Churchill Downs Reports Eighth Consecutive Year of Record Earnings

27 February 2001

During the fourth quarter of 2000, the Company reported net revenues of $100.9 million, up 8 percent over the $93.5 million reported during the same period in 1999. Net earnings for the quarter were $2.3 million, a decrease of 27 percent from $3.1 million earned during the last quarter of 1999. Earnings per share were 17 cents diluted on 13.2 million average diluted shares outstanding, compared with 31 cents on 10.0 million diluted shares outstanding from the same period last year.

The increases of 33 percent and 25 percent in the number of average diluted shares outstanding for the fourth quarter and year ended December 31, 2000, respectively, were due principally to the issuance of 3.15 million common shares for the September 2000 merger with Arlington International Racecourse, now doing business as Arlington Park. Our July 1999 public offering of 2.3 million common shares also had an effect on the full-year comparison of average shares outstanding.

Thomas H. Meeker, CDI's president and chief executive officer, said that 2000 was the Company's eighth consecutive year of record earnings.

``Our ability to achieve this sustained record of progress clearly validates the growth strategy we are following to capitalize on the outstanding opportunities for CDI. The last several years have been particularly eventful within our Company's 127-year history,'' Meeker said.

``We have substantially broadened the geographic and operating scope of our live racing, implemented a comprehensive branding program and begun to pursue the exciting potential available to us through our simulcast operations. One of the important highlights of 2000 was blending our operations into a branded product, a first for our industry and an integral component of our plans to expand our simulcast operations through the Churchill Downs Simulcast Network (''CDSN``).

"During 2000, we also continued our plan of aggregating premier racing content when we merged with Arlington Park in September 2000. This merger is one of our largest transactions to date and, with the inclusion of the management fees that we earned prior to closing, was modestly accretive to our year-end earnings. The first full-year inclusion of Calder Race Course and Hollywood Park, both acquired during 1999, had a significant impact on the comparison with our 1999 results.

"We completed our acquisition of Calder in April 1999, just a few weeks before the start of its racing season. So in 2000, we had to absorb losses from four months of the year when Calder conducts no live racing. With Hollywood Park, which we did not acquire until September 1999, our earnings benefited from having that racetrack's Spring Meet in our 2000 calendar.

``Our earnings for the full year and the fourth quarter were in line with our expectations. Our fourth-quarter results were impacted by having significantly more shares outstanding and including Arlington Park for the first time during a period in which it is not conducting any live racing.''

Meeker continued, ``2001 should mark another year of record revenues and earnings for our Company. We are optimistic about the current year given the inclusion of Arlington Park under the CDSN brand and the synergies we are already realizing from our six racetracks. We have completed our assimilation of Arlington Park, and consistent with the results we achieved with our prior acquisitions, we are confident that Arlington Park will positively impact our operating results.

``We are proud of how we have grown our business and our profit over the last several years, which was a period of strong economic growth. Today, the economic environment is, at best, uncertain, which presents a new challenge for our Company as well as most American businesses.

"During the course of developing our business through internal growth and acquisitions, we have also been effective in managing our cost structure and improving our operating margins. This discipline allows us to continue to manage our expenses and effectively meet the challenge of a slowing economy.

``For the first quarter, we will have to absorb for the first time the results of Arlington Park, which hosts no live racing during this period, but the impact of that factor on our per-share results will be mitigated by the higher number of shares outstanding. We expect to report a loss of 86 to 88 cents per share diluted for the first quarter, compared to a loss of 89 cents in 2000.

"It is important to note that we do not host live racing during the first quarter with the exception of two days of Thoroughbred racing at Calder and 19 days of Standardbred racing at Hoosier Park at Anderson. Therefore, we have historically reported a loss during this period.

``For 2001 as a whole, we expect an approximate 20 percent increase in net earnings over the record $19.2 million in 2000. As a result of the substantial increase in our average shares outstanding, we expect a much more moderate gain in earnings per share. This improvement would be in line with the percentage increase we realized in 2000. Finally, we expect our balance sheet in 2001 to continue benefiting from a positive cash flow. Internally generated funds in 2000 enabled us to reduce our long-term debt by $25 million, from $181 million to $156 million.''