SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 21, 1998
CHURCHILL DOWNS INCORPORATED
(Exact name of registrant as specified in its charter)
KENTUCKY 0-01469 61-0156015
-------- ------- ----------
(State or other (Commission File Number) (IRS Employer
jurisdiction if Identification No.)
incorporation or
organization)
700 Central Avenue, Louisville, KY 40208 (Address of
principal executive offices)
(Zip Code)
(502) 636-4400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
Explanatory Note:
This report on Form 8-K/A-2 is being filed to include herewith Exhibit 23,
Consent of Independent Accountants.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements of Business Acquired.
Consolidated Financial Statements
Racing Corporation of America
Year ended December 31, 1997
with Report of Independent Auditors
<PAGE>
Racing Corporation of America
Consolidated Financial Statements
Year ended December 31, 1997
Contents
Report of Independent Auditors.................................................1
Audited Consolidated Financial Statements
Consolidated Balance Sheet.....................................................2
Consolidated Statement of Income...............................................4
Consolidated Statement of Stockholder's Equity.................................5
Consolidated Statement of Cash Flows...........................................6
Notes to Consolidated Financial Statements.....................................7
<PAGE>
Report of Independent Auditors
Board of Directors
Racing Corporation of America
We have audited the accompanying consolidated balance sheet of Racing
Corporation of America (a wholly owned subsidiary of TVI Corp.) as of December
31, 1997, and the related consolidated statements of income, stockholder's
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Racing Corporation
of America at December 31, 1997, and the consolidated results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
April 7, 1998
<PAGE>
Racing Corporation of America
Consolidated Balance Sheet
December 31, 1997
Assets
Current assets:
Cash $ 280,576
Trade and other receivables 291,286
Prepaid expenses and other current assets 339,959
-------------
Total current assets 911,821
Property and equipment:
Land and improvements 3,247,939
Buildings and improvements 27,092,377
Equipment, furniture and fixtures 4,818,503
-------------
35,158,819
Less accumulated depreciation 11,384,236
-------------
Total property and equipment 23,774,583
Deferred income taxes 508,602
Other assets 280,572
-------------
Total assets $ 25,475,578
=============
2
<PAGE>
Racing Corporation of America
Consolidated Balance Sheet
December 31, 1997
Liabilities and stockholder's equity
Current liabilities:
Accounts payable and accrued expenses $1,852,959
Income taxes payable to affiliate 265,497
State income taxes payable 114,000
Current portion of long- term debt 47,999
Current portion of debt due to parent company 280,064
----------
Total Current liabilities: 2,560,519
Long-term debt, less current portion 54,794
Debt due to parent company, less current portion 342,008
Deferred income taxes 6,456,002
Other long-term liabilities 315,303
Stockholder's equity:
Preferred stock, $.01 par and $100,000 liquidation value per share:
Authorized shares- 2,000
Issued and outstanding shares-185 18,499,344
Common stock, $.01 par value:
Authorized shares- 3,000
Issued and outstanding shares-100 1
Additional paid-in capital 17,861,621
Accumulated deficit (20,580,082)
Receivable from former shareholder (33,932)
------------
Total stockholder's equity 15,746,952
------------
Total liabilities and stockholder's equity $25,475,578
============
See accompanying notes.
3
<PAGE>
Racing Corporation of America
Consolidated Statement of Income
Year ended December 31, 1997
Mutuel handle:
On-track $ 17,215,355
Intertrack 175,311,008
192,526,363
Returned to public 154,021,090
Commonwealth's share 3,800,287
Returned to tracks-
intertrack wagering 20,519,788
178,341,165
Net mutuel income 14,185,198
Admissions, concessions and other meeting 2,251,101
revenue
Rental income 1,464,814
Theater, tours, and other operating revenue 202,195
-------------
Gross revenue 18,103,308
Operating expenses:
Purses and stakes 6,687,473
Salary expense 4,041,463
Meeting expenses 2,218,802
Other operating expenses 563,229
-------------
13,510,967
Gross profit 4,592,341
General and administrative 2,923,204
Depreciation and amortization 1,037,101
Operating income 632,036
Other income (expense):
Interest expense (81,421)
Loss in investee company (100,000)
Other 270,509
Income before income taxes 721,124
Income tax expense 303,500
-------------
Net income $ 417,624
=============
See accompanying notes.
4
<PAGE>
Racing Corporation of America
Consolidated Statement of Stockholder's Equity
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Additional Receivable
Common Preferred Paid-In Accumulated from former
Stock Stock Capital Deficit shareholder Total
Balance at December 31, 1996 $ 1 $ 18,499,344 $18,987,621 (20,997,706) $ (33,932) $16,455,328
Net income - - - 417,624 - 417,624
Dividends paid 1 (1,126,000) (1,126,000)
-------- ------------ ------------ ------------- ------------ -----------
Balance at December 31, 1997 $ 1 $ 18,499,344 $17,861,621 $(20,580,082) $ (33,932) $ 5,746,952
======== ============ ============ ============= ============ ===========
</TABLE>
See accompanying notes.
5
<PAGE>
Racing Corporation of America
Consolidated Statement of Cash Flows
Year ended December 31, 1997
Operating activities
Net income $ 417,624
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 1,037,101
Deferred income taxes 189,500
Loss on disposal of property and equipment 15,800
Loss in investee company 100,000
-----------
Changes in operating assets and liabilities:
Receivables 79,245
Prepaid expenses and other current assets (1,893)
Accounts payable and accrued expenses (598,190)
-----------
Cash provided by operating activities 1,239,187
Investing activities
Purchases of property and equipment (282,305)
Proceeds on sale of equipment 750
-----------
Cash used in investing activities (281,555)
Financing activities
Proceeds from long-term debt 65,000
Principal payments on long-term debt (937,163)
Borrowings from affiliated company 978,913
Dividends paid to preferred stockholders (1,126,000)
Principal payments on notes payable-affiliated (1,578,927)
-----------
company
Cash used in financing activities (2,598,177)
-----------
Decrease in cash (1,640,545)
Cash at beginning of year 1,921,121
-----------
Cash at end of year $ 280,576
===========
Supplemental cash flow disclosures:
Interest paid $ 106,700
===========
See accompanying notes.
6
<PAGE>
Racing Corporation of America
Notes to Consolidated Financial Statements
December 31, 1997
1. Organization and Accounting Policies
Organization
Racing Corporation of America and its wholly owned subsidiary, Ellis Park Race
Course, Inc. (the Company) is wholly owned by TVI Corp. (TVI), a wholly owned
subsidiary of HTV Industries, Inc. (HTV). The Company is involved in various
activities related to the thoroughbred racing industry, including operating a
training and boarding facility in Lexington, Kentucky, and a thoroughbred horse
race track in Henderson, Kentucky. Intercompany accounts and transactions are
eliminated in the preparation of these consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Income Taxes
As the Company is included in the consolidated federal income tax return of HTV,
the amounts reflected as income taxes payable are due to an affiliate. Income
taxes are accounted for by the Company as if it filed a separate income tax
return. Deferred taxes are determined based on differences between the
consolidated financial statement and tax basis of assets and liabilities as
measured by the enacted tax rate which is expected to be in effect when the
differences reverse.
Property and Equipment
Property and equipment has been recorded at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets.
Estimated useful lives generally range from 20 to 40 years for buildings and 3
to 10 years for other property and equipment.
7
<PAGE>
Racing Corporation of America
Notes to Consolidated Financial Statements (continued)
1. Organization and Accounting Policies (continued)
Advertising Costs
The Company expenses advertising costs as they are incurred. Advertising expense
was $230,982 and $235,153 for 1997 and 1996, respectively.
2. Debt
Long-term debt payable to banks and other third parties consists of the
following at December 31, 1997:
Amounts due on various equipment loans with
interest rates ranging from 8.5% to 13% $102,793
Less Current portion 47,999
----------
$ 54,794
During 1997, the Company's subsidiary entered into an unsecured revolving credit
agreement with The Citizens National Bank of Evansville which provides for
borrowings of up to $2 million at prime plus 2% and had no outstanding balance
at December 31, 1997. This revolving credit agreement expires on April 30, 2000.
The credit agreement requires the Company, among other requirements, to maintain
a minimum net worth of $9 million and to have net income of at least $500,000 to
borrow under the credit agreement.
Maturities of long-term debt are as follows:
1998 $ 47,999
1999 19,920
2000 17,786
2001 17,088
-----------
$ 102,793
8
<PAGE>
Racing Corporation of America
Notes to Consolidated Financial Statements (continued)
3. Leases
The Company leases certain totalisator equipment under a noncancellable
operating lease expiring in 1999, which provides for contingent rentals based on
a percentage of pari-mutuel handle in excess of specified minimums. Certain
other equipment is also leased under noncancellable operating leases expiring in
various years. Rental expense for all operating leases follows:
Minimum rental $ 93,874
Contingent rentals 145,369
----------
$ 239,243
Future minimum annual lease payments under noncancellable operating leases with
initial or remaining terms of one year or more at December 31, 1997, are
approximately $93,874 in each of 1998 through 2000 and $31,291 in 2001.
4. Income Taxes
Income tax expense is comprised of the following:
Current--State $ 114,000
Deferred--Federal 189,500
----------
$ 303,500
Income tax expense differs from the normal statutory federal income tax on the
Company's pretax income principally due to state income taxes.
Significant components of the Company's deferred tax asset and liability include
differences between the book basis and the tax basis of property and equipment
and net operating loss carry forwards.
At December 31, 1997, the Company has non-restricted net operating loss carry
forwards of approximately $1.0 million that expire in the years 2005 through
2006.
9
<PAGE>
Racing Corporation of America
Notes to Consolidated Financial Statements (continued)
5. Transactions with Related Parties
During October 1997, the Company entered into a $665,000 loan agreement with
TVI. The note bears interest at a rate equal to the applicable federal rate as
published monthly by the IRS (approximately 6% at December 31, 1997) and is
secured by land and buildings with a net book value of approximately $5,030,000
at December 31, 1997. For the year ended December 31, 1997, the Company incurred
interest expense of $10,879 associated with this note.
Maturities on this indebtedness are as follows:
1998 $ 280,064
1999 284,369
2000 57,639
-----------
$ 622,072
6. Commitments and Contingencies
The Company is a party to certain claims and lawsuits with respect to various
matters. Although the actual liability is not determinable as of December 31,
1997, the Company believes that any liability resulting from all lawsuits and
claims in excess of amounts already provided for, should not have a material
adverse effect on its financial position.
The Company is liable under a contract with the Horseman's Association to make
certain capital improvements. At December 31, 1997, a $413,052 liability was
recorded for such capital improvements ($150,000 of which is classified as
current at December 31, 1997).
7. Preferred Stock
The Company issued 185 shares of preferred stock in 1992 at $100,000 per share.
The preferred stock has a $.01 par value per share and a value of $100,000 per
share plus accrued interest in the event of liquidation. The preferred stock
carries a 6% cumulative dividend. The shares are non-convertible and have no
voting rights. The Company paid dividends of $1,126,000 to preferred
stockholders in 1997. The aggregate amount of cumulative preferred dividends in
arrears is $5,155,096 at December 31, 1997.
10
<PAGE>
Racing Corporation of America
Notes to Consolidated Financial Statements (continued)
8. Subsequent Event
On March 28, 1998, TVI executed a stock purchase agreement with Churchill Downs
Incorporated (Churchill) whereby TVI agreed to sell all of its issued and
outstanding common and preferred shares of capital stock of Racing Corporation
of America to Churchill for $22 million. Management expects the transaction to
be closed on or before April 30, 1998.
9. Impact of Year 2000 (unaudited)
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time- sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on a recent assessment, the Company determined that it will be required to
modify or replace significant portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter. The Company presently believes that with modifications to existing
software and conversions to new software, the Year 2000 Issue will not pose
significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Company.
The Company has not estimated the total cost of the Year 2000 project, but does
not expect the cost to be material to the financial position of the Company.
11
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
B. Pro Forma Financial Information
Churchill Downs Incorporated
Unaudited Pro Forma Financial Information
The following unaudited Pro Forma Condensed Consolidated Balance
Sheet as of December 31, 1997 was prepared assuming that the acquisition of
Racing Corporation of America ("RCA") had occurred on December 31, 1997. The
Unaudited Pro Forma Condensed Consolidated Statement of Earnings for the year
ended December 31, 1997 was prepared assuming the RCA acquisition had occurred
on January 1, 1997. The RCA acquisition will be accounted for using the purchase
method of accounting. Under purchase accounting, tangible and identifiable
intangible assets acquired and liabilities assumed are recorded at their
respective fair values. The pro forma adjustments are based on preliminary
assumptions of the allocation of the purchase price as discussed in the Notes to
the Unaudited Pro Forma Condensed Consolidated Financial Statements.
The unaudited pro forma condensed consolidated financial statements are
based upon and should be read in conjunction with the historical consolidated
financial statements of Churchill Downs Incorporated ("CDI") , including notes
thereto, included in its report on Form 10-K for the year ended December 31,
1997 and the historical consolidated financial statements of RCA as of and for
the year ended December 31 , 1997, including notes thereto, included in this
Form 8-K. The unaudited pro forma condensed consolidated financial statements
presented herein are based on certain assumptions, are for informational
purposes only and do not necessarily reflect future results of operations and
financial position or what the results of operations or financial position would
have been had such transaction occurred at the beginning of the period
presented.
12
<PAGE>
Unaudited Pro Forma Condensed Consolidated Balance Sheet
December 31, 1997
<TABLE>
Historical
<S> <C> <C> <C> <C> <C>
Churchill Downs Pro Forma
Incorporated RCA Adjustments Pro Forma
Assets
Current Assets:
Cash and cash equivalents $ 9,280,233 $ 280,576 $(1,000,000) 6 $ 8,560,809
Accounts receivable 7,086,889 291,286 7,378,175
Other current assets 540,489 339,959 880,448
----------- ------------ ------------ -------------
Total current assets 16,907,611 911,821 (1,000,000) 16,819,432
Other assets 3,219,290 789,174 (22,400) 4 3,986,064
Plant and equipment, net 63,162,767 23,774,583 (1,977,783) 3 84,959,567
Intangibles, net 2,559,140 - 6,965,662 5 9,524,802
----------- ------------ ----------- -------------
$85,848,808 $ 25,475,578 $ 3,965,479 $115,289,865
=========== ============ =========== ============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 5,732,783 $ 1,852,959 $ 600,000 6 $ 8,185,742
Accrued expenses 7,937,575 7,937,575
Dividends payable 3,658,468 3,658,468
Income taxes payable 186,642 379,497 (379,497) 1 186,642
Deferred revenue 7,344,830 7,344,830
Long-term debt, current portion 79,805 328,063 (280,064) 2 127,804
------------ ------------ ------------ -------------
Total current liabilities 24,940,103 2,560,519 (59,561) 27,441,061
Long-term debt, due after
one year 2,633,164 396,802 (342,008) 2 18,837,958
16,150,000 6
Outstanding mutuel tickets
(payable after one year) 1,625,846 315,303 1,941,149
Deferred compensation 880,098 880,098
Deferred income taxes 2,377,100 6,456,002 (886,000) 4 7,947,102
Stockholders' equity:
Preferred stock 18,499,344 (18,499,344) 7 -
Common stock 3,614,567 1 (1) 7 8,464,567
4,850,000 6
Additional paid in capital 17,861,621 (17,861,621) 7 -
Retained earnings (deficit) 49,842,930 (20,580,082) 20,580,082 7 49,842,930
Note receivable for common
stock (65,000) (33,932) 33,932 2 (65,000)
------------ ------------- ------------ -------------
Total stockholders' equity 53,392,497 15,746,952 (10,896,952) 58,242,497
------------ ------------- ------------ -------------
$85,848,808 $ 25,475,578 $ 3,965,479) $115,289,865
============ ============= ============ =============
</TABLE>
13
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 1997
(1) To record the elimination of taxes payable not assumed by CDI.
(2) To record the elimination of inter company accounts not assumed by CDI.
(3) To record revaluation of property and equipment acquired to estimated
fair value.
(4) To record the revaluation of the deferred tax assets and liabilities to
their respective fair values upon occurrence of the acquisition.
(5) To record the excess of the purchase price over net assets acquired as
goodwill.
(6) To record the purchase price of the acquisition as follows:
Proceeds of line of credit $16,150,000
Cash on hand 1,000,000
Issuance of 200,000
shares 4,850,000
of CDI common stock
Liabilities associated with
transaction costs 600,000
Total purchase price $22,600,000
(7) To eliminate the historical equity of RCA.
(8) The pro forma adjustments are based on a preliminary allocation of the
purchase price. The actual purchase accounting adjustments could differ
based on the final appraisal of property and equipment and the final
determination of available elections related to the income tax treatment
of certain assets acquired and liabilities assumed in the transaction.
14
<PAGE>
Unaudited Pro Forma Condensed Consolidated Statement of Earnings
For the year ended December 31, 1997
<TABLE>
Historical
<S> <C> <C> <C> <C> <C>
Churchill Downs Pro Forma
Incorporated RCA Adjustments 6 Pro Forma
------------- ---- ------------ ---------
Net Revenues $118,907,367 $18,103,308 $137,010,675
Operating expenses:
Purses 39,718,374 6,687,473 46,405,847
Other direct expenses 55,705,722 6,823,494 $ 477,357 1 63,300,691
294,118 3
95,424,096 13,510,967 771,475 109,706,538
Gross profit 23,483,271 4,592,341 (771,475) 27,304,137
Selling, general and administrative 9,077,983 3,960,305 174,142 2 12,735,073
(477,357) 1
------------- ----------- ----------- ------------
Operating income 14,405,288 632,036 (468,260) 14,569,064
Other income(expense):
Interest income 575,084 575,084
Interest expense (332,117) (81,421) (1,018,000) 4 (1,431,538)
Miscellaneous income 325,087 170,509 495,596
------------- ------------ ----------- -------------
568,054 89,088 (1,018,000) (360,858)
Earnings before income tax provision 14,973,342 721,124 (1,486,260) 14,208,206
Federal and state income tax
provision 5,824,782 303,500 (524,847) 5 5,603,435
------------- ------------ ----------- -------------
Net earnings $ 9,148,560 $ 417,624 $ (941,413) $ 8,604,771
============= ============ =========== =============
Net earnings per share data:
Basic $1.25 $1.15
Diluted $1.25 $1.14
Weighted average shares
outstanding:
Basic 7,312,052 200,000 7,512,052
Diluted 7,320,670 200,000 7,520,670
</TABLE>
15
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Earnings
For the Year Ended December 31, 1997
(1) To reclassify depreciation and insurance expense for the Kentucky Horse
Center to operating expense to be consistent with the CDI classification
of such expenses.
(2) To record amortization of goodwill over 40 years.
(3) To record estimated incremental depreciation expense based on the fair
value of property and equipment which will be depreciated over their
estimated remaining useful lives.
(4) To record the estimated interest expense using an average 6.22 %
interest rate on borrowings necessary to finance the acquisition.
(5) To provide estimated federal and state income tax reduction from
incremental depreciation and interest expense using the statutory
federal and state tax rates.
(6) The pro forma adjustments are based on a preliminary allocation of the
purchase price. The actual purchase accounting adjustments could differ
based on the final appraisal of property and equipment and the final
determination of available elections related to the income tax treatment
of certain assets acquired and liabilities assumed in the transaction.
16
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
C. Exhibits
2.1 Stock Purchase Agreement dated as of March 28, 1998 by and
between Churchill Downs Incorporated and TVI Corp.
incorporated by reference to Exhibit 2.1 to Item 7 of the
Form 8-K filed by Churchill Downs Incorporated, dated
April 21, 1998.
2.2 Agreement and Plan of Merger dated as of April 17, 1998 by
and among TVI Corp., Racing Corporation of America,
Churchill Downs Incorporated and RCA Acquisition Company
incorporated by reference to Exhibit 2.2 to Item 7 of the
Form 8-K filed by Churchill Downs Incorporated, dated
April 21, 1998.
23 Consent of Ernest & Young LLP.
99 Press release issued on April 21, 1998 by Churchill Downs
Incorporated incorporated by reference to Exhibit 99 to
Item 7 of the Form 8-K by Churchill Downs Incorporated,
dated April 21, 1998.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CHURCHILL DOWNS INCORPORATED
December 21, 1998 \s\ Robert L. Decker
----------------------------------------
Robert L. Decker
Senior Vice President, Finance
(Principal Financial Officer)
December 21, 1998 \s\Vicki L. Baumgardner
----------------------------------------
Vicki L. Baumgardner
Vice President, Finance/Treasurer
(Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit Page
2.1 Stock Purchase Agreement dated as of March 28, 1998 by and
between Churchill Downs Incorporated and TVI Corp.
incorporated by reference to Exhibit 2.1 to Item 7 of the
Form 8-K filed by Churchill Downs Incorporated, dated
April 21, 1998.
2.2 Agreement and Plan of Merger dated as of April 17, 1998 by
and among TVI Corp., Racing Corporation of America,
Churchill Downs Incorporated and RCA Acquisition Company
incorporated by reference to Exhibit 2.2 to Item 7 of the
Form 8-K filed by Churchill Downs Incorporated, dated
April 21, 1998.
23 Consent of Ernst & Young LLP. 20
99 Press release issued on April 21, 1998 by Churchill Downs
Incorporated incorporated by reference to Exhibit 99 to
Item 7 of the Form 8-K by Churchill Downs Incorporated,
dated April 1, 1998.
<PAGE>
EXHIBIT 23
We consent to the use of our report dated April 7, 1998, with
respect to the consolidated financial statements of Racing Corporation of
America, (1) in the Current Report (Form 8-K) dated April 21, 1998 (as amended
on July 1, 1998 and July 10, 1998 and by this Form 8-K/A-2), of Churchill Downs
Incorporated and, (2) incorporated by reference in the Registration Statements
(Form S-8 No. 33-85012 pertaining to the Churchill Downs Incorporated 1993 Stock
Option Plan and Form S-8 No. 33-61111 pertaining to the Churchill Downs
Incorporated 1995 Employee Stock Purchase Plan).
/s/ Ernst & Young LLP
December 15, 1998
Louisville, Kentucky
<PAGE>
