03/14/2011 5:58PM

Churchill Downs Inc. sees net income slip

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Churchill Downs Inc. had net income of $16.4 million in 2010 on record annual revenue of $585.3 million, according to financial statements released late on Monday. The net earnings figure was a slight decline from the company's net earnings of $16.8 million in 2009.

Net earnings were negatively impacted by a $5.8 million loss on discontinued operations. Not counting discontinued operations -- which also included a gain of $2.6 million because of the redemption of an item that Churchill had previously been carrying as a liability on its balance sheet -- net earnings were $19.6 million in 2010, compared with $17.9 million in net earnings on continuing operations in 2009.

Julie Koenig-Loignon, a spokeswoman for Churchill, said that the loss on the discontinued operations arose from the company's decision to scrap a short-lived entertainment division in 2010. The division had organized a concert festival at Churchill called HullabaLOU that had disappointing ticket sales and had been estimated to have had losses exceeding $5 million.

Revenue of $585.3 million was a 24 percent gain over the 2009 annual revenue figure, in large part because of the opening of a casino at the company's Calder Race Course in south Florida and higher revenue from its account-wagering operation, Twinspires.com. Churchill merged Twinspires.com with Youbet.com during 2010, which made the combined company the largest account-wagering operation in the United States.

Although overall revenue jumped 24 percent, operating expenses increased at a higher rate, by 28 percent, going from $384 million in 2009 to $491.3 million last year. Selling, general, and administrative expenses increased 23 percent, from $51 million in 2009 to $62.4 million in 2010.

Churchill's online operations had revenue of $121.4 million in 2010, compared with $72 million in 2009, a gain of 69 percent. The company's casino operations had an even better year, with revenue climbing 98 percent, from $71.9 million in 2009 to $142.3 million. In addition to the opening of the Calder casino in January, Churchill purchased a stand-alone casino and resort property in Mississippi in December, 2010, an acquisition that is expected to add tens of millions of dollars in revenue in 2011.

The company's racing operations did not fare nearly as well, not surprising considering the brutal economic climate currently affecting racetracks. Although revenue at its flagship track in Louisville was up 5 percent, to $118.4 million, revenue at Arlington Park near Chicago was down 17 percent; revenue for Calder's racing operations was down 5 percent; and revenue from the racing operations at Fair Grounds was down eight percent, according to the financial statements.

In total, revenue from Churchill's racing operations was down 5 percent, from $324.6 million in 2009 to $307.5 million in 2010.
In a statement, Bob Evans, Churchill's chief executive, said that revenue at Churchill Downs was positively impacted by the track hosting the Breeders' Cup in November. But he cited the downturn in the racing business nationwide for putting a strain on the company's other racing properties.

"We still face a number of challenges as we work to improve the results of our racing operations, including nationwide declines in handle and intense competition for racehorses with tracks that are able to subsidize their purses with alternative gaming revenues," Evans said.