SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 8, 2000
CHURCHILL DOWNS INCORPORATED
(Exact name of registrant as specified in its charter)
Kentucky 0-1469 61-0156015
(State or other jurisdiction (Commission (IRS Employer
of incorporation or File Number) Identification No.)
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)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Churchill Downs Incorporated hereby incorporates herein has
included by reference pages F-2 through F-12 of the Proxy
Statement for a Special Meeting of Shareholders of Churchill
Downs Incorporated dated September 8, 2000.
ARLINGTON INTERNATIONAL
CONDENSED COMBINED BALANCE SHEETS
As of June 30, 2000 and December 31, 1999
(Dollars in thousands, except per share amounts)
ASSETS June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
Current assets
Cash $ 4,289 $ 1,534
Receivables, net of $95 and $124 allowance
for doubtful accounts 6,712 840
Inventories 114 84
Prepaid expenses 351 71
--------- ---------
Total current assets 11,466 2,529
Racing facilities and equipment
Land 25,307 26,054
Buildings and improvements 130,848 128,568
Equipment 17,964 17,420
Furniture and fixtures 43,852 41,985
Construction in process - 855
--------- ---------
217,971 214,882
Less-accumulated depreciation (124,637) (121,964)
--------- ---------
Racing facilities and equipment, net 93,334 92,918
--------- ---------
Advances to associated entities - 25,800
Other assets 1,227 1,418
--------- ---------
Total assets $106,027 $122,665
========= =========
The accompanying notes are an integral part of these financial statements.
2
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ARLINGTON INTERNATIONAL
CONDENSED COMBINED BALANCE SHEETS
As of June 30, 2000 and December 31, 1999
(Dollars in thousands, except per share amounts)
LIABILITIES AND SHAREHOLDERS' INVESTMENT June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
Current liabilities
Accounts payable $ 9,834 $ 5,628
Accrued real estate taxes 4,570 3,706
Other accrued expenses 13,165 4,743
--------- ---------
Total current liabilities 27,569 14,077
Advances from associated entities 67 52,202
Shareholders' investment
Common stock, $1 par value; 2,000 shares authorized,
issued and outstanding 2 2
Paid-in capital 191,576 96,109
Retained deficit (113,187) (39,725)
--------- ---------
Total shareholders' investment 78,391 56,386
--------- ---------
Total liabilities and shareholders' investment $106,027 $122,665
========= =========
The accompanying notes are an integral part of these financial statements.
3
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ARLINGTON INTERNATIONAL
CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the three-month and six-month periods ended June 30
(Dollars in thousands)
(Unaudited)
Three Month Period Six Month Period
2000 1999 2000 1999
------------------- -------------------
Total revenues $ 29,986 $ 5,787 $36,367 $ 11,015
Direct operating expenses 20,245 2,749 22,936 5,127
--------- --------- -------- ---------
Gross profit 9,741 3,038 13,431 5,888
General operating expenses 5,921 3,544 10,412 6,957
General administrative expenses 3,900 2,006 6,241 4,270
--------- --------- -------- ---------
Operating loss (80) (2,512) (3,222) (5,339)
--------- --------- -------- ---------
Other income (expense) 40 46 64 45
--------- --------- -------- ---------
Loss before income tax benefit (40) (2,466) (3,158) (5,294)
Income tax benefit - - - -
--------- --------- -------- ---------
Net Loss $ (40) $ (2,466) $(3,158) $ (5,294)
========= ========= ======== =========
The accompanying notes are an integral part of these financial statements.
4
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ARLINGTON INTERNATIONAL
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
For the six months ended June 30
(Dollars in thousands)
(Unaudited)
2000 1999
Cash flows from operating activities
Net loss $ (3,158) $ (5,294)
Adjustments to net income (loss):
Depreciation and amortization 2,673 2,180
Changes in assets and liabilities:
Receivables (5,872) 1,561
Inventories (30) (7)
Prepaid expenses and other assets (89) (15)
Current liabilities 13,492 (1,550)
--------- ---------
Net cash provided by (used in)
Operating activities 7,016 (3,125)
Cash flows from investing activities
Capital expenditures (3,089) (76)
Cash flows from financing activities
Changes in advances with associated entities, net (26,335) 2,946
Capital contribution 25,163 -
--------- ---------
Net cash (used in) provided by financing
activities (1,172) 2,946
--------- ---------
Net increase (decrease) in cash and cash equivalents 2,755 (255)
Cash and cash equivalents, beginning of period 1,534 1,360
--------- ---------
Cash and cash equivalents, end of period $ 4,289 $ 1,105
========= =========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ARLINGTON INTERNATIONAL
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
June 30, 2000, December 31, 1999, and June 30, 1999
(Dollars in thousands)
(Unaudited)
1. SUMMARY OF ACCOUNTING POLICIES
This unaudited financial data has been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and disclosures normally included in financial statements and
footnotes prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Arlington International believes
that the disclosures in these statements are adequate to make the
information presented not misleading. These financial statements should be
read in conjunction with, and have been prepared in conformity with the
accounting principles reflected in the combined financial statements and
related notes of Arlington International. These interim results include, in
the opinion of Arlington International, all normal and recurring
adjustments necessary to present fairly the results of operations for the
quarters ended June 30, 2000 and 1999. The 2000 interim results are not
necessarily indicative of the results that may be expected for the
remainder of the year.
Corporate Organization and Business Description
The combined financial statements of Arlington International include the
accounts of Arlington International Racecourse, Inc. and its wholly owned
corporate subsidiaries (AIRI) and Arlington Management Services Inc. and
subsidiary (AMSI) and Turf Club of Illinois, Inc. (TCI). All entities
operate within the horseracing segment of the gaming industry.
AIRI conducts thoroughbred racing meets and operates inter-track and
off-track wagering facilities in Illinois. AIRI is a wholly owned
subsidiary of Duchossois Industries, Inc. (DII). Arlington OTB Corporation,
a wholly owned subsidiary of AIRI, operates off-track wagering at a
facility in Chicago, Illinois and Waukegan, Illinois, under a
concessionaire's agreement with AIRI.
AMSI, a wholly owned subsidiary of DII, is the parent of a wholly owned
subsidiary, Quad City Downs,Inc. (QCD). QCD owns a racetrack facility and
grandstand in East Moline, Illinois, but has not conducted live racing
since 1993. QCD operates inter-track wagering in East Moline, Illinois, in
conjunction with an off-track wagering facility in Rockford, Illinois.
TCI, a wholly owned subsidiary of DII, owns certain real property located
in Arlington Heights, Illinois that it leases to AIRI.
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Arlington International has applied for and has received dates to host 103
days of thoroughbred racing in 2000 from May to September. For the three-
month and six-month periods ended June 30, 2000, Arlington International
had completed 35 days of live racing. Arlington International did not
conduct thoroughbred racing in 1999.
Principles of Consolidation
All significant intercompany transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of these financial statements in conformity with accounting
principles generally accepted in the United States requires the use of
certain estimates by management in determining the entity's assets,
liabilities, revenues and expenses. Actual results could differ from those
estimates.
Racing Facilities and Equipment
Racing facilities and equipment are stated at cost. Depreciation and
amortization are computed using straight-line and accelerated methods over
the estimated useful lives of 5 to 40 years for buildings and leasehold
improvements and 5 to 18 years for equipment.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If
the review indicates that the estimated future discounted cash flows
associated with an asset is less than the asset's carrying amount, the
asset is written down to fair value.
Comprehensive Income
As comprehensive income equals net income for each period presented,
Arlington International does not disclose comprehensive income separately
in the financial statements.
Revenues
Revenues are primarily generated from commissions on pari-mutuel wagering
at the racetrack and OTBs. In pari-mutuel wagering, all wagers are placed
in a common pool. The pari-mutuel operator retains as revenue a pre-
determined percentage of the total amount wagered, and the balance is
distributed to the winning patrons. Pari-mutuel commissions and simulcast
revenues recorded equal total revenues realized from pari-mutuel wagering
and simulcast fees less pari-mutuel taxes.
Other sources of revenue include admissions, parking and concession
revenues, which are recognized at the point of sale. The related costs
associated with these activities are included in direct operating expenses.
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2. RECOVERY OF ASSETS
In May 1995, the Illinois General Assembly amended the Illinois Racing Act
to implement full card simulcasting and change the revenue structure for
racing. These changes, along with increasing competition outside of racing,
had an unfavorable impact on the Company's net results. In September 1997,
Arlington International announced its suspension of live racing effective
in 1998 by withdrawing its application for 1998 thoroughbred racing dates.
In 1999, the Illinois Racing Act was amended. Provisions within the amended
legislation have favorably altered the economies of racing in Illinois and,
as a result, management decided to apply for and received dates to host
thoroughbred racing in 2000. Arlington International is also planning to
continue conducting intertrack wagering at its facilities, as permitted by
the Illinois Racing Act.
Management has concluded that its net investment in racing facilities and
equipment is realizable as of June 30, 2000.
3. LEGAL PROCEEDINGS
From time to time, Arlington International is subject to claims and
administrative proceedings, including environmental-related matters,
resulting from the conduct of its business. These matters are brought on
behalf of both private persons and governmental agencies. In the opinion of
management, the ultimate disposition of these matters will not have a
material adverse effect on the financial position or results of operations
of Arlington International.
4. SUBSEQUENT EVENT
On June 23, 2000, Churchill Downs Incorporated ("Churchill Downs") and DII
signed a definitive agreement whereby AIRI, AMSI and Turf Club of Illinois
Inc.(TCI) would merge with subsidiaries of Churchill Downs. Under the terms
of the agreement, Churchill Downs would issue 3.15 million shares of its
common stock upon closing to DII. The agreement also specifies the
issuance of up to an additional 1.25 million shares of Churchill Downs
stock to DII depending on certain developments and conditions over a future
period. DII has entered into a stockholder agreement that would provide for
restrictions on the voting and transfer of the shares of Churchill Downs
common stock received in the merger. On September 8, 2000, Churchill Downs
shareholders approved the transaction at a special meeting and the
transaction was completed on September 8, 2000.
5. RESTRUCTURING
In conjunction with the transaction with Churchill Downs, DII received
certain assets and forgave intercompany debt with Arlington International
and changed its ownership relationship with TCI. As a result, Arlington
International recorded dividends to DII of $66,709 and capital
contributions of $25,163.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
B. PRO FORMA FINANCIAL INFORMATION
CHURCHILL DOWNS INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed balance sheet was derived from our
unaudited consolidated balance sheet and the unaudited balance sheets of
Arlington International Racecourse, Inc. and subsidiaries ("Arlington
International") as of June 30, 2000. The unaudited pro forma condensed statement
of earnings for the six-month period ended June 30, 2000 was derived from our
unaudited consolidated statement of earnings and the unaudited statement of
operations of Arlington International for the six-month period ended June 30,
2000. The unaudited pro forma condensed statement of earnings for the year ended
December 31, 1999 was derived from our audited consolidated statement of
earnings for the year ended December 31, 1999, the audited statement of
operations of Arlington International for the year ended December 31, 1999, the
unaudited statements of earnings of Calder Race Course, Inc. ("Calder") and
Tropical Park, Inc. ("Tropical") (which together comprise Calder Race Course)
for the period from January 1, 1999 through April 23, 1999 and the unaudited
statement of earnings of Hollywood Park Race Track and Casino ("Hollywood
Park") for the period from January 1, 1999 through September 10, 1999. The
unaudited pro forma financial statements reflect the pro forma effects of the
Arlington International, Calder Race Course, and Hollywood Park transactions,
the new credit agreement entered into during 1999 and the July 1999 stock
offering as if they had occurred on January 1, 1999 for the statements of
earnings. The unaudited pro forma financial statements reflect the acquisition
of Arlington International as of June 30, 2000. The statements do not purport to
represent what our results of operations or financial position actually would
have been if the transactions, the new credit agreement and the offering had
occurred on or as of such dates and are not necessarily indicative of future
operating results or financial position, given that Arlington International has
not offered live racing during this period. It is anticipated that the ongoing
operating results for Arlington International will differ significantly from its
results included in the unaudited pro forma consolidated financial statements,
given the recent legislative changes and Arlington International's return to
live racing. 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, including
notes thereto, included in its report on Form 10-K for the year ended December
31, 1999, and its unaudited interim financial statements including notes
thereto, included in its report of Form 10-Q for the quarterly period ended June
30, 2000, the financial statements including notes thereto of Calder Race Course
and Hollywood Park included in our Form 8K/A dated June 18, 1999 and Form S-3/A
dated July 15, 1999, respectively, and the audited annual financial statements
of Arlington International for the year ended Dcember 31, 1999 incorporated by
reference in this form 8-K/A and unaudited interim financial statements of
Arlington International and the notes thereto included in this Form 8K/A.
The Arlington International, Calder Race Course and Hollywood Park transactions
have been accounted for using the purchase method of accounting. Under the
purchase method of accounting, the purchase price is allocated to the fair value
of the tangible and identifiable intangible assets acquired and liabilities
assumed. The pro forma adjustments are based on preliminary assumptions of the
allocation of the purchase price to Arlington International's assets and
liabilities and are subject to revision once appraisals, evaluations and other
studies of the fair value of the assets acquired and liabilities assumed are
completed. Actual purchase accounting adjustments related to the transactions
may differ from the pro forma adjustments presented herein.
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<PAGE>
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2000
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Historical Adjustments Pro Forma
Churchill Arlington and Churchill
Downs International Eliminations(1) Downs
---------- ------------- --------------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 21,931 $ 4,289 $ 26,220
Restricted cash 30,438 - 30,438
Accounts receivable 23,032 6,712 29,744
Other current assets 3,741 465 4,206
--------- --------- --------- ---------
Total current assets 79,142 11,466 - 90,608
Other assets 6,988 1,227 $ (136)(2) 8,079
Property, plant and equipment, net 276,341 93,334 (28,713)(2) 340,962
Intangibles, net of amortization 61,216 - 3,776 (2) 64,992
--------- --------- --------- ---------
Total assets $423,687 $106,027 $(25,073) $504,641
========= ========= ========= =========
Liabilities and Shareholders' Equity
Current liabilites:
Accounts payable $ 33,979 $ 9,834 $ 43,813
Accrued liabilities 38,833 17,735 $ 2,095 (3) 58,663
Income taxes payable 5,990 5,990
Deferred revenue 2,334 - 2,334
Long-term debt, current portion 2,904 - 2,904
--------- --------- --------- ---------
Total current liabilities 84,040 27,569 2,095 113,704
Long term liabilites:
Long-term debt, due after one year 166,658 - 166,658
Advances from associated entities 67 (67)(4) -
Other liabilities 9,737 - 9,737
Deferred income taxes 15,569 - 15,569
--------- --------- --------- ---------
Total liabilities 276,004 27,636 2,028 305,668
--------- --------- --------- ---------
Shareholders' equity:
Common stock 71,634 2 (2)(4)
51,290 (5) 122,924
Retained earnings (accumulated deficit) 76,172 (113,187) 113,187 (4) 76,172
Additional paid-in-capital - 191,576 (191,576)(4) -
Deferred compensation costs (58) (58)
Notes receivable for common stock (65) (65)
--------- --------- --------- ---------
Total shareholders' equity 147,683 78,391 (27,101) 198,973
--------- --------- --------- ---------
Total liabilities and
shareholders' equity $423,687 $106,027 $(25,073) $504,641
========= ========= ========= =========
</TABLE>
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<PAGE>
(1) Adjustments give pro forma effect to the Arlington International
transaction as if this transaction had occurred on June 30, 2000.
(2) To record the revaluation of acquired intangibles assets, other assets and
plant and equipment of Arlington International to its estimated fair value
reduced proportionately to reflect the estimated purchase price for the
transaction because the amount of the estimated purchase price for the
transaction is less than the estimated fair value of the long term assets.
(3) To accrue costs related to the transaction.
(4) To eliminate the historical equity accounts of Arlington International and
to eliminate assets/liabilities that were not assumed by Churchill Downs
in the transaction.
(5) To record the issuance of 3,150,000 shares of Churchill Downs common stock
at an estimated fair value of $16.28 per share, which includes a 30%
discount due to the restrictions imposed on the holder of common stock by
the terms of the Stockholder's Agreement.
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Unaudited Pro Forma Condensed Consolidated Statement of Earnings
For the Six-Month Period ended June 30, 2000
(in thousands, except per share data)
(1)
Historical Historical
Churchill Arlington Pro Forma Pro Forma
Downs International Adjustments(1) Combined
---------- ------------- -------------- ---------
Net revenues $157,583 $ 36,367 $193,950
Operating expenses 120,672 33,348 $(1,578)(2)
138 (3) 152,580
--------- --------- -------- --------
Gross profit (loss) 36,911 3,019 1,440 41,370
Selling, general and
administrative expenses 12,963 6,241 12 (4)
(474)(5) 18,742
--------- --------- -------- --------
Operating income (loss) 23,948 (3,222) 1,902 22,628
Other income (expense):
Interest income 506 506
Interest expense (7,671) (220)(6) (7,891)
Miscellaneous income (416) 64 (352)
--------- --------- -------- --------
(7,581) 64 (220) (7,737)
--------- --------- -------- --------
Earnings (loss) before income
tax provision (benefit) 16,367 (3,158) 1,682 14,891
Federal and state income tax
provision (benefit) 6,792 (613)(7) 6,179
--------- --------- -------- --------
Net earnings $ 9,575 $(3,158) $ 2,295 $ 8,712
========= ========= ======== ========
Earnings per common share:
Basic $ 0.97 $ 0.67
Diluted $ 0.97 $ 0.67
Weighted average shares outstanding
Basic 9,854 3,150 (8) 13,004
Diluted 9,908 3,150 (8) 13,058
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(1) Adjustments necessary to give pro forma effect to the Arlington
International transaction as if it had occurred on January 1, 1999.
Historical Arlington International statement of operations information is
based on the unaudited financial statements for the period from January 1,
2000 through June 30, 2000.
(2) To record the estimated decrease in depreciation expense as a result of the
revaluation of the acquired Arlington International property, plant and
equipment to its estimated fair value and useful lives.
(3) To record rental expense related to the lease by Churchill Downs of certain
Arlington International property from Duchossois Industries, Inc., under the
terms of the transaction.
(4) To record amortization over 20 years of trademarks recorded at their
estimated fair value.
(5) To eliminate the management fee paid to Duchossois Industries, Inc. that
will not be paid to Churchill Downs.
(6) To record the incremental .25% increase of the interest rate on the
Company's line of credit due to the pro forma effect of the purchase of
Arlington International in accordance with provisions of the credit
agreement.
(7) To adjust the historical Arlington International tax benefit to record the
income tax effect of the pro forma adjustments to our estimated effective
federal and state income tax rate of 41.5%.
(8) To record the issuance of 3,150,000 shares of Churchill Downs common stock
to be issued to the shareholder of Arlington International under the terms
of the transaction.
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Unaudited Pro Forma Condensed Consolidated Statement of Earnings
For the year ended December 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Unaudited (1)
Historical Historical Calder (1) Unaudited (1)
Churchill Race Course(1) Pro Forma Historical Pro Forma
Downs Calder Tropical Adjustments Hollywood Adjustments
---------- ------------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 258,427 $ 2,394 $ 1,181 $ 85,853 $ (40,261)(12)
25,577 (13)
2,083 (14)
Operating expenses
Purses 97,585 499 25,577 (13)
Other direct expenses 109,783 2,911 569 65 (4) 66,968 (1,595)(15)
377 (5) (653)(16)
115 (6) (31,861)(12)
---------- --------- --------- ----------- ---------- ----------
207,368 2,911 1,068 557 66,968 (8,532)
---------- --------- --------- ----------- ---------- ----------
Gross profit (loss) 51,059 (517) 113 (557) 18,885 (4,069)
Selling, general and
administrative expenses 18,546 685 212 - 5,141 (2,542)(12)
---------- --------- --------- ----------- ---------- ----------
Operating income (loss) 32,513 (1,202) (99) (557) 13,744 (1,527)
Other income (expense):
Interest income 847 33 79
Interest expense (7,839) (446) (325) (1,418)(7) (7,823)(17)
Rental income - 191 13 (115)(6) -
Miscellaneous income 334 - -
---------- --------- --------- ----------- ---------- ----------
Earnings (loss) before income
tax provision (benefit) 25,855 (1,424) (332) (2,090) 13,744 (9,350)
---------- --------- --------- ---------- ---------- ----------
Federal and state income 10,879 - - (1,616)(8) 1,846 (18)
tax provision
Net earnings $ 14,976 $ (1,424) $ (332) $ (474) $ 13,744 $ (11,196)
========== ========= ======== =========== ========== ==========
Earnings per common share:
Basic $ 1.74
Diluted $ 1.72
Weighted average shares
outstanding:
Basic 8,598
Diluted 8,718
(2) (3)
Stock Historical (3)
Offering Arlington Pro Forma Pro Forma
Adjustments Internatinal Adjustments Combined
----------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Net revenues $ 22,030
$ 357,284
Operating expenses
Purses 123,661
Other direct expenses 24,293 (3,189)(19)
250 (20)
168,033
--------- --------- ---------- -----------
- 24,293 (2,939) 291,694
--------- --------- ---------- -----------
Gross profit (loss) - (2,263) 2,939 65,590
Selling, general and
administrative expenses - 11,174 25 (21)
(948)(22) 32,293
--------- --------- ---------- -----------
Operating income (loss) - (13,437) 3,862 33,297
Other income (expense):
Interest income 959
Interest expense $ 8,229 (9) (353)(23) (9,975)
Rental income 89
Miscellaneous income 334
--------- --------- ---------- -----------
Earnings (loss) before income
tax provision (benefit) 8,229 (13,437) 3,509 24,704
--------- --------- ----------- -----------
Federal and state income 3,456 (10) (8) (4,169)(24) 10,388
tax provision
Net earnings $ 4,773 $(13,429) $ 7,678 $ 14,316
========= ========= ========== ===========
Earnings per common share:
Basic $ 1.10
Diluted $ 1.09
Weighted average shares
outstanding:
Basic 1,235 (11) 3,150 (25) 12,983
Diluted 1,235 (11) 3,150 (25) 13,103
</TABLE>
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<PAGE>
(1) Adjustments to give pro forma effect to the Calder Race Course and
Hollywood Park acquisitions and the new credit agreement as if each
transaction had occurred on January 1, 1999. Historical Calder Race
Course statement of earnings information is based on the unaudited
financial statements for the period from January 1, 1999 through April
23, 1999. Historical Hollywood Park statement of earnings information
is based on the unaudited financial statements for the period from
January 1, 1999 through September 10, 1999.
(2) Adjustments to give pro forma effect to the offering of 2,300,000
shares of Churchill Downs common stock on July 20, 1999 as if it had
occurred on January 1, 1999.
(3) Adjustments to give pro forma effect to the Arlington International
transaction if it had occurred on January 1, 1999. Historical
Arlington International statement of operations information is based
on the financial statements for the year ended December 31, 1999,
during which period Arlington International was not open for live
racing.
(4) To record the estimated increase in depreciation expense for the
period from January 1, 1999 to April 23, 1999 as a result of the
revaluation of the acquired Calder property, plant and equipment to
its estimated fair value and useful lives.
(5) To record estimated amortization over 40 years of the excess of the
Calder purchase price over the fair value of net assets acquired of
$48.2 million.
(6) To eliminate intercompany rental income and expense between Calder and
Tropical.
(7) To record the estimated incremental interest expense using an average
7.45% interest rate on borrowings of $92.0 million necessary to
finance the Calder acquisition and fund deferred financing costs,
including amortization expense of $125,000 related to deferred
financing costs of $2.5 million over 5 years.
(8) To record the income tax effect of the estimated increase in
depreciation and incremental interest expense resulting from the
Calder acquisition at our estimated federal and state income tax rate
of 42%.
(9) To record the reduction of interest expense due to the decrease in
interest rate from 7.45% to 6.7% due to the stock offering and the
reduction of the outstanding debt balances.
(10) To record the income tax effect of the pro forma adjustments related
to the stock offering at our estimated federal and state income tax
rate of 42%.
(11) To reflect the increase in weighted average shares outstanding for the
shares issued in the July 20, 1999 stock offering as if it had
occurred on January 1, 1999.
(12) To eliminate the historical results of operations of Hollywood Park
Casino, which will not be operated by Churchill Downs, under the terms
of the transactions.
(13) To reclassify purse expense of Hollywood Park to conform to Churchill
Down's historical presentation of these items.
(14) To record rental income and admissions revenue related to the lease by
Churchill Downs of the Hollywood Park Casino to Hollywood Park, Inc.,
now known as Pinnacle, Inc., under the terms of the transaction for
the period January 1, 1999 through September 10, 1999.
(15) To record the estimated decrease in depreciation expense as a result
of the revaluation of the acquired Hollywood Park property, plant and
equipment to its estimated fair value and useful lives.
15
<PAGE>
(16) To eliminate historical depreciation expense on Hollywood Park assets
not acquired by Churchill Downs in the transaction.
(17) To record estimated incremental interest expense using an average
7.45% interest rate on borrowings of $142.0 million necessary to
finance the Hollywood Park acquisition.
(18) To record the income tax effect of the pro forma adjustments related
to the acquisition of Hollywood Park at our estimated federal and
state income tax rate of 42%.
(19) To record the estimated decrease in depreciation expense as a result
of the revaluation of the property, plant and equipment at Arlington
International to its estimated fair value and useful lives.
(20) To record rental expense related to the lease by Churchill Downs of
certain Arlington International property from Duchossois Industries,
Inc., under the terms of the transaction.
(21) To record amortization over 20 years of trademarks recorded at their
estimated fair value.
(22) To eliminate the management fee paid to Duchossois Industries, Inc.
that will not be paid to Churchill Downs
(23) To record the increase of the interest rate of the Company's line of
credit from 6.7% to 6.95% due to the pro forma effect of the purchase
of Arlington International in accordance with provisions of the credit
agreement.
(24) To adjust historical Arlington International tax benefit and to record
the income tax effect of the estimated decrease in depreciation
expense to our estimated effective federal and state income tax rates
of 42%.
(25) To reflect the issuance of 3,150,000 shares of Churchill Downs common
stock to be issued to the shareholder of Arlington International under
terms of the transaction agreement as outstanding for the entire
period.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
B. EXHIBITS
Description By Reference To
----------- ----------------
(2) Amended and Restated Agreement Annex A of the Proxy
and Plan of Merger dated as of Statement for a Special
June 23, 2000, as amended as of Meeting of Shareholders of
July 14, 2000, by and among Churchill Downs Incorporated
Churchill Downs Incorporated, dated September 8, 2000
Duchossois Industries, Inc.,
A.Acquisition Corp., A. Manage-
ment Acquisition Corp., T. Club
Acquisition Corp., Arlington
International Racecourse, Inc.,
Arlington Management Services,
Inc., Turf Club of Illinois,Inc.*
(23) Consent of Arthur Andersen LLP Page 19, Report on Form
8-K/A dated September 8,
2000
(99)(a) Press release issued on Exhibit 99 of the Form 8-K
September 10, 1999 by Churchill Current Report dated
Downs Incorporated. * September 8, 2000
(99)(b) Arlington International Pages F-2 through F-12 of
historical combined financial the Proxy Statement for a
statements, including notes Special Meeting of
thereto, for the year ended Shareholders of Churchill
December 31, 1999* Downs Incorporated dated
September 8, 2000.
* Previously filed
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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 21, 2000
\s\Thomas H. Meeker
-------------------
Thomas H. Meeker
President and Chief Executive Officer
(Principal Executive Officer)
November 21, 2000
\s\Robert L. Decker
-------------------
Robert L. Decker
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
November 21, 2000
\s\Michael E. Miller
--------------------
Michael E. Miller
Senior Vice President, Finance
(Principal Accounting Officer)
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