November 3, 2010

Churchill Downs Incorporated Reports 2010 Third Quarter Results

  • Third Quarter Net Revenues From Continuing Operations Increase 35 Percent
  • Third Quarter EBITDA From Continuing Operations Increases 75 Percent

LOUISVILLE, Ky., Nov. 3, 2010 (GLOBE NEWSWIRE) -- Churchill Downs Incorporated ("CDI"), (Nasdaq:CHDN) today reported results for the third quarter and nine months ended September 30, 2010.

Net revenues from continuing operations for the third quarter of 2010 totaled $135.7 million, an increase of 35 percent over net revenues from continuing operations of $100.9 million recorded during the third quarter of 2009. Net revenues from continuing operations for the quarter were positively affected by the acquisition of Youbet.com ("Youbet") and United Tote, which contributed $25.0 million in net revenues from external customers, and Calder Casino, which contributed $13.2 million of net revenues from external customers. Racing Operations' net revenues from external customers declined $5.9 million.      

Net earnings from continuing operations for the third quarter were $3.7 million or $0.22 per diluted common share, compared to a net loss from continuing operations of $1.2 million, or $(0.09) per diluted common share, during the third quarter of 2009. Results of Churchill Downs Entertainment, LLC, were accounted for as discontinued operations during the quarter and experienced a net loss of $4.4 million. As a result, CDI experienced a total net loss per diluted common share of $(0.04), compared to a net loss per diluted common share of $(0.17) during the third quarter of 2009.

CDI's EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations for the third quarter increased 75 percent year over year from $9.7 million in 2009 to $17.1 million in 2010. Significant items positively affecting CDI's quarterly EBITDA from continuing operations included a $4.0 million increase in Gaming EBITDA driven primarily by the generation of $2.4 million of EBITDA at Calder Casino, which opened in January of this year. Additionally, Online Business EBITDA increased $3.0 million, reflecting the addition of Youbet, which contributed $1.6 million of EBITDA during the quarter, and the continued growth of TwinSpires.com. We remain on track to achieve our projected $12 million in annualized cost savings from personnel and other cost synergies related to the Youbet and United Tote acquisition integration.

"This was the quarter in which we first saw the earnings power of the diversification strategy we've been pursuing for the last few years," said Robert L. Evans, CDI President and Chief Executive Officer. "The decline in Racing Operations net revenues and EBITDA from continuing operations was more than offset by net revenue and EBITDA growth in our Online and Gaming businesses."

"We have been pursuing diversification into our Gaming and Online business segments and the results of that strategy are clear and increasingly important to our overall financial performance," added Evans. "While the third quarter showed that the business of operating race tracks remains in decline, we feel a great sense of optimism as the popularity and profitability of the Kentucky Derby and Kentucky Oaks continue to grow and as we execute on our diversification strategy with the integration of Youbet.com and the planned acquisition of Harlow's Casino Resort & Hotel in Greenville, Mississippi." 

A conference call regarding this news release is scheduled for Thursday, November 4, 2010, at 9:00 a.m. ET. Investors and other interested parties may listen to the conference call by accessing the online, real-time webcast of the call at www.ChurchillDownsIncorporated.com or by dialing toll-free: 877-372-0878 or if dialing internationally, using the toll number 253-237-1169, at least 10 minutes before the appointed time. The conference ID number for this call is 96477917. The online replay will be available within 90 minutes from the conclusion of the conference call, and will continue to be available for one year.  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"), CDI 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. CDI 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 ("CDI"), headquartered in Louisville, Ky., owns and operates four world renowned Thoroughbred racing facilities: Arlington Park in Illinois, Calder Casino and Race Course in Florida, Churchill Downs Racetrack in Kentucky, and Fair Grounds Race Course & Slots in Louisiana. CDI operates slot and gaming operations in Louisiana and Florida. CDI tracks are host to many of North America's most prestigious races, including the Arlington Million, the Kentucky Derby and the Kentucky Oaks, the Louisiana Derby and the Princess Rooney, along with hosting the Breeders' Cup World Championships for a record seventh time on Nov. 5-6, 2010 and eighth time on Nov. 4-5, 2011. CDI also owns off-track betting platforms TwinSpires.com, Youbet.com and other advance-deposit wagering providers; United Tote; television production, telecommunications and racing service companies such as BRIS; and a 50-percent interest in the national cable and satellite network HorseRacing TV, which supports CDI's network of simulcasting and racing operations. CDI has entered into a definitive purchase agreement to acquire Harlow's Casino Resort & Hotel in Greenville, MS, on Sept. 13, 2010.  CDI trades on the NASDAQ Global Select Market under the symbol CHDN. More information can be found at www.ChurchillDownsIncorporated.com

Information set forth in this press 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 press 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, including any disruptions in the credit markets; the effect (including possible increases in the cost of doing business) resulting from future war and terrorist activities or political uncertainties; the overall 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, online gaming and riverboat, cruise ship and land-based casinos) and other sports and entertainment options in the markets in which we operate; the impact of live racing day competition with other Florida, Illinois and Louisiana racetracks within those relevant 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 and gaming activities; a substantial change in allocation of live racing days; changes in Kentucky, Florida, Illinois or Louisiana law or regulations that impact revenues or costs of racing operations in those states; the presence of wagering and gaming operations at Indiana and 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 execute our acquisition strategy and to complete or successfully operate planned expansion projects; our ability to successfully complete any divestiture transaction; 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 Florida and Louisiana; our accountability for environmental contamination; the loss of key personnel; the impact of natural and other disasters on our operations and our ability to adjust the casualty losses through our property and business interruption insurance coverage; our ability to integrate Youbet and other businesses we acquire, including our ability to maintain revenues at historic 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 limiting, agreements on sharing of revenues from gaming and advance deposit wagering); the effect of claims of third parties to intellectual property rights; and the volatility of our stock price.

CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF NET LOSS
For the three months ended September 30, 2010 and 2009
(Unaudited)
(In thousands, except per share data)
       
       
 Three Months Ended
September 30,
 20102009% Change
Net revenues $135,744 $100,896 35
Operating expenses 117,168 85,344 37
Selling, general and administrative expenses 15,281 13,092 17
Operating income 3,295 2,460 34
       
Other income (expense):      
Interest income 30 393 (92)
Interest expense (1,625) (245) U
Equity in loss of unconsolidated investments (470) (568) 17
Miscellaneous, net 1,832 322 F
  (233) (98) U
Earnings from continuing operations before
benefit (provision) for income taxes
3,062 2,362 30
Income tax benefit (provision) 638 (3,578) F
Earnings (loss) from continuing operations 3,700 (1,216) F
Discontinued operations, net of income taxes:      
Loss from operations (4,389) (1,109) U
Net loss  $ (689)  $ (2,325) 70
       
Net loss per common share data:      
Basic      
Earnings (loss) from continuing operations  $ 0.22  $ (0.09) F
Discontinued operations (0.26) (0.08) U
Net loss  $ (0.04)  $ (0.17) 76
Diluted      
Earnings (loss) from continuing operations  $ 0.22  $ (0.09) F
Discontinued operations (0.26) (0.08) U
Net loss  $ (0.04)  $ (0.17) 76
       
Weighted average shares outstanding:      
Basic 16,311 13,587  
Diluted 16,768 13,587  
       
NM: Not meaningful U: > 100% unfavorable F: > 100% favorable      
CHURCHILL DOWNS INCORPORATED      
CONDENSED CONSLIDATED STATEMENTS OF NET EARNINGS      
For the nine months ended September 30, 2010 and 2009      
(Unaudited)      
(In thousands, except per share data)      
       
       
 Nine Months Ended
September 30,
 20102009% Change
Net revenues $411,306 $354,670 16
Operating expenses 331,533 272,556 22
Selling, general and administrative expenses 43,937 37,527 17
Operating income 35,836 44,587 (20)
       
Other income (expense):      
Interest income 158 780 (80)
Interest expense (4,303) (772) U
Equity in loss of unconsolidated investments (317) (641) 51
Miscellaneous, net 2,485 1,042 F
  (1,977) 409 U
Earnings from continuing operations before       
provision for income taxes 33,859 44,996 (25)
Income tax provision (10,034) (20,423) 51
Earnings from continuing operations 23,825 24,573 (3)
Discontinued operations, net of income taxes:      
Loss from operations (5,577) (863) U
Net earnings  $ 18,248  $ 23,710 (23)
       
Net earnings per common share data:      
Basic      
Earnings from continuing operations  $ 1.56  $ 1.75 (11)
Discontinued operations (0.36) (0.06) U
Net earnings  $ 1.20  $ 1.69 (29)
Diluted      
Earnings from continuing operations  $ 1.56  $ 1.75 (11)
Discontinued operations (0.36) (0.06) U
Net earnings  $ 1.20  $ 1.69 (29)
       
Weighted average shares outstanding:      
Basic 14,796 13,578  
Diluted 15,257 14,040  
       
NM: Not meaningful U: > 100% unfavorable F: > 100% favorable      
CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
For the three months ended September 30, 2010 and 2009
(Unaudited)
(In thousands, except per share data)
       
 Three Months Ended
September 30,
 20102009% Change
       
Net revenues from external customers:      
Churchill Downs $5,449 $5,226 4
Arlington Park 29,445 33,935 (13)
Calder 21,604 22,663 (5)
Fair Grounds 5,942 6,534 (9)
Total Racing Operations 62,440 68,358 (9)
Online Business 38,739 17,386 F
Gaming 28,306 14,104 F
Other Investments 6,195 963 F
Corporate 64 85 (25)
Net revenues from external customers $135,744 $100,896 35
       
Intercompany net revenues:      
Churchill Downs $336 $233 44
Arlington Park 1,199 800 50
Calder 557 381 46
Fair Grounds 39 11 F
Total Racing Operations 2,131 1,425 50
Online Business 112 150 (25)
Other Investments 629 386 63
Eliminations (2,872) (1,961) (46)
Net revenues  $ --   $ --  --
       
Reconciliation of Segment EBITDA to net loss:      
Racing Operations $1,254 $3,428 (63)
Online Business 5,818 2,802 F
Gaming 7,892 3,884 F
Other Investments 1,792 831 F
Corporate 296 (1,208) F
Total EBITDA  17,052 9,737 75
Depreciation and amortization (12,395) (7,523) (65)
Interest income (expense), net (1,595) 148 U
Income tax benefit (provision) 638 (3,578) F
Earnings (loss) from continuing operations 3,700 (1,216) F
 Discontinued operations, net of income taxes (4,389) (1,109) U
Net loss  $ (689)  $ (2,325) 70
       
NM: Not Meaningful U: > 100% unfavorable F: > 100% favorable      
CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
For the nine months ended September 30, 2010 and 2009
(Unaudited)
(In thousands, except per share data)
       
 Nine Months Ended
September 30,
 20102009% Change
       
Net revenues from external customers:      
Churchill Downs $96,979 $95,718 1
Arlington Park 61,533 75,337 (18)
Calder 42,848 44,295 (3)
Fair Grounds 32,367 35,262 (8)
Total Racing Operations 233,727 250,612 (7)
Online Business 86,089 54,830 57
Gaming 82,824 47,368 75
Other Investments 8,599 1,320 F
Corporate 67 540 (88)
Net revenues from external customers $411,306 $354,670 16
       
Intercompany net revenues:      
Churchill Downs $2,872 $2,438 18
Arlington Park 2,542 1,637 55
Calder 932 743 25
Fair Grounds 586 591 (1)
Total Racing Operations 6,932 5,409 28
Online Business 533 448 19
Other Investments 1,604 1,286 25
Eliminations (9,069) (7,143) (27)
Net revenues  $ --   $ --  --
       
Reconciliation of Segment EBITDA to net loss:      
Racing Operations      
Online Business $37,819 $41,174 (8)
Gaming 14,467 11,767 23
Other Investments 19,537 15,401 27
Corporate 2,918 1,651 77
Total EBITDA  (2,327) (2,606) 11
Depreciation and amortization 72,414 67,387 7
Interest income (expense), net (34,410) (22,399) (54)
Income tax benefit (provision) (4,145) 8 U
Earnings (loss) from continuing operations (10,034) (20,423) 51
Discontinued operations, net of income taxes 23,825 24,573 (3)
Net loss (5,577) (863) U
Net earnings $18,248 $23,710 (23)
 
NM: Not meaningful U: > 100% unfavorable F: > 100% favorable
CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
     
     
 September 30,
2010
December 31,
2009
ASSETS    
Current assets:    
Cash and cash equivalents  $ 14,533  $ 13,643
Restricted cash  61,101  35,125
Accounts receivable, net  22,472  33,446
Deferred income taxes  8,231  6,408
Other current assets  19,555  16,003
Total current assets  125,892  104,625
     
Property and equipment, net  465,922  458,222
Goodwill  183,394  115,349
Deferred income taxes  5,373  --
Other intangible assets, net  56,842  34,329
Other assets  12,508  12,877
Total assets  $ 849,931  $ 725,402
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:    
Accounts payable  $ 38,149  $ 35,034
Bank overdraft  10,667  3,738
Purses payable  16,223  11,857
Accrued expenses  52,384  46,603
Liabilities associated with assets held for dissolution  1,089  --
Dividends payable  --  6,777
Deferred revenue  17,597  30,972
Income taxes payable  501  1,997
Deferred riverboat subsidy  38,613  23,965
Note payable, related party  --  24,043
Total current liabilities  175,223  184,986
     
Long-term debt  109,500  71,132
Convertible note payable, related party  14,970  14,655
Other liabilities  20,147  19,137
Deferred revenue  15,532  16,720
Deferred income taxes  --  11,750
Total liabilities  335,372  318,380
     
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; 16,577 shares
issued September 30, 2010 and 13,684 shares issued at December 31, 2009
 234,712  145,423
Retained earnings  279,847  261,599
Total shareholders' equity  514,559  407,022
Total liabilities and shareholders' equity  $ 849,931  $ 725,402
CONTACT:  Churchill Downs Incorporated

          Liz Harris, Vice President

          502-641-5879

          Liz@kyderby.com


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