Churchill Downs Incorporated Reports 2011 Third-Quarter Results

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  • Net Revenues from Continuing Operations Grow 13 Percent, Reach New Q3 High
  • EBITDA More Than Doubles From Prior-Year Period
  • Growth in Gaming and Online Business Segments Fuels Higher Earnings

Churchill Downs Incorporated (“CDI” or “the Company”) (NASDAQ: CHDN) today reported business results for the third quarter and nine months ended Sept. 30, 2011.

Net revenues from continuing operations set a new record for the third quarter, climbing to $166.3 million, up 13 percent from the $147.5 million recorded during the third quarter of 2010. The increase was due primarily to the inclusion of net revenues of $13.4 million generated by Harlow’s Casino Resort & Hotel (“Harlow’s”), which the Company acquired in December 2010, as well as the improved quarter-over-quarter performance of the Calder Casino and the Company’s Online business segment. CDI’s online-wagering company,, experienced a wagering increase of 4.2 percent as compared to the prior-year period, which was partially due to growth in new customers and an increase in average-daily wagering through the platform. During the third quarter of 2011, total wagering on U.S. Thoroughbred races declined an average of 7.4 percent compared to the same period in 2010, according to statistics released by the Equibase Company.

EBITDA (earnings before interest, taxes, depreciation and amortization) for this year’s third quarter more than doubled to $43.0 million from the $17.1 million recorded during the third quarter of 2010.  Significant items affecting CDI’s EBITDA growth include the impact of the receipt of $19.3 million in Illinois Horse Racing Equity Trust Fund proceeds recorded as miscellaneous, other income during the quarter. The Trust Fund monies were related to Illinois riverboat casino impact fees that had been held in escrow pending the resolution of litigation. CDI’s share of the Trust Fund monies contributed to higher Racing Operations EBITDA for the third quarter of 2011. Gaming EBITDA also increased $5.3 million quarter-over-quarter, due to the inclusion of $4.0 million of EBITDA from Harlow’s and an increase of $0.9 million of EBITDA from the Calder Casino. EBITDA from CDI’s Online business grew $4.0 million compared to the year-earlier quarter, due to an increase of $2.2 million in pari-mutuel revenue as well as the impact of charges related to the integration that were recorded during the third quarter of 2010.

Net earnings from continuing operations for the period were $19.7 million, or $1.16 per diluted common share, versus $3.7 million, or $0.22 per diluted common share, in the third quarter of 2010. Net earnings from continuing operations were positively impacted by the continued growth of the Company’s Gaming and Online business segments and the inclusion of Illinois Horse Racing Equity Trust Fund monies during the quarter.

CDI Chairman and Chief Executive Officer Robert L. Evans said, “It was a very good quarter, even when we exclude the impact of the Illinois Horse Racing Equity Trust Fund proceeds. Once again, the decline in net revenues and EBITDA—excluding those Trust Fund proceeds—in our Racing Operations was more than offset by significant gains in our Online and Gaming businesses. We used the resulting cash flow to pay down another $28.6 million in long-term debt during the third quarter, bringing our debt reduction for the first nine months of the year to $108.8 million.”

A conference call regarding this news release is scheduled for Thursday, Oct. 27, 2011, 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  or by dialing (877) 372-0878 and entering the conference ID number 52962986 at least 10 minutes before the appointed time. International callers should dial (253) 237-1169. An online replay of the call will be available at by noon EDT. A copy of the Churchill Downs Incorporated’s news release announcing quarterly results and relevant financial and statistical information about the period will be accessible at

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), CDI 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.  CDI 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.  A reconciliation of EBITDA to net earnings is included in the Supplemental Information by Operating Unit table within this news release.

Churchill Downs Incorporated (“CDI”) (NASDAQ:  CHDN), headquartered in Louisville, Ky., owns and operates the world-renowned Churchill Downs Racetrack, home of the Kentucky Derby and Kentucky Oaks, as well as racetrack and casino operations and a poker room in Miami Gardens, Fla.; racetrack, casino and video poker operations in New Orleans,. La.; racetrack operations in Arlington Heights, Ill.; and a casino resort in Greenville, Miss. CDI also owns the country's premier account-wagering company,, and other advance-deposit wagering providers; the totalizator company, United Tote; and a collection of racing-related telecommunications and data companies. Information about CDI can be found online at

Information set forth in this discussion and analysis 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, including any disruptions in the credit markets; a decrease in consumers’ discretionary income; the effect (including possible increases in the cost of doing business) resulting from future war and terrorist activities or political uncertainties; the overall 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, online gaming and riverboat, cruise ship and land-based casinos) and other sports and entertainment options in the markets in which we operate; our ability to maintain racing and gaming licenses to conduct our businesses; the impact of live racing day competition with other Florida, Illinois and Louisiana racetracks within those respective markets; the impact of higher purses and other incentives in states that compete with our racetracks; 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; changes in Kentucky, Florida, Illinois or Louisiana law or regulations that impact revenues or costs of racing operations in those states; the presence of wagering and gaming operations at other states’ racetracks and casinos near our operations; our continued ability to effectively compete for the country’s horses and trainers necessary to achieve full field horse races; our continued ability to grow our share of the interstate simulcast market and obtain the consents of horsemen’s groups to interstate simulcasting; our ability to enter into agreements with other industry constituents for the purchase and sale of racing content for wagering purposes; our ability to execute our acquisition strategy and to complete or successfully operate planned expansion projects; our ability to successfully complete any divestiture transaction; market reaction to our expansion projects; the inability of our totalisator company, United Tote, to maintain its processes accurately or keep its technology current; our accountability for environmental contamination; the ability of our online business to prevent security breaches within its online technologies; the loss of key personnel; the impact of natural and other disasters on our operations and our ability to obtain insurance recoveries in respect of such losses (including losses related to business interruption); our ability to integrate any businesses we acquire into our existing operations, including our ability to maintain revenues at historic levels and achieve anticipated cost savings; the impact of wagering laws, including changes in laws or enforcement of those laws by regulatory agencies; the outcome of pending or threatened litigation; changes in our relationships with horsemen's groups and their memberships; our ability to reach agreement with horsemen's groups on future purse and other agreements (including, without limiting, agreements on sharing of revenues from gaming and advance deposit wagering); the effect of claims of third parties to intellectual property rights; and the volatility of our stock price.

The reader should read this discussion in conjunction with the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended Dec. 31, 2010, for further information, including Part I – Item 1A, "Risk Factors" for a discussion regarding some of the reasons that actual results may be materially different from those we anticipate, as modified by Part II – Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.