UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of Report (Date of earliest event reported): August 2,
2005
(Exact
name of registrant as specified in its charter)
|
KENTUCKY
|
0-1469
|
61-0156015
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
700
Central Avenue Louisville, Kentucky 40208
(Address
of principal executive offices)
(Zip
Code)
502-636-4400
Registrant’s
telephone number, including area code
Not
Applicable
(Former
name or former address, if changed since last
report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
|
[
]
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
[
]
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
[
]
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
[
]
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
|
Item
2.02
|
RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.
|
|
A copy
of the news release issued by Churchill Downs Incorporated (the
"Company")
on August 2, 2005 announcing the results of operations and financial
condition for the second quarter ended June 30, 2005, is attached
hereto
as Exhibit 99.1 and incorporated by reference herein.
|
|
|
Item
9.01
|
Financial
Statements and Exhibits.
|
|
(a) Exhibit
99.1 Press
release dated August 2, 2005 issued by Churchill Downs
Incorporated.
|
|
|
Exhibit
No.
|
Description
|
|
|
Exhibit
99.1
|
Press
release dated August 2, 2005 issued by Churchill Downs
Incorporated.
|
|
2
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
CHURCHILL
DOWNS INCORPORATED
|
|
|
Date:
August 2, 2005
|
By:/s/
Michael W. Anderson
|
|
Michael
W. Anderson
|
|
|
Vice
President Finance and Treasurer
|
|
3
|
FOR
IMMEDIATE RELEASE
|
Contact:
Mike Ogburn
|
|
(502)
636-4415, office
|
|
|
(502)
262-0224, cellular
|
|
|
mogburn@kyderby.com
|
CHURCHILL
DOWNS INCORPORATED REPORTS SECOND QUARTER EARNINGS
LOUISVILLE,
Ky. (Aug. 2, 2005)
-
Churchill Downs Incorporated (“CDI” or “Company”) (Nasdaq: CHDN) today reported
results for the second quarter and six months ended June 30, 2005.
Net
earnings for the second quarter were $24.2 million or $1.80 per share diluted,
compared to $27.7 million or $2.06 per share diluted for the same period
in
2004. The change year-over-year reflects higher depreciation costs; an
additional $2.5 million in interest expense; a higher tax rate due to increased
legislative expenses; and nearly $1 million in development costs associated
with
the pending sale of the Hollywood Park assets.
On
July
6, 2005, CDI announced that it had reached a definitive agreement to sell
its
Hollywood Park horse racing facility to Bay Meadows Land Company, LLC.
Due to
this pending transaction, results for Hollywood Park are treated as discontinued
operations and detailed as such in the accompanying tables.
Net
revenues from continuing operations for the second quarter reached $163.2
million, an increase of 16.4 percent compared with $140.2 million
for the
same period last year. Net earnings from continuing operations for the
quarter
were $22.7 million, a decline of less than one percent from $22.9 million
for
the same period a year ago. Diluted earnings per share from continuing
operations totaled $1.69, compared with $1.70 for the second quarter of
2004.
Results for the first half of 2005 are outlined in the accompanying
tables.
Thomas
H.
Meeker, CDI’s president and chief executive officer, said the Company delivered
solid results despite significant expenses during the quarter and weakness
across the racing industry. “The strength of the Kentucky Derby, Kentucky Oaks
and other marquee events helped offset some of the soft business levels
affecting our facilities and racing in general. Factors such as rain, excessive
heat and various equine-related illnesses contributed to smaller field
sizes
that, in turn, led to declines in wagering.
“Going
forward, we expect to continue to encounter smaller field sizes and other
problems affecting the industry. At this time, we anticipate business levels
for
the balance of the year to approximate those experienced in the latter
half of
2004, after factoring in the impact of the Hollywood Park
divestiture.”
Meeker
added, “Longer term, we are heartened by our progress on strategic initiatives
and the potential growth channels they create for the Company. For example,
we
made steady advances with regard to alternative gaming at Fair Grounds,
in both
the slots approval process and the rollout of new video poker machines.
While
the benefits of these efforts are not being fully realized in 2005, we
now
anticipate that they will materialize in 2006 and 2007.”
“Finally,
the Hollywood Park transaction represents a major strategic win for us.
We were
faced with an asset in a troublesome market at a huge competitive disadvantage
without alternative gaming. We were able to negotiate a sale that provides
a
very attractive price and the opportunity to re-enter this market should
the
gaming landscape change. We are reviewing the best alternatives for the
use of
this capital, but at a minimum, we have created the opportunity to reduce
our
current debt by a range of $190 million to $200 million,” concluded
Meeker.
A
conference call regarding this release is scheduled for Wednesday, Aug.
3, 2005,
beginning 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/investor_relations
or
www.fulldisclosure.com,
or by
calling (312) 461-9253 at least 10 minutes before the appointed time. The
online
replay will be available at approximately noon and continue for two weeks.
A
six-day telephonic replay will be available two hours after the call ends
by
dialing (719) 457-0820 and entering 9290204 when prompted for the access
code. A
copy of the Company’s news release announcing earnings and relevant financial
and statistical information about the period will be accessible at www.churchilldownsincorporated.com/investor_relations.
In
addition to the results provided in accordance with U.S. Generally Accepted
Accounting Principles (“GAAP”), the Company has provided a non-GAAP measurement,
which presents a financial measure of Earnings before Interest, Taxes,
Depreciation and Amortization (“EBITDA”). CDI uses EBITDA as a key performance
measure of results of operations for purposes of evaluating performance
internally. The Company believes the use of this measure enables management
and
investors to evaluate and compare, from period to period, CDI’s operating
performance in a meaningful and consistent manner. This non-GAAP measurement
is
not intended to replace the presentation of CDI’s financial results in
accordance with GAAP.
Churchill
Downs Incorporated, headquartered in Louisville, Ky., owns and operates
world-renowned horse racing venues throughout the United States. The Company’s
seven racetracks in California, Florida, Illinois, Indiana, Kentucky and
Louisiana host 121 graded-stakes events and many of North America’s most
prestigious races, including the Kentucky Derby and Kentucky Oaks, Hollywood
Gold Cup and Arlington Million. CDI racetracks have hosted nine Breeders’ Cup
World Thoroughbred Championships - more than any other North American racing
company. CDI also owns off-track betting facilities and has interests in
various
television production, telecommunications and racing services companies
that
support CDI’s network of simulcasting and racing operations. CDI trades on the
Nasdaq National Market under the symbol CHDN and can be found on the Internet
at
www.churchilldownsincorporated.com.
This
news release contains forward-looking statements made pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
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 our 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;
2
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, Louisiana and
California racetracks within those respective markets; costs associated
with our
efforts in support of alternative gaming initiatives; costs associated
with our
Customer Relationship Management initiatives; a substantial change in law
or
regulations affecting our pari-mutuel and gaming activities; a substantial
change in allocation of live racing days; litigation surrounding the Rosemont,
Illinois, riverboat casino; changes in Illinois law that impact revenues
of
racing operations in Illinois; a decrease in riverboat admissions subsidy
revenue from our Indiana operations; the impact of an additional Indiana
racetrack and its wagering facilities near our operations; our continued
ability
to effectively compete for the country’s top horses and trainers necessary to
field high-quality horse racing; our continued ability to grow our share
of the
interstate simulcast market; our ability to execute our acquisition strategy
and
to complete or successfully operate planned expansion projects; our ability
to
successfully complete any divestiture transaction; our ability to adequately
integrate acquired businesses; market reaction to our expansion projects;
any
business disruption associated with our facility renovations; the loss
of our
totalisator companies or their inability to provide adequate reliance on
their
internal control processes through SAS 70 reports 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
and
the volatility of our stock price.
3
CHURCHILL
DOWNS INCORPORATED
CONDENSED
CONSOLIDATED STATEMENTS OF NET EARNINGS
for
the three and six months ended June 30, 2005 and 2004
(Unaudited)
(In
thousands, except per share data)
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
2004
|
|||
|
Net
revenues
|
$
|
163,202
|
$
|
140,159
|
$
|
215,019
|
$
|
172,789
|
|||||
|
Operating
expenses
|
110,352
|
93,959
|
167,278
|
133,153
|
|||||||||
|
Gross
profit
|
52,850
|
46,200
|
47,741
|
39,636
|
|||||||||
|
Selling,
general and administrative expenses
|
12,461
|
8,298
|
25,382
|
15,858
|
|||||||||
|
Operating
income
|
40,389
|
37,902
|
22,359
|
23,778
|
|||||||||
|
Other
income (expense):
|
|||||||||||||
|
Interest
income
|
76
|
75
|
161
|
191
|
|||||||||
|
Interest
expense
|
(390
|
)
|
(204
|
)
|
(685
|
)
|
(385
|
)
|
|||||
|
Unrealized
gain on derivative instruments
|
204
|
-
|
410
|
-
|
|||||||||
|
Miscellaneous,
net
|
80
|
502
|
617
|
837
|
|||||||||
|
(30
|
)
|
373
|
503
|
643
|
|||||||||
|
Earnings
from continuing operations before provision
for income taxes
|
40,359
|
38,275
|
22,862
|
24,421
|
|||||||||
|
Provision
for income taxes
|
(17,681
|
)
|
(15,398
|
)
|
(10,042
|
)
|
(9,773
|
)
|
|||||
|
Net
earnings from continuing operations
|
22,678
|
22,877
|
12,820
|
14,648
|
|||||||||
|
Discontinued
operations, net of income taxes:
|
|||||||||||||
|
Earnings
(loss) from operations
|
1,508
|
4,819
|
(2,531
|
)
|
1,302
|
||||||||
|
Net
earnings
|
$
|
24,186
|
$
|
27,696
|
$
|
10,289
|
$
|
15,950
|
|||||
|
Net
earnings (loss) per common share:
|
|||||||||||||
|
Basic:
|
|||||||||||||
|
Net
earnings from continuing operations
|
$
|
1.70
|
$
|
1.72
|
$
|
0.96
|
$
|
1.10
|
|||||
|
Discontinued
operations:
|
|||||||||||||
|
Earnings
(loss) from operations
|
0.11
|
0.36
|
(0.19
|
)
|
0.10
|
||||||||
|
Net
earnings
|
$
|
1.81
|
$
|
2.08
|
$
|
0.77
|
$
|
1.20
|
|||||
|
Diluted:
|
|||||||||||||
|
Net
earnings from continuing operations
|
$
|
1.69
|
$
|
1.70
|
$
|
0.95
|
$
|
1.09
|
|||||
|
Discontinued
operations:
|
|||||||||||||
|
Earnings
(loss) from operations
|
0.11
|
0.36
|
(0.19
|
)
|
0.09
|
||||||||
|
Net
earnings
|
$
|
1.80
|
$
|
2.06
|
$
|
0.76
|
$
|
1.18
|
|||||
|
Weighted
average shares outstanding:
|
|||||||||||||
|
Basic
|
12,884
|
13,287
|
12,882
|
13,272
|
|||||||||
|
Diluted
|
13,457
|
13,473
|
13,506
|
13,460
|
|||||||||
Certain
financial statement amounts have been reclassified in the prior periods to
conform to current period presentation.
4
CHURCHILL
DOWNS INCORPORATED
SUPPLEMENTAL
INFORMATION BY OPERATING UNIT
for
the three and six months ended June 30, 2005 and 2004
(Unaudited)
(In
thousands)
|
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30,
|
|||||||||
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
2004
|
|||
|
Net
revenues by segment:
|
|||||||||||||
|
Kentucky
Operations
|
$
|
79,978
|
$
|
72,451
|
$
|
84,373
|
$
|
77,184
|
|||||
|
Arlington
Park
|
25,095
|
24,774
|
36,450
|
40,829
|
|||||||||
|
Calder
Race Course
|
25,511
|
25,152
|
27,421
|
26,951
|
|||||||||
|
Hoosier
Park
|
11,603
|
11,236
|
20,514
|
20,653
|
|||||||||
|
Louisiana
Operations
|
14,820
|
-
|
37,722
|
-
|
|||||||||
|
CDSN
|
25,523
|
26,132
|
34,289
|
27,011
|
|||||||||
|
Total
racing operations
|
182,530
|
159,745
|
240,859
|
192,628
|
|||||||||
|
Other
investments
|
886
|
900
|
1,023
|
1,083
|
|||||||||
|
Corporate
|
1,284
|
1,290
|
1,677
|
1,568
|
|||||||||
|
Eliminations
|
(21,498
|
)
|
(21,776
|
)
|
28,540
|
)
|
(22,490
|
)
|
|||||
|
Net
revenues from continuing operations
|
$
|
163,202
|
$
|
140,159
|
$
|
215,019
|
$
|
172,789
|
|||||
|
Segment
EBITDA and net earnings:
|
|||||||||||||
|
Kentucky
Operations
|
$
|
38,177
|
$
|
30,332
|
$
|
31,576
|
$
|
24,156
|
|||||
|
Arlington
Park
|
2,090
|
2,920
|
439
|
3,324
|
|||||||||
|
Calder
Race Course
|
3,018
|
3,354
|
(2,723
|
)
|
702
|
||||||||
|
Hoosier
Park
|
410
|
493
|
824
|
1,167
|
|||||||||
|
Louisiana
Operations
|
92
|
-
|
1,837
|
-
|
|||||||||
|
CDSN
|
6,184
|
6,264
|
8,317
|
6,131
|
|||||||||
|
Total
racing operations
|
49,971
|
43,363
|
40,270
|
35,480
|
|||||||||
|
Other
investments
|
372
|
632
|
550
|
647
|
|||||||||
|
Corporate
|
(3,696
|
)
|
(1,707
|
)
|
(7,047
|
)
|
(3,794
|
)
|
|||||
|
Total
EBITDA from continuing operations
|
46,647
|
42,288
|
33,773
|
32,333
|
|||||||||
|
Eliminations
|
-
|
(6
|
)
|
-
|
(6
|
)
|
|||||||
|
Depreciation
and amortization
|
(5,974
|
)
|
(3,878
|
)
|
(10,387
|
)
|
(7,712
|
)
|
|||||
|
Interest
income (expense), net
|
(314
|
)
|
(129
|
)
|
(524
|
)
|
(194
|
)
|
|||||
|
Provision
for income taxes
|
(17,681
|
)
|
(15,398
|
)
|
(10,042
|
)
|
(9,773
|
)
|
|||||
|
Net
earnings from continuing operations
|
22,678
|
22,877
|
12,820
|
14,648
|
|||||||||
|
Discontinued
operations, net of income taxes
|
1,508
|
4,819
|
(2,531
|
)
|
1,302
|
||||||||
|
Net
earnings
|
$
|
24,186
|
$
|
27,696
|
$
|
10,289
|
$
|
15,950
|
|
||||
5
|
CHURCHILL
DOWNS INCORPORATED
|
|||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|||||||
|
(Unaudited)
|
|||||||
|
(in
thousands)
|
|||||||
|
June
30,
2005
|
December
31, 2004
|
||||||
|
ASSETS
|
|||||||
|
Current
assets:
|
|||||||
|
Cash and cash equivalents
|
$
|
14,568
|
$
|
26,487
|
|||
|
Restricted cash
|
9,107
|
7,267
|
|||||
|
Accounts receivable, net
|
35,544
|
41,121
|
|||||
|
Deferred
income taxes
|
3,618
|
3,940
|
|||||
|
Other
current assets
|
6,615
|
3,589
|
|||||
|
Assets
held for sale
|
167,380
|
145,034
|
|||||
|
Total
current assets
|
236,832
|
227,438
|
|||||
|
Other assets
|
17,678
|
17,105
|
|||||
|
Plant and equipment, net
|
348,604
|
324,738
|
|||||
|
Goodwill
|
53,528
|
53,528
|
|||||
|
Other intangible assets, net
|
18,660
|
19,149
|
|||||
|
Total
assets
|
$
|
675,302
|
$
|
641,958
|
|||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
37,535
|
$
|
28,872
|
|||
|
Purses
payable
|
17,022
|
8,464
|
|||||
|
Accrued
expenses and other liabilities
|
42,064
|
30,985
|
|||||
|
Dividends
payable
|
-
|
6,430
|
|||||
|
Income
taxes payable
|
4,859
|
96
|
|||||
|
Deferred
revenue
|
7,148
|
25,880
|
|||||
|
Liabilities
associated with assets held for sale
|
29,888
|
11,852
|
|||||
|
Total
current liabilities
|
138,516
|
112,579
|
|||||
|
Long-term
debt
|
237,462
|
242,770
|
|||||
|
Other
liabilities
|
21,876
|
20,424
|
|||||
|
Deferred
revenue
|
18,792
|
19,071
|
|||||
|
Deferred
income taxes
|
8,677
|
8,686
|
|||||
|
Total
liabilities
|
425,323
|
403,530
|
|||||
|
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 12,930 shares
June
30, 2005
and 12,904 shares December 31, 2004
|
115,624
|
114,930
|
|||||
|
Retained
earnings
|
135,902
|
125,613
|
|||||
|
Unearned
compensation
|
(1,762
|
)
|
(1,935
|
)
|
|||
|
Accumulated
other comprehensive income (loss)
|
215
|
(180
|
)
|
||||
|
Total
shareholders' equity
|
249,979
|
238,428
|
|||||
|
Total
liabilities and shareholders' equity
|
$
|
675,302
|
$
|
641,958
|
|||
Certain
financial statement amounts have been reclassified in the prior periods to
conform to current period presentation.
6