March 12, 2012

Churchill Downs Incorporated Reports 2011 Fourth-Quarter and Year-End Results

  • Fourth Quarter 2011
  • Record revenue of $149.3 million up 9% over fourth quarter 2010
  • Record EBITDA of $19.6 million up 144% over fourth quarter 2010
  • Record earnings from continuing operations per diluted common share of $0.25 versus a loss of $0.26 in fourth quarter 2010
  • Full-Year 2011
  • Record revenue of $696.9 million up 19% over 2010
  • Record EBITDA of $158.7 million up 97% over 2010
  • Record earnings from continuing operations per diluted common share of $3.55 up 182% over 2010

LOUISVILLE, Ky., March 12, 2012 (GLOBE NEWSWIRE) -- Churchill Downs Incorporated ("CDI" or "the Company") (Nasdaq:CHDN) today reported business results for the fourth quarter and year ended Dec. 31, 2011.

2011 Fourth-Quarter Results of Operations:

During the fourth quarter of 2011, CDI grew net revenues from continuing operations to $149.3 million, an increase of nine percent from net revenues of $137.2 million recorded during the prior year's period. CDI's fourth-quarter EBITDA (earnings before interest, taxes, depreciation and amortization) more than doubled to $19.6 million. The year-over-year growth in EBITDA during the quarter was driven by the performance of the Company's Gaming and Online Business segments. Revenues of the Gaming Business segment increased 37% while EBITDA increased 52%. Revenues of the Online Business segment increased 18% while EBITDA more than tripled to $9.1 million from $2.8 million in the prior year's fourth quarter. EBITDA of the Company's Racing Business showed a loss of $3.3 million compared to a loss of $2.7 million in the fourth quarter of 2010.

Net earnings from continuing operations set a fourth-quarter record of $4.3 million, or $0.25 per diluted common share, versus a net loss from continuing operations of $4.3 million, or a net loss of $0.26 per diluted common share, during the final quarter of 2010.

2011 Year-End Results of Operations:

Net revenues from continuing operations for 2011 climbed to $696.9 million, a 19-percent increase from prior-year. The growth in net revenues was due principally to the continued expansion of the Company's Gaming and Online Businesses, including the effects of the 2010 acquisitions of Youbet.com LLC ("Youbet") and Harlow's Casino Resort & Hotel ("Harlow's").

Calder Casino, which opened on Jan. 20, 2010, increased total revenues by $17.6 million compared to its 2010 results. Calder Casino's improved performance was due, in part, to a new marketing strategy executed during 2011 along with the effect of having a full year of operations in 2011.

Revenues generated by CDI's Online Business increased $44.0 million in 2011 compared to the previous year, primarily reflecting the acquisition of Youbet during the second quarter of 2010, and the five additional months of Youbet operations that were included in CDI's 2011 results.

Revenues from the Company's Racing Business segment declined three percent in 2011.

EBITDA for the year nearly doubled to $158.7 million from the $80.4 million recorded in 2010. Gaming EBITDA increased $28.5 million as CDI benefitted from the acquisition of Harlow's during December 2010. Harlow's generated $17.5 million of EBITDA during 2011, despite closing for twenty-five days in May due to the Mississippi River flooding, compared to $1.2 million in the prior year. Additionally, Calder Casino generated EBITDA of $13.7 million, versus $3.7 million of EBITDA in the prior year. Fair Grounds Slots and VSI EBITDA increased $2.2 million to $25.8 million during 2011 primarily reflecting operating efficiencies at our video poker locations compared to the same period of 2010.  

Online Business EBITDA increased $20.5 million primarily due to merger-related cost synergies realized by the Company during 2011 as well as an additional five months of Youbet operations during 2011. 

Racing Operations EBITDA increased $27.8 million over the previous year, primarily reflecting the release of Illinois Horse Racing Equity Trust Fund proceeds with a net favorable impact of $19.3 million on EBITDA during 2011. In addition, Racing Operations benefitted from the increased profitability of Kentucky Oaks and Derby week, which contributed an additional $6.4 million in EBITDA during 2011.  

Net earnings from continuing operations for 2011 were $60.8 million, or $3.55 per diluted common share, compared to net earnings from continuing operations of $19.6 million, or $1.26 per diluted common share, in 2010.

Finally, the Company benefitted from favorable comparisons to the prior year, which included legal and development expenses of $4.2 million and reorganization charges of $3.4 million during 2010 related to our acquisitions of Harlow's and Youbet.

CDI Chairman and Chief Executive Officer Robert L. Evans said: "All of us at CDI are proud of the Company's performance in 2011. The record financial results in the fourth quarter and for the entire year; our strong cash flows that enabled us to reduce long-term debt by $137.5 million, from $265.1 million at year-end 2010 to $127.6 million at year-end 2011; the 20% increase in our annual dividend to shareholders, from $0.50 per share to $0.60 per share; and the 20.1% increase in our stock price, from $43.40 at year-end 2010 to $52.13 at year-end 2011, all reflect the strategy we have developed and executed over the last several years. As we look toward 2012, we hope to put in place the growth drivers that will enable the Company to continue its success in the future."

A conference call regarding this news release is scheduled for Tuesday, March 13, 2012, at 9 a.m. EDT. Investors and other interested parties may listen to the teleconference by accessing the online, real-time webcast of the call at http://ir.churchilldownsincorporated.com/events.cfm or by dialing (877) 372-0878 and entering the conference ID number44275812 at least 10 minutes before the appointed time.  International callers should dial (253) 237-1169. An online replay of the webcast will be available by noon EDT in the "Investors" section the Company's website at http://ir.churchilldownsincorporated.com/events.cfm. A copy of the CDI news release announcing quarterly results and relevant financial and statistical information abut 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. A reconciliation of EBITDA to net earnings is included in the Supplemental Information by Operating Unit table within this news release.

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 "Reform Act") provides certain "safe harbor" provisions for forward-looking statements. All forward-looking statements made in this news release are made pursuant to the Reform 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. The Company assumes 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 the Company believes that the expectations reflected in such forward-looking statements are reasonable, management 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 those factors described in Item 1, "Risk Factors," within the Company's Annual Report on Form 10-K.

Readers should review this news release with the financial statements in conjunction with other financial information included in the Company's Annual Report on Form 10-K. The Company's significant accounting polices are described in Note 1 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

CHURCHILL DOWNS INCORPORATED 
CONSOLIDATED STATEMENTS OF NET EARNINGS 
For the three months ended Dec. 31, 2011, and 2010
(in thousands, except per common share data) 
       
 Three Months Ended
December 31,
 20112010% Change
Net revenues      
Racing  $ 51,898  $ 59,743 (13)
Gaming  52,161  38,010 37
Online  40,072  34,033 18
Other  5,134  5,455 (6)
   149,265  137,241 9
Operating expenses      
Racing  56,103  61,612 (9)
Gaming  39,185  29,444 33
Online  27,443  26,256 5
Other  6,147  5,701 8
Selling, general and administrative expenses  14,086  18,496 (24)
       
Operating income (loss)  6,301  (4,268) F
       
Other income (expense):      
Interest income  228  27 F
Interest expense  (1,427)  (1,875) (24)
Equity in loss of unconsolidated investments  (690)  (255) U
Miscellaneous, net  94  411 (77)
   (1,795)  (1,692) (6)
Earnings (loss) from continuing operations before benefit for income taxes  4,506  (5,960) F
Income tax (provision) benefit  (235)  1,692 U
Net earnings (loss) from continuing operations  4,271  (4,268) F
Discontinued operations, net of income taxes:      
Loss from operations  (62)  (101) (39)
Gain on sale of assets  3,404  2,475 38
Net earnings (loss)  $ 7,613  $ (1,894) F
       
Net earnings (loss) per common share data:      
Basic      
Net earnings (loss) from continuing operations  $ 0.25  $ (0.26) F
Discontinued operations  0.20  0.14 43
Net earnings (loss)  $ 0.45  $ (0.12) F
Diluted      
Net earnings (loss) from continuing operations  $ 0.25  $ (0.26) F
Discontinued operations  0.19  0.14 36
Net earnings (loss)  $ 0.44  $ (0.12) F
       
Weighted average shares outstanding:      
Basic  17,042  16,341  
Diluted  17,200  16,341  
       
NM: Not meaningful U:  > 100% unfavorable F:  > 100% favorable      
 
CHURCHILL DOWNS INCORPORATED 
CONSOLIDATED STATEMENTS OF NET EARNINGS 
For the years ended Dec. 31, 2011, and 2010
(in thousands, except per common share data) 
       
 Year Ended
December 31,
 20112010% Change
Net revenues      
Racing  $ 298,270  $ 307,544 (3)
Gaming  212,629  142,273 49
Online  165,416  121,407 36
Other  20,539  14,121 45
   696,854  585,345 19
Operating expenses      
Racing  257,459  271,530 (5)
Gaming  157,875  117,946 34
Online  113,243  88,206 28
Other  22,738  13,663 66
Selling, general and administrative expenses  64,529  62,434 3
       
Operating income  81,010  31,566 F
       
Other income (expense):      
Interest income  468  185 F
Interest expense  (8,924)  (6,179) 44
Equity in loss of unconsolidated investments  (1,113)  (571) 95
Miscellaneous, net  23,643  2,897 F
   14,074  (3,668) F
Earnings from continuing operations before benefit for income taxes  95,084  27,898 F
Income tax provision  (34,289)  (8,341) U
Net earnings from continuing operations  60,795  19,557 F
Discontinued operations, net of income taxes:      
Loss from operations  (1)  (5,827) F
Gain on sale of assets  3,561  2,623 36
Net earnings  $ 64,355  $ 16,353 F
       
Net earnings per common share data:      
Basic      
Net earnings from continuing operations  $ 3.59  $ 1.27 F
Discontinued operations  0.21  (0.21) F
Net earnings  $ 3.80  $ 1.06 F
Diluted      
Net earnings from continuing operations  $ 3.55  $ 1.26 F
Discontinued operations  0.21  (0.21) F
Net earnings  $ 3.76  $ 1.05 F
       
Weighted average shares outstanding:      
Basic  16,638  15,186  
Diluted  17,125  15,666  
       
NM: Not meaningful U:  > 100% unfavorable F:  > 100% favorable      
 
CHURCHILL DOWNS INCORPORATED 
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
For the three months ended Dec. 31, 2011, and 2010
(in thousands, except per common share data) 
       
 Three Months Ended
December 31,
 20112010% Change
       
Net revenues from external customers:      
Churchill Downs  $ 17,164  $ 17,757 (3)
Arlington Park  7,421  7,856 (6)
Calder  16,962  23,287 (27)
Fair Grounds  10,351  10,842 (5)
Total Racing Operations  51,898  59,742 (13)
Calder Casino  20,245  16,363 24
Fair Grounds Slots  10,043  10,453 (4)
VSI  8,486  8,535 (1)
Harlow's Casino  13,387  2,659 F
Total Gaming  52,161  38,010 37
Online Business  40,072  34,032 18
Other Investments  5,070  5,382 (6)
Corporate  64  75 (15)
Net revenues from external customers  $ 149,265  $ 137,241 9
       
Intercompany net revenues:      
Churchill Downs  $ 1,095  $ 977 12
Arlington Park  565  467 21
Calder  1,178  944 25
Fair Grounds  365  382 (4)
Total Racing Operations  3,203  2,770 16
Online Business  185  143 29
Other Investments  1,282  1,018 26
Eliminations  (4,670)  (3,931) 19
Intercompany net revenues  $ --  $ --  
       
Segment EBITDA and net earnings (loss):      
Racing Operations  $ (3,266)  $ (2,689) (21)
Online Business  9,069  2,759 F
Gaming  13,529  8,926 52
Other Investments  260  1,001 (74)
Corporate  (36)  (1,995) 98
Total EBITDA   19,556  8,002 F
Depreciation and amortization  (13,851)  (12,114) 14
Interest (expense) income, net  (1,199)  (1,848) 35
Income tax (provision) benefit  (235)  1,692 U
Net earnings (loss) from continuing operations  4,271  (4,268) F
Discontinued operations, net of income taxes  3,342  2,374 41
Net earnings (loss)   $ 7,613  $ (1,894) F
       
NM: Not meaningful U:  > 100% unfavorable F:  > 100% favorable  
 
CHURCHILL DOWNS INCORPORATED 
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
For the years ended Dec. 31, 2011, and 2010
(in thousands, except per common share data)
       
 Year Ended
December 31,
 20112010% Change
       
Net revenues from external customers:      
Churchill Downs  $ 121,236  $ 118,366 2
Arlington Park  69,694  71,851 (3)
Calder  62,715  71,302 (12)
Fair Grounds  44,625  46,025 (3)
Total Racing Operations  298,270  307,544 (3)
Calder Casino  82,819  65,211 27
Fair Grounds Slots  41,553  40,432 3
VSI  35,052  33,971 3
Harlow's Casino  53,205  2,659 F
Total Gaming  212,629  142,273 49
Online Business  165,416  121,407 36
Other Investments  20,213  13,980 45
Corporate  326  141 F
Net revenues from external customers  $ 696,854  $ 585,345 19
       
Intercompany net revenues:      
Churchill Downs  $ 5,088  $ 3,850 32
Arlington Park  3,725  3,009 24
Calder  2,307  1,875 23
Fair Grounds  1,164  968 20
Total Racing Operations  12,284  9,702 27
Online Business  786  676 16
Other Investments  4,182  2,622 59
Eliminations  (17,252)  (13,000) (33)
Intercompany net revenues  $ --  $ -- --
       
Segment EBITDA and net earnings:      
Racing Operations  $ 62,957  $ 35,131 79
Online Business  37,740  17,226 F
Gaming  57,008  28,462 F
Other Investments  2,370  3,920 (40)
Corporate  (1,365)  (4,323) 68
Total EBITDA   158,710  80,416 97
Depreciation and amortization  (55,170)  (46,524) 19
Interest (expense) income, net  (8,456)  (5,994) 41
Income tax provision  (34,289)  (8,341) U
Net earnings from continuing operations  60,795  19,557 F
Discontinued operations, net of income taxes  3,560  (3,204) F
Net earnings  $ 64,355  $ 16,353 F
       
NM: Not meaningful U:  > 100% unfavorable F:  > 100% favorable  
 
CHURCHILL DOWNS INCORPORATED 
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
For the three months and years ended Dec. 31, 2011, and 2010
(in thousands)
         
 Three Months Ended 
December 31,
Change
Management fee expense (income):20112010$%
Racing Operations  $ 2,377  $ 3,343  $ (966)  (29)
Gaming  2,137  1,645  492  30
Online Business  1,652  1,699  (47)  (3)
Other Investments  (91)  299  (390)  F 
Corporate Income  (6,075)  (6,986)  911  (13)
Total management fees  $ --  $ --  $ --  
         
         
 Year Ended 
December 31,
Change
Management fee expense (income):20112010$%
Racing Operations  $ 11,197  $ 12,490  $ (1,293)  (10)
Gaming  7,677  4,767  2,910  61
Online Business  6,001  4,984  1,017  20
Other Investments  860  686  174  25
Corporate Income  (25,735)  (22,927)  (2,808)  12
Total management fees  $ --  $ --  $ --  
 
CHURCHILL DOWNS INCORPORATED
CONDENSED, CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended Dec. 31, 2011, and 2010
(unaudited)
(in thousands)
     
 20112010
Cash flows from operating activities:    
Net earnings  $ 64,355  $ 16,353
Adjustments to reconcile net earnings to net cash provided by operating activities:    
Depreciation and amortization  55,170  46,524
Asset impairment loss  694  1,598
Gain on sale of business  (271)  (4,175)
Equity in loss of unconsolidated investments  1,113  571
Loss on sale of assets  52  371
Unrealized gain on derivative instruments  (3,096)  (817)
Share-based compensation  5,531  4,802
Deferred tax provision (benefit)  14,097  8,634
Other  2,489  1,473
Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of business acquisitions and dispositions:    
Restricted cash  18,342  (20,338)
Accounts receivable  (407)  290
Other current assets  3,235  112
Income taxes   7,995  (12,729)
Accounts payable  14,447  1,834
Purses payable  7,301  (92)
Accrued expenses  2,441  4,963
Deferred revenue  (36,859)  11,379
Other assets and liabilities  16,549  (896)
Net cash provided by operating activities  173,178  59,857
     
Cash flows from investing activities:    
Acquisition of businesses, net of cash acquired  --   (169,665)
Additions to property and equipment  (22,667)  (61,952)
Purchases of minority investments  (1,189)  (450)
Acquisition of gaming license  (2,250)  (2,750)
Proceeds on sale of property and equipment  55  57
Change in deposit wagering asset  (1,010)  (181)
Net cash used in investing activities  (27,061)  (234,941)
     
Cash flows from financing activities:    
Borrowings on bank line of credit  320,181  442,758
Repayments of bank line of credit  (457,736)  (248,773)
Change in deposit wagering liability  802  139
Change in book overdraft  (188)  1,922
Payments of dividends  (8,165)  (6,777)
Windfall (shortfall) tax provision from share-based compensation  151  (126)
Loan origination fees  (155)  (421)
Repurchase of common stock  (1,308)  (944)
Common stock issued  725  564
Net cash (used in) provided by financing activities  (145,693)  188,342
     
Net increase in cash and cash equivalents  424  13,258
Cash and cash equivalents, beginning of year  26,901  13,643
Cash and cash equivalents, end of year  $ 27,325  $ 26,901
 
CHURCHILL DOWNS INCORPORATED
CONSOLIDATED BALANCE SHEETS
As of Dec. 31, 2011, and 2010
(in thousands)
     
 December 31,
2011
December 31,
2010
ASSETS    
Current assets:    
Cash and cash equivalents  $ 27,325  $ 26,901
Restricted cash  44,559  61,891
Accounts receivable, net  49,773  33,307
Deferred income taxes  8,727  16,136
Income taxes receivable  3,679  11,674
Other current assets  10,399  20,086
Total current assets  144,462  169,995
     
Property and equipment, net  477,356  507,476
Goodwill  213,712  214,528
Other intangible assets, net  103,827  113,436
Other assets  8,665  12,284
Total assets  $ 948,022  $ 1,017,719
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:    
Accounts payable  $ 56,514  $ 45,768
Bank overdraft  5,473  5,660
Purses payable  20,066  12,265
Accrued expenses  47,816  51,689
Dividends payable  10,110  8,165
Deferred revenue  33,472  24,512
Deferred riverboat subsidy  --  40,492
Total current liabilities  173,451  188,551
     
Long-term debt  127,563  265,117
Convertible note payable, related party  --  15,075
Other liabilities  29,542  17,775
Deferred revenue  17,884  15,556
Deferred income taxes  15,552  9,431
Total liabilities  363,992  511,505
     
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; 17,178 shares and 16,571 shares issued at December 31, 2011 and 2010, respectively  260,199  236,503
Retained earnings  323,831  269,711
Total shareholders' equity  584,030  506,214
Total liabilities and shareholders' equity  $ 948,022  $ 1,017,719
CONTACT: John Asher

         (502) 636-4586 (office)

         (502) 494-3626 (mobile)

         John.Asher@KyDerby.com


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