Churchill Downs Incorporated Reports Second-Quarter Earnings

Churchill Downs Incorporated ("CDI" or "Company") (NASDAQ: CHDN) today reported results for the second quarter and six months ended June 30, 2005.

Net earnings for the second quarter were $24.2 million or $1.80 per share diluted, compared to $27.7 million or $2.06 per share diluted for the same period in 2004. The change year-over-year reflects higher depreciation costs; an additional $2.5 million in interest expense; and a higher tax rate due to increased legislative expenses; and nearly $1 million in development costs associated with the pending sale of the Hollywood Park assets.

On July 6, 2005, CDI announced that it had reached a definitive agreement to sell its Hollywood Park horse racing facility to Bay Meadows Land Company, LLC. Due to this pending transaction, results for Hollywood Park are treated as discontinued operations and detailed as such in the accompanying tables.

Net revenues from continuing operations for the second quarter reached $163.2 million, an increase of 16.4 percent compared with $140.2 million for the same period last year. Net earnings from continuing operations for the quarter were $22.7 million, a decline of less than one percent from $22.9 million for the same period a year ago. Diluted earnings per share from continuing operations totaled $1.69, compared with $1.70 for the second quarter of 2004. Results for the first half of 2005 are outlined in the accompanying tables.

Thomas H. Meeker, CDI's president and chief executive officer, said the Company delivered solid results despite significant expenses during the quarter and weakness across the racing industry. "The strength of the Kentucky Derby, Kentucky Oaks and other marquee events helped offset some of the soft business levels affecting our facilities and racing in general. Factors such as rain, excessive heat and various equine-related illnesses contributed to smaller field sizes that, in turn, led to declines in wagering.

"Going forward, we expect to continue to encounter smaller field sizes and other problems affecting the industry. As this time, we anticipate business levels for the balance of the year to approximate those experienced in the latter half of 2004, after factoring in the impact of the Hollywood Park divestiture."

Meeker added, "Longer term, we are heartened by our progress on strategic initiatives and the potential growth channels they create for the Company. For example, we made steady advances with regard to alternative gaming at Fair Grounds, in both the slots approval process and the rollout of new video poker machines. While the benefits of these efforts are not being fully realized in 2005, we now anticipate that they will materialize in 2006 and 2007."

"Finally, the Hollywood Park transaction represents a major strategic win for us. We were faced with an asset in a troublesome market at a huge competitive disadvantage without alternative gaming. We were able to negotiate a sale that provides a very attractive price and the opportunity to re-enter this market should the gaming landscape change. We are reviewing the best alternatives for the use of this capital, but at a minimum, we have created the opportunity to reduce our current debt by a range of $190 million to $200 million," concluded Meeker.

A conference call regarding this release is scheduled for Wednesday, Aug. 3, 2005, beginning at 9 a.m. EDT. 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/investor_relations or www.fulldisclosure.com, or by calling (312) 461-9253 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 9290204 when prompted for the access code. A copy of the Company's news 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.