FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 of Incorporation) (I.R.S. Employer
Identification No.)
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
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 Sections 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 the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 27, 1995, the estimated aggregate market value of the shares of the
Registrant's Common Stock held by non-affiliates of the Registrant was
approximately $113,000,000.
As of March 27, 1995, 3,783,318 shares of the Registrant's Common Stock were
outstanding.
This Report consists of 22 consecutively numbered pages.
The date of this Report is April 27, 1995.
CONTENTS
PAGE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT 3
ITEM 11. EXECUTIVE COMPENSATION 9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 19
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 20
PART III
ITEM 10. DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information relating to the
Class I, Class II and Class III directors of the Company, the Directors Emeriti
and nominees for election as directors who are not currently directors of the
Company, and the beneficial ownership of Common Stock by such directors and
nominees.
Common Stock of the Company
Beneficially Owned as of
APRIL 1, 1995 (3)(4)
Name, Age and Principal Occupation (1) and
POSITIONS WITH COMPANY CERTAIN DIRECTORSHIPS (2) AMOUNT % OF CLASS
CLASS I - TERMS EXPIRING IN 1997
William S. Farish President, W.S. Farish & Company (Trust 25,280(5) .7%
56 management company) and Owner, Lane's
Director since 1985; Chairman End Farm; Director, Breeder's Cup
since 1992 Limited and Keeneland Association,
Incorporated; Vice Chairman and Steward
of Jockey Club; Advisory Director,
Galveston-Houston Company, Inc. and
Post Oak Bank; President, Ephraim
McDowell Cancer Research Foundation
Daniel M. Galbreath Chairman and Chief Executive Officer, 122,150 3.2%
66 The Galbreath Company (Realtor and
Director since 1979 builder); Director, Breeder's Cup
Limited, Keeneland Association,
Incorporated and BCF Management, Inc.;
General Partner of Bordon Chemicals &
Plastics, Limited Partnership; Owner,
Darby Dan Farms
Arthur B. Modell President and Director, Cleveland 1,000 *
69 Browns Football Company, Inc.
Director since 1985 (Professional football team); Board of
Trustees and President, Cleveland
Clinic Foundation; Director, Lake Erie
Radio Co.
CLASS II - TERMS EXPIRING IN 1995
Catesby W. Clay Chairman, Kentucky River Coal 46,630(5) 1.2%
71 Corporation (Coal land lessor);
Director since 1953 President, Runnymede Farm, Inc.
(Thoroughbred breeding); Director,
National Council of Coal Lessors
(Executive Committee), Kentucky Coal
Association, University of Kentucky
Mining Engineering Foundation; Director
and President, Foundation for Drug-Free
Youth
J. David Grissom Chairman, Mayfair Capital (Private 10,050(5) .3%
56 investment firm); Chairman and Chief
Director since 1979 Executive Officer, PNC Bank, Kentucky,
Inc. and Vice Chairman, PNC Financial
Corp. (until April, 1989); Director,
Transco Energy Company, Providian
Corporation, Columbia/HCA Healthcare
Corporation, LG&E Energy Corporation,
Regal Cinemas, Inc. and Sphere Drake
Holdings Limited; Chairman, Centre
College Board of Trustees
Seth W. Hancock Partner and Manager, Claiborne Farm and 142,825(5) 3.8%
45 President, Hancock Farms, Inc.
Director since 1973 (Thoroughbred breeding and farming);
Vice President and Director, Clay Ward
Agency, Inc. (Equine insurance);
Director, Hopewell Company and
Keeneland Association, Incorporated and
Breeder's Cup Limited (Executive
Committee)
Frank B. Hower, Jr. Retired; Former Chairman, Liberty 1,040(5) *
66 National Bancorp, Inc. (Bank holding
Director since 1979 company) and Liberty National Bank &
Trust Company of Louisville (until
February, 1990); Director, Liberty
National Bancorp, Inc., American Life
and Accident Insurance Company, The
Associated Group, Regional Airport
Authority of Louisville and Jefferson
County and Kentucky Historical Society;
Member, Board of Trustees, Centre
College, J. Graham Brown Foundation and
University of Louisville
CLASS III - TERMS EXPIRING IN 1996
Charles W. Bidwill, Jr. President and General Manager, National 221,259(5) 5.8%
66 Jockey Club (Operator of Sportsman's
Director since 1982 Park Racetrack); Director, Orange Park
Kennel Club, Associated Outdoor Clubs
(Tampa Greyhound Track), Bayard
Raceways and Caterers of North Florida,
Jacksonville Kennel Club, Big Shoulders
Fund, Archdiocese of Chicago, Link
Unlimited
Carl F. Pollard Owner, Hermitage Farm beginning in 1994 73,040(5) 1.9%
56 (Thoroughbred breeding); Director and
Director since 1985 Chairman of the Executive Committee,
Columbia/HCA Healthcare Corporation;
Former Chairman of the Board, Columbia
Healthcare Corporation; President and
Chief Operating Officer (1991-March
1993) and Senior Executive Vice
President (1984-1991), Humana Inc.
(Hospitals and health services);
Director, National City Bank, Kentucky
and Vestar, Inc.; President and
Director, Kentucky Derby Museum
Corporation
Darrell R. Wells (6) General Partner, Security Management 232,930(5) 6.2%
51 Company (Investments); Director, First
Director since 1985 Security Trust Company, Shelby County
Trust Bank, Commonwealth Bancshares,
Citizens Financial Corporation,
Commonwealth Bank & Trust Company and
Jundt Growth Fund
DIRECTORS EMERITI (7)
Louis J. Herrmann, Jr. Owner, Louis Herrmann Auto Consultant 50,265(5) 1.3%
75 Incorporated (Automobile sales);
Director since 1968; Secretary- Director, Kentucky Mutual Life
Treasurer from 1985 to 1986; Insurance Company
Director Emeritus since 1994
John W. Barr, III Retired; Former Chairman, National City 2,000(5) .1%
74 Bank, Kentucky (Bank holding company);
Director from 1979 to 1993; Director, Kitchen Kompact Company;
Director Emeritus since 1993 Director, Speed Museum, Cave Hill
Cemetery, Boy Scouts and American
Printing House for the Blind
Stanley F. Hugenberg, Jr. President, Jackantom Sales Company 3,670(5) .1%
77 (Manufacturers' representative);
Director from 1982 to 1992; Member, Board of Trustees, J. Graham
Director Emeritus since 1992 Brown Foundation; Director, Kentucky
Derby Museum Corporation
William T. Young Chairman, W.T. Young, Inc. (Warehousing 114,660(5) 3.0%
77 and thoroughbred horses); Director,
Director from 1985 to 1992; Columbia/HCA Healthcare Corporation
Director Emeritus since 1992
Y. Peyton Wells, Jr. (6) Retired; Former President and Director, 17,650 .5%
84 Shelby County Trust Bank
Director from 1967 to 1985;
Vice President from 1980 to 1985;
Director Emeritus ince 1985
NOMINEES FOR ELECTION AS DIRECTORS
NOT CURRENTLY DIRECTORS
CLASS I - TERM EXPIRING IN 1997
G. Watts Humphrey, Jr. President, GWH Holdings (Private -0- *
50 investment company); Chief Executive
Nominee for Director Officer, The Conair Group, Inc.,
Metaltech, Nextech and Smith-Steelite;
Deputy Chairman - Fourth District,
Federal Reserve Bank Board of
Cleveland; Chairman, The Society of
Plastics Industry, Inc. and The
Blood-Horse, Inc.; Director, Keeneland
Association, Incorporated
CLASS II - TERM EXPIRING IN 1998
W. Bruce Lunsford Chairman, President and Chief Executive 100,030(5) 2.6%
47 Officer, Vencor, Inc. (Intensive care
Nominee for Director hospitals and nursing homes); Director,
ResCare, Inc., National City Bank,
Kentucky (Executive Committee),
Kentucky Economic Development
Corporation and Kentucky Country Day
School; Member, Board of Trustees,
Bellarmine College and Centre College
CLASS III - TERM EXPIRING IN 1996
Thomas H. Meeker President and Chief Executive Officer 29,437(5)(8) .8%
51 of the Company; Director, Thoroughbred
Nominee for Director Racing Association of North America,
Inc. (Executive Committee), Equibase
Company, PNC Bank, Kentucky, Inc.
(Chairman, Audit Committee), Bell South
Telecommunications, Inc. (Vice
Chairman, Executive Committee) and
Alliant Health Systems, Inc. (Executive
Committee)
*Less than 0.1%
(1) Except as otherwise indicated, there has been no change in principal
occupation or employment during the past five years.
(2) Directorships in companies registered pursuant to the Securities
Exchange Act of 1934 or the Investment Company Act of 1940 and, in the
case of certain directors, other directorships considered significant
by them.
(3) No director or nominee shares voting or investment power of his
beneficially owned shares, except that Messrs. Bidwill, Clay,
Galbreath, Hancock, Herrmann and Wells share with others the voting and
investment power with respect to 2,919, 43,630, 27,377, 106,325, 10,200
and 232,930 shares, respectively, and Mr. Lunsford shares investment
power with respect to 10,000 shares. Of the total shares listed above,
Mr. Clay specifically disclaims beneficial ownership of 10,950 shares
owned by the Agnes Clay Pringle Trust of which he is the trustee, and
Mr. Hancock specifically disclaims beneficial ownership of 79,200
shares owned by the A.B. Hancock, Jr. Marital Trust of which is the
trustee, of 9,030 shares owned by the Nancy Clay Hancock Trust of which
he is a trustee and of 6,043.33 shares held by the ABC Partnership of
which he is a general partner, and Mr. Wells disclaims beneficial
ownership of 22,400 shares held by The Wells Foundation, Inc. of which
he is a trustee and of 135,791.90 shares held by The Wells Family
Partnership of which he is the Managing General Partner.
(4) Does not include shares held by certain adult members of the families
of certain directors, or in some cases by fiduciaries for the benefit
of family members, as to which such directors disclaim beneficial
ownership.
(5) Messrs. Farish, Clay, Grissom, Hancock, Hower, Bidwill, Pollard,
Darrell Wells, Herrmann, Barr, Hugenberg, Young, Lunsford and Meeker
are signatories to the Stockholder Agreement with respect to 25,280,
46,630, 10,050, 142,825, 1,040, 222,259 (including shares acquired
after April 1, 1995), 73,040, 232,930, 40,065, 2,000, 3,670, 114,660,
100,030 and 29,437 shares, respectively. See Item 12. "Security
Ownership of Certain Beneficial Owners and Management."
(6) Darrell R. Wells is the nephew of Y. Peyton Wells, Jr.
(7) Directors Emeriti are entitled to attend meetings of the Board of
Directors but do not have a vote on matters presented to the Board.
The Bylaws provide that once a director is 72 years of age, he
may not stand for re-election but shall assume Director Emeriti
status as of the annual meeting following his current term of service
as a director. The Chairman of the Board may continue to serve as a
director notwithstanding this provision.
(8) Includes 717 shares issuable under the Company's Incentive Compensation
Plan and 16,900 shares issuable under currently exercisable options.
EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers, as listed below, are elected
annually to their executive offices and serve at the pleasure of the Board of
Directors.
Common Stock of
the Company
Beneficially Owned
AS OF APRIL 1, 1995(1)(2)
Position(s) With Company % of
NAME AND AGE AND TERM OF OFFICE AMOUNT CLASS
William S. Farish (3) Director since 1985; 25,280(4) .7%
56 Chairman of the Board
since 1992
Thomas H. Meeker President and Chief Executive 29,437(4)(5) .8%
51 Officer since 1984
Jeffrey M. Smith Senior Vice President of Planning 3,349(6) .1%
42 and Development since February 1993;
Senior Vice President of Finance from 1991
to 1993; Treasurer from 1986 to 1993; Vice
President of Finance from 1990 to 1991;
Secretary from 1986 to 1990
Dan L. Parkerson Senior Vice President of Operations 2,450(7) .1%
52 since February 1991 and General
Manager since June 1991; Vice President of
Operations from 1990 to 1991; Director of
Operations from 1986 to 1990
David E. Carrico Senior Vice President of Administration 2,310(8) .1%
44 since June 1994; Vice President of
Marketing from 1990 to June 1994;
Director of Marketing from 1984 to 1990
Alexander M. Waldrop Senior Vice President since June 1994; 3,104(9) .1%
38 General Counsel and Secretary since
August 1992
Vicki L. Baumgardner Vice President of Finance and 1,653(10) *
43 Treasurer since to February 1993;
Controller from 1989
* Less than 0.1%
(1) See the Table on Options/SAR Grants in Last Fiscal Year under Item 11.
"Executive Compensation" for a discussion of stock options granted by
the Board of Directors to executive officers during 1994 and 1995.
(2) No executive officer shares voting or investment power with respect to
his or her beneficially owned shares.
(3) Mr. Farish does not serve full-time as an executive officer of the
Company and is not compensated as an officer of the Company.
(4) All shares owned by Mr. Farish and Mr. Meeker are subject to the
Stockholder Agreement. See Item 12. "Security Ownership of Certain
Beneficial Owners and Management."
(5) Includes 717 shares issuable under the Company's Incentive Compensation
Plan and 16,900 shares issuable under currently exercisable options.
(6) Includes 108 shares issuable under the Company's Incentive Compensation
Plan and 3,000 shares issuable under currently exercisable options.
(7) Includes 109 shares issuable under the Company's Incentive Compensation
Plan and 2,000 shares issuable under currently exercisable options.
(8) Includes 104 shares issuable under the Company's Incentive Compensation
Plan and 2,000 shares issuable under currently exercisable options.
(9) Includes 104 shares issuable under the Company's Incentive Compensation
Plan and 3,000 shares issuable under currently exercisable options.
(10) Includes 27 shares issuable under the Company's Incentive Compensation
Plan and 1,500 shares issuable under currently exercisable options.
Mr. Waldrop was employed as an attorney with the Louisville
law firm of Wyatt, Tarrant & Combs, which firm serves as primary outside counsel
to the Company, from August 1985 until his employment by the Company.
Section 16(a) of the Securities Exchange Act of 1934 requires
that the Company's executive officers, directors and persons who beneficially
own more than ten percent (10%) of the Company's Common Stock file certain
reports with the Securities and Exchange Commission ("SEC") with regard to their
beneficial ownership of such Common Stock. Pursuant to applicable SEC
regulations, the signatories to the Stockholder Agreement (and a prior
stockholder agreement) are (or were) also required to file such reports with the
SEC. The Company is required to disclose any failure to file or late filings of
such reports. See Item 12. "Security Ownership of Certain Beneficial Owners and
Management" for a discussion of the terms of the Stockholder Agreement. During
the Company's prior fiscal year, James W. Phillips and the Wells Family
Partnership each made a single late filing of one (1) report, covering one (1)
transaction. The Estate of Warner L. Jones, Jr. and Edna Veeneman Lewis each
made late filings of two (2) reports, each covering one (1) transaction. These
persons were obligated to make filings with the SEC solely because they were
signatories to a stockholder agreement no longer in effect similar to the
Stockholder Agreement; none of them is an officer or director nor are they
individually a beneficial owner of ten percent (10%) or more of the Company's
Common Stock. In addition, one (1) late filing covering one (1) transaction was
made by Seth W. Hancock, a director of the Company, and by Kevin Marie Nuss, an
officer of the Company who previously was subject to the filing requirements of
Section 16(a). The required reports were subsequently filed for each person.
Based solely on its review of the forms filed with the SEC, the Company believes
that all other filing requirements applicable to its directors, executive
officers and ten percent (10%) beneficial owners were satisfied.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the remuneration paid during
the last three (3) fiscal years by the Company to [i] Mr. Meeker, the President
and CEO of the Company, and [ii] each of the Company's four (4) most highly
compensated executive officers whose total annual salary and bonus exceeded
$100,000 in fiscal year 1994 (collectively the "named executive officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
All
Name & Long Term Other
Principal Compensation Compensation
Position Year (4)
Other Securities
Salary(1) Bonus(2) Annual Underlying
Compensa- Options/SARs
tion(3) (#)
Thomas H. Meeker, 1994 $245,000 $73,868 $49,463 10,000 $12,711
President and CEO
1993 217,250 101,673 43,645 50,700 20,088
1992 230,000 -0- 52,456 -0- 17,672
David E. Carrico, 1994 86,607 21,574 -0- 1,750 7,867
Senior Vice
President-Administration
1993 68,000 18,471 -0- 6,000 6,304
1992 60,000 -0- -0- -0- 5,516
Dan L. Parkerson, 1994 94,108 22,512 -0- 1,750 9,188
Senior Vice
President-Operations
and General Manager
1993 78,883 28,695 -0- 6,000 7,061
1992 76,000 -0- -0- -0- 7,586
Jeffrey M. Smith, 1994 93,581 22,278 -0- 2,000 9,171
Senior Vice President
- Planning and
Development
1993 76,083 27,694 -0- 9,000 8,133
1992 100,000 -0- -0- -0- 7,009
Alexander M. Waldrop, 1994 88,821 21,574 -0- 2,000 8,113
Senior Vice President,
General Counsel and
Secretary(5)
1993 75,167 19,543 -0- 9,000 132
1992 34,375 -0- -0- -0- 44
- - ------------------
(1) On November 18, 1993, the Company amended its Articles of Incorporation
to change its fiscal year from January 31 to December 31. Annual
compensation for 1993 is based upon actual compensation paid by the
Company to the named executive officers for the eleven months ended
December 1993. Annual compensation figures for 1992 and 1994 include a
twelve month period.
(2) Bonus awards were paid in cash and/or stock pursuant to the Company's
Incentive Compensation Plan or otherwise. See "Compensation Committee
Report on Executive Compensation."
(3) Includes above-market earnings on compensation deferred under the
Company's Incentive Compensation Plan and the expense of a Supplemental
Benefit Plan of which Mr. Meeker is currently the only participant. See
the discussion regarding the Supplemental Benefit Plan below.
(4) Consists of life insurance premiums paid by the Company with respect to
certain term life insurance payable on the officer's death to
beneficiaries designated by him and further, includes amounts
contributed by the Company to the officer's account under the Company's
Profit Sharing Plan. Amounts attributable to such term life insurance
are as follows:
MR. MEEKER MR. CARRICO MR. PARKERSON MR. SMITH MR. WALDROP
1994 $2,864 $247 $791 $278 $167
1993 2,909 247 812 288 132
1992 2,047 175 588 135 44
Pursuant to the Company's Profit Sharing Plan, the Company matches
employees' contributions (which are limited to 10% of annual
compensation up to $9,240 for calendar year 1994) up to 2% of quarterly
contributions and also makes discretionary contributions. Amounts
contributed by the Company on behalf of the named executive officers
are as follows:
MR. MEEKER MR. CARRICO MR. PARKERSON MR. SMITH MR. WALDROP
1994 $9,847 $7,620 $8,397 $8,893 $7,946
1993 17,179 6,057 6,249 7,845 0
1992 15,935 5,341 6,998 6,874 0
(5) Mr. Waldrop was employed by the Company in August, 1992 and his compen-
sation for 1992 reflects less than six months of service.
The following table provides information with respect to the named
executive officers concerning options granted during 1994:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT
DATE VALUE(3)
Number of % of Total
Securities Options
Underlying Granted to Exercise Market Grant Date
Options Employees or Base Price Present
Granted in Fiscal Price on Date Expiration Value
Name (1) Year ($/sh)(2) of Grant Date ($)
Thomas H. Meeker 2,272 11% $44 $44 3/15/2004 $58,686
2,728 13% 44 44 3/15/2004 70,464
2,352 11% 42.50 42.50 12/15/2004 57,412
2,648 13% 42.50 42.50 12/15/2004 64,638
David E. Carrico 750 4% 44 44 3/15/2004 19,373
1,000 5% 42.50 42.50 12/15/2004 24,410
Dan L. Parkerson 750 4% 44 44 3/15/2004 19,373
1,000 5% 42.50 42.50 12/15/2004 24,410
Jeffrey M. Smith 1,000 5% 44 44 3/15/2004 25,830
1,000 5% 42.50 42.50 12/15/2004 24,410
Alexander M. Waldrop 1,000 5% 44 44 3/15/2004 25,830
1,000 5% 42.50 42.50 12/15/2004 24,410
- - -------------------------
(1) 8,500 options are exercisable beginning 3/15/97. 9,000 options are exercis-
able beginning 12/15/97.
(2) The 2,272 options and 2,352 options granted to Mr. Meeker are intended to
qualify as incentive stock options under the Internal Revenue Code of 1986, as
amended, and accordingly, the exercise price of these options is the fair
market value of the shares as of the date of their grant. The 1,000 options
granted to each of Messrs. Carrico, Parkerson, Smith and Waldrop on December
15, 1994 are also intended to qualify as incentive stock options under the
Internal Revenue Code of 1986, as amended. All other options are non-qualified
stock options. 8,500 options and 9,000 options, respectively, have been granted
at an exercise price equal to the closing high bid price of the Company's
Common Stock as of March 15, 1994 and December 15, 1994, respectively.
(3) The options are valued using the Cox-Ross-Rubinstein Binomial option pricing
model, which is a variation of the Black-Scholes option pricing model. This
calculation is based on the following assumptions: (i) an expected option term
of eight years, (ii) an interest rate of 6.27% and 7.81% (March 15, 1994 and
December 15, 1994, respectively) based on the quoted yield of U.S. Treasury
Bonds on the date of grant maturing in eight years, (iii) a dividend yield of
.92% and 1.04% (March 15, 1994 and December 15, 1994, respectively) per share,
and (iv) a stock price volatility of 26.49% and 21.25% (March 15, 1994 and
December 15, 1994, respectively) based upon the average closing price of the
250-day period preceding the grant date. Based on these assumptions, the value
of the nonqualifying options was determined to be $25.83 and $24.41 (March 15,
1994 and December 15, 1994, respectively) per share and the value of the
incentive stock options was determined to be $25.83 and $24.41 (March 15, 1994
and December 15, 1994, respectively) per share.
The following table provides information with respect to the named
executive officers concerning unexercised options held as of December 31, 1994:
AGGREGATE OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUES
Value of unexercised in-the-money
Number of unexercised options at OPTIONS AT YEAR END (1)
YEAR END Exercisable/
Exercisable/ UNEXERCISABLE
NAME UNEXERCISABLE
Thomas H. Meeker 16,900/43,800 $0/7,500
David E. Carrico 2,000/5,750 0/1,500
Dan L. Parkerson 2,000/5,750 0/1,500
Jeffrey M. Smith 3,000/8,000 0/1,500
Alexander M. Waldrop 3,000/8,000 0/1,500
- - -------------------
(1) Closing high bid as of the last trading day of 1994 (December 30, 1994)
minus the exercise price.
The Company maintains a Supplemental Benefit Plan (the "Plan) in which
Mr. Meeker is currently the only participant. The Plan provides that if a
participant remains in the employ of the Company until age 55 or becomes totally
and permanently disabled, the participant will be paid a monthly benefit equal
to 45% of the "highest average monthly earnings", as defined in the Plan, prior
to the time of disability or age 55, reduced by certain other benefits as set
forth in the Plan, commencing on retirement(or attainment of age 55 if disabil-
ity occurs prior to said age) and continuing for life.(1) The benefit payable
under the Plan is increased by 1% for each year the participant remains
employed by the Company after age 55, to a maximum of 55% of the highest average
monthly earnings at age 65. Due to the reductions set forth in footnote 1, the
estimated annual benefit payable upon retirement at age 65 to Mr. Meeker under
the Plan is $50,486.
- - -------------
1 The Plan provides that the monthly benefit will be reduced by [i] 100% of the
primary insurance amount under social security payable to a participant
determined as of the later of the participant's retirement date or attainment of
age 62; [ii] 100% of the participant's monthly benefit calculated in the form of
a life annuity under the terminated Churchill Downs Pension Plan; [iii] 100% of
the monthly income option calculated as a life annuity from the cash surrender
value of all life insurance policies listed on a schedule attached to the
participant's plan agreement; and [iv] 100% of the employer contributions and
any employee contributions up to a maximum of $2,000 per year allocated to the
participant's accounts under the Churchill Downs Incorporated Profit Sharing
Plan, calculated in the form of a life annuity payable on his retirement date.
EMPLOYMENT AGREEMENT AND CHANGE IN CONTROL AGREEMENT
Mr. Meeker was employed as President and Chief Executive Officer of the
Company in October 1984 under an annually renewing three-year contract. Mr.
Meeker's compensation for 1995 includes a base salary of $245,000 per year,
reimbursement for travel and entertainment expenses (including his wife's travel
expenses on Company business), provision of an automobile, payment of dues for
one (1) country club and any other professional or business associations, and a
$250,000 life insurance policy. Mr. Meeker's employment may be terminated by the
Company prior to the expiration of his employment agreement only if he willfully
fails to perform his duties under his employment agreement or otherwise engages
in misconduct that injures the Company. Pursuant to Mr. Meeker's employment
agreement, in the event of both a "change in control" of the Company and, within
one (1) year of such "change in control," either termination of Mr. Meeker's
employment by the Company without "just cause" or his resignation, the Company
will pay to Mr. Meeker an amount equal to three (3) times his average annual
base salary over the prior five (5) years. A "change in control" is defined
generally to include the sale by the Company of all or substantially all of its
assets, a consolidation or merger involving the Company, the acquisition of over
30% of the Common Stock in a tender offer or any other change in control of the
type which would be required to be reported under the Federal securities laws;
however, a "change in control" will not be deemed to have occurred in the case
of a tender offer or change reportable under the Federal securities laws, unless
it is coupled with or followed by the election of at least one-half of the
directors of the Company to be elected at any one (1) election and the election
of such directors has not been previously approved by at least two-thirds of the
directors in office prior to such change in control.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the SEC, the Compensation Committee of the
Board of Directors (the "Committee") is required to disclose: (1) the
Committee's compensation policies applicable to the Company's executive
officers; (2) the relationship of executive compensation to Company performance;
and (3) the Committee's bases for determining the compensation of the Company's
Chief Executive Officer ("CEO"), Thomas H. Meeker, for the most recently
completed fiscal year. Pursuant to these requirements, the Committee has
prepared this report.
The Committee consists of five (5) independent Directors, none of whom
has ever been employed by the Company. The Committee annually reviews executive
officer compensation and makes recommendations to the Board of Directors on all
matters related to executive compensation. The Committee's authority and
oversight extend to total compensation, including base salary, annual incentive
compensation and stock options for the Company's executive officers as well as
the Company's Profit Sharing Plan. The Committee also administers the employment
contract and Supplemental Benefit Plan of the Company's CEO, Thomas H. Meeker.
The Committee makes its compensation recommendations to the Board of Directors
after considering the recommendations of the CEO (on all but CEO compensation)
and other qualified compensation consultants. The Committee also reviews
compensation data from comparable companies including those found in the peer
group performance graph (the "Peer Graph") which follows this report.
The fundamental philosophy of the Committee is to assure that the
Company's compensation program for executive officers links pay to business
strategy and performance in a manner which is effective in attracting,
motivating and retaining key executives while also providing performance
incentives which will inure to the benefit of executive officers and
shareholders alike. The objective is to provide total compensation commensurate
with Company performance by combining salaries that are competitive in the
marketplace with incentive pay opportunities established by the Committee which
are competitive with median levels of competitors' incentive compensation.
There are three (3) basic elements of the Company's executive
compensation program, each determined by individual and corporate performance:
(i) base salary compensation, (ii) annual variable performance incentive
compensation earned under the Company's Incentive Compensation Plan ("ICP"), and
(iii) stock option grants made under the Company's 1993 Stock Option Plan.
Base salaries are targeted to be competitive with comparable positions
in comparable companies. In determining base salaries, the Committee also takes
into account individual experience and performance and specific issues
particular to the Company.
The ICP provides a direct financial incentive in the form of annual
cash and/or stock bonuses. The amount of each bonus is determined by the
Company's achievement of certain target earnings per share (computed before
taxes but after recognition of awards made under the ICP) ("EPS") goals
established annually by the Committee. The ICP provides for the award of a bonus
based upon the Company's achievement of EPS goals and the 5-year total return to
shareholders in the form of dividends and increases in the Company's stock
price, compared to the Wilshire 5000 stock index. These goals are weighted with
achievement of EPS goals having a factor of two-thirds and comparative total
return to shareholders having a factor of one-third.
The Committee has determined that as an executive's level of
responsibility increases, a greater portion of his or her total compensation
should be performance based. Not only do awards increase as an executive rises
in the Company but also his or her ICP award is composed of a higher percentage
of stock which means the compensation shifts to reliance on the value of the
Company's stock.
For the Company's year ended December 31, 1994, the Committee set the
ICP minimum performance goal at EPS equal to the Company's budget and total
return to shareholders equal to the Wilshire 5000 and the Company met both the
EPS goal and total return to shareholders goal. As a result, bonuses were
awarded under the ICP for the Company's year ended December 31, 1994. These
bonuses are reflected in the Summary Compensation Table. For fiscal year 1995,
the Committee once again set the ICP minimum performance goal at EPS equal to
the Company's budget and total return to shareholders equal to the Wilshire
5000.
At the Annual Meeting of Shareholders held on June 16, 1994, the
shareholders of the Company approved the Churchill Downs Incorporated 1993 Stock
Option Plan (the "Option Plan"). The Committee believes that the granting of
options pursuant to the Option Plan to officers of the Company, including Mr.
Meeker, will further the Company's goals of attracting, motivating and retaining
employees while also providing compensation which links pay to performance.
During 1994, awards under the Option Plan were as follows: (1) Mr. Meeker was
granted 5,376 nonqualified stock options and 4,624 incentive stock options
("ISOs") and (2) all other officers were granted 4,800 nonqualified stock
options and 5,750 ISOs. The options are exercisable in 1997. The Option Plan
provides for cashless exercises through broker's transactions.
The Committee believes that the Option Plan is integral to a
performance based compensation package. Although the ICP reflects certain levels
of increases in stock price, the ICP is also heavily weighted toward earnings
per share goals established by the Committee. The Option Plan allows the Company
to further tie compensation to performance of the Company with a possibility of
greatly increasing the total compensation package of its executives without an
equivalent cash outlay by the Company.
Mr. Meeker was employed as President and Chief Executive Officer of the
Company in October 1984 under an annually renewing three-year contract. Each
year, Mr. Meeker's base salary is set by the Committee after considering the
Company's overall financial performance in light of the Company's strategic
development initiatives. In April of 1994, Mr. Meeker's annual base salary was
increased to $245,000. This relatively small increase in base salary reflects
the fact that the Committee has decided to shift a greater portion of Mr.
Meeker's overall compensation to performance based sources such as the ICP and
the Option Plan.
COMPENSATION COMMITTEE
Frank B. Hower, Jr.
William S. Farish
Catesby W. Clay
Arthur B. Modell
Darrell R. Wells
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company is unaware of any relationships among its officers and
directors which would require disclosure under this caption.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of each of a peer group index and the Wilshire 5000
index for the period of approximately five (5) fiscal years commencing January
31, 1990, and ending December 31, 1994. The period ending December 31, 1993
represents an eleven (11) month period due to the change in the Company's fiscal
year. The companies used in the peer group index consist of Bay Meadows
Operating Co., Fair Grounds Corp., Hollywood Park Operating Co., International
Thoroughbred Breeders, Inc. and Santa Anita Operating Co., which are all of the
publicly traded companies known to the Company to be engaged primarily in
thoroughbred racing in the continental United States. Turf Paradise, Inc. was
previously included in the peer group index but was acquired by Hollywood Park
Operating Co. in 1994. The Wilshire 5000 equity index measures the performance
of all United States headquartered equity securities with readily available
price data. The graph depicts the result of an investment of $100 in the
Company, the Wilshire 5000 index and the peer group companies. Since the Company
has historically paid dividends on an annual basis, the performance graph
assumes that dividends were reinvested annually.
1/31/90 1/31/91 1/31/92 1/31/93 12/31/93 12/31/94
Churchill Downs $100 $111 $174 $219 $261 $213
Wilshire 5000 $100 $106 $136 $150 $165 $165
Peer Group $100 $104 $ 89 $ 89 $139 $ 81
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of the Common Stock as of April 1, 1995 (except as otherwise
indicated), by [i] the only persons known by the Board of Directors to own
beneficially more than five percent (5%) of the Common Stock and [ii] the
Company's directors, nominees for election as directors and executive officers
as a group. Except as otherwise indicated, the persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
Shares
Name and Address Beneficially Percent
OF BENEFICIAL OWNER OWNED OF CLASS
28 parties to a Third Supplemental
Stockholder Agreement
c/o Thomas H. Meeker, Stockholder Representative
700 Central Avenue
Louisville, Kentucky 40208 1,196,146(1)(5) 31.5%
National City Corporation
National City Center
1900 East Ninth Street
Cleveland, Ohio 44114 196,485(2) 5.2%
Darrell R. Wells
4350 Brownsboro Road
Suite 310
Louisville, Kentucky 40207 232,930(3)(4)(5) 6.2%
Charles W. Bidwill, Jr.
911 Sunset Road
Winnetka, Illinois 60093 221,259(3)(4)(5) 5.8%
23 Directors, Nominees for Director
and Executive Officers as a Group 1,206,782(3)(4)(5)(6) 31.7%
(1) Information provided as of April 18, 1995. Pursuant to certain federal
securities laws, the parties to the Third Supplemental Stockholder
Agreement (the "Stockholder Agreement") may collectively be considered
a "group" and therefore may be deemed a "person" known by management of
the Company to own beneficially more than 5% of the shares of Common
Stock of the Company. The names and addresses of the parties to the
Stockholder Agreement are set forth in the Schedule 13D filed by such
parties with the Securities and Exchange Commission ("SEC") on April
25, 1995, which filing is incorporated herein by reference. Each
shareholder who is a party to the Stockholder Agreement has agreed that
until April 15, 1997, such shareholder will not sell, transfer, assign
or otherwise dispose of shares of Common Stock beneficially owned or
acquired by such shareholder without first offering to sell such Common
Stock to the Company and to all other signatories to the Stockholder
Agreement on the same terms and conditions as in an offer received from
a third party by such shareholder. The Stockholder Agreement provides
for proration of the shares offered by the selling shareholder in the
event that more than one of the signatories to the Stockholder
Agreement desires to purchase the shares offered by such selling
shareholder. The Stockholder Agreement provides that Common Stock may
be transferred by the parties to the Agreement, without compliance with
the Agreement [i] pursuant to an offer to purchase not less than all of
the outstanding shares of the Common Stock that the Board of Directors
has recommended and that an independent financial advisor retained by
the Company has determined is fair to the Company's shareholders from a
financial point of view; [ii] by gift, will or pursuant to the laws of
descent and distribution; [iii] by pledge to a financial institution;
[iv] if the transfer is by operation of law; or [v] in a small
transaction which is defined to be a transfer in any single calendar
month of 3,000 shares or less of the Common Stock. The Stockholder
Agreement does not restrict the rights of any shareholder who is a
party thereto to vote the Common Stock, to receive cash or stock
dividends, to receive shares of Common Stock in a stock split, or to
sell or dispose of shares of Common Stock, except as specifically set
forth in such Stockholder Agreement. The Company has approved and
become a third party beneficiary of the Stockholder Agreement.
(2) National City Corporation and its wholly-owned subsidiary, National
City Bank, Kentucky ("National City"), have informed the Company that
on February 10, 1995, National City held a total of 196,485 shares in
fiduciary accounts for others. National City has further informed the
Company that it has sole power to vote or direct the voting of 53,610
shares; sole power to dispose or to direct the disposition of 173,120
shares; shared power to vote or direct the voting of no shares; and
shared power to dispose or direct the disposition of 22,215 shares.
(3) Of the total shares listed above, Mr. Wells disclaims beneficial
ownership of 22,400 shares held by The Wells Foundation, Inc., of which
he is a trustee and of 135,791.90 shares held by The Wells Family
Partnership of which he is the Managing General Partner. Mr. Wells
shares voting and investment power with respect to all shares
attributed to him in the above table. Mr. Bidwill shares voting and
investment power with respect to 2,919 shares beneficially owned by
him.
(4) See Item 10. "Directors and Executive Officers of the Registrant."
(5) The 232,930 shares beneficially owned by Mr. Wells and 222,259
shares (including shares acquired after April 1, 1995) beneficially
owned by Mr. Bidwill are subject to the Stockholder Agreement. An
additional 588,727 shares owned by certain other directors, nominees
for election as directors and executive officers of the Company are
subject to the Stockholder Agreement.
(6) Includes 1,169 shares issuable under the Company's Incentive
Compensation Plan and 28,400 shares issuable under currently
exercisable options.
Information concerning the beneficial ownership of the
Company's stock by each of the directors and executive officers individually is
set forth under Item 10. "Directors and Executive Officers of the Registrant"
which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past fiscal year, the Company did not engage in any
transactions in which any director or officer of the Company had any material
interest, except as described below.
Directors of the Company may from time to time own or have
interests in horses racing at the Company's tracks. All such races are
conducted, as applicable, under the regulations of the Kentucky Racing
Commission or the Indiana Horse Racing Commission, and no director receives any
extra or special benefit with regard to having their horses selected to run in
races or in connection with the actual running of races.
One or more directors of the Company have an interest in
business entities which contract with the Company for the purpose of
simulcasting the Kentucky Derby and other races and the acceptance of interstate
wagers on such races. In such case, no extra or special benefit not shared by
all others so contracting with the Company is received by any director or entity
owned or controlled by a director. Mr. Charles W. Bidwill, Jr., a director and
five percent (5%) owner of the Company, is the President and General Manager and
part owner of National Jockey Club. In 1994, National Jockey Club and the
Company were parties to a simulcasting contract whereby National Jockey Club was
granted the right to simulcast the Company's Derby Trial - Grade III race, The
Kentucky Oaks - Grade I race and the Kentucky Derby - Grade I race. In
consideration for these rights, National Jockey Club paid to the Company 5.6% of
its gross handle on the simulcast races. For purposes of this and other
simulcast contracts, gross handle is defined as the total amount wagered by
patrons on the races at the National Jockey Club facility less any money
returned to the patrons by cancels and refunds. This simulcast contract is
uniform throughout the industry and the rates charged were substantially the
same as rates charged to other parties who contracted to simulcast the same
races. In 1994, the Company simulcast the Kentucky Derby to 576 locations in the
United States and selected international sites. National Jockey Club received no
extra or special benefit as a result of the Company's relationship with Mr.
Bidwill.
Thomas H. Meeker, President and Chief Executive Officer of the
Company, is currently indebted to the Company in the principal amount of
$65,000, represented by his demand note bearing interest at 8% per annum
(payable quarterly) and payable in full upon termination of Mr. Meeker's
employment with the Company for any reason. This indebtedness arose in
connection with Mr. Meeker's initial employment, pursuant to the terms of which
he was granted a loan by the Company for the purpose of purchasing the Company's
stock.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.
CHURCHILL DOWNS INCORPORATED
April 27, 1995 /S/VICKI L. BAUMGARDNER
--------------------------------------
Vicki L. Baumgardner, Vice President,
Finance/Treasurer
(Principal Financial Officer)
