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, 2000
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 (IRS Employer
of incorporation or organization) Identification No.)
700 Central Avenue, Louisville, KY 40208
(Address of principal executive offices)
(Zip Code)
(502) 636-4400
----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No____
The number of shares outstanding of registrant's common stock at November 14,
2000 was 13,015,449 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, 2000, 3
December 31, 1999 and September 30, 1999
Condensed Consolidated Statements of Earnings for the nine 4
and three months ended September 30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows for the nine 5
months ended September 30, 2000 and 1999
Condensed Notes to Consolidated Financial Statements 6-12
ITEM 2. Management's Discussion and Analysis of Financial 13-20
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 21
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings (Not applicable) 21
ITEM 2. Changes in Securities and Use of Proceeds 21-22
ITEM 3. Defaults Upon Senior Securities (Not applicable) 22
ITEM 4. Submission of Matters to a Vote of Security Holders 22
ITEM 5. Other Information (Not applicable) 22
ITEM 6. Exhibits and Reports on Form 8-K 22-23
Signatures 24
Exhibit Index 25
Exhibits 26-47
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
ASSETS 2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 11,359 $ 29,060 $ 27,936
Restricted cash 9,270 - -
Accounts receivable 35,096 24,279 14,812
Other current assets 4,627 2,751 3,110
--------- --------- ---------
Total current assets 60,352 56,090 45,858
Other assets 7,390 4,740 6,167
Plant and equipment, net 339,593 274,882 275,631
Intangible assets, net 64,346 62,334 61,899
--------- --------- ---------
$471,681 $398,046 $389,555
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,572 $ 14,794 $ 19,616
Accrued expenses 38,025 23,821 18,102
Dividends payable - 4,927 -
Income taxes payable 1,774 336 1,529
Deferred revenue 5,386 10,860 3,094
Long-term debt, current portion 2,277 552 465
--------- --------- ---------
Total current liabilities 82,034 55,290 42,806
Long-term debt 157,183 180,898 186,104
Other liabilities 10,299 8,263 4,836
Deferred income taxes 15,565 15,474 15,938
Commitments and contingencies - - -
Shareholders' equity:
Preferred stock, no par value;
250 shares authorized; no shares issued - - -
Common stock, no par value; 50,000 shares
authorized; issued: 13,015 shares
September 30, 2000 and 9,854 shares
December 31, 1999 and September 30, 1999 123,149 71,634 71,634
Retained earnings 83,545 66,667 68,446
Deferred compensation costs (29) (115) (144)
Note receivable for common stock (65) (65) (65)
--------- --------- ---------
206,600 138,121 139,871
--------- --------- ---------
$471,681 $398,046 $389,555
========= ========= =========
</TABLE>
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, 2000 and 1999
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------ -------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $261,120 $164,879 $103,536 $63,076
Operating expenses 200,954 129,482 80,282 54,662
--------- --------- --------- --------
Gross profit 60,166 35,397 23,254 8,414
Selling, general and administrative
expenses 20,394 11,668 7,430 4,779
--------- --------- --------- --------
Operating income 39,772 23,729 15,824 3,635
--------- --------- --------- --------
Other income (expense):
Interest income 774 566 269 204
Interest expense (11,353) (4,162) (3,683) (1,953)
Miscellaneous, net (513) 293 (97) 169
--------- --------- --------- --------
(11,092) (3,303) (3,511) (1,580)
--------- --------- --------- --------
Earnings before income tax provision 28,680 20,426 12,313 2,055
--------- --------- --------- --------
Federal and state income tax provision (11,802) (8,579) (5,010) (863)
--------- --------- --------- --------
Net earnings $ 16,878 $ 11,847 $ 7,303 $ 1,192
========= ========= ========= ========
Earnings per common share data:
Basic $ 1.67 $ 1.45 $ 0.69 $ 0.13
Diluted $ 1.66 $ 1.43 $ 0.68 $ 0.12
Weighted average shares outstanding:
Basic 10,121 8,175 10,649 9,455
Diluted 10,176 8,297 10,707 9,552
</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,
(Unaudited)
(In thousands)
2000 1999
---- ----
Cash flows from operating activities:
Net earnings $16,878 $ 11,847
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 12,655 7,724
Deferred compensation 351 213
Deferred income taxes 283 (145)
Increase (decrease) in cash resulting from
changes in operating assets and liabilities:
Restricted cash (9,270) -
Accounts receivable 2,044 (2,181)
Other current assets (1,899) (1,479)
Accounts payable 3,459 12,943
Accrued expenses 623 5,432
Income taxes payable 1,438 1,271
Deferred revenue (5,891) (5,319)
Other assets and liabilities 127 990
-------- ---------
Net cash provided by operating activities 20,798 31,296
-------- ---------
Cash flows from investing activities:
Additions to plant and equipment, net (16,776) (10,340)
Sale of Training Facility Assets 4,969 -
Acquisition of business, net of cash acquired of
$7,137 in 1999 - (227,857)
-------- --------
Net cash used in investing activities (11,807) (238,197)
-------- ---------
Cash flows from financing activities:
Increase (decrease) in long-term debt, net 2,432 (1,176)
Borrowings on bank line of credit 66,679 267,000
Repayments of bank line of credit (91,101) (95,000)
Payment of loan origination costs - (2,863)
Payment of dividends (4,927) (3,762)
Capital contribution by minority interest in subsidiary - 1,551
Common stock issued 225 62,707
-------- ---------
Net cash (used in) provided by financing activities
(26,692) 228,457
-------- ---------
Net (decrease) increase in cash and cash equivalents (17,701) 21,556
Cash and cash equivalents, beginning of period 29,060 6,380
-------- ---------
Cash and cash equivalents, end of period $11,359 $ 27,936
======== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $10,929 $ 3,032
Income taxes $10,117 $ 7,996
Schedule of non-cash activities:
Accrued acquisition costs related to Hollywood Park - $ 1,705
Accrued merger costs related to Arlington Park $ 2,095 -
Issuance of common stock related to the merger of
Arlington Park $51,291 -
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
the nine months ended September 30, 2000 and 1999 (unaudited)
($ in thousands, except per share data)
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
accounting principles generally accepted in the United States 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 accounting principles generally accepted in
the United States. 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, 1999
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 and recent
acquisition activity, 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 and third quarters of each year during
which all our operations are open for some or all of this period and the
Kentucky Derby and Kentucky Oaks are run.
2. Restricted Cash
Restricted cash represents refundable deposits and amounts due to
horsemen for purses, stakes and awards.
3. Long-Term Debt
The Company has a $250 million line of credit under a revolving loan
facility through a syndicate of banks to meet working capital and other
short-term requirements and to provide funding for acquisitions. The
interest rate on the borrowing is based upon LIBOR plus 75 to 250
additional basis points, which is determined by certain Company
financial ratios. There was $154.6 million outstanding on the line of
credit at September 30, 2000, compared to $178.0 million outstanding at
December 31, 1999, and $183.0 million outstanding at September 30, 1999.
The line of credit is secured by substantially all of the assets of the
Company and its wholly owned subsidiaries, and matures in 2004.
6
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
the nine months ended September 30, 2000 and 1999 (unaudited)
($ in thousands, except per share data)
3. Long-Term Debt (cont'd)
The Company has entered into interest rate swap contracts with major
financial institutions, which have termination dates through March 2003.
Under terms of these two separate contracts, we receive a LIBOR based
variable interest rate on notional amounts of $35.0 million each and pay
a fixed interest rate of 7.015% and 7.30%, which mature in March 2003
and May 2002, respectively. The Company also entered into an interest
rate swap in November 2000 in which we pay a fixed interest rate of
6.40% on a notional amount of $30.0 million, which matures in November
2001. The variable interest rate received 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 and Other Transactions
On September 8, 2000, three of the Company's wholly owned subsidiaries
merged with Arlington International Racecourse, Inc., Arlington
Management Services, Inc. and Turf Club of Illinois, Inc. (collectively
referred to as "Arlington Park"). The Company issued 3.15 million shares
of its common stock to Duchossois Industries, Inc. ("DII") and could
issue up to an additional 1.25 million shares of common stock dependent
upon the opening of the riverboat casino at Rosemont, Illinois, and the
amount of subsidies received by Arlington as a result thereof. For this
purpose, the purchase price is based upon the number of shares issued to
DII multiplied by an average trading price of the Company's shares for a
period immediately before and after the announcement of the mergers on
June 23, 2000, discounted to reflect restrictions on the voting and
transfer of such shares imposed by the Stockholder's Agreement, plus
merger-related costs. The acquisition was accounted for by the Company
under the purchase method of accounting and, accordingly, the financial
position and results of operations of Arlington Park have been included
in the Company's consolidated financial statements since the date of
acquisition. The assets and liabilities of Arlington Park were recorded
at their estimated fair values on the acquisition date based on a
preliminary appraisal. The allocation of the purchase price may require
adjustment in the Company's future financial statements based on a final
determination of the fair value of assets acquired in the acquisition.
On September 10, 1999, the Company acquired the assets of the Hollywood
Park racetrack 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 facility to the seller under a 10-year lease with
one 10-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 racetrack have been included in the Company's
consolidated financial statements since the date of acquisition.
On July 20, 1999, the Company issued 2.3 million shares of the Company's
common stock at a price of $29 per share. The total proceeds net of
offering expenses were $62.1 million and were used for the repayment of
bank borrowings.
7
<PAGE>
CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
the nine months ended September 30, 2000 and 1999 (unaudited)
($ in thousands, except per share data)
4. Acquisitions and Other Transactions (cont'd)
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. The purchase
price, including 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 $49.4 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 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.
Following are the unaudited pro forma results of operations as if the
September 8, 2000 merger with Arlington Park, the September 10, 1999
acquisition of Hollywood Park racetrack, the July 20, 1999 stock
issuance and the April 23, 1999 acquisition of Calder Race Course all
had occurred on January 1, 1999:
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
Net revenues $324,181 $258,133
Net earnings $16,251 $10,995
Earnings per common share:
Basic $1.22 $0.85
Diluted $1.22 $0.84
Weighted average shares:
Basic 13,271 12,977
Diluted 13,326 13,098
This unaudited pro forma financial information is not necessarily
indicative of the operating results that would have occurred had the
transactions been consummated as of January 1, 1999, nor is it
necessarily indicative of future operating results.
8
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CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
the nine months ended September 30, 2000 and 1999 (unaudited)
($ in thousands, except per share data)
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 ended
September 30, September 30,
--------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings (numerator) amounts used
for basic and diluted per share
computations: $16,878 $11,847 $7,303 $1,192
------- ------- ------ ------
Weighted average shares (denominator)
of common stock outstanding per share:
Basic 10,121 8,175 10,649 9,455
Plus dilutive effect of
stock options 55 122 58 97
------- ------- ------ ------
Diluted 10,176 8,297 10,707 9,552
Earnings per common share:
Basic $ 1.67 $ 1.45 $ 0.69 $ 0.13
Diluted $ 1.66 $ 1.43 $ 0.68 $ 0.12
</TABLE>
Options to purchase approximately 74 and 69 shares for the periods
ending September 30, 2000 and 1999, respectively, were not included in
the computation of earnings per common share- assuming dilution because
the options' exercise prices were greater than the average market price
of the common shares.
9
<PAGE>
CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
the nine months ended September 30, 2000 and 1999 (unaudited)
($ in thousands, except per share data)
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 seven segments: (1) Churchill Downs
racetrack and the Louisville Sports Spectrum simulcast facility, (2)
Hollywood Park racetrack and its on-site simulcast facility, (3) Calder
Race Course, (4) Arlington Park and its off-track betting facilities
("OTBs"), (5) Ellis Park racetrack and its on-site simulcast facility,
(6) Hoosier Park racetrack and its on-site simulcast facility and the
other three Indiana OTBs, and (7) other investments, including Charlson
Broadcast Technologies LLC ("CBT") and the Company's other various
equity interests, which are not material. Eliminations include the
elimination of management fees and other intersegment transactions. As a
result of a reorganization for internal reporting during 2000, the
Company's segment disclosures are presented on a new basis to correspond
with internal reporting for corporate revenues and expenses which, for
the nine and three months ended September 30, 1999 and 2000, are now
reported separate of Churchill Downs racetrack revenues and expenses.
Most of the Company's revenues are generated from commissions on
pari-mutuel wagering at the Company's racetracks and OTBs, plus
simulcast fees, Indiana riverboat admissions subsidy revenue,
admissions, concessions revenue, sponsorship revenues, licensing rights
and broadcast fees, lease income 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 shareholders for the year ended December 31, 1999.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") should not be considered as an alternative to, or more
meaningful than, net income (as determined in accordance with accounting
principles generally accepted in the United States), as a measure of our
operating results or cash flows (as determined in accordance with
accounting principles generally accepted in the United States) 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, 2000 and 1999 (unaudited)
($ in thousands, except per share data)
6. Segment Information (cont'd)
The table below presents information about reported segments for the
nine months and three months ended September 30, 2000 and 1999:
Nine Months Three Months
Ended September 30, Ended September 30,
--------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
Net revenues:
Churchill Downs $ 73,639 $ 66,653 $ 8,960 $ 5,520
Hollywood Park 75,003 1,117 24,124 1,117
Calder Race Course 42,556 39,053 28,888 27,352
Arlington Park 9,171 - 9,171 -
Hoosier Park 38,090 37,514 13,872 13,256
Ellis Park (a) 14,947 18,491 12,265 15,528
Other investments 11,524 4,378 8,011 1,667
--------- --------- --------- --------
264,930 167,206 105,291 64,440
Corporate revenues (b) 651 - 46 -
Eliminations (4,461) (2,327) (1,801) (1,364)
--------- --------- --------- --------
$261,120 $164,879 $103,536 $63,076
========= ========= ========= ========
EBITDA:
Churchill Downs $ 21,502 $ 18,001 $ (2,361) $(4,013)
Hollywood Park 13,380 (542) 3,909 (542)
Calder Race Course 7,001 8,865 7,746 6,977
Arlington Park 2,093 - 2,093 -
Hoosier Park 4,939 5,131 1,497 1,744
Ellis Park (a) 1,534 2,834 2,581 3,637
Other investments 7,137 1,115 6,437 454
--------- --------- --------- --------
57,586 35,404 21,902 8,257
Corporate expenses (b) (6,129) (3,949) (1,940) (1,404)
--------- --------- --------- --------
$ 51,457 $ 31,455 $ 19,962 $ 6,853
========= ========= ========= ========
Operating income (loss):
Churchill Downs $ 18,721 $ 15,328 $ (3,282) $(4,883)
Hollywood Park 10,082 (795) 2,767 (795)
Calder Race Course 4,307 7,364 6,834 6,062
Arlington Park 1,960 - 1,960 -
Hoosier Park 3,942 4,183 1,164 1,417
Ellis Park 442 1,842 2,211 3,292
Other investments 6,146 (244) 6,169 (54)
--------- --------- --------- --------
45,600 27,678 17,823 5,039
Corporate expenses (b) (5,828) (3,949) (1,999) (1,404)
--------- --------- --------- --------
$ 39,772 $ 23,729 $ 15,824 $ 3,635
========= ========= ========= ========
(a) The decrease from 1999 to 2000 is primarily the result of a shift of one
week of race dates to Churchill Downs.
(b) As a result of a reorganization for internal reporting during 2000, the
Company's segment disclosures are presented on a new basis to correspond
with internal reporting for corporate revenues and expenses. Corporate
revenues and expenses for the nine and three months ended September 30, 1999
and 2000 are reported separately.
11
<PAGE>
CHURCHILL DOWNS INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
the nine months ended September 30, 2000 and 1999 (unaudited)
($ in thousands, except per share data)
6. Segment Information (cont'd)
As of As of As of
September 30, December 31, September 30,
2000 1999 1999
------------- ------------ -------------
Total assets:
Churchill Downs $ 408,990 $345,909 $329,293
Hollywood Park 165,232 153,126 144,137
Calder Race Course 114,857 114,396 111,421
Arlington Park 85,080 - -
Hoosier Park 37,231 32,559 35,333
Ellis Park 30,606 25,015 26,742
Other investments 359,384 312,272 171,116
---------- --------- ---------
1,201,380 983,277 818,042
Eliminations (729,699) (585,231) (428,487)
---------- --------- ---------
$ 471,681 $398,046 $389,555
============ ========= =========
Following is a reconciliation of total EBITDA to income before provision
for income taxes:
Nine Months Three Months
ended ended
September 30, September 30,
(in thousands) 2000 1999 2000 1999
---- ---- ---- ----
Total EBITDA $51,457 $31,455 $19,962 $6,853
Depreciation and amortization (12,198) (7,433) (4,235) (3,049)
Interest income (expense), net (10,579) (3,596) (3,414) (1,749)
-------- -------- -------- -------
Earnings before provision for
income taxes $28,680 $20,426 $12,313 $2,055
======== ======== ======== =======
7. Pending Transactions
The Company previously entered into a definitive agreement with Centaur,
Inc. which was subsequently assigned to Centaur Racing, LLC ("Centaur"),
to sell a 26% interest in Hoosier Park, LP ("HPLP") for a purchase price
of $8.5 million. HPLP is an Indiana limited partnership that owns
Hoosier Park racetrack and related OTBs. The Company was to retain a 51%
interest in HPLP and continue to manage its day-to-day operations. On
September 12, 2000, the Company announced that approval for the sale had
been denied as a result of action taken by the Indiana Horse Racing
Commission ("IHRC") against Centaur, and as a result the ownership
structure has not changed. Centaur's performance under the definitive
agreement was guaranteed by an irrevocable Letter of Credit in the
amount of $2.5 million, which management expects to be available to us
at the end of Centaur's administrative appeals process, during the
fourth quarter of 2000.
12
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Information set forth in this discussion and analysis contains 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 financial performance of Arlington Park; litigation surrounding the
Rosemont, Illinois, riverboat casino; market reaction to our merger agreement
with Arlington Park; changes in Illinois law that impact revenues of the racing
operations in Illinois; the impact of gaming competition (including lotteries
and riverboat, cruise ship and land-based casinos) and other sports and
entertainment options in those markets in which we operate; a substantial change
in law or regulations affecting our pari-mutuel activities; a substantial change
in allocation of live racing days; a decrease in riverboat admissions subsidy
revenue from our Indiana operations; the impact of an additional racetrack near
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 continued ability to grow our share of the interstate simulcast market; the
impact of interest rate fluctuations; 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; 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 racing and simulcast signals of races. Additionally, we offer racing
services through our other interests. Our primary source of revenue is
commissions on pari-mutuel wagering at our racetracks and off-track betting
facilities ("OTBs"). Other sources of revenue include simulcast fees, Indiana
riverboat admissions subsidy revenue, admissions, concessions revenue,
sponsorship revenues, licensing rights and broadcast fees, lease income and
other sources.
We are the majority owner and operator of Hoosier Park at Anderson in Anderson,
Indiana, which conducts Thoroughbred, Quarter Horse and Standardbred horse
racing ("Hoosier Park"). Hoosier Park is owned by Hoosier Park, LP ("HPLP"), an
Indiana limited partnership. We previously entered into a definitive agreement
with Centaur, Inc., which was subsequently assigned to Centaur Racing, LLC
("Centaur"), to sell a 26% interest in HPLP for a purchase price of $8.5
million. We were to retain a 51% interest in HPLP and continue to manage its
day-to-day operations. On September 12, 2000, we announced that approval for the
sale had been denied as a result of action taken by the Indiana Horse Racing
Commission ("IHRC") against Centaur, and as a result the ownership structure has
not changed. Centaur's performance under the definitive agreement was guaranteed
by an irrevocable Letter of Credit in the amount of $2.5 million, which
13
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
management expects to be available to us at the end of Centaur's administrative
appeals process, during the fourth quarter of 2000.
Because of the seasonal nature of our business and recent acquisition activity,
revenues and operating results for any interim quarter are likely 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. We
normally earn a substantial portion of our net earnings in the second and third
quarters of each year during which all our operations are open for some or all
of this period and the Kentucky Derby and the Kentucky Oaks are run.
In Kentucky, two pieces of legislation significant to our operations were passed
in the 2000 session of the Kentucky General Assembly. First, an excise tax
credit for racetracks was included in the 2000-2002 Kentucky state budget. The
measure results in an ultimate credit of nearly $1.4 million in new revenue, and
is earmarked for horsemen's incentives and necessary capital improvements at
Churchill Downs racetrack over the next two years.
The Kentucky General Assembly also enacted legislation that eliminates the
excise tax on Breeders' Cup Championship Day wagering at any Kentucky track that
hosts the event. This legislation is aimed at attracting the Breeders' Cup to
Kentucky, and Churchill Downs, on a more frequent basis. On-track wagering for
the 2000 Breeders' Cup Day at Churchill Downs totaled $13.6 million and
generated excise taxes of approximately $475,000. This tax exemption will not
become effective until January 1, 2001, and therefore did not apply to the 2000
Breeders' Cup at Churchill Downs. The exemption will continue if the Breeders'
Cup returns to Kentucky within three years of the previously held event.
In 1999, the state of Illinois enacted legislation that provides for pari-mutuel
tax relief and related tax credits for Illinois racetracks, as well as
legislation providing for subsidies to Illinois horse racing tracks from
revenues generated by the relocation of a license to operate a riverboat casino
gaming facility. Arlington's share of subsidies from the proposed Rosemont
casino under the 1999 legislation is expected to range from $4.6 million to $8.0
million annually, based on publicly available sources. The 1999 legislation is
currently the subject of a lawsuit pending in Cook County, Illinois state court.
14
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
Pari-mutuel wagering information, including intercompany transactions, for our
six racetrack facilities and nine separate OTBs, which are included in their
respective racetracks, during the nine months ended September 30, 2000 and 1999
is as follows ($ in thousands):
<TABLE>
<CAPTION>
Calder
Churchill Hollywood Race Arlington Hoosier
Downs Park* Course* Park* Park Ellis Park
----- ---- ------ ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Live Racing
2000 handle $100,484 $144,499 $ 95,544 $ 65,679 $ 10,797 $ 16,686
2000 no. of days 53 65 96 103 119 41
1999 handle $93,689 $139,991 $110,463 - $ 10,747 $ 19,790
1999 no. of days 47 66 96 - 117 61
Export simulcasting
2000 handle $406,253 $505,495 $268,100 $267,432 $ 39,372 $102,512
2000 no. of days 53 65 96 103 119 41
1999 handle $334,554 $496,349 $238,077 - $ 25,247 $159,965
1999 no. of days 47 66 96 - 117 61
Import simulcasting
2000 handle $93,537 $191,126 - $346,095 $105,448 $ 27,616
2000 no. of days 176 142 - 1,370 908 272
1999 handle $97,250 $182,589 - $217,338 $104,399 $ 26,585
1999 no. of days 181 141 - 1,360 893 261
Number of OTBs 1 - - 5 3 -
Totals
2000 handle $600,274 $841,120 $363,644 $679,206 $155,617 $146,814
1999 handle $525,493 $818,929 $348,540 $217,338 $140,393 $206,340
</TABLE>
* Pari-mutuel wagering information is provided for the nine months ended
September 30, 2000 and 1999. Although the summary reflects handle for the first
nine months of 2000 and 1999 as if the acquisitions had taken place at the
beginning of the year, only revenues generated since the subsidiaries'
acquisition dates have been included in the Company's consolidated statements of
earnings.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended
-----------------------------------------------------------------------------
September 30, 1999
------------------
Net Revenues
Net revenues during the nine months ended September 30, 2000 increased $96.2
million (58%) from $164.9 million in 1999 to $261.1 million in 2000. Churchill
Downs racetrack revenues increased $7.0 million (10%) primarily due to $4.7
million of increased pari-mutuel wagering as a result of having an additional
week of live racing, which was transferred from Ellis Park. In addition,
Churchill Downs racetrack had increases in pari-mutuel wagering, as well as
increases in corporate sponsor event ticket prices, admissions
15
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
and seat revenue and concessions revenue as a result of record attendance on
Kentucky Oaks and Kentucky Derby days. Arlington Park contributed $9.2 million
to the first nine months of 2000 net revenues, Hollywood Park revenues increased
$73.9 million to $75.0 million in 2000 from $1.1 million in 1999 and Calder Race
Course revenues increased $3.5 million to $42.6 million in 2000 from $39.1
million in 1999 due to the timing of the 1999 acquisitions. The Arlington Park
merger was completed in the third quarter of 2000, Hollywood Park was acquired
in the third quarter of 1999 and Calder Race Course was acquired in the second
quarter of 1999. The remaining increase was primarily the result of the $5.8
million management contract that was in effect from July 1 through the closing
of the Arlington Park merger on September 8 offset by a reduction in revenues at
Ellis Park related to the reduction from 61 to 41 days of live racing during
2000.
Operating Expenses
Operating expenses increased $71.5 million (55%) from $129.5 million in 1999 to
$201.0 million in 2000 primarily as a result of Arlington Park's 2000 operating
expenses of $6.3 million, and increases in Hollywood Park and Calder Race Course
operating expenses of $59.9 million and $5.2 million, respectively, primarily
due to the timing of the acquisitions.
Gross Profit
Gross profit increased $24.7 million from $35.4 million in 1999 to $60.1 million
in 2000. The increase in gross profit was primarily the result of the
acquisition of Hollywood Park, the merger with Arlington Park and the increase
in gross profit for Churchill Downs racetrack due to an increase in the number
of live race days and record attendance on Kentucky Oaks and Kentucky Derby
days. The Arlington Park management fee also contributed to the increased gross
profit for 2000.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses increased by $8.7 million
(75%) from $11.7 million in 1999 to $20.4 million in 2000. SG&A expenses at
Churchill Downs corporate increased $2.6 million (38%) due primarily to
increased corporate staffing and compensation expenses reflecting the Company's
strengthened corporate services to meet the needs of new business units. The
1999 acquisitions of Calder Race Course and Hollywood Park resulted in increases
of $1.3 million and $3.1 million, respectively. In addition, Arlington Park had
expenses of $0.9 million during 2000.
Other Income and Expense
Interest expense increased $7.2 million from $4.2 million in 1999 to $11.4
million in 2000 primarily as a result of borrowings to finance the 1999
acquisitions of Calder Race Course and Hollywood Park.
16
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Income Tax Provision
The increase in the income tax provision of $3.2 million for the nine months
ended September 30, 2000 as compared to September 30, 1999 is a result of an
increase in pre-tax earnings.
Three Months Ended September 30, 2000 Compared to Three Months Ended
----------------------------------------------------------------------------
September 30, 1999
------------------
Net Revenues
Net revenues during the three months ended September 30, 2000 increased $40.4
million (64%) from $63.1 million in 1999 to $103.5 million in 2000. Churchill
Downs racetrack revenues increased $3.4 million (62%) due to $3.4 million of
increased pari-mutuel wagering as a result of having an additional week of live
racing, which transferred from Ellis Park. Hollywood Park revenues increased
$23.0 million to $24.1 million in 2000 from $1.1 million in 1999. Arlington Park
contributed net revenues of $9.2 million to the three months ended September 30,
2000. The remaining increase, as reflected in other investments, was primarily
the result of the $5.8 million management contract offset by a reduction in
revenues at Ellis Park related to the reduction from 61 to 41 days of live
racing during the third quarter.
Operating Expenses
Operating expenses increased $25.6 million (47%) from $54.7 million in 1999 to
$80.3 million in 2000. This is primarily attributable to the Hollywood Park
operating expenses increasing $18.5 million, and Arlington Park incurred 2000
operating expenses of $6.3 million.
Gross Profit
Gross profit increased $14.8 million from $8.4 million in 1999 to $23.2 million
in 2000. The increase in gross profit was primarily the result of the
acquisition of Hollywood Park and the merger with Arlington Park. The Arlington
Park management fee also contributed to the increased gross profits for the
three months ended September 30, 2000.
Selling, General and Administrative Expenses
SG&A expenses increased by $2.6 million (55%) from $4.8 million in 1999 to $7.4
million in 2000. SG&A expenses at Churchill Downs corporate increased $0.4
million (17%) due primarily to increased corporate staffing and compensation
expenses reflecting the Company's strengthened corporate services to meet the
needs of new business units. Hollywood Park expenses increased $0.9 million
primarily due to the timing of the acquisition. The merger with Arlington Park
added $ 0.9 million.
17
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Other Income and Expense
Interest expense increased $1.7 million from $2.0 million in 1999 to $3.7
million in 2000 primarily as a result of borrowings to finance the 1999
acquisition of Hollywood Park.
Income Tax Provision
Our income tax provision increased by $4.1 million for the three months ended
September 30, 2000, as compared to September 30, 1999, as a result of an
increase in pre-tax earnings of $10.3 million.
Significant Changes in the Balance Sheet September 30, 2000 to December 31, 1999
--------------------------------------------------------------------------------
Restricted cash increased $9.3 million due to the current period separate
classification of restricted assets.
Accounts receivable increased $10.8 million primarily due to the merger with
Arlington Park.
Net plant and equipment increased $64.7 million primarily as a result of the
merger with Arlington Park. Additional increases were due to routine capital
spending at our operating units offset by depreciation expense and the sale of
the Kentucky Horse Center assets during the second quarter of 2000.
Accounts payable increased $19.8 million at September 30, 2000, primarily due to
the merger with Arlington Park. In addition, there were increases in purses
payable and other expenses related to simulcast wagering for Churchill Downs
racetrack and Hoosier Park.
Accrued expenses increased $14.2 million primarily as a result of the Arlington
Park merger.
Dividends payable decreased $4.9 million at September 30, 2000, due to the
payment of dividends of $4.9 million (declared in 1999) in first quarter 2000.
Deferred revenue decreased $5.5 million at September 30, 2000, primarily due to
the significant amount of admission and seat revenue that was received prior to
December 31, 1999 recognized as income in May 2000 for the Kentucky Derby and
Kentucky Oaks race days.
The long-term debt decrease of $23.7 million was the result of the application
of current cash flow to reduce borrowings under our bank line of credit during
2000.
Common stock increased by $51.5 million primarily due to the issuance of 3.15
million shares of common stock to complete the merger with Arlington Park during
the third quarter of 2000.
Significant Changes in the Balance Sheet September 30, 2000 to
---------------------------------------------------------------------
September 30, 1999
------------------
Restricted cash increased $9.3 million due to the current period separate
classification of restricted assets.
18
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Accounts receivable increased $20.3 million at September 30, 2000. The merger
with Arlington Park increased accounts receivable by $15.8 million. In addition,
the timing of the 1999 acquisition of Hollywood Park increased accounts
receivable by $3.4 million.
Net plant and equipment increased $64.0 million primarily as a result of the
merger with Arlington Park. Additional increases were due to routine capital
spending at our operating units offset by depreciation expense and the sale of
the Kentucky Horse Center assets during the second quarter of 2000.
The accounts payable increase of $14.9 million was primarily due to the merger
with Arlington Park which represents $12.3 million of the increase.
Accrued expenses increased $19.9 million primarily due to the Arlington Park
merger.
The long-term debt net decrease of $28.9 million was the result of the
application of current cash flow to reduce borrowings under our bank line of
credit.
Common stock increased by $51.5 million primarily due to the issuance of 3.15
million shares of common stock to complete the merger with Arlington Park during
the third quarter of 2000.
Liquidity and Capital Resources
-------------------------------
The change in working capital between September 30, 2000 and 1999 is a result of
the Arlington merger. Cash flows provided by operations were $20.8 and $31.3
million for the nine months ended September 30, 2000 and 1999, respectively. The
increase in depreciation and amortization is primarily due to the timing of the
1999 acquisitions of Calder Race Course and Hollywood Park. The net decrease in
cash resulting from changes in operating assets and liabilities was primarily a
result of current period separate classification of restricted assets which
represent refundable deposits and amounts due to horseman for purses, stakes and
awards. In addition, the accounts payable decrease was primarily due to the
timing of the Arlington merger. Management believes cash flows from operations
and available borrowings during 2000 will be sufficient to fund our cash
requirements for the year, including capital improvements and future
acquisitions.
Cash flows used in investing activities were $11.8 million and $238.2 million
for the nine months ended September 30, 2000 and 1999, respectively. We used
$16.8 million during 2000 for capital spending at our facilities including $3.0
million for completion of the expansion of Churchill Downs' main entrance and
corporate offices. Cash used for 1999 business acquisitions consisted of $142.5
million 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
Charlson Broadcast Technologies, LLC during the first quarter.
Cash flows (used in) provided by financing activities were $(26.7) million and
$228.5 million for the nine months ended September 30, 2000 and 1999,
respectively. We borrowed $66.7 million and repaid $91.1
19
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
million on our line of credit during 2000. Cash provided by financing activities
in 1999 was used to finance the aforementioned acquisitions.
We have a $250 million line of credit under a revolving loan facility, of which
$154.6 million was outstanding at September 30, 2000. This line of credit is
secured by substantially all of our assets and matures in 2004. This credit
facility is intended to meet working capital and other short-term requirements
and to provide funding for future acquisitions.
Impact of Recent Accounting Pronouncements
------------------------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivatives and Hedging Activities (SFAS 133), which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. SFAS 133, as amended by SFAS 137 and
SFAS 138, is effective for the Company's year ending December 31, 2001.
Management of the Company is currently analyzing the impact of SFAS 133 but
anticipates that the adoption of SFAS 133 will not have a material effect on the
Company's results of operations or financial position.
On December 3, 1999, the staff of the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in
Financial Statements. SAB 101 summarizes some of the staff's interpretations of
the application of generally accepted accounting principles to revenue
recognition. The staff of the SEC issued Staff Accounting Bulletin No. 101B (SAB
101B) which delays the application of the accounting and disclosure requirements
to no later than the fourth quarter of the fiscal year beginning after December
15, 1999. Management of the Company is currently analyzing the impact of SAB 101
and plans to adopt the accounting and disclosure requirements in the fourth
quarter of 2000. Management does not anticipate the adoption of SAB 101 will
have a material effect on the Company's results of operations or financial
position.
Pending Transactions
--------------------
We previously entered into a definitive agreement with Centaur to sell a 26%
interest in HPLP for a purchase price of $8.5 million. We were to retain a 51%
interest in HPLP and continue to manage its day- to-day operations. On September
12, 2000, we announced that approval for the sale had been denied as a result of
action taken by the IHRC against Centaur, and as a result the ownership
structure has not changed. Centaur's performance under the definitive agreement
was guaranteed by an irrevocable Letter of Credit in the amount of $2.5 million,
which management expects to be available to us at the end of Centaur's
administrative appeals process, during the fourth quarter of 2000.
20
<PAGE>
CHURCHILL DOWNS INCORPORATED
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
At September 30, 2000, we had $154.6 million of debt outstanding
under our revolving loan facility, which bears interest at LIBOR
based variable rates. We are exposed to market risk on 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 annual pre-tax earnings and cash flows by $1.5
million.
In order to mitigate a portion of the market risk associated with
our variable rate debt, we have entered into interest rate swap
contracts with major financial institutions. Under terms of these
separate contracts we receive a LIBOR based variable interest
rate on notional amounts of $35.0 million each and pay a fixed
interest rate of 7.015% and 7.30%, which mature in March 2003 and
May 2002, respectively. Assuming the September 30, 2000, notional
amounts under the interest rate swap contracts remain constant, a
one percentage point increase in the LIBOR rate would increase
annual pre-tax earnings and cash flows by $0.7 million.
In November 2000, we entered into an interest rate swap in which
we pay a fixed interest rate of 6.40% on a notional amount of
$30.0 million, which matures in November 2001. Management plans
to engage in further interest rate swap agreements in the future
to reduce our interest rate exposure.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Not Applicable
ITEM 2. Changes in Securities and Use of Proceeds
On September 8, 2000, Churchill Downs Incorporated ("CDI")
completed a merger transaction with Arlington International
Racecourse pursuant to an Amended and Restated Agreement and Plan
of Merger (the "Merger Agreement") dated as of June 23, 2000, as
amended as of July 14, 2000, among CDI, Duchossois Industries,
Inc. ("DII"), A. Acquisition Corp., A. Management Acquisition
Corp., T. Club Acquisition Corp. (A. Acquisition Corp., A.
Management Acquisition Corp. and T. Club Acquisition Corp., each
a direct or indirect wholly owned subsidiary of CDI, being
collectively referred to as the "CDI Companies"), Arlington
International Racecourse, Inc., Arlington Management Services,
Inc. and Turf Club of Illinois, Inc. (Arlington International
Racecourse, Inc., Arlington Management Services, Inc. and Turf
Club of Illinois, Inc. being collectively referred to as the
"Arlington Companies"). The transaction was completed through the
21
<PAGE>
merger of the CDI Companies with and into the Arlington
Companies, with the Arlington Companies being the surviving
corporations of the mergers (the "Mergers") and becoming wholly-
owned subsidiaries of CDI. In the Mergers, DII received an
aggregate of 3,150,000 shares of CDI's common stock, no par value
("CDI Common Stock"), and has the right to receive up to
1,250,000 additional shares of CDI Common Stock, as provided in
the Merger Agreement. The purchase price was determined by CDI
based upon its analysis of the financial performance and assets
of the Arlington Companies.
In issuing the shares in the Merger, CDI relied on the exemption
from registration afforded by Rule 506 of Regulation D
promulgated pursuant to the Securities Act of 1933, based on the
issuance of shares meeting the requirements of Rule 506.
ITEM 3. Defaults Upon Senior Securities
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
The registrant held a Special Meeting of Shareholders on
September 8, 2000. A proposal (Proposal No. 1) to approve the
issuance of up to 4,400,000 shares of Churchill Downs common
stock to Duchossois Industries, Inc. as consideration for the
merger with Arlington International Racecourse, Inc., Arlington
Management Services, Inc. and Turf Club of Illinois, Inc. was
approved by a vote of the majority of the shares of the
registrant's common stock represented at the meeting: 6,449,161
shares were voted in favor of the proposal; 182,195 were voted
against; and 41,186 abstained.
The total number of shares of common stock outstanding as of
August 8, 2000, the record date of the Special Meeting of
Shareholders, was 9,865,449.
ITEM 5. Other Information
Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K.
A. Exhibits
See exhibit index on page 25.
B. Reports on Form 8-K
Churchill Downs Incorporated filed a Current Report on
Form 8-K dated September 8, 2000, under Item 2,
"Acquisitions or Disposition of Assets", reporting on the
merger of three wholly owned subsidiaries of Churchill
Downs Incorporated with Arlington International
Racecourse, Inc., Arlington Management Services, Inc. and
Turf Club of Illinois, Inc. - all Duchossois Industries,
Inc. companies.
22
<PAGE>
Churchill Downs Incorporated filed a Current Report on
Form 8-K dated July 27, 2000, under Item 5,"Other Events",
reporting the Confidentiality Agreement with Duchossois
Industries, Inc. and Arlington International Racecourse,
Inc. dated September 15, 1999.
Churchill Downs Incorporated filed a Current Report on
Form 8-K dated July 26, 2000, under Item 5, "Other
Events", reporting on Churchill Downs Incorporated second
quarter results for 2000, amended by Form 8-K/A dated
August 2, 2000.
23
<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 14, 2000 \s\Thomas H. Meeker
----------------------------------------------
Thomas H. Meeker
President and Chief Executive Officer
(Principal Executive Officer)
November 14, 2000 \s\Robert L. Decker
----------------------------------------------
Robert L. Decker
Executive Vice President and Chief Financial
Officer
(Principal Financial Officer)
November 14, 2000 \s\Michael E. Miller
----------------------------------------------
Michael E. Miller
Senior Vice President, Finance
(Principal Accounting Officer)
24
<PAGE>
EXHIBIT INDEX
Numbers Description By Reference To
------- ----------- ---------------
(2) Amended and Restated Agreement and Plan of Annex A of the Proxy
Merger dated as of June 23, 2000, as amended Statement for a
as of July 14, 2000, by and among Churchill Special Meeting of
Downs Incorporated, Duchossois Industries, Shareholders of
Inc., A. Acquisition Corp., A. Management Churchill Downs
Acquisition Corp., T. Club Acquisition Corp., Incorporated dated
Arlington International Racecourse, Inc., September 8, 2000
Arlington Management Services, Inc., Turf
Club of Illinois, Inc.
(3) Restated Bylaws of Churchill Downs Page 26, Report on
Incorporated as amended Form 10-Q for the
fiscal quarter ended
September 30, 2000
(10) Churchill Downs Incorporated Amended and Page 38, Report on
Restated Incentive Compensation Plan (1997)* Form 10-Q for the
fiscal quarter ended
September 30, 2000
(27) Financial Data Schedule for the fiscal Page 47, Report on
quarter ended September 30, 2000 Form 10-Q for the
fiscal quarter ended
September 30, 2000
* Management contract or compensatory plan or agreement.
25
<PAGE>
