Churchill Downs, Incorporated (CHDN)

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Churchill Downs Inc. (CHDN)

Q4 2008 Earnings Call

March 5, 2009 9:00 am ET


Bob Evans - President and Chief Executive Officer

Bill Mudd - Chief Financial Officer

Bill Carstanjen - Chief Operating Officer

Kevin Flanery - Senior Vice President


Ryan Worst - Brean Murray



Good day, ladies and gentlemen and welcome to the fourth quarter 2008 Churchill Downs Incorporated earnings conference call. My name is Francine and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions)

With us on the call today, we have Mr. Kevin Flanery, Senior Vice President, Mr. Bob Evans, President and CEO and Mr. Bill Mudd, CFO.

I’d now like to turn the presentation over to your host for today’s conference, Mr. Kevin Flanery; please proceed sir.

Kevin Flanery

Thank you, Francine. Good morning and welcome to this Churchill Downs Incorporated conference call to review the company’s results for the fourth quarter and full year 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 period to be presented in this conference call including any information required by Regulation G is available at the section of company’s website titled company news located at 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 company with the Securities and Exchange Commission for 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 we’ll 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; always the most fascinating part of these conference calls. Thanks for joining us today for this discussion of our financial performance for the fourth quarter and for the full year ending December 31, 2008. Before I get into all of that, I want to make a special mentioned of Vernon Niven.

Vernon is one of our four Executive Vice Presidents of Churchill Downs Incorporated and he is also President of our online business and of Vernon is on the call with us this morning he hates these things because he is out in Mountain View, California, 6:00 am out there. But as we previously have announced, Vernon will be leaving us in June and returning to Florida for personal reasons and I and everyone else that’s in the room here today want to thank him for his many contributions to Churchill Downs Incorporated.

We’ll be spending a little time today talking about the strong performance of the and Vernon has played the key role in creating a strong foundation for our online business. All of us here are going to wish him the very best.

In these quarterly calls I try to focus on the five the most important things we think you should now about you company. This quarter; I though I had organized my thoughts around the five key elements of our business; racing, gaming, online, entertainment and the Kentucky Oaks and Kentucky Derby and I thought I’d try to give you some time based perspective of what’s going on.

Before I start that, let me refer you again to the comments Kevin made at the beginning of our call regarding forward-looking statements. I'll start with racing. Last year, 2008, our thoroughbred racing handle was down an estimated 9%. That followed a relatively neutral year for the racing industry in 2007, although we were up about 8% in 2007.

Much of our 2008 decline was due to the horseman’s groups in different states restricting our ability to import and export signals for wagering purposes. The economic downturn in the financial industry crisis only exacerbated the problem. This year 2009, most of the signal disputes have been resolved and we expect to bounce back from the impact of last year’s signal cutoffs.

Beyond that, it’s really difficult to say where the overall industry handle was headed beyond 2009, but one thing we know for sure is that tracks that can supplement purses with revenue from expanded gaming will be better positioned to compete in this very difficult and very competitive marketplace.

Let me move to Gaming. Total U.S. Gaming revenues dropped about 4% last year, according to Fitz ratings, with the biggest declines coming in the destination gaming venues like Las Vegas and Atlantic City. Fortunately, our gaming business produced approximately $22 million more or about 73% more revenues in 2008 than it did in 2007 and here’s why.

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