UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITY
EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): May 8, 2007
(Exact
name of registrant as specified in its charter)
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Kentucky
(State
of incorporation)
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0-1469
(Commission
file number)
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61-0156015
(IRS
Employer Identification No.)
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700
Central Avenue, Louisville, Kentucky 40208
(Address
of principal executive offices)
(Zip
Code)
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||
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||
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(502) 636-4400
(Registrant’s
telephone number, including area
code)
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Check
the
appropriate box below if the Form 8-K is intended to simultaneously satisfy
the
filing obligation of the registrant under any of the following
provisions:
|
[ ]
|
Written
communications pursuant to Rule 425 under the Securities Act (18
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))
|
|
[ ]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
2.02. RESULTS OF OPERATION AND FINANCIAL CONDITION.
A
copy of
the news release issued by Churchill Downs Incorporated (the “Company”) on May
8, 2007 announcing the results of operations and financial condition for the
first quarter ended March 31, 2007, is attached hereto as Exhibit 99.1 and
incorporated by reference herein.
Item
9.01. Financial Statements and Exhibits.
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(d)
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Exhibit
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99.1
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Press
Release dated May 8, 2007 issued by Churchill Downs
Incorporated.
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Exhibit
No.
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Description
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Exhibit
99.1
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Press
Release dated May 8, 2007 issued by Churchill Downs
Incorporated.
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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 thereunto,
duly authorized.
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CHURCHILL
DOWNS INCORPORATED
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May
8, 2007
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/s/
Michael W. Anderson
By:
Michael W. Anderson
Title:
Vice President Finance and Treasurer
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FOR
IMMEDIATE RELEASE
Contact:
Julie Koenig Loignon
(502)
636-4502 (office)
juliek@kyderby.com
CHURCHILL
DOWNS INCORPORATED REPORTS
2007
FIRST-QUARTER RESULTS
Net
Revenues From Continuing Operations Increase by 32.55 Percent
Company
Narrows First-Quarter Loss From Continuing Operations by 15.11
Percent
LOUISVILLE,
Ky. (May 8, 2007) - Churchill
Downs Incorporated (NASDAQ: CHDN) (“Company”) today reported results for the
first quarter ended March 31, 2007.
Net
revenues from continuing operations for the first quarter of 2007 were $47.84
million, an increase of 32.55 percent from net revenues from continuing
operations of $36.09 million one year ago. The Company narrowed its
first-quarter net loss from continuing operations by 15.11 percent, posting
a
net loss of $8.43 million from continuing operations, or $0.63 per diluted
common share, compared to a net loss from continuing operations of $9.93
million, or $0.76 per diluted common share, during the first quarter of 2006.
Churchill
Downs Incorporated historically reports a net loss during the first quarter
because its four racetracks host relatively few live racing dates during
that
timeframe as opposed to the final nine months of the year. During the first
quarter of 2007, the Company did benefit from an additional 45 days of live
racing at Fair Grounds Race Course in New Orleans, which posted strong meet-end
results after resuming its standard racing season in late November 2006.
Fair
Grounds was closed for 15 months following Hurricane Katrina in late 2005
and
conducted only 12 days of live racing at a host site, Harrah’s Louisiana Downs,
in northern Louisiana during the first quarter of 2006.
The
continued strength of the Company’s Louisiana Operations, including Fair
Grounds’ simulcast-wagering and video poker facilities, contributed to the first
quarter year-over-year growth in net revenues from continuing operations.
During
the quarter, the Company also benefited from lower corporate expenses; Arlington
Park serving as the host site for “dark day” simulcast wagering in Illinois for
an additional eight days; and from a positive adjustment in workers’
compensation insurance reserves.
Churchill
Downs Incorporated’s President and Chief Executive Officer Robert L. Evans said
that while improving the Company’s year-over-year financial performance from
continuing operations during the first quarter, the Churchill Downs team
also
moved forward with a key strategic initiative intended to position the Company
for future growth.
“In
early
March, we announced our entry into the account-wagering business and two
months
later launched our new online wagering platform, TwinSpires (www.twinspires.com),
in
time to accept wagers on this year’s Kentucky Derby and Oaks at Churchill
Downs,” said Evans. “We experienced exceptional demand from customers wanting to
register for TwinSpires accounts during the four days between our launch
date
and the Kentucky Derby on May 5, with approximately 9,500 customers signing
up
for and funding TwinSpires accounts. We had a very ambitious plan to bring
TwinSpires to the market in a very short period of time.
“We
were
also pleased to see the continued popularity of our signature racing events,
as
wagering for the 133rd
Kentucky
Derby Presented by Yum! Brands matched the record levels attained during
the
2006 running, and we set new wagering records for the 133rd
Kentucky
Oaks, making Kentucky Derby weekend at Churchill Downs the biggest racing
event
in North America. We are pleased with these results given that rain on Kentucky
Oaks Day kept thousands of general admission patrons away, and three of our
races on the Derby undercard, including two of our stakes races,
had
unusually short fields. Additionally, one dozen wagering outlets based primarily
in Oklahoma could not accept wagers on the Oaks and Derby race cards due
to a
horsemen’s dispute. We believe that issue, along with the short Derby Day
fields, contributed to the decrease in off-track wagering.”
Evans
continued, “We are still examining to what extent changes in the
account-wagering market may have impacted handle on Kentucky Derby and Oaks
Days, considering two large U.S account-wagering providers were not taking
wagers on our products and our own platform, TwinSpires, debuted in the middle
of Derby week. Based on the wagering data we have so far, we are pleased
to see
that handle did migrate to other account-wagering providers that pay higher
host
fee commissions to the horsemen and tracks that produce the races as a result
of
the agreements they negotiated with TrackNet Media Group LLC. Through these
agreements, we have the potential for revenue and purse growth with or without
growth in handle.
“In
the
weeks ahead, we look forward to beginning construction on both a temporary
and
permanent slot machine gaming facility at Fair Grounds, with an October 2007
target date for the opening of our temporary operation. We also anticipate
adding new content, features and handicapping tools to our TwinSpires
account-wagering platform that will further distinguish TwinSpires from its
competitors. The incredible response to our TwinSpires launch confirmed for
us
the power of the Churchill Downs and Kentucky Derby brands in attracting
customers to our Company and its products and services.”
A
conference call regarding this release is scheduled for Wednesday,
May 9, 2007, at 9 a.m. EDT.
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 (800)
510-0178
and
entering the pass code 48951131
at least
10 minutes before the appointed time. The online replay will be available
at
approximately noon EDT and continue for two weeks. A two-week telephonic
replay
will be available one hour after the call ends by dialing (888) 286-8010
and
entering 13170987 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”). Churchill Downs 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,
Churchill Downs’ operating performance in a meaningful and consistent manner.
This non-GAAP measurement is not intended to replace the presentation of
Churchill Downs’ financial results in accordance with GAAP.
Churchill
Downs Incorporated (“Churchill Downs”), headquartered in Louisville, Ky., owns
and operates world-renowned horse racing venues throughout the United States.
Churchill Downs’ four racetracks in Florida, Illinois, Kentucky and Louisiana
host many of North America’s most prestigious races, including the Kentucky
Derby and Kentucky Oaks, Arlington Million, Princess Rooney Handicap and
Louisiana Derby. Churchill Downs racetracks have hosted seven Breeders’ Cup
World Championships. Churchill Downs also owns off-track betting facilities
and
has interests in various advance deposit wagering, television production,
telecommunications and racing services companies, including a 50-percent
interest in the national cable and satellite network HorseRacing TV™, that
support the Company’s network of simulcasting and racing operations. Churchill
Downs trades on the NASDAQ Global Select Market under the symbol CHDN and
can be
found on the Internet at www.churchilldownsincorporated.com.
Page
2 of
6
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 news
release 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,” “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;
failure to execute on our business strategies or resistance to our business
strategies; 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; the impact of an 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.
Page
3 of
6
CHURCHILL
DOWNS INCORPORATED
CONDENSED
CONSOLIDATED STATEMENTS OF NET LOSS
for
the three months ended March 31,
(Unaudited)
(In
thousands, except per common share data)
|
2007
|
2006
|
||||||
|
Net
revenues
|
$
|
47,842
|
$
|
36,093
|
|||
|
Operating
expenses
|
52,925
|
42,726
|
|||||
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Gross
loss
|
(5,083
|
)
|
(6,633
|
)
|
|||
|
Selling,
general and administrative expenses
|
9,825
|
10,767
|
|||||
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Insurance
recoveries, net of losses
|
(784
|
)
|
(997
|
)
|
|||
|
Operating
loss
|
(14,124
|
)
|
(16,403
|
)
|
|||
|
Other
income (expense):
|
|||||||
|
Interest
income
|
272
|
83
|
|||||
|
Interest
expense
|
(290
|
)
|
(473
|
)
|
|||
|
Unrealized
gain on derivative instruments
|
204
|
204
|
|||||
|
Miscellaneous,
net
|
160
|
348
|
|||||
|
346
|
162
|
||||||
|
Loss
from continuing operations before income tax benefit
|
(13,778
|
)
|
(16,241
|
)
|
|||
|
Income
tax benefit
|
5,348
|
6,311
|
|||||
|
Net
loss from continuing operations
|
(8,430
|
)
|
(9,930
|
)
|
|||
|
Discontinued
operations, net of income taxes:
|
|||||||
|
Earnings
(loss) from operations
|
421
|
(343
|
)
|
||||
|
Loss
on sale of business
|
(182
|
)
|
-
|
||||
|
Net
loss
|
$
|
(8,191
|
)
|
$
|
(10,273
|
)
|
|
|
Basic
and diluted net loss per common share:
|
|||||||
|
Net
loss from continuing operations
|
$
|
(0.63
|
)
|
$
|
(0.76
|
)
|
|
|
Discontinued
operations
|
0.02
|
(0.03
|
)
|
||||
|
Net
loss
|
$
|
(0.61
|
)
|
$
|
(0.79
|
)
|
|
|
Basic
and diluted weighted average shares outstanding
|
13,371
|
13,074
|
Page
4 of
6
CHURCHILL
DOWNS INCORPORATED
SUPPLEMENTAL
INFORMATION BY OPERATING UNIT
for
the three months ended March 31,
(Unaudited)
(In
thousands)
|
2007
|
2006
|
||||||
|
Net
revenues from external customers:
|
|||||||
|
Churchill
Downs Racetrack
|
$
|
3,296
|
$
|
3,238
|
|||
|
Arlington
Park
|
13,190
|
12,427
|
|||||
|
Calder
Race Course
|
1,198
|
2,268
|
|||||
|
Louisiana
Operations
|
29,479
|
17,073
|
|||||
|
Total
racing operations
|
47,163
|
35,006
|
|||||
|
Other
investments
|
121
|
455
|
|||||
|
Corporate
|
510
|
581
|
|||||
|
Net
revenues from continuing operations
|
47,794
|
36,042
|
|||||
|
Discontinued
operations
|
7,837
|
8,986
|
|||||
|
$
|
55,631
|
$
|
45,028
|
||||
|
Intercompany
net revenues:
|
|||||||
|
Churchill
Downs Racetrack
|
$
|
-
|
$
|
-
|
|||
|
Arlington
Park
|
-
|
-
|
|||||
|
Calder
Race Course
|
7
|
6
|
|||||
|
Louisiana
Operations
|
230
|
23
|
|||||
|
Total
racing operations
|
237
|
29
|
|||||
|
Other
investments
|
96
|
100
|
|||||
|
Eliminations
|
(285
|
)
|
(78
|
)
|
|||
|
|
48
|
51
|
|||||
|
Discontinued
Operations
|
(48
|
)
|
(51
|
)
|
|||
|
|
$
|
- |
$
|
-
|
|||
|
EBITDA:
|
|||||||
|
Churchill
Downs Racetrack
|
$
|
(5,726
|
)
|
$
|
(6,100
|
)
|
|
|
Arlington
Park
|
(2,090
|
)
|
(1,952
|
)
|
|||
|
Calder
Race Course
|
(2,572
|
)
|
(3,323
|
)
|
|||
|
Louisiana
Operations
|
2,766
|
594
|
|||||
|
Total
racing operations (EBITDA)
|
(7,622
|
)
|
(10,781
|
)
|
|||
|
Other
investments
|
(905
|
)
|
317
|
||||
|
Corporate
|
(313
|
)
|
(633
|
)
|
|||
|
Total
EBITDA
|
(8,840
|
)
|
(11,097
|
)
|
|||
|
Eliminations
|
56
|
22
|
|||||
|
Depreciation
and amortization
|
(4,976
|
)
|
(4,776
|
)
|
|||
|
Interest
income (expense), net
|
(18
|
)
|
(390
|
)
|
|||
|
Income
tax benefit
|
5,348
|
6,311
|
|||||
|
Net
loss from continuing operations
|
(8,430
|
)
|
(9,930
|
)
|
|||
|
Discontinued
operations, net of income taxes
|
239
|
(343
|
)
|
||||
|
Net
loss
|
$
|
(8,191
|
)
|
$
|
(10,273
|
)
|
Page
5 of
6
CHURCHILL
DOWNS INCORPORATED
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In
thousands)
|
|
|||||||
|
March
31, 2007 |
December
31, 2006 |
||||||
|
|
|||||||
|
ASSETS
|
|||||||
|
Current
assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
27,627
|
$
|
20,751
|
|||
|
Restricted
cash
|
1,028
|
12,704
|
|||||
|
Accounts
receivable, net
|
19,328
|
42,316
|
|||||
|
Deferred
income taxes
|
6,274
|
6,274
|
|||||
|
Income
taxes receivable
|
18,830
|
12,217
|
|||||
|
Other
current assets
|
15,062
|
8,857
|
|||||
|
Assets
held for sale
|
-
|
25,422
|
|||||
|
Total
current assets
|
88,149
|
128,541
|
|||||
|
Plant
and equipment, net
|
342,054
|
336,068
|
|||||
|
Goodwill
|
53,528
|
53,528
|
|||||
|
Other
intangible assets, net
|
15,940
|
16,048
|
|||||
|
Other
assets
|
16,312
|
12,143
|
|||||
|
Total
assets
|
$
|
515,983
|
$
|
546,328
|
|||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
14,900
|
$
|
21,476
|
|||
|
Purses
payable
|
10,009
|
18,128
|
|||||
|
Accrued
expenses
|
33,854
|
40,781
|
|||||
|
Dividends
payable
|
-
|
6,670
|
|||||
|
Deferred
revenue
|
43,373
|
26,165
|
|||||
|
Liabilities
associated with assets held for sale
|
-
|
13,671
|
|||||
|
Total
current liabilities
|
102,136
|
126,891
|
|||||
|
Long-term
debt
|
13,919
|
13,393
|
|||||
|
Other
liabilities
|
22,189
|
22,485
|
|||||
|
Deferred
revenue
|
21,088
|
20,416
|
|||||
|
Deferred
income taxes
|
13,064
|
13,064
|
|||||
|
Total
liabilities
|
172,396
|
196,249
|
|||||
|
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: 13,463 shares March 31,
|
|||||||
|
2007
and 13,420 shares December 31, 2006
|
130,955
|
128,937
|
|||||
|
Retained
earnings
|
212,632
|
221,142
|
|||||
|
Total
shareholders’ equity
|
343,587
|
350,079
|
|||||
|
Total
liabilities and shareholders’ equity
|
$
|
515,983
|
$
|
546,328
|
Page
6 of
6