Churchill Downs Incorporated (“CDI” or “the Company”) (NASDAQ: CHDN) July 27 reported business results for the second quarter and six months ended June 30, 2011.
Net revenues from continuing operations for the quarter grew 16% compared to the prior-year period—to $249.7 million from $215.4 million—primarily due to the continued expansion and growth of CDI’s online and gaming business segments, which now include the company’s 2010 acquisitions. CDI’s online and gaming segments recorded increases in net revenues from continuing operations of $16.7 million (up 56%) and $13.6 million (up 38%), respectively, when compared to the second quarter of 2010.
The online segment’s results for the second quarter of 2011 include three months of Youbet.com results as opposed to approximately one month of Youbet.com revenues reported during the second quarter of 2010. CDI’s most recent acquisition, Harlow’s Casino Resort & Hotel, generated $9.5 million in net revenues during the quarter, despite being forced to close for 25 days in May due to Mississippi River flooding, while Calder Casino’s net revenues improved $3.5 million over the comparable period in 2010.
EBITDA (earnings before interest, taxes, depreciation and amortization) for the second quarter of 2011 grew to $85 million, an increase of 41%from EBITDA of $60.4 million recorded in the second quarter of 2010. Racing operations EBITDA increased $9 million quarter over quarter, driven primarily by Kentucky Oaks and Derby week increases in sponsorship, admissions, corporate hospitality, and broadcast right fees that generated an extra $6.4 million Kentucky Oaks and Derby Week EBITDA compared to the prior year. During the second quarter, Churchill Downs Racetrack also benefited from a $2.9 million reduction in operating expenses related to a tax-increment financing agreement with the Commonwealth of Kentucky. CDI’s online and gaming businesses also recorded quarter-over-quarter EBITDA increases of $6.7 million and $6.1 million, respectively.
Net earnings from continuing operations for the period were $40.0 million, or $2.36 per diluted common share, an increase of 41% from net earnings from continuing operations of $28.3 million, or $1.90 per diluted common share, in the second quarter of 2010.
“This was the first quarter to fully reflect the impact of our growth-through-diversification strategy that we adopted a few years ago,” CDI chairman and CEO Robert L. Evans said in a statement. “Revenues, EBITDA, and net earnings from continuing operations set all-time records in the second quarter despite having to close our Harlow’s casino property for 25 days. We have estimated an EBITDA loss of approximately $3 million related to Harlow’s temporary closure, and are working with our insurance carriers to recover that amount as part of our business interruption claim. We continue to use the growing free cash flow generated by our operating activities to pay down long-term debt, which decreased by $80.2 million since the end of 2010, while examining other strategic ways in which we can deploy our capital.
“Looking ahead, we continue to see four paths to additional growth for our company. First, we believe our existing businesses will benefit if the economy continues to improve. Second, we are cautiously optimistic about the resolution of the Illinois gaming bill that would allow us to operate up to 1,200 slot machines at Arlington Park and up to 900 slot machines at Quad City Downs. Third, we believe there are opportunities ahead for our online business through the growth of TwinSpires.com, as bettors shift their wagers to the online channel, and through the possible expansion of legal Internet gaming in the United States. Finally, our business development processes and capabilities are significantly stronger, and we have the balance sheet capacity to continue to look for acquisition opportunities in regional casino gaming and elsewhere.”
A conference call regarding this news release is scheduled for Thurs., July 28, at 9 a.m. EDT. Investors and other interested parties may listen to the teleconference by accessing the online, real-time webcast and broadcast of the call at http://ir.churchilldownsincorporated.com/events.cfm or by dialing (877) 372-0878 and entering the conference ID number 52962971 atleast 10 minutes before the appointed time. International callers should dial (253) 237-1169. An online replay of the call will be available at http://ir.churchilldownsincorporated.com/events.cfm by noon EDT. A copy of the Churchill Downs Incorporated’s news release announcing quarterly results and relevant financial and statistical information about the period will be accessible at www.churchilldownsincorporated.com.
