Churchill Downs, Incorporated (CHDN)

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Churchill Downs Inc (CHDN)

Q3 2008 Earnings Call

November 6, 2008; 09:00 am ET


Bob Evans - President and Chief Executive Officer

Bill Mudd - Executive Vice President and Chief Financial Officer

William Carstanjen - Chief Development Officer and Executive.

Kevin Flanery - Senior Vice President, National Public Affairs


Steve Altebrando - Sidoti & Co.

Ryan Worst - Brean Murray.

Steve Wieczynski - Stifel Nicolaus



Good day ladies and gentlemen and welcome the third quarter 2008 Churchill Downs Incorporated earnings conference call. My name is [Tulisha] and I will be your operator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator Instructions)

I would now like to turn the call over to your host for today Mr. Kevin Flanery, Senior Vice President of Churchill Downs Incorporated.

Kevin Flanery

Thank you, Tulisha. Good morning and welcome to this Churchill Downs Incorporated conference call to review the company’s results for the third quarter of 2008.

The results were released yesterday afternoon in a news release that has been covered by the financial media. A copy of this release, announcing results as well as any other financial and statistical information about the periods to be presented in this conference call, including any information required by Regulation G, is available at the section of the company’s website titled ‘Company News,’ location at

Let me also note that a news release was issued advising of the acceptability of this conference call on a listen-only basis via phone and over the Internet.

As we begin, let me express that some statements made during this call will be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, expectations or beliefs about future events or results, or otherwise are not statements of historical facts. The actual performance of the company may differ materially from what is projected in such forward-looking statements.

Investors should refer to statements included in reports filed by the company with the Securities and Exchange Commission for a discussion of additional information concerning factors that could cause our actual results of operation to differ materially from the forward-looking statements made in this call.

The information being provided today is as of this date only and Churchill Downs Incorporated expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in expectations.

Members of our executive team are here and will be available to answer questions after some formal remarks. We’ll begin now with our President and Chief Executive Officer, Bob Evans; Bob.

Bob Evans

Thanks Kevin. Good morning everyone. Thank you for joining us today for this discussion of our third quarter financial performance. I will begin by making a few comments about our results and then I’ll turn it over to our Chief Financial Officer, Bill Mudd, who will take you through the numbers in more detail and we’ll then be happy to take your questions.

I am very pleased with our third quarter results and here are the highlights. On a continuing operations basis, we reported 11% higher EBITDA and more than double the net earnings compared to the third quarter of 2007 on about 4% less revenue. I ensured our online ADW and Gaming businesses offset weakness in our racing business and our conservative approach to managing our balance sheet has left us in a strong financial position with the resources available to pursue growth opportunities that may present themselves.

As its been our practice of late, I would like to focus on the five things we think you should know about the company at this point in time. Number one, the economy is having a very pronounced negative impact on all gaming businesses including U.S. thoroughbred racing. According to the National Thoroughbred Racing Association Handle or the amount wagered on U.S. Thoroughbred Racing was on a year-over-year, per day basis, down about 2.2% in the first quarter, down 3.7% in the second quarter and down 8.7% in the third quarter.

We have three tracks running during the third quarter; Churchill Downs only conducted five days of racing down from six days during 2007’s third quarter. Handle was down at Churchill 20%, but that was largely caused by the horsemen’s dispute as well as the one less race day.

Calder’s handle was down 27%, the disputes with Florida Horsemen and with Florida Breeders over how much of future slot revenue they would receive in purses were resolved during the quarter, but clearly there have been aftereffects on handle from their decision that have still not been overcome.

In addition, Calder’s signal was not available to any national events deposit wagering businesses during the quarter. Arlington Park, which raced through September 21 in the third quarter saw handle up about 6% outperforming the industry. So far in the fourth quarter, according to the respective press releases, Keeneland’s Fall Meet all sources wagering was down about 17.3% on track handle for Oak Trees, Santa Anita Meet was down 14% and the average per race wagering on the Breeder’s Cup Championship races, there were 14 this year versus 11 last year, was down about 17%.

Fair Grounds opens for live racing on November 14, the slot and video poker operation there will allow us to alter the highest daily overnight purses in Fair Grounds history, so we hope we will do better than the industry trend in the fourth quarter and going forward.

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