Kentucky
|
61-0156015
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
Part
I - FINANCIAL INFORMATION
|
Page
|
|
Item 1. |
Financial
Statements
|
|
3
|
||
4
|
||
5
|
||
6
|
||
Item
2.
|
16
|
|
Item
3.
|
34
|
|
Item
4.
|
35
|
|
Part
II - OTHER INFORMATION
|
||
Item
1.
|
36
|
|
Item
2.
|
36
|
|
Item
3.
|
36
|
|
Item
4.
|
36
|
|
Item
5.
|
37
|
|
Item
6.
|
37
|
|
38
|
||
39
|
PART
I.
|
FINANCIAL
INFORMATION
|
ITEM
1.
|
FINANCIAL
STATEMENTS
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$14,568
|
$26,487
|
|||||
Restricted
cash
|
9,107
|
7,267
|
|||||
Accounts
receivable, net of allowance for doubtful accounts of $881 at June
30,
2005 and
December 31, 2004
|
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
|
|
|
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
|
|||||
Other
comprehensive (loss) income, net of tax:
|
|||||||||
Change
in fair value of cash flow
hedges
|
(674
|
)
|
1,320
|
395
|
611
|
||||
Comprehensive
income
|
$23,512
|
$29,016
|
$10,684
|
$16,561
|
|||||
Net
earnings (loss) per common share data:
|
|||||||||
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
|
2005
|
|
2004
|
|||
Cash
flows from operating activities:
|
|||||
Net
earnings
|
$10,289
|
$15,950
|
|||
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
|||||
Depreciation
and amortization
|
13,563
|
10,819
|
|||
Amortization
of discount on convertible note payable
|
210
|
-
|
|||
Amortization
of restricted stock grant
|
198
|
-
|
|||
Unrealized
gain on derivative instruments
|
(410
|
)
|
-
|
||
Loss
on asset disposition
|
72
|
-
|
|||
Increase
(decrease) in cash resulting from changes in operating assets and
liabilities:
|
|||||
Restricted
cash
|
(17,125
|
)
|
(14,478
|
)
|
|
Accounts
receivable
|
(14,766
|
)
|
(19,863
|
)
|
|
Other
current assets
|
(3,482
|
)
|
(3,215
|
)
|
|
Accounts
payable
|
24,143
|
29,824
|
|||
Purses
payable
|
8,558
|
9,448
|
|||
Accrued
expenses and other liabilities
|
10,739
|
10,035
|
|||
Income
taxes payable
|
4,763
|
7,240
|
|||
Deferred
revenue
|
(1,366
|
)
|
(7,121
|
)
|
|
Other
assets and liabilities
|
1,281
|
2,406
|
|||
Net
cash provided by operating activities
|
36,667
|
41,045
|
|||
Cash
flows from investing activities:
|
|||||
Additions
to plant and equipment
|
(32,913
|
)
|
(47,828
|
)
|
|
Proceeds
on sale of fixed assets
|
2
|
-
|
|||
Net
cash used in investing activities
|
(32,911
|
)
|
(47,828
|
)
|
|
Cash
flows from financing activities:
|
|||||
Borrowings
on bank line of credit
|
217,423
|
196,295
|
|||
Repayments
of bank line of credit
|
(222,942
|
)
|
(175,434
|
)
|
|
Repayments
of long-term debt
|
-
|
(1,618
|
)
|
||
Change
in book overdraft
|
1,285
|
15
|
|||
Payment
of dividends
|
(6,430
|
)
|
(6,625
|
)
|
|
Common
stock issued
|
670
|
1,206
|
|||
Net
cash (used in) provided by financing activities
|
(9,994
|
)
|
13,839
|
||
Net
(decrease) increase in cash and cash equivalents
|
(6,238
|
)
|
7,056
|
||
Cash
and cash equivalents, beginning of period
|
27,712
|
16,440
|
|||
Cash
and cash equivalents, end of period
|
21,474
|
23,496
|
|||
Cash
and cash equivalents included in assets held for sale
|
(6,906
|
)
|
(10,287
|
)
|
|
Cash
and cash equivalents in continuing operations
|
$14,568
|
$13,209
|
|||
Cash
paid during the period for:
|
|||||
Interest
|
6,909
|
2,960
|
|||
Income
taxes
|
5,511
|
3,009
|
|||
Schedule
of non-cash activities:
|
|||||
Invoicing
for future events
|
1,208
|
362
|
|||
Plant
and equipment additions included in accounts payable/accrued
expenses
|
4,004
|
5,915
|
|||
Issuance
of common stock in connection with restricted stock plan
|
30
|
-
|
1.
|
Basis
of Presentation
|
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30,
|
|||||
|
|
2005
|
|
2004
|
|
2005
|
2004
|
||
Net
earnings, as reported
|
$24,186
|
$27,696
|
$10,289
|
$15,950
|
|||||
Add:
Stock based compensation expense included
in reported net earnings, net of tax benefit
|
58
|
-
|
115
|
-
|
|||||
Deduct:
Pro forma stock-based compensation
expense, net of tax benefit
|
(318
|
)
|
(681
|
)
|
(635
|
)
|
(869
|
)
|
|
Pro
forma net earnings
|
$23,926
|
$27,015
|
$9,769
|
$15,081
|
|||||
Pro
forma net earnings per common share:
|
|||||||||
Basic
|
$1.79
|
$2.03
|
$0.73
|
$1.14
|
|||||
Diluted
|
$1.78
|
$2.01
|
$0.72
|
$1.12
|
2.
|
Discontinued
Operations
|
§
|
Management,
having the authority to approve the action, commits to a plan to
sell the
assets.
|
§
|
The
assets are available for immediate sale in their present condition
subject
only to terms that are usual and customary for sales of such
assets.
|
§
|
An
active program to locate a buyer and other actions required to
complete
the plan to sell the assets have been
initiated.
|
§
|
The
sale of the assets is probable and transfer of the assets is expected
to
qualify for recognition as a completed sale within one
year.
|
§
|
The
assets are being marketed for sale at a price that is reasonable
in
relation to their current fair market
values.
|
§
|
Actions
required to complete the plan indicate that it is unlikely that
significant changes to the plan will be made or that the plan will
be
withdrawn.
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
Net
revenues
|
$49,369
|
$49,476
|
$53,804
|
$54,575
|
|||||
Operating
expenses
|
38,553
|
37,748
|
47,016
|
46,047
|
|||||
Gross
profit
|
10,816
|
11,728
|
6,788
|
8,528
|
|||||
Selling,
general and administrative expenses
|
2,134
|
1,787
|
3,355
|
3,305
|
|||||
Operating
income
|
8,682
|
9,941
|
3,433
|
5,223
|
|||||
Other
income (expense):
|
|||||||||
Interest
income
|
13
|
10
|
14
|
10
|
|||||
Interest
expense
|
(3,281
|
)
|
(970
|
)
|
(5,633
|
)
|
(2,173
|
)
|
|
Miscellaneous,
net
|
2
|
2
|
2
|
3
|
|||||
(3,266
|
)
|
(958
|
)
|
(5,617
|
)
|
(2,160
|
)
|
||
Earnings
(loss) before provision for income taxes
|
5,416
|
8,983
|
(2,184
|
)
|
3,063
|
||||
Provision
for income taxes
|
(3,908
|
)
|
(4,164
|
)
|
(347
|
)
|
(1,761
|
)
|
|
Net
earnings (loss)
|
$1,508
|
$4,819
|
$(2,531
|
)
|
$1,302
|
|
|
June30,
2005
|
December
31,
2004
|
||
Current assets | |||||
Cash
and cash equivalents
|
$6,906
|
$1,225
|
|||
Restricted
cash
|
15,285
|
-
|
|||
Accounts
receivable
|
12,367
|
9,402
|
|||
Other
current assets
|
957
|
501
|
|||
Plant
and equipment, net
|
131,865
|
133,906
|
|||
Assets
held for sale
|
167,380
|
145,034
|
|||
Current
liabilities:
|
|||||
Accounts
payable
|
22,030
|
5,265
|
|||
Accrued
expenses
|
7,529
|
6,526
|
|||
Deferred
revenue
|
329
|
61
|
|||
Liabilities
associated with assets held for sale
|
29,888
|
11,852
|
|||
Net
assets held for sale
|
$137,492
|
$133,182
|
3.
|
Convertible
Notes Payable
|
December
31, 2004
|
March
7, 2005
|
Change
|
|||
Long
put option
|
$3,413
|
$3,408
|
|
$(5)
|
|
Short
call option
|
(11,410)
|
(11,233)
|
|
177
|
|
Net
derivative financial instrument
|
$(7,997)
|
$(7,825)
|
|
$172
|
4.
|
Earnings
Per
Share
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||
2005
|
|
2004
|
|
2005
|
|
2004
|
|||
Numerator
for basic earnings from continuing operations
per common share:
|
|||||||||
Net
earnings from continuing operations
|
$22,678
|
$22,877
|
$12,820
|
$14,648
|
|||||
Net
earnings from continuing operations allocated to
participating securities
|
(770
|
)
|
-
|
(435
|
)
|
-
|
|||
Numerator
for basic earnings from continuing operations
per common share
|
$21,908
|
$22,877
|
$12,385
|
$14,648
|
|||||
Numerator
for basic earnings per common share:
|
|||||||||
Net
earnings
|
$24,186
|
$27,696
|
$10,289
|
$15,950
|
|||||
Net
earnings allocated to participating securities
|
(821
|
)
|
-
|
(349
|
)
|
-
|
|||
Numerator
for basic earnings per common share
|
$23,365
|
$27,696
|
$9,940
|
$15,950
|
|||||
Numerator
for diluted earnings per common share:
|
|||||||||
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
|
|||||
Denominator
for earnings per common share:
|
|||||||||
Basic
|
12,884
|
13,287
|
12,882
|
13,272
|
|||||
Plus
dilutive effect of stock options
|
120
|
186
|
171
|
188
|
|||||
Plus
dilutive effect of convertible note
|
453
|
-
|
453
|
-
|
|||||
Diluted
|
13,457
|
13,473
|
13,506
|
13,460
|
|||||
Earnings
(loss) per common share:
|
|||||||||
Basic
|
|||||||||
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
|
|||||||||
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
|
5.
|
Segment
Information
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||
2005
|
2004
|
2005
|
2004
|
||||
Net
revenues from external customers:
|
|||||||
Kentucky
Operations
|
$65,244
|
$57,194
|
$69,621
|
$61,927
|
|||
Arlington
Park
|
22,472
|
22,610
|
33,917
|
38,665
|
|||
Calder
Race Course
|
22,812
|
22,170
|
24,430
|
23,685
|
|||
Hoosier
Park
|
11,527
|
11,193
|
20,438
|
20,603
|
|||
Louisiana
Operations
|
14,820
|
-
|
31,387
|
-
|
|||
CDSN
|
25,523
|
26,132
|
34,289
|
27,011
|
|||
Total
racing operations
|
162,398
|
139,299
|
214,082
|
171,891
|
|||
Other
investments
|
206
|
200
|
206
|
238
|
|||
Corporate
|
1,019
|
1,024
|
1,152
|
1,024
|
|||
Net
revenues from continuing operations
|
163,623
|
140,523
|
215,440
|
173,153
|
|||
Discontinued
operations
|
48,948
|
49,112
|
53,383
|
54,211
|
|||
$212,571
|
$189,635
|
$268,823
|
$227,364
|
||||
Inter-company
net revenues:
|
|||||||
Kentucky
Operations
|
$14,734
|
$15,257
|
$14,752
|
$15,257
|
|||
Arlington
Park
|
2,623
|
2,164
|
2,623
|
2,164
|
|||
Calder
Race Course
|
2,699
|
2,982
|
2,991
|
3,266
|
|||
Hoosier
Park
|
76
|
43
|
76
|
50
|
|||
Louisiana
Operations
|
-
|
-
|
6,335
|
-
|
|||
Total
racing operations
|
20,132
|
20,446
|
26,777
|
20,737
|
|||
Other
investments
|
680
|
700
|
817
|
845
|
|||
Corporate
|
265
|
266
|
525
|
544
|
|||
Eliminations
|
(21,498)
|
(21,776)
|
(28,540)
|
(22,490)
|
|||
(421)
|
(364)
|
(421)
|
(364)
|
||||
Discontinued
operations
|
421
|
364
|
421
|
364
|
|||
$
-
|
$
-
|
$
-
|
$
-
|
||||
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
|
June30,
2005
|
December
31,
2005
|
||||||
Total
assets:
|
|||||||
Kentucky
Operations
|
$573,654
|
$572,039
|
|||||
Arlington
Park
|
85,160
|
83,047
|
|||||
Calder
Race Course
|
88,467
|
89,393
|
|||||
Hoosier
Park
|
37,329
|
33,073
|
|||||
Louisiana
Operations
|
72,967
|
74,971
|
|||||
CDSN
|
11,018
|
11,018
|
|||||
Other
investments
|
129,646
|
114,945
|
|||||
Assets
held for sale
|
167,380
|
145,034
|
|||||
1,165,621
|
1,123,520
|
||||||
Eliminations
|
(490,319
|
)
|
(481,562
|
)
|
|||
$675,302
|
$641,958
|
||||||
|
Six
Months Ended June 30,
|
||||||
2005
|
|
2004
|
|||||
Capital
expenditures, net:
|
|||||||
Kentucky
Operations
|
$22,489
|
$40,345
|
|||||
Hollywood
Park
|
1,135
|
3,133
|
|||||
Calder
Race Course
|
1,474
|
2,242
|
|||||
Arlington
Park
|
4,540
|
1,729
|
|||||
Hoosier
Park
|
124
|
372
|
|||||
Louisiana
Operations
|
3,045
|
-
|
|||||
Other
Investments
|
106
|
7
|
|||||
$32,913
|
$47,828
|
6.
|
Recently
Issued Accounting
Pronouncements
|
Three
Months Ended June 30,
|
Change
|
||||||||
(In thousands, except per share data and live race days) |
2005
|
2004
|
$
|
%
|
|||||
Total
pari-mutuel handle
|
$1,182,752
|
$1,175,577
|
$7,175
|
1
|
%
|
||||
Number
of live race days
|
187
|
182
|
5
|
3
|
%
|
||||
Net
pari-mutuel revenues
|
$100,294
|
$92,728
|
$7,566
|
8
|
%
|
||||
Riverboat
subsidy
|
2,700
|
2,708
|
(8
|
)
|
-
|
||||
Other
operating revenues
|
60,208
|
44,723
|
15,485
|
35
|
%
|
||||
Total
net revenues
|
$163,202
|
$140,159
|
$23,043
|
16
|
%
|
||||
Gross
profit
|
$52,850
|
$46,200
|
$6,650
|
14
|
%
|
||||
Gross
margin percentage
|
32
|
%
|
33
|
%
|
|||||
Operating
income
|
$40,389
|
$37,902
|
$2,487
|
7
|
%
|
||||
Net
earnings from continuing operations
|
$22,678
|
$22,877
|
$(199
|
)
|
(1
|
)%
|
|||
Diluted
earnings from continuing operations per share
|
$1.69
|
$1.70
|
§ |
Corporate
expenses increased $2.2 million during the three months ended June
30,
2005 primarily as a result of increased costs associated with our
initiative to attract and retain appropriate personnel to achieve
our
business objectives and increased costs associated with the Customer
Relationship Management ("CRM")
initiative.
|
§ |
Our
effective tax rate rose from 40% to 44% resulting primarily from
the
non-deductibility of legislative initiative
costs.
|
Three
Months Ended June 30,
|
Change
|
|||||||||
(In
thousands)
|
|
2005
|
2004
|
$
|
%
|
|||||
Purse
expenses
|
$41,729
|
$37,881
|
$3,848
|
10
|
%
|
|||||
Riverboat
purse expenses
|
1,336
|
1,344
|
(8
|
)
|
(1
|
)%
|
||||
Depreciation/amortization
|
5,974
|
3,878
|
2,096
|
54
|
%
|
|||||
Other
operating expenses
|
61,313
|
50,856
|
10,457
|
21
|
%
|
|||||
SG&A expenses
|
12,461
|
8,298
|
4,163
|
50
|
%
|
|||||
Total
|
$122,813
|
$102,257
|
$20,556
|
20
|
%
|
|||||
Percent of revenue
|
75
|
%
|
73
|
%
|
Three
Months Ended June
30,
|
Change
|
||||||||
(In thousands) |
2005
|
2004
|
$
|
%
|
|||||
Interest
income
|
$76
|
$75
|
$1
|
1
|
%
|
||||
Interest
expense
|
(390
|
)
|
(204
|
)
|
(186
|
)
|
(91
|
)%
|
|
Unrealized
gain on derivative instruments
|
204
|
-
|
204
|
100
|
%
|
||||
Miscellaneous,
net
|
80
|
502
|
(422
|
)
|
(84
|
)%
|
|||
Other
income (expense)
|
$(30
|
)
|
$373
|
$(403
|
)
|
(108
|
)%
|
||
Provision
for income taxes
|
$(17,681
|
)
|
$(15,398
|
)
|
$(2,283
|
)
|
(15
|
)%
|
|
Effective
tax rate
|
44
|
%
|
40
|
%
|
§ |
During
the three months ended June 30, 2004, we recognized $0.3 million
of
miscellaneous income related to consideration for the extension
of an
option to purchase an interest in Hoosier
Park.
|
§ |
We
recognized an unrealized gain on derivative instruments of $0.2
million
related to changes in the fair market value of embedded derivatives
within
a convertible promissory note issued during the fourth quarter
of
2004.
|
§ |
Our
year-to-date effective tax rate increased from 40% to 44% resulting
from
the non-deductibility of the legislative initiative
costs.
|
|
|
Three
Months Ended June
30,
|
Change
|
||||||
(In thousands)
|
|
2005
|
|
2004
|
|
$
|
|
%
|
|
Kentucky
Operations
|
$79,978
|
$72,451
|
$7,527
|
10
|
%
|
||||
Arlington
Park
|
25,095
|
24,774
|
321
|
1
|
%
|
||||
Calder
Race Course
|
25,511
|
25,152
|
359
|
1
|
%
|
||||
Hoosier
Park
|
11,603
|
11,236
|
367
|
3
|
%
|
||||
Louisiana
Operations
|
14,820
|
-
|
14,820
|
100
|
%
|
||||
CDSN
|
25,523
|
26,132
|
(609
|
)
|
(2
|
)%
|
|||
Total
Racing Operations
|
182,530
|
159,745
|
22,785
|
14
|
%
|
||||
Other
Investments
|
886
|
900
|
(14
|
)
|
(2
|
)%
|
|||
Corporate
|
1,284
|
1,290
|
(6
|
)
|
-
|
||||
Eliminations
|
(21,498
|
)
|
(21,776
|
)
|
278
|
1
|
%
|
||
Net
revenues from continuing operations
|
$163,202
|
$140,159
|
$23,043
|
16
|
%
|
§ |
Net
revenues from Kentucky Operations increased as we realized benefits
from
the opening of the newly renovated Churchill Downs racetrack facility,
including increased attendance during the week of the Kentucky
Derby.
|
§ |
During
the fourth quarter of 2004, we completed our acquisition of the
Louisiana
Operations which contributed $14.8 million to the overall increase
in
revenues.
|
Three
Months Ended June 30,
|
Change
|
||||||||||
(In thousands) |
2005
|
2004
|
$
|
%
|
|||||||
Kentucky
Operations
|
$45,113
|
$44,217
|
$896
|
2
|
%
|
||||||
Arlington
Park
|
24,365
|
22,930
|
1,435
|
6
|
%
|
||||||
Calder
Race Course
|
23,696
|
23,102
|
594
|
3
|
%
|
||||||
Hoosier
Park
|
11,525
|
11,104
|
421
|
4
|
%
|
||||||
Louisiana
Operations
|
16,069
|
-
|
16,069
|
100
|
%
|
||||||
CDSN
|
19,340
|
19,867
|
(527
|
)
|
(3
|
)%
|
|||||
Total
Racing Operations
|
$140,108
|
$121,220
|
$18,888
|
16
|
%
|
||||||
Other
Investments
|
784
|
786
|
(2
|
)
|
-
|
||||||
Corporate
|
5,184
|
3,004
|
2,180
|
73
|
%
|
||||||
Eliminations
|
(23,263
|
)
|
(22,753
|
)
|
(510
|
)
|
(2
|
)%
|
|||
Total
|
$122,813
|
$102,257
|
$20,556
|
20
|
%
|
§ |
Depreciation
expense from Kentucky Operations increased $1.2 million as a result
of
additional depreciation expense related to the newly renovated
Churchill
Downs racetrack facility that was completed during the three months
ended
June 30, 2005.
|
§
|
During
the fourth quarter of 2004, we completed our acquisition of the
Louisiana
Operations, which contributed $16.1 million to the overall increase
in
expenses.
|
§
|
Corporate
expenses increased during the three months ended June 30, 2005
compared to
the three months ended June 30, 2004 primarily as a result of increased
costs associated with our initiative to attract and retain appropriate
personnel to achieve our business objectives and increased costs
associated with the CRM initiative.
|
Three
Months Ended June 30,
|
Change
|
||||||||
(In thousands)
|
|
2005
|
|
2004
|
$
|
%
|
|||
Net
revenues
|
$49,369
|
$49,476
|
$(107
|
)
|
-
|
||||
Operating
expenses
|
38,553
|
37,748
|
805
|
2
|
%
|
||||
Gross
profit
|
10,816
|
11,728
|
(912
|
)
|
(8
|
)%
|
|||
Selling,
general and administrative expenses
|
2,134
|
1,787
|
347
|
19
|
%
|
||||
Operating
income
|
8,682
|
9,941
|
(1,259
|
)
|
(13
|
)%
|
|||
Other
income (expense):
|
|||||||||
Interest
income
|
13
|
10
|
3
|
30
|
%
|
||||
Interest
expense
|
(3,281
|
)
|
(970
|
)
|
(2,311
|
)
|
(238
|
)%
|
|
Miscellaneous,
net
|
2
|
2
|
-
|
-
|
|||||
(3,266
|
)
|
(958
|
)
|
(2,308
|
)
|
(241
|
)%
|
||
Earnings
before provision for income taxes
|
5,416
|
8,983
|
(3,567
|
)
|
40
|
%
|
|||
Provision
for income taxes
|
(3,908
|
)
|
(4,164
|
)
|
256
|
6
|
%
|
||
Net
earnings
|
$1,508
|
$4,819
|
$(3,311
|
)
|
(69
|
)%
|
§
|
SG&A
expenses increased during the three months ended June 30, 2005
as we
recognized higher development expenses in the current year related
to the
sale of the assets of Hollywood Park. During the three months
ended June
30, 2004, we incurred development expenses related to the California
alternative gaming initiative.
|
§
|
Pursuant
to the sale of the assets of Hollywood Park, we are required,
under the
existing debt agreements for the revolving loan facility and
the variable
rate senior notes, to use the proceeds to pay off the debt
balances under
these facilities unless amendments are made to the facilities
that provide
otherwise. As such, all interest expense related to these facilities
has
been allocated to discontinued operations for the three months
ended June
30, 2005 and 2004. Interest expense increased as a result of
additional
borrowings for the acquisition of the Louisiana Operations
as well as a
higher interest rate
environment.
|
Six
Months Ended June 30,
|
Change
|
||||||||||||
( In thousands, except per share data and live race days) |
2005
|
2004
|
$
|
|
%
|
|
|||||||
Total
pari-mutuel handle
|
$1,676,639
|
$1,400,894
|
$275,745
|
20
|
%
|
||||||||
Number
of live race days
|
250
|
192
|
58
|
30
|
%
|
||||||||
Net
pari-mutuel revenues
|
$139,983
|
$118,544
|
$21,439
|
18
|
%
|
||||||||
Riverboat
subsidy
|
5,519
|
5,535
|
(16
|
)
|
-
|
||||||||
Other
operating revenues
|
69,517
|
48,710
|
20,807
|
43
|
%
|
||||||||
Total
net revenues
|
$215,019
|
$172,789
|
$42,230
|
24
|
%
|
||||||||
Gross
profit
|
$47,741
|
$39,636
|
$8,105
|
20
|
%
|
||||||||
Gross
margin percentage
|
22
|
%
|
23
|
%
|
|||||||||
Operating
income
|
$22,359
|
$23,778
|
$(1,419
|
)
|
(6
|
)%
|
|||||||
Net
earnings from continuing operations
|
$12,820
|
$14,648
|
$(1,828
|
)
|
(12
|
)%
|
|||||||
Diluted
earnings from continuing operations per share
|
$0.95
|
$1.09
|
§ |
We
incurred $3.0 million of expenses related to alternative gaming
initiatives in Florida during the six months ended June 30,
2005.
|
§ |
Corporate
expenses increased $3.8 million during the six months ended June
30, 2005
primarily as a result of increased costs associated with our initiative
to
attract and retain appropriate personnel to achieve our business
objectives, increased professional fees related to obtaining compliance
with the Sarbanes-Oxley Act of 2002 and increased costs associated
with
the CRM initiative.
|
§ |
Our
year-to-date effective tax rate rose from 40% to 44% resulting primarily
from the non-deductibility of legislative initiative
costs.
|
Six
Months Ended June 30,
|
Change
|
|||||||||
(In thousands) |
2005
|
2004
|
$
|
%
|
||||||
Purse
expenses
|
$57,444
|
$47,244
|
$10,200
|
22
|
%
|
|||||
Riverboat
purse expenses
|
2,731
|
2,747
|
(16
|
)
|
(1
|
)%
|
||||
Depreciation/amortization
|
10,387
|
7,712
|
2,675
|
35
|
%
|
|||||
Other
operating expenses
|
96,716
|
75,450
|
21,266
|
28
|
%
|
|||||
SG&A
expenses
|
25,382
|
15,858
|
9,524
|
60
|
%
|
|||||
Total
|
$192,660
|
$149,011
|
$43,649
|
29
|
%
|
|||||
Percent
of revenue
|
90
|
%
|
86
|
%
|
|
|
Six
Months Ended June 30,
|
Change
|
|||||||
(In
thousands)
|
|
2005
|
|
2004
|
|
$
|
|
%
|
||
Interest
income
|