UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): November 7,
2006
(Exact
name of registrant as specified in its charter)
|
Kentucky
|
0-1469
|
61-0156015
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
file number)
|
(IRS
Employer Identification No.)
|
700
Central Avenue, Louisville, Kentucky 40208
(Address
of principal executive offices)
(Zip
Code)
(502)
636-4400
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instructions A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
|
|
|
|
ITEM
2.02
|
RESULTS
OF OPERATION AND FINANCIAL
CONDITION.
|
A
copy of
the news release issued by Churchill Downs Incorporated (the “Company”) on
November 7, 2006 announcing the results of operations and financial condition
for the third quarter ended September 30, 2006, is attached hereto as Exhibit
99.1 and incorporated by reference herein.
|
ITEM
9.01
|
FINANCIAL
STATEMENTS AND EXHIBITS.
|
|
(a)
|
Exhibit
|
|
99.1
|
Press
Release dated November 7, 2006 issued by Churchill Downs
Incorporated
|
|
Exhibit
No.
|
Description
|
|
Exhibit
99.1
|
Press
Release dated November 7, 2006 issued by Churchill Downs
Incorporated.
|
2
SIGNATURE
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 hereunto
duly authorized.
|
CHURCHILL
DOWNS INCORPORATED
|
|
|
Date: November
7, 2006
|
/s/
Michael W. Anderson
|
|
Michael
W. Anderson
Vice
President Finance and Treasurer
|
3
| FOR IMMEDIATE RELEASE |
Contact:
Julie Koenig
Loignon
|
502)
636-4502 (office)
(502)
262-5461 (mobile)
juliek@kyderby.com
CHURCHILL
DOWNS INCORPORATED REPORTS
2006
THIRD-QUARTER RESULTS
LOUISVILLE,
Ky. (Nov. 7, 2006)
-
Churchill Downs Incorporated (NASDAQ: CHDN) (“CDI” or “Company”) today reported
results for the third quarter and nine months ended Sept. 30, 2006.
Net
revenues from continuing operations for the third quarter were $106.4 million,
an increase of 4.6 percent over net revenues from continuing operations of
$101.7 million one year earlier. Net earnings
from continuing operations for the third quarter were $2.7 million, or $0.20
per
diluted share, down 15.6 percent from net earnings from continuing operations
of
$3.2 million, or $0.23 per diluted share, during the same period in 2005.
Results
from the third quarter and first nine months of 2006 are outlined in the
accompanying tables.
Net
revenues from continuing operations for the first nine months of 2006 were
$324.7 million, up 3.0 percent from $315.1 million during the first nine
months
of 2005. Net earnings from continuing operations for the nine months ended
Sept.
30, 2006, were $26.9 million, or $1.97 per diluted share, up 56.4 percent
from
$17.2 million, or $1.27 per diluted share, a year earlier.
During
the quarter, CDI completed the sale of Ellis Park, a racetrack in Henderson,
Ky., to a company owned by Kentucky businessman Ron Geary. Results from Ellis
Park are treated as discontinued operations and detailed as such in the
accompanying tables.
Robert
L.
Evans, who assumed his new role as CDI’s president and chief executive officer
on Aug. 14, credited the year-over-year growth in net revenues to the strong
performance posted by the Company’s Louisiana Operations. “We remain encouraged
by the solid results delivered by our video poker and simulcast-wagering
operations in Louisiana, which continue to outperform their pre-Hurricane
Katrina business levels,” said Evans. “Repairs to Fair Grounds Race Course are
nearing completion, and we look forward to bringing live horse racing back
to
the New Orleans community when the historic track reopens on Thanksgiving
Day.
“All
of
our operating units showed improvement in the quarter with the exception
of
Arlington Park, where a high level of on-track horse injuries and the related
publicity appeared to depress field sizes, attendance and, in turn, wagering.
Multiple independent examinations of the Arlington Park dirt track revealed
no
causal factors. We are evaluating numerous, significant changes in our racing
program and cost structure at Arlington Park to be implemented in time for
our
2007 meet.
“In
the
three months since joining CDI, I have worked with the management team to
identify a path for growth for the Company that will involve re-engaging
existing customers - and recruiting new fans - by leveraging technological
innovations now available to us. In addition, we will pursue alternative
gaming
opportunities in Louisiana, where we have been authorized to establish a
slot
machine gaming facility at Fair Grounds, and in other states where such
approvals must still be secured. In the coming months, I look forward to
briefing investors and other interested parties on the new strategies we
intend
to pursue.”
A
conference call regarding this release is scheduled for Wednesday, Nov. 8,
2006,
at 9 a.m. EST. Investors and other interested parties may listen to the
teleconference by accessing the online, real-time webcast and broadcast of
the
call at www.churchilldownsincorporated.com
or
www.earnings.com,
or by
dialing (719) 457-2695 at least 10 minutes before the appointed time. The
online
replay will be available at approximately noon EST and continue for two weeks.
A
two-week telephonic replay will be available two hours after the call ends
by
dialing (719) 457-0820 and entering 5677934 when prompted for the access
code. A
copy of this news release announcing quarterly results and relevant financial
and statistical information about the period will be accessible at www.churchilldownsincorporated.com.
In
addition to the results provided in accordance with U.S. Generally Accepted
Accounting Principles (“GAAP”), the Company has provided a non-GAAP measurement,
which presents a financial measure of Earnings before Interest, Taxes,
Depreciation and Amortization (“EBITDA”). CDI uses EBITDA as a key performance
measure of results of operations for purposes of evaluating performance
internally. The Company believes the use of this measure enables management
and
investors to evaluate and compare, from period to period, CDI’s operating
performance in a meaningful and consistent manner. This non-GAAP measurement
is
not intended to replace the presentation of CDI’s financial results in
accordance with GAAP.
Churchill
Downs Incorporated, headquartered in Louisville, Ky., owns and operates
world-renowned horse racing venues throughout the United States. CDI’s five
racetracks in Florida, Illinois, Indiana, Kentucky and Louisiana host many
of
North America’s most prestigious races, including the Kentucky Derby and
Kentucky Oaks, Arlington Million, Princess Rooney Handicap, Louisiana Derby
and
Indiana Derby. CDI racetracks have hosted seven Breeders’ Cup World
Championships. CDI also owns off-track betting facilities and has interests
in
various television production, telecommunications and racing services companies
that support CDI’s network of simulcasting and racing operations. CDI trades on
the NASDAQ Global Select Market under the symbol CHDN and can be found on
the
Internet at www.churchilldownsincorporated.com.
Information
set forth in this news release contains various “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E
of the Securities Exchange Act of 1934. The Private Securities Litigation
Reform
Act of 1995 (the “Act”) provides certain “safe harbor” provisions for
forward-looking statements. All forward-looking statements made in this
Quarterly Report on Form 10-Q are made pursuant to the Act. The reader
is
cautioned that such forward-looking statements are based on information
available at the time and/or management’s good faith belief with respect to
future events, and are subject to risks and uncertainties that could cause
actual performance or results to differ materially from those expressed
in the
statements. Forward-looking statements speak only as of the date the statement
was made. We assume no obligation to update forward-looking information
to
reflect actual results, changes in assumptions or changes in other factors
affecting forward-looking information. Forward-looking statements are typically
identified by the use of terms such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” “might,” “plan,”
2
“predict,”
“project,” “should,” “will,” and similar words, although some forward-looking
statements are expressed differently. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, we can give
no
assurance that such expectations will prove to be correct. Important
factors that could cause actual results to differ materially from expectations
include: the effect of global economic conditions; the effect (including
possible increases in the cost of doing business) resulting from future
war and
terrorist activities or political uncertainties; the economic environment;
the
impact of increasing insurance costs; the impact of interest rate fluctuations;
the effect of any change in our accounting policies or practices;
the
financial performance of our racing operations; the impact of gaming competition
(including lotteries and riverboat, cruise ship and land-based casinos)
and
other sports and entertainment options in those markets in which we operate;
the
impact of live racing day competition with other Florida and Louisiana
racetracks
within those respective markets; costs associated with our efforts in support
of
alternative gaming initiatives; costs associated with Customer Relationship
Management initiatives; a substantial change in law or regulations affecting
pari-mutuel and gaming activities; a substantial change in allocation of
live
racing days; litigation surrounding the Rosemont, Illinois, riverboat casino;
changes in Illinois law that impact revenues of racing operations in Illinois;
a
decrease in riverboat admissions subsidy revenue from our Indiana operations;
the impact of an additional Indiana racetrack and its wagering facilities
near
our operations; 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;
our
ability to execute our acquisition strategy and to complete or successfully
operate planned expansion projects; our ability to successfully complete
any
divestiture transaction; our ability to adequately integrate acquired
businesses; market reaction to our expansion projects; the loss of our
totalisator companies or their inability to provide us assurance of the
reliability of their internal control processes through Statement on Auditing
Standards No. 70 audits or to keep their technology current; the need for
various alternative gaming approvals in Louisiana; our accountability for
environmental contamination; the loss of key personnel; the impact of natural
disasters, including Hurricanes Katrina, Rita and Wilma on our operations
and
our ability to adjust the casualty losses through our property and business
interruption insurance coverage; any business disruption associated with
a
natural disaster and/or its aftermath; and the volatility of our stock
price.
3
CHURCHILL
DOWNS INCORPORATED
CONDENSED
CONSOLIDATED STATEMENTS OF NET EARNINGS
for
the
three and nine months ended September 30, 2006 and 2005
(Unaudited)
(In
thousands, except per share data)
|
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
Net
revenues
|
$
|
106,350
|
$
|
101,661
|
$
|
324,684
|
$
|
315,129
|
|||||
|
Operating
expenses
|
91,742
|
88,177
|
256,010
|
252,452
|
|||||||||
|
Gross
profit
|
14,608
|
13,484
|
68,674
|
62,677
|
|||||||||
|
Selling,
general and administrative expenses
|
11,452
|
10,244
|
35,018
|
34,918
|
|||||||||
|
Insurance
recoveries, net of losses
|
(1,832
|
)
|
(1,363
|
)
|
(12,954
|
)
|
(1,363
|
)
|
|||||
|
Operating
income
|
4,988
|
4,603
|
46,610
|
29,122
|
|||||||||
|
Other
income (expense):
|
|||||||||||||
|
Interest
income
|
272
|
135
|
634
|
296
|
|||||||||
|
Interest
expense
|
(526
|
)
|
(265
|
)
|
(1,708
|
)
|
(950
|
)
|
|||||
|
Unrealized
gain on derivative instruments
|
204
|
204
|
612
|
614
|
|||||||||
|
Miscellaneous,
net
|
(92
|
)
|
715
|
510
|
1,308
|
||||||||
|
(142
|
)
|
789
|
48
|
1,268
|
|||||||||
|
Earnings from continuing operations before provision for income
taxes
|
4,846
|
5,392
|
46,658
|
30,390
|
|||||||||
|
Provision
for income taxes
|
(2,128
|
)
|
(2,233
|
)
|
(19,772
|
)
|
(13,240
|
)
|
|||||
|
Net
earnings from continuing operations
|
2,718
|
3,159
|
26,886
|
17,150
|
|||||||||
|
Discontinued
operations, net of income taxes:
|
|||||||||||||
|
Earnings
(loss) from operations
|
1,832
|
(1,441
|
)
|
744
|
(5,143
|
)
|
|||||||
|
Gain
on sale of assets
|
4,197
|
69,917
|
4,197
|
69,917
|
|||||||||
|
Net
earnings
|
$
|
8,747
|
$
|
71,635
|
$
|
31,827
|
$
|
81,924
|
|||||
|
Net
earnings per common share:
|
|||||||||||||
|
Basic
|
|||||||||||||
|
Earnings
from continuing operations
|
$
|
0.20
|
$
|
0.24
|
$
|
1.98
|
$
|
1.28
|
|||||
|
Discontinued
operations
|
0.44
|
5.12
|
0.37
|
4.86
|
|||||||||
|
Net
earnings
|
$
|
0.64
|
$
|
5.36
|
$
|
2.35
|
$
|
6.14
|
|||||
|
Diluted
|
|||||||||||||
|
Earnings
from continuing operations
|
$
|
0.20
|
$
|
0.23
|
$
|
1.97
|
$
|
1.27
|
|||||
|
Discontinued
operations
|
0.44
|
5.07
|
0.36
|
4.80
|
|||||||||
|
Net
earnings
|
$
|
0.64
|
$
|
5.30
|
$
|
2.33
|
$
|
6.07
|
|||||
|
Weighted
average shares outstanding:
|
|||||||||||||
|
Basic
|
13,149
|
12,913
|
13,116
|
12,893
|
|||||||||
|
Diluted
|
13,656
|
13,511
|
13,635
|
13,507
|
|||||||||
Certain financial statement amounts have been reclassified in the prior periods
to conform to current period presentation.
4
CHURCHILL
DOWNS INCORPORATED
SUPPLEMENTAL
INFORMATION BY OPERATING UNIT
for
the
three and nine months ended September 30, 2006 and 2005
(Unaudited)
(In
thousands)
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||||
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|||||||
|
Net
revenues from external customers:
|
|||||||||||||
| Churchill Downs Racetrack | $ | 8,078 | $ | 6,708 | $ | 79,980 | $ | 75,385 | |||||
|
Arlington
Park
|
28,531
|
33,507
|
64,175
|
67,436
|
|||||||||
|
Calder
Race Course
|
29,450
|
28,612
|
54,603
|
53,052
|
|||||||||
|
Hoosier
Park
|
9,458
|
9,704
|
28,801
|
30,144
|
|||||||||
|
Louisiana
Operations
|
15,048
|
7,474
|
48,966
|
38,951
|
|||||||||
|
CDSN
|
14,961
|
15,065
|
46,429
|
49,354
|
|||||||||
|
Total
racing operations
|
105,526
|
101,070
|
322,954
|
314,322
|
|||||||||
|
Other
investments
|
883
|
663
|
1,626
|
869
|
|||||||||
|
Corporate
revenues
|
-
|
136
|
162
|
556
|
|||||||||
|
Net revenues from continuing operations
|
106,409
|
101,869
|
324,742
|
315,747
|
|||||||||
|
Discontinued
operations
|
9,175
|
26,472
|
10,895
|
81,487
|
|||||||||
|
$
|
115,584
|
$
|
128,341
|
$
|
335,637
|
$
|
397,234
|
||||||
|
Intercompany
net revenues
|
|||||||||||||
|
Churchill
Downs Racetrack
|
$
|
2,426
|
$
|
1,960
|
$
|
19,586
|
$
|
16,712
|
|||||
|
Arlington
Park
|
5,453
|
6,103
|
8,451
|
8,714
|
|||||||||
|
Calder
Race Course
|
3,807
|
3,665
|
6,831
|
6,646
|
|||||||||
|
Hoosier
Park
|
69
|
27
|
165
|
101
|
|||||||||
|
Louisiana
Operations
|
-
|
-
|
1,402
|
6,315
|
|||||||||
|
Total
racing operations
|
11,755
|
11,755
|
36,435
|
38,488
|
|||||||||
|
Other
investments
|
558
|
571
|
1,396
|
1,388
|
|||||||||
|
Eliminations
|
(12,372
|
)
|
(12,534
|
)
|
(37,889
|
)
|
(40,494
|
)
|
|||||
|
(59
|
)
|
(208
|
)
|
(58
|
)
|
(618
|
)
|
||||||
|
Discontinued
operations
|
59
|
208
|
58
|
618
|
|||||||||
|
|
$ | - |
$
|
-
|
$
|
-
|
$
|
-
|
|||||
|
EBITDA:
|
|||||||||||||
|
Churchill
Downs Racetrack
|
$
|
(3,331
|
)
|
$
|
(4,657
|
)
|
$
|
29,338
|
$
|
27,235
|
|||
|
Arlington
Park
|
2,415
|
8,330
|
1,219
|
8,342
|
|||||||||
|
Calder
Race Course
|
6,855
|
5,065
|
6,306
|
1,844
|
|||||||||
|
Hoosier
Park
|
22
|
(39
|
)
|
296
|
843
|
||||||||
|
Louisiana
Operations
|
1,211
|
(1,267
|
)
|
15,572
|
(1,674
|
)
|
|||||||
|
CDSN
|
3,833
|
3,745
|
11,397
|
12,062
|
|||||||||
|
Total
racing operations
|
11,005
|
11,177
|
64,128
|
48,652
|
|||||||||
|
Other
investments
|
471
|
1,139
|
1,485
|
1,695
|
|||||||||
|
Corporate
expenses
|
(1,159
|
)
|
(1,417
|
)
|
(2,409
|
)
|
(3,814
|
)
|
|||||
|
Total
EBITDA from continuing operations
|
10,317
|
10,899
|
63,204
|
46,533
|
|||||||||
|
Eliminations
|
(120
|
)
|
(183
|
)
|
(90
|
)
|
(155
|
)
|
|||||
|
Depreciation
and amortization
|
(5,097
|
)
|
(5,194
|
)
|
(15,382
|
)
|
(15,334
|
)
|
|||||
|
Interest
income (expense), net
|
(254
|
)
|
(130
|
)
|
(1,074
|
)
|
(654
|
)
|
|||||
|
Provision
for income taxes
|
(2,128
|
)
|
(2,233
|
)
|
(19,772
|
)
|
(13,240
|
)
|
|||||
|
Net
earnings from continuing operations
|
2,718
|
3,159
|
26,886
|
17,150
|
|||||||||
|
Discontinued
operations, net of income taxes
|
6,029
|
68,476
|
4,941
|
64,774
|
|||||||||
|
Net
earnings
|
$
|
8,747
|
$
|
71,635
|
$
|
31,827
|
$
|
81,924
|
|||||
Certain financial statement amounts have been reclassified in the prior periods
to conform to current period presentation.
5
CHURCHILL
DOWNS INCORPORATED
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)
|
|
|
September
30, 2006
|
December
31, 2005
|
|||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$
|
24,863
|
$
|
22,347
|
||||
|
Restricted
cash
|
16,721
|
4,946
|
||||||
|
Accounts
receivable, net
|
38,268
|
42,823
|
||||||
|
Deferred
income taxes
|
3,907
|
3,949
|
||||||
|
Income
taxes receivable
|
2,079
|
697
|
||||||
|
Other
current assets
|
12,046
|
6,942
|
||||||
|
Assets
held for sale
|
-
|
3,938
|
||||||
|
Total
current assets
|
97,884
|
85,642
|
||||||
|
Other
assets
|
13,120
|
13,020
|
||||||
|
Plant
and equipment, net
|
347,544
|
342,845
|
||||||
|
Goodwill
|
53,528
|
53,528
|
||||||
|
Other
intangible assets, net
|
17,594
|
18,130
|
||||||
|
Total
assets
|
$
|
529,670
|
$
|
513,165
|
||||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$
|
23,843
|
$
|
27,844
|
||||
|
Purses
payable
|
26,727
|
14,195
|
||||||
|
Accrued
expenses
|
45,356
|
41,844
|
||||||
|
Dividends
payable
|
-
|
6,520
|
||||||
|
Deferred
revenue
|
14,725
|
26,216
|
||||||
|
Liabilities
associated with assets held for sale
|
-
|
790
|
||||||
|
Total
current liabilities
|
110,651
|
117,409
|
||||||
|
Long-term
debt
|
19,154
|
33,793
|
||||||
|
Other
liabilities
|
23,215
|
21,448
|
||||||
|
Deferred
revenue
|
18,443
|
18,614
|
||||||
|
Deferred
income taxes
|
5,119
|
5,670
|
||||||
|
Total
liabilities
|
176,582
|
196,934
|
||||||
|
Commitments
and contingencies
|
||||||||
|
Shareholders'
equity:
|
||||||||
|
Preferred
stock, no par value; 250 shares authorized; no shares issued
|
-
|
-
|
||||||
|
Common
stock, no par value; 50,000 shares authorized; issued: 13,285 shares
September 30, 2006 and 13,132 shares December 31, 2005
|
123,260
|
121,270
|
||||||
|
Retained
earnings
|
229,828
|
198,001
|
||||||
|
Unearned
compensation
|
-
|
(3,040
|
)
|
|||||
|
Total
shareholders’ equity
|
353,088
|
316,231
|
||||||
|
Total
liabilities and shareholders’ equity
|
$
|
529,670
|
$
|
513,165
|
||||
Certain
financial statement amounts have been reclassified in the prior periods to
conform to current period presentation.
6