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 March 31, 1998

                                         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
               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 May 14, 1998
was 7,516,934 shares.





                                    Page 1 of 31

<PAGE>



                          CHURCHILL DOWNS INCORPORATED

                                      I N D E X


                                                                  PAGES

PART I.  FINANCIAL INFORMATION

   ITEM 1.  Condensed Consolidated Financial Statements (Unaudited)

            Condensed Consolidated Balance Sheets, March 31, 1998,
            December 31, 1997 and March 31, 1997                      3

            Condensed Consolidated Statements of Operations
            for the three months ended March 31, 1998 and 1997        4

            Condensed Consolidated Statements of Cash Flows for the
            three months ended March 31, 1998 and 1997                5

            Condensed Notes to Consolidated Financial Statements    6-8

   ITEM 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations                    9-20

   ITEM 3.  Quantitative and Qualitative Disclosures About
            Market Risk (Not Applicable)                             21

PART II.  OTHER INFORMATION AND SIGNATURES

   ITEM 1.  Legal Proceedings (Not applicable)                       21

   ITEM 2.  Changes in Securities and Use of Proceeds(Not applicable)21

   ITEM 3.  Defaults Upon Senior Securities(Not applicable)          21

   ITEM 4.  Submission of Matters to a Vote of Security Holders 
            (Not applicable)                                         21

   ITEM 5.  Other Information (Not applicable)                       21

   ITEM 6.  Exhibits and Reports on Form 8-K                         21

   Signatures                                                        22

   Exhibit Index                                                     23

   Exhibits                                                       24-32

                                          2

<PAGE>
<TABLE>
<CAPTION>



                            CHURCHILL DOWNS INCORPORATED
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                     (Unaudited)

                                          March 31       December 31     March 31
      ASSETS                              1998           1997             1997

<S>                                    <C>               <C>           <C>        
Current assets:
  Cash and cash equivalents            $11,803,389       $9,280,233    $ 7,084,056
  Accounts receivable                    5,925,377        7,086,889      3,918,264
  Prepaid income taxes                     969,185                -        870,792
  Other current assets                     847,493          540,489      1,180,439
                                        ----------       ----------      ---------
    Total current assets                19,545,444       16,907,611     13,053,551
                                       

Other assets                             5,563,557        5,778,430      3,634,018
Plant and equipment                    105,348,975      104,554,196    101,086,691
Less accumulated depreciation          (42,203,103)     (41,391,429)   (38,158,464)
                                       -----------      -----------    ----------- 
                                        63,145,872       63,162,767     62,928,227
                                       -----------      -----------    -----------
                                       $88,254,873      $85,848,808    $79,615,796
                                       ===========      ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                      $9,960,311       $5,732,783     $9,392,124
  Accrued expenses                       5,000,182        7,937,575      4,828,996
  Dividends payable                             -         3,658,468              -
  Income taxes payable                          -           186,642              -
  Deferred revenue                      13,718,956        7,344,830     11,477,348
  Long-term debt, current portion           79,805           79,805         73,893
                                        ----------       ----------     ----------
      Total current liabilities         28,759,254       24,940,103     25,772,361

Long-term debt, due after one year       2,633,164        2,633,164      2,752,969
Outstanding mutuel tickets 
  (payable after one year)               1,767,991        1,625,846      2,011,092
Deferred compensation                      893,898          880,098        830,580
Deferred income taxes                    2,377,100        2,377,100      2,316,600
Stockholders' equity:
  Preferred stock, no par value;
    authorized, 250,000 shares; 
    issued, none                                 -                -              -
  Common stock, no par value; 
    authorized, 20 million shares, 
    issued 7,316,934 shares, March 31, 
    1998 and December 31, 1997 and 
    7,308,526 shares, March 31, 1997     3,614,567        3,614,567      3,493,042
  Retained earnings                     48,273,899       49,842,930     42,504,152
  Note receivable for common stock         (65,000)         (65,000)       (65,000)
                                       -----------      -----------    ----------- 
                                        51,823,466       53,392,497     45,932,194
                                       -----------      -----------    -----------
                                       $88,254,873      $85,848,808    $79,615,796
                                       ===========      ===========    ===========

The accompanying notes are an integral part of the financial statements.
</TABLE>

                                          3

<PAGE>



                            CHURCHILL DOWNS INCORPORATED
               CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSSES)
                                     (Unaudited)


                                            Three Months Ended March 31
                                                1998            1997
                                            ------------     -----------

Net revenues                                 $15,385,151     $13,278,864
Operating expenses                            15,999,128      14,484,447
                                             -----------     -----------

   Gross loss                                   (613,977)     (1,205,583)

Selling, general and administrative expenses   2,155,754       1,929,840
                                               ---------       ---------

   Operating loss                             (2,769,731)     (3,135,423)

Other income (expense):
   Interest income                               189,270          66,380
   Interest expense                             (104,524)        (80,216)
   Miscellaneous income                          117,054         130,573
                                              ----------       ---------

                                                 201,800         116,737

Loss before income tax benefit                (2,567,931)     (3,018,686)

Federal and state income tax benefit             998,900       1,170,000
                                             -----------     -----------

   Net loss                                  $(1,569,031)    $(1,848,686)
                                             ===========     =========== 


Basic and diluted net loss per share              $ (.21)         $ (.25)


Basic and diluted weighted average shares 
  outstanding                                  7,316,934       7,308,526



The accompanying notes are an integral part of the financial statements.



                                          4

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                             Three Months Ended March 31
                                                 1998           1997
                                             ------------ --------------
Cash flows from operating activities:
   Net loss                                  $(1,569,031)    $(1,848,686)
   Adjustments to reconcile net loss to
     net cash provided by operating activities:
   Depreciation and amortization               1,159,106       1,143,522
   Deferred compensation                          13,800           5,369
   Increase (decrease) in cash resulting from
     changes in operating assets and liabilities:
     Accounts receivable                       1,161,512       1,299,972
     Prepaid income taxes                       (969,185)       (870,792)
     Other current assets                       (307,004)       (501,218)
     Accounts payable                          4,227,528       3,989,124
     Accrued expenses                         (2,937,393)     (3,192,491)
     Income taxes payable                       (186,642)     (2,510,508)
     Deferred revenue                          6,374,126       4,965,446
     Other assets and liabilities                335,118          25,972
                                               ---------       ---------
       Net cash provided by operating 
         activities                            7,301,935       2,505,710
                                               ---------       ---------

Cash flows from investing activities:
   Additions to plant and equipment, net      (1,120,311)     (1,083,468)
                                              ----------      ---------- 
     Net cash used in investing activities    (1,120,311)     (1,083,468)
                                              ----------      ---------- 

Cash flows from financing activities:
   Decrease in long-term debt, net                     -        (172,329)
   Dividends paid                             (3,658,468)     (2,375,271)
                                              ----------      ---------- 
     Net cash used in financing activities    (3,658,468)     (2,547,600)
                                              ----------      ---------- 

Net increase (decrease) in cash and cash 
  equivalents                                  2,523,156      (1,125,358)
Cash and cash equivalents, beginning of 
  period                                       9,280,233       8,209,414
                                             -----------     -----------
Cash and cash equivalents, end of period     $11,803,389     $ 7,084,056
                                             ===========     ===========
                                            
Supplemental disclosures of cash flow 
 information:  
Cash paid during the period for:
   Interest                                     $250,000         $92,300
   Income taxes                                  $18,000      $2,190,000


The accompanying notes are an integral part of the financial statements.


                                        5

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               for the three months ended March 31, 1998 and 1997
                                   (Unaudited)

         1. 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, 1997 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.


       2. 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 (loss) 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.

            During the three months  ended March 31, 1998 and 1997,  the Company
conducted   simulcast   receiving  wagering  for  367  and  360  location  days,
respectively,  which includes  simulcast wagering at its Sports Spectrum site in
Louisville,  Kentucky for 75 days in 1998  compared to 72 days in 1997.  Through
its  subsidiary,  Hoosier  Park L.P.  ("Hoosier  Park"),  the Company  conducted
simulcast wagering at its racetrack in Anderson,  Indiana and at three simulcast
wagering facilities located in Merrillville, Ft. Wayne and Indianapolis, Indiana
for a total of 292 days in 1998 compared to 288 days in 1997. Additionally,  the
Company  conducts  simulcast  wagering  on-track  during its Churchill Downs and
Hoosier Park live race meets.

         3. On March  19,  1998  the  Company  obtained  a  commitment  from its
principal  lender to increase its unsecured bank line of credit from $20 million
to $50 million.  The interest rate is based upon LIBOR plus 50 to 100 additional
basis points which is determined by certain Company financial  ratios.  The line
of credit  expires March 19, 2000.  There were no borrowings  outstanding on the
line of credit at March 31, 1998, December 31, 1997 or March 31, 1997.

         4.  Certain  prior  period  financial   statement   amounts  have  been
reclassified to conform to the current period presentation.



                                        6

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
          CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the
             three months ended March 31, 1998 and 1997 (continued)
                                   (Unaudited)


         5. Effective January 1, 1998, the Company adopted Statement of 
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 
130).  Currently,  there are no amounts to be  included  in the  computation  of
comprehensive  income of the Company that are required to be disclosed under the
provisions of SFAS 130. As such, total  comprehensive  income and net income are
the same for the three months ended March 31, 1998 and 1997, respectively.

         6. In June 1997,  the FASB issued  Statement  of  Financial  Accounting
Standards No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  (SFAS  131).  The  Company  will  adopt SFAS 131 during the fourth
quarter of 1998 as required.

         7. In February 1998, the FASB issued Statement of Financial  Accounting
Standards   No.  132,   "Employers'   Disclosures   about   Pensions  and  other
Post-retirement   Benefits"  (SFAS  132).  This  statement  revises   employers'
disclosures about pensions and other  post-retirement plans without changing the
measurement  or  recognition  of those plans.  The Company will include SFAS 132
disclosures in its 1998 annual report.

         8. On  March  28,  1998,  the  Company  entered  into a stock  purchase
agreement  with TVI  Corp.,  ("TVI")  for the  purchase  of 100% of the stock of
Racing Corporation of America ("RCA") for a purchase price of $22.0 million in a
combination of cash and common stock of the Company. RCA owns and operates Ellis
Park Race Course in  Henderson,  Kentucky,  and the  Kentucky  Horse  Center,  a
training facility located in Lexington,  Kentucky.  The sale closed on April 21,
1998 upon final  approval from the Kentucky  Racing  Commission.  As part of the
transaction,  TVI received  200,000  shares of the Company's  common stock.  The
remaining balance of $17.15 million was paid from cash on hand and a draw on the
Company's  bank line of credit.  The  acquisition  will be accounted  for by the
Company under purchase method of accounting and will be consolidated  during the
second quarter of 1998. The results of operations of RCA subsequent to April 20,
1998 will be included in the Company's  consolidated results of operations.  The
purchase  is not  anticipated  to have  any  material  effect  on the  Company's
earnings in 1998.



                                        7

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
          CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the
             three months ended March 31, 1998 and 1997 (continued)
                                   (Unaudited)


         9. The following is a  reconciliation  of the numerator and denominator
of the basic and diluted per share computations:

                                                 Three months ended
                                                      March 31,
                                                 1998            1997
                                             ------------    ------------
   Loss (numerator) amounts used for basic
     and diluted per share computations:     $(1,569,031)    $(1,848,686)


   Basic and diluted weighted average shares 
     (denominator) of common stock 
     outstanding per share                     7,316,934       7,308,526


   Basic and diluted net loss per share            $(.21)          $(.25)

     Options to  purchase 130,500  and 66,500  shares at March 31, 1998 and 1997
which equate to common stock  equivalents of 12,041 and 1,919, respectively, are
excluded from the computation since their effect is antidilutive  because of the
net loss for the periods.  In addition,  options to purchase 296,032 and 290,500
shares for the  quarters  ended March 31, 1998 and 1997 were not included in the
computation  of loss  per  share  common  share-assuming  dilution  because  the
options'  exercise  prices were  greater  than the average  market  price of the
common shares.

                                        8

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

     This  discussion  and  analysis  includes a forecast  of future  results of
operations.  Such a forecast is a "forward-looking  statement" under the federal
securities laws.  Actual results could differ  materially from this forecast and
there can be no assurance that such forecast of future results will be achieved.
Important  factors that could cause actual results to differ materially from the
presently  estimated  amounts include:  the continued  ability of the Company to
effectively compete for the country's top horses and trainers necessary to field
high-quality  horse  racing;  the  continued  ability of the Company to grow its
share of the interstate  simulcast market; a substantial change in allocation of
live racing days; the impact of competition from alternative  gaming ( including
riverboat casinos and lotteries) and other sports and  entertainment  options in
those markets in which the Company operates;  a decrease in riverboat admissions
revenue from the Company's Indiana operations;  and the Company's success in its
pursuit of  strategic  initiatives  designed to attract new patrons and generate
additional revenue for purses and capital investment.

     The Company  primarily  conducts  pari-mutuel  wagering on Thoroughbred and
Standardbred horse racing at its facilities in Kentucky and Indiana. The Company
owns and operates Churchill Downs racetrack in Louisville,  Kentucky ("Churchill
Downs").  Churchill Downs has conducted  Thoroughbred  racing continuously since
1875, and is internationally known as home of the Kentucky Derby. The Company is
also  majority  owner and operator of Hoosier Park in Anderson,  Indiana,  which
conducts Thoroughbred,  Quarter Horse and Standardbred horse racing. The Company
conducts  simulcast  wagering on horse racing  year-round at its four  Churchill
Downs Sports Spectrum facilities ("Sports Spectrum") in Kentucky and Indiana, as
well as its racetracks.

      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 Company normally earns a
substantial  portion of its net income in the second quarter of each year during
which the Kentucky  Derby and the Kentucky Oaks are run. The Kentucky  Derby and
the Kentucky Oaks are run on the first weekend in May.

     The Company's  primary  sources of income are  commissions  and fees earned
from  pari-mutuel  wagering on live and simulcast horse races.  Other sources of
income include admissions and seating, concession commissions (primarily for the
sale of food and beverages), riverboat admission tax supplement, license, rights
and broadcast fees and sponsorship revenues.


                                        9

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


     Kentucky's racetracks, including Churchill Downs and Ellis Park Race Course
("Ellis  Park"),  which was acquired by the Company during the second quarter of
1998,  are  subject to the  licensing  and  regulation  of the  Kentucky  Racing
Commission  ("KRC"),  which consists of 11 members  appointed by the governor of
Kentucky. Licenses to conduct live Thoroughbred race meetings and to participate
in  simulcasting  are  approved  annually  by the KRC  based  upon  applications
submitted by the racetracks in Kentucky. Although to some extent Churchill Downs
and Ellis Park  compete  with other  racetracks  in Kentucky for the awarding of
racing dates,  the KRC is required by state law to consider and seek to preserve
each racetrack's usual and customary live racing dates.  Generally,  there is no
substantial  change  from  year to  year in the  racing  dates  awarded  to each
racetrack.  Churchill  Downs  conducted  live  racing on 77 days during the year
ended  December 31, 1997.  For 1998,  Churchill  Downs has received a license to
conduct  live  racing for a total of 71 racing  days on  approximately  the same
dates as the prior year's Spring and Fall race  meetings.  For 1998,  Ellis Park
has received a license to conduct live racing for a total of 55 racing days. The
total number of days on which Churchill Downs and Ellis Park conduct live racing
fluctuates  annually according to the calendar year. A substantial change in the
allocation of live racing days at Churchill Downs or Ellis Park could impact the
Company's operations and earnings in future years. The purchase of Ellis Park is
not anticipated to have any material effect on earnings in 1998.

     Churchill Downs will host Breeders' Cup Day on November 7, 1998.  Breeders'
Cup Day is  sponsored  by  Breeders'  Cup  Limited,  a  tax-exempt  organization
chartered to promote  Thoroughbred  racing and  breeding.  The Breeders' Cup Day
races are held  annually,  featuring  $12 million in purses,  for the purpose of
determining Thoroughbred champions in seven different events.  Racetracks across
the United  States  compete for the  privilege of hosting the  Breeders' Cup Day
races each year and the 1998  Breeders'  Cup will be the  Company's  fourth time
hosting this event, the most of any racetrack.  The Breeders' Cup Day races were
held in  California in November  1997.  Hosting the event in 1998 is expected to
have a positive impact on the Company's 1998 results.

     In Indiana,  licenses to conduct live  Standardbred and  Thoroughbred  race
meetings,  including Quarter Horse races, and to participate in simulcasting are
approved  annually  by the  Indiana  Horse  Racing  Commission  ("IHRC"),  which
consists  of 5 members  appointed  by the  governor  of  Indiana.  Licenses  are
approved annually by the IHRC based upon applications  submitted by the Company.
Currently,  the Company is the only facility in Indiana licensed to conduct live
Standardbred,  Quarter  Horse  or  Thoroughbred  racing  and to  participate  in
simulcasting.  In 1997, the Company conducted 142 days of live racing, including
85 days of Standardbred racing and 57 days of Thoroughbred racing. Quarter Horse
races were also conducted  during some  Thoroughbred  race days. The Company has
received  a license  to  conduct  live  racing in 1998 for a total of 152 racing
days,  including 94 days of  Standardbred  racing,  and 58 days of  Thoroughbred
racing (which also includes  Quarter Horse races).  A substantial  change in the
allocation  of live  racing  days at  Hoosier  Park could  impact the  Company's
operations and earnings in future years.




                                       10

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


      The Company  employs  approximately  340 full-time  employees.  Due to the
seasonal  nature of the Company's live racing  business,  the number of seasonal
and  part-time  persons  employed  will  vary  throughout  the  year,  with peak
employment  occurring  Kentucky  Derby week when the Company  employs as many as
2,600 persons.  During 1997, average employment per pay period was approximately
900 individuals.

      The Company  generally does not directly  compete with other racetracks or
simulcast   facilities  for  patrons  due  to  geographic   separation  of  such
facilities.  However, the Company competes with other sports,  entertainment and
gaming options,  including riverboat casinos and lotteries, for patrons for both
live  racing and  simulcasting.  The  Company  attempts  to  attract  patrons by
providing  the  highest  quality  racing  products in  attractive  entertainment
facilities with well-priced,  appealing concession services.  The Company is the
premier racetrack in Kentucky for both live racing and simulcasting,  based upon
total handle and attendance, and the only facility in Indiana providing live and
simulcast racing.

      The development of riverboat  gaming  facilities began in Indiana pursuant
to authorizing  legislation passed by the state of Indiana in 1993. Illinois had
previously  authorized  riverboat  gaming.  There are currently  four  riverboat
casinos  operating  on the Ohio  River  along  Kentucky's  border  -- two in the
southeastern  Indiana cities of Lawrenceburg and Rising Sun, one in southwestern
Indiana in Evansville and one at Metropolis, Illinois.

      Direct competition with these riverboats has negatively  impacted wagering
at  Churchill  Downs and other  racetracks  in western  and  northern  Kentucky.
However,  Churchill  Downs  reversed  this  trend in 1997 with the  increase  in
attendance and wagering  experienced  during its 1997 Spring and Fall Meets, due
primarily to an aggressive on-track marketing program,  and further expansion of
interstate simulcasting.

      One, and possibly two, additional riverboats are anticipated to open along
the Indiana shore of the Ohio River. In May 1996, the Indiana Gaming  Commission
("IGA")awarded a preliminary license to RDI/Caesars World to operate the world's
largest  riverboat  casino  in  Harrison  County,  Indiana,  just 10 miles  from
Louisville.  A construction  permit was issued to RDI/Caesars  World by the U.S.
Army Corps of Engineers ("Corps") in February 1998, and they have announced that
the riverboat  will open in the fall of 1998.  However,  the U.S.  Environmental
Protection  Agency  ("EPA")  has  conducted  a  separate  review  of the  Corps'
decision,   and  issued  a  letter  critical  of  some  aspects  of  the  Corps'
decision-making  process. Also, the environmental groups have filed a lawsuit in
U.S. District Court for the western district of Kentucky  challenging the Corps'
decision to issue a  construction  permit to RDI/Caesars  World  ("environmental
litigation").  It is not known  whether  the EPA's  letter or the  environmental
litigation  will result in further delays for the project.  The IGA voted in May
1998 to consider in  September  1998  whether to grant a license to open a fifth
Indiana  riverboat along the Ohio River in either Crawford County or Switzerland
County, within 30 or 70 miles, respectively, of Louisville. Prior to the vote in
May, the IGA had voted to postpone indefinitely the granting of a fifth license.

                            

                                       11

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


       The full  impact  of  riverboat  casinos  on  Kentucky  racing  cannot be
accurately  determined  until all  riverboats are open and the markets are fully
matured.  Studies  project  that  Churchill  Downs could  experience  a material
adverse impact on its wagering and attendance in the Louisville  market when the
RDI/Caesars  World  riverboat is open and mature.  These same studies  projected
similar declines in western and northern Kentucky but recent experience at Ellis
Park and Turfway Park indicates the impact may not be as severe as these studies
projected.

       In  addition to those  riverboats  operating  along the Ohio River,  five
riverboat  casinos have opened along the Indiana shore of Lake Michigan near the
Company's Sports Spectrum in Merrillville,  Indiana.  The Company's  pari-mutuel
wagering activities at the Merrillville facility have been adversely impacted by
the opening of these Lake Michigan riverboats.

       Additionally,  the  Potawatomi  Indian Tribe has expressed an interest in
establishing a land-based casino in northeastern Indiana and they are attempting
to negotiate a compact with the state of Indiana. At this time, proposed changes
to the Indian Gaming Regulatory Act could have an impact on compact negotiations
between the Potawatomi Tribe and the state of Indiana.  The Company continues to
anticipate  that  development  of such an Indian casino will  negatively  impact
pari-mutuel  wagering activities at its Indiana facilities.  However, the extent
of the impact is unknown at this time due, in part, to the uncertain  geographic
distances between the Company's operations and the potential casino sites.

       The  Company  continues  to pursue  legislation  to allow  video  lottery
terminals at its racetrack  facilities in Kentucky and Indiana.  The integration
of alternative gaming products is one of four core business strategies developed
by the  Company to  position  itself to compete  in this  changing  environment.
Implementing  these  strategies,  the  Company has  successfully  grown its live
racing product by strengthening its flagship operations, increasing its share of
the  interstate  simulcast  market,  and  geographically  expanding  its  racing
operations in Kentucky and into Indiana. Alternative gaming in the form of video
lottery   terminals  and  slot  machines  should  enable  the  Company  to  more
effectively compete with Indiana riverboat casinos,  and provide new revenue for
purse  money and capital  investment.  Currently,  the  Company is working  with
members of the Kentucky  horse  industry to establish a consensus  for a plan to
operate video lottery terminals exclusively at Kentucky's racetracks.

       The horse industry in Indiana presently receives $.65 per $3 admission to
riverboats in the state to compensate  for the effect of riverboat  competition.
Riverboat  admissions  revenue from the Company's Indiana  operations  increased
$1.6  million as a result of the  opening of  additional  riverboats  along Lake
Michigan since March 31, 1997. The net increase in riverboat admissions revenue,
after  required  purse and marketing  expense  increases of  approximately  $1.0
million,  is $.6 million.  Legislation  challenging  the  allocation of the $.65
subsidy was introduced to the Senate Finance  Committee in the recent session of
the Indiana General Assembly,  but the bill did not pass out of the committee. A
change in Hoosier Park's share of the tax would significantly impact funding for
operating  expenditures and would in all likelihood reemphasize the need for the
integration of alternative  gaming  products at the racetrack in order for it to
effectively compete with riverboat casinos.


                                       12

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


       The  Company  owned and  operated  two live  racing  facilities  and four
simulcast  wagering  facilities  during the three month  period  ended March 31,
1998.  There was no live racing  conducted  during the three month periods ended
March 31,  1998 and 1997.  The  chart  below  summarizes  the  results  of these
operations.

<TABLE>
<CAPTION>

                                           KENTUCKY                                    INDIANA
                            ----------------------------------------     ------------------------------------
                            Three Months   Three Months                  Three Months Three Months
                               Ended           Ended                        Ended         Ended
                              March 31       March 31       Increase        March 31   March 31     Increase
                                1998           1997       (Decrease)         1998        1997       (Decrease)
                            ------------   ------------    --------       ----------- ------------  ---------

Intrastate Simulcast Receiving

<S>                         <C>            <C>                <C>       <C>          <C>                <C>        
   Number of Race Days               58             55          3              -           -               -
   Handle                   $12,269,151    $12,713,530         -3%             -           -               -
   Average Daily
     Handle                    $211,537       $231,155         -8%             -           -               -

Interstate Simulcast Receiving*

   Number of Race Days               75             72          3               292          288          4
   Handle                   $33,967,297    $30,535,383         11%      $33,536,353  $32,189,879          4%
   Average Daily
     Handle                    $452,897       $424,103          7%         $114,851     $111,770          3%

Total handle                $46,236,448    $43,248,913          7%      $33,536,353  $32,189,879          4%

Total average daily handle     $347,642       $340,543          2%         $114,851     $111,770          3%
<FN>
* The Company's  Indiana  operations  include four separate  simulcast  wagering
facilities.
</FN>
</TABLE>


            Total handle in Kentucky and Indiana increased $3.0 million (7%) and
$1.3 million  (4%),  respectively,  primarily as a result of  conducting 3 and 4
additional days, respectively, of interstate simulcast receiving wagering at the
Louisville and Indiana Sports Spectrums during the quarter ended March 31, 1998.



                                       13

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)

COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 TO 1997

REVENUES

            Net revenues  during the three months ended March 31, 1998 increased
approximately $2.1 million (16%).

            Pari-mutuel  revenues increased $.5 million primarily as a result of
increased  interstate  receiving  revenues generated from the 3 and 4 additional
days of wagering  conducted  at the  Louisville  and Indiana  Sports  Spectrums,
respectively, during the first quarter of 1998 versus 1997.

            The net increase in riverboat  admissions revenue from the Company's
Indiana  operations was $.6 million as a result of the opening of two additional
riverboats  along Lake Michigan since March 31, 1997.  The riverboat  admissions
revenue  increase of $1.6  million was  partially  offset by  increases  of $1.0
million of required purse and marketing  expenses  associated with the riverboat
admission subsidy which are recorded as operating expenses by the Company.

     Following is a summary of Net Revenues:

<TABLE>
<CAPTION>
                                                NET REVENUE SUMMARY
                      ----------------------------------------------------------------------
                       Three Months    % to       Three Months    % to      1998 vs 1997
                          Ended         Total        Ended       Total     $           %
                      March 31, 1998  Revenue    March 31, 1997 Revenue  Change       Change
                      --------------  -------   --------------- -------  ------       ------


<S>                       <C>              <C>    <C>               <C>  <C>             <C>
Pari-Mutuel Revenue
     Intrastate Receiving $1,134,465       7%     $1,168,309        9%   $(33,844)      -3%
     Interstate Receiving  9,319,267      61       8,795,980       66     523,287        6
                         $10,453,732      68%     $9,964,289       75%   $489,443        5%

Riverboat Admission, Promotion
     & Purse Revenue       3,810,250      25%      2,181,925       17%  1,628,325       75%

Admission & Seat Revenue     178,594       1         259,375        2     (80,781)     -31

License, Rights, Broadcast
    & Sponsorship Fees       120,408       1          50,733        -      69,675      137

Concession Commission        122,950       1         159,686        1     (36,736)     -23

Program Revenue              478,888       3         485,262        4      (6,374)      -1

Other                        220,329       1         177,594        1      42,735       24
                             -------       -         -------        -      ------       --
                         $15,385,151     100%    $13,278,864      100% $2,106,287       16%
                         ===========     ===     ===========      ===  ==========       == 
</TABLE>

                                       14

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)

OPERATING EXPENSES

     Total  operating  expenses  increased $1.5 million (10%) during the quarter
ended March 31, 1998. The gross loss decreased $.6 million (49%) during the same
period.

     Purse  expense   increased  $.9  million   (21%)  with   riverboat   purses
contributing  $.8 million (65%) to the total increase.  In Kentucky and Indiana,
all other  purse  expense  varies  directly  with  pari-mutuel  revenues  and is
calculated  as a percentage  of the related  revenue and may change from year to
year pursuant to contract or statute.  Accordingly,  intrastate  and  interstate
simulcast purses reflect changes in direct  proportion to changes in pari-mutuel
revenues for the same categories. The increase in interstate simulcast receiving
of  $162,000  is  directly  related to the  increase in net revenue for the same
category.

     Wages and contract labor expenses increased $106,000 (3%). Salary increases
resulting from increased  business activity and general cost of living increases
account for a significant portion of the variance.

     Simulcast  host fees  increased  $116,000  as a result of the  increase  in
handle on interstate  simulcast receiving wagering at the Louisville and Indiana
Sports Spectrums.

     Insurance,  taxes and license fees increased $256,000 in 1998 due primarily
to higher property taxes and use taxes.

     Maintenance expenses decreased by $125,000, due primarily to the scheduling
of fewer  maintenance  projects  in the first  quarter of 1998  versus the first
quarter of 1997.






                                       15

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


     Following is a summary of Operating Expenses:

<TABLE>
<CAPTION>
                                       OPERATING EXPENSE SUMMARY
                      Three Months     % to    Three Months   % to    1998 vs 1997
                         Ended         Total      Ended       Total    $       %
                    March 31, 1998   Expenses March 31, 1997 Expense Change  Change
                    --------------   -------- -------------- ------- ------  ------

<S>                     <C>             <C>    <C>            <C>    <C>        <C>
Purses: 
  Intrastate Receiving    $481,877        3%     $499,079       4%   $(17,202)   -3%
  Interstate Receiving   2,877,808       18     2,715,544      19     162,264     6
   Riverboat             2,014,141       13     1,220,257       8     793,884    65
                        $5,373,826       34%   $4,434,880      31%   $938,946    21%

Wages and Contract Labor 3,196,809       20     3,090,920      21     105,889     3

Simulcast Host Fee       2,193,352       14     2,077,515      14     115,837     6

Advertising, Marketing
    & Publicity            673,164        4       658,092       5      15,072     2

Racing Relations & Services 63,090        -        73,383       1     (10,293)  -14

Totalisator Expense        301,016        2       356,390       2     (55,374)  -16

Audio/Video & Signal
    Distribution Expense   407,207        2       333,301       2      73,906    22

Program Expense            416,293        2       338,967       2      77,326    23

Depreciation & 
  Amortization           1,159,106        7     1,143,522       8      15,584     1

Insurance, Taxes &  
  License Fees             780,159        5       524,526       4     255,633    49

Maintenance                262,383        2       387,854       3    (125,471)  -32

Utilities                  577,406        4       524,666       4      52,740    10

Facility/Land Rent         189,084        1       187,041       1       2,043     1

Other Meeting Expense      406,233        3       353,390       2      52,843    15   
                       -----------      ----  -----------     ---- ----------   ---
                       $15,999,128      100%  $14,484,447     100% $1,514,681   10%
                       ===========      ===   ===========     ===  ==========   == 

</TABLE>



                                       16

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


            Selling,  general and administrative  expenses increased by $226,000
(12%) during the three month  period ended March 31, 1998  primarily as a result
of increased  business  activity and general cost of living salary increases for
the Company's employees.

            Interest  income of  $189,000 in 1998  increased  by $123,000 as the
result of the additional  earnings  generated by the Company from its short-term
cash  investments  (cash  equivalents)  as well as the interest  earned on notes
receivable from a minority-owned investment.

Significant Changes in the Balance Sheet December 31, 1997 to March 31, 1998

            Accounts  receivable  at March 31, 1998 were $1.2 million lower than
at  December  31,  1997  primarily  due to the  collection  of  1997  Fall  meet
simulcasting  receivables  and purse  supplements  due from the  Commonwealth of
Kentucky  offset  partially by an increase in Indiana  riverboat  admissions tax
receivable.

            Prepaid  income  taxes  increased  $1.0  million  as a result of the
estimated  income tax benefit  (receivable)  associated  with the  quarterly net
loss.

            Accounts payable  increased $4.2 million at March 31, 1998 primarily
due to increase in purses  payable  related to simulcast  wagering and riverboat
admissions  revenue.  Purses  are paid  during  the  Company's  live race  meets
beginning in the second quarter.

            Accrued expenses  decreased $2.9 million at March 31, 1998 primarily
as a result of  payments  of  expenses  incurred  during the Fall 1997 live race
meet.

            Dividends payable decreased by $3.7 million at March 31, 1998 due to
the  payment  of  dividends  of $3.7  million  (declared  in 1997) in the  first
quarter.

            Deferred revenue  increased by $6.4 million at March 31, 1998 due to
advance  billings of season box and membership  revenue for Kentucky's live race
meets and the Derby Expansion Area relating to Kentucky Derby and Oaks races.


                                       17

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


SIGNIFICANT CHANGES IN THE BALANCE SHEET MARCH 31, 1997 TO MARCH 31, 1998

            Accounts  receivable  at March 31, 1998  increased by $2 million due
primarily to the increase in the Indiana  riverboat  admissions  tax  receivable
resulting  from two  additional  Indiana  riverboats  being open after March 31,
1997.

            Other  assets  increased  by  $1.9  million  due  primarily  to  the
Company's ownership investment in and loan to BC Racing Group, LLC totaling $2.2
million partially offset by accumulated amortization of organization costs.

            The cost of plant and  equipment  increased  by  approximately  $4.3
million due to the construction of a new on-site simulcast facility at Churchill
Downs as well as routine  capital  spending  throughout  the  Company.  This was
offset by an increase of $4.0 million in accumulated depreciation.

            Deferred  revenue   increased  by  $2.2  million  due  primarily  to
increased  admission and corporate  sponsor event ticket prices  associated with
the Kentucky Derby and Oaks days.


LIQUIDITY AND CAPITAL RESOURCES

            The working capital  deficiency for the three months ended March 31,
1998 decreased by $3.5 million compared to March 31, 1997 as shown below:

                                                     March  31
                                                 1998         1997
                                            ------------  ------------- 
Working capital deficiency                  $(9,213,810)  $(12,718,810)
Working capital ratio                         .68 to 1       .51 to 1














                                         18

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


            The  working  capital   deficiency   results  from  the  nature  and
seasonality of the Company's  business.  Cash flows provided by operations  were
$7.3  million  and $2.5  million for the three  months  ended March 31, 1998 and
1997,  respectively.  The  increase of $4.8 in 1998 is  primarily  the result of
timing of income taxes payable and deferred  revenue.  Management  believes cash
flows from operations and borrowings during 1998 will be substantially in excess
of the Company's disbursements for the year, including capital improvements.

            Cash flows used in investing  activities  were $1.1 million for both
the three  months  ended  March  31,  1998 and 1997.  Routine  capital  spending
throughout the Company accounted for the cash used in investing for both years.

            Cash flows used in financing  activities  were $3.7 and $2.6 million
for the three months ended March 31, 1998 and 1997,  respectively.  The increase
of $1.2 million in 1998 in cash used for financing is primarily the result of an
increase in dividends paid of $1.3 million.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

     Effective January 1, 1998, the Company adopted Statement of Financial 
Accounting  Standards  No. 130,  "Reporting  Comprehensive  Income"  (SFAS 130).
Currently,   there  are  no  amounts  to  be  included  in  the  computation  of
comprehensive  income of the Company that are required to be disclosed under the
provisions of SFAS 130. As such, total  comprehensive  income and net income are
the same for the three months ended March 31, 1998 and 1997, respectively.
     
            In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  (SFAS  131).  The  Company  will  adopt SFAS 131 during the fourth
quarter of 1998 as required.

            In February 1998, the FASB issued Statement of Financial  Accounting
Standards   No.  132,   "Employers'   Disclosures   about   Pensions  and  other
Post-retirement   Benefits"  (SFAS  132).  This  statement  revises   employers'
disclosures about pensions and other  post-retirement plans without changing the
measurement  or  recognition  of those plans.  The Company will include SFAS 132
disclosures in its 1998 annual report.
















                                       19

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


SUBSEQUENT EVENTS

            On  March  28,  1998,  the  Company  entered  into a stock  purchase
agreement  with TVI  Corp.,  ("TVI")  for the  purchase  of 100% of the stock of
Racing Corporation of America ("RCA") for a purchase price of $22.0 million in a
combination of cash and common stock of the Company. RCA owns and operates Ellis
Park Race Course in  Henderson,  Kentucky,  and the  Kentucky  Horse  Center,  a
training facility located in Lexington,  Kentucky.  The sale closed on April 21,
1998 upon final  approval from the Kentucky  Racing  Commission.  As part of the
transaction,  TVI received  200,000  shares of the Company's  common stock.  The
remaining balance of $17.15 million was paid from cash on hand and a draw on the
Company's  bank line of credit.  The  acquisition  will be accounted  for by the
Company under purchase method of accounting and will be consolidated  during the
second quarter of 1998. The results of operations of RCA subsequent to April 20,
1998 will be included in the Company's  consolidated results of operations.  The
purchase  is not  anticipated  to have  any  material  effect  on the  Company's
earnings in 1998.

                                       20

<PAGE>



                          CHURCHILL DOWNS INCORPORATED

ITEM 3.     Quantitative and Qualitative Disclosures about Market Risk

            Not Applicable

                           PART II. OTHER INFORMATION

ITEM 1.     Legal Proceedings

            Not Applicable

ITEM 2.     Changes in Securities and Use of Proceeds

            Not Applicable

ITEM 3.     Defaults Upon Senior Securities

            Not Applicable

ITEM 4.     Submission of Matters to a Vote of Security Holders

            Not Applicable

ITEM 5.     Other Information

            Not Applicable

ITEM 6.     Exhibits and Reports on Form 8-K.

            A.    Exhibits

                  See exhibit index.

            B.    Reports on Form 8-K

                  Churchill  Downs  Incorporated  filed a Current Report on Form
                  8-K on March 20, 1998  reporting,  under Item 5 Other  Events,
                  the adoption of a rights plan by Churchill Downs Incorporated.


                                         21

<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



      May 14, 1998                        \s\Thomas H. Meeker
                                          ----------------------
                                          Thomas H. Meeker
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)


      May 14, 1998                        \s\ Robert L. Decker
                                          -----------------------
                                          Robert L. Decker
                                          Senior Vice President, Finance
                                          (Principal Financial Officer)



      May 14, 1998                        \s\Vicki L. Baumgardner
                                          -------------------------   
                                          Vicki L. Baumgardner
                                          Vice President, Finance/Treasurer
                                          (Principal Accounting Officer)


                                       22

<PAGE>
<TABLE>
<CAPTION>



                                    EXHIBIT INDEX


<S>               <C>                                      <C>   
Numbers           Description                               By Reference To
(2)    (a)        Stock Purchase Agreement dated            Exhibit 2.1 to Current Report
                  as of March 28, 1998 between              on Form 8-K dated April 21,
                  Churchill Downs Incorporated and          1998
                  TVI Corp.

(2)    (b)        Agreement and Plan of Merger dated        Exhibit 2.2 to Current Report
                  as of  April 17, 1998 by and among        on Form 8-K dated April 21,
                  TVI Corp., Racing Corporation of          1998
                  America, Churchill Downs 
                  Incorporated and RCA Acquisition Company

(3)    (d)        Restated Bylaws as amended                Pages 67 to 76, Report on
                                                            Form 10-K for the year ended
                                                            December 31, 1997

(3)    (e)        Articles of Amendment to Articles of      Pages 24-32
                  Incorporation of Churchill Downs
                  Incorporated

(4)               Rights Agreement dated as of March        Exhibit 4.1 to Current Report
                  19, 1998 between Churchill Downs          on Form 8-K dated March 19,
                  Incorporated and Bank of Louisville       1998

(27)              Financial Data Schedule                   Page 33
</TABLE>



                                         23