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 June 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 August 13, 1999 was 9,832,127 shares. -1-
CHURCHILL DOWNS INCORPORATED I N D E X PART I. FINANCIAL INFORMATION PAGES ITEM 1. Financial Statements Condensed Consolidated Balance Sheets, June 30, 1999, 3 December 31, 1998 and June 30, 1998 Condensed Consolidated Statements of Earnings for the six 4 and three months ended June 30, 1999 and 1998 Condensed Consolidated Statements of Cash Flows for the 5 six months ended June 30, 1999 and 1998 Condensed Notes to Consolidated Financial Statements 6-12 ITEM 2. Management's Discussion and Analysis of Financial 13-23 Condition and Results of Operations ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 24 PART II. OTHER INFORMATION AND SIGNATURES ITEM 1. Legal Proceedings (Not applicable) 24 ITEM 2. Changes in Securities and Use of Proceeds (Not applicable) 24 ITEM 3. Defaults Upon Senior Securities (Not applicable) 24 ITEM 4. Submission of Matters to a Vote of Security Holders 24-25 ITEM 5. Other Information (Not applicable) 25 ITEM 6. Exhibits and Reports on Form 8-K 25 Signatures 26 Exhibit Index 27 Exhibits 28-59 -2-
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, June 30, ASSETS 1999 1998 1998 ---- ---- ---- Current assets: Cash and cash equivalents $ 21,927,123 $ 6,379,686 $ 7,952,835 Accounts receivable 14,652,743 11,968,114 14,436,397 Other current assets 1,670,492 1,049,084 363,734 ------------- ------------- ------------- Total current assets 38,250,358 19,396,884 22,752,966 Other assets 8,947,247 3,796,292 4,452,913 Plant and equipment, net 133,461,131 83,088,204 84,663,446 Intangible assets, net 62,268,627 8,369,395 9,488,088 ------------- ------------- ------------- $242,927,363 $114,650,775 $121,357,413 ============= ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 14,717,921 $ 6,530,502 $ 11,375,368 Accrued expenses 16,937,491 8,098,228 9,359,247 Dividends payable - 3,762,521 - Income taxes payable 7,678,956 257,588 7,110,768 Deferred revenue 3,362,318 8,412,552 2,307,262 Long-term debt, current portion 479,202 126,812 122,801 ------------- ------------- ------------- Total current liabilities 43,175,888 27,188,203 30,275,446 Long-term debt, due after one year 103,271,284 13,538,027 8,728,963 Other liabilities 4,553,890 1,755,760 4,099,794 Deferred income taxes 15,982,069 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, 20,000,000 shares, issued 7,525,041 shares, June 30, 1999 and December 31, 1998 and 7,516,934 shares, June 30, 1998 8,926,975 8,926,975 8,808,613 Retained earnings 67,254,715 56,598,957 61,796,384 Deferred compensation costs (172,458) (229,944) (287,430) Note receivable for common stock (65,000) (65,000) (65,000) ------------- ------------- ------------- 75,944,232 65,230,988 70,252,567 ------------- ------------- ------------- $242,927,363 $114,650,775 $121,357,413 ============= ============= ============= The accompanying notes are an integral part of the condensed consolidated financial statements. -3-
CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS for the six and three months ended June 30, 1999 and 1998 (Unaudited) <TABLE> <CAPTION> Six Months Ended June 30, Three Months Ended June 30, 1999 1998 1999 1998 <S> <C> <C> <C> <C> Net revenues $101,802,751 $82,759,503 $84,139,825 $67,374,352 Operating expenses 74,819,679 58,336,648 55,662,526 42,337,520 ------------- ------------ ------------ ------------ Gross profit 26,983,072 24,422,855 28,477,299 25,036,832 Selling, general and administrative expenses 6,889,501 4,972,595 3,586,386 2,816,841 ------------- ------------ ------------ ------------ Operating income 20,093,571 19,450,260 24,890,913 22,219,991 ------------ ----------- ----------- ------------ Other income (expense): Interest income 362,233 362,305 214,802 173,035 Interest expense (2,208,832) (405,297) (1,773,367) (300,773) Miscellaneous, net 125,025 166,186 80,908 49,131 ------------- ------------ ------------ ------------ (1,721,574) 123,194 (1,477,657) (78,607) ------------ ------------ ------------ ------------ Earnings before income tax provision 18,371,997 19,573,454 23,413,256 22,141,384 ------------- ------------ ------------ ------------ Federal and state income tax provision (7,716,239) (7,620,000) (9,747,362) (8,618,900) ------------- ------------ ------------ ------------ Net earnings $ 10,655,758 $11,953,454 $13,665,894 $13,522,484 ============= ============ ============ ============ Net earnings per share: Basic $1.42 $1.62 $1.82 $1.81 Diluted $1.39 $1.61 $1.79 $1.79 Weighted average shares outstanding: Basic 7,525,041 7,395,387 7,525,041 7,472,978 Diluted 7,670,520 7,438,018 7,649,420 7,546,183 </TABLE> The accompanying notes are an integral part of the condensed consolidated financial statements. -4-
CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS for the six months ended June 30, 1999 and 1998 (Unaudited) Six Months Ended June 30 1999 1998 Cash flows from operating activities: Net earnings $10,655,758 $11,953,454 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 4,510,995 2,551,573 Deferred compensation 150,392 84,216 Deferred income taxes (100,781) - Increase (decrease) in cash resulting from changes in operating assets and liabilities: Accounts receivable (2,022,241) (6,428,673) Other current assets (38,939) 302,756 Accounts payable 7,894,379 3,694,371 Accrued expenses 2,748,996 681,115 Income taxes payable 7,421,368 6,924,126 Deferred revenue (5,050,234) (5,071,986) Other assets and liabilities (33,738) 1,007,463 ------------ ------------- Net cash provided by operating activities 26,135,955 15,698,415 ------------ ------------- Cash flows from investing activities: Additions to plant and equipment, net (8,079,580) (2,181,257) Prepaid acquisition costs - Hollywood Park (322,799) - Acquisition of business, net of cash acquired (85,324,542) (17,232,849) ------------ ------------- Net cash used in investing activities (93,726,921) (19,414,106) ------------ ------------- Cash flows from financing activities: Increase (decrease) in long-term debt, net (994,698) 46,761 Borrowings on bank line of credit 119,000,000 16,000,000 Repayments of bank line of credit (30,000,000) (10,000,000) Payment of loan origination costs (2,655,794) - Dividends paid (3,762,521) (3,658,468) Contribution by minority interest in subsidiary 1,551,416 - ------------ ------------- Net cash provided by financing activities 83,138,403 2,388,293 ------------ ------------- Net increase (decrease) in cash and cash equivalents 15,547,437 (1,327,398) Cash and cash equivalents, beginning of period 6,379,686 9,280,233 ------------ ------------- Cash and cash equivalents, end of period $21,927,123 $ 7,952,835 ============ ============= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $1,650,000 $410,652 Income taxes $775,000 $539,000 Noncash transaction: Issuance of common stock related to the acquisition of RCA - $4,850,000 Accrued acquisition costs related to Hollywood Park $1,668,672 - The accompanying notes are an integral part of the condensed consolidated financial statements. -5-
CHURCHILL DOWNS INCORPORATED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the six months ended June 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. 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. 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, including the pending acquisition of Hollywood Park Race Track. 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 by certain Company financial ratios. There was $100.0 million outstanding on the line of credit at June 30, 1999 compared to $11.0 million outstanding at December 31, 1998 and $6.0 million outstanding at June 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. 3. Reclassification Certain prior period financial statement amounts have been reclassified to conform to the current period presentation. -6-
CHURCHILL DOWNS INCORPORATED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the six months ended June 30, 1999 and 1998 (continued) (Unaudited) 4. Acquisitions On May 5, 1999, the Company entered into a definitive agreement with Hollywood Park, Inc. to acquire the Hollywood Park Race Track and the Hollywood Park Casino in Inglewood, California, for approximately $140.0 million plus acquisition costs which approximate $2.0 million as of June 30, 1999. Consummation of the acquisition is subject to several conditions, including receipt of regulatory approvals. The Company will acquire approximately 240 acres of land upon which the racetrack and casino are located. The Company will lease the Hollywood Park Casino to Hollywood Park, Inc. 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 transaction is expected to close on August 31, 1999. On April 23, 1999, the Company acquired all of the outstanding stock of Calder Race Course, Inc. and Tropical Park, Inc. from KE Acquisition Corporation 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 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 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 purchase price allocation above 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. RCA owns and operates Ellis Park Race Course in Henderson, Kentucky, and the Kentucky Horse Center, a training facility located in Lexington, Kentucky. As part of the transaction, TVI received 200,000 shares of the Company's common stock valued at $4.9 million with the remaining balance of $17.1 million paid from cash on hand and a draw on the Company's bank line of credit. The purchase price of $22.6 million was allocated to the -7-
CHURCHILL DOWNS INCORPORATED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the six months ended June 30, 1999 and 1998 (continued) (Unaudited) acquired assets and liabilities based on their fair values on the acquisition date with the excess of $6.4 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 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 April 23, 1999 acquisition of Calder Race Course and the April 21, 1998 acquisition of Racing Corporation of America had occurred on January 1, 1998 (in thousands, except per share and share amounts): Six Months Ended Six Months Ended June 30, 1999 June 30, 1998 ------------- ------------- Net revenues $105,378 $97,318 Net earnings $8,553 $7,346 Earnings per common share: Basic $1.14 $0.99 Diluted $1.11 $0.98 Weighted average shares Basic 7,525,041 7,455,387 Diluted 7,670,520 7,498,018 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. 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. -8-
CHURCHILL DOWNS INCORPORATED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the six months ended June 30, 1999 and 1998 (continued) (Unaudited) 5. Earnings Per Share The following is a reconciliation of the numerator and denominator of the basic and diluted per share computations: <TABLE> <CAPTION> Six months Three months ended June 30, ended June 30, 1999 1998 1999 1998 <S> <C> <C> <C> <C> Earnings (numerator) amounts used for basic and diluted per share computations: $10,655,758 $11,953,454 $13,665,894 $13,522,484 ----------- ----------- ----------- ----------- Weighted average shares (denominator) of common stock outstanding per share: Basic 7,525,041 7,395,387 7,525,041 7,472,978 Plus dilutive effect of outstanding stock options 145,479 42,631 124,379 73,205 ----------- ----------- ----------- ----------- Diluted 7,670,520 7,438,018 7,649,420 7,546,183 Basic net earnings per share $1.42 $1.62 $1.82 $1.81 Diluted net earnings per share $1.39 $1.61 $1.79 $1.79 </TABLE> Options to purchase 51,766 shares for the three and six months ended June 30, 1999 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 share. On July 20, 1999, the Company issued 2,300,000 shares of common stock. If these shares had been outstanding in the periods presented above, it would have materially impacted the number of potential common shares outstanding and basic and diluted net earnings per share at the end of the periods. 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 five segments: (1) Churchill Downs racetrack, the Louisville Sports Spectrum simulcast facility and Churchill Downs corporate expenses (2) Calder Race Course (3) Ellis Park racetrack and its on-site simulcast facility, (4) Hoosier Park racetrack and its on-site simulcast facility and the other three Indiana simulcast facilities and (5) Other operations. Hollywood Park Race Track will be included as a segment after the expected third quarter acquisition. -9-
CHURCHILL DOWNS INCORPORATED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the six months ended June 30, 1999 and 1998 (continued) (Unaudited) Most of the Company's revenues are generated from commissions on pari-mutuel wagering at the Company's racetracks and simulcast wagering facilities, as well as Indiana riverboat admissions revenue, simulcast fees, admissions and concessions revenue and other sources. Other operations include Kentucky Horse Center, Charlson Broadcast Technologies, LLC and the Company's investments in various other business enterprises. The Company's equity interest in the net income of equity method investees is not material. Eliminations include the elimination of management fees and other intersegment transactions. 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-
CHURCHILL DOWNS INCORPORATED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the six months ended June 30, 1999 and 1998 (continued) (Unaudited) The table below presents information about reported segments for the six months and three months ended June 30, 1999 and 1998: Segment Information (in thousands) Six Months Ended June 30, 1999 and 1998 <TABLE> <CAPTION> Calder Churchill Race Hoosier Ellis Other Elimina- Downs Course Park Park operations tions Total Net Revenues <S> <C> <C> <C> <C> <C> <C> <C> 1999 61,133 11,701 24,258 2,963 2,711 (963) 101,803 1998 59,229 - 21,892 1,298 947 (606) 82,760 EBITDA 1999 19,469 1,888 3,387 (803) 661 - 24,602 1998 19,163 - 3,007 (429) 427 - 22,168 Operating income (loss) 1999 17,666 1,302 2,766 (1,450) (190) - 20,094 1998 17,297 - 2,457 (629) 325 - 19,450 Total Assets 1999 191,894 108,593 34,737 23,031 171,655 (286,983) 242,927 1998 93,186 - 32,492 19,746 68,487 (92,554) 121,357 Three Months Ended June 30, 1999 and 1998 Calder Churchill Race Hoosier Ellis Other Elimina- Downs Course Park Park operations tions Total Net Revenues 1999 56,490 11,701 13,310 1,797 1,497 (655) 84,140 1998 53,862 - 11,874 1,298 613 (272) 67,375 EBITDA 1999 23,944 1,888 1,709 (421) 332 - 27,452 1998 22,514 - 1,353 (429) 224 - 23,662 Operating income (loss) 1999 23,056 1,302 1,389 (748) (108) - 24,891 1998 21,640 - 1,078 (629) 131 - 22,220 Following is a reconciliation of total EBITDA to income before provision for income taxes: </TABLE> Six Months Three Months ended June 30, ended June 30, (in thousands) 1999 1998 1999 1998 ---- ---- ---- ---- Total EBITDA $24,602 $22,168 $27,452 $23,662 Depreciation and amortization (4,384) (2,552) (2,481) (1,393) Interest income (expense), net (1,846) (43) (1,558) (128) -------- -------- -------- -------- Earnings before provision for income taxes $18,372 $19,573 $23,413 $22,141 ======== ======== ======== ======== -11-
CHURCHILL DOWNS INCORPORATED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the six months ended June 30, 1999 and 1998 (continued) (Unaudited) 7. Subsequent Events On July 20, 1999 the Company issued 2,300,000 shares of the Company's common stock at a price of $29 per share. The total proceeds before offering expenses were $63.2 million, and were used for the repayment of bank borrowings. -12
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 and 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 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
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Our primary sources of revenue are commissions and fees earned from pari-mutuel wagering on live and simulcast horse races. Other sources of revenue include admissions and seating, riverboat admission tax subsidy, concession commissions primarily for the sale of food and beverages, sponsorship revenues, licensing rights and broadcast fees. RESULTS OF OPERATIONS Pari-mutuel wagering for our four live racing facilities and four separate simulcast wagering facilities during the six months ended June 30, 1999 and 1998 is as follows: ($ in thousands, except for number of days) Churchill Downs Calder Hoosier Ellis racetrack Race Course** Park Park* Live racing 1999 handle $93,689 $35,225 $5,546 $596 1999 no. of days 47 29 67 2 1998 handle $95,951 $35,785 $4,924 $342 1998 no. of days 47 30 54 1 Export simulcasting 1999 handle $336,344 $68,409 $9,593 $4,736 1999 no. of days 47 41 67 2 1998 handle $303,951 $67,654 $9,170 $1,531 1998 no. of days 47 41 54 1 Import simulcasting 1999 handle $55,258 - $69,262 $23,894 1999 no. of days 101 - 581 179 1998 handle $62,041 - $66,617 $23,481 1998 no. of days 98 - 589 177 * Pari-mutuel wagering information for Ellis Park is provided for the six months ended June 30, 1999 and 1998. However, only revenues generated since its acquisition on April 21, 1998 have been included in the Company's results of operations. **Pari-mutuel wagering information for Calder Race Course is provided for the six months ended June 30, 1999 and 1998. However, only revenues generated since its acquisition on April 23, 1999 have been included in the Company's results of operations. -14-
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998 Net Revenues Net revenues during the six months ended June 30, 1999 increased $19.0 million (23%) from $82.8 million in 1998 to $101.8 million in 1999. 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. Calder Race Course contributed $11.7 million to the first six months of 1999 net revenues as opposed to none in the prior year. Hoosier Park revenues increased $2.4 million (11%) primarily due to a $1.8 million increase in the riverboat gross admissions subsidy of which a portion was required to be spent on purses and marketing expenses. Net revenues for Ellis Park for the first six months of 1999 increased $1.7 million (128%) primarily due to the timing of the acquisition. Other operations, including the 1999 acquisition of Charlson Broadcasting Technologies the 1998 acquisition of Kentucky Horse Center and intercompany eliminations, comprised the remaining $1.3 million of the increase. Operating Expenses Operating expenses increased $16.5 million (28%) from $58.3 million in 1998 to $74.8 million in 1999. Churchill Downs racetrack's operating expenses increased $1.0 million (3%). Calder Race Course incurred 1999 operating expenses of $9.9 million versus none in the first six months of 1998. Hoosier Park operating expenses increased $2.1 million (11%) due primarily to required increases in purses and marketing expenses related to the riverboat admissions subsidy. Ellis Park operating expenses increased $2.2 million (131%) for the first six months of 1999 as compared to expenses after the acquisition date of April, 21 1998 for the prior year. Other operations, including Charlson Broadcasting Technologies, Kentucky Horse Center and intercompany eliminations, accounted for the remaining $1.3 million of the increase in operating expenses. Gross Profit Gross profit increased $2.6 million from $24.4 million in 1998 to $27.0 million in 1999. The increase in gross profit was primarily the result of the current year acquisition of Calder Race Course and the increase in gross profit for Churchill Downs racetrack due to record attendance on Kentucky Oaks and Kentucky Derby days. Selling, General and Administrative Expenses Selling, general and administrative ("SG&A") expenses increased by $1.9 million (38%) from $5.0 million in 1998 to $6.9 million in 1999. SG&A expenses at Churchill Downs increased $0.6 million (15%) due primarily to increased corporate staffing and compensation expenses reflecting the -15-
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Company's strengthened corporate services to meet the needs of new business units. The acquisition of Calder Race Course contributed $0.5 million and the second quarter of 1998 acquisition of Ellis Park contributed $0.3 million of the increase. Other operations, including Charlson Broadcast Technologies, LLC and Kentucky Horse Center, accounted for remaining $0.5 million of the increase in SG&A expenses. Other Income and Expense Interest expense increased $1.8 million from $0.4 million in 1998 to $2.2 million in 1999 primarily as a result of borrowings to finance the acquisition of Calder Race Course and Charlson Broadcast Technologies, LLC in 1999 and the acquisition of Ellis Park in April 1998. Income Tax Provision Our income tax provision increased by $0.1 million for the six months ended June 30, 1999 as compared to June 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 amortization expense related to the acquisitions of Calder Race Course in April 1999, Charlson Broadcast Technologies, LLC in January 1999 and Ellis Park and Kentucky Horse Center in April 1998 offset by a decrease in pre-tax earnings of $1.2 million. Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998 Net Revenues Net revenues during the three months ended June 30, 1999 increased $16.7 million (25%) from $67.4 million in 1998 to $84.1 million in 1999. Churchill Downs racetrack revenues increased $2.6 million (5%) primarily due to $1.9 million of increased revenues on the Kentucky Oaks and Kentucky Derby days. Calder Race Course contributed $11.7 million to the three months ended June 30, 1999 net revenues as opposed to none in the prior year. Hoosier Park revenues increased $1.4 million (12%) primarily due to a $1.0 million increase in the riverboat gross admissions subsidy of which a portion was required to be spent on purses and marketing expenses. Net revenues for Ellis Park for the second quarter of 1999 increased by $0.5 million (38%). Other operations, including the 1999 acquisition of Charlson Broadcasting Technologies and intercompany eliminations, comprised the remaining $0.5 million of the increase. Operating Expenses Operating expenses increased $13.4 million (32%) from $42.3 million in 1998 to $55.7 million in 1999. Churchill Downs racetrack operating expenses increased $1.0 million (3%). Calder Race Course incurred 1999 operating expenses of $9.9 million versus none in the second quarter of 1998. Hoosier -16-
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Park operating expenses increased $1.2 million (11%) due primarily to required increases in purses and marketing expenses related to the riverboat admissions subsidy. Ellis Park operating expenses increased $0.6 million (36%) for the second quarter of 1999 as compared to expenses after the acquisition date of April 21, 1998 for the prior year, consistent with the increase in revenues. Other operations, including Charlson Broadcasting Technologies, Ellis Park and intercompany eliminations, accounted for the remaining $0.7 million of the increase in operating expenses. Gross Profit Gross profit increased $3.5 million from $25.0 million in 1998 to $28.5 million in 1999. The increase in gross profit was primarily the result of the current year acquisition of Calder Race Course and the increase in gross profit for Churchill Downs racetrack due to record attendance on Kentucky Oaks and Kentucky Derby days. Selling, General and Administrative Expenses Selling, general and administrative ("SG&A") expenses increased by $0.8 million (29%) from $2.8 million in 1998 to $3.6 million in 1999. SG&A expenses at Churchill Downs increased $0.2 million (9%) 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 acquisition of Calder Race Course contributed $0.5 million. Other operations accounted for remaining $0.1 million of the increase in SG&A expenses. Other Income and Expense Interest expense increased $1.5 million from $0.3 million in 1998 to $1.8 million in 1999 primarily as a result of borrowings to finance the acquisition of Calder Race Course and Charlson Broadcast Technologies, LLC in 1999 and the acquisition of Ellis Park in April 1998. Income Tax Provision Our income tax provision increased by $1.1 million for the three months ended June 30, 1999 as compared to June 30, 1998 as a result of an increase in pre-tax earnings of $1.3 million and an increase in the estimated effective tax rate from 38.9% in 1998 to 41.6% in 1999 due primarily to non-deductible amortization expense related to the acquisitions of Calder Race Course in April 1999, Charlson Broadcast Technologies, LLC in January 1999 and Ellis Park and Kentucky Horse Center in April 1998. -17-
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Significant Changes in the Balance Sheet June 30, 1999 to December 31, 1998 Accounts receivable balances increased by $2.7 million in 1999. The acquisition of Calder Race Course increased accounts receivable by $1.3 million. The remaining increase of $1.4 million was primarily a result of the timing of payments received for Churchill Downs live meet. Other assets increased $5.2 million in 1999. The acquisition of Calder Race Course increased other assets $1.8 million primarily due to investments held for the future Florida Stallion Stakes races. The remaining increase was primarily due to $2.0 million of costs incurred for the expected acquisition of Hollywood Park. Intangible assets increased $53.9 million primarily due to the addition of goodwill of $3.2 million recorded for the acquisition of Charlson Broadcast Technologies, LLC during the first quarter of 1999, and $48.7 million recorded for the acquisition of Calder Race Course during the second quarter of 1999. In addition, costs related to the Company's new $250 million revolving loan facility of $2.7 million are included. These increases were partially offset by current year additions to accumulated amortization. The net plant and equipment increase of $50.4 million during 1999 included $48.2 million for the acquisitions of Calder Race Course and Charlson Broadcast Technologies, LLC and the remaining increase was due to routine capital spending at our operating units offset by current year depreciation expense. Accounts payable increased $8.2 million at June 30, 1999 primarily due to increases in purses payable and other expenses related to simulcast wagering for Hoosier Park and Ellis Park and an increase in accounts payable was also due to our acquisition of Calder Race Course during the second quarter of 1999. Accrued expenses increased $8.8 million, primarily due to a $7.1 million increase as a result of the Calder Race Course acquisition. The remaining increase was due to accrued acquisition costs related to Calder Race Course and the acquisition costs related to the expected third quarter of 1999 acquisition of Hollywood Park Racetrack. Dividends payable decreased $3.7 million at June 30, 1999 due to the payment of dividends of $3.7 million (declared in 1998) in first quarter 1999. Income taxes payable increased by $7.4 million at June 30, 1999 representing the estimated income tax expense attributed to income generated in the six months of 1999 and the increase in effective tax rate. Deferred revenue decreased $5.1 million at June 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. This decrease was offset by a $2.0 million increase in deferred revenues acquired with the acquisition of Calder Race Course in the second quarter of 1999. -18
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The long-term debt increase of $89.7 million was the result of additional borrowings on our bank line of credit during 1999, primarily used to fund the 1999 acquisitions of Calder Race Course and Charlson Broadcast Technologies, LLC. Deferred income taxes increased by $9.0 million primarily as a result of the recognition of deferred taxes with the Calder Race Course acquisition during the second quarter of 1999. Significant Changes in the Balance Sheet June 30, 1999 to June 30, 1998 Other assets increased $4.5 million in 1999. The acquisition of Calder Race Course increased other assets $1.8 million primarily due to investments held for the future Florida Stallion Stakes races. The remaining increase was primarily due to $2.0 million of costs incurred for the expected acquisition of Hollywood Park. Intangible assets increased $52.8 million primarily due to the addition of goodwill of $3.2 million recorded for the acquisition of Charlson Broadcast Technologies, LLC during the first quarter of 1999, and $48.7 million recorded for the acquisition of Calder Race Course during the second quarter of 1999. In addition, costs related to the Company's new $250 million revolving loan facility of $2.7 million are included. These increases were partially offset by additions to accumulated amortization. Net plant and equipment increase of $48.8 million included $48.2 million for the acquisitions of Calder Race Course and Charlson Broadcast Technologies, LLC and the remaining increase was due to routine capital spending at our operating units offset by depreciation expense. The accounts payable increase of $3.3 million was primarily due to the acquisition of Calder Race Course which represents $2.2 million of the increase. The remaining $1.1 million was due to the timing of payments for horsemen-related and simulcast payables for Churchill Downs racetrack Spring Meet. Accrued expenses increased $7.6 million, primarily due to a $7.1 million increase as a result of the Calder Race Course acquisition. The long-term debt increase of $94.5 million was due primarily to line of credit borrowings used to fund the acquisitions of Calder Race Course during the second quarter of 1999 and Charlson Broadcast Technologies, LLC during the first quarter of 1999. Deferred income taxes increased by $8.0 million as a result of the recognition of deferred taxes with the Calder Race Course acquisition during the second quarter of 1999. -19-
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Liquidity and Capital Resources The working capital deficiency was $4.9 and $7.5 million for the six months ended June 30, 1999 and 1998, respectively, which results from the seasonality of our businesses. Cash flows provided by operations were $26.1 and $15.7 million for the six months ended June 30, 1999 and 1998, respectively. Significant changes in operating cash flows are primarily a result of the current year acquisitions of Charlson Broadcast Technologies, LLC and Calder Race Course. 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 and the acquisition of Hollywood Park Race Track and Casino. Cash flows used in investing activities were $93.7 and $19.4 million for the six months ended June 30, 1999 and 1998, respectively. Cash used for 1999 business acquisitions consisted of $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. We also had prepaid acquisition costs of $0.3 million for the expected third quarter acquisition of Hollywood Park Race Track and Casino. We used $8.1 million for capital spending at our facilities including $1.2 million for the construction of a stable area dormitory and $0.6 million for the renovation of the racing offices at Churchill Downs racetack facility. The additional increase in capital spending from prior year spending is primarily the result of the RCA, Charlson Broadcast LLC, and Calder Race Course acquisitions. Cash flows provided by financing activities were $83.1 and $2.4 million for the six months ended June 30, 1999 and 1998, respectively. We borrowed $119 million and repaid $30 million on our line of credit during 1999 primarily to finance the purchase of Calder Race Course and Charlson Broadcast Technologies, LLC. We received a $1.6 million contribution by a minority interest in our Charlson Broadcast Technologies, LLC subsidiary. In addition, we incurred $2.7 million of costs for the origination of the $250 million line of credit. In April 1999, our total line of credit was increased to $250 million under a new revolving loan facility, of which $100 million was outstanding at June 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 meet working capital and other short-term requirements and to provide funding for acquisitions, including the pending purchase of Hollywood Park. The new revolving loan facility matures in 2004. 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 be unable to distinguish the year 2000 from the year 1900. This could result in system failure or miscalculations leading to a disruption of business operations. -20-
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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. At the end of June 1999, all hardware and embedded chip technology/firmware that we own were 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. Based on the schedule outlined above, we expect our owned systems to be Year 2000 compliant prior to the year 2000. We will test the system by advancing dates to include a majority of the Year 2000 critical dates by the fourth quarter of 1999. However, even though our planned modifications to internally owned hardware and software should adequately address Year 2000 issues, there can be no assurance that unforeseen difficulties will not arise. -21-
CHURCHILL DOWNS INCORPORATED ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 on us should the systems upon which the services are dependent be unable to function. The totalisator services provided by United Tote Company and AmTote International, Inc. 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 systems 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. Based on our evaluation, we believe that AmTote, which is utilized by Calder Race Course, is on schedule to be Year 2000 compliant by the fourth quarter of 1999. The video services provided by an outside vendor 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 are working closely with the vendor to ensure the software applications that provide the graphical enhancements and other distinguishing features to the televised signal for Churchill Downs racetrack and Hoosier Park are Year 2000 compliant. The graphical software was upgraded during the second quarter of 1999 to a Year 2000 compliant version of the application. We purchase data and statistical information from Equibase 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 has implemented a Year 2000 remediation plan which is expected to be completed by the third quarter of 1999. 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. 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. In the event that any of our third party service providers do not successfully and timely achieve Year 2000 compliance, and we are unable to replace them with alternate service providers, it could result in a delay in providing our core live racing and simulcasting products to our customers and have a material adverse effect on our business, financial condition and results of operations. -22-
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 are identifying if any of these systems employ technology that may not be Year 2000 compliant. We will work closely with manufacturers of these products to develop a remedial plan to assure Year 2000 compliance if any problems are identified. Cost and Contingency Planning To date, the total cost is estimated to be less than $100,000 to remediate Year 2000 compliance issues. 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 are currently evaluating our most reasonably likely worst-case Year 2000 scenario and are also developing contingency plans as part of our efforts to identify and correct Year 2000 issues affecting our owned systems as well as issues involving third party service providers. We intend to complete both the evaluation of a worst-case Year 2000 scenario and contingency planning in the third quarter of 1999. Due to our recent acquisition of Calder Race Course, we will continue to assess the status of the Company's Year 2000 compliance in regards to the factors mentioned above and we expect to complete this evaluation in the third quarter. Subsequent Events On July 20, 1999, we issued 2,300,000 shares of common stock at a price of $29 per share. The total proceeds before offering expenses were $63.2 million, and were used for the repayment of bank borrowings. -23-
CHURCHILL DOWNS INCORPORATED ITEM 3. Quantitative and Qualitative Disclosures about Market Risk Our major market risk exposure is primarily due to possible fluctuations in interest rates as they relate to our variable rate debt. We do not enter into derivative financial investments for trading or speculation purposes. As a result, we believe that our market risk exposure is not material to our financial position, liquidity or results of operations. 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 The registrant's 1999 Annual Meeting of Shareholders was held on June 17, 1999. Proxies were solicited by the registrant's board of directors pursuant to Regulation 14 under the Securities Exchange Act of 1934. There was no solicitation in opposition to the board's nominees as listed in the proxy statement, and all nominees were elected by vote of the shareholders. Voting results for each nominee were as follows: Class III Directors Votes For Votes Withheld ------------------- --------- -------------- Charles W. Bidwill, Jr. 6,228,039 78,237 Daniel P. Harrington 6,229,780 76,496 Thomas H. Meeker 6,229,635 76,641 Carl F. Pollard 6,230,389 75,887 Darrell R. Wells 6,230,549 75,727 A proposal (Proposal No. 2) to approve amending Churchill Downs' Articles of Incorporation to increase the number of authorized common shares from 20 million to 50 million was approved by a vote of the majority of the shares of the registrant's common stock represented at the meeting: 5,832,957 shares were voted in favor of the proposal; 416,557 were voted against; and 56,763 abstained. -24-
A proposal (Proposal No. 3) to approve the minutes of the 1998 Annual Meeting of Shareholders was approved by a vote of the majority of the shares of the registrant's common stock represented at the meeting: 6,241,967 shares were voted in favor of the proposal; 9,764 were voted against; and 54,546 abstained. The total number of shares of common stock outstanding as of April 20, 1999, the record date of the Annual Meeting of Shareholders, was 7,525,041. ITEM 5. Other Information Not Applicable ITEM 6. Exhibits and Reports on Form 8-K. A. Exhibits See exhibit index on page 30. B. Reports on Form 8-K Churchill Downs Incorporated filed a Current Report on Form 8-K dated April 23, 1999, amended by Form 8-K/A dated June 18, 1999, reporting, under Item 2, "Acquisition or disposition of assets", the acquisition of Calder Race Course, Inc. and Tropical Park, Inc. pursuant to a Stock Purchase Agreement and Joint Escrow Instructions dated January 21, 1999, amended by a First Amendment to Stock Purchase Agreement dated April 19, 1999 and an Agreement and Plan of Merger and Amendment to Stock Purchase Agreement dated April 22, 1999. -25-
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 August 13, 1999 \s\Thomas H. Meeker Thomas H. Meeker President and Chief Executive Officer (Director and Principal Executive Officer) August 13, 1999 \s\Robert L. Decker Robert L. Decker Executive Vice President and Chief Financial Officer (Principal Financial Officer) August 13, 1999 \s\Vicki L. Baumgardner Vicki L. Baumgardner Vice President, Finance and Treasurer (Principal Accounting Officer) -26-
EXHIBIT INDE+X 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 Common Stock between Churchill Downs S-3/A dated 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) First Amendment to Stock Purchase Exhibit 2.2 to Report on Agreement dated as of April 19, 1999 Form 8-K dated April 23, by and between Churchill Downs 1999 Incorporated, Churchill Downs Management Company and KE Acquisition Corp. (b) Agreement and Plan of Merger and Exhibit 2.3 to Report on Amendment to Stock Purchase Agreement Form 8-K dated April 23, dated as of April 22, 1999 by and 1999 among Churchill Downs Incorporated, Churchill Downs Management Company, CR Acquisition Corp., TP Acquisition Corp., Calder Race Course, Inc., Tropical Park, Inc. and KE Acquisition Corp. (c) Asset Purchase Agreement dated May 5, Exhibit 2.1 to Registration 1999 between Hollywood Park, Inc., a Statementon Form S-3 dated Delaware Corporation, and Churchill May 21, 1999 Downs Incorporated (3)(a) Restated Bylaws of Churchill Downs Page 28, Report on Form Incorporated as amended 10-Q for the fiscal quarter ended June 30, 1999 (10)(a) $250,000,000 Revolving Credit Facility Exhibit (10)(a) to Report Credit Agreement between Churchill on Form 10-Q for the fiscal Downs Incorporated, and the guarantors quarter ended March 31, party hereto, and the Banks party 1999 hereto and PNC Bank, National Association, as Agent, and CIBC Oppenheimer Corp., as Syndication Agent, and Bank One, Kentucky, N.A., as Documentation Agent, dated as of April 23, 1999 (b) First Amendment to $250,000,000 Exhibit (10)(b) to Report Revolving Credit Facility Credit on Form 10-Q for the fiscal Agreement dated April 30, 1999 quarter ended March 31, 1999 (c) Second Amendment to $250,000,000 Page 43, Report on Form Revolving Credit Facility Credit 10-Q for the fiscal quarter Agreement dated June 14, ended June 30, 1999 (27) Financial Data Schedule for the Page 59,Report on Form fiscal quarter ended June 30, 1999 10-Q for the fiscal quarter ended June 30, 1999 -27-