CDI Quarterly Net Revenue Up Slightly

Company paid adjustment to Internal Revenue Service as result of audit.

Churchill Downs Inc. reported Oct. 28 that net revenue from continuing operations for the third quarter of 2009 totaled $100.9 million, an increase of $1.3 million, or 1%, over the $99.6 million recorded during the third quarter of 2008.

The company reported that it also incurred $2.3 million tax payments to the Internal Revenue Service following an audit.

In a statement issued following the close of the stock market, CDI attributed the revenue gain primarily to increased wagering through the company’s online business and increased gaming revenue from slot machines at Fair Grounds Race Course & Slots, which opened its permanent gaming facility in November 2008.

CDI reported those increases were partially offset by a decline in pari-mutuel revenue primarily at Arlington Park and Calder Casino & Race Course coupled with a decline in sponsorship, group, and concession revenue attributed to the continued weakness in the U.S. economy.

Total EBITDA from continuing operations for the third quarter declined $1.4 million, or 12%, to $9.7 million, compared with $11.1 million during the third quarter of 2008. Growth in online business EBITDA was more than offset during this period by a decline in EBITDA of racing operations.

Net loss from continuing operations for the quarter was $1.2 million, a decrease of $3.5 million from net earnings of $2.3 million recorded during the third quarter of 2008. During the third quarter of 2009, the company recognized $2.3 million of income tax expense associated with proposed adjustments that arose during an audit of the company’s income tax returns for the years 2004 through 2007 by the Internal Revenue Service.

According to the release, handle through during the third quarter of 2009 increased 43% over the third quarter of 2008.

“The growth was driven by access to new racing content that was not available in the third quarter of 2008, an increase in customers, and higher average daily wagering,” CDI said in the release.

“Total pari-mutuel handle for the U.S. Thoroughbred industry, according to figures published by Equibase, declined 10% during the third quarter compared to the same period in 2008,”  CDI president and chief executive officer Robert Evans said in a statement. “While we outperformed the industry, with our total pari-mutuel handle down only 3% during the third quarter, gains in our other business segments didn’t offset the decline in racing.

“Our introduction of night racing at Churchill Downs and high-definition live racing video from our racetracks, the NTRA Safety and Integrity Alliance accreditation of our racetracks, and our recently announced $1.5-million supplemental purse contribution at Churchill Downs are significant investments intended to improve the performance of our racing operations. But, given the economy and industry handle declines, it is increasingly difficult to earn an acceptable return on those investments.”

CDI reported that the new Calder slots facility is still on schedule to open in late January 2010. Capital expenditures to construct the casino remain at $85 million. The facility is anticipated to generate between $80 million and $100 million in annual, full-year gross gaming revenue, according to the company.

“The anticipated gross gaming revenue does not include any effect of the Florida Division of Pari-Mutuel Wagering’s Oct. 6 ruling that will allow Calder  to operate slot machines that emulate table games such as blackjack and roulette,” the statement said.