Churchill 2004 earnings in steep fall

Mar 22, 2005 4:32 AM

After reporting a substantial decrease in its earnings for fiscal year 2004, Churchill Downs Inc. (CHDN) advised analysts and investors it would no longer issue earnings per share guidance due to the difficulty in predicting results from development-related activities. However, it will continue to discuss business trends, operational results and developments that affect these results.

Obviously, management was concerned because for fiscal 2004, the company earned $8.9 million or $0.67 per share compared to fiscal 2003 when it earned $23.4 million or $1.75 per share. The 2003 earnings included the $1.6 million the company received from the sale of Kentucky Downs. Analysts had estimated earnings of $1.22 per share for 2004.

Tom Meeker, president and CEO, said he anticipates "an exceptional Kentucky Derby and Kentucky Oaks (to be raced on the first Saturday in May)" but refused to address the strong rumors that the company was considering selling Hollywood Park near Los Angeles, Cal. All he would say was, "we also will continue to aggressively pursue additional opportunities to build shareholder value, including ongoing development initiatives, exploration of options to maximize our Hollywood Park asset, and the potential incorporation of slot machines at Fair Grounds in 2006."

Also on the agenda, he said was a continued effort to get slot machines for Calder Racetrack whose site is in the Miami-Dade County where voters rejected the proposal in a vote in early March.

"Are we disappointed at the result of the vote? Yes," Meeker said. "Are we going to give up" Absolutely not," he added. He indicated that Churchill will join with a coalition of Florida pari-mutuel facilities called "Floridians for a Level Playing Field" in seeking another vote of the county in 2007.

Churchill Downs Inc. purchased Hollywood Park and its 240 acres in 1999 from the company that later became Pinnacle Entertainment Inc. (PNK) for $140 million. Because of skyrocketing land values in the area, the property has an estimated value of $300 million. Reportedly United Parcel Service (UPS) and other developers have been eyeing the real estate that is in close proximity of Los Angeles International Airport.

Fearing a development other than racing, horsemen have been organizing to prepare for the discontinuation of racing at the track that shares most of the racing calendar with Santa Anita Park.

Recently, millionaire Mike Pegram, the McDonald’s franchisee who raced Derby and Preakness winner Real Quiet and the Eclipse award-winning filly Silverbulletday, has teamed up with Los Alamitos Race Course owner Dr. Edward Allred, to spend $40 million on the conversion of the Quarter House racing facility into a track that would accommodate Thoroughbreds. The track is located in Orange County, about 26 miles south of Hollywood Park.

In an interview, Pegram said that if Hollywood closes the horsemen will be faced with year-round racing at Santa Anita, an option that he felt was not in the best interest of the sport. "I love Santa Anita but I don’t want to be there in June and July." He said he felt the Pegram-Allred plan would "bring some stability to Southern California racing."