EX-99.1 2 pressrelease02-25x15.htm EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: Courtney Yopp Norris
(502) 636-4564
Courtney.Norris@kyderby.com
CHURCHILL DOWNS INCORPORATED REPORTS
2014 FOURTH-QUARTER AND FULL YEAR RESULTS
2014 FOURTH-QUARTER

• | Record net revenues of $168.3 million, a 4% increase over fourth-quarter 2013

• | Record Adjusted EBITDA of $28.5 million, up 47% over fourth-quarter 2013

• | Completed acquisition of Big Fish Games on December 16

2014 FULL YEAR

• | Record net revenues of $812.9 million, a 4% increase over 2013

• | Record Adjusted EBITDA of $202.5 million, up 15% over 2013

• | Record Kentucky Oaks & Derby Week Adjusted EBITDA, an $8.8 million increase over 2013

LOUISVILLE, Ky. (Wednesday, Feb. 25, 2015) - Churchill Downs Incorporated (CHDN: NASDAQ) (CDI or Company) today reported business results for the fourth-quarter and full year ended Dec. 31, 2014.
MANAGEMENT COMMENTARY
“The Company produced record net revenues and Adjusted EBITDA results for both the fourth-quarter and the full year of 2014,” said CDI Chief Executive Officer Bill Carstanjen. “While we closed our acquisition of Big Fish Games in December, our record performance over the course of 2014 was largely driven by our racing, casino and TwinSpires.com businesses. We look forward in 2015 to continuing the momentum in our traditional businesses as well as the new contributions of Big Fish Games and its exceptional team.”
CONSOLIDATED RESULTS
(in millions, except per share data):

| Fourth-Quarter |  | Full Year
| 2014 |  | 2013 |  | % Change |  | 2014 |  | 2013 |  | % Change
GAAP Measures: |  |  |  |  |  |  |  |  |  |  |
Net revenues | $ | 168.3 |  |  | $ | 162.4 |  |  | 4 |  |  | $ | 812.9 |  |  | $ | 779.3 |  |  | 4 |
(Loss) earnings from continuing operations | (13.8 | ) |  | (5.6 | ) |  | U |  |  | 46.4 |  |  | 55.0 |  |  | (16 | )
Diluted (loss) earnings from continuing operations per share | $ | (0.81 | ) |  | $ | (0.32 | ) |  | U |  |  | $ | 2.64 |  |  | $ | 3.07 |  |  | (14 | )
Net cash provided by operating activities | $ | 27.4 |  |  | $ | 30.5 |  |  | (10 | ) |  | $ | 141.6 |  |  | $ | 144.9 |  |  | (2 | )
Non-GAAP Measure: |  |  |  |  |  |  |  |  |  |  |
Adjusted EBITDA | $ | 28.5 |  |  | $ | 19.3 |  |  | 47 |  |  | $ | 202.5 |  |  | $ | 176.2 |  |  | 15 |
U: > 100% unfavorable; F: > 100% favorable |  |  |  |  |  |  |  |  |  |

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
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During the fourth-quarter of 2014, CDI net revenues increased $5.9 million, or 4%, from the prior year primarily due to the acquisition of Big Fish Games on December 16, 2014, offset by the loss of revenues from the cessation of pari-mutuel operations at Calder Race Course. Adjusted EBITDA for the quarter increased $9.2 million due to the acquisition of Big Fish Games, the improvement in profitability related to the cessation of pari-mutuel operations at Calder Race Course and an increase in Adjusted EBITDA related to CDI’s share of operating income from Miami Valley Gaming (MVG). Below the Adjusted EBITDA line, several Big Fish Games acquisition-related charges totaling $14.7 million impacted earnings (loss) and earnings (loss) per share figures. They consist of non-recurring transaction-related expenses of $6.4 million, adjustments of $3.8 million associated with the change in fair value of the earn-out and deferred founder liabilities recorded since the acquisition date, and $4.5 million reflecting the change in Big Fish Games deferred revenue primarily resulting from business combination accounting rules. Additionally, asset impairment charges of $4.8 million reflect $3.2 million for our investment in Luckity, which ceased operations during the quarter and $1.6 million for our unsuccessful attempt to obtain a New York gaming license in the Capital Region. Partially offsetting the unfavorable adjustments to earnings was a $4.6 million decline in share-based compensation to the prior year and pre-opening costs of $2.4 million incurred for MVG’s opening during December 2013.
During the year-ended December 31, 2014, CDI net revenues increased $33.6 million, or 4%, as revenues from the acquisitions of Oxford Casino and Big Fish Games coupled with a strong Kentucky Oaks & Derby week were partially offset by a decline in Racing Operations revenues from the cessation of pari-mutuel operations at Calder Race Course during the second half of the year and declines in revenues from certain other casino properties during the year. Adjusted EBITDA increased $26.3 million, or 15%, driven by increases of $11.8 million and $11.1 million from the Oxford Casino acquisition and the late 2013 opening of MVG, respectively. In addition, increased profitability from Kentucky Oaks & Derby week of $8.8 million and from the acquisition of Big Fish Games of $3.8 million more than offset the declines in TwinSpires.com from the loss of Texas resident wagering in September 2013 and new online pari-mutuel taxes imposed by New York on January 1, 2014.
CASINO RESULTS
(in millions):

| Fourth-Quarter |  | Full Year
| 2014 |  | 2013 |  | % Change |  | 2014 |  | 2013 |  | % Change
Net revenues | $ | 78.7 |  |  | $ | 78.7 |  |  | — |  | $ | 329.0 |  |  | $ | 297.5 |  |  | 11
Adjusted EBITDA | 22.7 |  |  | 18.8 |  |  | 21 |  | 101.1 |  |  | 80.6 |  |  | 25

During the fourth-quarter of 2014, Casino revenues remained flat as revenue increases at Oxford Casino were offset by declines at other casino properties. Casino Adjusted EBITDA increased $3.9 million, or 21%, primarily due to the inclusion of a full quarter of our share of operating income from MVG, which opened in December 2013, and improvements in profitability at our Oxford facility.
During the year-ended December 31, 2014, Casino revenues increased $31.5 million, or 11%, as revenues from the Oxford acquisition were offset by declines at our other casino properties due to general economic weakness during a majority of the year, a decline in wagering at our Louisiana properties which mirrored declines in the New Orleans market as a whole and the closure of poker operations at Calder Casino. Adjusted EBITDA during the year increased $20.5 million, or 25%, due to the increase in Oxford Adjusted EBITDA of $11.8 million and CDI’s share of operating income from MVG of $11.1 million.

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Improvements were partially offset by a decline in Adjusted EBITDA from Louisiana operations of $1.5 million and $0.6 million at our Mississippi casinos.
TWINSPIRES RESULTS
(in millions):

| Fourth-Quarter |  | Full Year
| 2014 |  | 2013 |  | % Change |  | 2014 |  | 2013 |  | % Change
Net revenues | $ | 40.9 |  |  | $ | 40.6 |  |  | 1 |  |  | $ | 190.3 |  |  | $ | 184.5 |  |  | 3 |
Adjusted EBITDA | 10.1 |  |  | 10.7 |  |  | (5 | ) |  | 45.3 |  |  | 49.1 |  |  | (8 | )
Total Handle | 195.1 |  |  | 188.5 |  |  | 4 |  |  | 897.7 |  |  | 868.7 |  |  | 3 |

During the fourth-quarter of 2014, TwinSpires revenues increased $0.3 million from the prior year on increased handle of 4% driven by organic customer growth. Total wagering on U.S. thoroughbred racing declined 4% for the fourth-quarter, meaning TwinSpires growth outpaced the industry by 8 percentage points. Adjusted EBITDA declined $0.6 million, or 5%, due primarily to new online pari-mutuel taxes in New York.
During the year-ended December 31, 2014, TwinSpires revenues increased $5.8 million, or 3%, over the prior year, reflecting an increase of 3% in pari-mutuel handle compared to a total industry handle decline of 2.8%. Excluding the impact of wagering disruptions in Illinois and the loss of all online wagering in
Texas for all of 2014, TwinSpires’s handle increased 5.0% during the year, due in part to a 19% increase in unique players, and outpaced industry growth by 8 percentage points.
TwinSpires Adjusted EBITDA decreased $3.8 million for the year was driven by a $5.4 million decline on the loss of Texas resident wagering, and a $3.9 million decline on new online pari-mutuel taxes in New York. These losses were partially offset by organic handle growth of 5%, the reinstatement of Illinois resident online wagering, and improvements in our investment in HRTV.
RACING RESULTS
(in millions):

| Fourth-Quarter |  | Full Year
| 2014 |  | 2013 |  | % Change |  | 2014 |  | 2013 |  | % Change
Net revenues | $ | 30.4 |  |  | $ | 38.4 |  |  | (21 | )% |  | $ | 261.5 |  |  | $ | 274.3 |  |  | (5 | )%
Adjusted EBITDA | (5.4 | ) |  | (8.1 | ) |  | 33 | % |  | 61.2 |  |  | 50.3 |  |  | 22 | %
Total Handle | 229.0 |  |  | 331.1 |  |  | (31 | )% |  | 1,470.0 |  |  | 1,806.1 |  |  | (19 | )%

During the fourth-quarter of 2014, CDI Racing Operations revenues declined $8.0 million, or 21%, primarily due to the cessation of pari-mutuel operations at Calder Race Course. Racing Operations Adjusted EBITDA improved $2.6 million during the quarter primarily as a result of the cessation of pari-mutuel operations at Calder Race Course.
During the year-ended December 31, 2014, Racing Operations revenues decreased $12.8 million, or 5%, from the prior year. Calder revenues declined $17.5 million during the year primarily as a result of the closure of pari-mutuel operations in July 2014. Fairgrounds revenues declined $2.1 million due to inclement weather causing turf races to be moved to our dirt track and Arlington Park revenues declined

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due to tougher competition in the simulcast market. Partially offsetting these declines was an increase in Kentucky Oaks & Derby week revenues. Racing Operations Adjusted EBITDA increased $10.9 million, or 22%, due to increased profitability of $8.8 million generated by Kentucky Oaks & Derby week and improvements of Adjusted EBITDA at Calder of $3.3 million due to the cessation of pari-mutuel operations. Partially offsetting these gains was a loss at Churchill Downs, excluding Kentucky Oaks & Derby week, from declines in pari-mutuel revenues resulting from fewer starters per race.
BIG FISH GAMES RESULTS
(in millions):
CDI acquired Big Fish Games on December 16, 2014. The revenues recognized subsequent to the acquisition, of $13.9 million, were generated from its Premium Paid, Casino and Free-to-Play Casual games. Big Fish Games generated Adjusted EBITDA of $3.8 million since its acquisition. Only the financial results since the acquisition are included in the consolidated results of the Company.
The chart below includes fourth-quarter and full year bookings results for Big Fish Games. This chart is for informational purposes only as it includes pre-acquisition results. Therefore, a reconciliation to GAAP revenues is not provided. Bookings is a non-GAAP financial measure that is equal to the revenue recognized during the period plus the change in deferred revenue for the period. We record the sale of virtual goods, subscriptions, and paid downloads as deferred revenue and then recognize that revenue over the estimated average player life or as virtual goods are consumed. We use bookings as a leading indicator of revenue trends for the business.

| Fourth-Quarter |  | Full Year
| 2014 |  |  | 2013 |  |  | % Change |  | 2014 |  |  | 2013 |  |  | % Change
Bookings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Premium Paid |  | $32.3 |  |  |  | $41.9 |  |  | (23) |  |  |  | $140.4 |  |  |  | $184.6 |  |  | (24) |
Casino | 46.9 |  |  | 24.2 |  |  | 94 |  |  | 157.1 |  |  | 78.1 |  |  | 101 |
Free-to-Play Casual | 16.2 |  |  | 5.4 |  |  | 200 |  |  | 38.6 |  |  | 15.4 |  |  | 151 |
Total Bookings | $95.4 |  |  | $71.5 |  |  | 33 |  |  | $336.1 |  |  | $278.1 |  |  | 21 |

For the fourth-quarter, including results before CDI’s acquisition, Big Fish Games total bookings increased $23.9 million, or 33%, driven by a $22.7 million, or 94%, increase in Casino. The gains were driven by a 77% increase in quarterly average paying users and a 9% increase in average bookings per paying user compared to the fourth-quarter of 2013. Partially offsetting this increase was a $9.6 million, or 23%, decline in our Premium Paid business driven by customers continuing to shift from paid PC games to mobile free-to-play games along with a strengthening U.S. dollar (USD) currency resulting in lower USD bookings. Free-to-play Casual bookings jumped $10.8 million on the successful introduction of Gummy Drop! on iOS in the third-quarter and Android in the fourth-quarter of 2014.
Total year results, including results before CDI’s acquisition, were similar with Casino bookings more than doubling to $157 million driven by a 56% increase in average quarterly paying users and a 29% increase in average revenue per paying user.
BUSINESS RESULTS CONFERENCE CALL
A conference call regarding this news release is scheduled for Thursday, February 26, 2014, at 9 a.m. ET. 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

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
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dialing (877) 372-0878 and entering the pass code 90181200 at least 10 minutes before the appointed time. International callers should dial (253) 237-1169. The online replay will be available at approximately noon EDT and continue for two weeks. 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 and certain other items as described in the Company’s Annual Report on Form 10K (“Adjusted EBITDA”). Churchill Downs Incorporated uses Adjusted 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.
ABOUT CHURCHILL DOWNS INCORPORATED
Churchill Downs Incorporated (CDI) (NASDAQ: CHDN), headquartered in Louisville, Ky., owns the world-renowned Churchill Downs Racetrack, home of the Kentucky Derby and Kentucky Oaks, as well as racetrack and casino operations in Miami Gardens, Fla.; racetrack, casino and video poker operations in New Orleans, La.; racetrack operations in Arlington Heights, Ill.; a casino resort in Greenville, Miss.; a casino hotel in Vicksburg, Miss.; a casino in Oxford, Maine; and a 50 percent owned joint venture, Miami Valley Gaming and Racing LLC, in Lebanon, Ohio. CDI also owns Big Fish Games, Inc., one of the world’s largest producers and distributors of casual games; the country's premier online wagering company, TwinSpires.com; the totalisator company, United Tote; Bluff Media, an Atlanta-based multimedia poker company; and a collection of racing-related telecommunications and data companies. Additional information about CDI can be found online at www.churchilldownsincorporated.com.
Information set forth in this news release 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 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,” “hope,” “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, including any disruptions in the credit markets; a decrease in consumers’ discretionary income; our continued ability to attract new users in the social gaming market, and to achieve significant engagement and monetization levels; the effect (including possible increases in the cost of doing business) resulting from future war and terrorist activities or political uncertainties; the overall 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, online gaming and riverboat, cruise ship and land-based casinos) and other sports and entertainment options in the markets in which we operate; our ability to maintain racing and gaming licenses to conduct our businesses; the impact of live racing day competition with other Kentucky, Illinois, Louisiana or Ohio racetracks within those respective markets; the impact of higher purses and other incentives in states that compete with our racetracks; 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 Kentucky, Illinois, Louisiana or Ohio law or regulations that impact revenues or costs of racing operations in those states; the presence of wagering and gaming operations at other states’ racetracks and casinos near our operations; our continued ability

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
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to effectively compete for the country’s horses and trainers necessary to achieve full field horse races; 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 enter into agreements with other industry constituents for the purchase and sale of racing content for wagering purposes; our ability to execute our acquisition strategy and to complete or successfully operate planned expansion projects; our ability to successfully complete any divestiture transaction; market reaction to our expansion projects; the ability of our totalisator company, United Tote, to maintain its processes accurately or keep its technology current; our accountability for environmental contamination; the ability of our online business to prevent security breaches within its online technologies; the loss of key personnel; the impact of natural and other disasters on our operations and our ability to obtain insurance recoveries in respect of such losses (including losses related to business interruption); our ability to integrate any businesses we acquire into our existing operations, 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; changes in our relationships with horsemen's groups and their memberships; our ability to reach agreement with horsemen's groups on future purse and other agreements (including, without limiting, agreements on sharing of revenues from gaming and advance deposit wagering); 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 the Company’s Quarterly Reports on Form 10-Q and Annual Report on Form 10-K for the year ended December 31, 2014 for further information.

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CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for three months ended December 31,
(in thousands, except per common share data)

| 2014 |  | 2013 |  | % Change
Net revenues: |  |  |  |  |
Racing | $ | 30,384 |  |  | $ | 38,382 |  |  | (21)
Casinos | 78,692 |  |  | 78,665 |  |  | —
TwinSpires | 40,907 |  |  | 40,572 |  |  | 1
Big Fish Games | 13,855 |  |  | — |  |  | F
Other | 4,470 |  |  | 4,741 |  |  | (6)
| 168,308 |  |  | 162,360 |  |  | 4
Operating expenses: |  |  |  |  |
Racing | 41,074 |  |  | 47,631 |  |  | (14)
Casinos | 59,034 |  |  | 61,181 |  |  | (4)
TwinSpires | 31,293 |  |  | 27,642 |  |  | 13
Big Fish Games | 15,971 |  |  | — |  |  | U
Other | 6,303 |  |  | 8,614 |  |  | (27)
Selling, general and administrative expenses | 24,510 |  |  | 22,604 |  |  | 8
Acquisition related charges | 3,826 |  |  | — |  |  | U
Operating loss | (13,703 | ) |  | (5,312 | ) |  | U
Other income (expense): |  |  |  |  |
Interest income | 5 |  |  | 7 |  |  | (29)
Interest expense | (5,735 | ) |  | (2,092 | ) |  | U
Equity in gains (losses) of unconsolidated investments | 475 |  |  | (2,460 | ) |  | F
Miscellaneous, net | 137 |  |  | 199 |  |  | (31)
| (5,118 | ) |  | (4,346 | ) |  | (18)
Loss from continuing operations before income taxes | (18,821 | ) |  | (9,658 | ) |  | 95
Income tax benefit | 5,014 |  |  | 4,085 |  |  | 23
Loss from continuing operations | (13,807 | ) |  | (5,573 | ) |  | U
Discontinued operations, net of income taxes: |  |  |  |  |
Loss from operations | — |  |  | (49 | ) |  | (100)
Loss on sale of assets | — |  |  | (83 | ) |  | (100)
Net loss | $ | (13,807 | ) |  | $ | (5,705 | ) |  | U
Net loss per common share data: |  |  |  |  |
Basic |  |  |  |  |
Loss from continuing operations | $ | (0.81 | ) |  | $ | (0.32 | ) |  | U
Discontinued operations | — |  |  | (0.01 | ) |  | 100
Net (loss) earnings | $ | (0.81 | ) |  | $ | (0.33 | ) |  | U
Diluted |  |  |  |  |
Loss from continuing operations | $ | (0.81 | ) |  | $ | (0.32 | ) |  | U
Discontinued operations | — |  |  | (0.01 | ) |  | 100
Net (loss) earnings | $ | (0.81 | ) |  | $ | (0.33 | ) |  | U
Weighted average shares outstanding: |  |  |  |  |
Basic | 17,118 |  |  | 17,370 |  |  |
Diluted | 17,118 |  |  | 17,370 |  |  |
Other comprehensive loss: |  |  |  |  |
Foreign currency translation, net of tax | (125 | ) |  | — |  |  | U
Other comprehensive loss | (125 | ) |  | — |  |  | U
Comprehensive loss | $ | (13,932 | ) |  | $ | (5,705 | ) |  | U

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
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CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the years ended December 31,
(in thousands, except per common share data)

| 2014 |  | 2013 |  | % Change
Net revenues: |  |  |  |  |
Racing | $ | 261,453 |  |  | $ | 274,269 |  |  | (5)
Casinos | 329,010 |  |  | 297,473 |  |  | 11
TwinSpires | 190,333 |  |  | 184,541 |  |  | 3
Big Fish Games | 13,855 |  |  | — |  |  | F
Other | 18,283 |  |  | 23,042 |  |  | (21)
| 812,934 |  |  | 779,325 |  |  | 4
Operating expenses: |  |  |  |  |
Racing | 216,269 |  |  | 233,286 |  |  | (7)
Casinos | 244,051 |  |  | 222,879 |  |  | 9
TwinSpires | 133,553 |  |  | 123,449 |  |  | 8
Big Fish Games | 15,971 |  |  | — |  |  | U
Other | 24,188 |  |  | 26,540 |  |  | (9)
Selling, general and administrative expenses | 85,114 |  |  | 83,446 |  |  | 2
Acquisition related changes | 3,826 |  |  | — |  |  | U
Insurance recoveries, net of losses | (431 | ) |  | (375 | ) |  | 15
Operating income | 90,393 |  |  | 90,100 |  |  | —
Other income (expense): |  |  |  |  |
Interest income | 20 |  |  | 112 |  |  | (82)
Interest expense | (20,842 | ) |  | (6,231 | ) |  | U
Equity in gains (losses) of unconsolidated investments | 6,328 |  |  | (4,142 | ) |  | F
Miscellaneous, net | 619 |  |  | 5,667 |  |  | (89)
| (13,875 | ) |  | (4,594 | ) |  | U
Earnings from continuing operations before provision for income taxes | 76,518 |  |  | 85,506 |  |  | (11)
Income tax provision | (30,161 | ) |  | (30,473 | ) |  | 1
Earnings from continuing operations | 46,357 |  |  | 55,033 |  |  | (16)
Discontinued operations, net of income taxes: |  |  |  |  |
Loss from operations | — |  |  | (50 | ) |  | 100
Loss on sale of assets | — |  |  | (83 | ) |  | 100
Net earnings | $ | 46,357 |  |  | $ | 54,900 |  |  | (16)
Net earnings per common share data: |  |  |  |  |
Basic |  |  |  |  |
Earnings from continuing operations | $ | 2.67 |  |  | $ | 3.13 |  |  | (15)
Discontinued operations | — |  |  | (0.01 | ) |  | 100
Net earnings | $ | 2.67 |  |  | $ | 3.12 |  |  | (14)
Diluted |  |  |  |  |
Earnings from continuing operations | $ | 2.64 |  |  | $ | 3.07 |  |  | (14)
Discontinued operations | — |  |  | (0.01 | ) |  | 100
Net earnings | $ | 2.64 |  |  | $ | 3.06 |  |  | (14)
Weighted average shares outstanding: |  |  |  |  |
Basic | 17,271 |  |  | 17,294 |  |  |
Diluted | 17,589 |  |  | 17,938 |  |  |
Other comprehensive loss: |  |  |  |  |
Foreign currency translation, net of tax | (125 | ) |  | — |  |  | U
Other comprehensive loss | (125 | ) |  | — |  |  | U
Comprehensive income | $ | 46,232 |  |  | $ | 54,900 |  |  | (16)

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
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CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the three months ended December 31,
(in thousands, except per common share data)

| 2014 |  | 2013 |  | % Change
Net revenues from external customers: |  |  |  |  |
Churchill Downs | $ | 14,680 |  |  | $ | 14,311 |  |  | 3
Arlington | 6,023 |  |  | 6,763 |  |  | (11)
Calder | 801 |  |  | 8,356 |  |  | (90)
Fair Grounds | 8,880 |  |  | 8,952 |  |  | (1)
Total Racing | 30,384 |  |  | 38,382 |  |  | (21)
Calder Casino | 18,443 |  |  | 18,842 |  |  | (2)
Fair Grounds Slots | 9,951 |  |  | 10,033 |  |  | (1)
VSI | 8,598 |  |  | 8,482 |  |  | 1
Harlow’s Casino | 11,774 |  |  | 11,907 |  |  | (1)
Oxford Casino | 17,718 |  |  | 16,620 |  |  | 7
Riverwalk Casino | 12,208 |  |  | 12,781 |  |  | (4)
Total Casinos | 78,692 |  |  | 78,665 |  |  | —
TwinSpires | 40,907 |  |  | 40,572 |  |  | 1
Big Fish Games | 13,855 |  |  | — |  |  | F
Other Investments | 4,261 |  |  | 4,492 |  |  | (5)
Corporate | 209 |  |  | 249 |  |  | (16)
Net revenues from external customers | $ | 168,308 |  |  | $ | 162,360 |  |  | 4
Intercompany net revenues: |  |  |  |  |
Churchill Downs | $ | 1,187 |  |  | $ | 1,201 |  |  | (1)
Arlington Park | 972 |  |  | 285 |  |  | F
Calder | — |  |  | 346 |  |  | (100)
Fair Grounds | 345 |  |  | 296 |  |  | 17
Total Racing | 2,504 |  |  | 2,128 |  |  | 18
TwinSpires | 244 |  |  | 196 |  |  | 24
Other Investments | 1,193 |  |  | 1,221 |  |  | (2)
Eliminations | (3,941 | ) |  | (3,545 | ) |  | 11
Net revenues | $ | — |  |  | $ | — |  |  | —

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
Page 10 of 16, Wednesday, February 25, 2015

Reconciliation of Segment Adjusted EBITDA to net earnings: |  |  |  |  |
Racing | $ | (5,440 | ) |  | $ | (8,078 | ) |  | 33
Casinos | 22,744 |  |  | 18,843 |  |  | 21
TwinSpires | 10,147 |  |  | 10,698 |  |  | (5)
Big Fish Games | 3,837 |  |  | — |  |  | F
Other Investments | (1,382 | ) |  | (889 | ) |  | (55)
Corporate | (1,392 | ) |  | (1,225 | ) |  | (14)
Total Segment Adjusted EBITDA | 28,514 |  |  | 19,349 |  |  | 47
Big Fish Games acquisition charges | (3,826 | ) |  | — |  |  | U
Big Fish Games transaction expenses | (6,367 | ) |  | — |  |  | U
Big Fish Games changes in deferred revenue | (4,497 | ) |  | — |  |  | U
Share-based compensation expense | (1,365 | ) |  | (5,915 | ) |  | 77
Pre-opening expenses | — |  |  | (2,409 | ) |  | 100
MVG interest expense, net | (590 | ) |  | (170 | ) |  | U
Asset impairment charges | (4,843 | ) |  | — |  |  | U
Other charges | (184 | ) |  | (2,500 | ) |  | 93
Depreciation and amortization | (19,933 | ) |  | (15,928 | ) |  | (25)
Interest income (expense), net | (5,730 | ) |  | (2,085 | ) |  | U
Income tax benefit | 5,014 |  |  | 4,085 |  |  | 23
Loss from continuing operations | (13,807 | ) |  | (5,573 | ) |  | U
Discontinued operations, net of income taxes | — |  |  | (132 | ) |  | 100
Net loss | (13,807 | ) |  | (5,705 | ) |  | U
Foreign currency translation, net of tax | (125 | ) |  | — |  |  | U
Comprehensive loss | $ | (13,932 | ) |  | $ | (5,705 | ) |  | U

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
Page 11 of 16, Wednesday, February 25, 2015
CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the years ended December 31,
(in thousands, except per common share data)

| 2014 |  | 2013 |  | % Change
Net revenues from external customers: |  |  |  |  |
Churchill Downs | $ | 143,191 |  |  | $ | 132,845 |  |  | 8
Arlington | 60,312 |  |  | 64,483 |  |  | (6)
Calder | 19,325 |  |  | 36,264 |  |  | (47)
Fair Grounds | 38,625 |  |  | 40,677 |  |  | (5)
Total Racing | 261,453 |  |  | 274,269 |  |  | (5)
Calder Casino | 77,003 |  |  | 78,951 |  |  | (2)
Fair Grounds Slots | 40,774 |  |  | 42,156 |  |  | (3)
VSI | 34,369 |  |  | 35,931 |  |  | (4)
Harlow’s Casino | 50,199 |  |  | 52,440 |  |  | (4)
Oxford Casino | 76,526 |  |  | 34,350 |  |  | 123
Riverwalk Casino | 50,139 |  |  | 53,645 |  |  | (7)
Total Casinos | 329,010 |  |  | 297,473 |  |  | 11
TwinSpires | 190,333 |  |  | 184,541 |  |  | 3
Big Fish Games | 13,855 |  |  | — |  |  | F
Other Investments | 17,125 |  |  | 21,899 |  |  | (22)
Corporate | 1,158 |  |  | 1,143 |  |  | 1
Net revenues from external customers | $ | 812,934 |  |  | $ | 779,325 |  |  | 4
Intercompany net revenues: |  |  |  |  |
Churchill Downs | $ | 7,038 |  |  | $ | 6,686 |  |  | 5
Arlington | 5,767 |  |  | 3,395 |  |  | 70
Calder | 707 |  |  | 1,263 |  |  | (44)
Fair Grounds | 1,089 |  |  | 1,151 |  |  | (5)
Total Racing | 14,601 |  |  | 12,495 |  |  | 17
TwinSpires | 958 |  |  | 853 |  |  | 12
Other Investments | 4,130 |  |  | 4,409 |  |  | (6)
Eliminations | (19,689 | ) |  | (17,757 | ) |  | 11
Net revenues | $ | — |  |  | $ | — |  |  | —

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
Page 12 of 16, Wednesday, February 25, 2015

Reconciliation of segment Adjusted EBITDA to net earnings: |  |  |  |  |
Racing | $ | 61,160 |  |  | $ | 50,275 |  |  | 22
Casinos | 101,106 |  |  | 80,631 |  |  | 25
TwinSpires | 45,282 |  |  | 49,122 |  |  | (8)
Big Fish Games | 3,837 |  |  | — |  |  | F
Other Investments | (3,857 | ) |  | 809 |  |  | U
Corporate | (5,037 | ) |  | (4,606 | ) |  | (9)
Total segment Adjusted EBITDA | 202,491 |  |  | 176,231 |  |  | 15
Insurance recoveries, net of losses | 431 |  |  | 375 |  |  | 15
Big Fish Games acquisition charges | (3,826 | ) |  | — |  |  | U
Big Fish Games transaction expenses | (6,367 | ) |  | — |  |  | U
Big Fish Games changes in deferred revenue | (4,497 | ) |  | — |  |  | U
HRE Trust Fund proceeds | — |  |  | 4,541 |  |  | (100)
Share-based compensation expense | (11,932 | ) |  | (21,482 | ) |  | (44)
Pre-opening expenses | (27 | ) |  | (3,620 | ) |  | (99)
MVG interest expense, net | (2,546 | ) |  | (170 | ) |  | U
Asset impairment charges | (4,843 | ) |  | — |  |  | U
Other charges | (3,287 | ) |  | (2,500 | ) |  | 31
Depreciation and amortization | (68,257 | ) |  | (61,750 | ) |  | 11
Interest income (expense), net | (20,822 | ) |  | (6,119 | ) |  | U
Income tax provision | (30,161 | ) |  | (30,473 | ) |  | (1)
Earnings from continuing operations | 46,357 |  |  | 55,033 |  |  | (16)
Discontinued operations, net of income taxes | — |  |  | (133 | ) |  | (100)
Net earnings | 46,357 |  |  | 54,900 |  |  | (16)
Foreign currency translation, net of tax | (125 | ) |  | — |  |  | U
Comprehensive income | $ | 46,232 |  |  | $ | 54,900 |  |  | (16)

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
Page 13 of 16, Wednesday, February 25, 2015
CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the three months and years ended December 31,
(in thousands)

|  | Three Months Ended December 31, |  | Change
Intercompany management fee (expense) income: | 2014 |  | 2013 |  | $ |  | %
Racing |  | $ | (1,138 | ) |  | $ | (1,478 | ) |  | $ | 340 |  |  | 23
Casinos |  | (2,279 | ) |  | (2,350 | ) |  | 71 |  |  | 3
TwinSpires |  | (1,202 | ) |  | (1,254 | ) |  | 52 |  |  | 4
Other Investments |  | (148 | ) |  | (160 | ) |  | 12 |  |  | 8
Corporate Income |  | 4,767 |  |  | 5,242 |  |  | (475 | ) |  | (9)
Total management fees |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |

|  | Year Ended December 31, |  | Change
Intercompany management fee (expense) income: | 2014 |  | 2013 |  | $ |  | %
Racing |  | $ | (6,821 | ) |  | $ | (6,978 | ) |  | $ | 157 |  |  | 2
Casinos |  | (8,129 | ) |  | (7,238 | ) |  | (891 | ) |  | (12)
TwinSpires |  | (4,775 | ) |  | (4,428 | ) |  | (347 | ) |  | (8)
Other Investments |  | (495 | ) |  | (603 | ) |  | 108 |  |  | 18
Corporate Income |  | 20,220 |  |  | 19,247 |  |  | 973 |  |  | 5
Total management fees |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
Page 14 of 16, Wednesday, February 25, 2015

CHURCHILL DOWNS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, (in thousands)
| 2014 |  | 2013
Cash flows from operating activities: |  |  |
Net earnings | $ | 46,357 |  |  | $ | 54,900 |
Adjustments to reconcile net earnings to net cash provided by operating activities: |  |  |
Depreciation and amortization | 68,257 |  |  | 61,750 |
Acquisition related charges | 3,826 |  |  | — |
Asset impairment loss | 3,247 |  |  | — |
Gain on sale of business and asset dispositions | (382 | ) |  | (366 | )
Equity in (gains) losses of unconsolidated investments | (6,328 | ) |  | 4,142 |
Share-based compensation | 11,931 |  |  | 21,482 |
Deferred tax provision | 14,839 |  |  | 5,284 |
Other | 619 |  |  | 689 |
Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of business acquisitions and dispositions: |  |  |
Restricted cash | 9,468 |  |  | 6,359 |
Accounts receivable | (1,619 | ) |  | (495 | )
Other current assets | (3,255 | ) |  | 1,372 |
Income taxes | 206 |  |  | (11,023 | )
Accounts payable | (8,385 | ) |  | (5,879 | )
Purses payable | (7,669 | ) |  | (6,594 | )
Accrued expenses | 8,330 |  |  | 4,866 |
Deferred revenue | 639 |  |  | 6,029 |
Other assets and liabilities | 1,538 |  |  | 2,399 |
Net cash provided by operating activities | 141,619 |  |  | 144,915 |
Cash flows from investing activities: |  |  |
Additions to property and equipment | (54,486 | ) |  | (48,771 | )
Acquisition of businesses, net of cash acquired | (366,045 | ) |  | (154,872 | )
Acquisition of gaming licenses | (2,250 | ) |  | (2,650 | )
Investment in joint ventures | (17,906 | ) |  | (70,500 | )
Purchases of minority investments | (602 | ) |  | (902 | )
Proceeds from sale of assets | 981 |  |  | 15 |
Net cash used in investing activities | (440,308 | ) |  | (277,680 | )
Cash flows from financing activities: |  |  |
Borrowings on bank line of credit | 804,986 |  |  | 740,131 |
Repayments of bank line of credit | (403,822 | ) |  | (880,667 | )
Proceeds from bond issuance | — |  |  | 300,000 |
Change in bank overdraft | (429 | ) |  | (5,053 | )
Payments of dividends | (15,186 | ) |  | — |
Repurchase of common stock | (61,561 | ) |  | — |
Repurchase of common stock from share-based compensation | (15,021 | ) |  | (10,723 | )
Common stock issued | 7,475 |  |  | 1,135 |
Windfall tax provision from share-based compensation | 7,708 |  |  | 2,981 |
Loan origination fees | (1,069 | ) |  | (2,258 | )
Debt issuance costs | (1,032 | ) |  | (5,250 | )
Net cash provided by (used in) financing activities | 322,049 |  |  | 140,296 |
Net increase in cash and cash equivalents | 23,360 |  |  | 7,531 |
Effect of exchange rate changes on cash | (132 | ) |  | — |
Cash and cash equivalents, beginning of year | 44,708 |  |  | 37,177 |
Cash and cash equivalents, end of year | $ | 67,936 |  |  | $ | 44,708 |

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
Page 15 of 16, Wednesday, February 25, 2015
CHURCHILL DOWNS INCORPORATED
CONSOLIDATED BALANCE SHEETS
December 31,
(in thousands)

| 2014 |  | 2013
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 67,936 |  |  | $ | 44,708 |
Restricted cash | 26,065 |  |  | 36,074 |
Accounts receivable, net | 75,890 |  |  | 46,572 |
Deferred income taxes | 17,716 |  |  | 8,927 |
Income taxes receivable | 29,455 |  |  | 12,398 |
Other current assets | 24,665 |  |  | 12,036 |
Total current assets | 241,727 |  |  | 160,715 |
Property and equipment, net | 595,315 |  |  | 585,498 |
Investment in and advances to unconsolidated affiliates | 109,548 |  |  | 86,151 |
Goodwill | 839,520 |  |  | 300,616 |
Other intangible assets, net | 549,972 |  |  | 198,149 |
Other assets | 24,192 |  |  | 21,132 |
Total assets | $ | 2,360,274 |  |  | $ | 1,352,261 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 45,597 |  |  | $ | 43,123 |
Bank overdraft | 544 |  |  | 973 |
Purses payable | 11,169 |  |  | 18,839 |
Account wagering deposit liabilities | 18,137 |  |  | 18,679 |
Accrued expenses | 91,056 |  |  | 67,328 |
Tax refund due to Big Fish Games former equity holders | 18,087 |  |  | — |
Deferred revenue | 51,833 |  |  | 49,078 |
Deferred revenue - Big Fish Games | 41,747 |  |  | — |
Big Fish Games deferred payment, current | 27,180 |  |  | — |
Current maturities of long-term debt | 11,250 |  |  | — |
Dividends payable | 17,419 |  |  | 15,186 |
Total current liabilities | 334,019 |  |  | 213,206 |
Long-term debt, net of current maturities | 459,105 |  |  | 69,191 |
Notes payable | 300,000 |  |  | 300,000 |
Big Fish Games deferred payment, net of current amount due | 51,620 |  |  | — |
Big Fish Games earnout liability | 327,800 |  |  | — |
Other liabilities | 21,718 |  |  | 17,753 |
Deferred revenue | 16,489 |  |  | 16,706 |
Deferred income taxes | 149,522 |  |  | 30,616 |
Total liabilities | 1,660,273 |  |  | 647,472 |
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; 17,472 shares issued at December 31, 2014 and 17,948 shares issued at December 31, 2013 | 262,280 |  |  | 295,955 |
Accumulated other comprehensive loss | (125 | ) |  | — |
Retained earnings | 437,846 |  |  | 408,834 |
Total shareholders’ equity | 700,001 |  |  | 704,789 |
Total liabilities and shareholders’ equity | $ | 2,360,274 |  |  | $ | 1,352,261 |

Churchill Downs Incorporated Reports 2014 Fourth-Quarter and Year-End Results
Page 16 of 16, Wednesday, February 25, 2015
CHURCHILL DOWNS INCORPORATED
JOINT VENTURE FINANCIAL STATEMENTS
for the three months and year ended December 31,
(Unaudited)
Summarized financial information for Miami Valley Gaming, LLC is comprised of the following (in thousands):

| Three Months Ended December 31, |  | Year Ended December 31,
| 2014 |  | 2013 |  | % Change |  | 2014 |  | 2013 |  | % Change
Gaming revenue | $ | 27,183 |  |  | $ | 6,472 |  |  | F |  | $ | 126,111 |  |  | $ | 6,472 |  |  | F
Non-gaming revenue | 1,424 |  |  | 970 |  |  | 47% |  | 6,257 |  |  | 5,479 |  |  | 14%
Net revenues | 28,607 |  |  | 7,442 |  |  | F |  | 132,368 |  |  | 11,951 |  |  | F
Operating and SG&A expenses | 20,998 |  |  | 6,112 |  |  | U |  | 97,385 |  |  | 10,815 |  |  | U
Adjusted EBITDA | 7,609 |  |  | 1,330 |  |  | F |  | 34,983 |  |  | 1,136 |  |  | F
Depreciation & amortization expenses | 1,984 |  |  | 821 |  |  | U |  | 12,299 |  |  | 935 |  |  | U
Pre-opening expenses | — |  |  | 4,818 |  |  | (100)% |  | 54 |  |  | 7,240 |  |  | (99)%
Operating income (loss) | 5,625 |  |  | (4,309 | ) |  | F |  | 22,630 |  |  | (7,039 | ) |  | F
Interest (expense) income, net | (1,175 | ) |  | (397 | ) |  | U |  | (4,829 | ) |  | (397 | ) |  | U
Net earnings (loss) | $ | 4,450 |  |  | $ | (4,706 | ) |  | F |  | $ | 17,801 |  |  | $ | (7,436 | ) |  | F

Reconciliation of operating income (loss) to Churchill Downs' Adjusted EBITDA | Three Months Ended December 31, |  | Year Ended December 31,
2014 |  | 2013 |  | % Change |  | 2014 |  | 2013 |  | % Change
Operating income (loss) | $ | 5,625 |  |  | $ | (4,309 | ) |  | F |  | $ | 22,630 |  |  | $ | (7,039 | ) |  | F
Pre-opening expenses | — |  |  | 4,818 |  |  | F |  | 54 |  |  | 7,240 |  |  | (99)%
| 5,625 |  |  | 509 |  |  | F |  | 22,684 |  |  | 201 |  |  | F
Churchill Downs' Adjusted EBITDA | $ | 2,813 |  |  | $ | 255 |  |  | F |  | $ | 11,342 |  |  | $ | 101 |  |  | F

| December 31, 2014 |  | December 31, 2013
Assets |  |  |
Current assets | $ | 24,943 |  |  | $ | 18,001 |
Property and equipment, net | 130,868 |  |  | 140,793 |
Other assets, net | 105,059 |  |  | 80,408 |
Total assets | $ | 260,870 |  |  | $ | 239,202 |
Liabilities and Members' Equity |  |  |
Current liabilities | $ | 16,775 |  |  | $ | 36,324 |
Current portion of long-term debt | 8,332 |  |  | 8,471 |
Long-term debt, excluding current portion | 26,584 |  |  | 32,287 |
Other liabilities | 83 |  |  | 75 |
Members' equity | 209,096 |  |  | 162,045 |
Total liabilities and members' equity | $ | 260,870 |  |  | $ | 239,202 |