Churchill up on quarter after sale of Hollywood

Churchill Downs Inc. realized a $69.9 million gain on its recent sale of Hollywood Park in Southern California and had net earnings of $71.6 million, or $5.30 a share, in the third quarter of 2005, according to financial documents released Tuesday.

Churchill had a net loss of $3.8 million, or 29 cents a share, in the third quarter last year. The one-time gain on the sale of Hollywood Park, however, as well as several other uncommon events during the third quarter this year make any comparison between the two periods difficult.

Excluding the gain on the sale, Churchill had net earnings from continuing operations of $3.8 million in the quarter, compared with a net loss from continuing operations of $396,000 last year, according to the financial documents. Net revenue from continuing operations was $112.0 million in the third quarter, compared with $102.5 million in the quarter last year. Operating expenses were $96.7 million, compared with $83.9 million last year.

In addition to the sale of Hollywood, which Churchill bought in 1999 for $140 million, the quarter was marked by the damage done to two Churchill tracks, Fair Grounds in New Orleans and Calder Race Course in Florida, by hurricanes. Fair Grounds, which Churchill bought late in 2004, had to be temporarily closed because of the evacuation of New Orleans after Hurricane Katrina struck, and Calder suffered numerous dark days because of weather-related cancellations.

Just last weekend, another Churchill property, Ellis Park, suffered major damage from a tornado in western Kentucky. Churchill's third quarter ended on Sept. 30, and any impact from the damage at Ellis will be reflected in fourth-quarter results or later.

Churchill carries disaster insurance on all its properties, including coverage for loss of revenue, according to Julie Koenig-Loignon, a spokeswoman for the company, so any major impact from this year's string of events will likely be largely mitigated by the policies.

The sale of Hollywood Park for $260 million in cash allowed Churchill virtually to eliminate all of its long-term debt. On its balance sheet, Churchill said that the company's long-term debt as of Sept. 30 was $18.1 million, down from $242.8 at the end of the third quarter last year.

Hollywood Park is likely to be bulldozed in three years unless slot machines are legalized at California racetracks or if the state legislature cuts racetracks in on gambling revenues at tribal casinos. In the deal to sell Hollywood, Churchill retained an interest in the track should slot machines be legalized.