Churchill Downs Incorporated Investky 2009
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Churchill Downs Incorporated - InvestKY 2009 Equity Investment Conference Bill Mudd, Chief Financial Officer June 4 th , 2009 1 Forward Looking Statements In addition to historical facts or statements of current conditions, this presentation contains forward- looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, expectations or beliefs about future events or results, or otherwise are not statements of historical fact. The actual performance of the Company may differ materially from what is projected in such forward-looking statements. Investors should refer to statements included in reports filed by the company with the Securities and Exchange Commission for discussion of additional information concerning factors that could cause our actual results of operation to differ materially from the forward-looking statements made in this call. The information being provided today is as of this date only, and Churchill Downs Incorporated expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in expectations. This presentation includes “Non-GAAP financial measures” within the meaning of SEC Regulation G. A reconciliation of all Non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found at: http://www.churchilldownsincorporated.com/investors/quarterly_results. 2 Agenda Churchill Downs Incorporated Overview Racing: An Industry in Transition & Derby Week Innovations On-Line: Winning with Technology, Marketing, & Data Alternative Gaming: Louisiana & Florida Financials 3 Churchill Downs Incorporated Overview 4 Who We Are – CDI at a Glance CDI delivers racing, gaming and entertainment that customers love and that grow the value of our shareholders’ investment Arlington Park • 96 Live Days • $791MM Handle • 10 OTB’s Churchill Downs • 78 Live Days • $766MM Handle Twinspires.com • Home of the Kentucky Derby & Oaks • Leading advanced deposit wagering BRIS company The #1 source for • 36 States HRTV thoroughbred information • 24 hour horse racing • $234MM in 2008 handle channel Fair Grounds Calder Casino & Race Course & Slots Race Course • 50% ownership with • 82 Live Days Magna Entertainment • 160 Live Days • $499MM Handle • Access to over 70 tracks • $650MM Handle • 10 OTB’s, 700+ Video Poker Machines • $85MM Casino construction project in progress • 606 Slot Machines Our Job is Fun!!! TM 5 Racing: An Industry in Transition & Derby Week Innovations 6 Racing: An Industry in Transition • 10 year Industry Handle is flat, 90% now bet off-track • On Track Handle down 37% over this period 1999 - 2008 N.A. Thoroughbred Handle CAGR +1.1% On Track ($ Millions) (On Track CAGR (5.0)%, Off Track CAGR +0.8%) Off Track $18,000 15,000 10,000 5,000 - 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 7 Source: Jockey Club Fact Book. Note: Inflation averaged 2.7% and 3.4% over the last 10 and 4 years, respectively (CPI). Racing: An Industry in Transition • 10 year Industry Handle is flat, 90% now bet off-track • On Track Handle down 37% over this period • At the same time, Purses have increased driven by Alternative Gaming 1999 - 2008 N.A. Thoroughbred Purses CAGR +2.2% -(a $1,400 1,000 500 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Alternative Gaming Contribution Racing Only • • • Delaware Pennsylvania • Kentucky Nebraska • • • Florida Rhode Island • Arizona Ohio • • • Iowa West Virginia • California Oregon • • • Louisiana Indiana • Kansas Texas • • * • Maine Maryland • Massachusetts Virginia • • * New Mexico Illinois • Michigan * • New York • Minnesota * (card rooms) • Oklahoma • Arkansas * Impact not yet recognized Alternative Gaming Required to be Competitive… -a) Jockey Club Fact Book 8 Racing: An Industry in Transition • Handle generation is highly correlated to field size • Tracks with purse gaming contributions are seeing an increase in field sizes No Gaming Contribution Gaming Contribution 9 Racing: An Industry in Transition Our Competitors are Struggling … Friday, September 12, 2008 An emotional farewell NYRA emerges from bankruptcy, new NYRA incorporated Bay Meadows closes, leaving memories –yAdam Sichko Donna Vlahos Abbott | The Business Review Larry Stumes, Special to The Chronicle Hayward View Larger Monday, August 18, 2008 The newly reformed New York Racing Association Inc. trumpeted its freedom from There were no horses like Seabiscuit, Determine, Round Table, Native Diver, Johnbankruptcy Henry, Brown today, one day after a federal bankruptcy judge approved the horse racing Bess or Lost in the Fog running Sunday on the final day of live racing in the historyassociation’s of Bay Meadows. plans to erase its financial troubles. The “new” NYRA incorporated with the state today, formalizing negotiations over details Those horses and many more, along with some of thoroughbred racing's most famousof its renewed jockeys, horse racing franchise, which state legislators approved in February. NYRA trainersMEC: and owners,Other had Assets graced the San to Mateo be track Sold with their Separately presence since ithas opened operated Nov. Saratoga 3, Race Course, Belmont Park and Aqueduct since 1955, but it has 1934.by Ryan Conley spent the past 22 months in Chapter 11 bankruptcy. Date Posted: 3/6/2009 10:05:28 AM The 10,026 fans who filled the grandstand Sunday - three times the normal crowd“It’s - had a historic to make occasion. do Our debts are gone, our management team is stronger and we Last Updated: 3/7/2009 4:14:28 PM with You Lift Me Up, who won the $63,450 Last Dance Stakes. The 11/16-mile grasshave event a clean for run 3- at running racing, which is a big deal, in a managerial sense,” said C. year-oldSeveral fillies assets was owned the final by Magna race ever Entertainment run at Bay Me Corp.adows. will apparently be offeredSteven separately Duncker, for sale chairman of NYRA’s board. from a $195-million “stalking horse bid” its parent company has tendered in relationAs part to MEC’sof the deal, Chapter the state waived roughly $200 million in debts and liens against As the six horses made their way out of the saddling ring and onto the track for the final post parade, 11 bankruptcy filing March 5. NYRA, while giving the association $105 million to pay off creditors and cover operating bugler David Hardiman played "Auld lang Syne." Then came the "Call to the Post,"expenses. which drew In exchange, a the state gained tougher oversight of NYRA’s operations, and it standing ovation, followed by "Taps." The horses broke their parade to stand in front of the crowd According to a series of “Frequently Asked Questions” documents listed on MEC’snow Webowns site, the amongproperty deeds for the three race tracks. while their jockeys gave a salute. the assets being marketed separately by Miller Buckfire & Co., are Santa Anita Park, The Maryland AnotherJockey standing Club (which ovation includes accompanied Pimlico Race the horses Course into and the Laurel starting Park), gate Remington and still another Park, Thistledown, came when theand gate Portland opened Meadows, and track among announcer other Michael properties. Wrona substituted "Dancing!" for his normal "They're off!" Also included in assets not part of the “stalking horse bid” affiliated with parent company MI Developments are MEC’s joint-venture interests with Churchill Downs Inc. in HRTV and TrackNet Media Group. Miller Buckfire & Co. is described as MEC’s financial advisor and investment banker. The "stalking horse bid," which can be topped by a third party in a court auction, includes the assets of Gulfstream Park, Golden Gate Fields, Palm Meadows Training Center, Lone Star Park, AmTote International, and the company's advance deposit wagering entity, XpressBet.com. 10 Racing: CDI is Well Positioned The Good News … • Fair Grounds… Opened permanent slots facility in November ‘08 • Calder… Constructing a new $85MM Facility to open in early 2010 • Illinois & Kentucky… gaming under consideration by the legislature And, We Continue to Focus on Executing New Ideas… Night Racing at CDRT Export Pricing New Derby & Expanded Innovations Distribution Operating Efficiencies 11 Racing: Derby Week Innovations • Attendance of 104,867 (up 5%) with handle of • Total attendance of 153,563 (down 3%) with $30MM (down 4%) a handle of $156MM (down 5%) • Partnership with Susan G. Komen for the • Mine that Bird and Calvin Borel grace the Cure cover of “Sports Illustrated” • Survivors Parade and Winner’s Circle • Derby Barbie • Track-wide “Pink Out” • New Infield Club and Citation Lounge • First-ever Oaks telecast on Bravo, featuring • Highest Derby ratings in 17 years fashion, food, celebrities, live racing and • Ratings Up 11% vs. 2008 Nancy O’Dell as host • 3 hours of live coverage Derby Day, including • “Top Chef” Cooking Demonstrations celebrity Red Carpet interviews & the national • “First Lady of Fashion Contest” carried on anthem by LeAnn Rimes Bravo • Full week of Derby party and fashion promotions on the “Today Show” 12 On-Line Gaming: Winning with Technology, Marketing, & Data 13 ADW Segment Share Customers Increasingly Choose to Wager Via ADW Providers N.A. Thoroughbred Industry - ADW Handle Growth -(a $1,600 $18,000 $1,494.5 ADW $1,421.2 $1,381.3 $1,400 Industry $1,247.0 $1,200 $16,000 $1,019.7 $1,000 $943.9 $800 $14,000 Dollars Millions Dollars in Dollars Millions Dollars in $600 $503.1 $400 $12,000 $200 $80.0 $19.8 $-