000,000 line of credit
is available to the Company. Management believes that the Company has the
ability to obtain additional long-term financing should the need arise.
14 of 16
<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 March 31, 1996, no Form 8-K's were filed
by the Company.
15 of 16
<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.
CHURCHILL DOWNS INCORPORATED
May 15, 1996 /s/Thomas H. Meeker
----------------------------
Thomas H. Meeker
President
May 15, 1996 /s/Vicki L. Baumgardner
----------------------------
Vicki L. Baumgardner, Treasurer
(Principal Financial and Accounting
Officer)
16 of 16
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