Churchill Downs Reports Record Net Revenues

Bolstered by strong numbers during Kentucky Derby week, strength in its online wagering business, and acquisition of a new casino, Churchill Downs Inc. reported record $732.4 million in net revenues from continuing operations for 2012.

According to the annual and fourth quarter results released Feb. 27 by the Louisville, Ky.-based racetrack and gaming company, net revenues last year reflected a 5% increase over the $696.9 million figure for 2011.

CDI reported net revenues from racing operations increased $3.2 million during 2012, reflecting an increase in revenues from the week in which the Kentucky Derby Presented by Yum! Brands (gr. I) and Kentucky Oaks (gr. I) were run, and a 4% increase in the number of live race days run at company-owned tracks.

The company said earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2012 declined 5% compared to EBITDA recorded during 2011. The difference was primarily due to the recognition of $19.3 million in net proceeds from the Illinois Horse Racing Equity Trust Fund in 2011. 
 
Racing operations EBITDA decreased $13.5 million over the previous year, primarily from the HRE Trust Fund difference. Partially offsetting these declines was increased profitability of $5.4 million from the Kentucky Oaks and Derby week related to improvements in admissions, sponsorships, and pari-mutuel revenues during the year ended Dec. 31, 2012, according to CDI.

The company's gaming segment increased $10.5 million in 2012, primarily due to $10.3 million of net revenues generated by Riverwalk Casino Hotel, acquired in October 2012, and an increase of $3.4 million at Harlow's Casino Resort & Spa, which was closed for 25 days during the same period of 2011 due to damage sustained from Mississippi River flooding. The earnings report said these increases were partially offset by a $5 million decline in net revenues at Calder Casino during the year due to increased regional competitive pressure from the opening of a new casino in Miami during January 2012, "along with what we believe to be a weak South Florida economy." 
 
Net revenues generated by CDI's online business increased 11%, or $17.9 million, to $183.3 million in 2012, compared to the previous year, reflecting an increase in online business handle of 10.9%.
 
Net earnings from continuing operations for 2012 were $58.3 million, or $3.34 per diluted common share, compared to net earnings from continuing operations of $60.8 million, or $3.55 per diluted common share, in 2011.

For the fourth quarter, net revenues from the racing segment declined 7% to $48.5 million, from $52.1 million in 2011, primarily due to Churchill Downs hosting the Breeders' Cup World Championships in 2011.

Quarterly gaming net revenues increased 21% to $62.9 million, from $52.2 million, and online business net revenues increased 2% to $40.9 million, during the quarter. CDI said the online business increase during the quarter was driven by a 4.3% increase in pari-mutuel handle and continuing growth in customers at TwinSpires.com.

"CDI's strong performance in 2012 was reflected in the 27.5% increase in the market price of Churchill Downs common stock from $52.13 at the end of 2011 to $66.45 at the end of 2012, and our second, consecutive 20% dividend increase, from $0.60 to $0.72 per share," said CDI chairman and CEO Robert L. Evans in a release.

Corporate EBITDA decreased by $5.8 million in 2012 due to higher long-term compensation expenses related to the 2012 financial performance of the company and the impact of a non-recurring gain of $2.7 million related to a financial note conversion during 2011.