Churchill Non-Committal on Instant Racing

Racetrack and gaming company continues to seek acquisitions.

The chairman of Churchill Downs Inc. said July 28 that the racetrack and gaming company may not proceed with installation of Instant Racing machines even after pending litigation is finalized, likely some time in 2012.

During a conference call to address the company’s quarterly earnings report issued the previous day, CDI chairman and CEO Bob Evans reiterated the company’s position that it could not justify a capital expenditure to install the machines used in the electronic games until it was deemed legal.

“We’re still not convinced these machines will be economically competitive in the Louisville market, which already has casino style gaming only 14 miles away at the riverboat casino in Indiana,” Evans said.

The state Attorney General has ruled Instant Racing, a form of electronic gaming that is based on previously run horse races and is technically called “historical racing,” is legal under state laws defining pari-mutuel wagering, which is the type of betting that goes on at racetracks. The Kentucky Horse Racing Commission has approved regulations to allow Instant Racing and is a party to a lawsuit filed by the state’s racetracks seeking a legal ruling on the games’ legality.

Kentucky Downs is in the process of installing 200 Instant Racing machines and Ellis Park has indicated it will follow suit, even before the Court of Appeals has ruled on their legality.

Evans also said that despite a recent Illinois court ruling upholding a tax on the state’s riverboat casinos used to help subsidize the state’s racing industry, the funds remain in escrow until all appeals have been exhausted.

Arlington Park, which is owned by CDI, has received $44.2 million from the tax through the end of the second quarter. Once the funds are available, 60% of the money will be used to increase purses at Arlington Park and the balance goes to Arlington Park itself, Evans said.

“We hold these funds at the direction of the court in an escrow account,” Evans said. “The riverboats have clearly demonstrated they will play this matter out for as long as they can so we may see additional litigation on this in federal or state courts.”

Evans said “is not possible to predict the outcome nor the timing” of legislation that has been passed in Illinois permitting up to 1,200 slot machines at Arlington Park and up to 900 of the gaming devices at Quad City Downs, a now-closed harness track owned by Arlington.

The bill permitting the machines has passed the state Assembly but the Senate president has not sent it to the governor for consideration.

The CDI chairman also declined to predict what might happen in regard to expanded gaming in Kentucky, with Evans noting that nothing is likely to happen until after the fall gubernatorial election between incumbent Steve Beshear and Senate president David Williams. Beshear has been pro-gaming and Williams has previously blocked legislation aimed at allowing alternative gaming at tracks.

With CDI reporting positive results of the second quarter, including a 16% gain in net revenues, Evans said the company is seeking additional acquisitions.

“We continue to look at potential acquisitions, primarily in the regional casino space, but in other areas as well,” Evans said.