CDI Confident in Derby Sales, Slots Plan

CDI confident in Derby sales, slots plan

Churchill Downs has seen some weakness in ticket sales for its annual Derby-Oaks weekend extravaganza, but feels there is enough interest in the events to produce another strong showing for the racetrack company.

In a March 5 conference call related to year-end and fourth-quarter earnings, CDI officials said the troubled national economy has had some effect on ticket sales for the Kentucky Oaks (gr. I) and Kentucky Derby Presented by Yum! Brands (gr. I).

“There has been some weakness, what I call in the ‘first-go’ in some seating areas,” said CDI president and chief executive officer Robert L. Evans. “But I don’t think it is a particularly large concern, and there are a lot of people that want to attend.

“While we may, on the first pass, get a company that is not going to attend this year, for whatever reason, we can always find someone else who wants to use those seats. We have two months to go, it’s hard to predict exactly what is going to happen. So far we are comfortable with sales performance.”

On March 4 CDI reported a profit of $29.1 million for 2008, despite a company-wide drop in handle for its four racetrack properties.

In its earnings release, CDI said it plans to build a 100,000-square foot slots operation at Calder Race Course, and is currently budgeting $85 million for the project, which the company hopes to have completed by the end of the year. An analyst asked if the project cost was in line with current economic conditions in South Florida, given that competitor Isle Capri at Pompano Park spent about $170 million on its slots operation.

CDI's chief operating officer, William C. Carstanjen, said the company gained some advantage by Miami-Dade County voters waiting until 2008 to approve slots at its local pari-mutuel facilities (Broward County voters approved slots for its three local facilities, including Gulfstream Park, in 2005).

“One advantage to not getting slots the first time around is that we have been able to watch the performance of the market as the other folks got started with their facilities,” Carstanjen said. “We have stress-tested our assumptions many, many times, and we feel that this is not just an acceptable investment, but will be a very good investment for us.”

Start-up costs on the Calder slots operation are projected at $4 million in 2009, including what the company said was about $2 million in application fees.

Evans said CDI is hopeful legislative actions will lead to slots in both Kentucky and Illinois, where the company operates Arlington Park.

“The politics in these situations seem to change almost daily," Evans said. “But we remain optimistic that the need for new state revenues will eventually result in us getting the right to conduct slot machine gaming in both in Kentucky and in Illinois.”