Churchill Downs Incorporated (CDI) reported record net revenues for 2013 of $779.3 million, for an increase of 7% over 2012, and the company’s common stock surged by 35% during the year. While adjusted EBITDA grew by 11% from the previous year, to $176.2 million, diluted earnings per share fell in 2013 to $3.06 from $3.34 in 2012. The erosion in earnings per share reflected an increase of 36% in gaming expenses and 13% in selling expenses and overhead.

Net revenues at CDI racetracks from racing operations decreased to $274.3 million in 2013, or by 9%. Net revenues at Churchill Downs racetrack grew by 7%, whereas net revenues from horse racing at Arlington Park, Calder Race Course, and Fairgrounds Race Course dropped by 7%, 44%, and 8%, respectively. Calder held 22% fewer live races in 2013 than in 2012 and ran concurrently with nearby Gulfstream Park during the fourth quarter.

CDI opened another racetrack/casino in December 2013, Miami Valley Gaming & Racing, a 50/50 joint venture north of Cincinnati, Ohio, presenting harness racing.

Online business had a slight uptick in net revenues in 2013 of 1% to $184.5 million. Online encompasses TwinSpires, United Tote, Bloodstock Research and Information Services, and an interest in HRTV. Online handle was damaged when CDI stopped accepting wagers from Texas in September of 2013 after an unsuccessful challenge to state law that the company is appealing.

Net revenues from gaming at CDI casinos soared to $297.5 million in 2013. The 33% increase was attributable to CDI acquisitions of Riverwalk Casino in Mississippi in October 2012 and Oxford Casino in Maine in July 2013. CDI casinos associated with racetracks–Calder Casino and Fair Grounds Slots—experienced little change in net gaming revenues during 2013—Calder had a 1% increase and Fair Grounds had a 2% decrease.

Net revenues from racing operations and online services accounted for 58.9% of total CDI net revenues in 2013, down from 66.4% in 2012.

An adapted version of this analysis appeared in the Blood-Horse magazine of March 8, 2014. Copyright © 2014 Blood-Horse Publications. Used with permission.