Churchill Downs Inc. (CDI) on Monday reported results for the third quarter
and nine months ended September 30, 2012.
Net revenues from continuing operations for the third quarter of 2012 declined 1 percent, or $1.5 million, to $164.9 million compared to the same period of the prior year. Third quarter EBITDA (earnings before interest, taxes, depreciation and amortization) declined to $21.3 million, from $43.0 million, during the third quarter of 2011. Net earnings from continued operations for the period were $6.0 million, or $0.34 per diluted common share, a decrease of 70 percent from net earnings from continued operations of $19.7 million, or $1.16 per diluted common share, during the third quarter of 2011. The decline in EBITDA and net earnings was predominately the result of the $19.3 million in Illinois Horse Racing Equity Trust Fund payments that were received in the third quarter of 2011.
Online Business (consisting of Twinspires.com, Luckity.com, Velocity and the Company's equity investment in HRTV) net revenues for the third quarter increased 9 percent over the same period of the prior year to $45.6 million. CDI's online wagering company, TwinSpires.com, reported a handle increase of 10.6 percent, or $20.5 million, compared to 2.2 percent growth of total U.S. Thoroughbred industry wagering for the same period, according to Equibase.com.
Despite growth in TwinSpires.com revenue and handle, third-quarter Online Business EBITDA declined $0.8 million, or 8 percent, primarily due to $1.0 million of expenditures related to the launch of the Company's new real money gaming site, Luckity.com, and the continuation of spending on the development of an exchange wagering platform; increased losses of $0.4 million from our equity investment in horseracing television network HRTV; and severance and other non-recurring costs of $0.6 million.
Racing Operations revenues decreased 6 percent, or $3.9 million, due to three fewer racing days at Churchill Downs Racetrack and weather-related cancellations at Calder Race Course. Racing Operations EBITDA decreased $19.5 million, due to the impact of recognizing $19.3 million from the Illinois Horse Racing Equity Trust Fund along with recognition of insurance proceeds net of losses of $0.6 million during 2011's third quarter. Partially offsetting these prior year items were EBITDA improvements as operating efficiencies from cost control measures more than offset the fewer live race days and weather-related cancellations.
Gaming revenues decreased $2.4 million, or 5 percent, during the quarter largely due to continued competition in the South Florida market and the closure of the Company's casino and video poker operations in New Orleans for five days in September as the result of Hurricane Isaac. Gaming EBITDA decreased $1.1 million driven primarily by revenue losses at Calder Casino.
CDI Chairman and Chief Executive Officer Robert L. Evans said the Company made a lot of progress building its portfolio of growth opportunities in the third quarter and in the few weeks since.
"We hope to see the revenue and EBITDA growth impact of these new opportunities starting in the fourth quarter of this year, and into 2013 and 2014, including our decision to proceed with construction of our joint venture casino project near Lebanon, Ohio; the completion of the acquisition of Riverwalk Casino Hotel; the launch of the real-money gaming site, Luckity.com; and significant progress on the $15 million renovation and rebuilding of Harlow's following the 2011 Mississippi River flood which we expect to complete by year-end," Evans said.
"We are also pleased with the construction progress at Churchill Downs Racetrack including the new ultra-luxury area known as The Mansion, which is 93 percent sold or committed under three- to seven-year contracts, and the new Paddock Plaza area that will add over 200 upper-price-range seats to our inventory for various big events next year including the Kentucky Derby, the Kentucky Oaks and our night racing and other events," Evans concluded.
A conference call regarding this news release is scheduled for Tuesday 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.earnings.com, or by dialing (877) 372-0878 and entering the pass code 59454442 at least 10 minutes before the appointed time. International callers should dial (253) 237-1169. A copy of the Company's news release announcing quarterly results and relevant financial and statistical information about the period will be accessible at the CDI website.
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"). Churchill Downs Incorporated 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, the Company's operating performance in a meaningful and consistent manner. This non-GAAP measurement is not intended to replace the presentation of the Company's financial results in accordance with GAAP.