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Churchill Downs Reports Loss

5 May 2004

LOUISVILLE, Kentucky – (PRESS RELEASE) -- Churchill Downs Incorporated (Nasdaq: CHDN) today reported results for the first quarter ended March 31, 2004. The reported loss for the quarter was smaller than the guidance previously provided by the Company.

Net revenues were $37.7 million, up 5.6 percent compared with $35.7 million for the same period of the prior year. CDI reported a net loss of $11.7 million, or $0.89 per share, compared with a net loss of $11.5 million, or $0.87 per share, in the first quarter of 2003. The Company had forecast a loss of $0.92 per share for the quarter just ended.

CDI historically operates at a loss for the first quarter because it conducts minimal live racing events during the period. The slightly higher net loss year-over-year resulted primarily from additional expenses related to temporary facility construction for the 130th Kentucky Derby, legislative initiatives and the Company's Customer Relationship Management ("CRM") initiative. These expenses were partially offset by interest expense savings along with higher revenues as a result of more simulcast "dark" days at Arlington Park compared to 2003.

Thomas H. Meeker, CDI's president and chief executive officer, said, "While we are cognizant of the need for effective cost control to mitigate our first quarter operating loss, we will continue to invest in our long-term strategic initiatives, such as CRM and legislative efforts.

"We are proud of the efforts of our employees, vendors, architects, contractors and building trades partners in the Master Plan construction process that extended through the first quarter and into Derby. In the face of significant obstacles and inclement weather, it appears that we concluded a successful 130th running of the Kentucky Oaks and Kentucky Derby this past weekend. The record wagering, strong television ratings and solid attendance are a testament to our team, our partners and the strength of our brand."

Meeker added, "Notwithstanding the results of the Derby weekend, racing continues to be threatened by new competitive forces. For that reason, we will continue to pursue alternative gaming in all of the jurisdictions in which we operate, especially Kentucky, where Thoroughbred racing is the state's signature industry and the Kentucky Derby its signature event. We believe that the long-term success of our Company and the industry depend upon a level playing field with competitors in the gaming industry.

"Looking ahead to the second quarter, it is difficult to provide guidance with five of our six racetracks just beginning to offer live racing. However, based upon what we know today, we anticipate earnings for the second quarter will range from $2.10 to $2.15 per diluted share, above the $2.09 per diluted share that we reported in 2003. Although we do benefit in 2004 from having access to the full complement of our Jockey Club Suites, our operating margins on Oaks and Derby will be down as a result of temporary venue expenses incurred for those events. Additionally, as in the first quarter, we will continue to incur expenses related to our CRM and legislative initiatives significantly in excess of 2003 levels. Our guidance for earnings for the full year -- which is conditional on the results of the second quarter -- remains at approximately $1.70 per diluted share, compared with $1.80 per share in 2003 that included nearly $0.18 from a one-time real estate tax settlement at Arlington Park."

 
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