Churchill Downs Reports Q3 Earnings

Churchill Downs Incorporated today reported results for the third quarter and nine months ended Sept. 30, 2005.

Net earnings for the third quarter were $71.6 million or $5.30 per diluted share, compared to a loss of $3.8 million or $0.29 per diluted share for the same period in 2004. During the third quarter of 2005, CDI recognized a gain, net of income taxes, of $69.9 million on the sale of the assets of Hollywood Park. Results from Hollywood Park are treated as discontinued operations and detailed as such in the accompanying tables. During the third quarter of 2004, the Company recognized $6.2 million of impairment losses on the assets of Ellis Park.

Net revenues from continuing operations for the third quarter reached $112.0 million, an increase of 9.3 percent, compared with $102.5 million for the same period last year. Net earnings from continuing operations were $3.8 million during the third quarter, compared to a loss from continuing operations of $396,000 during the year-earlier period. Diluted net earnings per share from continuing operations totaled $0.28, compared to a loss of $0.03 per share from continuing operations during the third quarter of 2004. Results for the third quarter and first nine months of 2005 are outlined in the accompanying tables.

CDI's President and Chief Executive Thomas H. Meeker said, "Our financial results during the third quarter and first nine months of the year demonstrate our ability to grow top-line revenues, EBITDA and net earnings in the face of significant challenges. Our continuing operations delivered positive growth while racing 12 fewer days and confronting short fields sizes, equine illnesses and hurricanes in two states where we operate.

"Through the sale of Hollywood Park, we strengthened our balance sheet by virtually eliminating our long-term debt. We also negotiated an amended credit facility at favorable rates. As a result, the Company now enjoys access to capital and the freedom to execute on strategic opportunities as they develop. While CDI no longer owns or manages Hollywood Park, per the amended Asset Purchase Agreement, we have the right to reinvest in the asset should the California legislative environment improve and alternative gaming activities become available at the property.

"During the quarter, hurricanes disrupted our operations in Louisiana and Florida. Hurricane Katrina closed Fair Grounds Race Course and its off-track betting and video poker operations, while Hurricanes Dennis, Katrina and Rita caused lost race days and simulcast-only days at Calder Race Course. Severe weather also affected our operations in October and November, as Calder sustained damage during Hurricane Wilma on Oct. 24, and Ellis Park sustained damage during a tornado that struck Western Kentucky Nov. 6. We are working with our insurance providers to assess the extent of the damage to Calder, Ellis Park and our Louisiana operations. We are also in discussions with federal, state and local officials overseeing the restoration of southeast Louisiana following Hurricane Katrina.

"One year ago, we made a long-term investment in New Orleans because we believe in the community and appreciate its deep connection to Fair Grounds as a racetrack and as home to the world-famous Jazz and Heritage Festival. We want Fair Grounds and Jazz Fest to remain part of a revitalized New Orleans. As we move forward, we believe there will be opportunities to reposition our operations within the community in ways that will benefit the community and the Company.

"Despite the challenges presented by the current closure of Fair Grounds, we are pleased to offer a shortened race meet this winter at Harrah's Louisiana Downs in Bossier City, La. We appreciate the support and cooperation demonstrated by our host site for this season as well as our Louisiana horsemen and state officials and regulators in allowing Fair Grounds racing to continue. We are also heartened by the Oct. 26 reopening of five of Fair Grounds' off-track betting and video poker locations in the New Orleans area and are progressing with plans to reopen additional sites."

Meeker concluded, "Churchill Downs Incorporated is part of a dynamic and ever-changing industry, and our long-term success depends in part on our ability to adapt to change. Given the state of the industry, we believe there are several attractive opportunities for us to redeploy our capital, develop more distribution channels for our products, and further leverage our brand."