Churchill Downs Reports Record Net Revenues

Strong Derby week, online wagering business, and new casino help account for growth.

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.