Churchill Downs expects strong revenue from Kentucky Derby

ssloan@herald-leader.comFebruary 28, 2013 

Churchill Downs executives said Thursday that this year's Kentucky Derby is on track for a strong performance.

Executives discussed the signature event, scheduled for May 4 this year, at the company's flagship Louisville racetrack while talking with analysts about fourth-quarter and annual earnings.

Chief financial officer William Mudd said revenue from premium admissions, including boxes, suites and tables in premium areas, is "very strong compared to last year."

"Sales of our personal seats licenses are significantly ahead of last year," he said. "Sponsorship sales are on track to outpace last year."

Some of that growth is coming from a new upscale area called the Mansion, targeting high-end customers.

It was a bright spot for the company's racing segment in an otherwise tough quarter.

Revenues from racing fell 7 percent to $48.5 million in the fourth quarter from $52.1 million in the same quarter in 2011. The company attributed the decline to not hosting the Breeders' Cup World Championships in 2012, as it did in Louisville in 2011.

For the quarter, the racing segment lost $4.3 million, worse than a $2.8 million loss in the fourth quarter of 2011.

Overall revenues rose 6 percent to $158.5 million in the fourth quarter from $149.3 million in the fourth quarter of 2011. But profits fell to $2.37 million, or 14 cents a share, from $7.6 million, or 44 cents a share, in the fourth quarter of 2011.

The company's online segment, which includes betting through its advance-deposit wagering site TwinSpires.com, also had quarterly results that left executives "a bit disappointed," Mudd said.

Sales growth in the segment was only 2 percent for the quarter, although it was 11 percent for the year.

Expenses related to the launch of the company's new online gambling platform, Luckity.com, reduced profitability in the segment for the quarter. But executives spoke of the high-growth possibilities for the site, which has a variety of games and betting options.

The winners are determined by the outcome of live horse races, but the players don't see the races.

"We've seen the phenomenon going on with social gaming in the country ... so we wanted to take the skills and the capabilities we'd built in TwinSpires and move into a new area and use those skills to reach a different customer set," Churchill Downs president William Carstanjen said.

Carstanjen said the company has not yet begun to heavily market the site because the focus has been on improving the quality of the online experience.

"There's a been a lot of learning and some hiccups, too," he said. "It's fair to say there are a lot of encouraging signs that we've seen so far.

"We really, with very little marketing, have not had trouble acquiring customers."

Scott Sloan: (859) 231-1447. Twitter: @HeraldLeaderBiz.

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