CHURCHILL DOWNS INC. OPERATING RESULTS FOR 2012

Churchill Downs Inc. (CDI) describes itself as “a diversified provider of pari-mutuel horseracing, casino gaming, entertainment, and is the country’s premier source of online account wagering on horseracing events.” It has approximately 2,300 full-time associates and hires seasonal employees as needed.
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CDI, which recently reported operating results for the fiscal year ended December 31, 2012, presents a picture of an enterprise delivering solid returns for its shareholders despite a decrease in net income last year.

Corporate net income was $58.3 million for 2012, a 9.5% decrease from 2011, but nearly a fourfold increase over 2010. The 2012 metric translated into diluted earnings per share (i.e., factoring in stock options) of $3.34, compared to $3.76 in 2011 and $1.05 in 2010.

CDI net revenue grew from $696.9 million in 2011 to $732.4 million in 2012. Racing’s relative contribution to corporate net revenues declined from 42.9% in 2011 to 41.2% in 2012; Gaming’s share held steady at 30.5%; and Online’s impact rose from 23.7% in 2011 to 25% in 2012.

The Louisville-based company is organized into four business segments. Racing consists of racetracks, one each in Florida, Illinois, Kentucky, and Louisiana. Gaming encompasses two casinos/hotels in Mississippi, a pair of racinos, in Florida and Louisiana, and a poker-machine operator in Louisiana. Online includes four account wagering services (three in the United States and one on the Isle of Man), Bloodstock Research Information Services, and an equity investment in HRTV.

The smallest CDI segment, referred to as Other, is invested in United Tote, Bluff Media, which publishes poker content, and the planned Miami Valley Gaming & Racing racetrack casino in Ohio.

The Racing segment’s 2012 EBITDA (earnings before interest, taxes, depreciation, and amortization) of $50.8 million was a decline of 21% from 2011, whereas the 2012 EBITDA of $67.8 million for Gaming and $40.3 million for Online were increases of 19% and 6.7%, respectively, over 2011.

CDI’s stock, trading on NASDAQ under the symbol CHDN, in 2012 was usually valued at an above-average price-to-earnings multiple. The stock ranged in price per share from a low of $49.82 in the first quarter of 2012 to a high of $67.20 in the fourth quarter, and has continued to trade near its peak during 2013.

Copyright © 2013 the Blood-Horse. Used with permission.

Postscript:  A week ago, Churchill Downs Inc. agreed to acquire Oxford Casino in Maine for $160 million. The casino opened in June 2012 and the seller is Black Bear Realty Company.

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