SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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 (IRS Employer 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)
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 15,
1999 was 9,853,627 shares.
1
<PAGE>
CHURCHILL DOWNS INCORPORATED
I N D E X
PART I. FINANCIAL INFORMATION PAGES
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets, September 30, 1999, 3
December 31, 1998 and September 30, 1998
Condensed Consolidated Statements of Earnings for the nine 4
and three months ended September 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows for the nine 5
months ended September 30, 1999 and 1998
Condensed Notes to Consolidated Financial Statements 6-12
ITEM 2. Management's Discussion and Analysis of Financial Condition 13-22
and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 23
PART II. OTHER INFORMATION AND SIGNATURES
ITEM 1. Legal Proceedings (Not applicable) 23
ITEM 2. Changes in Securities and Use of Proceeds (Not applicable) 23
ITEM 3. Defaults Upon Senior Securities (Not applicable) 23
ITEM 4. Submission of Matters to a Vote of Security Holders (Not 23
applicable)
ITEM 5. Other Information (Not applicable) 23
ITEM 6. Exhibits and Reports on Form 8-K 24
Signatures 25
Exhibit Index 26
Exhibits 27
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31, September 30,
ASSETS 1999 1998 1998
Current assets:
Cash and cash equivalents $ 27,935,299 $ 6,379,686 $ 8,130,380
Accounts receivable 14,812,135 11,968,114 10,925,891
Other current assets 3,110,220 1,049,084 564,286
------------ ------------ ------------
Total current assets 45,857,654 19,396,884 19,620,557
Other assets 6,167,279 3,796,292 4,202,289
Plant and equipment, net 275,630,759 83,088,204 83,949,445
Intangible assets, net 61,899,268 8,369,395 9,636,961
------------ ------------ ------------
$389,554,960 $114,650,775 $117,409,252
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,671,367 $ 6,380,785 $ 10,312,702
Accrued expenses 21,172,818 8,247,945 8,596,301
Dividends payable - 3,762,521 -
Income taxes payable 1,529,022 257,588 2,310,085
Deferred revenue 3,093,814 8,412,552 5,647,027
Long-term debt, current portion 465,321 126,812 128,404
------------ ------------ ------------
Total current liabilities 40,932,342 27,188,203 26,994,519
Long-term debt, due after one year 186,103,789 13,538,027 9,543,201
Other liabilities 6,709,702 1,755,760 3,126,132
Deferred income taxes 15,937,932 6,937,797 8,000,643
Shareholders' equity:
Preferred stock, no par value;
authorized, 250,000 shares;
issued, none - - -
Common stock, no par value;
authorized, 50,000,000 shares,
issued 9,853,627 shares,
September 30, 1999,7,525,041
shares, December 31, 1998
and September 30, 1998 71,633,498 8,926,975 8,926,975
Retained earnings 68,446,412 56,598,957 61,141,469
Deferred compensation costs (143,715) (229,944) (258,687)
Note receivable for common stock (65,000) (65,000) (65,000)
------------ ------------ ------------
139,871,195 65,230,988 69,744,757
------------ ------------ ------------
$389,554,960 $114,650,775 $117,409,252
============ ============ ============
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
for the nine and three months ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net revenues $164,878,881 $116,058,759 $63,076,130 $33,299,256
Operating expenses 128,787,641 88,884,904 53,967,962 30,548,256
------------ ------------ ----------- -----------
Gross profit 36,091,240 27,173,855 9,108,168 2,751,000
Selling, general and
administrative expenses 12,362,704 8,739,883 5,473,203 3,767,288
------------ ------------ ----------- -----------
Operating income (loss) 23,728,536 18,433,972 3,634,965 (1,016,288)
------------ ------------ ----------- -----------
Other income (expense):
Interest income 566,410 449,543 204,177 87,238
Interest expense (4,162,041) (646,521) (1,953,209) (241,224)
Miscellaneous, net 293,742 261,545 168,717 95,359
------------ ------------ ----------- -----------
(3,301,889) 64,567 (1,580,315) (58,627)
------------ ------------ ----------- -----------
Earnings (loss) before income
tax provision 20,426,647 18,498,539 2,054,650 (1,074,915)
------------ ------------ ----------- -----------
Federal and state income tax
(provision) benefit (8,579,192) (7,200,000) (862,953) 420,000
------------ ------------ ----------- -----------
Net earnings (loss) $ 11,847,455 $ 11,298,539 $ 1,191,697 $ (654,915)
============ ============ =========== ===========
Net earnings (loss) per share:
Basic $1.45 $1.52 $.13 $(.09)
Diluted $1.43 $1.51 $.12 $(.09)
Weighted average shares
outstanding:
Basic 8,175,473 7,438,159 9,455,127 7,522,309
Diluted 8,296,761 7,496,524 9,552,088 7,522,309
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1999 and 1998
(Unaudited)
Nine Months Ended September, 30
1999 1998
Cash flows from operating activities:
Net earnings $ 11,847,455 $11,298,539
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 7,724,316 3,972,359
Deferred compensation 212,567 126,759
Deferred income taxes (144,918) -
Increase (decrease) in cash resulting from
changes in operating assets and liabilities:
Accounts receivable (2,181,633) 804,593
Other current assets (1,478,667) 102,204
Accounts payable 7,997,542 3,448,408
Accrued expenses 8,503,278 (950,785)
Income taxes payable 1,271,434 2,123,443
Deferred revenue (5,318,738) (5,454,981)
Other assets and liabilities 2,863,755 95,609
------------ -------------
Net cash provided by operating activities 31,296,391 15,566,148
------------ -------------
Cash flows from investing activities:
Additions to plant and equipment, net (10,340,396) (2,809,648)
Acquisition of business, net of cash acquired (227,857,146) (17,232,849)
------------ -------------
Net cash used in investing activities (238,197,542) (20,042,497)
------------ -------------
Cash flows from financing activities:
Decrease in long-term debt, net (1,176,074) (133,398)
Borrowings on bank line of credit 267,000,000 17,000,000
Repayments of bank line of credit (95,000,000) (10,000,000)
Payment of loan origination costs (2,862,580) -
Dividends paid (3,762,521) (3,658,468)
Contribution by minority interest in subsidiary 1,551,416 -
Common stock issued 62,706,523 118,362
------------ -------------
Net cash provided by financing activities 228,456,764 3,326,496
------------ -------------
Net increase (decrease) in cash and cash equivalents 21,555,613 (1,149,853)
Cash and cash equivalents, beginning of period 6,379,686 9,280,233
------------ -------------
Cash and cash equivalents, end of period $ 27,935,299 $ 8,130,380
============ =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $3,031,609 $451,377
Income taxes $7,996,146 $4,919,540
Noncash investing and financing activities:
Accrued acquisition costs related
to Hollywood Park $1,704,675 -
Issuance of common stock related to
the acquisition of RCA - $4,850,000
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1999 and 1998 (continued)
(Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated 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
Churchill Downs Incorporated's (the "Company") annual report on Form
10-K. The year end condensed consolidated 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, 1998 for further information. The
accompanying condensed consolidated financial statements have been
prepared in accordance with the registrant's customary accounting
practices and have not been audited. Certain prior period financial
statement amounts have been reclassified to conform to the current
period presentation. 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.
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 accompanying condensed consolidated financial statements
reflect a disproportionate share of annual net earnings as the Company
normally earns a substantial portion of its net earnings in the second
quarter of each year during which the Kentucky Derby and Kentucky Oaks
are run. The Kentucky Derby and Kentucky Oaks are run on the first
weekend in May.
2. Interest Rate Swaps
The Company utilizes interest rate swap contracts to hedge exposure to
interest rate fluctuations on its variable rate debt. The differential
between the fixed interest rate paid and the variable interest rate
received under the interest rate swap contracts is recognized as an
adjustment to interest expense in the period in which the differential
occurs. Differential amounts incurred under the interest rate swap
contracts but not settled in cash at the end of a reporting period are
recorded as receivables or payables in the balance sheet. Any gains or
losses realized on the early termination of interest rate swap contracts
are deferred and amortized as an adjustment to interest expense over the
remaining term of the underlying debt instrument.
3. Long-Term Debt
On April 23, 1999, the Company increased its line of credit to $250
million under a new revolving loan facility through a syndicate of banks
headed by its principal lender to meet working capital and other
short-term requirements and to provide funding for acquisitions. This
credit facility replaced a $100 million line of credit obtained during
the third quarter of 1998. The interest rate on the borrowing is based
upon LIBOR plus 75 to 250 additional basis points, which is determined
6
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the nine months ended September 30, 1999 and 1998
(Unaudited)
3. Long-Term Debt (cont'd)
by certain Company financial ratios. There was $183.0 million
outstanding on the line of credit at September 30, 1999 compared to
$11.0 million outstanding at December 31, 1998 and $7.0 million
outstanding at September 30, 1998 under previous lines of credit. The
line of credit is secured by substantially all of the assets of the
Company and its wholly owned subsidiaries, and matures in 2004.
During the third quarter of 1999 we entered into interest rate swap
contracts with a major financial institution which have termination
dates through August 31, 2000. Under the terms of the contracts we
receive a LIBOR based variable interest rate and pay a fixed interest
rate of 5.89% and 5.92% on notional amounts of $35.0 and $70.0 million,
respectively. The variable interest rate paid on the contracts is
determined based on LIBOR on the last day of each month, which is
consistent with the variable rate determination on the underlying debt.
4. Acquisitions
On September 10, 1999, the Company acquired the assets of the Hollywood
Park Race Track and the Hollywood Park Casino in Inglewood, California,
including approximately 240 acres of land upon which the racetrack and
casino are located, for a purchase price of $140.0 million plus
approximately $2.5 million in transaction costs. The Company leases the
Hollywood Park Casino to the seller under a ten-year lease with one
ten-year renewal option. The lease provides for annual rent of $3.0
million, subject to adjustment during the renewal period. The entire
purchase price of $142.5 million was allocated to the acquired assets
and liabilities based on their fair values on the acquisition date. The
acquisition was accounted for by the Company as an asset purchase and,
accordingly, the financial position and results of operations of
Hollywood Park Race Track have been included in the Company's
consolidated financial statements since the date of acquisition. The
allocation of the purchase price is preliminary and may require
adjustment in the Company's future financial statements based on a final
determination of the fair value of assets assumed in the acquisition.
On April 23, 1999, the Company acquired all of the outstanding stock of
Calder Race Course, Inc. and Tropical Park, Inc. from KE Acquisition
Corp. for a purchase price of $86 million cash plus a closing net
working capital adjustment of approximately $2.9 million cash and $0.6
million in transaction costs. The purchase included Calder Race Course
in Miami and the licenses held by Calder Race Course, Inc. and Tropical
Park, Inc. to conduct horse racing at Calder Race Course. Calder Race
Course, one of four Thoroughbred tracks in Florida, offers live racing
and simulcast- only days during two consecutive race meets, which run
from late May through early January. The purchase price, plus additional
costs, of $89.5 million was allocated to the acquired assets and
liabilities based on their fair values on the acquisition date with the
excess of $48.7 million being recorded as goodwill, which is being
amortized over 40 years. The acquisition was accounted for by the
Company under the purchase method of accounting and, accordingly, the
financial position
7
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the nine months ended September 30, 1999 and 1998
(Unaudited)
4. Acquisitions (cont'd)
and results of operations of Calder Race Course, Inc. and Tropical Park,
Inc. have been included in the Company's consolidated financial
statements since the date of acquisition. The allocation of the purchase
price is preliminary and may require adjustment in the Company's future
financial statements based on a final determination of liabilities
assumed in the acquisition.
On April 21, 1998, the Company acquired from TVI Corp. ("TVI") all of
the outstanding stock of Racing Corporation of America ("RCA") for a
purchase price of $22.6 million, which includes transaction costs of
$0.6 million. The acquisition was accounted for by the Company under the
purchase method of accounting and, accordingly, the results of
operations of RCA subsequent to April 20, 1998, are included in the
Company's consolidated results of operations.
Following are the unaudited pro forma results of operations as if the
September 10, 1999 acquisition of Hollywood Park Race Track, the
July 20, 1999 stock issuance, the April 23, 1999 acquisition of Calder
Race Course and the April 21, 1998 acquisition of RCA had occurred on
January 1, 1998 (in thousands, except per share and share amounts):
Nine Months Ended Nine Months Ended
September 30, 1999 September 30, 1998
Net revenues $241,820 $226,693
Net earnings $14,956 $12,272
Earnings per common share:
Basic $1.52 $1.25
Diluted $1.50 $1.24
Weighted average shares
Basic 9,826,729 9,798,433
Diluted 9,948,017 9,856,798
This unaudited pro forma financial information is not necessarily
indicative of the operating results that would have occurred had the
transactions been consummated as of January 1, 1998, nor is it
necessarily indicative of future operating results.
8
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the nine months ended September 30, 1999 and 1998
(Unaudited)
4. Acquisitions (cont'd)
On January 13, 1999, the Company acquired a 60% interest in Charlson
Broadcast Technologies, LLC ("CBT") for $3.1 million and made an
additional equity contribution to CBT in the amount of $2.3 million.
CBT's total assets and liabilities were $2.1 million and $2.2 million,
respectively, on the date of acquisition. The purchase price was
allocated to the fair value of net assets acquired, with the excess of
$3.2 million being amortized over periods of 5 and 20 years based on the
nature of the intangibles acquired. The acquisition was accounted for by
the Company under the purchase method of accounting and, accordingly,
the financial position and results of operations have been included in
the Company's consolidated financial statements since the date of
acquisition.
5. Earnings Per Share
The following is a reconciliation of the numerator and denominator of
the basic and diluted per share computations:
<TABLE>
<CAPTION>
Nine months Three months
ended September 30, ended September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Earnings (loss) (numerator) amounts
used for basic and diluted per share
computations: $11,847,455 $11,298,539 $1,191,697 $(654,915)
----------- ----------- ---------- ---------
Weighted average shares (denominator) of
common stock outstanding per share:
Basic 8,175,473 7,438,159 9,455,127 7,522,309
Plus dilutive effect of outstanding
stock options 121,288 58,365 96,961 -
--------- --------- --------- ---------
Diluted 8,296,761 7,496,524 9,552,088 7,522,309
Basic net earnings (loss) per share $1.45 $1.52 $.13 (.09)
Diluted net earnings per share $1.43 $1.51 $.12 (.09)
</TABLE>
Options to purchase 69,266 shares for the three months and nine months
ended September 30, 1999 were not included in the computation of diluted
net earnings per common share because the options' exercise prices were
greater than the average market price of the common share. In addition,
options to purchase 426,532 shares for the three months ended September
30, 1998 are excluded from the computation of diluted net earnings
(loss) per common share since their effect is antidilutive because of
the net loss for the period.
9
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the nine months ended September 30, 1999 and 1998
(Unaudited)
6. Segment Information
The Company has adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information." The Company has determined that it
currently operates in the following six segments: (1) Churchill Downs
racetrack, the Louisville Sports Spectrum simulcast facility and
Churchill Downs corporate expenses (2) Hollywood Park Race Track (3)
Calder Race Course (4) Ellis Park racetrack and its on-site simulcast
facility, (5) Hoosier Park racetrack and its on-site simulcast facility
and the other three Indiana simulcast facilities and (6) Other
operations, including Kentucky Horse Center, CBT and the Company's
investments in various equity interests in the net income of equity
method investees, which are not material. Eliminations include the
elimination of management fees and other intersegment transactions.
Most of the Company's revenues are generated from commissions on
pari-mutuel wagering at the Company's racetracks and simulcast wagering
facilities, plus Indiana riverboat admissions revenue, simulcast fees,
admissions and concessions revenue and other sources.
The accounting policies of the segments are the same as those described
in the "Summary of Significant Accounting Policies" in the Company's
annual report to stockholders for the year ended December 31, 1998.
EBITDA should not be considered as an alternative to, or more meaningful
than, net income (as determined in accordance with GAAP) as a measure of
our operating results of cash flows (as determined in accordance with
GAAP) or as a measure of our liquidity.
10
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the nine months ended September 30, 1999 and 1998
(Unaudited)
6. Segment Information (cont'd)
The table below presents information about reported segments for the nine months
and three months ended September 30, 1999 and 1998 ($ in thousands):
Nine Months Three Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
Net revenues:
Churchill Downs $ 66,653 $ 64,712 $ 5,520 $ 5,483
including corporate
expenses
Hollywood Park 1,117 - 1,117 -
Calder Race Course 39,053 - 27,352 -
Hoosier Park 37,514 34,540 13,256 12,648
Ellis Park 18,491 16,039 15,528 14,741
Other Operations 4,378 1,677 1,667 730
-------- -------- ------- -------
167,206 116,968 64,440 33,602
Eliminations (2,327) (909) (1,364) (303)
-------- -------- ------- -------
$164,879 $116,059 $63,076 $33,299
======== ======== ======= =======
EBITDA:
Churchill Downs $14,052 $14,738 $(5,417) $(4,425)
including corporate
expenses
Hollywood Park (542) - (542) -
Calder Race Course 8,865 - 6,977 -
Hoosier Park 5,131 4,391 1,744 1,384
Ellis Park 2,834 2,890 3,637 3,318
Other Operations 1,115 649 454 223
-------- -------- ------- -------
$31,455 $22,668 $ 6,853 $ 500
======== ======== ======= =======
Operating income (loss):
Churchill Downs $11,379 $11,952 $(6,287) $(5,344)
including corporate
expenses
Hollywood Park (795) - (795) -
Calder Race Course 7,364 - 6,062 -
Hoosier Park 4,183 3,566 1,417 1,109
Ellis Park 1,842 2,517 3,292 3,145
Other Operations (244) 399 (54) 74
-------- -------- ------- -------
$23,729 $18,434 $ 3,635 $(1,016)
======== ======== ======= =======
11
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
the nine months ended September 30, 1999 and 1998 (continued)
(Unaudited)
6. Segment Information (cont'd)
As of As of As of
September 30, December 31, September 30,
1999 1998 1998
Total Assets:
Churchill Downs $329,293 $ 89,427 $ 87,247
Hollywood Park 144,137 - -
Calder Race Course 111,421 - -
Hoosier Park 35,333 31,732 33,753
Ellis Park 26,742 23,038 20,849
Other Operations 171,116 71,109 70,208
--------- -------- --------
818,042 215,306 212,057
Eliminations (428,487) (100,655) (94,648)
--------- -------- --------
$389,555 $114,651 $117,409
========= ======== ========
Following is a reconciliation of total EBITDA to income before provision for
income taxes:
Nine Months Three Months
ended September 30, ended September 30,
(in thousands) 1999 1998 1999 1998
Total EBITDA $31,455 $22,668 $6,853 $ 500
Depreciation and amortization (7,433) (3,972) (3,049) (1,421)
Interest income (expense), net (3,595) (197) (1,749) (154)
------- ------- ------ -------
Earnings before provision
for income taxes $20,427 $18,499 $2,055 $(1,075)
======= ======= ====== =======
12
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CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information set forth in this discussion and analysis contain various
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Private
Securities Litigation Reform Act of 1995 ( the "Act") provides certain "safe
harbor" provisions for forward-looking statements. All forward-looking
statements made in this Quarterly Report on Form 10-Q are made pursuant to the
Act. These statements represent our judgment concerning the future and are
subject to risks and uncertainties that could cause our actual operating results
and financial condition to differ materially. Forward-looking statements are
typically identified by the use of terms such as "may," "will," "expect,"
"anticipate," "estimate," and similar words, although some forward-looking
statements are expressed differently. Although we believe that the expectations
reflected in such forward- looking statements are reasonable we can give no
assurance that such expectations will prove to be correct. Important factors
that could cause actual results to differ materially from our expectations
include: the impact of competition from alternative gaming (including lotteries,
land-based, riverboat and cruise ship casinos) in those markets in which we
operate; a substantial change in law or regulations affecting our gaming
activities; a substantial change in allocation of live racing days; a decrease
in riverboat admissions revenue from our Indiana operations; our continued
ability to effectively compete for the country's top horses and trainers
necessary to field high-quality horse racing; our ability to execute our
acquisition strategy and to complete or successfully operate planned expansion
projects; our ability to adequately integrate acquired businesses; the loss of
our totalisator companies or their inability to keep their technology current;
our accountability for environmental contamination; Year 2000 computer issues;
the loss of key personnel and the volatility of our stock price.
Overview
We conduct pari-mutuel wagering on live Thoroughbred, Standardbred and Quarter
Horse horse races and simulcast signals of races. Additionally, we offer racing
services through our other interests.
We own and operate the Churchill Downs racetrack in Louisville, Kentucky, which
has conducted Thoroughbred racing since 1875 and is internationally known as
home of the Kentucky Derby. We also own and operate Hollywood Park Race Track, a
Thoroughbred racetrack in Inglewood, California ("Hollywood Park"); Calder Race
Course, a Thoroughbred racetrack in Miami, Florida; Ellis Park Race Course, a
Thoroughbred racetrack in Henderson, Kentucky ("Ellis Park"); and Kentucky Horse
Center, a Thoroughbred training center in Lexington, Kentucky. Additionally, we
are the majority owner and operator of Hoosier Park in Anderson, Indiana, which
conducts Thoroughbred, Quarter Horse and Standardbred horse racing. We conduct
simulcast wagering on horse racing in Louisville, Kentucky, and at our three
simulcast wagering facilities in Indianapolis, Merrillville and Fort Wayne,
Indiana, as well as at our racetracks.
Because of the seasonal timing of our racing meets, 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.
13
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Our primary source of revenue is commissions on pari-mutuel wagering at our
racetracks and simulcast wagering facilities. Other sources of revenue include
Indiana riverboat admissions revenue, simulcast fees, admissions and concessions
revenue and other sources.
RESULTS OF OPERATIONS
The following summary shows intercompany pari-mutuel wagering by Churchill
Downs-owned companies. Pari-mutuel wagering for our five live racing facilities
and four separate simulcast wagering facilities, which are included in their
respective racetracks, during the nine months ended September 30, 1999 and 1998
is as follows ($ in thousands, except for number of days):
<TABLE>
<CAPTION>
Churchill
Downs Hollywood Calder Race
racetrack Park* Course* Hoosier Park Ellis Park*
<S> <C> <C> <C> <C> <C>
Live racing
1999 handle $93,689 $139,842 $110,463 $10,747 $19,790
1999 no. of days 47 66 96 117 61
1998 handle $95,951 $146,479 $106,867 $11,179 $20,944
1998 no. of days 47 66 95 110 61
Export simulcasting
1999 handle $336,344 $456,569 $238,077 $25,247 $159,965
1999 no. of days 47 66 96 117 61
1998 handle $304,057 $463,763 $210,034 $25,323 $116,749
1998 no. of days 47 66 95 110 61
Import simulcasting
1999 handle $95,460 $182,589 - $104,399 $26,585
1999 no. of days 181 141 - 893 261
1998 handle $107,648 $171,325 - $99,984 $26,065
1998 no. of days 178 143 - 901 264
Totals
1999 handle $525,493 $779,000 $348,540 $140,393 $206,340
1998 handle $507,656 $781,567 $316,901 $136,486 $163,758
</TABLE>
* Pari-mutuel wagering information is provided for the nine months ended
September 30, 1999 and 1998. Although the summary reflects handle for the full
nine month period, only revenues generated since the subsidiaries' acquisition
dates have been included in the Company's results of operations.
14
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
Net Revenues
Net revenues during the nine months ended September 30, 1999 increased $48.8
million (42%) from $116.1 million in 1998 to $164.9 million in 1999. Calder Race
Course contributed $39.1 million and Hollywood Park contributed $1.1 million to
the first nine months of 1999 net revenues as opposed to none in the prior year.
Churchill Downs racetrack revenues increased $1.9 million (3%) primarily due to
an increase in corporate sponsor event ticket prices, admissions and seat
revenue, concessions, and program revenue as a result of record attendance on
Kentucky Oaks and Kentucky Derby days. Hoosier Park revenues increased $3.0
million (9%) primarily due to a $2.1 million increase in the riverboat gross
admissions subsidy of which a portion was required to be spent on purses and
marketing expenses and a $0.8 million (4%) increase in pari-mutuel revenue. Net
revenues for Ellis Park for the first nine months of 1999 increased $2.4 million
(15%) primarily due to the timing of the 1998 acquisition and increased
pari-mutuel wagering revenue during the third quarter of 1999. Revenue from
other operations, which include Charlson Broadcast Technologies, LLC ("CBT")and
Kentucky Horse Center, comprised the remaining $1.3 million of the increase.
Operating Expenses
Operating expenses increased $39.9 million (45%) from $88.9 million in 1998 to
$128.8 million in 1999. Calder Race Course and Hollywood Park incurred 1999
operating expenses of $30.3 million and $1.7 million, respectively, versus none
in the first nine months of 1998. Churchill Downs racetrack's operating expenses
increased $1.4 million (3%). Hoosier Park operating expenses increased $2.4
million (8%) due primarily to increases in purses payable consistent with the
increase in pari-mutuel revenues and an increase in required purses and
marketing expenses related to the riverboat admissions subsidy. Ellis Park
operating expenses increased $2.6 million (21%) for the first nine months of
1999 as compared to expenses after the acquisition date of April, 21 1998 for
the prior year. Other operations accounted for the remaining $1.5 million of the
increase in operating expenses.
Gross Profit
Gross profit increased $8.9 million from $27.2 million in 1998 to $36.1 million
in 1999. The increase was primarily due to an $8.7 million increase in gross
profit from Calder Race Course.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses increased by $3.6 million
(41%) from $8.7 million in 1998 to $12.3 million in 1999. Calder Race Course and
Hollywood Park added $1.3 million and $0.2 million, respectively, and the
inclusion of Ellis Park during all of 1999 contributed $0.5 million of the
increase. SG&A expenses at Churchill Downs racetrack and corporate expenses
increased $1.1 million(20%) due primarily to increased corporate staffing and
compensation expenses reflecting the
15
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Selling, General and Administrative Expenses (cont'd)
Company's strengthened corporate services to meet the needs of new business
units. Other operations accounted for the remaining $0.5 million of the increase
in SG&A expenses.
Other Income and Expense
Interest expense increased $3.5 million from $0.7 million in 1998 to $4.2
million in 1999 primarily as a result of borrowings to finance the acquisitions
of Calder Race Course, Hollywood Park and CBT in 1999 and the acquisition of
Ellis Park in April 1998.
Income Tax Provision
Our income tax provision increased by $1.4 million for the nine months ended
September 30, 1999 as compared to September 30, 1998 as a result of an increase
in the estimated effective tax rate from 38.9% in 1998 to 42.0% in 1999 due
primarily to non-deductible goodwill amortization expense related to the
acquisitions of Calder Race Course, CBT and Ellis Park.
Three Months Ended September 30, 1999 Compared to Three Months Ended
September 30, 1998
Net Revenues
Net revenues during the three months ended September 30, 1999 increased $29.8
million (89%) from $33.3 million in 1998 to $63.1 million in 1999. Hollywood
Park and Calder Race Course contributed $1.1 million and $27.4 million,
respectively, to the three months ended September 30, 1999 net revenues as
opposed to none in the prior year. Hoosier Park revenues increased $0.6 million
(5%) primarily due to a $0.3 million increase in the riverboat gross admissions
subsidy of which a portion was required to be spent on purses and marketing
expenses and a $0.3 million (4%) increase in pari-mutuel revenues. Net revenues
for Ellis Park for the third quarter of 1999 increased by $0.8 million (5%) due
primarily to increased pari- mutuel revenues. Other operations represented a
decrease of $0.1 million.
Operating Expenses
Operating expenses increased $23.4 million (77%) from $30.5 million in 1998 to
$53.9 million in 1999. Calder Race Course and Hollywood Park incurred 1999
operating expenses of million $20.5 and $1.7 million versus none in the third
quarter of 1998. Churchill Downs racetrack operating expenses increased $0.4
million (4%). Hoosier Park operating expenses increased $0.4 million (3%) due
primarily to increased purse expenses, consistent with the increase in
pari-mutuel revenues. Ellis Park operating expenses increased $0.4 million (4%)
for the third quarter of 1999 primarily due to increased purse expenses,
consistent with the increase in pari-mutuel revenues.
16
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Gross Profit
Gross profit increased $6.4 million from $2.7 million in 1998 to $9.1 million in
1999. The increase in gross profit was primarily the result of gross profit from
Calder Race Course.
Selling, General and Administrative Expenses
SG&A expenses increased by $1.7 million (45%) from $3.8 million in 1998 to $5.5
million in 1999. Calder Race Course and Hollywood Park added $0.8 million and
$0.2 million, respectively. SG&A expenses at Churchill Downs increased $0.6
million (29%) due primarily to increased corporate staffing and compensation
expenses reflecting the Company's strengthened corporate services to meet the
needs of new business units. Other operations accounted for the remaining $0.1
million of the increase in SG&A expenses.
Other Income and Expense
Interest expense increased $1.7 million from $0.2 million in 1998 to $1.9
million in 1999 primarily as a result of borrowings to finance the acquisitions
of Hollywood Park, Calder Race Course and CBT in 1999.
Income Tax Provision
Our income tax provision increased by $1.3 million for the three months ended
September 30, 1999 as compared to the tax benefit at September 30, 1998 as a
result of an increase in pre-tax earnings of $3.1 million and an increase in the
estimated effective tax rate from 39.1% in 1998 to 42.0% in 1999 due primarily
to non-deductible goodwill amortization expense related to the acquisitions of
Calder Race Course, CBT and Ellis Park.
Significant Changes in the Balance Sheet September 30, 1999 to December 31, 1998
The net plant and equipment increase of $192.5 million during 1999 included
$188.5 million for the acquisitions of Hollywood Park, Calder Race Course and
CBT. The remaining increase was due to routine capital spending at our operating
units offset by current year depreciation expense.
Intangible assets increased $53.5 million primarily a result of the addition of
approximately $52.0 million of goodwill due to the acquisitions of Calder Race
Course and CBT. In addition, costs of $2.9 million related to the Company's new
$250 million revolving loan facility are included. These increases were
partially offset by current year amortization expense.
Dividends payable decreased $3.7 million at September 30, 1999 due to the
payment of dividends of $3.7 million (declared in 1998) in first quarter 1999.
17
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Deferred revenue decreased $5.3 million at September 30, 1999 primarily due to
the significant amount of admission and seat revenue that was received prior to
December 31, 1998 recognized as income in May 1999 for the Kentucky Derby and
Kentucky Oaks race days.
The long-term debt increase of $172.6 million was the result of additional
borrowings on our bank line of credit during 1999, used to fund the 1999
acquisitions of Hollywood Park, Calder Race Course and CBT.
Deferred income taxes increased by $9.0 million primarily as a result of the
Calder Race Course acquisition during the second quarter of 1999.
Common stock increased by $62.7 million primarily due to $62.1 million in net
proceeds received with the public offering during the third quarter of 1999.
Significant Changes in the Balance Sheet September 30,1999 to September 30, 1998
The net plant and equipment increase of $191.7 million included $188.5 million
for the acquisitions of Hollywood Park, Calder Race Course and CBT and the
remaining increase was due to routine capital spending at our operating units
offset by depreciation expense.
Intangible assets increased $52.3 million primarily a result of the addition of
approximately $52.0 million of goodwill due to the acquisitions of Calder Race
Course and CBT. In addition, costs of $2.9 million related to the Company's new
$250 million revolving loan facility are included. These increases were
partially offset by amortization expense.
Accrued expenses increased $12.6 million primarily due to a $10.4 million
increase as a result of the Hollywood Park and Calder Race Course acquisitions.
The long-term debt increase of $176.6 million was due primarily to line of
credit borrowings used to fund the acquisitions of Hollywood Park, Calder Race
Course and CBT.
Deferred income taxes increased by $7.9 million primarily as a result of the
Calder Race Course acquisition during the second quarter of 1999.
Common stock increased by $62.7 million primarily due to $62.1 million in net
proceeds received with the public offering during the third quarter of 1999.
18
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources
The working capital surplus (deficiency) was $4.9 and $(7.4) million for the
nine months ended September 30, 1999 and 1998, respectively. Cash flows provided
by operations were $31.3 and $15.6 million for the nine months ended September
30, 1999 and 1998, respectively. The significant increases in operating cash
flows were primarily a result of the current year acquisition of Calder Race
Course which generated operating cash flows of approximately $8.5 million.
Management believes cash flows from operations and available borrowings during
1999 will be sufficient to fund our cash requirements for the year, including
capital improvements.
Cash flows used in investing activities were $238.2 and $20.0 million for the
nine months ended September 30, 1999 and 1998, respectively. Cash used for 1999
business acquisitions consisted of $142.5 million net of cash acquired for the
acquisition of Hollywood Park during the third quarter, $82.4 million net of
cash acquired for the acquisition of Calder Race Course during the second
quarter and $2.9 million net of cash acquired for the acquisition of CBT during
the first quarter. We used $10.3 million for capital spending at our facilities
including $2.0 million for the construction of a stable area dormitory and $0.6
million for the renovation of the racing offices at Churchill Downs racetrack
facility. The additional increase in capital spending from prior year spending
is primarily the result of the RCA (owns and operates Ellis Park and Kentucky
Horse Center), CBT, and Calder Race Course acquisitions.
Cash flows provided by financing activities were $228.5 and $3.3 million for the
nine months ended September 30, 1999 and 1998, respectively. We borrowed $267
million on our line of credit during 1999 primarily to finance the purchase of
Hollywood Park, Calder Race Course and CBT. We received net proceeds of $62.1 in
connection with the July 15, 1999 common stock public offering and an additional
$0.6 million for the issuance of common stock under our stock purchase plan and
the exercise of stock options. Proceeds from the stock offering and operations
were used to repay $95 million on our line of credit.
In April 1999, our total line of credit was increased to $250 million under a
new revolving loan facility, of which $183 million was outstanding at September
30, 1999. This credit facility replaced a $100 million line of credit obtained
during the third quarter of 1998. The new facility is secured by substantially
all of our assets. This credit facility is intended to provide funds for
acquisitions and to meet working capital and other short-term requirements. The
new revolving loan facility matures in 2004.
19
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Impact of the Year 2000 Issue
The "Year 2000 Issue" is the result of computer programs that were written using
two digits rather than four to define the applicable year in date-dependent
systems. If our computer programs with date- sensitive functions are not Year
2000 compliant, they may not be able to distinguish the year 2000 from the year
1900. This could result in system failure or miscalculations leading to a
disruption of business operations.
Some of our mission critical operations are dependent upon computer systems and
applications. These systems are either directly owned and controlled by us or
are provided under contract by third party technology service providers. To
address the Year 2000 issue, we have categorized the Year 2000 Issue into four
principal areas.
Systems Owned By the Company
The first area is related to systems that we own. These systems include
application software and dedicated hardware that run our core operations. In
addition, there are numerous applications that provide administrative support
and management reporting functions. We developed some of these applications
internally and purchased other applications.
To address Year 2000 compliance across this broad category of systems, we have
broken each system down into its most elemental pieces in order to study the
hardware including any embedded chip technology/firmware, the operating systems
and, finally, the applications themselves.
We have identified hardware, including any embedded chip technology/firmware
that was not Year 2000 compliant and replaced it as part of the routine turnover
of technology capital. The remaining hardware requiring replacement was upgraded
during the first half of 1999. All hardware and embedded chip
technology/firmware that we own are believed to be Year 2000 compliant.
We have checked all operating systems supporting specific applications by
advancing the dates to determine if the date change impacts operating
system-level functionality. As new operating system upgrades are made available
and installed, periodic testing will continue to assure operating system- level
functionality is maintained. In addition, we have contacted the developers of
the operating systems we use and have received assurances as to their
compatibility with the Year 2000 transition.
Application software compliance with the Year 2000 has been certified through a
combination of technical consultation with the software developers and testing.
Applications developed with internal resources have been written with Year 2000
compliance in mind using development tools that are Year 2000 compliant. We have
received technical reports from third parties on Year 2000 compliance for
financial reporting, payroll, operations control and reporting and internal
communications applications.
We require Year 2000 compliance on any software upgrades.
20
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Based on the schedule outlined above, we believe our owned systems are Year
2000 compliant. We have tested the systems by advancing dates to a majority of
the Year 2000 critical dates without failure. However, there can be no assurance
that unforeseen difficulties will not arise.
Technology Services Provided to the Company Under Contract By Third Parties
The second area is services provided to us by third parties. Many of these
services are mission critical and could materially impact us should the
systems upon which the services are dependent be unable to function.
The totalisator services provided by United Tote Company, AmTote International,
Inc., and Autotote are the most critical to our operations. Totalisator services
include the calculation of amounts wagered and owed to winning ticket holders.
United Tote developed a plan to bring all systems provided to us into Year 2000
compliance during 1998. United Tote and the Company initiated this plan during
the second quarter of 1998 by undertaking a comprehensive system hardware and
software upgrade that is Year 2000 compliant. We successfully installed the
upgrades in three phases with the last phase having been completed in October
1998. All on-track, intertrack wagering and hub operations are Year 2000
compliant. We will continue to work closely with United Tote to assure that
future releases and upgrades are Year 2000 compliant by including this provision
as a condition in contracts for future services. We have also successfully
participated in Year 2000 tests with AmTote and Autotote. These vendors are
utilized by Calder Race Course and Hollywood Park, respectively.
Results of these tests have confirmed that they are Year 2000 compliant.
The video services provided to our racetracks by Spector Entertainment Group,
Inc. and CBT are also important to our operations. Video services include the
capture, production and distribution of the television signal for distribution
to customers located on our premises and to customers located at remote outlets
throughout the nation. We have worked closely with Spector Entertainment Group,
Inc. and CBT to ensure the software applications that provide the graphical
enhancements and other distinguishing features to the televised signal are Year
2000 compliant.
We purchase data and statistical information from Equibase Corporation for
resale to the public. This information is an essential element of our product
and is included in printed material made available to our customers to assist in
their wagering decisions. Equibase Corporation advised us, in writing that all
of their data systems have been certified as Year 2000 compliant.
A variety of other smaller and less critical technology service providers are
involved with our product. We have received assurance letters from a majority of
these suppliers and will continue to work to receive assurances from those
remaining.
21
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Because of the nature of our business and its dependence upon key technology
services provided by third parties, we require that all new software and
technology services are Year 2000 compliant. This requirement includes patches,
upgrades and fixes to existing technology services.
We believe that all of our third party service providers are Year 2000
compliant.
Industry-wide Issues
Because we derive a significant portion of our revenues from customers at other
racing organizations that are confronted with the same technological issues,
including totalisator, video and statistical information services, we have been
actively participating in an industry-wide assessment and remedial efforts to
address the Year 2000 issue.
Feedback Control Systems
A variety of the newer control and regulating systems are date sensitive.
Environmental control systems, elevator/escalator systems, fire control and
security systems utilize date-sensitive software/embedded chip technology for
correct operation. We have systems that perform each of these functions, and we
have identified that these systems do employ technology that is Year 2000
compliant.
Cost and Contingency Planning
To date, the total cost is estimated to be less than $300,000 to remediate Year
2000 compliance issues, and the total project costs incurred to date has been
approximately $225,000. Our management believes that any future costs to
remediate Year 2000 compliance issues will not be material to our financial
position or results of operations.
We have completed the evaluation of what we believe to be a worst case Year
2000 scenario for our owned systems as well as issues involving third party
service providers. We have also completed the Year 2000 compliance evaluation
for our recent acquisitions of Calder Race Course and Hollywood Park and
remediation plans have been completed on all critical operating systems.
Contingency plans for any other unexpected Year 2000 impact will be
finalized before year-end.
22
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Since December 31, 1998 we have increased the amount of variable
rate debt outstanding under our revolving loan facility. At
September 30, 1999, we had $183.0 million of debt outstanding
under this facility which bears interest at LIBOR based variable
rates. We are exposed to market risk on this variable rate debt
due to potential adverse changes in the LIBOR rate. Assuming the
outstanding balance on the revolving loan facility remains
constant, a one percentage point increase in the LIBOR rate would
reduce pre-tax earnings and cash flows by $1.8 million.
In order to mitigate a portion of the market risk associated with
our variable rate debt, we entered into interest rate swap
contracts with a major financial institution. Under terms of the
contracts we receive a LIBOR based variable interest rate and pay
a fixed interest rate on a notional amount of $105.0 million.
Assuming the notional amounts under the interest rate swap
contracts remain constant, a one percentage point increase in the
LIBOR rate would reduce pre-tax earnings and cash flows by $0.8
million.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Not Applicable
ITEM 2. Changes in Securities and Use of Proceeds
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Not Applicable
ITEM 5. Other Information
Not Applicable
23
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K.
A. Exhibits
See exhibit index on page 26.
B. Reports on Form 8-K
Churchill Downs Incorporated filed a Current Report on
Form 8-K dated August 4, 1999, reporting, under Item 5,
"Other Events", to include additional supplemental
information for operating units and to provide operating
income for business units consistent with segment
disclosure.
Churchill Downs Incorporated filed a Current Report on
Form 8-K dated September 10, 1999, reporting, under Item
2, "Acquisition or disposition of assets", for the
acquisition of Hollywood Park Race Track horse racing
facility and the Hollywood Park Casino card club casino
pursuant to an Asset Purchase Agreement dated as of May 5,
1999, amended by Amendment No. 1 dated August 31, 1999.
24
<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
November 15, 1999 \s\Thomas H. Meeker
Thomas H. Meeker
President and Chief Executive Officer
(Director and Principal Executive Officer)
November 15, 1999 \s\Robert L. Decker
Robert L. Decker
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
November 15, 1999 \s\Vicki L. Baumgardner
Vicki L. Baumgardner
Vice President, Finance and Treasurer
(Principal Accounting Officer)
25
<PAGE>
EXHIBIT INDEX
Numbers Description By Reference To
(1) Underwriting agreement for 2,000,000 Exhibit 1.1 to Registration
Shares of Churchill Downs Incorporated Statement on Form S-3/A dated
Common Stock between Churchill Downs July 15, 1999
Incorporated and CIBC World Markets
Corporation, Lehman Brothers, Inc.,
JC Bradford & Co., J.J.B. Hilliard,
W.L. Lyons, Inc.on behalf of several
underwriters
(2)(a) Amendment No. 1 to Asset Purchase Exhibit 2.2 to Report on
Agreement dated as of August 31, 1999 Form 8-K dated September 23,
by and among Churchill Downs 1999
Incorporated, Churchill Downs
California Company and Hollywood
Park, Inc.
(10) Casino Lease Agreement dated as Exhibit 10.1 to Report on
of September 10, 999 by and between Form 8-K
Churchill Downs California dated
September 23, 1999 Company and
Hollywood Park, Inc.
(27) Financial Data Schedule for the Page 27, Report on Form 10-Q
fiscal quarter ended September 30, for the fiscal quarter ended
1999 September 30, 1999
26
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
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<CASH> 27,935
<SECURITIES> 0
<RECEIVABLES> 14,812
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<PP&E> 371,655
<DEPRECIATION> 96,024
<TOTAL-ASSETS> 389,555
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<COMMON> 71,633
0
0
<OTHER-SE> 68,238
<TOTAL-LIABILITY-AND-EQUITY> 389,555
<SALES> 164,879
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<CGS> 128,788
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<INCOME-TAX> 8,579
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