A pair of big one-time expenses, one related to a sale agreement rights deal and one linked to remeasurement of state tax liabilities, sparked a big drop in fourth-quarter net income for Churchill Downs from a year earlier. But the per share result and revenue both beat Wall Street forecasts.
In a statement Wednesday, the Louisville, Kentucky-based company, which owns five racetracks, six casinos and the twinspires.com online betting platform, said its net income was $4 million, or 10 cents per share, for the three months ended Dec. 31, down from net income of $11.4 million, or 28 cents per share, a year earlier.
Analysts surveyed by Yahoo Finance had, on average, expected a 6 cents-per-share loss for the quarter.
Churchill Downs said a $7.5 million after-tax expense related to the accelerated amortization of the purchase and sale agreement rights related to the acquisition of Turfway Park in Florence, Kentucky, and a $5.6 million non-cash tax expense related to the re-measurement of deferred tax liabilities prompted by changes in state enacted rates hurt first-quarter earnings.
Churchill Downs paid $46 million for Turfway Park from Jack Entertainment and Hard Rock International in a deal that closed last autumn.
Quarterly adjusted earnings before interest, taxes, depreciation and amortization surged 71.6% to a record $73.8 million from $43 million.
Revenue rose 28.1% to $280.6 million from $219 million. The latest result topped the $261.7 million forecast of Yahoo Finance-polled analysts.
As in past quarters, Churchill Downs entered the earnings reveal on a blitz of activity.
This week, Churchill Downs said it signed a deal with Steriline Racing of Australia to build a customized 20-stall starting gate at the company’s namesake thoroughbred horseracing track. Financial terms weren’t disclosed.
The gate will replace a gate in use since 1930 and will be used exclusively for the Kentucky Derby, including the race’s 146th running May 2. In a statement, Churchill Downs said the new gate will cut a wide space between post positions 14 and 15.
Last week, Churchill Downs said it will partner with Las Vegas-based Scientific Games Corp. and New South Wales, Australia-based Ainsworth Game Technology, to introduce a new historical racing machine. Financial terms weren’t disclosed.
In a statement, Churchill Downs said Scientific Games will supply many of its popular games including 88 Fortunes, Tree of Wealth, Quick Hit, Lock It Link and Ultimate Fire Link for the product, which the Kentucky Horse Racing Commission has approved. Ainsworth will supply the operating system.
Churchill Downs said its Derby City Gaming property in Louisville, Kentucky, will unveil the new cabinets in the first quarter.
In the statement, Churchill Downs ticked off positives, including the Turfway deal acquisition and deals for the Presque Isle Downs & Casino in Erie, Pennsylvania, (a $178.9 million deal closed in January 2019) and management of Lady Luck Casino Nemacolin (a $100,000 deal closed in March 2019). Churchill Downs also completed the 61.3% equity investment in Midwest Gaming Holdings LLC, parent of the Rivers Des Plaines Casino in Des Plaines, Illinois.
For the 12 months ended Dec. 31, Churchill Downs had net income of $137.5 million, or $3.38 per diluted share, down from net income of $352.8 million, or $8.48 per share.
Twelve-month adjusted EBITDA rose 27.9% to $451.4 million from $328.8 million. Twelve-month revenue rose 31.6 percent to $1.33 billion from $1.01 billion.
Churchill Downs shares fell $4.80, or 3.19% to close at $145.44 on the Nasdaq. The share price has risen 7.8 percent in 2020.
Follow Matthew Crowley on Twitter @copyjockey
