Churchill Downs, Incorporated (CHDN)

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Churchill Downs, Incorporated (CHDN)

Q4 2012 Earnings Call

February 28, 2013 09:00 AM ET


Courtney Norris - Director of Corporate Communications

Bill Carstanjen - President and COO

Bill Mudd - CFO


Amit Kapoor - Gabelli & Company

Steve Altebrando - Sidoti & Company

Jeffrey Thomison - Hilliard Lyons

Steve Altebrando - Sidoti & Company LLC



Good day, ladies and gentlemen, and welcome to the Churchill Downs Incorporated Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode, and later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today’s conference, Ms. Courtney Norris, Director of Corporate Communications.

Courtney Norris

Good morning and welcome to this Churchill Downs Incorporated conference call to review the Company’s results for the fourth quarter and year ended December 31, 2012. 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 and any other financial and statistical information about the period 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 'News', located at as well as in the website's Inventors section. Let me also note that a news release was issued advising of the accessibility 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 fact. 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 operations to differ materially from the forward-looking statements made in this call.

The information being provided today is 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 and expectations.

At this point, I would typically turn the call over to CDI’s Chairman and CEO, Mr. Bob Evans. However, he is unable to join us today. We have with us Mr. Bill Carstanjen, CDI’s President and Chief Operating Officer, as well as Mr. Bill Mudd, CDI’s Chief Financial Officer, who will be available to answer questions at the end.

I will now turn it over to Mr. Mudd, who will take you through the numbers.

Bill Mudd

Thanks, Courtney, and good morning, everyone. After I make a few comments about our fourth quarter and total year results, as Courtney mentioned, Bill Carstanjen and I will be happy to answer any questions you may have.

Overall, it was a very good year with net revenues up 5%, and a pretty good fourth quarter with net revenues up 6%. For the year, our Racing Operations revenues increased 1% to $302 million. Racing Operations handle was flat with 2011 while the U.S. industry handle posted a 1% increase, according to figures published by This is a first total year increase in U.S. wagering on thoroughbred racing since 2006. For the fourth quarter, our Racing Operations revenues decreased 7%, driven primarily due to the revenues recognized in the prior year from hosting the Breeders' Cup at our Churchill Downs facility.

I am certain you will ask how the Derby is shaping up. Well, here's where we stand. We're 65 days out from this year's Derby. With the caveat total admissions revenue, it also depend on cash gate sales on the day of the event which are very much driven by weather, and then our pari-mutuel revenues are also, by the still to be determined build-size and competitiveness of the Oaks and Derby races, and the other races on the Oaks and Derby Day cards. Those caveats at this point, 65 days out, are premium admissions revenue. That is, boxes, (fleets), tables in our premium areas are very strong compared to last year.

Sales of our personal seat licenses are significantly better than last year, sponsorship sales are on track to outpace last year, and handle in the first of the three Oaks and Derby future wager pools was the second highest single pool total in its 15 year history, missing the 2012 record by $10,000, by a massive snow-storm on the East Coast. If those trends hold, and there's no way to know if that will be the case or not, then this year's Oaks and Derby week financial performance should be strong.

Now let's move on to gaming. Our gaming business revenues increased 5% in 2012, reflecting revenues generated by Riverwalk, which was acquired in October. Additionally, Harlow’s revenues increased by $3.4 million, which was closed for 25 days during 2011 as a result of the historic Mississippi River flood. Revenues in our Calder Casino declined by 6% in the year as a result of new competition entering the market in the first quarter along with what we believe to be a weaker South Florida economy. We expect this headwind to continue through at least the first quarter of 2013, as we did not begin seeing the impact of new competition on our result through the second quarter of 2012.

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