Churchill Downs Incorporated Reports 2008 Q2 Results

-- 2008 Q2 Net Revenues From Continuing Operations Grow 6 Percent

-- 2008 Q2 EBITDA From Continuing Operations Grows 4 Percent

-- 2008 Q2 Net Earnings Remain Flat Compared To Prior Year
LOUISVILLE, Ky.--(Business Wire)--
Churchill Downs Incorporated (NASDAQ: CHDN) ("Company" or "CDI")
today reported results for the second quarter and six months ended
June 30, 2008.

Net revenues from continuing operations for the second quarter of
2008 totaled $179.3 million, an increase of 6 percent over net
revenues from continuing operations of $169.9 million recorded during
the second quarter of 2007. Net revenues from continuing operations
for the quarter were positively affected by the performance of the
Company's advance-deposit wagering ("ADW") business, gaming revenues
related to the temporary slots facility at Fair Grounds Race Course
("Fair Grounds"), and additional operating revenues from the 2008
Kentucky Derby and Kentucky Oaks. These increases were offset in part
by a decline in pari-mutuel business at Calder Race Course ("Calder"),
caused primarily by the Florida Horsemen's Benevolent and Protective
Association ("Florida HBPA") decision to withhold consent to export
racing signals from Calder during the second quarter of 2008. In
addition, local horsemen's groups in Ohio, Kentucky, Delaware,
Virginia, Pennsylvania, Texas and Maryland withheld consents for
certain racetracks to export their signals to Calder, while disputes
in Kentucky and Florida over distribution of the simulcast signal to
certain ADW businesses also offset net revenues from continuing
operations.

Net earnings from continuing operations for the second quarter
were $29.4 million, or $2.10 per diluted common share, compared to net
earnings from continuing operations of $29.5 million, or $2.12 per
diluted common share, during the second quarter of 2007. The Company's
EBITDA (earnings before interest, taxes, depreciation and
amortization) from continuing operations increased 4 percent year over
year from $55.1 million in 2007 to $57.5 million in 2008. Calder's
inability to export its signal to locations (including racetracks and
off-track betting facilities) outside of Florida and import certain
out-of-state racetracks resulted in a negative impact of approximately
$3 million on the EBITDA of the Company's Racing Operations. In
addition, the inability to export Calder and Churchill Downs signals
to certain ADW businesses resulted in a negative impact of
approximately $1 million on the EBITDA of the Company's Racing
Operations. Year-to-date revenue increased 13 percent and year-to-date
EBITDA, which included $17.2 million of net insurance recoveries from
Louisiana, increased 45 percent over the first six months of 2007.

"Through the second quarter of 2008, we have continued to manage
our business and expenses in a fiscally prudent manner, with an eye
toward growth and positive returns," said Churchill Downs Incorporated
President and Chief Executive Officer Robert L. Evans. "Despite a
tough economic and industry environment, and despite simulcast signal
disputes with horsemen, we were able to grow revenue and EBITDA over
2007 levels. We have generated $85 million in cash from operations so
far this year, which has been used to pay down the debt used to fund
the acquisition of certain assets of AmericaTab, Bloodstock Research
Information Services ("BRIS") and the Thoroughbred Sports Network in
June 2007. Our long-term debt was $10 million at the end of the second
quarter. I am very proud of the effort put forward by the CDI team to
make this happen.

"We have enjoyed success at our temporary slots facility at Fair
Grounds, which continues to outperform our expectations," Evans
continued. "The permanent slots facility at Fair Grounds is currently
on budget and on schedule to open later this year. We are still not
prepared to move forward with the announcement of our plans regarding
a slots operation at Calder. We have reached an agreement with the
Florida HBPA but we are still awaiting resolution of the slot
agreement by Florida Thoroughbred breeders. Once we have their
agreement, we will begin exploring the avenues necessary to proceed
with our plans. While we are quite pleased with TwinSpires.com's 12
percent growth in handle over 2008's first-quarter levels, we believe
we could have done considerably better if not for disputes with
Florida and Kentucky horsemen over ADW signal pricing.

"We hope that we can reach agreements with our local horsemen's
groups over ADW signal pricing. We believe that the ADW business in
general and TwinSpires.com in particular are extremely important to
the future of our industry, and we will not rush into any arrangement
with horsemen that could compromise the financial health of
advance-deposit wagering in the future."

During the second quarter of 2008, the Company implemented a
business realignment that more properly considers changes in the
business. As a result of this realignment, the Company redefined its
business segments into the following four segments: (1) Racing
Operations, which includes Churchill Downs, Calder, Arlington Park and
its 11 off-track betting facilities ("OTBs") and Fair Grounds and its
10 OTBs; (2) Online Business, which includes TwinSpires.com, CDI's ADW
business, and our BRIS data business, as well as the Company's equity
investment in Horse Racing TV; (3) Gaming, which includes video poker
and slot operations; and (4) Other Investments, including Churchill
Downs Simulcast Productions and other of the Company's minor
investments.

A conference call regarding this news release is scheduled for
Wednesday, Aug. 6, 2008, at 9 a.m. EDT. Investors and other interested
parties may listen to the teleconference by accessing the online,
real-time webcast and broadcast of the call at
www.churchilldownsincorporated.com or www.earnings.com, or by dialing
(888) 713-4217 and entering the pass code 79867056 at least 10 minutes
before the appointed time. The online replay will be available at
approximately noon EDT and continue for two weeks. A two-week
telephonic replay will be available one hour after the call ends by
dialing (888) 286-8010 and entering 91678886 when prompted for the
access code. A copy of the Company's news release announcing quarterly
results and relevant financial and statistical information about the
period will be accessible at www.churchilldownsincorporated.com.

In addition to the results provided in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP"), the Company has
provided a non-GAAP measurement, which presents a financial measure of
earnings before interest, taxes, depreciation and amortization
("EBITDA"). Churchill Downs Incorporated uses EBITDA as a key
performance measure of results of operations for purposes of
evaluating performance internally. The Company believes the use of
this measure enables management and investors to evaluate and compare,
from period to period, the Company's operating performance in a
meaningful and consistent manner. This non-GAAP measurement is not
intended to replace the presentation of the Company's financial
results in accordance with GAAP.

Churchill Downs Incorporated ("Churchill Downs"), headquartered in
Louisville, Ky., owns and operates world-renowned horse racing venues
throughout the United States. Churchill Downs' four racetracks in
Florida, Illinois, Kentucky and Louisiana host many of North America's
most prestigious races, including the Kentucky Derby and Kentucky
Oaks, Arlington Million, Princess Rooney Handicap and Louisiana Derby.
Churchill Downs racetracks have hosted seven Breeders' Cup World
Championships. Churchill Downs also owns off-track betting facilities
and has interests in various advance-deposit wagering, television
production, telecommunications and racing services companies,
including a 50-percent interest in the national cable and satellite
network HorseRacing TV(TM), that support the Company's network of
simulcasting and racing operations. Churchill Downs trades on the
NASDAQ Global Select Market under the symbol CHDN and can be found on
the Internet at www.churchilldownsincorporated.com.

Information set forth in this discussion and analysis contains
various "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Private Securities Litigation Reform Act of
1995 (the "Act") provides certain "safe harbor" provisions for
forward-looking statements. All forward-looking statements made in
this Quarterly Report on Form 10-Q are made pursuant to the Act. The
reader is cautioned that such forward-looking statements are based on
information available at the time and/or management's good faith
belief with respect to future events, and are subject to risks and
uncertainties that could cause actual performance or results to differ
materially from those expressed in the statements. Forward-looking
statements speak only as of the date the statement was made. We assume
no obligation to update forward-looking information to reflect actual
results, changes in assumptions or changes in other factors affecting
forward-looking information. Forward-looking statements are typically
identified by the use of terms such as "anticipate," "believe,"
"could," "estimate," "expect," "intend," "may," "might," "plan,"
"predict," "project," "should," "will," and similar words, although
some forward-looking statements are expressed differently. Although we
believe that the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such
expectations will prove to be correct. Important factors that could
cause actual results to differ materially from expectations include:
the effect of global economic conditions; the effect (including
possible increases in the cost of doing business) resulting from
future war and terrorist activities or political uncertainties; the
economic environment; the impact of increasing insurance costs; the
impact of interest rate fluctuations; the effect of any change in our
accounting policies or practices; the financial performance of our
racing operations; the impact of gaming competition (including
lotteries and riverboat, cruise ship and land-based casinos) and other
sports and entertainment options in those markets in which we operate;
the impact of live racing day competition with other Florida and
Louisiana racetracks within those respective markets; costs associated
with our efforts in support of alternative gaming initiatives; costs
associated with customer relationship management initiatives; a
substantial change in law or regulations affecting pari-mutuel and
gaming activities; a substantial change in allocation of live racing
days; changes in Illinois law that impact revenues of racing
operations in Illinois; the presence of wagering facilities of Indiana
racetracks near our operations; our continued ability to effectively
compete for the country's top horses and trainers necessary to field
high-quality horse racing; our continued ability to grow our share of
the interstate simulcast market and obtain the consents of horsemen's
groups to interstate simulcasting; our ability to execute our
acquisition strategy and to complete or successfully operate planned
expansion projects; our ability to successfully complete any
divestiture transaction; our ability to execute on our temporary and
permanent slot facilities in Louisiana and permanent slot facility in
Florida; market reaction to our expansion projects; the loss of our
totalisator companies or their inability to provide us assurance of
the reliability of their internal control processes through Statement
on Auditing Standards No. 70 audits or to keep their technology
current; the need for various alternative gaming approvals in
Louisiana; our accountability for environmental contamination; the
loss of key personnel; the impact of natural disasters on our
operations and our ability to adjust the casualty losses through our
property and business interruption insurance coverage; any business
disruption associated with a natural disaster and/or its aftermath;
our ability to integrate businesses we acquire, including our ability
to maintain revenues at historic levels and achieve anticipated cost
savings; the impact of wagering laws, including changes in laws or
enforcement of those laws by regulatory agencies; the outcome of
pending or threatened litigation, including the outcome of any
counter-suits or claims arising in connection with a pending lawsuit
in federal court in the Western District of Kentucky styled Churchill
Downs Incorporated, et al v. Thoroughbred Horsemen's Group, LLC, Case
#08-CV-225-S; changes in our relationships with horsemen's groups and
their memberships; our ability to reach agreement with horsemen's
groups on future purse agreements; our ability to reach agreement with
the Florida Breeders and Owners Association on the sharing of slots
revenues; the effect of claims of third parties to intellectual
property rights; and the volatility of our stock price.

You should read this discussion in conjunction with the Condensed
Consolidated Financial Statements included in this Quarterly Report on
Form 10-Q and the Company's Annual Report on Form 10-K for the year
ended December 31, 2007 for further information, including Part I -
Item 1A, "Risk Factors" for a discussion regarding some of the reasons
that actual results may be materially different from those we
anticipate, as modified by Part II - Item 1A of this Quarterly Report
on Form 10-Q.

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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
for the three months ended June 30, 2008
(Unaudited)
(In thousands, except per share data)

Three Months Ended
June 30,
---------------------------
%
2008 2007 Change
--------- --------- -------
Net revenues $179,297 $169,933 6
Operating expenses 114,669 108,577 6
Selling, general and administrative
expenses 13,545 13,069 4
--------- ---------

Operating profit 51,083 48,287 6

Other income (expense):
Interest income 157 393 (60)
Interest expense (276) (841) 67
Equity in loss of unconsolidated
investments (1,140) (695) (64)
Miscellaneous, net 461 1,831 (75)
--------- ---------
(798) 688 U
--------- ---------

Earnings from continuing operations before
provision for income taxes 50,285 48,975 3

Provision for income taxes (20,854) (19,513) (7)
--------- ---------

Net earnings from continuing operations 29,431 29,462 -

Discontinued operations, net of income
taxes:
Loss from operations (19) (143) 87
--------- ---------

Net earnings $ 29,412 $ 29,319 -
========= =========

Net earnings (loss) per common share:

Basic
Net earnings from continuing operations $ 2.11 $ 2.12 -
Discontinued operations - (0.01) NM
--------- ---------
Net earnings $ 2.11 $ 2.11 -
========= =========

Diluted
Net earnings from continuing operations $ 2.10 $ 2.12 (1)
Discontinued operations - (0.01) NM
--------- ---------
Net earnings $ 2.10 $ 2.11 -
========= =========

Weighted average shares outstanding
Basic 13,529 13,427 1
Diluted 13,998 13,903 1

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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
for the six months ended June 30, 2008
(Unaudited)
(In thousands, except per share data)

Six Months Ended
June 30,
---------------------------
%
2008 2007 Change
--------- --------- -------
Net revenues $245,018 $217,775 13
Operating expenses 182,853 161,502 13
Selling, general and administrative
expenses 25,702 22,894 12
Insurance recoveries (17,200) (784) F
--------- ---------

Operating profit 53,663 34,163 57

Other income (expense):
Interest income 334 665 (50)
Interest expense (1,177) (1,131) (4)
Equity in loss of unconsolidated
investments (1,970) (994) (98)
Miscellaneous, net 833 2,494 (67)
--------- ---------
(1,980) 1,034 U
--------- ---------

Earnings from continuing operations before
provision for income taxes 51,683 35,197 47

Provision for income taxes (21,417) (14,165) (51)
--------- ---------

Net earnings from continuing operations 30,266 21,032 44

Discontinued operations, net of income
taxes:
(Loss) earnings from operations (112) 278 U
Loss on sale of business - (182) NM
--------- ---------

Net earnings $ 30,154 $ 21,128 43
========= =========

Net earnings (loss) per common share:

Basic
Net earnings from continuing operations $ 2.17 $ 1.52 43
Discontinued operations (0.01) 0.01 U
--------- ---------
Net earnings $ 2.16 $ 1.53 41
========= =========

Diluted
Net earnings from continuing operations $ 2.16 $ 1.52 42
Discontinued operations (0.01) - NM
--------- ---------
Net earnings $ 2.15 $ 1.52 41
========= =========

Weighted average shares outstanding
Basic 13,525 13,399 1
Diluted 14,010 13,886 1

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CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the three months ended June 30, 2008
(Unaudited)
(In thousands)

Three months ended
June 30,
---------------------------
%
2008 2007 Change
---------------------------
Net revenues from external customers:
Churchill Downs $ 93,661 $ 91,550 2
Arlington Park 27,756 28,762 (3)
Calder 18,501 26,635 (31)
Fair Grounds 11,814 12,520 (6)
--------- ---------
Total Racing Operations 151,732 159,467 (5)
On-line Business 15,587 3,285 F
Gaming 11,770 6,314 86
Other Investments 168 357 (53)
Corporate 40 510 (92)
--------- ---------
Net revenues from continuing
operations $179,297 $169,933 6
========= =========

Intercompany net revenues:
Churchill Downs $ 1,253 $ 1,702 (26)
Arlington Park 652 256 F
Calder 179 183 (2)
Fair Grounds 47 2 F
--------- ---------
Total Racing Operations 2,131 2,143 (1)
Other Investments 555 559 (1)
Eliminations (2,686) (2,702) 1
--------- ---------
Net revenues from continuing
operations $ - $ - -
========= =========

Segment EBITDA and net earnings:
Racing Operations $ 51,858 $ 54,295 (4)
On-line Business 1,549 (1,501) F
Gaming 4,739 2,801 69
Other Investments 336 418 (20)
Corporate (958) (948) (1)
--------- ---------
Total EBITDA 57,524 55,065 4
Depreciation and amortization (7,120) (5,642) 26
Interest income (expense), net (119) (448) 73
Income tax (expense) (20,854) (19,513) (7)
--------- ---------
Net earnings from continuing operations 29,431 29,462 -
Discontinued operations, net of income
taxes (19) (143) 87
--------- ---------
Net earnings $ 29,412 $ 29,319 -
========= =========

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CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the six months ended June 30, 2008
(Unaudited)
(In thousands)

Six months ended
June 30,
----------------------------
%
2008 2007 Change
--------- --------- --------
Net revenues from external customers:
Churchill Downs $ 96,130 $ 94,846 1
Arlington Park 40,769 41,952 (3)
Calder 21,418 27,833 (23)
Fair Grounds 32,250 35,351 (9)
--------- ---------
Total Racing Operations 190,567 199,982 (5)
On-line Business 29,731 3,285 F
Gaming 24,244 12,962 87
Other Investments 282 478 (41)
Corporate 194 1,020 (81)
--------- ---------
Net revenues from continuing
operations 245,018 217,727 13
Discontinued operations - 7,837 NM
--------- ---------
Net revenues $245,018 $225,564 9
========= =========

Intercompany net revenues:
Churchill Downs $ 1,426 $ 1,702 (16)
Arlington Park 862 256 F
Calder 200 190 5
Fair Grounds 884 232 F
--------- ---------
Total Racing Operations 3,372 2,380 42
Other Investments 910 655 39
Eliminations (4,282) (2,987) (43)
--------- ---------
Net revenues from continuing operations - 48 NM
Discontinued operations - (48) NM
--------- ---------
$ - $ - -
========= =========

Segment EBITDA and net earnings:
Racing Operations $ 56,462 $ 43,845 29
On-line Business 2,290 (2,193) F
Gaming 9,451 5,645 67
Other Investments 523 189 F
Corporate (1,925) (1,261) (53)
--------- ---------
Total EBITDA 66,801 46,225 45
Eliminations - 57 NM
Depreciation and amortization (14,275) (10,619) (34)
Interest income (expense), net (843) (466) (81)
Income tax (expense) (21,417) (14,165) (51)
--------- ---------
Net earnings from continuing operations 30,266 21,032 44
Discontinued operations, net of income U
taxes (112) 96
--------- ---------

Net earnings $ 30,154 $ 21,128 43
========= =========

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NM: Not meaningful U: less than 100% unfavorable F: greater
than 100%
favorable

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CHURCHILL DOWNS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

June 30, December 31,
2008 2007
--------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 18,631 $ 15,345
Restricted cash 11,516 11,295
Accounts receivable, net 41,018 46,335
Deferred income taxes 6,497 6,497
Income taxes receivable - 13,414
Other current assets 13,545 10,396
--------- -------------
Total current assets 91,207 103,282

Plant and equipment, net 365,929 357,986
Goodwill 115,349 108,349
Other intangible assets, net 34,180 39,087
Other assets 15,049 16,112
--------- -------------
Total assets $ 621,714 $ 624,816
========= =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 61,027 $ 32,032
Purses payable 15,945 12,816
Accrued expenses 51,631 43,788
Dividends payable - 6,750
Income taxes payable 5,625 -
Deferred revenue 8,989 25,455
--------- -------------
Total current liabilities 143,217 120,841

Long-term debt 10,000 67,989
Convertible note payable, related party 14,444 14,234
Other liabilties 21,567 20,452
Deferred revenue 18,296 19,680
Deferred income taxes 14,062 14,062
--------- -------------
Total liabilities 221,586 257,258

Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 250 shares
authorized; no shares issued - -
Common stock, no par value; 50,000 shares
authorized; 13,673 shares issued June 30,
2008 and 13,672 shares issued December 31,
2007 140,177 137,761
Retained earnings 259,951 229,797
--------- -------------
Total shareholders' equity 400,128 367,558
--------- -------------
Total liabilities and shareholders' equity $ 621,714 $ 624,816
========= =============

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For Churchill Downs Incorporated
Kevin Flanery, 502-636-4859
kevin.flanery@kyderby.com

Copyright Business Wire 2008