24/04/2019 21:37:25

Churchill Downs Incorporated Reports 2019 First Quarter Results

LOUISVILLE, Ky., April 24, 2019 (GLOBE NEWSWIRE) -- Churchill Downs Incorporated (Nasdaq: CHDN) ("CDI" or the "Company") today reported business results for the first quarter ended March 31, 2019.

First Quarter 2019 Highlights

  • Net revenue of $265.4 million, a 40% increase over the prior year quarter
  • Net income of $11.6 million, compared to $182.0 million in the prior year quarter
    • Adjusted net income of $25.5 million, compared to $15.8 million in the prior year quarter
  • Adjusted EBITDA of $74.6 million, a 52% increase over the prior year quarter
  • Completed the Presque Isle Downs and Casino ("Presque Isle") acquisition on January 11, 2019
  • On March 5, 2019, we acquired a 61.3% equity ownership interest in Midwest Gaming Holdings, LLC ("Midwest Gaming")
  • Completed the acquisition of certain assets related to the management of Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") on March 8, 2019

CONSOLIDATED RESULTS

First Quarter

(in millions, except per share data)

2019

 

2018

    
Net revenue$265.4  $189.3 
Net income from continuing operations$11.9  $14.1 
Diluted EPS from continuing operations$0.30  $0.32 
Net income$11.6  $182.0 
Diluted EPS$0.29  $4.18 
Adjusted net income(a)$25.5  $15.8 
Adjusted diluted EPS(a)$0.63  $0.36 
Adjusted EBITDA(a)$74.6  $49.2 
 

(a) This is a non-GAAP measure. See explanation and reconciliation of non-GAAP measures below.

FIRST QUARTER 2019 NET INCOME

The Company's first quarter 2019 net income was $11.6 million, comprised of $11.9 million in net income from continuing operations and $0.3 million in net loss from discontinued operations, compared to $182.0 million in the prior year quarter, comprised of $14.1 million in net income from continuing operations and $167.9 million in net income from discontinued operations.

The following items impacted the comparability of the Company's first quarter net income from continuing operations:

  • $6.6 million after-tax impact of our portion of Midwest Gaming's non-cash recapitalization costs based on our percentage ownership of Midwest Gaming;

  • $2.8 million non-cash tax impact related to the re-measurement of our net deferred tax liabilities based on an increase in revenue related to states with higher tax rates compared to the prior year quarter; and

  • $2.5 million after-tax increase in expenses primarily related to higher transaction expenses and pre-opening expenses. 

Excluding these items, first quarter 2019 net income from continuing operations increased $9.7 million primarily due to the following:

  • $12.5 million after-tax increase driven by the results of our operations and equity in income from our unconsolidated affiliates.

  • Partially offset by $2.8 million after-tax increase in interest expense associated with higher outstanding debt balances.

The Company's first quarter 2019 net income from discontinued operations decreased by $168.2 million compared to the prior year quarter related to net income from Big Fish Games, Inc. ("Big Fish Games"), driven by the $168.3 million after-tax gain on the sale of Big Fish in January 2018 (the “Big Fish Transaction”).

Due to the Big Fish Transaction, the Company has presented Big Fish Games as held for sale and discontinued operations in the condensed consolidated financial statements and related notes in our Quarterly Report on Form 10-Q.

SEGMENT RESULTS

During the first quarter of 2019, we realigned our operating segments to reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources. As a result of such alignment, our three reportable segments are: Churchill Downs, Online Wagering, and Gaming.  The Churchill Downs segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack and Derby City Gaming.  The Online Wagering segment includes the revenue and expenses for the TwinSpires business ("TwinSpires") and the online sports betting and iGaming business.  The Gaming segment includes revenue and expenses for the casino properties and associated racetrack or Jai Alai facilities which support the casino license as applicable.  Effective January 1, 2019, the Company does not allocate corporate and other related expenses to the operating segments in the accompanying condensed consolidated statements of comprehensive income in this press release and our Quarterly Report on Form 10-Q.  Prior year results were reclassified to conform to this presentation.  Refer to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 23, 2019 for further details regarding our segment realignment.

The summaries below present net revenue from external customers and intercompany revenue from each of our reportable segments:

Churchill Downs

First Quarter

(in millions)

2019

 

2018

    
Net revenue$21.4  $2.3 
Adjusted EBITDA1.4  (6.0)

For the first quarter of 2019, net revenue increased $19.1 million from the first quarter of the prior year due to a $18.7 million increase from the opening of Derby City Gaming in September 2018 and a $0.4 million increase at Churchill Downs Racetrack.

Adjusted EBITDA increased $7.4 million from the first quarter of the prior year primarily due to the opening of Derby City Gaming in September 2018, which contributed $7.6 million of Adjusted EBITDA, partially offset by a $0.2 million decrease at Churchill Downs Racetrack.

Online Wagering

First Quarter

(in millions)

2019

 

2018

    
Net revenue$63.4  $63.6 
Adjusted EBITDA16.9  17.9 

For the first quarter of 2019, TwinSpires net revenue decreased $0.3 million from the prior year.  Active players grew 2.4% while net revenue per active player declined 3.3%.  Handle grew 0.1% during the first quarter 2019 compared to the prior year, which outpaced the U.S. thoroughbred industry performance by 3.5 percentage points.  Industry handle was down due to the shift in racing dates at Oaklawn Park Racetrack from the first quarter of 2019 to the second quarter of 2019, the impact of inclement weather and Santa Anita race date cancellations in the first quarter of 2019.

Adjusted EBITDA decreased $1.0 million due to our online sports betting and iGaming operations, which launched during the first quarter of 2019.  TwinSpires' Adjusted EBITDA was flat compared to the prior year quarter.

Gaming

First Quarter

(in millions)

2019

 

2018

    
Net revenue$170.1  $112.5 
Adjusted EBITDA64.8  46.4 

For the first quarter of 2019, net revenue increased $57.6 million from the prior year primarily driven by:

  • $29.7 million increase due to the acquisition of Presque Isle in January 2019;

  • $18.4 million increase due to the consolidation of Ocean Downs as a result of the acquisition of the remaining 37.5% of Ocean Downs in August 2018;  

  • $3.9 million increase at our Mississippi properties primarily due to the opening of our retail BetAmerica Sportsbooks at both properties in August 2018;

  • $3.4 million increase at Fair Grounds and VSI primarily due to two additional off-track betting and video poker facilities opening during 2018, successful marketing and promotional activities, and increased handle; and 

  • $2.3 million increase due to the acquisition of certain assets related to the management of Lady Luck Nemacolin.

  • Partially offsetting these increases was a $0.1 million decrease from other sources. 

Adjusted EBITDA increased $18.4 million primarily driven by:

  • $13.1 million increase from the acquisition of the 61.3% equity investment in Midwest Gaming in March 2019, the acquisition of Presque Isle in January 2019, and the  acquisition of certain assets related to the management of Lady Luck Casino Nemacolin in March 2019;

  • $2.4 million increase from our Mississippi properties primarily due to the opening of our retail BetAmerica Sportsbooks at both properties in August 2018;

  • $1.8 million increase from Fair Grounds and VSI primarily due to two additional off-track betting and video poker facilities opening during 2018;

  • $1.0 million increase from Ocean Downs due to VLT performance; and

  • $1.0 million increase from our equity investment at MVG.

  • Partially offsetting these increases were a $0.5 million decrease at Calder due to favorable insurance reserve adjustments in the prior year quarter that did not recur in 2019 and an increase in professional and legal fees in the first quarter of 2019.  Also, Oxford decreased $0.4 million primarily due to inclement weather. 

Capital Management

The Company repurchased 282,416 shares of its common stock in conjunction with its $300.0 million publicly announced share repurchase program at a total purchase price of $25.0 million in the first quarter of 2019, based on trade date.  We had approximately $243.0 million repurchase authority remaining under this program as of March 31, 2019, based on trade date.

Conference Call

A conference call regarding this news release is scheduled for Thursday, April 25, 2019, at 9 a.m. ET.  Investors and other interested parties may listen to the teleconference by accessing the online, real-time webcast and broadcast of the call at https://ir.churchilldownsincorporated.com/events.cfm, or by dialing (877) 372-0878 and entering the pass code 7187939 at least 10 minutes before the appointed time.  International callers should dial (253) 237-1169.  An online replay will be available at approximately noon ET on Thursday, April 25, 2019, and will continue to be available for two weeks.  A copy of the Company’s news release announcing quarterly results and relevant financial and statistical information about the period will be accessible at www.churchilldownsincorporated.com.

Use of Non-GAAP Measures

In addition to the results provided in accordance with GAAP, the Company also uses non-GAAP measures, including adjusted net income, adjusted diluted EPS, EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA.

The Company uses non-GAAP measures as a key performance measure of the results of operations for purposes of evaluating performance internally. These measures facilitate comparison of operating performance between periods and helps investors to better understand the operating results of CDI by excluding certain items that may not be indicative of the Company's core business or operating results. The Company believes the use of these measures enable management and investors to evaluate and compare, from period to period, the Company’s operating performance in a meaningful and consistent manner. The non-GAAP measures are a supplemental measure of our performance that is not required by, or presented in accordance with GAAP, and should not be considered as an alternative to, or more meaningful than, net income or diluted EPS (as determined in accordance with GAAP) as a measure of our operating results.

We use Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with GAAP. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

Adjusted net income and adjusted diluted EPS exclude discontinued operations net income or loss; recapitalization costs related to the Midwest Gaming transaction; transaction expense, which includes acquisition and disposition related charges, Calder exit costs, as well as legal, accounting, and other deal-related expense; pre-opening expense; and certain other gains, charges, recoveries, and expenses.

Adjusted EBITDA includes CDI's portion of the EBITDA from our equity investments.

Adjusted EBITDA excludes:

  • Transaction expense, net which includes:
    • Acquisition and disposition related charges, including fair value adjustments related to earnouts and deferred payments;
    • Calder Racing exit costs; and
    • Other transaction expense, including legal, accounting, and other deal-related expense;
  • Stock-based compensation expense;
  • Recapitalization costs related to the Midwest Gaming transaction;
  • Asset impairments;
  • Gain on Ocean Downs/Saratoga Transaction;
  • Loss on extinguishment of debt;
  • Pre-opening expense; and
  • Other charges, recoveries and expenses

For purposes of segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the condensed consolidated statements of comprehensive income.  Refer to the reconciliation of comprehensive income to Adjusted EBITDA included herewith for additional information.

About Churchill Downs Incorporated

Churchill Downs Incorporated ("CDI") (Nasdaq: CHDN), headquartered in Louisville, Ky., is an industry-leading racing, online and gaming entertainment company anchored by our iconic flagship event - The Kentucky Derby.  We own and operate the largest legal online horseracing wagering platform in the U.S., through our TwinSpires business.  We are also a leader in brick-and-mortar casino gaming with approximately 11,000 slot machines and VLTs and approximately 200 table games in eight states.  In August 2018, we launched our BetAmerica Sportsbook at our two Mississippi casino properties and have announced plans to enter additional U.S. sports betting and iGaming markets.  Derby City Gaming, the first historical racing machine ("HRM") facility in Louisville, Kentucky, was opened in September 2018 with 900 HRM machines.  Additional information about CDI can be found online at www.churchilldownsincorporated.com.

Information set forth in this presentation contains various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), which provides certain “safe harbor” provisions. All forward-looking statements made in this presentation are made pursuant to the Act. Forward-looking statements are typically identified by the use of terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “will,” and similar words, although some forward-looking statements are expressed differently.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from expectations include the following: the effect of economic conditions on our consumers' confidence and discretionary spending or our access to credit; additional or increased taxes and fees; public perceptions or lack of confidence in the integrity of our business; loss of key or highly skilled personnel; restrictions in our debt facilities limiting our flexibility to operate our business; general risks related to real estate ownership, including fluctuations in market values and environmental regulations; catastrophic events and system failures disrupting our operations; online security risk, including cyber-security breaches; inability to recover under our insurance policies for damages sustained at our properties in the event of inclement weather and casualty events; increases in insurance costs and inability to obtain similar insurance coverage in the future; inability to identify and complete acquisition, expansion or divestiture projects, on time, on budget or as planned; difficulty in integrating recent or future acquisitions into our operations; number of people attending and wagering on live horse races; inability to respond to rapid technological changes in a timely manner; inadvertent infringement of the intellectual property of others; inability to protect our own intellectual property rights; payment-related risks, such as risk associated with fraudulent credit card and debit card use; compliance with the Foreign Corrupt Practices Act or applicable money-laundering regulations; work stoppages and labor issues; difficulty in attracting a sufficient number of horses and trainers for full field horseraces; inability to negotiate agreements with industry constituents, including horsemen and other racetracks; personal injury litigation related to injuries occurring at our racetracks; our inability to utilize and provide totalisator services; weather conditions affecting our ability to conduct live racing; increased competition in the horseracing business; changes in the regulatory environment of our racing operations; changes in regulatory environment of our online horseracing business; increase in competition in our online horseracing; uncertainty and changes in the legal landscape relating to our online wagering business; legalization of online sports betting and iGaming in the United States and our ability to predict and capitalize on any such legalization; inability to expand our sports betting operations and effectively compete; failure to comply with laws requiring us to block access to certain individuals could result in penalties or impairment with respect to our mobile and online wagering products; increased competition in our casino business; changes in regulatory environment of our casino business; development and expansion of casinos is costly and susceptible to delays, cost overruns and other uncertainties; and concentration and evolution of slot machine manufacturing and other technology conditions that could impose additional costs.

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

Three Months Ended March 31,

(in millions, except per common share data)

2019

 

2018

Net revenue:

   
Churchill Downs$21.0  $2.0 
Online Wagering63.1  63.2 
Gaming168.8  111.5 
All Other12.5  12.6 

Total net revenue

265.4  189.3 

Operating expense:

   
Churchill Downs23.4  9.9 
Online Wagering45.1  44.0 
Gaming125.0  79.6 
All Other15.5  16.3 
Selling, general and administrative expense24.9  18.4 
Transaction expense, net3.5  1.4 

Total operating expense

237.4  169.6 

Operating income

28.0  19.7 

Other income (expense):

   
Interest expense, net(13.7) (9.6)
Equity in income of unconsolidated investments4.1  6.5 
Miscellaneous, net  0.1 

Total other income (expense)

(9.6) (3.0)
  Income from continuing operations before provision for income taxes18.4  16.7 
Income tax provision(6.5) (2.6)
Income from continuing operations, net of tax11.9  14.1 
(Loss) income from discontinued operations, net of tax(0.3) 167.9 

Net income

$11.6  $182.0 

Net income (loss) per common share data - basic:

   
Continuing operations$0.30  $0.33 
Discontinued operations$(0.01) $3.87 
Net income per common share data - basic$0.29  $4.20 

Net income (loss) per common share data - diluted:

   
Continuing operations$0.30  $0.32 
Discontinued operations$(0.01) $3.86 
Net income per common share data - diluted$0.29  $4.18 
    
Weighted average shares outstanding:   
Basic40.4  43.3 
Diluted40.6  43.5 

Other comprehensive income (loss):

   
Foreign currency translation, net of tax$  $0.6 
Change in pension benefits, net of tax  (0.2)
Other comprehensive income (loss)  0.4 

Comprehensive income

$11.6  $182.4 
        

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in millions)

March 31, 2019

 

December 31, 2018

ASSETS

   
Current assets:   
Cash and cash equivalents$119.7  $133.3 
Restricted cash37.7  40.0 
Accounts receivable, net47.5  28.8 
Income taxes receivable16.7  17.0 
Other current assets37.8  22.4 
Total current assets259.4  241.5 
Property and equipment, net866.5  757.5 
Investment in and advances to unconsolidated affiliates625.7  108.1 
Goodwill363.8  338.0 
Other intangible assets, net345.0  264.0 
Other assets18.1  16.1 
Total assets$2,478.5  $1,725.2 
    

LIABILITIES AND SHAREHOLDERS' EQUITY

   
Current liabilities:   
Accounts payable$72.1  $47.0 
Purses payable16.1  15.8 
Account wagering deposit liabilities30.7  29.6 
Accrued expense78.0  89.8 
Current deferred revenue96.8  47.9 
Current maturities of long-term debt4.0  4.0 
Dividends payable  22.5 
Total current liabilities297.7  256.6 
Long-term debt, net of current maturities and loan origination fees386.5  387.3 
Notes payable, net of debt issuance costs1,084.3  493.0 
Non-current deferred revenue21.0  21.1 
Deferred income taxes194.0  78.2 
Other liabilities38.1  15.7 
Total liabilities2,021.6  1,251.9 
Commitments and contingencies   
Shareholders' equity:   
Preferred stock, no par value; 0.3 shares authorized; no shares issued or outstanding   
Common stock, no par value; 150.0 shares authorized; 40.2 shares issued and outstanding at March 31, 2019 and 40.4 shares at December 31, 2018   
Retained earnings457.8  474.2 
Accumulated other comprehensive loss(0.9) (0.9)
Total shareholders' equity456.9  473.3 
      Total liabilities and shareholders' equity$2,478.5  $1,725.2 
        

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited)

 

Three Months Ended March 31,

(in millions)

2019

 

2018

Cash flows from operating activities:

   
Net income$11.6  $182.0 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization20.8  13.8 
Gain on sale of Big Fish Games  (219.5)
Distributions from unconsolidated affiliates6.0  4.5 
Equity in income of unconsolidated affiliates(4.1) (6.5)
Stock-based compensation4.7  6.2 
Deferred income taxes6.4  2.1 
Other0.4  (3.2)
Changes in operating assets and liabilities, net of business acquisitions and dispositions:   
Income taxes0.3  52.4 
Deferred revenue46.2  35.8 
Other assets and liabilities(22.0) (11.7)
      Net cash provided by operating activities70.3  55.9 

Cash flows from investing activities:

   
Capital maintenance expenditures(13.9) (7.5)
Capital project expenditures(14.2) (26.5)
Acquisition of businesses, net of cash acquired(171.3)  
Proceeds from sale of Big Fish Games  970.7 
Investments in and advances to unconsolidated affiliates(409.8)  
Other(9.9)  
     Net cash (used in) provided by investing activities(619.1) 936.7 

Cash flows from financing activities:

   
Proceeds from borrowings under long-term debt obligations1,231.9  100.9 
Repayments of borrowings under long-term debt obligations(632.9) (343.9)
Big Fish Games earnout payment  (31.8)
Big Fish Games deferred payment  (26.4)
Payment of dividends(22.2) (23.7)
Repurchase of common stock(34.1) (514.4)
Debt issuance costs(7.5)  
Other(2.3) (4.5)
     Net cash provided by (used in) financing activities532.9  (843.8)

Net (decrease) increase in cash, cash equivalents and restricted cash

(15.9) 148.8 
Effect of exchange rate changes on cash flows  (0.1)
Cash, cash equivalents and restricted cash, beginning of period173.3  85.5 
Cash, cash equivalents and restricted cash, end of period$157.4  $234.2 
        

CHURCHILL DOWNS INCORPORATED

SUPPLEMENTAL INFORMATION

(Unaudited)

 

Three Months Ended March 31,

 

2019

 

2018

GAAP net income$11.6  $182.0 
    
Adjustments, continuing operations:   
Recapitalization costs related to Midwest Gaming8.3   
Transaction expense, net3.5  1.4 
Pre-opening expense and other expense1.7  0.6 
Income tax impact on net income adjustments(a)(2.7) (0.3)
Re-measurement of net deferred tax liabilities2.8   
Total adjustments, continuing operations13.6  1.7 
Gain on Big Fish Transaction, net of tax(b)  (168.3)
Big Fish Games net loss(b)0.3  0.4 
Total adjustments13.9  (166.2)
Adjusted net income$25.5  $15.8 
Adjusted diluted EPS$0.63  $0.36 
Weighted average shares outstanding - Diluted40.6  43.5 

(a)  The income tax impact for each adjustment is derived by applying the effective tax rate, including current and deferred income tax expense, based upon the jurisdiction and the nature of the adjustment.

(b)  Due to the Big Fish Transaction, the Big Fish Games segment is presented as a discontinued operation.

CHURCHILL DOWNS INCORPORATED

SUPPLEMENTAL INFORMATION

(Unaudited)

 

Three Months Ended March 31,

(in millions)

2019

 

2018

Net revenue from external customers:

   

Churchill Downs:

   
Churchill Downs Racetrack$2.3  $2.0 
Derby City Gaming18.7   
Total Churchill Downs21.0  2.0 

Online Wagering:

   
TwinSpires63.0  63.2 
Online Sports Betting and iGaming0.1   
Total Online Wagering63.1  63.2 

Gaming:

   
Oxford23.9  24.2 
Calder25.4  24.9 
Riverwalk16.3  14.4 
Harlow’s15.3  13.3 
Fair Grounds and VSI37.5  34.4 
Ocean Downs18.4   
Presque Isle29.7   
Lady Luck Nemacolin2.3   
Saratoga  0.3 
Total Gaming168.8  111.5 
All Other12.5  12.6 
Net revenue from external customers$265.4  $189.3 
    

Intercompany net revenue:

   
Churchill Downs$0.4  $0.3 
Online Wagering0.3  0.4 
Gaming1.3  1.0 
All Other2.2  2.4 
Eliminations(4.2) (4.1)
Intercompany net revenue$  $ 
        

CHURCHILL DOWNS INCORPORATED

SUPPLEMENTAL INFORMATION

(Unaudited)

 

Three Months Ended March 31, 2019

(in millions)

Churchill

Downs

 

Online

Wagering

 

Gaming

 

Total

Segments

 

All Other

 

Total

Net revenue from external customers

           
Pari-mutuel:           
Live and simulcast racing$1.4  $60.5  $12.2  $74.1  $7.5  $81.6 
Historical racing17.7      17.7    17.7 
Racing event-related services    1.5  1.5    1.5 
Gaming  0.1  146.6  146.7    146.7 
Other1.9  2.5  8.5  12.9  5.0  17.9 
Total$21.0  $63.1  $168.8  $252.9  $12.5  $265.4 

 

Three Months Ended March 31, 2018

(in millions)

Churchill

Downs

 

Online

Wagering

 

Gaming

 

Total

Segments

 

All Other

 

Total

Net revenue from external customers

           
Pari-mutuel:           
Live and simulcast racing$1.3  $61.0  $10.6  $72.9  $7.9  $80.8 
Historical racing           
Racing event-related services    1.4  1.4    1.4 
Gaming    93.9  93.9    93.9 
Other0.7  2.2  5.6  8.5  4.7  13.2 
Total$2.0  $63.2  $111.5  $176.7  $12.6  $189.3 
                      

CHURCHILL DOWNS INCORPORATED

SUPPLEMENTAL INFORMATION

(Unaudited)

Adjusted EBITDA by segment is comprised of the following:

 

Three Months Ended March 31, 2019

(in millions)

Churchill

Downs

 

Online

Wagering

 

Gaming

 

Total

Segments

 

All Other

 

Eliminations

 

Total

Net revenue$21.4  $63.4  $170.1  $254.9  $14.7  $(4.2) $265.4 
              
Taxes & purses(6.2) (3.3) (65.0) (74.5) (3.7)   (78.2)
                     
Marketing & advertising(1.1) (1.0) (5.1) (7.2) (0.1) 0.2  (7.1)
Salaries & benefits(5.2) (2.5) (24.5) (32.2) (4.6)   (36.8)
Content expense(0.5) (32.1) (1.2) (33.8) (1.8) 3.7  (31.9)
Selling, general & administrative expense(1.7) (1.8) (6.4) (9.9) (9.5) 0.2  (19.2)
Other operating expense(5.3) (5.8) (19.0) (30.1) (3.5) 0.1  (33.5)
Other income    15.9  15.9      15.9 
Adjusted EBITDA$1.4  $16.9  $64.8  $83.1  $(8.5) $  $74.6 

 

Three Months Ended March 31, 2018

(in millions)

Churchill

Downs

 

Online

Wagering

 

Gaming

 

Total

Segments

 

All Other

 

Eliminations

 

Total

Net revenue$2.3  $63.6  $112.5  $178.4  $15.0  $(4.1) $189.3 
              
Taxes & purses(0.7) (3.4) (38.0) (42.1) (4.0)   (46.1)
                     
Marketing & advertising(0.3) (0.8) (3.6) (4.7) (0.1) 0.1  (4.7)
Salaries & benefits(3.1) (2.1) (16.9) (22.1) (5.3)   (27.4)
Content expense(0.4) (32.2) (0.9) (33.5) (1.8) 3.3  (32.0)
Selling, general & administrative expense(1.0) (1.4) (3.8) (6.2) (9.1) 0.3  (15.0)
Other operating expense(2.8) (5.8) (13.7) (22.3) (3.9) 0.4  (25.8)
Other income    10.8  10.8  0.1    10.9 
Adjusted EBITDA$(6.0) $17.9  $46.4  $58.3  $(9.1) $  $49.2 
                            

CHURCHILL DOWNS INCORPORATED

SUPPLEMENTAL INFORMATION

(Unaudited)

 

Three Months Ended March 31,

(in millions)

2019

 

2018

Reconciliation of Comprehensive Income to Adjusted EBITDA:

   
    

Comprehensive income

$11.6  $182.4 
Foreign currency translation, net of tax  (0.6)
Change in pension benefits, net of tax  0.2 

Net income

11.6  182.0 
Loss (income) from discontinued operations, net of tax0.3  (167.9)
Income from continuing operations, net of tax11.9  14.1 
    
Additions:   
Depreciation and amortization20.8  13.8 
Interest expense13.7  9.6 
Income tax provision6.5  2.6 
EBITDA$52.9  $40.1 
    
Adjustments to EBITDA:   
Selling, general and administrative:   
   Stock-based compensation expense$4.7  $2.8 
   Other charges0.5   
Pre-opening expense1.3  0.6 
Other income, expense:   
Interest, depreciation and amortization expense related to equity investments3.5  4.3 
Recapitalization costs related to Midwest Gaming8.2   
Transaction expense, net3.5  1.4 
      Total adjustments to EBITDA21.7  9.1 

Adjusted EBITDA

$74.6  $49.2 
    

Adjusted EBITDA by segment:

   
Churchill Downs$1.4  $(6.0)
Online Wagering16.9  17.9 
Gaming64.8  46.4 
Total segment Adjusted EBITDA83.1  58.3 
All Other(8.5) (9.1)

Total Adjusted EBITDA

$74.6  $49.2 
        

CHURCHILL DOWNS INCORPORATED

SUPPLEMENTAL OPERATIONAL METRICS

(Unaudited)

 

First Quarter

(in millions)

2019

 

2018

 

Change

Gaming(a)

     
Revenue$170.1  $112.5  $57.6 
Adjusted EBITDA64.8  46.4  18.4 
Margin38.1% 41.2% (3.1)%
      
Wholly-owned casino margin(b)31.4% 36.0% (4.6)%
Same store wholly-owned casino margin(c)36.5% 36.0% 0.5 %

(a)  Gaming revenue and Adjusted EBITDA includes the casino and racing related results.

(b)  Wholly-owned casino margin only includes the following casino related results:

  • Calder Casino

  • Fair Grounds Slots and VSI

  • Harlow's Casino

  • Lady Luck Nemacolin

  • Ocean Downs Casino

  • Oxford Casino

  • Presque Isle Casino

  • Riverwalk Casino

(c)  Same store wholly-owned casino margin excludes Ocean Downs, Presque Isle and Lady Luck Nemacolin results for the first quarter ended March 31, 2019.

CHURCHILL DOWNS INCORPORATED

UNCONSOLIDATED AFFILIATES' FINANCIAL RESULTS

(Unaudited)

Summarized below are the financial results for our unconsolidated affiliates:

 

Summarized Income Statement

 

Three Months Ended March 31,

(in millions)

2019(a)

 

2018(b)

Net revenue$89.5  $107.4 
    
Operating and SG&A expense61.0  84.1 
Depreciation and amortization2.2  6.6 
Total operating expense63.2  90.7 

Operating income

26.3  16.7 
Interest and other, net(17.0) (2.9)

Net income

$9.3  $13.8 

 

Summarized Balance Sheet

(in millions)

March 31, 2019(a)

 

December 31, 2018(c)

Assets

   
Current assets$67.1  $24.0 
Property and equipment, net243.6  95.7 
Other assets, net235.4  106.7 
Total assets$546.1  $226.4 
    

Liabilities and Members' Equity

   
Current liabilities$87.2  $21.2 
Long-term debt752.3   
Other liabilities7.5   
Members' equity(300.9) 205.2 
Total liabilities and members' equity$546.1  $226.4 

(a)  Three months ended March 31, 2019 summarized income statement information and March 31, 2019 summarized balance sheet information include the following equity investments: MVG, Midwest Gaming from the transaction date of March 5, 2019, and two other immaterial joint ventures.

(b)  Three months ended March 31, 2018 summarized income statement information include the following equity investments: MVG, Saratoga New York, Saratoga Colorado, Ocean Downs, and two other immaterial joint ventures.

(c)  December 31, 2018 summarized balance sheet information included MVG and two other immaterial joint ventures.

Contact: Nick Zangari

(502) 394-1157

Nick.Zangari@kyderby.com

 

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