Record Second Quarter for Churchill Downs

Churchill Downs Inc. hit several financial records during its second quarter due to record wagering on Kentucky Derby and Kentucky Oaks days, additional racing days, and growth in its simulcast network.

Net revenues for the second quarter reached $172.6 million, an increase of 5.7%, compared with $163.3 million for the same period last year. Net earnings for the quarter were $23.1 million, a 5.5% increase over $21.9 million in 2001. Diluted earnings per share totaled $1.73, compared with $1.66 for the second quarter of 2001. Net revenue, net earnings, and earnings per share were all records.

Wagering on Derby and Oaks days increased 14.5% and 15.4%, respectively, and Churchill Downs Simulcast Network net revenues increased 17.2% over the same period a year ago. The Churchill Downs family of six racetracks also had 16 additional live race days in the second quarter of 2002 compared to the same period in 2001.

"We are especially encouraged by the vitality of our premier racing event, the Kentucky Derby," said Tom Meeker, Churchill Downs' president and chief executive officer. "That event is the cornerstone for our strategy of continuing to enhance our brand leadership and develop new outlets for our live racing product. Although we are facing challenges in building revenues in the higher-margin, on-track portion of our business, our results clearly show the continuing success of actions we are taking to increase the contribution from simulcasting and other new distribution outlets."

Meeker said the company has benefited from account wagering in California that has grown impressively since it was launched in late January. While account wagering makes up a very small portion of the total handle, Meeker described it as "a promising, new market for our live racing product."

"We also believe the second-quarter results validate the decision made earlier in the year to create a separate operating unit for CDSN, and we are already benefiting from the added focus being brought to this growing segment of our business," he said.

The earnings per share exceeded the range previous estimated by the company. During the first six months of the year, Churchill Downs had to absorb $2.2 million of incremental insurance and lobbying costs. Meeker said he expects earnings per share for the third quarter to be between $0.57 and $0.60, up from $0.54 for the same quarter of 2001. Estimated earnings for the full year are projected to be $1.77 to $1.80 per share, compared with $1.67 per share last year.

The market anticipated a good quarter and Churchill Downs' stock rose 90 cents per share (up 2.5%) to $35.80 on moderate trading.