- Record revenue of $138.2 million up 5% over first
quarter 2011
- Record EBITDA of $17.3 million up 55% over first
quarter 2011
- Record earnings from continuing operations per diluted
common share of $0.08 versus a loss of $0.19 in first quarter
2011
Churchill Downs Incorporated (Nasdaq:CHDN) ("Company") today
reported results for the first quarter ended March 31, 2012.
Due primarily to revenue growth of 20% within CDI's
Online Business segment, the Company's net revenues from continuing
operations for the first quarter of 2012 increased 5% to $138.2
from $131.6 million during the same period of the prior year.
CDI's online wagering company, Twinspires.com,
experienced a handle increase of 15.2% as compared to the
prior-year period driven primarily by new customer growth. During
the first quarter of 2012, total wagering on U.S. Thoroughbred
races increased 5.4% compared to the same period in 2011, according
to statistics released by the Equibase Company.
Quarter-over-quarter EBITDA (earnings before interest, taxes,
depreciation, and amortization) grew to $17.3 million, compared to
EBITDA of $11.2 million during the first quarter of 2011. EBITDA
from our Online business increased $2.9 million, or 38%.
Our Gaming Business segment EBITDA increased $2.9 million, or
16%, and benefitted from insurance recoveries, net of losses of
$1.5 million, which reflects the settlement of our 2011 wind damage
claim sustained at Harlow's Casino Resort & Hotel ("Harlow's.")
Additionally, Calder Casino received $0.8 million in proceeds for a
non-recurring reimbursement of administrative expenses.
Net earnings from continuing operations for the period were $1.4
million, or $0.08 per diluted common share, compared to a net loss
from continuing operations of $3.2 million, or $0.19 per diluted
common share, during the first quarter of 2011.
CDI Chairman and Chief Executive Officer Robert L. Evans said
the first quarter results show the positive effect the new business
model is having:
"All three of our business segments, Racing, Gaming and Online,
showed improved EBITDA performance in the first quarter leading to
positive first quarter earnings from continuing operations.
Historically, the seasonal nature of our racing operations resulted
in losses for the quarter, but the diversification of our business
model into our Gaming and Online Businesses more than offset first
quarter losses from Racing.
"While our first quarter results do not reflect the economics of
Kentucky Oaks and Kentucky Derby, I have to mention the exciting
week we just concluded starting with our Opening Night event on
Saturday, April 28, and ending with an incredible Kentucky Derby on
Saturday, May 5.
"Oaks Day attendance of 112,552 was the second-highest ever.
Total all-sources handle on the Oaks Day card totaled a record
$39.9 million, up 7% over 2011's $37.5 million, the previous
record.
"The Oaks and our Thursday night Taste of Derby event generated
approximately $200,000 for our cancer and hunger charitable
partners. These two events have generated over $700,000 in
charitable contributions since we started the now famous Oaks "Pink
Out" in 2009 and the Taste of Derby event in 2010.
"And then there was the Kentucky Derby; pick a record and we
probably set it this year. Attendance was a record 165,307, up from
the previous record of 164,858 set last year. All-sources handle
for the 13 Derby Day races totaled a record $187.0 million, up 13%
from last year's $165.2 million, and 7% above the previous record
of $175.1 million set in 2006.
"Handle on just the Kentucky Derby race was $133.1 million, up
19% from last year's $112 million and 12% higher than the previous
record of $118.4 million set in 2006.
"While still preliminary and subject to change, Oaks and Derby
Week EBITDA will be approximately $4.5 to $5.5 million higher than
in 2011, and will be a new record.
"Finally, on behalf of our investors, our Board of Directors and
our management team, I want to thank our fans, our sponsors, our
partners at NBC Sports and, most of all, the horsemen and our over
11,000 full and part-time employees who put on this spectacular
event."
A conference call regarding this news release is scheduled for
Tuesday, May 8, 2012, at 9 a.m. ET. Investors and other interested
parties may listen to the teleconference by accessing the online,
real-time webcast and broadcast of the call at
www.churchilldownsincorporated.com or www.earnings.com, or by
dialing (877) 372-0878 and entering the pass code75239964 at least
10 minutes before the appointed time. International callers should
dial (253) 237-1169. The online replay will be available at
approximately noon EDT and continue for two weeks. A copy of the
Company's news release announcing quarterly results and relevant
financial and statistical information about the period will be
accessible at www.churchilldownsincorporated.com.
In addition to the results provided in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP"), the Company has
provided a non-GAAP measurement, which presents a financial measure
of earnings before interest, taxes, depreciation and amortization
("EBITDA"). Churchill Downs Incorporated uses EBITDA as a key
performance measure of results of operations for purposes of
evaluating performance internally. The Company believes the use of
this measure enables management and investors to evaluate and
compare, from period to period, the Company's operating performance
in a meaningful and consistent manner. This non-GAAP measurement is
not intended to replace the presentation of the Company's financial
results in accordance with GAAP.
ABOUT CHURCHILL DOWNS INCORPORATED
Churchill Downs Incorporated ("CDI") (Nasdaq:CHDN),
headquartered in Louisville, Ky., owns and operates the
world-renowned Churchill Downs Racetrack, home of the Kentucky
Derby and Kentucky Oaks, as well as racetrack and casino operations
and a poker room in Miami Gardens, Fla.; racetrack, casino and
video poker operations in New Orleans, La.; racetrack operations in
Arlington Heights, Ill.; and a casino resort in Greenville, Miss.
CDI also owns the country's premier account-wagering company,
TwinSpires.com, and other advance-deposit wagering providers; the
totalisator company, United Tote; Bluff Media, an Atlanta-based
multimedia poker content, brand and publishing company; and a
collection of racing-related telecommunications and data companies.
Information about CDI can be found online at
www.churchilldownsincorporated.com.
Information set forth in this news release contains various
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Private Securities Litigation Reform Act
of 1995 (the "Act") provides certain "safe harbor" provisions for
forward-looking statements. All forward-looking statements made in
this news release are made pursuant to the Act. The reader is
cautioned that such forward-looking statements are based on
information available at the time and/or management's good faith
belief with respect to future events, and are subject to risks and
uncertainties that could cause actual performance or results to
differ materially from those expressed in the statements.
Forward-looking statements speak only as of the date the statement
was made. We assume no obligation to update forward-looking
information to reflect actual results, changes in assumptions or
changes in other factors affecting forward-looking information.
Forward-looking statements are typically identified by the use of
terms such as "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "might," "plan," "predict," "project,"
"should," "will," and similar words, although some forward-looking
statements are expressed differently. Although we believe that the
expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will
prove to be correct. Important factors that could cause actual
results to differ materially from expectations include: the effect
of global economic conditions, including any disruptions in the
credit markets; a decrease in consumers' discretionary income; the
effect (including possible increases in the cost of doing business)
resulting from future war and terrorist activities or political
uncertainties; the overall economic environment; the impact of
increasing insurance costs; the impact of interest rate
fluctuations; the effect of any change in our accounting policies
or practices; the financial performance of our racing operations;
the impact of gaming competition (including lotteries, online
gaming and riverboat, cruise ship and land-based casinos) and other
sports and entertainment options in the markets in which we
operate; our ability to maintain racing and gaming licenses to
conduct our businesses; the impact of live racing day competition
with other Florida, Illinois and Louisiana racetracks within those
respective markets; the impact of higher purses and other
incentives in states that compete with our racetracks; costs
associated with our efforts in support of alternative gaming
initiatives; costs associated with customer relationship management
initiatives; a substantial change in law or regulations affecting
pari-mutuel and gaming activities; a substantial change in
allocation of live racing days; changes in Kentucky, Florida,
Illinois or Louisiana law or regulations that impact revenues or
costs of racing operations in those states; the presence of
wagering and gaming operations at other states' racetracks and
casinos near our operations; our continued ability to effectively
compete for the country's horses and trainers necessary to achieve
full field horse races; our continued ability to grow our share of
the interstate simulcast market and obtain the consents of
horsemen's groups to interstate simulcasting; our ability to enter
into agreements with other industry constituents for the purchase
and sale of racing content for wagering purposes; our ability to
execute our acquisition strategy and to complete or successfully
operate planned expansion projects; our ability to successfully
complete any divestiture transaction; market reaction to our
expansion projects; the inability of our totalisator company,
United Tote, to maintain its processes accurately or keep its
technology current; our accountability for environmental
contamination; the inability of our Online Business to prevent
security breaches within its online technologies; the loss of key
personnel; the impact of natural and other disasters on our
operations and our ability to obtain insurance recoveries in
respect of such losses (including losses related to business
interruption); our ability to integrate any businesses we acquire
into our existing operations, including our ability to maintain
revenues at historic levels and achieve anticipated cost savings;
the impact of wagering laws, including changes in laws or
enforcement of those laws by regulatory agencies; the outcome of
pending or threatened litigation; changes in our relationships with
horsemen's groups and their memberships; our ability to reach
agreement with horsemen's groups on future purse and other
agreements (including, without limiting, agreements on sharing of
revenues from gaming and advance deposit wagering); the effect of
claims of third parties to intellectual property rights; and the
volatility of our stock price.
You should read this discussion in conjunction with the
Condensed Consolidated Financial Statements included in this
Quarterly Report on Form 10-Q and the Company's Annual Report on
Form 10-K for the year ended December 31, 2011 for further
information, including Part I – Item 1A, "Risk Factors" for a
discussion regarding some of the reasons that actual results may be
materially different from those we anticipate, as modified by Part
II – Item 1A, "Risk Factors" of this Quarterly Report on Form
10-Q.
| |
| CHURCHILL DOWNS
INCORPORATED |
| CONDENSED CONSOLIDATED
STATEMENTS OF NET EARNINGS (LOSS) AND COMPREHENSIVE
EARNINGS |
| for the three months
ended March 31, 2012 and 2011 |
| (Unaudited) (In
thousands, except per share data) |
| |
Three Months
Ended |
| |
March
31, |
| |
2012 |
2011 |
% Change |
| Net revenues |
|
|
|
| Racing |
$ 30,182 |
$ 31,628 |
(5) |
| Gaming |
59,336 |
59,087 |
-- |
| Online |
44,035 |
36,803 |
20 |
| Other |
4,643 |
4,036 |
15 |
| |
138,196 |
131,554 |
5 |
| Operating expenses |
|
|
|
| Racing |
42,988 |
45,585 |
(6) |
| Gaming |
40,940 |
41,402 |
(1) |
| Online |
30,151 |
26,365 |
14 |
| Other |
5,709 |
5,051 |
13 |
| Selling, general and administrative
expenses |
16,199 |
16,004 |
1 |
| Insurance recoveries, net of losses |
(1,511) |
-- |
NM |
| |
|
|
|
| Operating income (loss) |
3,720 |
(2,853) |
F |
| |
|
|
|
| Other income (expense): |
|
|
|
| Interest income |
18 |
68 |
(74) |
| Interest expense |
(1,223) |
(2,460) |
(50) |
| Equity in loss of unconsolidated
investments |
(220) |
(416) |
(47) |
| Miscellaneous, net |
33 |
457 |
(93) |
| |
(1,392) |
(2,351) |
(41) |
| Earnings (loss) from continuing operations
before (provision) benefit for income taxes |
2,328 |
(5,204) |
F |
| Income tax (provision) benefit |
(974) |
2,018 |
U |
| Earnings (loss) from continuing
operations |
1,354 |
(3,186) |
F |
| Discontinued operations, net of income
taxes: |
|
|
|
| (Loss) earnings from operations |
(1) |
1 |
U |
| Net earnings (loss) and comprehensive
earnings |
$ 1,353 |
$ (3,185) |
F |
| |
|
|
|
| |
|
|
|
| Net earnings (loss) per common share
data: |
|
|
|
| Basic |
$ 0.08 |
$ (0.19) |
F |
| Diluted |
$ 0.08 |
$ (0.19) |
F |
| |
|
|
|
| Weighted average shares outstanding: |
|
|
|
| Basic |
16,903 |
16,358 |
|
| Diluted |
17,433 |
16,358 |
|
| |
|
|
|
| |
|
|
|
| NM: Not
meaningful
U: >100%
unfavorable
F: >100% favorable |
|
|
|
| |
|
|
|
| CHURCHILL DOWNS
INCORPORATED |
| SUPPLEMENTAL
INFORMATION BY OPERATING UNIT |
| for the three months
ended March 31, 2012 and 2011 |
| (Unaudited)
(In thousands) |
| |
Three Months
Ended |
| |
March
31, |
| |
2012 |
2011 |
% Change |
| |
|
|
|
| Net revenues from external
customers: |
|
|
|
| Churchill Downs |
$ 2,550 |
$ 2,322 |
10 |
| Arlington Park |
9,417 |
9,348 |
1 |
| Calder |
1,868 |
2,668 |
(30) |
| Fair Grounds |
16,347 |
17,290 |
(5) |
| Total Racing
Operations |
30,182 |
31,628 |
(5) |
| Calder Casino |
21,879 |
20,612 |
6 |
| Fair Ground Slots |
12,031 |
12,171 |
(1) |
| VSI |
9,563 |
9,427 |
1 |
| Harlow's Casino |
15,863 |
16,877 |
(6) |
| Total Gaming |
59,336 |
59,087 |
-- |
| Online Business |
44,035 |
36,803 |
20 |
| Other Investments |
4,502 |
3,965 |
14 |
| Corporate |
141 |
71 |
99 |
| Net revenues from external
customers |
$ 138,196 |
$ 131,554 |
5 |
| |
|
|
|
| Intercompany net
revenues: |
|
|
|
| Churchill Downs |
$ 186 |
$ 148 |
26 |
| Arlington Park |
556 |
533 |
4 |
| Calder |
10 |
61 |
(84) |
| Fair Grounds |
747 |
778 |
(4) |
| Total Racing
Operations |
1,499 |
1,520 |
(1) |
| Online Business |
206 |
196 |
5 |
| Other Investments |
750 |
599 |
25 |
| Eliminations |
(2,455) |
(2,315) |
(6) |
| Intercompany net
revenues |
$ -- |
$ -- |
-- |
| |
|
|
|
| Reconciliation of Segment
EBITDA to net earnings (loss): |
|
|
| Racing Operations |
$ (11,539) |
$ (12,638) |
9 |
| Gaming |
20,389 |
17,533 |
16 |
| Online Business |
10,421 |
7,545 |
38 |
| Other Investments |
(330) |
(92) |
U |
| Corporate |
(1,601) |
(1,174) |
(36) |
| Total EBITDA |
17,340 |
11,174 |
55 |
| Depreciation and amortization |
(13,807) |
(13,986) |
(1) |
| Interest income (expense), net |
(1,205) |
(2,392) |
(50) |
| Income tax (provision) benefit |
(974) |
2,018 |
U |
| Earnings (loss) from
continuing operations |
1,354 |
(3,186) |
F |
| Discontinued operations, net of income
taxes |
(1) |
1 |
U |
| Net earnings
(loss) |
$ 1,353 |
$ (3,185) |
F |
| |
|
|
|
| |
|
|
|
| NM: Not
meaningful
U: >100%
unfavorable
F: >100% favorable |
| |
|
|
|
| |
|
|
|
|
| CHURCHILL DOWNS
INCORPORATED |
| SUPPLEMENTAL
INFORMATION BY OPERATING UNIT |
| for the three months
ended March 31, 2012 and 2011 |
| (Unaudited) (In
thousands) |
| |
|
|
|
|
| |
Three Months
Ended March 31, |
Change |
| Management fee (expense)
income: |
2012 |
2011 |
$ |
% |
| Racing Operations |
$ (1,406) |
$ (1,462) |
$ (56) |
-4% |
| Gaming |
(2,633) |
(2,607) |
26 |
1% |
| Online Business |
(1,963) |
(1,632) |
331 |
20% |
| Other Investments |
(227) |
(201) |
26 |
13% |
| Corporate |
6,229 |
5,902 |
(327) |
6% |
| Total
management fees |
$ -- |
$ -- |
$ -- |
-- |
| |
|
|
|
|
| |
|
|
| CHURCHILL DOWNS
INCORPORATED |
| CONDENSED, CONSOLIDATED
STATEMENT OF CASH FLOWS |
| for the three months
ended March 31, 2012 and 2011 |
| (Unaudited) (In
thousands) |
| |
|
|
| |
2012 |
2011 |
| Cash flows from operating
activities: |
|
|
| Net earnings (loss) |
$ 1,353 |
$ (3,185) |
| Adjustments to reconcile net earnings
(loss) to net cash provided by operating activities: |
|
|
| Depreciation and amortization |
13,807 |
13,986 |
| Asset impairment loss |
1,369 |
60 |
| Gain on asset disposition |
(21) |
-- |
| Equity in losses of unconsolidated
investments |
220 |
416 |
| Unrealized gain on derivative
instruments |
-- |
(204) |
| Share-based compensation |
1,924 |
1,531 |
| Other |
228 |
271 |
| Increase
(decrease) in cash resulting from changes in operating assets and
liabilities, net of business acquisition: |
| Restricted
cash |
4,327 |
6,547 |
| Accounts
receivable |
7,160 |
10,451 |
| Other current
assets |
(7,280) |
(5,129) |
| Accounts
payable |
(2,399) |
(2,349) |
| Purses
payable |
209 |
(3,189) |
| Accrued
expenses |
(5,462) |
(2,774) |
| Deferred
revenue |
38,782 |
37,774 |
| Income taxes
receivable and payable |
110 |
5,163 |
| Other assets
and liabilities |
782 |
1,106 |
|
Net cash provided by operating activities |
55,109 |
60,475 |
| Cash flows from investing
activities: |
|
|
| Additions to property and equipment |
(9,120) |
(5,517) |
| Acquisition of business, net of cash |
(6,630) |
-- |
| Investment in joint venture |
(4,275) |
-- |
| Purchases of minority investments |
(1,482) |
-- |
| Assumption of note receivable |
(1,100) |
-- |
| Proceeds on sale of property and
equipment |
65 |
46 |
| Proceeds from insurance recoveries |
1,369 |
-- |
| Change in deposit wagering asset |
(1,675) |
388 |
| Net cash used
in investing activities |
(22,848) |
(5,083) |
| Cash flows from financing
activities: |
|
|
| Borrowings on bank line of credit |
79,135 |
72,436 |
| Repayments on bank line of credit |
(98,936) |
(114,683) |
| Change in book overdraft |
(3,241) |
(4,064) |
| Payment of dividends |
(10,110) |
(8,165) |
| Repurchase of common stock |
(268) |
(151) |
| Common stock issued |
391 |
-- |
| Windfall tax benefit from share-based
compensation |
443 |
-- |
| Change in deposit wagering liability |
1,882 |
(318) |
| Net cash used
in financing activities |
(30,704) |
(54,945) |
| Net increase in cash and cash
equivalents |
1,557 |
447 |
| Cash and cash equivalents, beginning of
period |
27,325 |
26,901 |
| Cash and cash equivalents, end of period |
$ 28,882 |
$ 27,348 |
| |
|
|
| |
|
|
| CHURCHILL DOWNS
INCORPORATED |
| CONDENSED CONSOLIDATED
BALANCE SHEETS |
| As of March 31, 2012,
and December 31, 2011 |
| (in
thousands) |
| |
|
|
| |
|
|
| |
March 31, |
December 31, |
| ASSETS |
2012 |
2011 |
| Current assets: |
|
|
| Cash and cash equivalents |
$ 28,882 |
$ 27,325 |
| Restricted cash |
41,907 |
44,559 |
| Accounts receivable, net |
24,118 |
49,773 |
| Deferred income taxes |
8,018 |
8,727 |
| Income taxes receivable |
3,569 |
3,679 |
| Other current assets |
17,551 |
10,399 |
| Total current assets |
124,045 |
144,462 |
| |
|
|
| Property and equipment, net |
475,480 |
477,356 |
| Goodwill |
216,883 |
213,712 |
| Other intangible assets, net |
106,811 |
103,827 |
| Other assets |
13,969 |
8,665 |
| Total assets |
$ 937,188 |
$ 948,022 |
| |
|
|
| LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
| Current liabilities: |
|
|
| Accounts payable |
$ 53,422 |
$ 56,514 |
| Bank overdraft |
2,232 |
5,473 |
| Purses payable |
20,275 |
20,066 |
| Accrued expenses |
39,649 |
47,816 |
| Dividends payable |
-- |
10,110 |
| Deferred revenue |
56,035 |
33,472 |
| Total current
liabilities |
171,613 |
173,451 |
| |
|
|
| Long-term debt |
107,761 |
127,563 |
| Other liabilities |
30,621 |
29,542 |
| Deferred revenue |
18,860 |
17,884 |
| Deferred income taxes |
15,552 |
15,552 |
| Total liabilities |
344,407 |
363,992 |
| |
|
|
| Commitments and contingencies |
|
|
| Shareholders' equity: |
|
|
| Preferred stock, no par value; 250 shares
authorized; no shares issued |
-- |
-- |
| Common stock, no par value; 50,000 shares
authorized; 17,347 shares issued at March 31, 2012 and 17,178
shares issued at December 31, 2011 |
267,597 |
260,199 |
| Retained earnings |
325,184 |
323,831 |
| Total shareholders'
equity |
592,781 |
584,030 |
| Total liabilities and
shareholders' equity |
$ 937,188 |
$ 948,022 |
| |
|
|
CONTACT: Courtney Yopp Norris
(502) 636-4564
Courtney.Norris@kyderby.com
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