Churchill Downs Incorporated (CDI) released their results for the second
quarter and six months ending on June 30, 2009. Net earnings from continuing
operations for the quarter grew 5 percent to $30.9 million, or $2.20 per diluted
common share, compared to net earnings from continuing operations of $29.4
million, or $2.10 per diluted common share, for the same period in 2008. CDI’s
earnings before interest, taxes, depreciation and amortization (EBITDA) also
grew quarter-over-quarter from $57.5 million in 2008 to $58.6 million in 2009,
an increase of 2 percent. The primary drivers for the year-over-year increases
in both net earnings and EBITDA from continuing operations were the continued
growth of the company’s online business, including the advance-deposit wagering
(ADW) platform, TwinSpires.com, which posted gains in net revenues from
continuing operations of 35 percent compared to the prior period, and the growth
of the company’s gaming business in Louisiana, which improved its
quarter-over-quarter net revenues from continuing operations by 31 percent.
Net revenues from continuing operations for the second quarter of 2009
increased slightly to $180.0 million from $179.3 million recorded during the
second quarter of 2008. The growth of the company’s online and gaming businesses
primarily fueled the period-over-period increase in net revenues from continuing
operations. That growth was partially offset by a decline in corporate
hospitality and admissions revenues generated by Kentucky Derby week, the loss
of six racing dates at Churchill Downs driven by a reduced number of entries
that resulted in lower wagering revenues, as well as lower pari-mutuel revenues
at Arlington Park and Fair Grounds, which the Company believes is attributable
to the general weakness of the U.S. economy.
Churchill Downs Incorporated President and Chief Executive Officer Robert L.
Evans said, “Despite a tough economy, our company’s investments in slot-machine
gaming and online businesses have helped Churchill Downs Incorporated grow
second-quarter net revenues and net earnings from continuing operations
year-over-year while also mitigating the continued declines in our Racing
Operations. Our signature racing events, the Kentucky Derby (G1) and Kentucky
Oaks (G1), were not immune to the ongoing recession as many of our corporate
clients elected to reduce their 2009 Derby-related marketing and hospitality
expenditures. As a result, our profitability from Kentucky Derby week declined
by $3.2 million compared to one year ago. We believe this decline occurred under
extraordinary economic conditions, and we remain encouraged by the strength of
Derby weekend’s other key metrics, including a combined Derby and Oaks on-track
attendance of 258,403; two-day total wagering of $186.0 million; and a
phenomenal 9.8 national television rating for NBC’s broadcast of the Kentucky
Derby race segment, the highest TV rating for the race in 17 years.
“While total U.S. wagering on horse racing for the second quarter of 2009
declined by 11 percent compared to the prior period according to figures
published by Equibase, total handle on Churchill Downs Incorporated races dipped
by 3 percent during the same period as handle growth through our ADW business
helped offset wagering declines at the majority of our racetracks and off-track
betting facilities. From April through June 2009, TwinSpires.com experienced an
expansion in average daily wagering and average daily active users.
“One of the highlights of the quarter was our experiment with night racing at
Churchill Downs Racetrack,” Evans continued. “Lights certainly added a new
dimension to our core product on the track, and the great variety of amenities
and activities offered throughout our facility — from red carpet entrances and
gourmet dinners to a paddock dance club and the ‘Bet Or No Bet’ wagering
promotion — attracted 89,115 guests over three evenings and presented horse
racing as a fresh and ‘buzz worthy’ entertainment option. We were thrilled with
our customers’ responses to these innovations and to learn that ‘Downs After
Dark’ had strong appeal for both veteran and novice fans. We are currently
examining the financial results of our night racing experiment, and with newly
appointed Churchill Downs Racetrack President Kevin Flanery, we will soon
determine whether to make night racing a staple of our entertainment offerings.
“June 2009 brought the start of construction on our new slot-machine gaming
facility at Calder Casino and Race Course in Miami Gardens, Florida. The
108,000-square foot facility will be adjacent to the racing operation’s
grandstand building and will initially offer 1,225 slot machines. Calder’s new
gaming facility is scheduled to open early next year.
“The month of June also brought a significant disappointment for the entire
Kentucky horse racing industry when the Kentucky Senate President and his
supporters blocked passage of House Bill 2 out of committee during a special
session called by Gov. Steve Beshear. This action killed legislation that would
have authorized video lottery terminals at Kentucky’s racetracks and would have
allowed the state’s signature industry to compete on a level playing field.
Without this kind of gaming legislation, horse racing in Kentucky will continue
to fall behind other states with slots-fed purses. We will continue to work with
state lawmakers — regardless of their party affiliation — to pass this
legislation and help Kentucky’s largest agribusiness overcome this competitive
disadvantage.”