Churchill Downs Incorporated Reports 2004 Fourth-Quarter/Year-end Results

Churchill Downs Incorporated (NASDAQ: CHDN) (“CDI” or “Company”) today reported earnings results for the fourth quarter and year ended Dec. 31, 2004.

Net revenues for the year totaled $463.1 million, a 4.3-percent increase from revenues of $444.1 million in 2003. Net earnings totaled $0.67 per fully diluted share, compared with $1.75 per fully diluted share in 2003. The 2004 results included a one-time, $1.6 million gain from the sale of a portion of the Company’s ownership in Kentucky Downs offset by $5.9 million in expenses related to alternative gaming ballot initiatives, $6.2 million in non-cash impairment charges at Ellis Park, and a $4.3 million non-cash, unrealized loss related to the terms of a convertible note issued in the fourth quarter.

For the fourth quarter of 2004, the Company reported net revenues of $116.1 million, an increase of 17.5 percent from the $98.8 million reported during the same period in 2003. The net loss was $3.2 million, or ($0.25) per diluted share, versus a loss of $389,000 or ($0.03) per diluted share in the fourth quarter of 2003. The results include the non-cash, $4.3 million mark-to-market, unrealized loss related to the terms of a convertible note issued in the fourth quarter of 2004.

Thomas H. Meeker, CDI’s president and chief executive officer, described 2004 as a pivotal year for the Company. “Our 2004 performance was strong across our operations, especially when looking beyond the unusual items that reduced our earnings by approximately $0.98 per share,” stated Meeker. “In 2004 we grew our revenues, maintained our gross profit margin of 17 percent and generated EBITDA of more than $50 million.

“We also achieved several key objectives over the course of the year. We acquired Fair Grounds Race Course and in the process gained first quarter racing and an entry into the ‘racino’ business. We gained statewide approval to pursue alternative gaming in Florida, and despite a setback at the local level, remain hopeful that we can win an enabling vote in 2007. We continued the build out of our Customer Relationship Management (“CRM”) platform, and have nearly completed the renovations at Churchill Downs racetrack, where sales of our new luxury suites and personal seat licenses more than exceeded our expectations. These achievements are significant examples of steps we are taking to position our Company for future growth.

“In 2005, we anticipate an exceptional Kentucky Derby and Oaks in our newly renovated Churchill Downs facility, improvement in our simulcast sales and initial returns from our CRM initiative,” Meeker continued. “We also will continue to aggressively pursue additional opportunities to build shareholder value, including ongoing development initiatives, exploration of options to maximize our Hollywood Park asset, and the potential incorporation of slot machines at Fair Grounds in 2006.”

Meeker concluded, “Because of the unpredictable nature of these development-related activities, both in the coming years and the recent past, providing guidance on an earnings per share (“EPS”) basis has proven to be more and more difficult and less meaningful. Consequently, we have made a decision to suspend our practice of assigning an EPS target to our various reporting periods. We will continue to provide updates on business trends, operational results and ongoing development initiatives, but will not attempt to quantify their impact through EPS guidance.”

Note: As part of the 2004 internal controls review mandated by Sarbanes Oxley, the Company identified two material weaknesses in its controls and disclosed them in the Form 10-K filed for the period discussed in this press release. One of these issues has been resolved and is no longer a material weakness. The second involves the controls and audit procedures of our tote vendors, and will be resolved by Dec. 31, 2005.

A conference call regarding this release is scheduled for Thursday, March 17, 2005, beginning 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.fulldisclosure.com or by calling (719) 457-2727 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 5620447 when prompted for the access code. A copy of this press 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 involve risks and uncertainties that could cause our actual operating results and financial condition to differ materially. 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; the effect of any change in the Company’s 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 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 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; our accountability for environmental contamination; the loss of key personnel and the volatility of our stock price.