Churchill Downs, Incorporated (CHDN)

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Churchill Downs Inc. (CHDN)

Q1 2008 Earnings Call

May 7 2008 9:00 am ET


Julie Koenig Loignon - VP Communications

Bob Evans - President, CEO

Bill Mudd - CFO, EVP


Ryan Worst - Brean Murray

George Kenlly - Stifel Nicolaus



Good day, ladies and gentlemen. And welcome to the first quarter 2008 Churchill Downs Earning Conference Call. My name is Jeremy. And I will be your coordinator for today. (Operator Instructions). At this time I would like to turn the presentation over to your host for today's call, Ms. Julie Koenig Loignon. You may proceed ma'am.

Julie Koenig Loignon

Thank you, Jeremy. Good morning and welcome to the Churchill Downs, Incorporated conference call to review the company's results for the first 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 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 Company News located at Let me also note that a news release was issued advising out 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 operation 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 in expectations.

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

Bob Evans

Thanks, Julie. Good morning everyone. Thanks for joining us. All of us here at Churchill Downs have been devastated by the Eight Belles tragedy. None of us can recall seeing an accident such as that, and our people have seen a lot of horse racing over the years. Our sympathies go out to her breeder, owner, trainer, her jockey, her groom and all her connections. We don't know what the actual cause was. And those who have already opined on the topic don't either, they're just speculating. Perhaps we'll never know. But we are hopeful the research currently underway in various academic and other organizations plus the actual real-world experience we're gaining at our track Arlington Park which put in the synthetic polytrack surface prior to last year's meet and in other tracks will show us the way to safer racing for both horse and jockey.

Frankly, it's been hard to focus on pulling the information together for yesterday's earnings release and today's conference call. So if our tone is different today, that's why.

Let me make a few comments about our Q1 performance. I'll then turn it over to our CFO Bill Mudd who will take you through the numbers. I'll return to talk briefly about the derby, the situation with horseman at Calor and Churchill Downs and the balance of the year. We will then be happy to take your questions. But I ask since this is about our Q1 financial results today, please address your questions to the business side of Churchill Downs.

We're very pleased with our Q1 performance. Q1 revenue was up 37%. Operating expenses and G&A expenses both increased at slower rates than the rate of growth in revenue. Cash flow provided by operating activities totaled $44.5 million for the quarter that included $11.5 million of cash from insurance settlements, and that compares to $19.7 million of cash from operating activities in the previous year's first quarter that number included $0.8 million of insurance settlements.

We paid down $18 million in loans ending the quarter at about $50 million in long-term debt. And since the end of the first quarter we have further paid down another $20 million bringing our long-term debt today to $30 million. And we contemplate making another $10 million to $15 million payment yet this month.

The slots business at the Fair Grounds, our video poker business in New Orleans and our advanced deposition wagering or ADW business accounted for most of the improvement in Q1 results. Racing operations which consisted of only 57 days of racing in the first quarter was three days or about 5% below Q1 2007.

EBITDA was $9.3 million, including the $17.2 million insurance settlement compared to negative $8.8 millions in 2007 first quarter that number included $0.8 millions in insurance settlements. Let me turn this over to Bill now to cover more of the numbers.

Bill Mudd

Thank you, Bob. Good morning everyone. I will be reviewing the information as set forth in the tables of the press release that can be found under the company news section that Julie referred to earlier which is on our website And then as Bob mentioned, I'll turn it back over to him for final comments.

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