Churchill Downs, Incorporated · NASDAQ:CHDN

Churchill Downs — Wells Fargo Securities 2013 Boston Gaming Forum

31 slides from Churchill Downs's conference presentation, Dec 4, 2013

  1. Slide 1: Wells Fargo Securities 2013 Boston Gaming Forum

    Prepared For: Investor Relations (NASDAQ: CHDN) December 5, 2013 Bill Mudd, EVP and CFO Mike Anderson, VP Finance & IR Wells Fargo Securities 2013 Boston Gaming Forum Boston, MA

  2. Slide 2: Forward-Looking Statements

    Forward-Looking Statements This document 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 harbo

  3. Slide 3: Forward-Looking Statements (cont'd)

    Forward-Looking Statements (cont’d) 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 possib

  4. Slide 4: Key investment highlights

    4 Key investment highlights Proven management team  Diverse backgrounds with multi-industry, technology and international experience  Proven record of capital allocation, revenue & earnings growth at Churchill Downs  Iconic Kentucky Oaks & Derby Brands continue to set all-time records  ~6,700 ga

  5. Slide 5: Churchill Downs has diversified its business model

    5 Churchill Downs has diversified its business model… LTM 9/30/13 Revenue by business unit LTM 9/30/13 Adj. EBITDA by business unit 2008 Revenue by business unit 2008 Adj. EBITDA by business unit Source: Company filings Note: Revenues exclude corporate revenue and eliminations  Churchill has signif

  6. Slide 6: Driven by successfully investing nearly $900 million since 2007

    6 …driven by successfully investing nearly $900 million since 2007 Leverage and acquisition history Source: Company filings 1 Pro forma leverage based on LTM 9/30/13 unadjusted EBITDA of $178 million (includes Oxford LTM EBITDA of $20.9 million) 2 Miami Valley Gaming investment reflects 50% of the p

  7. Slide 7: Churchill Downs has an experienced management team

    Bill Carstanjen, President & COO Bob Evans, Chairman & CEO Alan Tse, EVP & General Counsel Bill Mudd, EVP & CFO  President and COO, 8 years with CDI  M&A background with Cravath, Swaine & Moore LLP and GE  Previously led legal and development teams  Formerly with GE Capital  Columbia Law School

  8. Slide 8: Growth opportunities provide significant upside

     Derby and Oaks  High-end seating expansion and amenities funded through cash flow  Renegotiation of media and presenting sponsor in 2015  Ohio Joint Venture  Currently under construction  Scheduled opening December 12, 2013  Kentucky gaming  Targeting a 2014 public referendum, assuming legi

  9. Slide 9: Churchill Downs operates in three distinct segments

    Churchill Downs operates in three distinct segments We are a diversified Racing, Gaming, & Online Entertainment Company Racing 1 Gaming 2 Online Business 3 • Consists of 4 race tracks that conducted 381 days of live racing in 2012, 395 live racing days projected for 2013, majority of racing occurs i

  10. Slide 10: Racing Operations: Own premier Thoroughbred Racetracks

    Racing Operations: Own 4 premier Thoroughbred Racetracks Our debt and equity is back-stopped with valuable real estate • 336 acres in western Chicago suburb, Arlington Heights • Operates 11 OTB‟s • 20 minutes from O‟Hare airport • Metra commuter train stop on property - easy access to other suburbs

  11. Slide 11: Racing Operations Adjusted EBITDA has grown despite industry declines

    (2)% +41% $39 $47 $54 2010 2011 2012 $308 Racing Operations Adjusted EBITDA has grown despite industry declines Revenues Adjusted EBITDA 2012 v 2010  Wagering on U.S. Thoroughbreds in 2012 was up 1% Y/Y, first total year increase since 2006 - 2012 U.S. Industry still down 20% from 2008 according to

  12. Slide 12: The Kentucky Oaks & Derby profits come from many sources

    The Kentucky Oaks & Derby profits come from many sources Sources of Derby Week Profitability (Illustrative Approximations) Wagering, net of purses & pari-mutuel taxes Premium Tickets / Other Sponsorships TV / Radio Licensing F&B, Merchandise, Parking, Programs General Admissions  Premium tickets is

  13. Slide 13: The Kentucky Derby has proven resilience to economic weakness

    The Kentucky Derby has proven resilience to economic weakness 2013 Derby Week results prove the resiliency and brand power of this iconic entertainment event  Record Derby Week Adjusted EBITDA for the fourth consecutive year, up $5.8 mil. in Adjusted EBITDA - Kentucky Derby Week Adjusted EBITDA has

  14. Slide 14: 2014 Kentucky Derby growth expected from new venues / seating expansion

    2014 Kentucky Derby growth expected from new venues / seating expansion Continued growth and popularity of Kentucky Derby Week fuels expansion efforts  In July 2013, we announced a $14.5 mil. expansion project at Churchill Downs Racetrack - New Grandstand Terrace & Rooftop Garden - 51,000 square fe

  15. Slide 15: What is The Kentucky Oaks & Derby worth?

    Sports League Number of Teams Enterprise Value ($B) EBITDA ($ millions) EV / EBITDA (multiple) 30 $18.2 $432 ($14.4 Avg./Team) 42.0x 32 $33.2 $979 ($30.6 Avg./Team) 33.9x 30 $11.8 $175 ($5.8 Avg./Team) 67.4x 30 $7.2 $127 ($4.2 Avg./Team) 56.9x 9 $1.3 $58 ($6.4 Avg./Team) 22.0x Total 131 $71.6 $1,770

  16. Slide 16: Gaming: Our properties are relatively new and in mature markets

    • Located in Miami Gardens Florida, near Sun Life Stadium • Greenfield construction, opened January 2010 • 1,214 Slot Machines • 29 Poker Tables Gaming: Our properties are relatively new and in mature markets Growing our Gaming Business thru development and acquisitions Calder Casino Harlow’s Casino

  17. Slide 17: Gaming Adj. EBITDA growth driven by greenfield development & acquisitions

    Gaming Adj. EBITDA growth driven by greenfield development & acquisitions Acquisition & development focused on ROI ($ in millions) $47 $62 3Q YTD 2012 3Q YTD 2013 $160 $219 Revenues Adjusted EBITDA Y/Y% +37% +31% Adjusted EBITDA Margin % 30% 28% 1,400 3,500 3,500 4,300 6,700 2009 2010 2011 2012 2014

  18. Slide 18: New Miami Valley Gaming joint venture opens December 2013

    New Miami Valley Gaming joint venture opens December 2013 Partnering with Delaware North on a $272 million development in an attractive gaming market  1Q 2012 – announced a Joint Venture (“JV”) with Delaware North Companies (“DNC”) to purchase Lebanon Raceway license in Ohio to develop a new Video

  19. Slide 19: Kentucky gaming expansion provides significant upside opportunity

    Commentary Regional overview Kentucky gaming expansion provides significant upside opportunity • Kentucky Wins! Was created by a group of business leaders to change the debate on expanded gaming in the Commonwealth • Launched in October, 2013 this organization continues to build momentum heading int

  20. Slide 20: Illinois gaming expansion also provides significant upside

    Commentary Regional overview Illinois gaming expansion also provides significant upside • Attractive location .. Arlington Heights is a suburb of Chicago, the commercial hub of the Midwest and 3rd largest metropolitan area in the United States • ~9 miles from Des Plaines Casino ($759 win per unit in

  21. Slide 21: Online Business has grown organically as customers shift wagering behavior

    Online Business has grown organically as customers shift wagering behavior $35 $38 3Q YTD 2012 3Q YTD 2013 $142 $144 Revenues Adjusted EBITDA 2012 v 2010 +51% +132% Y/Y% +1% +9%  Online wagering has grown ~8% to ~14% faster than the industry, as customers continue to shift wagering channels due to

  22. Slide 22: Twinspires provides a lot of the functionality required for real money gaming

    22 Twinspires provides a lot of the functionality required for real money gaming We plan to compete as an online gaming technology provider Online

  23. Slide 23: Proven ability to grow Revenues & Adjusted EBITDA

    Proven ability to grow Revenues & Adjusted EBITDA $87 $145 $158 $585 $697 $732 -50 50 150 250 350 450 550 650 750 0 20 40 60 80 100 120 140 160 180 200 2010 2011 2012 Revenues Adjusted EBITDA  All three segments showed Adjusted EBITDA growth in 2012: - Racing Operations up 15% - Derby sets another

  24. Slide 24: Investment highlights

    24 Investment highlights Strong financial performance & balance sheet Diversified business model Proven and experienced management team Significant organic growth opportunities

  25. Slide 25: Appendix

    Appendix CuurcHILt Downs

  26. Slide 26: Market overview – Calder Casino & Race Course (Miami Gardens, FL)

    Commentary Regional overview Market overview – Calder Casino & Race Course (Miami Gardens, FL) • Calder is located just north of Miami with easy access to all of South Florida‟s major highways • Miami / Fort Lauderdale 2012 population: 2,591,0351 • Miami-Dade County median household income: $43,9572

  27. Slide 27: Market overview – Fair Grounds Race Course & Slots (New Orleans, LA)

    Regional overview Commentary Market overview – Fair Grounds Race Course & Slots (New Orleans, LA) • New Orleans is a major U.S. port and metropolitan area in the state of Louisiana and is located on the Mississippi River. It is a major tourist destination, known for its various entertainment attract

  28. Slide 28: Market overview – Harlow's Casino Resort & Hotel (Greenville, MS)

    Ameristar DiamondJacks Lady Luck Horizon Riverwalk Trop Casino LA AR MS Isle of Capri, Lula (102 miles north) Memphis (150 miles northwest) Jackson Little Rock (150 miles northwest) Commentary *PLEASE DO NOT DELETE THIS TEXT BOX* This map was created using MapInfo. Updates and edits can be easily do

  29. Slide 29: Market overview – Riverwalk (Vicksburg, MS)

    Trop Casino Isle of Capri, Natchez (75 miles south) LA AR MS Harlow‟s Isle of Capri, Lula (166 miles north) Memphis (250 miles north) Little Rock (220 miles north) Jackson Shreveport (176 mileswest) Baton Rouge (161 miles south) Commentary Regional overview Market overview – Riverwalk (Vicksburg, MS

  30. Slide 30: Market overview – Oxford Casino (Oxford, ME)

    Commentary Regional overview Market overview – Oxford Casino (Oxford, ME) • Oxford is located 140 miles northwest of Boston, MA, 125 miles from Manchester, NH, and 35 miles northwest of Portland, ME • Portland 2012 population: 518,1171 • Portland median household income (2007-2011): $45,1532 • Portl

  31. Slide 31: Market overview – Miami Valley Gaming & Racing (Lebanon, OH)

    1 US Census Bureau 2012 estimate: Cincinnati, OH-KY-IN & Dayton, OH 2 US Census Bureau 2007-2011 estimate: Warren County & Dayton 3 Bureau of Labor Statistics estimate: Cincinnati / Middletown & Dayton (as of August 2013) Commentary Regional overview Market overview – Miami Valley Gaming & Racing (L

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