Churchill Downs Incorporated Reports 2006 Third-Quarter Results

Churchill Downs Incorporated (NASDAQ: CHDN) (“CDI” or “Company”) today reported results for the third quarter and nine months ended Sept. 30, 2006.

Net revenues from continuing operations for the third quarter were $106.4 million, an increase of 4.6 percent over net revenues from continuing operations of $101.7 million one year earlier. Net earnings from continuing operations for the third quarter were $2.7 million, or $0.20 per diluted share, down 15.6 percent from net earnings from continuing operations of $3.2 million, or $0.23 per diluted share, during the same period in 2005. Results from the third quarter and first nine months of 2006 are outlined in the accompanying tables.

Net revenues from continuing operations for the first nine months of 2006 were $324.7 million, up 3.0 percent from $315.1 million during the first nine months of 2005. Net earnings from continuing operations for the nine months ended Sept. 30, 2006, were $26.9 million, or $1.97 per diluted share, up 56.4 percent from $17.2 million, or $1.27 per diluted share, a year earlier.

During the quarter, CDI completed the sale of Ellis Park, a racetrack in Henderson, Ky., to a company owned by Kentucky businessman Ron Geary. Results from Ellis Park are treated as discontinued operations and detailed as such in the accompanying tables.

Robert L. Evans, who assumed his new role as CDI’s president and chief executive officer on Aug. 14, credited the year-over-year growth in net revenues to the strong performance posted by the Company’s Louisiana Operations. “We remain encouraged by the solid results delivered by our video poker and simulcast-wagering operations in Louisiana, which continue to outperform their pre-Hurricane Katrina business levels,” said Evans. “Repairs to Fair Grounds Race Course are nearing completion, and we look forward to bringing live horse racing back to the New Orleans community when the historic track reopens on Thanksgiving Day.

“All of our operating units showed improvement in the quarter with the exception of Arlington Park, where a high level of on-track horse injuries and the related publicity appeared to depress field sizes, attendance and, in turn, wagering. Multiple independent examinations of the Arlington Park dirt track revealed no causal factors. We are evaluating numerous, significant changes in our racing program and cost structure at Arlington Park to be implemented in time for our 2007 meet.

“In the three months since joining CDI, I have worked with the management team to identify a path for growth for the Company that will involve re-engaging existing customers – and recruiting new fans – by leveraging technological innovations now available to us. In addition, we will pursue alternative gaming opportunities in Louisiana, where we have been authorized to establish a slot machine gaming facility at Fair Grounds, and in other states where such approvals must still be secured. In the coming months, I look forward to briefing investors and other interested parties on the new strategies we intend to pursue.”

A conference call regarding this release is scheduled for Wednesday, Nov. 8, 2006, at 9 a.m. EST. 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 or www.earnings.com, or by dialing (719) 457-2695 at least 10 minutes before the appointed time. The online replay will be available at approximately noon EST and continue for two weeks. A two-week telephonic replay will be available two hours after the call ends by dialing (719) 457-0820 and entering 5677934 when prompted for the access code. A copy of this news release announcing quarterly results and relevant financial and statistical information about 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”), 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. CDI’s five racetracks in Florida, Illinois, Indiana, Kentucky and Louisiana host many of North America’s most prestigious races, including the Kentucky Derby and Kentucky Oaks, Arlington Million, Princess Rooney Handicap, Louisiana Derby and Indiana Derby. CDI racetracks have hosted seven Breeders’ Cup World Championships. 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 Global Select Market under the symbol CHDN and can be found on the Internet at www.churchilldownsincorporated.com.

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 “Act”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the 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. 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 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; 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 and Louisiana racetracks within those respective markets; costs associated with our efforts in support of alternative gaming initiatives; costs associated with Customer Relationship Management initiatives; a substantial change in law or regulations affecting 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; the loss of our totalisator companies or their inability to provide us assurance of the reliability of their internal control processes through Statement on Auditing Standards No. 70 audits 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; the impact of natural disasters, including Hurricanes Katrina, Rita and Wilma on our operations and our ability to adjust the casualty losses through our property and business interruption insurance coverage; any business disruption associated with a natural disaster and/or its aftermath; and the volatility of our stock price.