Churchill Downs

Jamila MamonAnthony SumterPaul TalbotSusan TomberlinMelissa Wilson

Agenda Description of Churchill Downs

General Overview of expected Economy and Industry

Overview of Financial Statements

Credit Analysis

Conclusion

Churchill Downs History

• Located: Louisville, Kentucky

• Opened their doors in 1875 (130 years)

• Known for Kentucky Derby

Products

• Horse Racing

• Casinos

• Twin Spires

• Big Fish Games

Markets

• Casinos• Horse Racing

Markets

Markets

Markets

Markets

Expected Economy & Industry Prospects Consumer spending is steady and it is expected to continue in accordance with consumer

income.

GDP will increase by 2.1% in 2015; 2.3% in 2016; and 2.2% in 2017

unemployment rate is expected to drop 5.0% in 2015; 4.8% in 2016, and 4.8% in 2017

Many forecasts suggest a recession is coming, predictions fall around 2017 or 2018

Dr. Bill Conerly suggests, “Businesses plans should be based on expansion—the odds certainly favor growth. However, every company should acknowledge the risk of recession, and also acknowledge their inability to predict when the next recession will come.”

Expected Economy & Industry Prospects Demand for entertainment and leisure activities depends greatly on economic

conditions and the disposable income of consumers.

There is significant and growing competition to the business as many of its competitors are online and web-based

Economic trends and popularity of the horseback racing industry are unfavorable and have been on a steady decline for the past few years.

Horserace wagering and attendance declined 27% from 2007 to 2011

External Factors

Economic Recession

Employee Strikes/Work Stoppage

Extreme Weather Conditions (CDI carries flood, property and casualty insurance as well as business interruption insurance. )

State, local or federal changes in the laws (casino and horseracing industries are highly regulated)

Legalization of online real money gaming

Influences of consumer trends

Conclusion• With the given reports from Churchill Downs Incorporated, we have decided not to extend the revolving credit facility.

The current financials look great compared to the industry with some exceptions, but there are many issues we have found that have caused our bank to question whether to lend out such a large sum of money

• First, Churchill downs already has a great deal of long-term debt, which does not mature until 2019.

• Churchill Downs is also in a period of growth, and with high operating margins, this combination can make it risky to invest in, even with a strong economy.

• Furthermore, economists are predicting another recession to hit sometime around 2017, which would directly affect Churchill Down’s ability to pay the loan.

• When looking at all these factors together, the risk is more than we are willing to take at this time. We would be willing to reconsider this decision as the growth at Churchill Downs starts to level off or they repay a considerable amount of their other long-term debt back; but for now, we cannot rationalize giving them more debt.

Questions