Churchill Downs offsets track-betting declines

Churchill Downs Inc.'s account-wagering business and a slot-machine parlor at one track boosted its sagging racetrack business during the July-September quarter.

Earnings before taxes from expanded gambling at Churchill's Fair Grounds track in New Orleans of $4.38 million nearly outpaced the $4.69 million in earnings from racing operations at its four tracks, two of which raced most of the period.

Increases in pretax earnings from expanded gambling in Louisiana and Churchill's TwinSpires.com account-wagering service offset a 39 percent decline in racing earnings during the period.

The company's net earnings more than tripled to $2.47 million from $818,000 a year ago, when Churchill's Louisiana slots parlor was only open for a portion of the quarter.

Net revenue declined 4 percent to $99.6 million from $103.9 million during the same period of 2007.

"All in all, we had a strong quarter," Churchill Chief Financial Officer Bill Mudd said. "I think that's impressive considering the state of our economy and the challenges we have in the racing industry."

Betting handle for the third quarter at Churchill properties and through TwinSpires dropped 12 percent -- roughly in line with industry declines -- but that was lessened by a 62 percent gain in the online handle of $56 million.

While expanded gambling is a growing part of Churchill's portfolio, Mudd said the near-parity during the just-completed quarter with the pari-mutuel and other racing earnings numbers is a function of seasonality and other factors.

Fair Grounds plans to open a permanent slots parlor Nov. 14 to replace a temporary one launched in September 2007. And Florida voters have approved allowing slots at Churchill's Calder Race Course near Miami.

Year-to-date pretax earnings for racing are $61.1 million, compared with $13.8 million for expanded gambling.

Mudd also said that expanded gambling will outpace racing during the January-March quarter, when only one Churchill track offers live racing. Racing will be bigger during the second quarter when Churchill runs the Kentucky Derby.

"Racing is our core, and gaming is there because of racing and the gaming is what is giving us purse money to run even better meets," Mudd said, citing record purses for the upcoming Fair Grounds meet.

The earnings report comes a day after Maryland voters approved allowing slots to boost racing purses and to give more money to education. Churchill has pursued expanded gambling unsuccessfully for more than a decade in Kentucky.

Purses at Maryland thoroughbred racetracks are expected to increase after as many as 15,000 slot machines are installed at five locations, possibly including Magna Entertainment Corp.'s Laurel Park.

The Maryland Jockey Club, the Magna entity that owns Laurel and Pimlico Race Course -- where the second leg of the thoroughbred Triple Crown, the Preakness Stakes, is run -- announced yesterday that it will pursue a license for 4,750 slots at Laurel.