Churchill Downs reports record revenue but lower profits

A rendering of the library in Churchill Downs' planned Mansion section for high-end customers.
A rendering of the library in Churchill Downs' planned Mansion section for high-end customers. Photo courtesy Churchill Downs

Churchill Downs announced record first-quarter revenue on Wednesday, but the Louisville-based company's profits fell and executives said the increasingly important gaming business underperformed.

The company's revenue jumped 7 percent to $148.1 million from $138.2 million in the same quarter a year ago. Driving that was growth in gaming, which saw revenue increase 21 percent to $72.1 million from $59.3 million a year ago.

Part of that increase came because of Churchill's acquisition of the Riverwalk Casino Hotel in Vicksburg, Miss., that was completed Oct. 23. Riverwalk added $14.1 million in revenue in the quarter. The casino hotel features 723 slot machines and 18 table games, as well as a five-story, 80-room hotel.

But the gaming segment's results remained below the expectations of the racing company's leadership. Churchill Downs CEO Robert L. Evans attributed the difference to the "higher payroll taxes that became effective January 1, and delays in issuing federal and state income tax refunds."

The company's online business segment also came in under expectations and saw sales drop 3 percent to $42.9 million from $44 million in the same period a year ago. Evans noted the company stopped taking wagers in Illinois on on Jan. 18, because "the bill authorizing such wagering was allowed to expire by the state legislature."

The company's signature racing segment saw revenue fall 8 percent in the quarter to $27.8 million from $30.2 million in the same quarter in 2012.

Churchill attributed the decline to fewer host days at Arlington International Racecourse in Illinois compared to the same period last year.

The racing segment's biggest event — the Kentucky Derby — is coming in a couple of weeks and Evans noted pre-event indications "look strong" for the week of events surrounding it and the Kentucky Oaks.

The company is looking to build on the Derby's growth this year by adding an upscale area called The Mansion at Churchill Downs to target high-end customers.

Churchill also owns racetracks in Miami Gardens, Fla., and New Orleans. Only Calder Race Course in Florida saw racing revenues from external customers increase in the quarter.

While expenses for the racing segment also dropped, they did not drop as much as sales, pushing overall profits down for the company.

The company's net income in the quarter was $1.06 million, or 6 cents per share, down from $1.35 million, or 8 cents per share, in the first quarter of 2012.

Executives will discuss the company's quarterly results with analysts during a Thursday morning conference call.