Gaming, Online Segments Boost CDI's Revenues

Track-operating company took $5 million loss on HullabaLOU Music Festival.

Boosted by growth in its gaming and online segments and from the success of this year’s Kentucky Derby Presented by Yum! Brands (gr. I) and Kentucky Oaks (gr. I), Churchill Downs Inc. reported that net revenues rose 11% during the second quarter of 2010.

The Louisville, Ky., track operating company reported net revenues of $200.5 million compared with $180 million during the second quarter of 2009.

The company reported the performance of its gaming segment increased 83% over last year and its online segment was up 41% over last year. Net revenues from CDI’s racing operations segment, excluding Kentucky Oaks and Derby Week, declined consistent with the 6% decline in U.S. Thoroughbred industry handle, and the 5% reduction in CDI race days from 118 to 112 in the quarter.

Earnings from continuing operations for the second quarter were $27.6 million or $1.85 per diluted common share, compared to net earnings from continuing operations of $30.9 million, or $2.20 per diluted common share, during the second quarter of 2009. CDI’s EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations increased 1% year over year from $58.6 million in 2009 to $59.3 million in 2010. Earnings in the quarter were negatively affected by $4 million in costs related to the acquisition of, Inc., which closed on June 2, 2010.

"This was an important quarter for us on four fronts," Robert L. Evans, CDI president and chief executive officer, said in a release. "First, we set a new record in terms of the EBITDA performance of our most important asset, the Kentucky Oaks and Kentucky Derby week, up $3.4 million from last year. Second, we continued on pace to meet our expected $80-$100 million in annual gross gaming revenue (GGR) for the Calder Casino, with $21.1 million in GGR for the quarter. Third, we realized 11% handle growth in our online business excluding, despite a decline in overall U.S. Thoroughbred industry handle of 6%. Finally, we completed the acquisition of and United Tote and are pleased to report that, based upon our integration efforts to date, we should achieve annualized cost synergies of $12 million, rather than the $10 million we previously anticipated."

Evans also said the inaugural HullabaLOU Music Festival at Churchill Downs on July 23-25, subsequent to the close of the quarter, was a success but that the track’s losses on the event were more than double initial projections.

"We more than achieved our primary goals of establishing a national brand and creating an outstanding entertainment experience for the over 78,000 people who attended," Evans’ statement said. "Of the attendees surveyed, 99% said they would recommend HullabaLOU to their friends, 70% said they would definitely attend next year, while 28% said they would likely attend depending on the weather (heat) and the lineup of bands. However, with national concert ticket sales off 17% through June, according to Pollstar, and with the punishing 95-plus degree heat during the three-day event, our EBITDA loss exceeded $5 million, roughly twice what we had expected."