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Churchill's 2009 earnings down 39 percent

Annual earnings for Churchill Downs Inc. plunged 39 percent even as 2009 revenue grew 2 percent, according to fourth-quarter figures released Tuesday by the Louisville-based racetrack company.

The company reported net earnings from continuing operations of $17.7 million for 2009, down from $29.1 million in 2008. Annually, earnings per share fell to $1.28, from $2.10.

For the quarter, Churchill reported a net loss of almost $6.9 million, a 69 percent increase from the loss of $4.1 million reported in the same quarter of 2008.

Churchill Downs Inc. CEO Bob Evans said the financial results showed the value of increased diversification.

"Despite the economic recession and very challenging conditions in the U.S. Thoroughbred industry, we were able to grow revenues in 2009," Evans said in a news release. Churchill "is making significant investments in our racing business, though it is proving increasingly difficult to generate an acceptable return on those investments."

Evans pointed to $10 million in investments, including the installation of lights for night racing at Churchill Downs, as well as the company's funding of three weekends of Kentucky Derby prep race coverage on NBC.

Net revenue for 2009 grew by just over $9 million, to $439.7 million. While revenue from racing operations fell almost $20 million, revenue from online business and gaming grew by $17 million and $11.6 million, respectively.

Those two factors are likely to drive the company's growth in 2010, with the January opening of a new casino at Calder in Florida and the anticipated completion in the second quarter of the merger with advance-deposit wagering company Youbet.com.

But in the short term, both factors were costly in the fourth quarter, when the company recorded $1.8 million in pre-opening costs related to the casino, as well as legal and other professional fees related to the Youbet merger. Other factors influencing the downturn, according to the release, included "various bankruptcies across the U.S. Thoroughbred industry" and litigation surrounding gambling revenue in Illinois. Churchill Downs' main racetrack rival, Magna Entertainment, is mired in bankruptcy.

Churchill shares (CHDN-NASDAQ) closed at $36.11 per share on Tuesday. The results were released after the market closed.

Churchill will discuss its fourth quarter and year-end results in a conference call at 9 a.m. Wednesday. To listen, go to www.ChurchillDownsIncorporated.com or www.OpenCompany.info. People can also dial 1-877-815-1625; conference call ID number 59009855.

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