Churchill Downs benefits from gaming growth but online stagnates

US racing and gaming operator Churchill Downs Incorporated (CDI) has reported a 5 per cent increase in net revenues to a record $283.8m for the second quarter of 2013, following strong growth from the company’s land-based gaming business.

CDI benefited from the expansion of its gaming segment which included revenues from the recently acquired Riverwalk Casino Hotel.

Q2 2013 Revenues

Total gaming revenues were up 30 per cent year-on-year to $66.9m, including $14.1m of revenues generated by Riverwalk.

This helped to offset a 2 per cent decline in revenues from the company’s core racing operations to $157.4m, with results impacted by the loss of host revenues at Calder Race Course which offset strong performance of Kentucky Oaks and Derby week.

Online wagering revenues, which includes TwinSpires.com and Luckity.com, fell marginally by 0.3 per cent to $52.5m as lost wagering by Illinois customers were offset by growth in other jurisdictions.

“TwinSpires.com's handle was up only 1.3 per cent for the quarter, reflecting the expiration of Illinois' Advance Deposit Wagering (ADW) legislation at the end of 2012, which was not reinstated until June 7,” said CDI chairman and CEO Robert L Evans. “Excluding the impact from Illinois, TwinSpires.com's handle was up 7.2 per cent in the second-quarter outpacing the US thoroughbred industry handle growth of 1.0 per cent as reported by Equibase.com.”

CDI said that it is well positioned to continue growing and gaining online market share from better technology, innovation and ability to offer integrated data. The company is also positioned to participate in US online poker upon legalisation under its Bluff brand.

Total operating expenses increased by 4 per cent to $201.7m following a 30 per cent rise in gaming expenses to $49.6m, while selling, general and administrative expenses were up 10 per cent to $22.1m.

Operating income fell marginally compared to last year to $82.1m, with net earnings increasing 4 per cent to $50.3m.

“With record second-quarter net revenues and net earnings, we were pleased with the quarter,” said Evans. We continue to build our growth portfolio as we closed on our acquisition of the Oxford Casino in Maine, on July 17, and will invest approximately $3.2m to expand the gaming floor.

“Construction of Miami Valley Gaming, our 1,600-video-lottery-terminal joint venture project north of Cincinnati, Ohio, is progressing on budget and ahead of schedule and we hope to open the property in early-to-mid December 2013.”

CDI has announced a $14.5m project at Churchill Downs Racetrack to construct 51,000 square feet of new space adding 2,400 new reserved seats and new amenities serving 20,400 existing seats.

“We intend to complete this project in time for the 140th running of the Kentucky Oaks and Derby in May 2014,” said Evans.

For the six month period, total revenues increased by 6 per cent to $431.8m, with net earnings up by 3 per cent year-on-year to $51.4m.

As at June 30th the company held cash and cash equivalents of $38.9m compared to $31.8m a year ago.

Shares in Churchill Downs Incorporated (Co. Data) (NASDAQ:CDI) closed yesterday in New York at $82.21 per share.