Third Quarter Earnings Down for Churchill Downs

A decrease in Churchill Downs' third quarter earnings has been attributed to an increase in outstanding shares and the aftermath of Sept. 11's terrorist attacks.

The Louisville-based racing conglomerate reported a 20.6% decrease in earnings per share after the market closed Tuesday. Diluted earnings per share for the quarter ending Sept. 30 was 54 cents on 13.2 million shares compared with earnings of 68 cents on 10.7 million shares for the same period of 2000.

The increase in the average number of shares outstanding for the third quarter was due principally to the issuance of 3.15 million common shares for the September 2000 merger with Arlington International Racecourse, now doing business as Arlington Park.
Net revenues for the third quarter totaled $121.2 million, an increase of 16.8 percent, compared with $103.8 million for the same period a year ago.

"We expected our earnings per share for the third quarter to be lower than a year ago because of the significantly higher number of shares outstanding," remarked Thomas Meeker, Churchill Downs' president and chief executive officer. "Although we maintained a solid level of profitability for the quarter, our earnings were modestly below published analyst estimates due to the impact of the attacks of Sept. 11 and the subsequent economic slowdown."

Meeker said the company's decision to close its live racing and off-tracking betting operations for two days following the attacks on New York City and Washington, D.C. were appropriate despite the negative affect on its finances.

"For the most part, we also experienced a slower pace of activity in on-track attendance and handle after we re-opened our facilities that were conducting live racing, a trend that continues at most of our racetrack," he said. "We are encouraged, however, by the improvement that began in October in our off-track betting activity, the relative stability of our simulcast revenues, and the continued growth of our TVG (TV Games Network) revenues."

Meeker said he continues to expect higher revenue and earnings for the fourth quarter and record-setting revenues and net income for the year. The company, however, did lower its earnings estimate to reflect the 21% increase in the average number of shares outstanding. Churchill Downs now expects earnings per share to fall between $1.62 and $1.68 instead of a previously expected $1.75 per share, which equaled earnings for 2000.