On Wednesday, Churchill Downs Incorporated reported results for the fourth
quarter and year ending on December 31, 2008. For the full year, net revenues
from continuing operations grew to $430.6 million, a 5 percent increase from the
prior-year total of $410.7 million. Net revenues from continuing operations for
the fourth quarter of 2008 were $85.9 million, down 3 percent from the previous
year total of $89.1 million.
Net revenues from continuing operations for the year increased as both the
company’s On-line Business and its Gaming Business experienced a full year of
operations in 2008, compared to a partial year of operations in 2007. These
increases were partially offset by decreased revenues at Calder Race Course,
caused primarily by the decision of certain horsemen’s groups to withhold
consent to import or export racing signals during a portion of 2008.
Net earnings from continuing operations for 2008 increased to $29.1 million,
or $2.09 per diluted common share, from $17.0 million, or $1.23 per diluted
common share, in 2007. For the fourth quarter of 2008, the company’s net loss
from continuing operations improved to $3.5 million, or $0.26 per diluted common
share, from a net loss from continuing operations of $5.1 million, or $0.38 per
diluted common share, in the same period of 2007. Total EBITDA (earnings before
interest, taxes, depreciation and amortization) increased by 45 percent, or
$25.1 million, from $55.2 million in 2007 to $80.2 million in 2008. Insurance
recoveries increased from $0.8 million in 2007 related to damages incurred at
Calder from Hurricane Wilma to $17.2 million in 2008 related to damages incurred
at Fair Grounds Race Course from Hurricane Katrina.
The decline in Racing Operations EBITDA, excluding insurance recoveries, of
$6.9 million was driven primarily by lost pari-mutuel wagering at Calder related
to the horsemen’s disputes. An increase in business at Churchill Downs racetrack
from the performance of Kentucky Derby week partially offset this decline.
Gaming EBITDA increased year-over-year by $7.8 million primarily due to a full
year of performance of the slot operations at Fair Grounds, while On-line
Business EBITDA increased year-over-year by $7.8 million as a result of a full
year of performance of TwinSpires, which also benefited from additional racing
content.
President and Chief Executive Officer Robert L. Evans said the Company
continued to improve its financial results in 2008 and make progress on
strategic initiatives designed to generate further growth.
“Despite a challenging economy in 2008, we continued to grow revenues and
manage our cost structure proactively, which led to strong full-year results for
the Company,” Evans said. “Our reported EBITDA of $80.2 million for 2008, a
record high for us, was favorably affected by higher insurance settlements of
$16.4 million related to damages incurred from natural disasters. Excluding
insurance recoveries in both years, company EBITDA increased by 16 percent
year-over-year. We repaid $24.8 million in net bank debt despite spending over
$40 million on new investments like our permanent slot facility in New Orleans.
We ended the year with a strong balance sheet that, we believe, positions us
well for the expected tough economy in 2009 and to pursue growth opportunities.
“We saw the value of our increasingly diversified business mix in 2008, as
gains in our Gaming and On-line business segments more than offset declines in
our Racing Operations. TwinSpires produced $31.7 million more in additional
revenue than in 2007 as a result of a full year of operations in 2008, as well
as customers increasingly choosing to wager on-line. In addition, our Gaming
Business, buoyed by a full year of operations and the opening of our permanent
slot facility at Fair Grounds in November 2008, produced $21.5 million more in
revenues in 2008 than in 2007. Average daily gross win per unit remains at $250
through the first two months of 2009. Our Gaming and On-line businesses together
accounted for approximately 24 percent of our net revenues from continuing
operations and 31 percent of our EBITDA in 2008.
“We continue to work through the design, planning, permitting and licensing
processes for the construction of an up-to-2,000 slot machine facility at
Calder,” Evans continued. “We currently plan to build a stand-alone,
approximately 100,000 square-foot facility that we hope to open prior to the
holidays in 2009 if all goes according to schedule. Including machine
acquisition, we plan to invest approximately $85 million in this project. We
will adjust and finalize our plan and timeline in light of the ongoing
discussions in Tallahassee regarding a competitive tax structure for the South
Florida pari-mutuels. We also continue to pursue expanded gaming in Kentucky and
Illinois in an effort to remain competitive with surrounding states and with
other gaming opportunities available to our customers.
“In November of 2008, the company’s board of directors approved a new
strategy for Churchill Downs Incorporated. It is our intention, building on our
leadership position in Thoroughbred racing, to become the leading provider of
integrated racing, gaming and entertainment, delivered at our racetracks,
off-track betting facilities, casinos and other venues, as well as on-line via
Twinspires.com, BRISnet.com and other Web sites. We believe the best way to
maintain our leadership position in racing is to first ensure that we remain a
growing, profitable and financially sound business, and second, to look for new
and innovative ways to design and market racing to a broader audience. 2008 saw
the introduction of several new initiatives intended to grow racing, including
the launch of the industry’s first Internet protocol television network for
racing, Twinspires.tv, the introduction of the first high-definition simulcast
television broadcast of any racetrack in the United States, and the announcement
of the return of the Breeders’ Cup World Championships to Churchill Downs in
2010 for a record seventh time.
“As another example of our ongoing commitment to racing, we announced on
March 2 that we will invest an additional $1 million or more annually in a
series of groundbreaking new rules, actions and policies designed to enhance the
safety and welfare of every horse and jockey that will compete not only in
Kentucky Derby 135 on May 2, but in each of the over 4,000 races conducted
annually at CDI racetracks. We hope every racetrack in the U.S. will join us in
raising the level of safety in our industry,” Evans concluded.
A conference call regarding this news release is scheduled for Thursday at 9
a.m. (EDT). Investors and other interested parties may listen to the
teleconference by accessing the on-line, real-time webcast and broadcast of the
call at www.churchilldownsincorporated.com or www.earnings.com, or by dialing
(800) 591-6930 and entering the pass code 30991120 at least 10 minutes before
the appointed time. The on-line replay will be available at approximately noon
and continue for two weeks. A two-week telephonic replay will be available one
hour after the call ends by dialing (888) 286-8010 and entering 21549002 when
prompted for the access code. 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.