EX-99.1 2 pressrelease7-29x15.htm EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: Courtney Yopp Norris
(502) 636-4564
Courtney.Norris@kyderby.com
CHURCHILL DOWNS INCORPORATED REPORTS
2015 SECOND-QUARTER RESULTS

• | Record net revenues of $409.2 million, up 35% over second-quarter 2014

• | Record Adjusted EBITDA of $157.2 million, 34% above 2014’s second-quarter

• | Record Kentucky Oaks and Derby week Adjusted EBITDA, grows $6.0 million over prior year

• | Record first half net cash from operating activities of $194.2 million, up 63% over prior year

LOUISVILLE, Ky. (July 29, 2015) - Churchill Downs Incorporated (CHDN: NASDAQ) (CDI or Company) today reported business results for the second-quarter ended June 30, 2015.
MANAGEMENT COMMENTARY
Bill Carstanjen, CDI’s Chief Executive Officer: “Our second-quarter delivered record revenues and Adjusted EBITDA driven primarily by a fantastic 2015 Kentucky Oaks and Derby and by the contributions of our Big Fish Games division. While all of our segments showed improvements, Big Fish Games was our largest growth catalyst for the quarter and further validates our strategy to enter the online and mobile games segment.”
CONSOLIDATED RESULTS
(in millions, except per share data):

|  | Second Quarter
|  | 2015 |  | 2014 |  | % Change
GAAP Measures: |  |  |  |  |  |
Net revenues |  | $409.2 |  | $303.5 |  | 35 |
Net earnings |  | 55.0 |  |  | 57.3 |  |  | (4 | )
Diluted earnings from continuing operations per share |  | $3.10 |  | $3.21 |  | (3 | )
Net cash flow provided by operating activities |  | 194.2 |  |  | 119.1 |  |  | 63 |
Non-GAAP Measure: |  |  |  |  |  |  |
Adjusted EBITDA |  | $157.2 |  | $117.0 |  | 34 |
U: > 100% unfavorable; F: > 100% favorable |  |  |  |  |  |

During the second-quarter of 2015, CDI net revenues increased $105.8 million, or 35%, from the prior year, primarily due to additional revenues from Big Fish Games which the Company acquired in December 2014.

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
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Total Adjusted EBITDA increased $40.2 million, or 34%, driven primarily by the addition of Big Fish Games’ Adjusted EBITDA of $28.2 million. In addition, Casino Adjusted EBITDA increased $1.8 million, as the majority of our properties improved either from strong revenue trends or margin improvements from operating cost efficiencies. TwinSpires Adjusted EBITDA increased $2.6 million driven by handle growth and the discontinuation of Luckity.com. Finally, Racing Adjusted EBITDA improved $7.1 million due to another record Kentucky Oaks and Derby week growing year-over-year by $6.0 million and the 2014 leasing of Calder’s pari-mutuel operations to a third party.
BIG FISH GAMES RESULTS
(in millions):

|  | Second Quarter
|  | 2015 |  | 2014 (1) |  | % Change
Bookings |  |  |  |  |  |
Casino |  | $48.2 |  | $36.8 |  | 31 |
Free-to-Play Casual |  | 36.5 |  |  | 7.5 |  |  | F |
Premium |  | 28.0 |  |  | 36.1 |  |  | (22 | )
Total Bookings |  | $112.7 |  | $80.4 |  | 40 |
Net revenues |  | $104.5 |  | $ | — |  |  | F |
Adjusted EBITDA |  | 28.2 |  |  | — |  |  | F |
(1) Big Fish Games bookings for period ended June 30, 2014 not included in the consolidated financial results for CDI. Included for comparative purposes only.

The chart above includes second-quarter bookings for 2015 as well as pre-acquisition results for second-quarter 2014. Bookings are a non-GAAP financial measure equal to the revenue recognized plus the change in deferred revenue for the period.
During the second-quarter, Big Fish Games contributed revenues of $104.5 million and Adjusted EBITDA of $28.2 million. Comparing results to Big Fish Games before CDI’s acquisition, total bookings for the quarter increased $32.2 million, or 40%, driven by growth in both the Casino and Free-to-Play Casual segments. Casino bookings grew by $11.5 million, driven by a 24% increase in quarterly average paying users and a 6% increase in average bookings per paying user compared to the second-quarter of 2014. Free-to-Play Casual continues to enjoy the success of its Gummy Drop! product, which launched in the third-quarter of 2014, with total bookings’ growth of $29.0 million driven by a 173% increase in quarterly average paying users and a 78% increase in average bookings per paying user. Premium bookings declined $8.1 million, or 22%, primarily driven by customers continuing to shift from paid PC games to free-to-play mobile games. In addition, the strengthening U.S. dollar (USD) as compared to other currencies where our Premium segment operates resulted in conversion to lower USD bookings of approximately $1.4 million.

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
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CASINO RESULTS
(in millions):

|  | Second Quarter
|  | 2015 |  | 2014 |  | % Change
Net revenues |  | $83.8 |  | $81.8 |  | 2 |
Adjusted EBITDA |  | 28.0 |  |  | 26.2 |  |  | 7 |

During the second-quarter of 2015, Casino revenues increased $2.0 million, or 2%, from the prior year. Oxford revenues increased $1.6 million, reflective of both total gaming market growth and increased market share. VSI revenues grew $0.9 million from the addition of new video poker machines throughout our Louisiana properties. Partially offsetting the overall growth was a decline in revenues of $0.5 million at Fair Grounds Slots due to a recently implemented smoking ban in Orleans Parish.
Casino Adjusted EBITDA increased by $1.8 million due to improved margins and operating efficiencies at a majority of our properties plus stronger revenue trends at our Oxford Maine facility.
TWINSPIRES RESULTS
(in millions):

|  | Second Quarter
|  | 2015 |  | 2014 |  | % Change
Net revenues |  | $60.7 |  | $57.1 |  | 6 |
Adjusted EBITDA |  | 16.7 |  |  | 14.1 |  |  | 19 |
Total handle |  | 289.4 |  |  | 266.5 |  |  | 9 |

During the second-quarter of 2015, TwinSpires revenues improved $3.7 million due to an 8.6% increase in handle and an increase of 17% in unique players.
TwinSpires Adjusted EBITDA increased $2.6 million, from organic revenue growth and a reduction in Pennsylvania pari-mutuel taxes from a favorable tax ruling received during the third quarter of 2014, partially offset by higher New York taxes.
RACING RESULTS
(in millions):

|  | Second Quarter
|  | 2015 |  | 2014 |  | % Change
Net revenues |  | $155.4 |  | $159.4 |  | (3 | )
Adjusted EBITDA |  | 85.2 |  |  | 78.1 |  |  | 9 |
Total handle |  | 557.8 |  |  | 667.6 |  |  | (16 | )

During the second-quarter of 2015, revenues generated by Racing decreased $4.0 million as the cessation of Calder's pari-mutuel operations on July 1, 2014, accounted for a loss of 40 live race days and a corresponding decline in revenues of $9.0 million as compared to the prior year. Declines in revenues at Arlington also contributed to the overall decrease. Arlington’s decline was a result of the reduction in

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
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state purse subsidies which led to a decrease in live race days and field sizes. Partially offsetting these declines was an increase at Churchill Downs of $8.4 million driven primarily from the successful Kentucky Oaks and Derby week.
Racing Adjusted EBITDA increased $7.1 million, due to a record-breaking Kentucky Oaks and Derby week with increased profitability of $6.0 million, as well as improved performance at Calder due to the cessation of pari-mutuel operations during July 2014.
BUSINESS RESULTS CONFERENCE CALL
A conference call regarding this news release is scheduled for Thursday, July 30, 2015, 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 by dialing (877) 372-0878 and entering the pass code 59263186 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 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; 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 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.

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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; the effect (including possible increases in the cost of doing business) resulting from future war and terrorist activities or political uncertainties; the impact of increasing insurance costs; the impact of interest rate fluctuations; maintaining favorable relationships we have with third-party mobile platforms, the inability to secure new content from third-party developers on favorable terms, keeping our games free from programming errors or flaws, the effect if smart phone and tablet usage does not continue to increase; the financial performance of our racing operations; the impact of casino 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 and 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 or casino 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 in those states; the presence of wagering and casino operations at other states’ racetracks and casinos near our operations; our continued ability 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 acquisitions and planned expansion projects including the effect of required payments in the event we are unable to complete acquisitions; our ability to successfully complete any divestiture transaction; market reaction to our expansion projects; the inability of our totalisator company, United Tote, to maintain its processes accurately, keep its technology current or maintain its significant customers; our accountability for environmental contamination; the ability of Big Fish Games or TwinSpires to prevent security breaches within their 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 or anticipated 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 limitation, agreements on sharing of revenues from casinos 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 this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2014 for further information, including Part I - Item 1A, "Risk Factors" of our Form 10-K for a discussion regarding some of the reasons that actual results may be materially different from those we anticipate.

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
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CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (in thousands, except per common share data)

| Three Months Ended |  |
| June 30, |  |
| 2015 |  | 2014 |  | % Change
Net revenues: |  |  |  |  |
Big Fish Games | $ | 104,526 |  |  | $ | — |  |  | F
Casinos | 83,770 |  |  | 81,779 |  |  | 2
TwinSpires | 60,748 |  |  | 57,076 |  |  | 6
Racing | 155,436 |  |  | 159,435 |  |  | (3)
Other | 4,759 |  |  | 5,182 |  |  | (8)
| 409,239 |  |  | 303,472 |  |  | 35
Operating expenses: |  |  |  |  |
Big Fish Games | 83,446 |  |  | — |  |  | U
Casinos | 61,062 |  |  | 62,005 |  |  | (2)
TwinSpires | 37,607 |  |  | 36,811 |  |  | 2
Racing | 75,850 |  |  | 85,483 |  |  | (11)
Other | 5,303 |  |  | 6,350 |  |  | (16)
Research and development | 9,847 |  |  | — |  |  | U
Selling, general and administrative expenses | 22,035 |  |  | 18,666 |  |  | 18
Acquisition related charges | 8,200 |  |  | — |  |  | U
Operating income | 105,889 |  |  | 94,157 |  |  | 12
Other income (expense): |  |  |  |  |
Interest income | 6 |  |  | 5 |  |  | 20
Interest expense | (7,112 | ) |  | (4,961 | ) |  | 43
Equity in gains of unconsolidated investments | 2,907 |  |  | 2,506 |  |  | 16
Miscellaneous, net | 28 |  |  | 393 |  |  | (93)
| (4,171 | ) |  | (2,057 | ) |  | U
Earnings from continuing operations before provision for income taxes | 101,718 |  |  | 92,100 |  |  | 10
Income tax provision | (46,674 | ) |  | (34,767 | ) |  | 34
Net earnings | $ | 55,044 |  |  | $ | 57,333 |  |  | (4)
Net earnings per common share data: |  |  |  |  |
Basic |  |  |  |  |
Net earnings | $ | 3.12 |  |  | $ | 3.23 |  |  | (3)
Diluted |  |  |  |  |
Net earnings | $ | 3.10 |  |  | $ | 3.21 |  |  | (3)
Weighted average shares outstanding: |  |  |  |  |
Basic | 17,331 |  |  | 17,531 |  |  |
Diluted | 17,735 |  |  | 17,880 |  |  |
Other comprehensive loss: |  |  |  |  |
Foreign currency translation, net of tax effect | (28 | ) |  | — |  |  | U
Other comprehensive loss | (28 | ) |  | — |  |  | U
Comprehensive earnings | $ | 55,016 |  |  | $ | 57,333 |  |  | (4)

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
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CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands, except per common share data)

| Six Months Ended |  |
| June 30, |  |
| 2015 |  | 2014 |  | % Change
Net revenues: |  |  |  |  |
Big Fish Games | $ | 196,429 |  |  | $ | — |  |  | F
Casinos | $ | 169,185 |  |  | $ | 168,165 |  |  | 1
TwinSpires | 106,063 |  |  | 103,160 |  |  | 3
Racing | 179,874 |  |  | 190,014 |  |  | (5)
Other | 8,598 |  |  | 9,274 |  |  | (7)
| 660,149 |  |  | 470,613 |  |  | 40
Operating expenses: |  |  |  |  |
Big Fish Games | 165,605 |  |  | — |  |  | U
Casinos | 121,843 |  |  | 124,051 |  |  | (2)
TwinSpires | 69,388 |  |  | 70,388 |  |  | (1)
Racing | 112,360 |  |  | 128,703 |  |  | (13)
Other | 10,906 |  |  | 12,048 |  |  | (9)
Research and development | 20,079 |  |  | — |  |  | U
Selling, general and administrative expenses | 43,607 |  |  | 40,131 |  |  | 9
Acquisition related charges | 14,600 |  |  | — |  |  | U
Insurance recoveries, net of losses | — |  |  | (431 | ) |  | (100)
Operating income | 101,761 |  |  | 95,723 |  |  | 6
Other income (expense): |  |  |  |  |
Interest income | 224 |  |  | 9 |  |  | F
Interest expense | (14,596 | ) |  | (9,934 | ) |  | 47
Equity in gains of unconsolidated investments | 5,855 |  |  | 4,796 |  |  | 22
Gain on sale of equity investment | 5,817 |  |  | — |  |  | F
Miscellaneous, net | (160 | ) |  | 368 |  |  | U
| (2,860 | ) |  | (4,761 | ) |  | (40)
Earnings from continuing operations before provision for income taxes | 98,901 |  |  | 90,962 |  |  | 9
Income tax provision | (45,415 | ) |  | (34,329 | ) |  | (32)
Net earnings | 53,486 |  |  | 56,633 |  |  | (6)
Net earnings per common share data: |  |  |  |  |
Basic |  |  |  |  |
Net earnings | $ | 3.04 |  |  | $ | 3.20 |  |  | (5)
Diluted |  |  |  |  |
Net earnings | $ | 3.02 |  |  | $ | 3.17 |  |  | (5)
Weighted average shares outstanding: |  |  |  |  |
Basic | 17,300 |  |  | 17,475 |  |  |
Diluted | 17,698 |  |  | 17,884 |  |  |
Other comprehensive loss: |  |  |  |  |
Foreign currency translation, net of tax effect | (415 | ) |  | — |  |  | U
Other comprehensive loss | (415 | ) |  | — |  |  | U
Comprehensive earnings | $ | 53,071 |  |  | $ | 56,633 |  |  | (6)

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
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CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the three months ended June 30,
(Unaudited) (in thousands, except per common share data)

| 2015 |  | 2014 |  | % Change
Net revenues from external customers: |  |  |  |  |
Big Fish Games | $ | 104,526 |  |  | $ | — |  |  | F
Casinos: |  |  |  |  |
Calder Casino | 19,786 |  |  | 19,873 |  |  | —
Fair Grounds Slots | 9,053 |  |  | 9,586 |  |  | (6)
VSI | 9,389 |  |  | 8,479 |  |  | 11
Harlow's Casino | 12,050 |  |  | 11,777 |  |  | 2
Oxford Casino | 20,958 |  |  | 19,402 |  |  | 8
Riverwalk Casino | 12,534 |  |  | 12,662 |  |  | (1)
Total Casinos | 83,770 |  |  | 81,779 |  |  | 2
TwinSpires | 60,748 |  |  | 57,076 |  |  | 6
Racing: |  |  |  |  |
Churchill Downs | 126,792 |  |  | 118,348 |  |  | 7
Arlington | 18,119 |  |  | 21,193 |  |  | (15)
Calder | 717 |  |  | 9,714 |  |  | (93)
Fair Grounds | 9,808 |  |  | 10,180 |  |  | (4)
Total Racing | 155,436 |  |  | 159,435 |  |  | (3)
Other Investments | 4,502 |  |  | 4,778 |  |  | (6)
Corporate | 257 |  |  | 404 |  |  | (36)
Net revenues from external customers | $ | 409,239 |  |  | $ | 303,472 |  |  | 35
Intercompany net revenues: |  |  |  |  |
TwinSpires | $ | 250 |  |  | $ | 244 |  |  | 2
Racing: |  |  |  |  |
Churchill Downs | 5,384 |  |  | 4,945 |  |  | 9
Arlington | 1,486 |  |  | 1,777 |  |  | (16)
Calder | — |  |  | 351 |  |  | (100)
Fair Grounds | — |  |  | (3 | ) |  | (100)
Total Racing | 6,870 |  |  | 7,070 |  |  | (3)
Other Investments | 1,093 |  |  | 1,210 |  |  | (10)
Eliminations | (8,213 | ) |  | (8,524 | ) |  | (4)
Net revenues | $ | — |  |  | $ | — |  |  |
Reconciliation of Adjusted EBITDA to net earnings: |  |  |  |  |
Big Fish Games | $ | 28,238 |  |  | $ | — |  |  | F
Casinos | 27,955 |  |  | 26,174 |  |  | 7
TwinSpires | 16,717 |  |  | 14,087 |  |  | 19
Racing | 85,195 |  |  | 78,079 |  |  | 9
Other Investments | 781 |  |  | (223 | ) |  | F
Corporate Adjusted EBITDA | (1,687 | ) |  | (1,141 | ) |  | (48)
Total segment Adjusted EBITDA | 157,199 |  |  | 116,976 |  |  | 34
Big Fish Games acquisition charges | (8,200 | ) |  | — |  |  | U
Big Fish Games changes in deferred revenue | (8,220 | ) |  | — |  |  | U
Share-based compensation | (3,372 | ) |  | (3,113 | ) |  | 8
MVG interest expense, net | (536 | ) |  | (597 | ) |  | (10)
Other charges and recoveries, net | (777 | ) |  | (450 | ) |  | 73
Depreciation and amortization | (27,270 | ) |  | (15,760 | ) |  | 73
Interest (expense) income, net | (7,106 | ) |  | (4,956 | ) |  | 43
Income tax provision | (46,674 | ) |  | (34,767 | ) |  | 34
Earnings from continuing operations | 55,044 |  |  | 57,333 |  |  | (4)
Foreign currency translation, net of tax effect | (28 | ) |  | — |  |  | U
Comprehensive earnings | $ | 55,016 |  |  | $ | 57,333 |  |  | (4)

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CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the six months ended June 30,
(Unaudited) (in thousands, except per common share data)

| 2015 |  | 2014 |  | % Change
Net revenues from external customers: |  |  |  |  |
Big Fish Games | $ | 196,429 |  |  | $ | — |  |  | F
Casinos: |  |  |  |  |
Calder Casino | 40,165 |  |  | 40,456 |  |  | (1)
Fair Grounds Slots | 20,535 |  |  | 21,370 |  |  | (4)
VSI | 18,573 |  |  | 17,233 |  |  | 8
Harlow's Casino | 25,730 |  |  | 26,228 |  |  | (2)
Oxford Casino | 38,461 |  |  | 36,921 |  |  | 4
Riverwalk Casino | 25,721 |  |  | 25,957 |  |  | (1)
Total Casinos | 169,185 |  |  | 168,165 |  |  | 1
TwinSpires | 106,063 |  |  | 103,160 |  |  | 3
Racing: |  |  |  |  |
Churchill Downs | 128,800 |  |  | 120,490 |  |  | 7
Arlington | 23,931 |  |  | 27,315 |  |  | (12)
Calder | 1,391 |  |  | 17,738 |  |  | (92)
Fair Grounds | 25,752 |  |  | 24,471 |  |  | 5
Total Racing | 179,874 |  |  | 190,014 |  |  | (5)
Other Investments | 8,107 |  |  | 8,615 |  |  | (6)
Corporate | 491 |  |  | 659 |  |  | (25)
Net revenues from external customers | $ | 660,149 |  |  | $ | 470,613 |  |  | 40
Intercompany net revenues: |  |  |  |  |
TwinSpires | $ | 547 |  |  | $ | 474 |  |  | 15
Racing: |  |  |  |  |
Churchill Downs | 5,617 |  |  | 5,173 |  |  | 9
Arlington | 2,444 |  |  | 2,794 |  |  | (13)
Calder | — |  |  | 707 |  |  | (100)
Fair Grounds | 858 |  |  | 729 |  |  | 18
Total Racing | 8,919 |  |  | 9,403 |  |  | (5)
Other Investments | 1,888 |  |  | 2,108 |  |  | (10)
Eliminations | (11,354 | ) |  | (11,985 | ) |  | (5)
Net revenues | $ | — |  |  | $ | — |  |  |
Reconciliation of Adjusted EBITDA to net earnings: |  |  |  |  |
Big Fish Games | $ | 48,264 |  |  | $ | — |  |  | F
Casinos | 56,742 |  |  | 53,425 |  |  | 6
TwinSpires | 27,907 |  |  | 24,037 |  |  | 16
Racing | 75,998 |  |  | 67,829 |  |  | 12
Other Investments | 113 |  |  | (1,576 | ) |  | F
Corporate Adjusted EBITDA | (3,554 | ) |  | (2,247 | ) |  | (58)
Total segment Adjusted EBITDA | 205,470 |  |  | 141,468 |  |  | 45
Insurance recoveries, net of losses | — |  |  | 431 |  |  | (100)
Big Fish Games acquisition charges | (14,600 | ) |  | — |  |  | U
Big Fish Games changes in deferred revenue | (21,096 | ) |  | — |  |  | U
Share-based compensation | (6,095 | ) |  | (8,354 | ) |  | (27)
MVG interest expense, net | (1,090 | ) |  | (1,137 | ) |  | (4)
Other charges and recoveries, net | 5,361 |  |  | (477 | ) |  | F
Depreciation and amortization | (54,677 | ) |  | (31,044 | ) |  | 76
Interest (expense) income, net | (14,372 | ) |  | (9,925 | ) |  | 45
Income tax provision | (45,415 | ) |  | (34,329 | ) |  | 32
Earnings from continuing operations | 53,486 |  |  | 56,633 |  |  | (6)
Foreign currency translation, net of tax effect | (415 | ) |  | — |  |  | U
Comprehensive earnings | $ | 53,071 |  |  | $ | 56,633 |  |  | (6)

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
Page 10 of 14, July 29, 2015
CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION BY OPERATING UNIT
for the three and six months ended June 30,
(unaudited) (in thousands)

|  | Three Months Ended June 30, |  | Change
|  | 2015 |  | 2014 |  | $ |  | %
Intercompany management fee (expense) income: |  |  |  |  |  |  |  |
Big Fish Games |  | $ | (750 | ) |  | $ | — |  |  | $ | (750 | ) |  | U
Casinos |  | (1,008 | ) |  | (957 | ) |  | (51 | ) |  | (5)
TwinSpires |  | (875 | ) |  | (802 | ) |  | (73 | ) |  | (9)
Racing |  | (2,995 | ) |  | (3,200 | ) |  | 205 |  |  | 6
Other Investments |  | (75 | ) |  | (80 | ) |  | 5 |  |  | 6
Corporate Income |  | 5,703 |  |  | 5,039 |  |  | 664 |  |  | 13
Total management fees |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |

|  | Six Months Ended June 30, |  | Change
|  | 2015 |  | 2014 |  | $ |  | %
Intercompany management fee (expense) income: |  |  |  |  |  |  |  |
Big Fish Games |  | $ | (1,500 | ) |  | $ | — |  |  | $ | (1,500 | ) |  | U
Casinos |  | (3,332 | ) |  | (3,531 | ) |  | 199 |  |  | 6
TwinSpires |  | (2,098 | ) |  | (2,233 | ) |  | 135 |  |  | 6
Racing |  | (3,693 | ) |  | (4,178 | ) |  | 485 |  |  | 12
Other Investments |  | (188 | ) |  | (213 | ) |  | 25 |  |  | 12
Corporate Income |  | 10,811 |  |  | 10,155 |  |  | 656 |  |  | 6
Total management fees |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
Page 11 of 14, July 29, 2015

CHURCHILL DOWNS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, (unaudited) (in thousands)
| 2015 |  | 2014
Cash flows from operating activities: |  |  |
Net earnings | $ | 53,486 |  |  | $ | 56,633 |
Adjustments to reconcile net earnings to net cash provided by operating activities: |  |  |
Depreciation and amortization | 54,677 |  |  | 31,044 |
Game technology and rights amortization | 3,060 |  |  | — |
Acquisition related charges | 14,600 |  |  | — |
Asset impairment loss | 250 |  |  | — |
Loss on asset disposals | 393 |  |  | 66 |
Gain on sale of equity investment | (5,817 | ) |  | — |
Equity in gains of unconsolidated investments | (5,855 | ) |  | (4,796 | )
Dividend from investment in unconsolidated affiliate | 7,500 |  |  | — |
Share-based compensation | 6,095 |  |  | 8,354 |
Other | 804 |  |  | 302 |
Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of business acquisition: |  |  |
Restricted cash | (2,620 | ) |  | 2,385 |
Accounts receivable | (13,431 | ) |  | (13,828 | )
Other current assets | (8,615 | ) |  | (4,981 | )
Game technology and rights | (11,217 | ) |  | — |
Accounts payable | 26,972 |  |  | 28,433 |
Purses payable | 10,321 |  |  | 2,036 |
Accrued expenses | (1,028 | ) |  | (1,775 | )
Deferred revenue | 422 |  |  | (25,843 | )
Income taxes receivable and payable | 59,045 |  |  | 38,967 |
Other assets and liabilities | 5,136 |  |  | 2,091 |
Net cash provided by operating activities | 194,178 |  |  | 119,088 |
Cash flows from investing activities: |  |  |
Additions to property and equipment | (22,681 | ) |  | (38,475 | )
Deferred payments to Big Fish Games former equity holders | (959 | ) |  | — |
Investment in joint ventures | (332 | ) |  | (6,500 | )
Proceeds from sale of equity investment | 6,000 |  |  | — |
Purchases of minority investments | (81 | ) |  | (273 | )
Proceeds on sale of property and equipment | 81 |  |  | 88 |
Net cash used in investing activities | (17,972 | ) |  | (45,160 | )
(continued on next page)

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
Page 12 of 14, July 29, 2015

CHURCHILL DOWNS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, (unaudited) (in thousands)
| 2015 |  | 2014
Cash flows from financing activities: |  |  |
Borrowings on bank line of credit | 189,871 |  |  | 210,854 |
Repayments on bank line of credit | (346,484 | ) |  | (211,247 | )
Tax refund payments to Big Fish Games equity holders | (11,773 | ) |  | — |
Change in bank overdraft | 5,222 |  |  | 5,504 |
Payment of dividends | (17,419 | ) |  | (15,186 | )
Repurchase of common stock | — |  |  | (61,561 | )
Repurchase of common stock from share-based compensation | (5,929 | ) |  | (8,121 | )
Common stock issued | 88 |  |  | 4,525 |
Windfall tax benefit from share-based compensation | 3,103 |  |  | 4,465 |
Loan origination fees | (26 | ) |  | (170 | )
Debt issuance costs | — |  |  | (1,029 | )
Net cash used in financing activities | (183,347 | ) |  | (71,966 | )
Net (decrease) increase in cash and cash equivalents | (7,141 | ) |  | 1,962 |
Effect of exchange rate changes on cash | (1,551 | ) |  | — |
Cash and cash equivalents, beginning of year | 67,936 |  |  | 44,708 |
Cash and cash equivalents, end of year | $ | 59,244 |  |  | $ | 46,670 |

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
Page 13 of 14, July 29, 2015
CHURCHILL DOWNS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(unaudited) (in thousands)

| June 30, 2015 |  | December 31, 2014
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 59,244 |  |  | $ | 67,936 |
Restricted cash | 28,685 |  |  | 26,065 |
Accounts receivable, net | 66,885 |  |  | 75,890 |
Deferred income taxes | 18,759 |  |  | 18,519 |
Income taxes receivable | — |  |  | 29,455 |
Game technology and rights, net | 8,250 |  |  | 530 |
Other current assets | 33,243 |  |  | 24,135 |
Total current assets | 215,066 |  |  | 242,530 |
Property and equipment, net | 589,552 |  |  | 595,315 |
Investment in and advances to unconsolidated affiliate | 107,465 |  |  | 109,548 |
Goodwill | 840,947 |  |  | 840,947 |
Other intangible assets, net | 521,607 |  |  | 549,972 |
Other assets | 24,353 |  |  | 24,192 |
Total assets | $ | 2,298,990 |  |  | $ | 2,362,504 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 66,291 |  |  | $ | 45,597 |
Bank overdraft | 5,766 |  |  | 544 |
Purses payable | 21,490 |  |  | 11,169 |
Account wagering deposit liabilities | 21,160 |  |  | 18,137 |
Accrued expenses | 92,665 |  |  | 93,286 |
Income taxes payable | 32,609 |  |  | — |
Tax refund due to Big Fish Games former equity holders | 6,313 |  |  | 18,087 |
Deferred revenue | 10,985 |  |  | 51,833 |
Deferred revenue - Big Fish Games | 62,844 |  |  | 41,747 |
Big Fish Games deferred payment, current | 28,100 |  |  | 27,180 |
Big Fish Games earnout liability, current | 272,850 |  |  | — |
Current maturities of long-term debt | 13,750 |  |  | 11,250 |
Dividends payable | — |  |  | 17,419 |
Total current liabilities | 634,823 |  |  | 336,249 |
Long-term debt, net of current maturities | 299,992 |  |  | 459,105 |
Notes payable | 300,000 |  |  | 300,000 |
Big Fish Games deferred payment, net of current amount due | 54,200 |  |  | 51,620 |
Big Fish Games earnout liability, net of current amount due | 66,050 |  |  | 327,800 |
Other liabilities | 24,521 |  |  | 21,718 |
Deferred revenue | 13,641 |  |  | 16,489 |
Deferred income taxes | 149,326 |  |  | 149,522 |
Total liabilities | 1,542,553 |  |  | 1,662,503 |
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; 17,580 shares issued at June 30, 2015 and 17,472 shares issued at December 31, 2014 | 265,645 |  |  | 262,280 |
Accumulated other comprehensive loss | (540 | ) |  | (125 | )
Retained earnings | 491,332 |  |  | 437,846 |
Total shareholders’ equity | 756,437 |  |  | 700,001 |
Total liabilities and shareholders’ equity | $ | 2,298,990 |  |  | $ | 2,362,504 |

Churchill Downs Incorporated Reports 2015 Second-Quarter Results
Page 14 of 14, July 29, 2015
CHURCHILL DOWNS INCORPORATED
JOINT VENTURE FINANCIAL STATEMENTS
for the three and six months ended June 30,
(Unaudited)
Summarized financial information for Miami Valley Gaming, LLC is comprised of the following (in thousands):

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2015 |  | 2014 |  | % Change |  | 2015 |  | 2014 |  | % Change
Casino revenue | $ | 33,119 |  |  | $ | 33,124 |  |  | —% |  | $ | 65,163 |  |  | $ | 64,287 |  |  | 1%
Non-casino revenue | 1,879 |  |  | 1,913 |  |  | (2)% |  | 3,836 |  |  | 3,544 |  |  | 8%
Net revenues | 34,998 |  |  | 35,037 |  |  | —% |  | 68,999 |  |  | 67,831 |  |  | 2%
Operating and SG&A expenses | 25,052 |  |  | 24,777 |  |  | 1% |  | 49,686 |  |  | 48,988 |  |  | 1%
Adjusted EBITDA | 9,946 |  |  | 10,260 |  |  | (3)% |  | 19,313 |  |  | 18,843 |  |  | 2%
Depreciation & amortization expenses | 3,154 |  |  | 3,474 |  |  | (9)% |  | 6,298 |  |  | 6,841 |  |  | (8)%
Pre-opening expenses | — |  |  | — |  |  | N/A |  | — |  |  | 54 |  |  | (100)%
Operating income | 6,792 |  |  | 6,786 |  |  | —% |  | 13,015 |  |  | 11,948 |  |  | 9%
Interest (expense) income, net | (1,073 | ) |  | (1,194 | ) |  | (10)% |  | (2,181 | ) |  | (2,274 | ) |  | (4)%
Net income | $ | 5,719 |  |  | $ | 5,592 |  |  | 2% |  | $ | 10,834 |  |  | $ | 9,674 |  |  | 12%

Reconciliation of operating income to Churchill Downs' Adjusted EBITDA | Three Months Ended June 30, |  | Six Months Ended June 30,
2015 |  | 2014 |  | % Change |  | 2015 |  | 2014 |  | % Change
Operating income | $ | 6,792 |  |  | $ | 6,786 |  |  | — | % |  | $ | 13,015 |  |  | $ | 11,948 |  |  | 9%
Pre-opening expenses | — |  |  | — |  |  | N/A |  |  | — |  |  | 54 |  |  | (100)%
| 6,792 |  |  | 6,786 |  |  | — | % |  | 13,015 |  |  | 12,002 |  |  | 8%
Churchill Downs' Adjusted EBITDA | $ | 3,396 |  |  | $ | 3,393 |  |  | — | % |  | $ | 6,508 |  |  | $ | 6,001 |  |  | 8%

| June 30, 2015 |  | December 31, 2014
Assets |  |  |
Current assets | $ | 23,382 |  |  | $ | 24,943 |
Property and equipment, net | 125,597 |  |  | 130,868 |
Other assets, net | 105,059 |  |  | 105,059 |
Total assets | $ | 254,038 |  |  | $ | 260,870 |
Liabilities and Members' Equity |  |  |
Current liabilities | $ | 17,110 |  |  | $ | 16,775 |
Current portion of long-term debt | 8,332 |  |  | 8,332 |
Long-term debt, excluding current portion | 23,591 |  |  | 26,584 |
Other liabilities | 75 |  |  | 83 |
Members' equity | 204,930 |  |  | 209,096 |
Total liabilities and members' equity | $ | 254,038 |  |  | $ | 260,870 |