UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-K/A

             [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                        For Year Ended December 31, 1998

            [ ] 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, KENTUCKY                         40208
----------------------------------------                         -----
 Address of Principal Executive Offices                         Zip Code

Registrant's Telephone Number, Including Area Code            502-636-4400


           Securities registered pursuant to Section 12(b) of the Act:
               None                                    None
Title of Each Class registered         Name of Each Exchange on which registered

           Securities registered pursuant to Section 12(g) of the Act:

                           COMMON STOCK, NO PAR VALUE
                                 Title of Class

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 and (2) has been subject to such filing requirements for
the past 90 days.  YES  X  NO

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. (_________)

As of March 25, 1999,  7,525,041  shares of the  Registrant's  Common Stock were
outstanding,  and the aggregate market value of the shares held by nonaffiliates
of the Registrant was $131,000,000.

Portions  of  the  Registrant's  Proxy  Statement  for  its  Annual  Meeting  of
Shareholders to be held on June 17, 1999 are incorporated by reference herein in
response to Items 10, 11, 12 and 13 of Part III of Form 10-K.  The exhibit index
is located on pages 58 to 59 of Form 10-K.

                                  Page 1 of 28

<PAGE>





                                    I N D E X




                                                                           PAGES
ITEM 8.           Financial Statements and Supplementary Data                3
SIGNATURES                                                                  26
EXHIBIT 21        Subsidiaries of the registrant                            27
EXHIBIT 23        Consent of PricewaterhouseCoopers LLP                     28


                                       -2-

<PAGE>




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                 REPORT OF INDEPENDENT ACCOUNTANTS


To the Stockholders and Board of Directors
Churchill Downs Incorporated

In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing under Item 14 (a) (1), present fairly, in all material  respects,  the
consolidated   financial  position  of  Churchill  Downs  Incorporated  and  its
subsidiaries  as of December 31, 1998,  1997 and 1996,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting  principles.
In addition,  in our opinion,  the  consolidated  financial  statement  schedule
listed in the index appearing  under Item 14 (a) (2),  presents  fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated  financial statements.  These financial statements
and financial  statement  schedule are the  responsibility  of  management;  our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial  statement  schedule  based on our audits.  We conducted our audits of
these statements in accordance with generally  accepted auditing standards which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.


PricewaterhouseCoopers LLP
/s/PricewaterhouseCoopers LLP

Louisville, Kentucky
February 24, 1999

                                       -3-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
                           CONSOLIDATED BALANCE SHEETS


                                                  December 31,
            ASSETS                    1998           1997          1996
                                      ----           ----          ----
Current assets:
     Cash and cash equivalents    $ 6,379,686    $ 9,280,233    $ 8,209,414
     Accounts receivable           11,968,114      7,086,889      5,218,236
     Other current assets           1,049,084        540,489        679,221
                                 ------------    -----------    -----------
          Total current assets     19,396,884     16,907,611     14,106,871

Other assets                        3,796,292      3,884,080      1,574,714
Plant and equipment, net           83,088,204     63,162,767     62,882,189
Intangible assets, net              8,369,395      1,894,350      2,165,192
                                 ------------    -----------    -----------
                                 $114,650,775    $85,848,808    $80,728,966
                                 ============    ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable             $ 6,530,502    $ 5,732,783     $5,403,000
     Accrued expenses               8,098,228      7,937,575      8,021,487
     Dividends payable              3,762,521      3,658,468      2,375,271
     Income taxes payable             257,588        186,642      2,510,508
     Deferred revenue               8,412,552      7,344,830      6,511,902
     Long-term debt, current
       portion                        126,812         79,805         73,893
                                 ------------    -----------    -----------
       Total current liabilities   27,188,203     24,940,103     24,896,061

Long-term debt, due after
     one year                      13,538,027      2,633,164      2,878,714
Outstanding mutuel tickets
     (payable after one year)         806,573      1,625,846      2,031,500
Deferred compensation                 949,187        880,098        825,211
Deferred income taxes               6,937,797      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, 20,000,000
       shares, issued 7,525,041
       shares, 1998, 7,316,934
       shares, 1997 and 7,308,524
       shares, 1996                 8,926,975      3,614,567      3,493,042
     Retained earnings             56,598,957     49,842,930     44,352,838
     Deferred compensation costs     (229,944)            -              -
     Note receivable for common
     stock                            (65,000)       (65,000)       (65,000)
                                 -------------    -----------   ------------
                                   65,230,988     53,392,497     47,780,880
                                 -------------   ------------   ------------
                                 $114,650,775    $85,848,808    $80,728,966
                                 =============   ============   ============
The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


                                       -4-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
                       CONSOLIDATED STATEMENTS OF EARNINGS



                                            Years ended December 31,
                                     1998            1997           1996

Net  revenues                    $147,300,299   $118,907,367    $107,858,818
                                 ------------  -------------    ------------

Operating expenses:
   Purses                          50,192,973     39,718,374      34,439,143
   Other direct expenses           68,895,654     55,705,722      52,438,836
                                 ------------    -----------    ------------
                                  119,088,627     95,424,096      86,877,979
                                 ------------    -----------    ------------

     Gross profit                  28,211,672     23,483,271      20,980,839

Selling, general and
     administrative                11,068,262      9,077,983       8,665,942
                                 ------------    -----------    ------------

     Operating income              17,143,410     14,405,288      12,314,897
                                 ------------    -----------    ------------

Other income (expense):
          Interest income             679,782        575,084         390,669
          Interest expense           (896,067)      (332,117)       (337,438)
          Miscellaneous income        342,423        325,087         673,398
                                 ------------    -----------    ------------

                                      126,138        568,054         726,629
                                 ------------    -----------    ------------

Earnings before provision for
income taxes                       17,269,548     14,973,342      13,041,526


Provision for income taxes          6,751,000      5,824,782       4,970,000
                                 ------------    -----------    ------------

Net earnings                      $10,518,548     $9,148,560      $8,071,526
                                 ============    ===========    ============

Earnings per common share data:
     Basic                              $1.41          $1.25           $1.08
     Diluted                            $1.40          $1.25           $1.08

Weighted average shares :
  outstanding
     Basic                          7,460,058      7,312,052       7,445,542
     Diluted                        7,539,482      7,320,670       7,447,706

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


                                       -5-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                             Years Ended December 31, 1998, 1997 and 1996
                                                                                  Note       Deferred
                                     Common        Stock        Retained       Receivable  Compensation
                                     Shares        Amount       Earnings      Common Stock    Costs          Total
<S>                                 <C>          <C>           <C>            <C>           <C>            <C>
Balances December 31, 1995          7,569,206    $3,504,388    $43,486,460    $(65,000)     $(272,691)     $46,653,157

Net earnings                                                     8,071,526                                   8,071,526

Deferred compensation
  amortization                                                                                272,691          272,691

Issuance of common stock
  at $14.45 per share                   7,818       112,970                                                    112,970

Repurchase of common stock           (268,500)     (124,316)    (4,829,877)                                 (4,954,193)

Cash dividends, $.33 per share                                  (2,375,271)                                 (2,375,271)
                                    ---------    ----------    ------------   ---------     ----------     ------------

Balances December 31, 1996          7,308,524     3,493,042     44,352,838      (65,000)            -       47,780,880

Net earnings                                                     9,148,560                                   9,148,560

Issuance of common stock
  at $14.45 per share                   8,410       121,525                                                    121,525

Cash dividends, $.50 per share                                  (3,658,468)                                 (3,658,468)
                                    ---------    ----------    -----------    ---------     ----------     ------------

Balances December 31, 1997          7,316,934     3,614,567     49,842,930      (65,000)            -       53,392,497

Net earnings                                                    10,518,548                                  10,518,548

Deferred compensation                               344,046                                   (344,046)             -

Deferred compensation
amortization                                                                                   114,102         114,102

Issuance of common stock at
   $24.25 per share in conjunction
   with RCA acquisition               200,000     4,850,000                                                  4,850,000

Issuance of common stock
  at $14.60 per share                   8,107       118,362                                                    118,362

Cash dividends, $.50 per share                                  (3,762,521)                                 (3,762,521)
                                    ---------    ----------    -----------    ---------     ----------     ------------

Balances December 31, 1998          7,525,041    $8,926,975    $56,598,957    $ (65,000)     $(229,944)    $65,230,988
                                    =========    ==========    ===========    ==========    ===========    ===========
</TABLE>

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

                                       -6-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                 Years Ended December 31,
                                                             1998           1997           1996
<S>                                                       <C>            <C>           <C>
Cash flows from operating activities:
     Net earnings                                         $10,518,548    $9,148,560     $8,071,526
     Adjustments to reconcile net earnings to
          net cash provided by operating activities:
     Depreciation and amortization                          5,743,932     4,558,761      4,814,114
     Deferred income taxes                                   (121,000)      352,100       (461,000)
     Deferred compensation                                    183,191        54,887        226,690
     Increase (decrease) in cash resulting from
          changes in operating assets and liabilities:
          Accounts receivable                              (2,972,985)   (2,053,211)    (2,943,932)
          Other current assets                               (292,994)     (152,868)       232,699
          Accounts payable                                 (1,245,550)      329,783     (1,114,508)
          Accrued expenses                                   (579,904)      (83,912)     4,710,605
          Income taxes payable (refundable)                    70,946    (2,323,866)     1,461,000
          Deferred revenue                                    757,889     1,017,486        237,958
          Other assets and liabilities                     (1,245,808)     (377,523)      (109,037)
                                                          ------------   -----------   ------------
             Net cash provided by operating activities     10,816,265    10,470,197     15,126,115
                                                          ------------  ------------   ------------

Cash flows from investing activities:
     Acquisition of business, net of cash acquired
          of $517,151                                     (17,232,849)           -              -
     Additions to plant and equipment, net                 (3,524,032)   (4,568,494)    (2,570,795)
     Purchase of minority-owned investment                         -     (2,337,500)            -
                                                          ------------   -----------   ------------
          Net cash used in investing activities           (20,756,881)   (6,905,994)    (2,570,795)
                                                          ------------   -----------   ------------

Cash flows from financing activities:
     Decrease in long-term debt, net                         (140,164)     (239,638)    (3,468,569)
     Borrowings on bank line of credit                     22,000,000
     Repayments of bank line of credit                    (11,000,000)
     Dividends paid                                        (3,658,468)   (2,375,271)    (1,892,302)
     Common stock issued                                      118,362       121,525        112,970
     Common stock repurchased                                      -             -      (4,954,193)
     Loan origination costs                                  (279,661)           -              -
                                                          ------------   ----------    -----------
          Net cash provided by (used in) financing
             activities                                     7,040,069    (2,493,384)   (10,202,094)
                                                          -----------    -----------   ------------

Net increase (decrease) in cash and cash equivalents       (2,900,547)    1,070,819      2,353,226
Cash and cash equivalents, beginning of period              9,280,233     8,209,414      5,856,188
                                                          -----------    ----------    -----------
Cash and cash equivalents, end of period                   $6,379,686    $9,280,233     $8,209,414
                                                          ===========    ==========    ===========
Supplemental  disclosures of cash flow information:
Cash paid during the period for:
     Interest                                                $497,307      $151,397       $277,149
     Income taxes                                          $7,129,540    $7,914,974     $3,970,000
Schedule of Non-cash Activities:
     Issuance of common stock related to the
          acquisition of RCA                               $4,850,000            -              -
     Invoicing for future Kentucky Derby and Oaks            $677,733      $402,328       $586,886
     Plant & equipment additions included in
          accounts payable                                    $95,055            -              -
     Compensation expense                                    $344,406            -              -
</TABLE>

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

                                       -7-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.      Basis of Presentation and Summary of Significant Accounting Policies:

        Basis of Presentation:

        Churchill Downs Incorporated (the "Company") conducts Spring, Summer and
        Fall live race  meetings for  Thoroughbred  horses and  participates  in
        intrastate  and  interstate  simulcast  wagering  at its  racetracks  in
        Kentucky. In Indiana, the Company, through its subsidiary,  Hoosier Park
        L.P.  (Hoosier  Park),  conducts  live  Thoroughbred,  Quarter Horse and
        Standardbred  horse  races  and  participates  in  interstate  simulcast
        wagering.  Both its  Kentucky  and  Indiana  operations  are  subject to
        regulation by the racing commissions of the respective states.

        The accompanying  consolidated financial statements include the accounts
        of the Company,  its wholly owned  subsidiaries,  Ellis Park Race Course
        (Ellis Park), Churchill Downs Management Company (CDMC), Churchill Downs
        Investment  Company (CDIC),  the Kentucky Horse Center and Anderson Park
        Inc.  (Anderson) and its  majority-owned  subsidiary,  Hoosier Park. All
        significant intercompany balances and transactions have been eliminated.

        The  preparation  of financial  statements in conformity  with generally
        accepted accounting principles requires management to make estimates and
        assumptions  that affect the reported  amounts of assets and liabilities
        and disclosure of contingent  assets and liabilities at the dates of the
        financial  statements and the reported  amounts of revenues and expenses
        during the  reporting  periods.  Actual  results could differ from those
        estimates.

        A Summary of Significant Accounting Policies Follows:

        Cash  Equivalents:

        The Company  considers  investments  with  original  maturities of three
        months or less to be cash  equivalents.  The Company  has,  from time to
        time, cash in the bank in excess of federally insured limits.

        Plant and Equipment:

        Plant and  equipment  are recorded at cost.  Depreciation  is calculated
        using the  straight-line  method over the estimated  useful lives of the
        related assets.





                                       -8-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


1.      Basis of Presentation and Summary of Significant Accounting Policies:
                                    (cont'd)

        Intangible Assets:

        Amortization  of the cost of  acquisition  in  excess  of fair  value of
        assets acquired and the Indiana racing license is provided over 40 years
        using the  straight-line  method.  Organizational  costs were  amortized
        using  the  straight-line  method  over 24  months  to 60  months.  Loan
        origination  costs on the Company's  line of credit are being  amortized
        under the  effective  interest  method  over 36 months,  the term of the
        loan.

        Long-lived Assets:

        In the event that facts and  circumstances  indicate  that the  carrying
        amount of tangible or intangible  long-lived  assets or groups of assets
        may be impaired, an evaluation of recoverability would be performed.  If
        an evaluation is required,  the estimated future undiscounted cash flows
        associated  with the assets  would be compared  to the assets'  carrying
        amount to determine if a write-down to market value or  discounted  cash
        flow value is required.

        Deferred Revenue:

        Deferred  revenue  includes  primarily  advance  sales  related  to  the
        Kentucky Derby and Oaks races in Kentucky.

        Stock-Based Compensation:

        The  Company  accounts  for  stock-based compensation in accordance with
        Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued
        to  Employees".  In  accordance  with  Statement of Financial Accounting
        Standards  (SFAS)  No. 123 "Accounting  for  Stock-based  Compensation"
        proforma disclosure of net earnings and earnings per share are presented
        in Note 10 as if SFAS No. 123 had been applied.

        Reclassification:

        Certain financial  statement amounts have been reclassified in the prior
        years to conform to current year presentation.





                                       -9-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.      Acquisitions:

        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,  including  transaction costs. RCA owns
        and  operates  Ellis Park Race Course in  Henderson,  Kentucky,  and the
        Kentucky  Horse  Center,  a  training  facility  located  in  Lexington,
        Kentucky. The purchase price was paid as 200,000 shares of the Company's
        common stock valued at $4.9 million with the remainder paid in cash. The
        purchase  price was  allocated  to the acquired  assets and  liabilities
        based on their fair  values on the  acquisition  date with the excess of
        $6.4 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.

        Pursuant to the terms of the purchase  agreement between the Company and
        TVI, if alternative  gaming (whether full casino,  slot machine or video
        lottery) is  legalized in the  Commonwealth  of Kentucky by December 31,
        2015, TVI will receive royalty  payments equal to 50% of annual earnings
        before  interest and taxes of the gaming  operations  at Ellis Park Race
        Course and at the  Kentucky  Horse  Center.  Should  gaming be legalized
        before  December 31, 2006,  such royalties will be payable for ten years
        from the date that such gaming  becomes fully  operational.  The royalty
        period will be reduced by one year for each year from 2006  through 2015
        in which gaming is legalized.

        Following  are the  unaudited  pro forma results of operations as if the
        April  21,  1998  transaction  had  occurred  on  January  1,  1997  (in
        thousands, except per share and share amounts):

                                           1998                1997
                                           ----                ----
     Net revenues                        $149,272            $137,316
     Net earnings                         $9,589              $8,845
     Earnings per common share:
          Basic                           $1.28                $1.18
          Diluted                         $1.26                $1.18
     Weighted average shares
     outstanding:
          Basic                         7,520,332            7,512,052
          Diluted                       7,599,756            7,520,670


                                      -10-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.      Acquisitions: (cont'd)

        This  unaudited  proforma  financial   information  is  not  necessarily
        indicative  of the  operating  results that would have  occurred had the
        transaction   been  consummated  as  of  January  1,  1997,  nor  is  it
        necessarily indicative of future operating results.

        In July 1997, the Company purchased a 24% interest in the Kentucky Downs
        racecourse  in Franklin,  Kentucky.  The  Company's  investment  of $2.2
        million is accounted for under the equity method of accounting.

3.      Plant and Equipment:

        Plant and equipment is comprised of the following:


                                      1998            1997             1996
                                      ----            ----             ----
     Land                           $7,631,657      $5,999,036      $5,879,994
     Grandstands and buildings      73,376,961      57,579,747      56,154,054
     Equipment                       4,979,383       3,416,306       2,936,129
     Furniture and fixtures          5,341,119       4,327,797       3,603,276
     Tracks and other improvements  37,997,696      33,118,100      31,377,753
     Construction in process           249,438         113,210          74,206
                                   -----------     -----------     -----------
                                   129,576,254     104,554,196     100,025,412
     Accumulated depreciation      (46,488,050)    (41,391,429)    (37,143,223)
                                   ------------    ------------    ------------
                                   $83,088,204     $63,162,767     $62,882,189
                                   ===========     ===========     ===========

     Depreciation expense was $5,490,450,  $4,287,916, and $4,038,135 for the
     years ended December 31, 1998, 1997 and 1996.

4. Intangibles assets:

        The Company's intangible assets are comprised of the following:

                                      1998            1997            1996
                                      ----            ----            ----
Cost of acquisition in excess
     of fair value of net assets
     acquired                       $6,448,867              -               -
Indiana racing license               2,085,428      $2,085,428      $2,085,428
Loan origination costs                 279,661              -               -
Organizational and preopening costs         -               -          932,738
                                   -----------     -----------     -----------
                                     8,813,956       2,085,428       3,018,166
   Accumulated amortization           (444,561)       (191,078)       (852,974)
                                   ------------    ------------    ------------
                                    $8,369,395      $1,894,350      $2,165,192
                                   ===========     ===========     ===========

                                      -11-
<PAGE>



                          CHURCHILL DOWNS INCORPORATED (Continued)


4.      Intangibles assets: (cont'd)

        Amortization  expense was $253,482,  $270,845 and $775,979 for the years
        ended December 31, 1998, 1997 and 1996.

5.      Income Taxes:

        Components of the provision for income taxes are as follows:


                                      1998            1997            1996
                                      ----            ----            ----
     Currently payable:
       Federal                      $6,110,000      $4,616,800      $4,538,000
       State & local                   762,000         856,100         893,000
                                   -----------     -----------     -----------
                                     6,872,000       5,472,900       5,431,000
                                   -----------     -----------     -----------
     Deferred:
       Federal                          45,500         308,100        (382,000)
       State & local                     6,500          44,000         (79,000)
                                   -----------     -----------     ------------
                                       52,000          352,100        (461,000)
                                   -----------     -----------     ------------
     Reversal of valuation
       allowance                      (173,000)             -               -
                                   ------------    -----------     -----------
                                    $6,751,000      $5,825,000      $4,970,000
                                   ===========     ===========     ===========

         The Company's  income tax expense is different from the amount computed
         by applying  the  statutory  federal  income tax rate to income  before
         taxes as follows:


                                       1998            1997            1996
                                       ----            ----            ----
Federal statutory tax on
   earnings before income tax       $5,942,000      $5,141,000      $4,464,000
State income taxes, net of
   federal income tax benefit          747,000         612,000         537,000
Permanent differences and other        235,000          72,000         (31,000)
Reversal of valuation allowance       (173,000)             -               -
                                   ------------    -----------     -----------
                                    $6,751,000      $5,825,000      $4,970,000
                                   ===========     ===========     ===========

        At December 31, 1998, the Company has net operating  loss  carryforwards
        of  approximately  $3,885,000  for  Indiana  state  income tax  purposes
        expiring  from  2009  through  2011  and  approximately  $8,786,000  for
        Kentucky  state income tax  purposes  expiring  from 2002 through  2011.
        Management has determined that its ability to realize future benefits of
        the state net operating loss  carryforwards  meets the "more likely than
        not" criteria of SFAS No. 109, "Accounting for Income Taxes"; therefore,
        no valuation allowance has been recorded at December 31, 1998.


                                      -12-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


5.      Income Taxes: (cont'd)

        Components of the Company's  deferred tax assets and  liabilities are as
        follows:

                                      1998            1997             1996
                                      ----            ----             ----
Deferred tax liabilities:
   Property & equipment in excess
      of tax basis                  $7,804,600      $2,415,000      $2,284,000
   Racing license in excess of tax
      basis                            650,000         636,000         657,000
                                   -----------     -----------     -----------
          Deferred tax liabilities   8,454,600       3,051,000       2,941,000
                                   -----------     -----------     -----------

Deferred tax assets:
   Supplemental  benefit plan          315,400         295,000         273,000
   State net operating loss
       carryforwards                   856,700         173,000         176,000
   Allowance for uncollectible
       receivables                      87,100          71,000          66,000
   Other assets                        191,300         250,000         136,000
   Other accruals                      246,100         128,400         511,500
                                   -----------     -----------     -----------
         Deferred tax assets         1,696,600         917,400       1,162,500
                                   -----------     -----------     -----------

Valuation allowance for state net
   operating loss carryforwards             -          173,000         176,000
                                   -----------     -----------     -----------
      Net deferred tax liability    $6,758,000      $2,306,600      $1,954,500
                                   ===========     ===========     ===========

Income taxes are classified in the balance sheet as follows:

   Net non-current deferred tax
      liability                     $6,937,800      $2,377,100      $2,316,600
   Net current deferred tax asset     (179,800)        (70,500)       (362,100)
                                   ------------    ------------    ------------
                                    $6,758,000      $2,306,600      $1,954,500
                                   ===========     ============     ===========


                                      -13-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


6.      Stockholders' Equity:

        On March 19, 1998, the Company's Board of Directors authorized a 2-for-1
        stock split of its common stock  effective March 30, 1998. All share and
        per share amounts in the accompanying  consolidated financial statements
        have been restated to give effect to the stock split.

        Additionally,  the Company's  Board of Directors  approved a stockholder
        "Rights  Plan"  (the  "Plan")  on March  19,  1998,  which  grants  each
        stockholder  the right to  purchase a fraction of a share of Series 1998
        Preferred Stock at the rate of one right for each share of the Company's
        common stock.  The rights will become  exercisable  10 business days (or
        such  later  date as  determined  by the Board of  Directors)  after any
        person or group  acquires,  obtains a right to  acquire or  announces  a
        tender offer for 15% or more of the Company's  outstanding common stock.
        The rights  would  allow the holder to purchase  preferred  stock of the
        Company at a 50% discount.  The Plan is intended to protect stockholders
        from  takeover  tactics  that may be used by an acquirer  that the Board
        believes  are not in the best  interests of the  shareholders.  The Plan
        expires on March 19, 2008.

7.      Employee Benefit Plans:

        The  Company  has  a  profit-sharing  plan  that  covers  all  full-time
        employees  with one year or more of  service.  The  Company  will  match
        contributions  made by the  employee up to 2% of the  employee's  annual
        compensation and contribute a discretionary  amount determined  annually
        by the Board of Directors.  The Company's  contribution  to the plan for
        the years ended December 31, 1998, 1997 and 1996 was $806,000, $535,000,
        and $402,000 respectively.

        The  Company  is  a  member  of  a   noncontributory   defined   benefit
        multi-employer  retirement  plan  for  all  members  of the  Pari-mutuel
        Clerk's Union of Kentucky.  Contributions  are made in  accordance  with
        negotiated labor  contracts.  Retirement plan expense for the year ended
        December 31, 1998, 1997 and 1996 was $258,000,  $205,000,  and $183,000,
        respectively.
        The Company's policy is to fund this expense as accrued.

        The estimated  present  value of future  payments  under a  supplemental
        benefit plan is charged to expense over the period of active  employment
        of the  employees  covered  under the plan.  Supplemental  benefit  plan
        expense  for the  years  ended  December  31,  1998,  1997  and 1996 was
        $55,200, $51,000, and $51,000 respectively.





                                      -14-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


8.      Long-Term Debt:

        On  September  15,  1998,  the Company  obtained a $100  million line of
        credit,  which expires in September  2001,  through a syndicate of banks
        headed by its principal  lender.  The new credit facility replaces a $50
        million line of credit  obtained  during the second quarter of 1998. The
        interest  rate on  borrowings  is  based  upon  LIBOR  plus 50 to  112.5
        additional basis points which is determined by certain Company financial
        ratios.  There was $11.0  million  outstanding  on the line of credit at
        December 31, 1998,  and no borrowings  outstanding  at December 31, 1997
        and 1996 under  previous  lines of credit.  Provisions  contained in the
        line of credit  agreement  require  the  Company to  maintain  specified
        levels of net worth,  a specific  ratio of  consolidated  funded debt to
        consolidated   earnings  before   interest,   taxes,   depreciation  and
        amortization  and a  specific  ratio  of  consolidated  earnings  before
        interest  and  taxes to the sum of  consolidated  interest  expense  and
        consolidated dividends.

        The  Company  also has two  non-interest  bearing  notes  payable in the
        aggregate  face  amount  of  $900,000  relating  to the  purchase  of an
        intrastate  wagering  license from the former  owners of the  Louisville
        Sports Spectrum  property.  Interest has been imputed at 8%. The balance
        of these notes net of unamortized discount was $196,000,  $276,000,  and
        $350,000 at December 31, 1998,  1997 and 1996,  respectively.  The notes
        require aggregate annual payments of $110,000.

        On May  31,  1996,  the  Company  entered  into a  Partnership  Interest
        Purchase Agreement with Conseco, L.L.C.  ("Conseco") for the sale of 10%
        of the Company's  partnership  interest in Hoosier Park to Conseco.  The
        transaction also included assumption by Conseco of a loan to the Company
        of  approximately  $2,600,000,  of which the  balance is  $2,395,092  at
        December 31, 1998. The loan requires interest of prime plus 2% (9.75% at
        December 31, 1998) payable monthly with principal due November 2004. The
        note is collateralized by 10% of the assets of Hoosier Park. Conseco had
        an option to purchase an  additional  47% interest in Hoosier Park which
        expired unexercised on December 31, 1998.

        Future aggregate maturities of long-term debt are as follows:


                                   1999-         $     127,000
                                   2000-               126,000
                                   2001-            11,008,000
                                   2002-                 9,000
                                   2003-                    -
                              Thereafter             2,395,000
                                                   -----------
                                                   $13,665,000
                                                   ===========

                                      -15-

<PAGE>




                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


9.      Operating Leases:

        The Company has a long-term  operating  lease for the land in  Anderson,
        Indiana  on which its  Hoosier  Park  facility  is  located,  as well as
        operating  leases for the  Indianapolis  off-track  betting facility and
        certain  totalisator and  audio/visual and other equipment and services.
        The Anderson  lease expires in 2003,  with an option to extend the lease
        for three additional ten year terms.  The Indianapolis  lease expires in
        2009,  with an option to extend the lease for two  additional  five year
        terms. The leases include  provisions for minimum lease payments as well
        as contingent  lease  payments  based on handle or revenues.  Total rent
        expense  for  all  operating  leases  was  $4,022,000,   $3,803,000  and
        $3,465,000 for the years ended December 31, 1998, 1997 and 1996.

        Future minimum operating lease payments are as follows:


                                        Minimum Lease
                                           Payment
                                           -------
                                   1999              $ 725,604
                                   2000                704,625
                                   2001                556,214
                                   2002                462,045
                                   2003                372,840
                              Thereafter             1,694,301
                                                    -----------
                                                    $4,515,629
                                                    ===========


10.     Stock-Based Compensation Plans:

        The Company sponsors both the "Churchill Downs  Incorporated  1997 Stock
        Option Plan" (the "97 Plan") and the "Churchill Downs  Incorporated 1993
        Stock Option Plan" (the "93 Plan"),  stock-based incentive  compensation
        plans, which are described below. The Company applies APB Opinion 25 and
        related  interpretations in accounting for both the plans.  However, pro
        forma  disclosures  as if  the  Company  adopted  the  cost  recognition
        provisions of SFAS 123 are presented below.

        The  Company is  authorized  to issue up to 300,000  shares and  400,000
        shares of common  stock (as  adjusted  for the stock split) under the 97
        Plan and 93 Plan, respectively, pursuant to "Awards" granted in the form
        of incentive stock options (intended to qualify under Section 422 of the
        Internal  Revenue  Code of 1986,  as amended)  and  non-qualified  stock
        options.  Awards may be granted to selected  employees of the Company or
        any subsidiary.


                                      -16-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.     Stock-Based Compensation Plans: (cont'd)

        Employee Stock Options:

        Both the 97 Plan and the 93 Plan provide that the exercise  price of any
        incentive stock option may not be less than the fair market value of the
        common  stock  on  the  date  of  grant.   The  exercise  price  of  any
        nonqualified  stock  option is not so limited by the plans.  The Company
        granted stock options in 1998,  1997 and 1996. The stock options granted
        in those years have  contractual  terms of 10 years and varying  vesting
        dates,  ranging from one to three years  following the date of grant. In
        accordance with APB 25, the Company has not recognized any  compensation
        cost for these stock options.

        A summary of the status of the  Company's  stock  options as of December
        31, 1998,  1997 and 1996 and the changes  during the year ended on those
        dates is presented below:

<TABLE>
<CAPTION>

                              1998                       1997                    1996
                       --------------------    ----------------------    ---------------------

                     # of Shares   Weighted   # of Shares    Weighted   # of Shares   Weighted
                      Underlying    Average    Underlying     Average    Underlying    Average
                       Options     Exercise     Options      Exercise     Options     Exercise
                                    Prices                    Prices                   Prices
<S>                    <C>          <C>           <C>          <C>        <C>           <C>
Outstanding at beginning
     of the year       426,532       $19.45       337,000      $19.08     248,000       $22.34
Granted                 51,766       $32.50        89,532      $20.83     274,400       $18.97
Exercised                   -            -             -           -           -            -
Canceled                    -            -             -           -      185,400       $23.27
Forfeited                   -            -             -           -           -            -
Expired                     -            -             -           -           -            -
Outstanding at end
   of year             478,298       $20.86       426,532      $19.45     337,000       $19.08
Exercisable at
   end of year         248,000       $21.02       207,400      $19.67          -            -
Weighted-average fair value per
   share of options granted
   during the year                   $10.42                     $6.34                    $5.55

</TABLE>


        The fair value of each stock option  granted is estimated on the date of
        grant using the Black- Scholes  option-pricing  model with the following
        weighted-average   assumptions  for  grants  in  1998,  1997  and  1996,
        respectively:  dividend  yields ranging from 1.20% to 1.54%;  risk- free
        interest  rates are  different  for each  grant and range  from 5.75% to
        6.63%;  and the expected  lives of options are  different for each grant
        and range from approximately 5.83 to 6.5 years, and expected  volatility
        rates of 24.86%,  19.38% and 18.75% for years ending  December 31, 1998,
        1997 and 1996.


                                      -17-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


10.     Stock-Based Compensation Plans: (cont'd)

        The  following  table   summarizes   information   about  stock  options
        outstanding at December 31, 1998:

<TABLE>
<CAPTION>

                                 Options Outstanding                      Options Exercisable
                   -----------------------------------------------    ----------------------------
                     Number      Weighted Average     Weighted          Number         Weighted
Range of           Outstanding      Remaining          Average        Exercisable      Average
Exercise Prices    at 12/31/98   Contributing Life   Exercise Price   at 12/31/98    Exercise Price
<S>                    <C>             <C>              <C>              <C>              <C>
$15.75 to $19.25       315,900         6.05             $18.72           211,000          $20.89
$21.25 to $32.50       162,398         8.20             $25.02            37,000          $21.71
                       -------                                           -------
TOTAL                  478,298         6.77             $20.86           248,000          $21.02
                       =======                                           =======

</TABLE>

        Employee Stock Purchase Plan:

        Under the Company's  Employee Stock  Purchase Plan (the "Employee  Stock
        Purchase  Plan"),  the  Company  is  authorized  to  sell,  pursuant  to
        short-term  stock  options,  shares of its common stock to its full-time
        (or  part-time  for at least 20 hours per week and at least five  months
        per year)  employees at a discount  from the common  stock's fair market
        value.  The  Employee  Stock  Purchase  Plan  operates  on the  basis of
        recurring, consecutive one-year periods. Each period commences on August
        1 and ends on the next following July 31.

        On the first day of each 12-month  period,  August 1, the Company offers
        to each  eligible  employee the  opportunity  to purchase  common stock.
        Employees  elect to  participate  for each  period to have a  designated
        percentage of their compensation withheld (after-tax) and applied to the
        purchase of shares of common  stock on the last day of the period,  July
        31. The Employee  Stock Purchase Plan allows  withdrawals,  terminations
        and reductions on the amounts being deducted. The purchase price for the
        common stock is 85% of the lesser of the fair market value of the common
        stock on (I) the  first day of the  period,  or (ii) the last day of the
        period.  No employee may purchase  common stock under the Employee Stock
        Purchase Plan valued at more than $25,000 for each calendar year.

        Under the Employee Stock Purchase Plan, the Company sold 8,107 shares of
        common stock to 102 employees  pursuant to options  granted on August 1,
        1997, and exercised on July 31, 1998. Because the plan year overlaps the
        Company's  fiscal  year,  the  number of shares to be sold  pursuant  to
        options  granted on August 1, 1998,  can only be  estimated  because the
        1998 plan year is not yet complete.  The  Company's  estimate of options
        granted in 1998 under the Plan is based on the number of shares  sold to
        employees under the Plan for the 1997 plan year, adjusted to reflect the
        change in the number of employees participating in the Plan in 1998.



                                      -18-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


10.     Stock-Based Compensation Plans: (cont'd)

        A  summary  of the  status  of the  Company's  stock  options  under the
        Employee Stock Purchase Plan as of December 31, 1998,  1997 and 1996 and
        the changes during the year ended on those dates is presented below:

<TABLE>
<CAPTION>

                               1998                      1997                     1996
                       --------------------   -----------------------    ---------------------

                      # of Shares  Weighted   # of Shares    Weighted    # of Shares  Weighted
                       Underlying   Average    Underlying     Average     Underlying   Average
                        Options    Exercise      Options     Exercise      Options    Exercise
                                    Prices                    Prices                   Prices
<S>                      <C>         <C>            <C>        <C>          <C>         <C>
Outstanding at beginning
   of the year           8,030       $14.60         8,000      $14.45       7,818       $14.45
Adjustment to prior
year estimated grants       77       $14.60           410      $14.45          -            -
Granted                  5,238       $31.45         8,030      $18.94       8,000       $17.22
Exercised                8,107       $14.60         8,410      $14.95       7,818       $14.45
Forfeited                   -            -             -           -           -            -
Expired                     -            -             -           -           -            -
Outstanding at end
   of year               5,238       $31.45         8,030      $18.94       8,000       $17.22
Exercisable at end
   of year                  -            -             -           -           -            -
Weighted-average
   Fair value per share
   of options granted
   during the year      $12.16                      $5.36                   $5.35

</TABLE>

                                      -19-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


10.     Stock-Based Compensation Plans: (cont'd)

        Had the  compensation  cost for the Company's  stock-based  compensation
        plans  been  determined  consistent  with SFAS 123,  the  Company's  net
        earnings and  earnings  per common  share for 1998,  1997 and 1996 would
        approximate the pro forma amounts presented below:


                                 1998             1997             1996
                             ------------     ------------     ------------
Net earnings:
   As reported                $10,518,548       $9,148,560       $8,071,526
   Pro-forma                  $10,086,914       $8,605,000        7,530,000

Earnings per common share:
   As reported
       Basic                        $1.41            $1.25            $1.08
       Diluted                      $1.40            $1.25            $1.08
   Pro-forma
       Basic                        $1.35            $1.18            $1.01
       Diluted                      $1.34            $1.18            $1.01

        The effects of applying  SFAS 123 in this pro forma  disclosure  are not
        indicative of future amounts.  The Company  anticipates making awards in
        the future under its stock-based compensation plans.

11.     Fair Values of Financial Instruments:

        Financial   Accounting  Standards  Board  ("FASB")  Statement  No.  107,
        "Disclosure  about Fair Value of Financial  Instruments," is a part of a
        continuing  process  by the FASB to  improve  information  on  financial
        instruments.  The  following  methods and  assumptions  were used by the
        Company in  estimating  its fair value  disclosures  for such  financial
        instruments as defined by the Statement:

        Cash and Cash  Equivalents - The carrying amount reported in the balance
        sheet for cash and cash equivalents approximates its fair value.

        Long-Term Debt - The carrying amounts of the Company's  borrowings under
        its line of credit agreements and other long-term debt approximates fair
        value, based upon current interest rates.


                                      -20-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.     Contingencies:

        On January 22, 1992, the Company  acquired  certain assets of Louisville
        Downs,  Incorporated for $5,000,000 including the site of the Louisville
        Sports Spectrum. In conjunction with this purchase, the Company withheld
        $1,000,000  from the amount due to the sellers to offset  certain  costs
        related to the  remediation of  environmental  contamination  associated
        with  underground  storage tanks at the site. All of the $1,000,000 hold
        back had been utilized as of December 31, 1998 and  additional  costs of
        remediation have not yet been conclusively determined.  The sellers have
        now received a reimbursement  from the State of Kentucky of $995,000 for
        remediation costs and that amount is now being held in an escrow account
        to pay further costs of remediation.  Approximately  $985,000 remains in
        the account.  In addition to the hold back,  the Company has obtained an
        indemnity to cover the full cost of remediation  from the prior owner of
        the property.

        It is not  anticipated  that the Company  will have any  liability  as a
        result of compliance with  environmental laws with respect to any of the
        Company's  property.   Except  as  discussed  herein,   compliance  with
        environmental  laws has not  affected the ability to develop and operate
        the Company's properties and the Company is not otherwise subject to any
        material   compliance   costs  in  connection   with  federal  or  state
        environmental laws.

13.     Earnings Per Common Share Computations:

        The following is a  reconciliation  of the numerator and  denominator of
        the earnings per common share computations:

                                         1998           1997         1996
                                         ----           ----         ----
Net earnings (numerator) amounts
   used for basic and diluted per
   share computations:                $10,518,548    $9,148,560    $8,071,526
                                      ===========    ==========    ==========
Weighted average shares (denominator)
   of common stock outstanding per
   share computations:
      Basic                             7,460,058     7,312,052     7,445,542
      Plus dilutive effect of stock
        options                            79,424         8,618         2,164
                                      -----------    ----------    ----------
      Diluted                           7,539,482     7,320,670     7,447,706
                                      ===========    ==========    ==========
Earnings per common share:
      Basic                                 $1.41         $1.25         $1.08
      Diluted                               $1.40         $1.25         $1.08

        Options to purchase 51,766, 9,800 and 135,250 shares for the years ended
        December 31, 1998, 1997 and 1996, respectively, were not included in the
        computation of earnings per common  share-assuming  dilution because the
        options'  exercise  prices were greater than the average market price of
        the common shares.



                                      -21-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


14.     Segment Information

        In 1998 the Company adopted SFAS No. 131, "Disclosures about Segments of
        an Enterprise and Related  Information." The Company has determined that
        it currently  operates in the  following  four  segments:  (1) Churchill
        Downs racetrack and the Louisville Sports Spectrum  simulcast  facility,
        (2) Ellis Park racetrack and its on-site simulcast facility, (3) Hoosier
        Park  racetrack and its on-site  simulcast  facility and the other three
        Indiana simulcast facilities and (4) Other operations.

        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  simulcast  fees,  admissions  and  concessions
        revenue and other sources.  Other operations includes the Kentucky Horse
        Center  and  the  Company's   investments   in  various  other  business
        enterprises.  The  Company's  equity in the net income of equity  method
        investees is not  significant.  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."  The  Company
        evaluates the  performance  of its segments and  allocates  resources to
        them  based  on  earnings  before  interest,   taxes,  depreciation  and
        amortization ("EBITDA") and operating income.




                                      -22-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.     Segment Information: (cont'd)

        The table below presents  information  about  reported  segments for the
        years ending December 31, 1998, 1997 and 1996:

                       Segment Information (in thousands)
               Churchill   Hoosier    Ellis    Other       Elimina-
                 Downs      Park      Park    operations    tions         Total
Net revenues:
1998             $80,925   $47,744   $17,386      $2,497     $(1,252)   $147,300
1997              77,404    41,503        -        1,299      (1,299)    118,907
1996              74,540    33,319        -        1,334      (1,334)    107,859
EBITDA:
1998             $14,417    $5,599    $2,305        $909          -      $23,230
1997              14,205     4,282        -          802          -       19,289
1996              15,390     1,565        -          847          -       17,802
Operating income:
1998             $10,700    $4,499    $1,422        $522          -      $17,143
1997              10,557     3,088        -          760          -       14,405
1996              11,482         6        -          827          -       12,315
Total assets:
1998             $89,427   $31,732   $23,038     $71,109   $(100,655)   $114,651
1997              72,490    29,689        -       31,180     (47,510)     85,849
1996              71,047    28,626        -       26,062     (45,006)     80,729

        Following  is a  reconciliation  of  total  EBITDA  to  income  before
        provision for income taxes:


(in thousands)                        1998          1997          1996
                                      ----          ----          ----
Total EBITDA                         $23,230       $19,289       $17,802
Depreciation and amortization         (5,744)       (4,559)       (4,814)
Interest income (expense)               (216)          243            53
                                     -------       -------       -------
Earnings before provision for
income taxes                         $17,270       $14,973       $13,041
                                     =======       =======       =======


                                      -23-

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


15.     Subsequent Events:

        On January 13,  1999,  the Company  acquired a 60%  interest in Charlson
        Broadcast  Technologies,  LLC  ("CBT")  for a  purchase  price  of  $5.4
        million.  CBT provides  simulcast  graphic  software  video  services to
        racetracks  and  simulcast  wagering  facilities  throughout  the United
        States.  The purchase  agreement  includes  provisions for an additional
        contingent purchase price to be paid by the Company to the former owners
        of the 60%  interest  based upon the  achievement  of certain  operating
        targets.

        On January 21,1999, the Company entered into an agreement to acquire all
        of the  outstanding  shares of Calder Race  Course,  Inc.,  and Tropical
        Park,  Inc.  ("Calder"),  from KE Acquisition  Corp., a private  holding
        company.  Terms of the agreement include a purchase price of $86 million
        subject to certain  adjustments.  Closing of the acquisition is expected
        in early April 1999.








                                      -24-

<PAGE>




<TABLE>
<CAPTION>

      Supplementary Financial Information(Unaudited)                        Common Stock Information

                                                                        Per Share of Common Stock
                                                             ------------------------------------------------
                                 Operating                   Basic     Diluted
                      Net         Income     Net Earnings   Earnings   Earnings                Market Price
                    Revenues      (Loss)       (Loss)        (Loss)     (Loss)    Dividends    High      Low
                    --------     ----------  ------------    ------    --------   ---------    ----     ---
<S>              <C>            <C>           <C>              <C>     <C>          <C>       <C>      <C>

1998             $147,300,299   $17,143,410   $10,518,548      $1.41     $1.40
Fourth Quarter     31,241,540    (1,290,562)     (779,990)      (.10)     (.10)     $0.50     $36.44   $27.25
Third Quarter      33,299,256    (1,016,288)     (654,915)      (.09)     (.09)                41.44    27.63
Second Quarter     67,374,352    22,219,991    13,522,484       1.81      1.79                 43.25    24.00
First Quarter      15,385,151    (2,769,731)   (1,569,031)      (.21)     (.21)                25.31    19.31
-------------------------------------------------------------------------------------------------------------
1997             $118,907,367   $14,405,288    $9,148,560      $1.25     $1.25
Fourth Quarter     28,021,261      (269,688)       30,749       0.00      0.00      $0.50     $23.38   $20.75
Third Quarter      16,827,607    (3,005,270)   (1,819,209)     (0.25)   ( 0.25)                21.00    16.25
Second Quarter     60,779,635    20,815,669    12,785,706       1.75      1.75                 19.00    16.50
First Quarter      13,278,864    (3,135,423)   (1,848,686)     (0.25)    (0.25)                18.50    16.00
-------------------------------------------------------------------------------------------------------------
1996             $107,858,818   $12,314,897   $ 8,071,526      $1.08     $1.08
Fourth Quarter     26,369,324    (1,092,044)     (171,138)     (0.02)    (0.02)     $0.33     $18.25   $17.00
Third Quarter      15,200,752    (2,782,430)   (1,580,988)     (0.21)    (0.21)                18.75    17.00
Second Quarter     54,939,249    19,637,584    11,896,865       1.59      1.59                 22.00    18.00
First Quarter      11,349,493    (3,448,213)   (2,073,213)     (0.27)    (0.27)                20.00    16.00
-------------------------------------------------------------------------------------------------------------

</TABLE>



The Company's Common Stock is traded in the over-the-counter market. As of March
29, 1993, the Company's  Common Stock was listed on the National  Association of
Securities  Dealers,  Inc.'s  SmallCap Market under the symbol CHDN. As of March
24, 1999, there were approximately 3,100 stockholders of record.

Earnings  (loss) per share and other per share  amounts have been  retroactively
adjusted for the 2-for-1 stock split with a record date of March 30, 1998.

Quarterly  earnings (loss) per share figures may not equal total earnings (loss)
per share for the year due in part to the fluctuation of the market price of the
stock.

The above  table  sets forth the high and low bid  quotations  (as  reported  by
NASDAQ) and dividend  payment  information for the Company's Common Stock during
its last three years.  Quotations reflect  inter-dealer  prices,  without retail
mark-up,  mark-down  or  commissions,  and may not  necessarily  reflect  actual
transactions.


                                      -25-

<PAGE>




                                                 SIGNATURES


          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
the  registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.



                                     CHURCHILL  DOWNS INCORPORATED



        June 15, 1999                 \s\Thomas H. Meeker
                                      Thomas H. Meeker
                                      President and Chief Executive Officer
                                      (Director and Principal Executive Officer)



        June 15, 1999                 \s\Robert L. Decker
                                      Robert L. Decker
                                      Executive Vice President and Chief
                                      Financial Officer
                                      (Principal Financial Officer)



        June 15, 1999                 \s\Vicki L. Baumgardner
                                      Vicki L. Baumgardner
                                      Vice President, Finance and Treasurer
                                      (Principal Accounting Officer)










                                      -26-

<PAGE>



                                  EXHIBIT (21)



Subsidiary                                       State/Jurisdiction of
                                                 Incorporation/Organization

Churchill Downs Management Company                      Kentucky
Hoosier Park, L.P. (limited partnership)                Indiana
Ellis Park Race Course, Inc.                            Kentucky
Racing Corporation of America d/b/a Kentucky
Horse Center                                            Delaware
Calder Race Course, Inc.                                Florida
Tropical Park, Inc                                      Florida



                                      -27-

<PAGE>


                                  EXHIBIT (23)


       We  consent  to  the  incorporation  by  reference  in  the  registration
statements of Churchill  Downs  Incorporated  on Forms S-8 (File Nos.  33-85012,
333-62013 and 33-61111) of our report,  dated February 24, 1999 on our audits of
the  consolidated  financial  statements and  consolidated  financial  statement
schedule of Churchill Downs  Incorporated as of December 31, 1998, 1997 and 1996
and for each of the three  years then ended  which  report is  included  in this
Annual report on Form 10-K/A.


\s\ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Louisville, Kentucky
June 15, 1999



                                       -28