03/02/2010 12:00AM

Churchill's net incomes declines in 2009


Churchill Downs Inc. had net income of $16.8 million in 2009, down 41 percent from net income of $28.5 million in 2008, according to financial statements released late Tuesday afternoon.

The decline in net income, from $2.09 per diluted share in 2008 to $1.27 per diluted share in 2009, did not reflect an erosion of Churchill's business, but was instead largely accountable to the impact of a $17.2 million insurance settlement Churchill booked in 2008 that boosted last year's net income. In addition, Churchill paid $2.3 million in 2009 to settle claims by the IRS that the company did not calculate its taxes properly in 2004-07.

For the year, revenue for Churchill was $439.7 million, a 2 percent gain over net revenue of $430.6 million last year, according to the financial documents. The gain was due entirely to growth in Churchill's account-wagering and slot-machine businesses. Operating expenses increased 3 percent during the year, from $344.3 million to $354 million.

Net revenue for Churchill's racing operations at Churchill Downs in Louisville, Ky., Arlington Park outside of Chicago, Calder Race Course in Miami, and Fair Grounds in New Orleans was $304.4 million, down 6 percent compared with combined net revenue at the four properties of $323.9 million last year. Revenue at each of the properties was down in 2009 compared with 2008, according to financial documents.

Churchill's account-wagering operations had net revenue of $70.9 million in 2009, a 31 percent jump over net revenue of $54 million last year. Revenue for Churchill's account-wagering operations is expected to more than double this year if regulators and shareholders approve an acquisition of Youbet.com, the second-largest account-wagering company in the United States. Churchill reached a deal to merge with Youbet late in 2009 that values Youbet at $128.6 million. The transaction is expected to close early in the second quarter.

Slot machines at Fair Grounds generated $62.3 million in net revenue, up 23 percent from $50.6 million in net revenue last year, before Churchill expanded the operation. Although the casino at Fair Grounds was Churchill's only casino-type operation open in 2008, the company opened a casino at Calder Race Course in January of this year.

In the fourth quarter, net loss was $6.9 million, compared to $4.1 million in the fourth quarter of 2008. In a statement, Churchill said that the wider loss was partially attributable to $1.8 million in pre-opening costs for the Calder casino.

Net revenue in the fourth quarter was down 1 percent, from $85.9 million in 2008 to $85 million in 2009. Operating expenses in the quarter increased 4 percent, from $78.1 million to $81.5 million.