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, 1999

                                       OR

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                        for the transition period from to

                          Commission file number 0-1469

                          CHURCHILL DOWNS INCORPORATED
             (Exact name of registrant as specified in its charter)

                  Kentucky                          61-0156015
       (State or other jurisdiction of              (IRS Employer
        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, 1999
was 7,525,041 shares.




                                        1

<PAGE>




                          CHURCHILL DOWNS INCORPORATED

                                    I N D E X


                                                                           PAGES

PART I.  FINANCIAL INFORMATION

    ITEM 1.    Financial Statements

               Condensed Consolidated Balance Sheets, March 31, 1999,
               December 31, 1998 and March 31, 1998                            3

               Condensed Consolidated Statements of Earnings
               for the three months ended March 31, 1999 and 1998              4

               Condensed Consolidated Statements of Cash Flows for the
               three months ended March 31, 1999 and 1998                      5

               Condensed Notes to Consolidated Financial Statements         6-10

    ITEM 2.    Management's Discussion and Analysis of Financial
               Condition and Results of Operations                         11-22

    ITEM 3.    Quantitative and Qualitative Disclosures About
               Market Risk                                                    23

PART II.  OTHER INFORMATION 

    ITEM 1.    Legal Proceedings (Not applicable)                             23

    ITEM 2.    Changes in Securities and Use of Proceeds (Not applicable)     23

    ITEM 3.    Defaults Upon Senior Securities     (Not applicable)           23

    ITEM 4.    Submission of Matters to a Vote of Security Holders
               (Not applicable)                                               23

    ITEM 5.    Other Information (Not applicable)                             23

    ITEM 6.    Exhibits and Reports on Form 8-K                               23

    Signatures                                                                24

    Exhibit Index                                                             25

    Exhibits                                                                  26

                                        2

<PAGE>



                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
                          CHURCHILL DOWNS INCORPORATED
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                         March 31,     December 31,     March 31,
                        ASSETS                             1999            1998           1998
                                                          ------          ------         -----
<S>                                                     <C>            <C>             <C>
Current assets:
     Cash and cash equivalents                          $12,590,422     $ 6,379,686    $11,803,389
     Accounts receivable                                  8,401,845      11,968,114      5,925,377
     Prepaid income taxes                                 2,374,781               -        969,185
     Other current assets                                   950,089       1,049,084        847,493
                                                       ------------    ------------    -----------
          Total current assets                           24,317,137      19,396,884     19,545,444

Other assets                                              5,427,113       3,796,292      3,691,108
Plant and equipment, net                                 85,826,688      83,088,204     63,145,872
Intangible assets, net                                   11,406,833       8,369,395      1,872,449
                                                       ------------    ------------    -----------
                                                       $126,977,771    $114,650,775    $88,254,873
                                                       ============    ============    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                   $11,329,628     $ 6,530,502     $9,960,311
     Accrued expenses                                     5,307,925       8,098,228      5,000,182
     Dividends payable                                            -       3,762,521              -
     Income taxes payable                                         -         257,588              -
     Deferred revenue                                    15,461,793       8,412,552     13,718,956
     Long-term debt, current portion                        570,526         126,812         79,805
                                                       ------------    ------------    -----------
          Total current liabilities                      32,669,872      27,188,203     28,759,254

Long-term debt, due after one year                       21,236,525      13,538,027      2,633,164
Other liabilities                                         3,810,159       1,755,760      2,661,889
Deferred income taxes                                     7,011,619       6,937,797      2,377,100
Shareholders' equity:
     Preferred stock, no par value;
          authorized, 250,000 shares; issued, none                -               -              -
     Common stock, no par value; authorized,
          20,000,000 shares, issued 7,525,041 shares,
          March 31, 1999 and December 31, 1998 and
          7,316,934 shares, March 31, 1998                8,926,975       8,926,975      3,614,567
     Retained earnings                                   53,588,822      56,598,957     48,273,899
     Deferred compensation costs                           (201,201)       (229,944)             -
     Note receivable for common stock                       (65,000)        (65,000)       (65,000)
                                                       ------------    ------------    -----------
                                                         62,249,596      65,230,988     51,823,466
                                                       ------------    ------------   ------------
                                                       $126,977,771    $114,650,775    $88,254,873
                                                       ============    ============    ===========
</TABLE>

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


                                        3

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
               for the three months ended March 31, 1999 and 1998
                                   (Unaudited)



                                                    1999              1998
                                                    ----              ----

Net  revenues                                     $17,662,926       $15,385,151
Operating expenses                                 19,157,153        15,999,128
                                                  -----------       ------------

     Gross loss                                    (1,494,227)         (613,977)

Selling, general and administrative expenses        3,303,115         2,155,754
                                                  -----------       ------------

     Operating loss                               ( 4,797,342)       (2,769,731)
                                                  -----------       ------------

Other income (expense):
          Interest income                             147,431           189,270
          Interest expense                           (435,465)         (104,524)
          Miscellaneous, net                           44,117           117,054
                                                  -----------       ------------

                                                     (243,917)          201,800
                                                  -----------       ------------

     Loss before income tax benefit                (5,041,259)       (2,567,931)
                                                  -----------       ------------

Federal and state income tax benefit                2,031,123           998,900
                                                  -----------       ------------

     Net loss                                     $(3,010,136)      $(1,569,031)
                                                  ============      ============


Basic and diluted net loss per share                    $(.40)            $(.21)

Basic and diluted weighted average
     shares outstanding                             7,525,041         7,316,934




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


                                        4

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               for the three months ended March 31, 1999 and 1998
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                    1999           1998
                                                                   ------         -----
<S>                                                              <C>             <C>
Cash flows from operating activities:
     Net earnings                                                $(3,010,136)    $(1,569,031)
     Adjustments to reconcile net earnings to
          net cash provided by operating activities:
     Depreciation and amortization                                 1,903,255       1,159,106
     Deferred income taxes                                            73,822               -
     Deferred compensation                                            98,591          13,800
     Increase (decrease) in cash resulting from
          changes in operating assets and liabilities:
          Accounts receivable                                      4,405,301       1,161,512
          Prepaid income taxes                                    (2,374,781)       (969,185)
          Other current assets                                       112,733        (307,004)
          Accounts payable                                         4,713,229       4,227,528
          Accrued expenses                                        (2,868,898)     (2,937,393)
          Income taxes payable                                      (257,588)       (186,642)
          Deferred revenue                                         6,258,985       6,374,126
          Other assets and liabilities                            (1,205,204)        335,118
                                                                 ------------    ------------
               Net cash provided by operating activities           7,849,309       7,301,935
                                                                 ------------    ------------

Cash flows from investing activities:
     Additions to plant and equipment, net                        (2,563,687)     (1,120,311)
     Acquisition of business, net of cash acquired of $25,767     (2,925,648)              -
                                                                 ------------    ------------
          Net cash used in investing activities                   (5,489,335)     (1,120,311)
                                                                 ------------    ------------

Cash flows from financing activities:
     Increase (decrease) in long-term debt, net                     (938,133)              -
     Borrowings on bank line of credit                             8,000,000               -
     Repayments of bank line of credit                            (1,000,000)              -
     Dividends paid                                               (3,762,521)     (3,658,468)
     Contribution by minority interest in subsidiary               1,551,416               -
                                                                 ------------    ------------
          Net cash provided by (used in) financing activities      3,850,762      (3,658,468)
                                                                 ------------    ------------

Net increase in cash and cash equivalents                          6,210,736       2,523,156
Cash and cash equivalents, beginning of period                     6,379,686       9,280,233
                                                                 ------------    ------------
Cash and cash equivalents, end of period                         $12,590,422     $11,803,389
                                                                 ============    ============

Supplemental  disclosures of cash flow information:  
Cash paid during the period for:
     Interest                                                       $526,322        $250,000
     Income taxes                                                          -         $18,000
Noncash transactions:
     Invoicing  for 1999 and 1998 Kentucky  Derby and Oaks          $790,256        $371,252
</TABLE>

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

                                        5

<PAGE>




                          CHURCHILL DOWNS INCORPORATED
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               for the three months ended March 31, 1999 and 1998
                                   (Unaudited)

1.    Basis of Presentation

      The accompanying condensed consolidated financial statements are presented
      in accordance with the  requirements of Form 10-Q and  consequently do not
      include all of the  disclosures  normally  required by generally  accepted
      accounting   principles  or  those   normally  made  in  Churchill   Downs
      Incorporated's  (the  "Company")  annual report on Form 10-K. The year end
      condensed  consolidated  balance  sheet  data  was  derived  from  audited
      financial  statements,  but does not include all  disclosures  required by
      generally accepted accounting principles.  Accordingly, the reader of this
      Form  10-Q may wish to refer to the  Company's  Form  10-K for the  period
      ended  December  31,  1998  for  further  information.   The  accompanying
      condensed   consolidated   financial  statements  have  been  prepared  in
      accordance with the registrant's  customary  accounting practices and have
      not been audited. In the opinion of management,  all adjustments necessary
      for a fair  presentation of this  information  have been made and all such
      adjustments are of a normal recurring nature.

      Because of the seasonal  nature of the  Company's  business,  revenues and
      operating  results  for any  interim  quarter  are not  indicative  of the
      revenues  and  operating  results  for the  year  and are not  necessarily
      comparable with results for the corresponding period of the previous year.
      The accompanying  condensed  consolidated  financial  statements reflect a
      disproportionate  share of  annual  net  earnings  (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.

2.    Long-Term Debt

      On September 15, 1998, the Company  obtained a $100 million line of credit
      through a syndicate of banks headed by its principal lender, which expires
      in September  2001.  This credit  facility  replaced a $50 million line of
      credit  obtained  during the second  quarter of 1998. The interest rate on
      borrowings was based upon LIBOR plus 50 to 112.5  additional basis points,
      which was determined by certain Company financial ratios.  There was $18.0
      million outstanding on the line of credit at March 31, 1999, $11.0 million
      outstanding  at December 31, 1998 and no borrowings  outstanding  at March
      31,  1998,  under  previous  lines  of  credit.  In  connection  with  our
      acquisition strategy,  the Company increased the line of credit during the
      second quarter of 1999 to $250 million (See Note 7).

3.    Reclassification

      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, 1999 and 1998 (continued)
                                   (Unaudited)


4.    Acquisitions

      On January  13,  1999,  the  Company  acquired a 60%  interest in Charlson
      Broadcast  Technologies,   LLC  ("CBT")  for  $3.1  million  and  made  an
      additional equity contribution to CBT in the amount of $2.3 million. CBT's
      total  assets  and  liabilities   were  $2.1  million  and  $2.2  million,
      respectively, on the date of acquisition. The purchase price was allocated
      to the fair value of net assets acquired,  with the excess of $3.2 million
      being  amortized over periods of 5 and 15 years based on the nature of the
      intangibles  acquired.  CBT's financial position and results of operations
      have been  included in the  Company's  consolidated  financial  statements
      since the date of acquisition.

      On April 21, 1998, the Company acquired from TVI Corp., ("TVI") all of the
      outstanding stock of Racing  Corporation of America ("RCA") for a purchase
      price of $22.6 million,  which includes  transaction costs of $.6 million.
      RCA owns and operates Ellis Park Race Course in Henderson,  Kentucky,  and
      the Kentucky  Horse  Center,  a training  facility  located in  Lexington,
      Kentucky.  As part of the transaction,  TVI received 200,000 shares of the
      Company's  common stock valued at $4.9 million with the remaining  balance
      of $17.1 million paid from cash on hand and a draw on the  Company's  bank
      line of credit.  The purchase  price of $22.6 million was allocated to the
      acquired  assets  and  liabilities  based  on  their  fair  values  on the
      acquisition  date  with the  excess  of $6.4  million  being  recorded  as
      goodwill,  which is being  amortized over 40 years.  The  acquisition  was
      accounted for by the Company under the purchase  method of accounting and,
      accordingly,  the results of  operations  of RCA  subsequent  to April 20,
      1998, are included in the Company's consolidated results of operations.

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


                                                                Three Months
                                                                    Ended 
                                                                March 31, 1998
             Net revenues                                         $16,942
             Net loss                                             $(2,264)

             Basic and diluted net loss per share                  $(.30)

             Basic and diluted weighted average shares           7,516,934

         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,  1998,  nor  is  it
         necessarily indicative of future operating results.

                                        7

<PAGE>



                          CHURCHILL DOWNS INCORPORATED
            CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
           the three months ended March 31, 1999 and 1998 (continued)
                                   (Unaudited)


5.    Earnings Per Share

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


                                                     Three months ended
                                                         March 31,
                                                      1999              1998
                                                      ----              ----
      Loss (numerator) amounts used for basic
        and diluted per share computations:       $(3,010,136)      $(1,569,031)
                                                  ------------      ------------

      Basic and diluted weighted average shares
        (denominator)of common stock outstanding 
        per share                                    7,525,041         7,316,934
      Basic and diluted net loss per share              $(.40)            $(.21)
  

      Options to purchase  478,298 and 426,532 shares for the three months ended
      March 31,  1999 and 1998 are  excluded  from the  computation  of earnings
      (loss)  per  common   share-assuming   dilution   since  their  effect  is
      antidilutive because of the net loss for the period.

6.    Segment Information

      The Company has adopted  SFAS No. 131  "Disclosures  about  Segments of an
      Enterprise and Related  Information."  The Company has determined  that it
      currently  operates in the following  four segments:  (1) Churchill  Downs
      racetrack, the Louisville Sports Spectrum simulcast facility and Churchill
      Downs  corporate  expenses  (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 include Kentucky Horse Center and the
      Company's investments in various other business enterprises. The Company's
      equity  interest  in the net  income of  equity  method  investees  is not
      significant.  Eliminations  include the elimination of management fees and
      other intersegment transactions.

                                        8

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
            CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
           the three months ended March 31, 1999 and 1998 (continued)
                                   (Unaudited)


6.    Segment Information (continued)

      The accounting policies of the segments are the same as those described in
      the "Summary of Significant  Accounting  Policies" in the Company's annual
      report to stockholders for the year ended December 31, 1998.

      The table below presents information about reported segments for the three
      months ending March 31, 1999 and 1998:

                       Segment Information (in thousands)
<TABLE>
<CAPTION>

                            Churchill   Hoosier    Ellis        Other       Elimina-
                             Downs       Park       Park      operations     tions         Total
Net revenues:
<S>                          <C>        <C>         <C>         <C>            <C>        <C>    
1999                         $4,643     $10,948     $1,166      $1,214         $(308)     $17,663
1998                          5,367      10,018          -         334          (334)      15,385
EBITDA:
1999                        $(4,475)     $1,678      $(382)       $329            -       $(2,850)
1998                         (3,351)      1,686          -         171            -        (1,494)
Operating income (loss):
1999                        $(5,390)     $1,377      $(702)       $(82)            -      $(4,797)
1998                         (4,343)      1,713          -        (140)            -       (2,770)
Total assets:
1999                        $98,429     $32,835    $22,788     $83,277     $(110,351)    $126,978
1998                         71,024      31,410          -      29,504       (43,683)      88,255
</TABLE>

      Following is a  reconciliation  of total EBITDA to income before provision
      for income taxes: 
      (in thousands)                             1999        1998
                                                 ----        ----
      Total EBITDA                             $(2,850)    $(1,494)
      Depreciation and amortization             (1,903)     (1,159)
      Interest income (expense), net              (288)         85
                                               --------    --------
      Earnings before provision for
      income taxes                             $(5,041)    $(2,568)
                                               ========    ========


                                        9

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
            CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for
           the three months ended March 31, 1999 and 1998 (continued)
                                   (Unaudited)



7.    Subsequent Events

      On April 23, 1999, the Company  acquired  all of the outstanding stock of
      Calder  Race  Course, Inc. and  Tropical  Park, Inc. from  KE Acquisition
      Corporation  for a purchase price  of $86 million cash plus a closing net
      working capital  adjustment  of approximately $2.4  million cash and $0.6
      million in transaction costs. The purchase included Calder Race Course  in
      Miami and the licenses held by Calder Race Course, Inc. and Tropical Park,
      Inc. to  conduct horse racing at Calder Race Course.  Calder Race Course, 
      one  of  four  Thoroughbred   tracks  in  Florida, offers  live racing and
      simulcast-only days during two consecutive race meets, which run from late
      May  through   early  January.  The   results of operations of Calder Race
      Course,  Inc. and  Tropical  Park, Inc. will be  included in the Company's
      consolidated  financial statements from the date of acquisition during the
      second quarter of 1999.

      Also on April 23, 1999,  the Company  increased its line of credit under a
      new  revolving  loan  facility  through a syndicate of banks headed by its
      principal lender to meet working capital and other short-term requirements
      and to provide funding for acquisitions, including the pending acquisition
      of Hollywood Park Race Track.  The interest rate on the borrowing is based
      upon LIBOR plus 100 to 250 additional basis points, which is determined by
      certain  Company  financial  ratios.  The line of  credit  is  secured  by
      substantially  all of the  assets  of the  Company  and its  wholly  owned
      subsidiaries. The new facility offers a line of credit of $250 million and
      matures in 2004.

      On May 6, 1999,  the Company  signed a  definitive  agreement  whereby the
      Company would purchase the Hollywood  Park Race Track,  the Hollywood Park
      Casino  and  approximately  240 acres  located  at the  racetrack  site in
      Inglewood,  California.  The racetrack offers live Thoroughbred racing and
      simulcast  wagering.  Terms of the agreement  includes a purchase price of
      $140 million  subject to certain  adjustments  and   certain conditions to
      closing. If not so terminated,  closing of the transaction is expected in 
      the third quarter of 1999.


                                       10

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


        This discussion and analysis  contains  forward-looking  statements made
pursuant to the "safe harbor"  provisions of the Private  Securities  Litigation
Reform Act of 1995. The reader is cautioned that such forward-looking statements
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from the presently  estimated amounts.  These risks and uncertainties
include:  our  continued  ability to  effectively  compete for the country's top
horses and trainers  necessary to field high-quality horse racing; our continued
ability to grow our share of the  interstate  simulcast  market;  a  substantial
change in regulations  affecting our gaming activities;  a substantial change in
allocation  of live racing  days;  the impact of  competition  from  alternative
gaming  (including  lotteries  and  riverboat and cruise ship casinos) and other
sports  and  entertainment  options  in those  markets  in which we  operate;  a
decrease in riverboat admissions revenue from our Indiana operations;  Year 2000
computer  issues;  and our  success  in  pursuit  of our  strategic  initiatives
designed to attract new patrons and generate additional revenues.

Overview

        We conduct  pari-mutuel  wagering on live  Thoroughbred and Standardbred
and Quarter Horse horse racing and  simulcast  audio and video signals of races.
Additionally, we offer racing services through our other interests.

        We own and operate the Churchill Downs racetrack in Louisville, Kentucky
which  has  conducted  Thoroughbred  racing  continuously  since  1875 and is
internationally  known as home of the  Kentucky  Derby.  We also own and operate
Ellis Park Race Course, a Thoroughbred racetrack, in Henderson, Kentucky ("Ellis
Park"), and Kentucky Horse Center, a Thoroughbred training center, in Lexington,
Kentucky.  Additionally,  we are the majority owner and operator of Hoosier Park
in  Anderson,   Indiana,   which  conducts   Thoroughbred,   Quarter  Horse  and
Standardbred  horse racing. We conduct simulcast wagering on horse racing at our
four simulcast wagering facilities in Louisville, Kentucky, and in Indianapolis,
Merrillville and Fort Wayne,  Indiana,  as well as at our racetracks.  We hold a
majority interest in Charlson Broadcast  Technologies,  LLC, a simulcast graphic
software  and video  services  company  for  racetracks  and  simulcast-wagering
facilities.  Additionally,  we have a 50% interest in Kentucky Off-Track Betting
Inc., an alliance of  Kentucky's  racetracks  that  operates  simulcast-wagering
facilities  in  Maysville,  Jamestown,  Pineville  and Corbin,  Kentucky,  and a
minority  interest in Kentucky Downs Race Course in Franklin,  Kentucky;  NASRIN
Services,  LLC, a  telecommunications  company  specializing in the simulcasting
needs  of  racetracks;  and  EquiSource,  LLC  a  company  that  provides  group
purchasing services for the Thoroughbred industry.

         Because of the seasonal nature of our 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.  We  normally  earn a  substantial
portion of our net earnings in the second  quarter of each year during which the
Kentucky Derby and the Kentucky Oaks are run on the first weekend in May.

        Our  primary  sources  of  income are  commissions and  fees earned from
pari-mutuel wagering

                                       11

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


on live and simulcast  horse races.  Other sources of income include  admissions
and seating, riverboat admission tax subsidy,  concession commissions (primarily
for the sale of food and beverages),  sponsorship revenues, licensing rights and
broadcast fees.

        Churchill  Downs  racetrack and Ellis Park as well as  Kentucky's  other
racetracks  are subject to the licensing and  regulation of the Kentucky  Racing
Commission ("KRC").  The KRC 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
racetrack  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.

        We received  approval  from the KRC to conduct  live racing at Churchill
Downs  racetrack  from April 24 through June 27, 1999  ("Spring  Meet") and from
October 31  through  November  27,  1999  ("Fall  Meet") for a total of 71 days,
compared  to 71 racing days in 1998.  Ellis Park has been  granted a total of 61
live racing days running from June 28 through September 6, 1999,  compared to 61
days of racing during 1998.  The total number of days on which  Churchill  Downs
racetrack and Ellis Park conduct live racing  fluctuates  annually  according to
the calendar year.

        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 five  members  appointed  by the  governor of Indiana.  Licenses are
approved annually by the IHRC based upon applications submitted by Hoosier Park.
Currently, Hoosier Park is the only facility in Indiana licensed to conduct live
Standardbred,  Quarter  Horse  or  Thoroughbred  racing  and to  participate  in
simulcasting.  Quarter Horse races are conducted during some  Thoroughbred  race
days.  Hoosier  Park has received a license to conduct live racing in 1999 for a
total of 169 racing days,  including 104 days of Standardbred racing and 65 days
of Thoroughbred  racing (which also includes Quarter Horse races).  During 1998,
Hoosier Park conducted racing for 95 days of Standardbred  racing and 58 days of
Thoroughbred racing.

        In  Florida,  licenses  to  conduct  live  Thoroughbred  racing  and  to
participate in simulcasting are approved by the State of Florida Department of 
Business  and  Professional Regulation.  Calder  Race Course, Inc. and Tropical 
Park, Inc.,  which  were acquired  April 23, 1999 (see  Note 7 of the  condensed
notes to consolidated financial statements) hold licenses to conduct live racing
at Calder Race Course.  Calder Race Course, Inc. has been approved from May 23,
1999  through  November 2, 1999  and  Tropical Park, Inc. has been approved from
November 3, 1999 through January 2, 2000. Calder Race Course, Inc. and Tropical 
Park, Inc. have been approved for a total of 168 days.

        We employ approximately 500 full-time employees Company-wide. Due to the
seasonal  nature  of our live  racing  business,  the  number  of  seasonal  and
part-time persons employed will vary

                                       12

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


throughout the year, with peak employment  occurring Kentucky Derby week when we
employ  as many as 2,600  persons.  At March 31,  1999,  average  full-time  and
seasonal employment per pay period was approximately 850 individuals.

        We generally do not directly  compete with other racetracks or simulcast
wagering facilities for patrons due to geographic separation of such facilities.
However,  we  compete  with other  sports,  entertainment  and  gaming  options,
including  lotteries,  riverboat and cruise ship casinos,  and other pari-mutuel
wagering  facilities,  for  patrons for both live  racing and  simulcasting.  We
attempt to attract  patrons by providing the highest  quality racing products in
attractive  entertainment  facilities with fairly priced,  appealing  concession
services.

        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  five  riverboat
casinos  operating on the Ohio River along Kentucky's border -- including two in
the  southeastern  Indiana  cities  of  Lawrenceburg  and  Rising  Sun,  one  in
southwestern  Indiana in Evansville and one at Metropolis,  Illinois.  The fifth
riverboat casino,  licensed to RDI/Caesars,  opened in November 1998 in Harrison
County,  Indiana,  10 miles from Louisville.  Business at our simulcast wagering
facility, the Louisville Sports Spectrum,  decreased during the first quarter of
1999 as compared  to the prior  year.  From  January 1 through  March 31,  1999,
wagering and attendance at the facility  declined by 13 percent and 3.2 percent,
respectively,  compared  to  the  same  period  in  1998.  It is  impossible  to
accurately  determine  the  extent  of the  riverboat's  impact  on  the  Sports
Spectrum's  business  because  other  factors  may have had an  impact,  such as
inclement  weather  and the  corresponding  loss of  simulcast  programs  due to
cancellations  at  racetracks  that send their  simulcast  signals to the Sports
Spectrum.

        The Indiana Gaming Commission voted in September 1998 to grant a license
to open a sixth Indiana  riverboat  along the Ohio River in Switzerland  County,
Indiana,  approximately 70 miles from Louisville.  The license holder, Hollywood
Park, Inc., plans to build a riverboat casino,  hotel and resort complex,  which
is projected to open in the third quarter of 2000.

        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 the  Churchill  Downs  racetrack  and the Sports
Spectrum  could  experience  a  more  significant  impact  on its  wagering  and
attendance in the Louisville market,  than is presently being experienced,  when
the RDI/Caesars riverboat is open to full capacity and has established itself in
the  market.  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 our
Sports Spectrum in Merrillville, Indiana. Our pari-mutuel wagering activities at
the Merrillville  facility have been adversely  impacted by the opening of these
Lake Michigan riverboats.

                                       13

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


        Additionally,  the  Pokagon  Band of the  Potawatomi  Indian  Tribe  has
expressed an interest in establishing land-based casinos in northeastern Indiana
and southwestern  Michigan although Indiana Governor Frank O'Bannon has publicly
expressed his opposition at this time to any further  expansion of casino gaming
in Indiana. We continue to anticipate that development of any such Indian casino
will negatively impact pari-mutuel wagering activities at Hoosier Park's Indiana
facilities.  However, the potential impact is difficult to estimate at this time
due, in part, to the  uncertain  geographic  distances  between  Hoosier  Park's
operations and the potential casino sites.

         The  integration  of  alternative  gaming  products  at  our  racetrack
facilities is one of our four core business strategies  developed to position us
to compete in this changing environment.  Implementing these strategies, we have
successfully  grown  our live  racing  product  by  strengthening  our  flagship
operations,  increasing  our  share  of the  interstate  simulcast  market,  and
geographically expanding our racing operations in Kentucky, Indiana and Florida.
Alternative  gaming in the form of video  lottery  terminals should enable us to
more effectively  compete with Indiana riverboat casinos and provide new revenue
for purse money and capital  investment.  We continue to pursue legislation to
allow  video  lottery  terminals  at  our  racetrack  facilities in  Kentucky.  
Currently,  we  are 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 Indiana riverboats to compensate for the effect of riverboat competition. The
horse  industry is required to allocate 70% of such  revenue  directly for purse
expenses,  breed development and reimbursement of approved  marketing costs. The
balance,  or 30%,  is  retained  by  Hoosier  Park as the only  horse  racetrack
currently  operating in Indiana.  Riverboat  admissions revenue from our Indiana
operations  increased $0.8 million for the quarter ended March 31, 1999 compared
to 1998,  as a result of the  expansion  of existing  and opening of  additional
riverboats.  The net increase in riverboat  admissions  revenue,  after required
purse and marketing  expense  increases of approximately  $0.6 million,  is $0.2
million.

        Legislation  that sought to cap Hoosier Park's share of the $.65 subsidy
was introduced in the 1999 session of the Indiana General Assembly,  however, no
such  legislation  had  passed  at  the  time  the  1999  session  adjourned.  A
significant  change in Hoosier  Park's share of the subsidy would impact funding
for  operating  expenditures,  potentially  reducing the number of race dates at
Hoosier Park and, in all likelihood,  re-emphasize  the need for the integration
of alternative  gaming products at the Hoosier Park racetrack in order for it to
effectively compete with riverboat casinos.

        We have partnered with ODS  Technologies  L.P. (ODS) in the  development
and operation of an in-home  interactive  wagering  system in Jefferson  County,
Kentucky,  since  1995.  The second  phase of our  relationship  with ODS is the
launching  of the  Television  Games  Network  (TVG),  projected  for the second
half of 1999.


                                       14

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)



RESULTS OF OPERATIONS

Pari-mutuel  wagering  for our three live racing  facilities  and four  separate
simulcast  wagering  facilities during the quarter ended March 31, 1999 and 1998
is as follows:


                               ($ in thousands, except for number of days)
                             Churchill Downs     Hoosier Park        Ellis Park*
                                 racetrack
Simulcast receiving
     1999 handle                   $41,517           $33,972            $11,538
     1999 no. of days                   77               284                 90
     1998 handle                   $46,236           $33,536            $10,748
     1998 no. of days                   75               292                 90

* Pari-mutuel  wagering information for the Ellis Park is provided for quarter 
ended March 31, 1999 and 1998. However,  since Ellis Park was  acquired on April
21, 1998 no revenues are included in the  Company's  results of  operations  for
the first quarter of 1998.

Comparison of Profit and Loss for Three Months Ended March 31, 1999 to 1998

Net Revenues

Net revenues during the three months ended March 31, 1999 increased $2.3 million
(15%) from  $15.4  million in 1998 to $17.7  million  in 1999.  Churchill  Downs
racetrack  revenues  decreased  $0.8 million (14%) due primarily to decreases in
the  Louisville  Sports  Spectrum  simulcast  revenues.  Hoosier  Park  revenues
increased  $0.9 million  (9%)  primarily  due to a $0.8 million  increase in the
riverboat gross  admissions  subsidy of which a portion was required to be spent
on purses and marketing  expenses.  Ellis Park contributed $1.2 million to first
quarter  1999  net  revenues  as  opposed  to  none  in the  prior  year.  Other
operations,  including the 1998 acquisition of Kentucky Horse Center,  comprised
the remaining $1.0 million of the increase.

Operating Expenses

Operating  expenses  increased  $3.2 million (20%) from $16.0 million in 1998 to
$19.2 million in 1999.  Hoosier Park operating  expenses  increased $1.2 million
(15%) due  primarily  to required  increases  in purses and  marketing  expenses
related to the riverboat admissions subsidy.  Ellis Park incurred 1999 operating
expenses  of $1.6  million  versus  none in the  first  quarter  of 1998.  Other
operations,  including  Kentucky Horse Center,  accounted for the remaining $0.4
million of the increase in operating expenses.


                                       15

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)



Gross  Loss

Gross loss increased $0.9 million from $0.6 million loss in 1998 to $1.5 million
loss in 1999.  Ellis  Park  accounted  for $0.5  million  and  other  operations
contributed $0.3 million of the increase in gross loss.

Selling, General and Administrative Expenses

Selling,  general and administrative ("SG&A") expenses increased by $1.1 million
(53%)  from $2.2  million  in 1998 to $3.3  million in 1999.  SG&A  expenses  at
Churchill  Downs  increased  $0.4  million  (23%)  due  primarily  to  increased
corporate   staffing  and   compensation   expenses   reflecting  the  Company's
strengthened  corporate  services to meet the needs of new business  units.  The
acquisition  of Ellis  Park  contributed  $0.2  million  and  other  operations,
including  Kentucky Horse Center,  accounted for $0.4 million of the increase in
SG&A expenses.

Other Income and Expense

Interest  expense  increased  $0.3  million  from $0.1  million  in 1998 to $0.4
million in 1999  primarily as a result of borrowings to finance the  acquisition
of Ellis Park.

Income Tax Provision

Our income tax benefit  increased  by $1.0  million from $1.0 million in 1998 to
$2.0  million in 1999  primarily  as the result of a increase in pre-tax loss of
$2.5 million.  The  effective  income tax rate  increased  from 38.9% in 1998 to
40.3% in 1999 due primarily to  non-deductible  amortization  expense related to
the  acquisitions  of Ellis Park and Kentucky  Horse Center in 1998 and Charlson
Broadcast Technologies, LLC in January 1999.

Significant Changes in the Balance Sheet March 31, 1999 to December 31, 1998

Accounts receivable balances decreased by $3.6 million in 1999.  Churchill Downs
decreased  its  live  meet  accounts  receivable  by $2.9  million  through  the
collection of 1998 Fall meet  receivables. 

Prepaid income taxes  increased $2.4 million as a result of the estimated income
tax benefit (receivable)  associated with the quarterly net loss.

Intangible  assets  increased $3.0 million as a result of the goodwill  recorded
for the  acquisition of Charlson  Broadcast  Technologies,  LLC during the first
quarter of 1999.

The net plant and equipment  increase of $2.7 million  during 1999 was primarily
due to the  acquisition  of  Charlson  Broadcast  Technologies,  LLC and routine
capital  spending at our  operating  units offset by current  year  depreciation
expense.

                                       16

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


Accounts  payable  increased  $4.8  million at March 31, 1999  primarily  due to
increases in purses payable and other expenses related to simulcast wagering.

Dividends payable decreased $3.7 million at March 31, 1999 due to the payment of
dividends of $3.7 million (declared in 1998) in first quarter 1999.

Deferred  revenue  increased $7.0 million at March 31, 1999,  primarily due to a
$6.5 million increase in corporate  sponsor event ticket prices,  season box and
membership  sales,  admissions and future wagering  related to the 1999 Kentucky
Derby and Kentucky Oaks race days.

The  long-term  debt  increase  of $7.7  million  was the  result of  additional
borrowings  on our  bank  line of  credit  during  the  first  quarter  of 1999,
primarily to fund the acquisition of Charlson Broadcast Technologies, LLC.

Significant Changes in the Balance Sheet March 31, 1999 to March 31, 1998

Intangible assets increased $9.5 million due to the addition of goodwill of $6.5
million recorded for the acquisition of Ellis Park and Kentucky Horse Center and
$3.0  million  for  the   acquisition   and  formation  of  Charlson   Broadcast
Technologies, LLC.

Net plant and equipment increased $22.7 million primarily due to the acquisition
of Ellis Park and Kentucky Horse Center,  Charlson Broadcast  Technologies,  LLC
and routine  capital  spending at our  operating  units  offset by  depreciation
expense.

The  long-term  debt  increase  of  $18.6  million  was due to  line  of  credit
borrowings used to fund the acquisitions of Ellis Park and Kentucky Horse Center
during  the second  quarter of 1998 and  Charlson  Broadcast  Technologies,  LLC
during the first quarter of 1999.

Deferred  income taxes  increased by $4.6 million as a result of the recognition
of deferred  taxes with the Ellis Park and  Kentucky  Horse  Center  acquisition
during the second quarter of 1998.

Liquidity and Capital Resources

The working  capital  deficiency  was $8.4 and $9.2 million for the three months
ended March 31, 1999 and 1998, respectively,  which results from the seasonality
of our businesses.  Cash flows provided by operations were $7.8 and $7.3 million
for the three  months  ended March 31, 1999 and 1998,  respectively.  Management
believes cash flows from operations and available borrowings during 1999 will be
sufficient  to fund  our  cash  requirements  for the  year,  including  capital
improvements  and the acquisitions of Calder Race Course and Hollywood Park Race
Track and Casino.

Cash flows used in investing activities were $5.5 and $1.1 million for the three
months ended March 31, 1999 and 1998, respectively.  The $5.5 million in 1999 is
comprised of the $2.9 million

                                       17

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


acquisition  of a majority  interest in  Charlson  Broadcast  Technologies,  LLC
during the first quarter and $2.6 million in capital spending at our facilities.
The  capital  additions  for all  locations,  including  construction  of a $2.4
million stable area dormitory at the Churchill Downs racetrack facility, are not
expected to exceed $10 million for 1999.

Cash  flows  provided  by (used in)  financing  activities  were $3.9 and $(3.7)
million for the three  months  ended March 31, 1999 and 1998,  respectively.  We
borrowed  $8 million  and repaid $1  million on our line of credit  during  1999
primarily to finance the purchase of Charlson  Broadcast  Technologies,  LLC. In
addition,  we received a $1.5 million contribution by a minority interest in our
Charlson Broadcast Technologies, LLC subsidiary.

In  September  1998,  we obtained a $100  million  line of credit,  of which $82
million  was  available  at March 31,  1999  (See  "Subsequent  Events"  section
discussed  later). In April 1999, our total line of credit was increased to $250
million under a new revolving loan facility, secured by substantially all of our
assets, to meet working capital and other short-term requirements and to provide
funding for  acquisitions,  including  the pending  purchase of Hollywood  Park,
which if completed,  is scheduled to close in the third quarter of 1999. The new
revolving loan facility matures in 2004.

Impact of the Year 2000 Issue

The "Year 2000 Issue" is the result of computer programs that were written using
two digits  rather  than four to define the  applicable  year in  date-dependent
systems.  If our computer  programs with  date-sensitive  functions are not Year
2000  compliant,  they may be unable to distinguish  the year 2000 from the year
1900.  This  could  result in system  failure  or  miscalculations  leading to a
disruption of business operations.

Certain of our mission  critical  operations are dependent upon computer systems
and  applications.  These systems are either directly owned and controlled by us
or are provided under contract by third party technology service  providers.  To
address the Year 2000 issue,  we have  categorized the Year 2000 Issue into four
principal areas.

Systems Owned By the Company

The  first  area is  related  to  systems  that we own.  These  systems  include
application  software and dedicated  hardware that run our core  operations.  In
addition,  there are numerous applications that provide  administrative  support
and  management  reporting  functions.  Some of  these  applications  have  been
developed internally and others have been purchased.

To address Year 2000 compliance  across this broad category of systems,  we have
broken  each system  down into its most  elemental  pieces in order to study the
hardware including any embedded chip technology/firmware,  the operating systems
and finally, the applications themselves.


                                       18

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


Hardware including any embedded chip  technology/firmware that was not Year 2000
compliant has been  identified  and replaced as part of the routine  turnover of
technology capital. Hardware remaining to be replaced is scheduled for upgrading
during the first half of 1999.  By June 1999,  all hardware  and  embedded  chip
technology/firmware that we own is expected to be Year 2000 compliant.

All operating  systems  supporting  specific  applications  have been checked by
advancing  the dates to  determine if operating  system-level  functionality  is
impacted by the date change. As new operating system upgrades are made available
and installed,  periodic testing will continue to assure operating  system-level
functionality  is maintained.  In addition,  we have contacted the developers of
the  operating  systems  we  use  and  have  received  assurances  as  to  their
compatibility with the Year 2000 transition.

Application  software compliance with the Year 2000 has been certified through a
combination of technical  consultation with the software developers and testing.
Applications  developed with internal  resources have been written with the Year
2000 compliance in mind using development tools that are Year 2000 compliant. We
have received  technical  reports from third parties on Year 2000 compliance for
financial  reporting,  payroll,  operations  control and  reporting and internal
communications  applications.  We require Year 2000  compliance  on any software
upgrades.

Based on the schedule  outlined  above,  we expect our owned  systems to be Year
2000  compliant  prior to the year 2000.  The system will be tested by advancing
dates to  include a  majority  of the Year  2000  critical  dates by the  fourth
quarter of 1999.  However,  even though our planned  modifications to internally
owned hardware and software should  adequately  address Year 2000 issues,  there
can be no assurance that unforeseen difficulties will not arise.

Technology Services Provided to the Company Under Contract By Third Parties

The second  area is  services  provided  to us by third  parties.  Many of these
services are mission critical and could materially  impact us should the systems
upon which the services are dependent be unable to function.

The   totalisator   services   provided  by  United  Tote   Company  and  AmTote
International,  Inc.  are  the  most  critical  to our  operations.  Totalisator
services  include the  calculation of amounts wagered and owed to winning ticket
holders.  United Tote developed a plan to bring all systems  provided to us into
Year 2000  compliance  during 1998.  United Tote and the Company  initiated this
plan during the second  quarter of 1998 by  undertaking a  comprehensive  system
hardware and  software  upgrade  that is Year 2000  compliant.  The systems were
successfully installed in three phases with the last phase having been completed
in October 1998. All on-track,  intertrack  wagering and hub operations are Year
2000 compliant. We will continue to work closely with United Tote to assure that
future releases and upgrades are Year 2000 compliant by including this provision
as a condition of

                                       19

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


contracting for future services.  We are in the process of determining if AmTote
International,  Inc.  is  Year 2000  compliant  and  expect to  complete  this 
evaluation during the second quarter of 1999. 

The video  services  provided  by an outside  vendor are also  important  to our
operations.  Video services include the capture,  production and distribution of
the television  signal for distribution to customers located on our premises and
to customers  located at remote outlets  throughout  the nation.  We are working
closely  with the vendor to ensure the  software  applications  that provide the
graphical enhancements and other distinguishing features to the televised signal
for  Churchill  Downs  racetrack and Hoosier Park are Year 2000  compliant.  The
existing software for the graphical enhancements to the television signal is not
Year 2000  compliant.  We have  contacted the developer of the software  package
directly and have  received  assurances  that an upgrade to the software will be
Year 2000 compliant.

We purchase certain data and statistical information from Equibase for resale to
the  public.  This  information  is an  essential  element of our product and is
included in printed  material made available to our customers to assist in their
wagering decisions. Equibase has implemented a Year 2000 remediation plan, which
is expected to be completed by the second quarter of 1999.

A variety of other smaller and less critical  technology  service  providers are
involved with our product. We have received assurance letters from a majority of
these  suppliers  and will  continue  to work to receive  assurances  from those
remaining.

Because of the nature of our business  and its  dependence  upon key  technology
services  provided  by third  parties,  we  require  that all new  software  and
technology services are Year 2000 compliant. This requirement extends to include
patches, upgrades and fixes to existing technology services.

In the event that any of our third party service  providers do not  successfully
and timely achieve Year 2000 compliance,  and we are unable to replace them with
alternate  service  providers,  it could result in a delay in providing our core
live  racing and  simulcasting  products  to our  customers  and have a material
adverse effect on our business, financial condition and results of operations.

Industry-wide Issues

Because a  significant  portion of our revenues  are derived  from  customers at
other  racing  organizations  that are  confronted  with the same  technological
issues,  including totalisator,  video and statistical  information services, we
have been actively  participating  in an  industry-wide  assessment and remedial
efforts to address the Year 2000 issue.

Feedback Control Systems

A variety  of the newer  control  and  regulating  systems  are date  sensitive.
Environmental  control  systems,  elevator/escalator  systems,  fire control and
security systems utilize date-sensitive

                                       20

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


software/embedded  chip technology for correct  operation.  We have systems that
perform each of these  functions,  and are  identifying  if any of these systems
employ technology that may not be Year 2000 compliant. We will work closely with
manufacturers  of these  products to develop a remedial plan to assure year 2000
compliance if problems are identified.

Cost and Contingency Planning

To date,  we have  incurred  less than $75,000 in costs to  remediate  Year 2000
compliance  issues.  Our management  believes that any future costs to remediate
Year 2000  compliance  issues will not be material to our financial  position or
results of operations.

We are currently  evaluating our most  reasonably  likely  worst-case  Year 2000
scenario  and are also  developing  contingency  plans as part of our efforts to
identify and correct  Year 2000 issues  affecting  our owned  systems as well as
issues involving third party service  providers.  We intend to complete both its
evaluation of a worst-case Year 2000 scenario and  contingency  planning by June
30, 1999.  Due  to  the recent  acquisition  of  Calder  Race Course,  Inc. and 
Tropical  Park,  Inc.  we  will  continue  to  assess  the  status  of  our Year
2000 compliance for those entities in regards to the factors mentioned above,and
we expect to complete this evaluation in the second quarter of 1999.

Subsequent Events

On April 23, 1999, we  acquired  all of the outstanding   stock of  Calder Race 
Course, Inc.  and  Tropical Park, Inc. from  KE  Acquisition  Corporation  for a
purchase price of $86 million cash plus a closing net working capital adjustment
of approximately $2.4 million cash and $0.6 million in transaction costs.   The
purchase  included  Calder Race Course in Miami and the  licenses held by Calder
Race Course, Inc. and Tropical Park, Inc. to conduct horse racing at Calder Race
Course.  Calder Race Course , one of four Thoroughbred tracks in Florida, offers
live racing and simulcast-only days during two consecutive race meets, which run
from late May through early January.  The results of operations of Calder Race 
Course,  Inc. and  Tropical  Park, Inc. will  be  included  in  our consolidated
financial  statements  from the date of acquisition.  Management believes  the  
acquisition  of Calder Race Course, Inc. and  Tropical Park, Inc. will increase 
earnings during 1999.

Also on April 23, 1999,  we increased  our line of credit under a new  revolving
loan  facility  through a syndicate of banks headed by our  principal  lender to
meet working capital and other  short-term  requirements  and to provide funding
for  acquisitions,  including  the pending  acquisition  of Hollywood  Park Race
Track.  The interest  rate on the  borrowing is based upon LIBOR plus 100 to 250
additional  basis  points,  which is  determined  by certain  Company  financial
ratios.  The line of credit is secured by substantially all of the assets of the
Company and its wholly owned  subsidiaries.  The new  facility  offers a line of
credit of $250 million and matures in 2004.

On May 6, 1999, we signed a definitive  agreement  whereby we would purchase the
Hollywood Park Race Track, the Hollywood Park Casino and approximately 240 acres
located at the racetrack site in

                                       21

<PAGE>


                          CHURCHILL DOWNS INCORPORATED
       ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


Inglewood,  California.  The  racetrack  offers  live  Thoroughbred  racing  and
simulcast  wagering.  Terms of the agreement  includes a purchase  price of $140
million subject to certain  adjustments and certain conditions to closing.  If  
not so terminated, closing of the transaction is expected in the third quarter 
of 1999.



                                       22

<PAGE>



                          CHURCHILL DOWNS INCORPORATED

ITEM 3.        Quantitative and Qualitative Disclosures about Market Risk

Our market risk exposures set forth in our December 31, 1998 Form 10-K have not 
changed significantly through the first quarter of 1999. However, as a result of
our  Calder  Race  Course, Inc. and Tropical  Park, Inc. acquisition,  borrowing
under our  variable  rate debt is expected to increase  significantly during the
second quarter of 1999.

                           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

                      Not applicable


                                       23

<PAGE>




                                   SIGNATURES


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


                                    CHURCHILL DOWNS INCORPORATED



        May 14, 1999                \s\Thomas H. Meeker
                                    --------------------------------------------
                                    Thomas H. Meeker
                                    President and Chief Executive Officer
                                    (Director and Principal Executive Officer)


        May 14, 1999                \s\ Robert L. Decker        
                                    -------------------------------------------
                                    Robert L. Decker
                                    Executive Vice President and Chief Financial
                                    Officer
                                    (Principal Financial Officer)



        May 14, 1999                \s\Vicki L. Baumgardner      
                                    --------------------------------------------
                                    Vicki L. Baumgardner
                                    Vice President, Finance and Treasurer
                                    (Principal  Accounting Officer)


                                       24

<PAGE>





                                  EXHIBIT INDEX

Numbers  Description                                      By Reference To

(2)(a)   Stock Purchase Agreement and Joint Escrow  Exhibit 2.1 to Report on
         Instructions dated as of January 21, 1999  Form  8-K  dated April 23,
         by and among Churchill Downs Incorporated  1999 
         and KE Acquisition Corp. 

   (b)   First   Amendment to   Stock   Purchase    Exhibit 2.2 to Report on
         Agreement dated as of April 19, 1999 by    Form  8-K  dated April 23,-
         and between Churchill Downs Incorporated,  1999 
         Churchill Downs Management Company and
         KE Acquisition Corp.

   (c)   Agreement and Plan of Merger and           Exhibit 2.3 to Report on 
         Amendment to Stock Purchase Agreement      Form 8-K dated April 23,  
         dated as of April 22,1999 by  and  among   
         Churchill  Downs  Incorporated,  Churchill
         Downs Management Company, CR Acquisition 
         Corp., TP Acquisition Corp., Calder Race 
         Course, Inc., Tropical Park, Inc. and KE
         Acquisition Corp.

(10)(a)  $250,000,000 Revolving Credit Facility     Page 26, Report on Form 
         Credit Agreement between Churchill Downs   10-Q for the fiscal 
         Incorporated, and the guarantors party     quarter ended March 31,1999
         hereto,and the Banks party hereto and PNC   
         Bank, National Association, as Agent, and
         CIBC  Oppenheimer  Corp., as  Syndication
         Agent, and Bank One, Kentucky, N.A., as
         Documentation  Agent, dated  as of 
         April 23, 1999

    (b)  First Amendment to $250,000,000            Page 156, Report on Form 
         Revolving Credit Facility Credit           10-Q  for  the   fiscal 
         Agreement dated April  30, 1999            quarter ended March 31, 1999

    (c)  Churchill Downs Incorporated  Amended and  Exhibit (10)(a) to report
         Restated  Supplemental Benefit Plan dated  on Form 10-K forthe year  
         December 1, 1998 *                         ended December 31, 1998 

    (d)  Churchill Downs Incorporated, Amended and  Exhibit (10)(n) to Report 
         Restated  Deferred  Compensation Plan for  on Form 10-K for the year 
         Employees and Directors *                  ended December31, 1998 

(27)     Financial Data Schedule for the fiscal     Page 161  Report on Form 
         quarter ended March 31, 1999               10-Q  for the fiscal 
                                                    quarter ended March 31, 1999

* Management contract or compensatory plan or arrangement.

                                       25