Calling it a “tease” with details to follow later, Churchill Downs Inc. chairman and CEO Robert Evans said March 13 the company plans to construct "The Mansion" at its flagship track in Louisville in time for the 2013 Kentucky Derby Presented by Yum! Brands (gr. I) and Kentucky Oaks (gr. I).
“We will be making some exciting changes to the Churchill Downs property later this year that we hope will favorably affect our Derby and Oaks financials starting in 2013,” Evans said during a conference call with stock analysts to discuss CDI’s earnings that were released March 12. “We will announce those changes after this year’s Oaks and Derby. Coming for Oaks and Derby in 2013: ‘The Mansion at Churchill Downs’.”
Evans announced the upcoming development after reaffirming CDI’s commitment to Kentucky racing despite a setback during the current session of the state Legislature. The state Senate, led by Senate President David Williams’ opposition, voted down a bill that would have allowed a constitutional amendment on casino gambling on the November general election ballot.
“While the issue (of casino gambling) might not be dead in 2012, it looks as though we will have to continue to fight in 2013 and if necessary beyond that. There are other states in which we can invest our capital in gaming. From a purely rationale perspective, I suppose we should just pursue those and abandon hope of getting it done in Illinois and Kentucky. But frankly, we just can’t do that. Thoroughbred racing is such a part of Kentucky’s heritage and Churchill Downs’ history, we can’t just walk away. This year is Churchill Downs’ 138th year in business in Kentucky and we plan on being here at least another 138. So we lost this round, but we’re not defeated.
“We not only plan to keep coming back but to increase the resources and attention we devote to this issue until we get it done,” Evans said. “Every time we poll the people of Kentucky they have supported expanded gaming by a margin of 2 to 1. Eventually, those in Frankfort are going to have to listen and act on the will of the people. Meanwhile, we will look for gaming opportunities outside the state of Kentucky and Illinois.”
After explaining how CDI’s business model has changed since 2000 from one that derived most of its revenues from live racing and simulcasting to one now dominated by alternative and online gaming, Evans said the publicly held company has diversified in order to remain profitable to its shareholders.
“To millions of people worldwide, Churchill Downs means the Kentucky Derby, the Kentucky Oaks,” Evans said. “Churchill Downs means Thoroughbred racing. While that is what our brands mean, it no longer is our business model in terms of how we will grow and earn an acceptable return on our shareholders’ investments. Our business model has changed dramatically.”
"With the number of racetracks owned by Churchill decreasing from seven to four now and with about 41% fewer live racing dates scheduled at its tracks in 2012 when compared with a decade ago, Churchill was left with an unprofitable business of conducting live racing, excluding the Oaks and Derby, and the unprofitable business of conducting simulcasting when we’re not racing live,” he said.
Evans said Churchill is seeing favorable numbers for this year’s Derby and Oaks, with sponsorships and personal seat license sales running ahead of last year’s robust numbers. He added, however, that admission revenues are driven by sales on the days of the events and that those are dictated by weather.
“If those trends hold, and there is no way to know if that will be the case or not, this year’s Oaks and Derby financial performance should be strong,” Evans said..
Evans said the company remains optimistic about achieving a favorable outcome with regard to casino type gaming at racetracks in Illinois.
“On the expanded gaming front in Illinois, there is considerable behind the scenes work going on in trying to get a gaming bill either the governor will sign or one that will allow the Illinois legislature to override his veto,” Evans said. “We are not supportive of the subsidy concept that has been discussed extensively. The subsidy approach has been tried over the past six years and despite spending hundreds of thousands of dollars in legal fees, we still have not received all of the subsidy money.
“We continue to be amazed at political leaders in a state that so desperately needs additional tax revenues would prefer new subsidies to the racing industry rather than Senate Bill 1849 which provides new tax revenues from the racing industry and creates thousand of new jobs.”