4-27-15 8K Q1 Earnings
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): April 27, 2015

 
(Exact name of registrant as specified in its charter)
 
Kentucky
(State of incorporation)
001-33998
(Commission file number)
61-0156015
(IRS Employer Identification No.)
 
 
 
600 North Hurstbourne Parkway, Suite 400, Louisville, Kentucky 40222
 (Address of principal executive offices)
(Zip Code)
 
(502) 636-4400
(Registrant's telephone number, including area code)

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))
 
[  ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 












 Item 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
 
A copy of the news release issued by Churchill Downs Incorporated (the “Company”) on April 27, 2015 announcing the results of operations and financial condition for the quarter ended March 31, 2015, is attached hereto as Exhibit 99.1 and incorporated by reference herein.


Item 9.01.  Financial Statements and Exhibits.
 
 
(d)
Exhibits

 
 
 
 
99.1
Press Release dated April 27, 2015 issued by Churchill Downs Incorporated.
 
 
 
 
Exhibit No.
Description
 
 
 
 
Exhibit 99.1
Press Release dated April 27, 2015 issued by Churchill Downs Incorporated.


  

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.
 

 
 
CHURCHILL DOWNS INCORPORATED
April 27, 2015
 
/s/ William E. Mudd___________________
 
 
By: William E. Mudd
 
 
Title: President and Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)




Press Release 4-27-15

FOR IMMEDIATE RELEASE
Contact: Courtney Yopp Norris
(502) 636-4564
Courtney.Norris@kyderby.com
CHURCHILL DOWNS INCORPORATED REPORTS
2015 FIRST-QUARTER BUSINESS RESULTS
Record net revenues of $250.9 million, up 50% over first-quarter 2014
Record Adjusted EBITDA of $48.3 million, up 97% over first-quarter 2014
Record net cash from operating activities of $89.7 million, up 73% over first-quarter 2014
Net loss driven by $19.3 million of Big Fish Games acquisition related charges and deferred revenue adjustments
LOUISVILLE, Ky. (Monday, April 27, 2015) - Churchill Downs Incorporated (CHDN: NASDAQ) (CDI or Company) today reported business results for the first-quarter ended March 31, 2015.
MANAGEMENT COMMENTARY
“Our Big Fish Games acquisition, completed late in the fourth-quarter, helped drive record first-quarter results and provided further validation of our strategy to enter the growing online and mobile games segment. In addition, we saw encouraging results across all of CDI’s operating segments - Casino Adjusted EBITDA grew 6%; TwinSpires Adjusted EBITDA grew 12%; and Racing Adjusted EBITDA improved 10%,” said Bill Carstanjen, CDI’s Chief Executive Officer. “The performance of our operating segments also drove a 73% improvement in cash provided by operating activities over prior year and, consequently, we reduced the Company’s total debt to approximately $700 million from $770 million at year end. We are looking forward to another spectacular Kentucky Oaks and Kentucky Derby this weekend. We think fans will appreciate the improvements made to Churchill Downs Racetrack and our team is very excited to once again welcome everyone who attends or watches on television to ‘the greatest two minutes in sports’.”
CONSOLIDATED RESULTS
(in millions, except per share data):
 
 
First Quarter
 
 
2015
 
2014
 
% Change
GAAP Measures:
 
 
 
 
 
 
Net revenues
 
$250.9
 
$167.1
 
50

Loss from continuing operations
 
(1.6
)
 
(0.7
)
 
U

Diluted loss from continuing operations per share
 
$(0.09)
 
$(0.04)
 
U

Net cash flow provided by operating activities
 
89.7

 
51.9

 
73

 
 
 
 
 
 


Non-GAAP Measure:
 
 
 
 
 


Adjusted EBITDA
 
$48.3
 
$24.5
 
97

 
 
 
 
 
 
 
U: > 100% unfavorable; F: > 100% favorable
 
 
 
 
 
 


Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 2 of 12, March 31, 2015


During the first-quarter of 2015, CDI net revenues increased $83.8 million, or 50%, from the prior year, primarily due to the addition of revenues from Big Fish Games, which was acquired in December of 2014.
Total Adjusted EBITDA nearly doubled to $48.3 million, driven in part by the addition of Big Fish Games’ Adjusted EBITDA of $20.0 million. In addition, Casino Adjusted EBITDA increased $1.5 million driven by operating margin improvements at Oxford, Miami Valley Gaming (MVG) and CDI’s Louisiana properties. TwinSpires Adjusted EBITDA increased $1.2 million driven by handle growth, a reduction in pari-mutuel taxes and the discontinuation of Luckity.com. Finally, Racing Adjusted EBITDA improved $1.1 million due to the leasing of Calder’s pari-mutuel operations to a third party.
As in the fourth-quarter of 2014, during the first-quarter of 2015, several Big Fish Games acquisition related charges and deferred revenue adjustments impacted quarterly net loss and net loss per share figures below the Adjusted EBITDA line. Adjustments of $19.3 million consist of a non-cash charge of $6.4 million associated with the change in fair value of the earn-out and deferred founder liabilities, $9.2 million non-cash deferred revenue adjustment resulting from purchase price accounting rules and a $3.7 million adjustment reflecting the actual cash change in Big Fish Games deferred revenue during the quarter. The acquisition related non-cash charges and deferred revenue adjustments are expected to continue through the rest of 2015, and into the first-quarter of 2016, when the final earn-out is determined. Partially offsetting these charges was a $5.8 million gain from the sale of our remaining ownership interest in HRTV.
BIG FISH GAMES RESULTS
(in millions):
 
 
First Quarter
 
 
2015
 
2014 (1)
 
% Change
Bookings
 
 
 
 
 
 
Casino
 
$49.3
 
$29.5
 
67

Free-to-Play Casual
 
27.0

 
5.7

 
F

Premium
 
28.5

 
39.8

 
(28
)
Total Bookings
 
$104.8
 
$75.0
 
40

 
 
 
 
 
 
 
Net revenues
 
$91.9
 
$

 
F

Adjusted EBITDA
 
20.0

 

 
F

 
 
 
 
 
 
 
(1) Big Fish Games bookings for period ended March 31, 2014 not included in the consolidated financial results for CDI. Included for comparative purposes only
The chart above includes first-quarter bookings for 2015 as well as pre-acquisition results for first-quarter 2014. Bookings is a non-GAAP financial measure equal to the revenue recognized plus the change in deferred revenue for the period. During the first-quarter, comparing results to Big Fish Games before CDI’s acquisition, total bookings increased $29.8 million, or 40%, driven by a $19.8 million increase in Casino and a $21.3 million increase in Free-to-Play Casual. Casino bookings grew by 67%, driven by a 50% increase in quarterly average paying users and a 12% increase in average bookings per paying user compared to the first-quarter of 2014. Free-to-play Casual continues to enjoy the success of its Gummy Drop! product, which launched in the third-quarter of 2014, with total growth in bookings of $21.3 million driven by an 153% increase in quarterly average paying users. Premium bookings declined $11.3 million, or 28%, primarily driven by customers continuing to shift from paid PC games to free-to-play mobile games. In addition, the strengthening U.S. dollar (USD) as compared to other currencies in


Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 3 of 12, March 31, 2015


jurisdictions where our Premium segment operates resulted in conversion to lower USD bookings of approximately $2.2 million.
CASINO RESULTS
(in millions):
 
 
First Quarter
 
 
2015
 
2014
 
% Change
 
 
 
 
 
 
 
Net revenues
 
$85.4
 
$86.4
 
(1
)
Adjusted EBITDA
 
28.8

 
27.3

 
6

During the first-quarter of 2015, Casino revenues declined $1.0 million mainly due to a $0.8 million decrease at Harlow’s from increased competition in the market and higher free-play offerings. Partially offsetting this decline was a $0.4 million increase in revenues at our Louisiana video poker operations, which we believe benefitted from newly installed video poker machines. Casino Adjusted EBITDA increased $1.5 million, or 6%, due to improvements at Oxford, MVG and CDI’s Louisiana properties.
TWINSPIRES RESULTS
(in millions):
 
 
First Quarter
 
 
2015
 
2014
 
% Change
 
 
 
 
 
 
 
Net revenues
 
$45.3
 
$46.1
 
(2
)
Adjusted EBITDA
 
11.2

 
10.0

 
12

Total handle
 
214.1

 
211.8

 
1

During the first-quarter of 2015, TwinSpires revenues decreased $0.8 million from the prior year due to the cancellation of a third-party administrative call center service agreement during the fourth-quarter of 2014. However, TwinSpires wagering handle increased 1.1% compared to a U.S. thoroughbred racing handle decline of 5.2%, outpacing the industry by 6.3 percentage points. TwinSpires Adjusted EBITDA increased $1.2 million driven by the growth in wagering revenues, a reduction in Pennsylvania pari-mutuel taxes from a favorable tax ruling received during the third-quarter of 2014, and also from the discontinuation of Luckity.com, which ceased operations during November 2014.
RACING RESULTS
(in millions):
 
 
First Quarter
 
 
2015
 
2014
 
% Change
 
 
 
 
 
 
 
Net revenues
 
$24.4
 
$30.6
 
(20
)
Adjusted EBITDA
 
(9.2
)
 
(10.3
)
 
(10
)
Total handle
 
225.6

 
290.8

 
(22
)
During the first-quarter of 2015, CDI Racing revenues declined $6.1 million, or 20%, primarily due to the July 1, 2014 cessation of pari-mutuel operations at Calder. Partially offsetting this decrease was an increase in Fair Grounds revenues of $1.8 million on a 10.5% increase in handle. Racing Adjusted


Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 4 of 12, March 31, 2015


EBITDA improved $1.1 million due to a $1.4 million improvement at Calder as a result of the leasing of pari-mutuel operations to a third party which was offset partially by declines in simulcasting operations at Churchill Downs and Arlington.
BUSINESS RESULTS CONFERENCE CALL
A conference call regarding this news release is scheduled for Tuesday, April 28, 2015, at 9 a.m. ET. 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 by dialing (877) 372-0878 and entering the pass code 27472696 at least 10 minutes before the appointed time. International callers should dial (253) 237-1169. The online replay will be available at approximately noon EDT and continue for two weeks. A copy of the Company’s 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 and certain other items as described in the Company’s Annual Report on Form 10K (“Adjusted EBITDA”). Churchill Downs Incorporated uses Adjusted 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, the Company’s operating performance in a meaningful and consistent manner. This non-GAAP measurement is not intended to replace the presentation of the Company’s financial results in accordance with GAAP.
ABOUT CHURCHILL DOWNS INCORPORATED
Churchill Downs Incorporated (CDI) (NASDAQ: CHDN), headquartered in Louisville, Ky., owns the world-renowned Churchill Downs Racetrack, home of the Kentucky Derby and Kentucky Oaks, as well as racetrack and casino operations in Miami Gardens, Fla.; racetrack, casino and video poker operations in New Orleans, La.; racetrack operations in Arlington Heights, Ill.; a casino resort in Greenville, Miss.; a casino hotel in Vicksburg, Miss.; a casino in Oxford, Maine; and a 50 percent owned joint venture, Miami Valley Gaming and Racing LLC, in Lebanon, Ohio. CDI also owns Big Fish Games, Inc., one of the world’s largest producers and distributors of casual games; the country's premier online wagering company, TwinSpires.com; the totalisator company, United Tote; Bluff Media, an Atlanta-based multimedia poker company; and a collection of racing-related telecommunications and data companies. Additional information about CDI can be found online at www.churchilldownsincorporated.com.
Information set forth in this discussion and analysis 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,” “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, including any disruptions in the credit markets; a decrease in consumers’ discretionary income; the effect (including possible increases in the cost of doing business) resulting from future war and terrorist activities or political uncertainties; the impact of increasing insurance costs; the impact of interest rate fluctuations; maintaining favorable relationships we have with third-party mobile platforms, the inability to secure new content


Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 5 of 12, March 31, 2015


from third-party developers on favorable terms, keeping our games free from programming errors or flaws, the effect if smart phone and tablet usage does not continue to increase; the financial performance of our racing operations; the impact of casino competition (including lotteries, online gaming and riverboat, cruise ship and land-based casinos) and other sports and entertainment options in the markets in which we operate; our ability to maintain racing and gaming licenses to conduct our businesses; the impact of live racing day competition with other Kentucky, Illinois, Louisiana and Ohio racetracks within those respective markets; the impact of higher purses and other incentives in states that compete with our racetracks; 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 or casino activities; a substantial change in allocation of live racing days; changes in Kentucky, Illinois, Louisiana or Ohio law or regulations that impact revenues or costs of racing in those states; the presence of wagering and casino operations at other states’ racetracks and casinos near our operations; our continued ability to effectively compete for the country’s horses and trainers necessary to achieve full field horse races; our continued ability to grow our share of the interstate simulcast market and obtain the consents of horsemen’s groups to interstate simulcasting; our ability to enter into agreements with other industry constituents for the purchase and sale of racing content for wagering purposes; our ability to execute our acquisition strategy and to complete or successfully operate acquisitions and planned expansion projects including the effect of required payments in the event we are unable to complete acquisitions; our ability to successfully complete any divestiture transaction; market reaction to our expansion projects; the inability of our totalisator company, United Tote, to maintain its processes accurately, keep its technology current or maintain its significant customers; our accountability for environmental contamination; the ability of Big Fish Games or TwinSpires to prevent security breaches within their online technologies; the loss of key personnel; the impact of natural and other disasters on our operations and our ability to obtain insurance recoveries in respect of such losses (including losses related to business interruption); our ability to integrate any businesses we acquire into our existing operations, including our ability to maintain revenues at historic or anticipated levels and achieve anticipated cost savings; the impact of wagering laws, including changes in laws or enforcement of those laws by regulatory agencies; the outcome of pending or threatened litigation; changes in our relationships with horsemen’s groups and their memberships; our ability to reach agreement with horsemen’s groups on future purse and other agreements (including, without limitation, agreements on sharing of revenues from casinos and advance deposit wagering); the effect of claims of third parties to intellectual property rights; and the volatility of our stock price.
You should read this discussion in conjunction with the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2014 for further information, including Part I - Item 1A, "Risk Factors" of our Form 10-K for a discussion regarding some of the reasons that actual results may be materially different from those we anticipate.


Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 6 of 12, March 31, 2015


CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited) (in thousands, except per common share data)

 
Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
% Change
Net revenues:
 
 
 
 
 
Big Fish Games
$
91,903

 
$

 
F
Casinos
85,415

 
86,386

 
(1)
TwinSpires
45,315

 
46,084

 
(2)
Racing
24,438

 
30,579

 
(20)
Other
3,839

 
4,092

 
(6)
 
250,910

 
167,141

 
50
Operating expenses:
 
 
 
 
 
Big Fish Games
82,159

 

 
U
Casinos
60,781

 
62,046

 
(2)
TwinSpires
31,781

 
33,577

 
(5)
Racing
36,510

 
43,220

 
(16)
Other
5,603

 
5,698

 
(2)
Research and development
10,232

 

 
U
Selling, general and administrative expenses
21,572

 
21,465

 
Acquisition related charges
6,400

 

 
U
Insurance recoveries, net of losses

 
(431
)
 
(100)
Operating (loss) income
(4,128
)
 
1,566

 
U
Other income (expense):
 
 
 
 
 
Interest income
218

 
4

 
F
Interest expense
(7,484
)
 
(4,973
)
 
50
Equity in gains of unconsolidated investments
2,948

 
2,290

 
29
Gain on sale of equity investment
5,817

 

 
F
Miscellaneous, net
(188
)
 
(25
)
 
U
 
1,311

 
(2,704
)
 
F
Loss from continuing operations before income tax benefit
(2,817
)
 
(1,138
)
 
U
Income tax benefit
1,259

 
438

 
F
Net loss
$
(1,558
)
 
$
(700
)
 
U
 
 
 
 
 

Net loss per common share data:
 
 
 
 

Basic
 
 
 
 

Net loss
$
(0.09
)
 
$
(0.04
)
 
U
Diluted
 
 
 
 

Net loss
$
(0.09
)
 
$
(0.04
)
 
U
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
17,268

 
17,419

 
 
Diluted
17,268

 
17,419

 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
Foreign currency translation, net of ($328) tax effect
(387
)
 

 
U
Other comprehensive loss
(387
)
 

 
U
Comprehensive loss
$
(1,945
)
 
$
(700
)
 
U



Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 7 of 12, March 31, 2015


CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the three months ended March 31,
(Unaudited) (in thousands, except per common share data)
 
2015
 
2014
 
% Change
Net revenues from external customers:
 
 
 
 
 
Big Fish Games
$
91,903

 
$

 
F
Casinos:
 
 
 
 

Calder Casino
20,379

 
20,583

 
(1)
Fair Grounds Slots
11,482

 
11,784

 
(3)
VSI
9,184

 
8,754

 
5
Harlow's Casino
13,680

 
14,451

 
(5)
Oxford Casino
17,503

 
17,519

 
Riverwalk Casino
13,187

 
13,295

 
(1)
Total Casinos
85,415

 
86,386

 
(1)
TwinSpires
45,315

 
46,084

 
(2)
Racing:
 
 
 
 

Churchill Downs
2,008

 
2,142

 
(6)
Arlington
5,812

 
6,122

 
(5)
Calder
674

 
8,024

 
(92)
Fair Grounds
15,944

 
14,291

 
12
Total Racing
24,438

 
30,579

 
(20)
Other Investments
3,605

 
3,837

 
(6)
Corporate
234

 
255

 
(8)
Net revenues from external customers
$
250,910

 
$
167,141

 
50
Intercompany net revenues:
 
 
 
 
 
TwinSpires
$
297

 
$
230

 
29
Racing:
 
 
 
 

Churchill Downs
233

 
228

 
2
Arlington
958

 
1,017

 
(6)
Calder

 
356

 
(100)
Fair Grounds
858

 
732

 
17
Total Racing
2,049

 
2,333

 
(12)
Other Investments
795

 
898

 
(11)
Eliminations
(3,141
)
 
(3,461
)
 
(9)
Net revenues
$

 
$

 

Reconciliation of Adjusted EBITDA to net loss:
 
 
 
 
 
Big Fish Games
$
20,026

 
$

 
F
Casinos
28,787

 
27,251

 
6
TwinSpires
11,190

 
9,950

 
12
Racing
(9,197
)
 
(10,250
)
 
10
Other Investments
(668
)
 
(1,353
)
 
51
Corporate Adjusted EBITDA
(1,867
)
 
(1,106
)
 
(69)
Total segment Adjusted EBITDA
48,271

 
24,492

 
97
Insurance recoveries, net of losses

 
431

 
(100)
Big Fish Games acquisition charges
(6,400
)
 

 
U
Big Fish Games changes in deferred revenue
(12,876
)
 

 
U
Share-based compensation
(2,723
)
 
(5,241
)
 
(48)
Pre-opening costs

 
(27
)
 
(100)
MVG interest expense, net
(554
)
 
(540
)
 
3
Other charges and recoveries
6,138

 

 
F
Depreciation and amortization
(27,407
)
 
(15,284
)
 
79
Interest (expense) income, net
(7,266
)
 
(4,969
)
 
46
Income tax benefit
1,259

 
438

 
F
Loss from continuing operations
(1,558
)
 
(700
)
 
U
Foreign currency translation, net of ($328) tax effected
(387
)
 

 
U
Comprehensive loss
$
(1,945
)
 
$
(700
)
 
U


Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 8 of 12, March 31, 2015


CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the three months ended March 31,
(unaudited) (in thousands)

 
 
Three Months Ended March 31,
 
Change
 
 
2015
 
2014
 
$
 
%
Intercompany management fee (expense) income:
 
 
 
 
 
 
 
 
Big Fish Games
 
$
(750
)
 
$

 
$
(750
)
 
U
Casinos
 
(2,324
)
 
(2,574
)
 
250

 
10
TwinSpires
 
(1,223
)
 
(1,431
)
 
208

 
15
Racing
 
(698
)
 
(978
)
 
280

 
29
Other Investments
 
(113
)
 
(133
)
 
20

 
15
Corporate Income
 
5,108

 
5,116

 
(8
)
 
Total management fees
 
$

 
$

 
$

 
 






Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 9 of 12, March 31, 2015


CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
(unaudited) (in thousands)
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(1,558
)
 
$
(700
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
27,407

 
15,284

Game technology and rights amortization
725

 

Acquisition related charges
6,400

 

Loss on asset disposals
377

 
1

Gain on sale of equity investment
(5,817
)
 

Equity in gains of unconsolidated investments
(2,948
)
 
(2,290
)
Dividend from investment in unconsolidated affiliate
3,500

 

Share-based compensation
2,723

 
5,241

Other
402

 
149

Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of business acquisition:
 
 
 
Restricted cash
5,293

 
6,547

Accounts receivable
(2,244
)
 
(153
)
Other current assets
(10,962
)
 
(8,883
)
Game technology and rights
(4,812
)
 

Accounts payable
9,532

 
9,519

Purses payable
(5,007
)
 
(5,445
)
Accrued expenses
(5,921
)
 
(6,979
)
Deferred revenue
55,939

 
33,099

Income taxes receivable and payable
12,997

 
6,030

Other assets and liabilities
3,648

 
511

Net cash provided by operating activities
89,674

 
51,931

Cash flows from investing activities:
 
 
 
Additions to property and equipment
(9,784
)
 
(20,169
)
Deferred payments to Big Fish Games former equity holders
(959
)
 

Investment in joint ventures
(327
)
 
(6,500
)
Proceeds from sale of equity investment
6,000

 

Purchases of minority investments
(81
)
 
(273
)
Proceeds on sale of property and equipment
67

 
86

Net cash used in investing activities
(5,084
)
 
(26,856
)
(continued on next page)


Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 10 of 12, March 31, 2015


CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
(unaudited) (in thousands)
 
2015
 
2014
Cash flows from financing activities:
 
 
 
Borrowings on bank line of credit
75,620

 
93,067

Repayments on bank line of credit
(146,218
)
 
(96,509
)
Tax refund payments to Big Fish Games equity holders
(11,773
)
 

Change in bank overdraft
747

 
1,845

Payment of dividends
(17,419
)
 
(15,186
)
Repurchase of common stock
(4,870
)
 
(7,402
)
Common stock issued

 
68

Windfall tax benefit from share-based compensation
2,834

 
2,630

Loan origination fees
(26
)
 
(103
)
Debt issuance costs

 
(1,029
)
Net cash used in financing activities
(101,105
)
 
(22,619
)
Net (decrease) increase in cash and cash equivalents
(16,515
)
 
2,456

Effect of exchange rate changes on cash
(1,896
)
 

Cash and cash equivalents, beginning of year
67,936

 
44,708

Cash and cash equivalents, end of year
$
49,525

 
$
47,164



Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 11 of 12, March 31, 2015


CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (in thousands)
 
March 31,
2015
 
December 31, 2014
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
49,525

 
$
67,936

Restricted cash
20,772

 
26,065

Accounts receivable, net
60,361

 
75,890

Deferred income taxes
17,707

 
18,519

Income taxes receivable
14,560

 
29,455

Game technology and rights, net
4,617

 
530

Other current assets
35,131

 
24,135

Total current assets
202,673

 
242,530

Property and equipment, net
590,170

 
595,315

Investment in and advances to unconsolidated affiliate
108,606

 
109,548

Goodwill
840,947

 
840,947

Other intangible assets, net
535,732

 
549,972

Other assets
24,242

 
24,192

Total assets
$
2,302,370

 
$
2,362,504

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
51,988

 
$
45,597

Bank overdraft
1,291

 
544

Purses payable
6,162

 
11,169

Account wagering deposit liabilities
19,294

 
18,137

Accrued expenses
85,934

 
93,286

Tax refund due to Big Fish Games former equity holders
6,313

 
18,087

Deferred revenue
75,758

 
51,833

Deferred revenue - Big Fish Games
54,623

 
41,747

Big Fish Games deferred payment, current
27,710

 
27,180

Current maturities of long-term debt
12,500

 
11,250

Dividends payable

 
17,419

Total current liabilities
341,573

 
336,249

Long-term debt, net of current maturities
387,257

 
459,105

Notes payable
300,000

 
300,000

Big Fish Games deferred payment, net of current amount due
52,690

 
51,620

Big Fish Games earnout liability
332,600

 
327,800

Other liabilities
23,119

 
21,718

Deferred revenue
17,196

 
16,489

Deferred income taxes
149,192

 
149,522

Total liabilities
1,603,627

 
1,662,503

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; 17,581 shares issued at March 31, 2015 and 17,472 shares issued at December 31, 2014
262,967

 
262,280

Accumulated other comprehensive loss
(512
)
 
(125
)
Retained earnings
436,288

 
437,846

Total shareholders’ equity
698,743

 
700,001

Total liabilities and shareholders’ equity
$
2,302,370

 
$
2,362,504



Churchill Downs Incorporated Reports 2015 First-Quarter Results
Page 12 of 12, March 31, 2015


CHURCHILL DOWNS INCORPORATED
JOINT VENTURE FINANCIAL STATEMENTS
for the three months ended March 31,
(Unaudited)


Summarized financial information for Miami Valley Gaming, LLC is comprised of the following (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
 
% Change
Casino revenue
$
32,044

 
$
31,163

 
3%
Non-casino revenue
1,957

 
1,631

 
20%
Net revenues
34,001

 
32,794

 
4%
Operating and SG&A expenses
24,634

 
24,211

 
2%
Adjusted EBITDA
9,367

 
8,583

 
9%
Depreciation & amortization expenses
3,144

 
3,367

 
(7)%
Pre-opening expenses

 
54

 
(100)%
Operating income
6,223

 
5,162

 
21%
Interest (expense) income, net
(1,108
)
 
(1,080
)
 
3%
Net income
$
5,115

 
$
4,082

 
25%


Reconciliation of operating income to Churchill Downs' Adjusted EBITDA
Three Months Ended March 31,
2015
 
2014
 
% Change
Operating income
$
6,223

 
$
5,162

 
21%
Pre-opening expenses

 
54

 
(100)%
 
6,223

 
5,216

 
19%
Churchill Downs' Adjusted EBITDA
$
3,112

 
$
2,608

 
19%


 
March 31, 2015
 
December 31, 2014
Assets
 
 
 
Current assets
$
22,466

 
$
24,943

Property and equipment, net
128,418

 
130,868

Other assets, net
105,059

 
105,059

Total assets
$
255,943

 
$
260,870

 
 
 
 
Liabilities and Members' Equity
 
 
 
Current liabilities
$
15,231

 
$
16,775

Current portion of long-term debt
8,332

 
8,332

Long-term debt, excluding current portion
25,094

 
26,584

Other liabilities
75

 
83

Members' equity
207,211

 
209,096

Total liabilities and members' equity
$
255,943

 
$
260,870