Fair Grounds in New Orleans sets the pace for Churchill Downs in '08

New Orleans CityBusiness, Jun 15, 2009 by Christian Moises

The Fair Grounds Race Course and Slots was a big player in Churchill Downs Inc.'s first quarter of 2009 earnings report.

The Louisville, Ky.-based parent company of the New Orleans horse track credits the Gentilly facility for helping boost revenues, but a hurricane-related insurance payment in the first quarter of 2008 heavily contributed to its year-over-year income drop.

Stephen Altebrando, an analyst with Sidoti and Co., expects the Fair Grounds to account for about 35 percent of Churchill's overall business in 2009.

"At this point, (the Fair Grounds) is a key player in their overall operations because of the track and the off-site video poker and off-track betting sites," Altebrando said.

Churchill Downs Inc. reported first-quarter revenue of $73.7 million, up from $65.7 million a year ago. But fourth-quarter revenue, which Altebrando said is the period to watch because of peak racing activity, was down 3.6 percent from $85.9 million in 2008 compared with $89.1 million in 2007.

The company took a hit on net income in the first quarter, posting a $4.8 million loss, worse than the $740,000 earned in the first quarter of 2007 but better than the $6.2 million loss in fourth quarter of 2007.

Altebrando said the losses weren't a surprise, as most racing occurs in the summer months.

The Fair Grounds had a 100 percent increase in attendance during days that featured live racing and simulcasts from other tracks, from 298,356 during the 2007-08 season to 596,543 this season, according to the Louisiana Racing Commission.

But more people didn't necessarily translate to more spending. Between the 2007-08 and 2008-09 seasons, there was a 6.1 percent decrease in wagering on races at the track and at off-track-betting sites showing Fair Grounds races.

The Fair Grounds' temporary slots facility attracted 175,806 people during the 2007-08 racing season with gamblers losing $10.4 million, according to Louisiana State Police figures. During the 2008-09 season, 396,222 people lost $59.5 million at the permanent facility.

Sean Smith, senior equity analyst with Zacks Investment Research, said the permanent slots facility was a key player in Churchill's success this year.

"The permanent facility allowed the track to have record purses, which really increases the quality of horseracing there and improves the facility all around," said Smith.

"Going forward, that's the way the thoroughbred industry is going to have to go," he said. "They're going to need that alternative component to support the horseracing."

The 2008-09 racing season had 86 live race days from Nov. 14 through March 29, while the slots figures for the racing season account for winnings and attendance for all days between Nov. 1 and March 31, regardless of whether there was live racing.