CHDN

Churchill Downs, Incorporated (CHDN)

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Churchill Downs, Inc. (CHDN)

Q1 2013 Earnings Conference Call

April 25, 2013 9.00 am ET

Executives

Courtney Norris – Director of Corporate Communications

Robert L. Evans – Chairman and Chief Executive Officer

William E. Mudd – Executive Vice President and Chief Financial Officer

Analysts

Steve T. Altebrando – Sidoti & Co. LLC

Amit Kapoor – Gabelli & Co., Inc.

Jeff S. Thomison – J.J.B. Hilliard, W.L. Lyons LLC

Steve T. Altebrando – Sidoti & Co. LLC

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Churchill Downs Incorporated First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today’s program is being recorded.

I would now like to introduce your host for today’s program, Ms. Courtney Norris, Director of Corporate Communications at Churchill Downs. Please go ahead.

Courtney Norris

Thank you Jonathan, good morning and welcome to this Churchill Downs Incorporated conference call to review the Company’s results for the first quarter ended March 31, 2013. 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 churchilldownsincorporated.com 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 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 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.

I will now turn the over to our Chairman and CEO; Bob Evans, Bob?

Robert L. Evans

Thanks, Courtney. I don’t have any prepared comments today, other than what we put in the press release. Let turn this over to our CFO, Bill Mudd, who will take you through some of the details regarding the numbers, then will be back and start to answer whatever questions you may have. Bill?

William E. Mudd

Thank you Bob and good morning everyone. Despite some challenges, which I will highlight in a few minutes. We set records to both revenue and EBITDA for the first quarter. Revenues increased 7% to $148 million, while EBITDA improved 3% to $17.9 million.

Our racing segment posted revenues of $27.8 million, down 8% from the prior year. The only track that was conducted live racing during the period was our Fairgrounds property, which revenue decreased 2% on an equivalent number of race days. The decline in total racing segment revenues was primarily driven by lower host days at Arlington Park. When there is no live racing in the state, the track is selected by the Illinois Racing Board to act as the host track. Host track receives a percentage of revenues from pari-mutuel wagering activity at locations across the state.

Arlington was awarded 44 days in 2012, but that number was reduced to 26 days in 2013 and is the primary reason for our racing revenues decreasing year-over-year. This decision is made on a yearly basis, we don’t know what the decision will be for 2014. But certainly we will attempt to argue for return to 44 days we had in 2012.

Racing EBITDA was essentially even with the prior year perhaps a $1 million loss associated with fewer host days in Illinois was mostly offset by 400,000 of net insurance recoveries associated with hail damage sustained at Churchill Downs in April of last year.

But we are on the racing segment, I am sure most of you want to know how the Derby is shaping up. There’s not a lot more I can say than what was discussed during the last earnings call. But we continue to be very optimistic about this year’s performance. The weather can always affect general admission attendance and wagering among other revenue sources. But all the leading metrics we track suggest another record year.

Our gaming segment posted revenues of $72.1 million during the quarter, up 21% to the prior year driven by the Riverwalk acquisition. We believe higher payroll taxes and delay in tax refund impacted revenues at all of our properties, but it had a more distinct effect on our Mississippi properties results.

Carlos had a tough start in the quarter where January revenues down 10%, February revenues down 8%. The margin prove to be a much better months with revenues up 7% and we are continuing to see positive results midway through April. We believe these things in year-over-year performance are driven by the timing of refund cheques.

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