10/27/2005 11:00PM

Tumultuous year for company

Email
Anthony Schweiker/Calder Race Course
One of the Calder barns that was damaged last week by Hurricane Wilma.

LOUISVILLE, Ky. - Arguably the most eventful 12-month period in the history of Churchill Downs Inc. began at just about this time last year. A major push for slots at the company's south Florida track, Calder, narrowly failed on Nov. 2 in Miami-Dade County, after which a heated and complex controversy over jockey insurance soon followed at the company's flagship track, Churchill Downs.

And that was just the beginning.

"The year that our company has been through kind of mirrors what goes on in the racing business all the time," said Churchill racetrack president Steve Sexton. "It's been a classic year of highs and lows."

As Churchill embarks Sunday on a 21-day meet - its first conducted in the fall since a 3 1/2-year, $121 million renovation was completed in April - surely its employees, stockholders, and fans are hoping for considerably less tumult in the coming months. Indeed, the last 12 months have been adventurous ones, to say the least. In chronological order:

- While the slots referendum barely failed in Miami-Dade County, where Calder is located, the same measure barely passed in neighboring Broward County. Gulfstream Park, owned by CDI's corporate rival, Magna Entertainment Corp., is located in Broward. Gulfstream is undergoing a massive renovation that ultimately will include the housing of slots.

- The jockey insurance flap erupted just outside the Churchill jockeys' room on Nov. 10, eventually resulting in the ejection of 14 jockeys for the duration of the 2004 fall meet. The controversy also spilled over to Hoosier Park, the suburban Indianapolis track owned by CDI, on Nov. 12, when jockeys refused to ride. The industrywide issue of jockey insurance remains a huge one today.

- CDI opened its first meet at the Fair Grounds on Nov. 25, just a few weeks after closing the deal on its purchase of the New Orleans track for a reported $47 million.

- Isolated cases of an equine virus known as strangles were positively diagnosed at Churchill and at CDI-owned Trackside in Louisville in December. In February and March, strangles cases were confirmed in several states, most prominently at the Palm Meadows training center in south Florida, and at one critical point there were grave concerns that the disease could reach epidemic proportions and threaten the 131st running of the Kentucky Derby on May 7. That threat subsided, however, and the Derby was held without further intrusion.

- The perpetual slots-at-racetracks issue was hotly debated while the Kentucky General Assembly was in session in Frankfort from January through March, but a bill never left committee, leaving Churchill and other state tracks without slots. Meanwhile, Kentucky citizens continue to spend hundreds of millions of dollars a year at Indiana riverboat casinos while the tracks continue to incur major expenses in lobbying for their slots cause. "Slots is a huge issue for us every year," said John Asher, a Churchill racetrack vice president.

- To great fanfare, Churchill opened its spring meet April 30 with the renovation finally complete. By most accounts, the new plant was well-received by fans, and they responded with a 12 percent increase in ontrack handle from the previous year. Nevertheless, all-sources handle on the 52-day meet essentially remained static.

- Less than two weeks after the Derby, suspected cases of equine herpes virus were diagnosed in three Churchill barns, forcing the barns to be placed under strict quarantine. The situation lasted about a month, adversely affecting the operations of three major stables, before fading away.

- CDI sold one of the shining jewels in its racetrack portfolio, Hollywood Park in Southern California, to the Bay Meadows Land Co. for a reported $260 million on July 5. A clause in the deal permits CDI to reassume a major stake in the track within the next several years if substantial changes are made in the state's gaming laws. From a pure financial standpoint, the sale was the highlight of the year for CDI, since the company bought Hollywood in 1999 for $140 million.

- After the spring meet closed July 9, Churchill shifted its off-season simulcasting operations from Trackside, which had been in operation since the early 1990's, to the second floor of the main plant. Since then, handle on simulcast imports has been down more than 20 percent, which many longtime horseplayers insist reflects their dissatisfaction with what they perceive as diminished convenience and comfort.

- Fair Grounds was among the innumerable New Orleans institutions heavily damaged by Hurricane Katrina on Aug. 29. CDI officials announced in the hurricane aftermath that the four-month meet scheduled for 2005-06 was canceled, with no word on when racing will resume there. A 37-day contingency meet, Fair Grounds at Louisiana Downs, begins Nov. 19.

- From a business standpoint, CDI-owned Ellis Park endured one of the worst meets in its 82-year history when purses were slashed 15 percent midway through a 41-day meet, which ended Sept. 5. All-sources handle at Ellis, which has struggled mightily in recent years against nearby gaming competitors, was down 24 percent from a comparable meet in 2003.

- To date, Churchill has been affected only indirectly by the dramatic revisions in Kentucky's equine medication regulations, which were signed into law by Gov. Ernie Fletcher in late August under an emergency stipulation. But, "we're not out of the woods yet on that one," said Asher. In early September, a 60-day moratorium on the new rules was put in place, but that lapses during the upcoming Churchill meet. Discussions attempting to resolve this hot-button issue are ongoing among veterinarians, trainers, and state regulators.

- Calder incurred substantial damage Monday from Hurricane Wilma and has been without power this week, although track officials had scheduled a reopening Saturday for the Breeders' Cup simulcasts.

- Stock prices for CDI have fluctuated considerably in the past year. CDI stock reached a closing-day high of $46.91 on Aug. 2; as of the close of business Thursday, the price was $31.69, a decline of 32 percent.

As the 2005 fall meet begins, Sexton said he and other officials within the company are eager to see the next 12 months bring fewer crises and greater prosperity than the preceding 12.

"It's only 21 days, but we're hoping we don't have any more knuckleballs," he said. "We're really optimistic about having a good meet. It's important for us financially and just in terms of keeping everybody motivated and going. It would be a great way to wrap up an eventful period."