Churchill Downs' CEO Discusses Q2 2013 Results - Earnings Call Transcript

Aug. 1.13 | About: Churchill Downs, (CHDN)

Churchill Downs, Incorporated (NASDAQ:CHDN)

Q2 2013 Earnings Conference Call

August 01, 2013 09:00 am ET

Executives

Courtney Yopp Norris – Director-Corporate Communications

Robert L. Evans – Chairman and Chief Executive Officer

William E. Mudd – Executive Vice President and Chief Financial Officer

William C. Carstanjen – President and Chief Operating Officer

Alan K. Tse – Executive Vice President-General Counsel

Analysts

Amit Kappor – Gabelli & Company

Steve Altebrando – Sidoti & Company LLC

Cameron P. S. McKnight – Wells Fargo Securities LLC

Justin Sebastiano – Brean Capital

Gregg Michael Klein – Imperial Capital LLC

Operator

Good day ladies and gentlemen and welcome to the Churchill Downs, Incorporated Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I’d now like to introduce your host for today’s conference Ms. Courtney Norris, Director of Corporate Communications. Please go ahead.

Courtney Yopp Norris

Thank you, Kate. Good morning and welcome to this Churchill Downs Incorporated conference call to review the Company’s results for the second quarter ended June 30, 2013. The results were released yesterday afternoon in a news release that has been covered by the financial media. A copy of this release announcing results and any other financial and statistical information about the period to be presented in this conference call, including any information required by Regulation G, is available at the section of the Company’s website titled News located at churchilldownsincorporated.com as well as in the website's Inventors Section. Let me also note that a news release was issued advising of the accessibility of this conference call on a listen-only basis via phone and over the Internet.

As we begin, let me express that some statements made during this call will be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, expectations or beliefs about future events or results, or otherwise are not statements of historical fact. The actual performance of the Company may differ materially from what is projected in such forward-looking statements. Investors should refer to the statements included in reports filed by the Company with the Securities and Exchange Commission for a discussion of additional information concerning factors that could cause our actual results of operations to differ materially from the forward-looking statements made in this call.

The information being provided today is of this date only, and Churchill Downs Incorporated expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes and expectations.

I will now turn the call over to our Chairman and CEO, Bob Evans.

Robert L. Evans

Thanks, Courtney. Good morning everyone. Thanks for us join us today. Here is a quick summary of the second quarter of 2013. Net revenue hit a second quarter record of $283.8 million up 5% over last year. Net earnings of $50.3 million were also a second record up 4% over 2012.

During this quarter, we will report adjusted EBITDA our CFO, Bill Mudd will take you through the details of that in just a minute. Adjusted EBITDA in the second quarter was $103.9 million, up 9% or $8.9 million on a year-over-year basis. On an adjusted EBITDA basis, Racing excluding Oaks and Derby week, was up about $2.7 million as a result of a generally tough industry, a very rainy jazz fest at fairgrounds and the so called racing-dates dispute involving our Calder racetrack in South Florida.

Gaming excluding our Riverwalk property that we didn’t own in last year second quarter and our online segments were essentially flat. Gaming’s performance reflected a sluggish economy. Calder, Fair Grounds Slots & Video Poker and Riverwalk were all up. Carlos was the only property that declined.

Online’s stock performance was due primarily to being cut off from taking TwinSpires.com wagers in Illinois. You’ve recall that the authorizing legislation expired on December 31 of last year and the Legislator and Governor didn’t get the new bill signed until June 7.

We’re excluding Illinois in both years. TwinSpires.com’s handle was up 7% in the second quarter, exceeding the U.S. thoroughbred industry handle growth of 1% as reported by Equibase.com.

Riverwalk which you recall, we closed that deal last October added $4.8 million, and Oaks and Derby Week despite miserable weather was up $5.8 million to another adjusted EBITDA record, the third straight year of at least a $5 million increase and up $21 million over the last four years. Everything else, corporate costs, United Tote et cetera were negative $86,000 to $1.1 million improvement over last years second quarter. So we’re very happy with the quarter’s results although we like everyone else could certainly use some real economic growth.

A few other matter, we closed on our acquisition of the Oxford Casino in Maine on July 17, about four month or so ahead of schedule. I’d like to thank the Maine Gaming Control Board for their timely work on our license application. We were at the property on July 19, and had the chance to meet the leadership team and a number of the rest of the team members, really a great group. We think there are more business opportunities for us at the property and we intent to make a $3.2 million investment to expand the gaming floor and to add more slot machines and high limit table games. We don’t yet have a final schedule for completing that work, but it will occur during the falls and winters season.

Miami Valley Gaming are 50-50 joint venture project North of Cincinnati requesting on budget and ahead of schedule. We now hope to open the property in early to mid December or about three months or so ahead of plan. Almost exactly one year ago, we announced that we would build and open the 300 ultra luxury seat mansion Churchill Downs Mansion, in time for the 2013 Kentucky Oaks and Kentucky Derby.

That project included not only the Manson but also the racing of the Paddock Civilian buildings relocating and expanding the gold room which serves our wager in VIP. The construction of a new media center now known as the Parley and construction of the 218 sea Plaza Balcony. The good result of the Mansion and Plaza Balcony and our financial returns on this leadership for excellent as was our customers response.

Tuesday of this week we announced that we would construct an another new area, the Grandstand Terrace and Rooftop Garden, in time for 2014 Kentucky Oaks and Derby next May.

This $14.5 million project will add 51,000 square feet of new space, the north-end of the grandstand overlooking the Kentucky Derby starting game. This project will add 2,400 new reserved seats, a 4% increase in reserve seating. We will add new restaurants, new wagering windows and new concession areas serving approximately 20,400 seats or about 37% for our total reserve seating areas.

Finally in South Florida, the racing day dispute is affecting Calder’s financial performance. I find it disappointing that we haven’t been able to reach a mutually satisfactory agreement there, but we will continue to try. It’s very difficult to predict exactly what will happen here since this is a whole new ball game. For example, while Gulfstream Park is running on top of us, that’s hurting us right now. But when are raising this December into next April, it will be all upside for us since historically we haven’t run those dates, but we will starting this year and next.

Just what the net effect will be is hard to say. It may very well take a couple of years, maybe more for this result and the final outcome is known. So a good quarter and we continue to build our growth portfolio.

Let me turn this over to our CFO, Bill Mudd, who will take you through the details, after which we will try to answer your questions. Bill?

William E. Mudd

Thanks Bob and good morning everyone. As Bob mentioned, we started reporting adjusted EBITDA as a performance measure of our operating results during the second quarter. We did so to be more consistent with other gaining companies and to provide a clear view of our performance by discussing certain items, such as insurance recoveries, previously-opening expenses, non-recurring proceeds from horse racing equity trust funds, and non-cash share based compensation which fluctuates from period-to-period.

Full description of this measurement can be found in the Form 10-Q, we filed yesterday. Unless otherwise noted my comments will focus on adjusted EBITDA when discussing the segment information. Overall, it was a very good quarter, setting a number of new second quarter records; total revenues were up 5% to $183.8 million a new record, adjusted EBITDA was up 9% to $103.9 million, another new record. And net income from continuing operations was $50.3 million, up 4%, also a new record.

Year-to-date cash from operating activities was $100 million, up 4% from $96 million in the prior-year. Year-to-date capital spending is $23.8 million, $11.2 million maintenance purposes and $14.6 million related to new projects, primarily for the Churchill Downs Oaks and Derby venues and the Harlow's renovation.

We spent $12.5 million funding our shares of mining Miami Valley Gaming development in Ohio in the first half of 2013, bringing our investment to-date in the joint venture to $32.4 million. We are making great progress on the build-out and are on track for early to mid-December.

We amended our revolving credit facility in May, increasing our existing borrowing capacity to $0.5 billion, while reducing the pricing grid including two tiered leverage capability. This will provide us with flexibility as we continue to grow the company.

Debt is now classified as long-term in our balance sheet and ended the quarter at $153 million, down from approximately $210 million at year-end; in 2012, this balance does not include the $160 million acquisitions of Oxford Casino, which closed July 17. Even with the Oxford acquisition, our balance sheet remains in great shape with approximately 1.5 terms of leverage.

Now, let’s take a look at our segments. Our Racing segment had a strong quarter despite a couple of headwinds with adjusted EBITDA up $3.1 million or 5%. Kentucky Oaks and Derby Weeks had another record with adjusted EBITDA, up $5.8 million over the prior-year on the introduction of the Mansion, the Paddock Plaza Balcony and upgraded first turn offering, in addition to hire ticket pricing and hire sponsorship revenues. Partially offsetting this record performance was a decline in adjusted EBITDA at Calder Race Course due primarily to the loss of Florida hosting revenue.

Let me take a minute to explain hosting revenues. In Florida, a thoroughbred racetrack conducting a live racing meet has control over hosting out-of-state signals and received a commission on wagers placed at other racetracks throughout the state. When multiple racetracks are operating currently, each track can be a little horse track for the out-of-state signals.

On May, 7, all of Florida’s three racetracks began claiming they are horse tracks on a year-around basis; this resulted in $5.1 million reduction in revenues and $1.5 million reduction in adjusted EBITDA in our Carder facility.

It is our belief that the statues required three days of live racing a week to be the horse track. We have filed a petition to clarify the rules and are waiting a decision from the Division of Administrative Hearings. If we are unsuccessful in our appeal, we will lose some of the horse fee revenues we previously received when we conducted live racing and will gain horse fee revenues during the period when we previously did not race. This means our July to November results could be worse than previous years, while our December to April results will improve.

The remaining $0.7 million decrease in Calder Racing profitability is driven by a horsemen dispute that prevented us from exploring the signal to out of state locations for four days as well as lower on track wagering.

Additionally, our Fair Grounds adjusted EBITDA declined by approximately $0.8 million due to the timing of the Louisiana Derby, which occurred on April 1 of last year and lower Jazz Fest results, which were affected by inclement weather.

Our gaming segment had a very good quarter with all of our locations except Harlow showing revenue growth year-over-year. Riverwalk is the primary driver of total segment growth as we acquired the property in October of last year. The probably grew net gaming revenue by 1.9% year-over-year on a comparable basis, which we think is exceptional considering the Mississippi river counties continued economic treatment and deliver $4.8 million in adjusted EBITDA.

Harlow’s was not successful overcoming the challenging economy. Revenues declined 5% from prior year, leading to an adjusted EBITDA reduction of $1 million. Renovations completed in January of this year have so far not offset a tough economy.

Our Calder Casino revenues increased 7%, driving adjusted EBITDA up by $0.5 million, as a result of focused marketing efforts and the closure of Internet cafes in the state.

Our Louisiana slots and video poker operations also posted revenues gains of 4% and 5% respectively. Unfortunately, adjusted EBITDA was flat prior year as revenue gains were offset by higher property taxes and slots and higher marketing expenditures in our video poker operations.

Our online business did well despite not being able to take bets from Illinois residents majority of the quarter, including on the Kentucky Oaks and Derby and the Preakness Stakes. Fortunately, we were able to resume accepting wagers on June 7, just before the Belmont Stakes on the passage of enabling legislation.

Handle for the quarter increased by 1.3% over the prior year to approximately $255 million, slightly outperforming total industry handle, which increased 1% according to figures published by Equibase.com. Excluding Illinois wagering for both periods TwinSpires handle improved by 7.2% outperforming the industry by 6.3% for the three months period.

Adjusted EBITDA increased 2% or $0.3 million of above prior year has losses from Illinois wagering of $0.6 million were offset by gains in our high volume wagering platform velocity and better operating performance in our HRTV joint venture. Investments in our Luckity product were consistent with prior year at $0.7 million.

Now I would like to cover a few of the items below adjusted EBITDA. Insurance recoveries net of losses decreased $5 million as a result for 2012, gains resulting from the 2011 flood damage at Harlow. Illinois horseracing equity trust funds increased by $0.3 million reflecting the final disbursement related to original nine riverboat licenses.

In July, we received the final disbursement of horseracing equity trust funds associated with the 10th Illinois riverboat license. Arlington racetrack share of these proceeds total $4.3 million and we recorded as a gain in our third quarter results.

Share based compensation increased $1.5 million as a result of a new executive long-term incentive plan that went into effect March 21, 2013. There are couple of points I want to make on these line item.

First, under the long-term incentive plan that expired at the end of 2012, participants earned incentive compensation based on achieving certain EBITDA performance. That equity is accrued over one to three years depending on when the target is achieved.

As such, our second quarter contains expenses associated both with the old plan and the new one. The new four year long-term incentive plan has two components, restricted stock awards and stock price vesting restricted stock. Approximately 20% of the shares are restricted stock, which is accrued ratably over the adjusting period.

The other recognized compensation expense associated with this portion of the plan, is $4.5 million and we recognized over the next 34 month. Approximately 80% of the incentive stock award are at risk invest in 25% increments based on our future holding stock price achieving certain levels for 20 consecutive days.

The expense for these shares is accrued based on actuarial assessment even if stock price triggers the risk free way and the five-year stock price volatility among other factors. The unrecognized expense associated with this portion of the plan is $10.9 million and will be recognized over a weighted average service period of 11 months. The point of this is that while this is a four-year long-term incentive plan, vast majority of the expense occurs in the first 14 months.

Finally pre-opening costs associated with our Miami Valley Gaming Investment totaled $0.5 million in the quarter. This will increase in the third and fourth quarter as we entered the final months prior to our December opening.

With that, I’ll turn it over to Bob, who will open the call for questions. Bob?

Robert L. Evans

Okay. Thanks Phil. Kathe, do we have any questions?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Amit Kappor with Gabelli & Company. Your line is open.

Amit Kappor – Gabelli & Company

Thank you. Good morning, Bob, Bill and Will. Can you please remind us and I guess update us on the status of the Illinois Gaming legislation post the passage in the Senate? It's just currently pending and how long is the legislation active, and any prospects that you guys see from underground? Thank you.

William C. Carstanjen

Amit, it’s Bill Carstanjen. Those are always tough questions. You stated the backs directly, well in terms of predicting what happens next. I think it’s anybody’s guess, so we continue to be really focused. We have a core team that works on these issues everyday and all of you just have to stay tuned.

Amit Kappor – Gabelli & Company

Thank you. In terms of the governor's office, is there any indication of – hoping this end bill passes the House, what kind of reception it might receive at the end of the line?

Robert L. Evans

It’s often a case with the gaming bill. It’s often wrapped up with other issues going on in the state. And Illinois, one of the most important issues has been pension reform. I think it’s fair to say, we feel like our prospects are tied impart to how that develops within the legislature and with the Governor. So we will continue to monitor that and will play our hand at, it is there to be played, but I think we will have to watch that get the pension reform situation in Illinois. I think that will have to make some progress before we do.

Amit Kappor – Gabelli & Company

Okay, wonderful thank you.

Operator

Our next question comes from the line of Steve Altebrando with Sidoti & Company. Your line is open.

Steve Altebrando – Sidoti & Company LLC

Good morning. Can you give a sense of how ADW is performing in Illinois since being turned back on?

Robert L. Evans

Sure. We were, of course, really alarmed by the prospect of ADW being cut off in Illinois under the theory that it’s never a good idea to take away from the customers something they like doing, they can always find other things to do with their time and money.

So we were pretty pleasantly surprised when the new legislation passed with how quickly the ADW bounced back. It just bounced back very, very strongly and generally we’ve been pleased that it hasn’t come back all the way to what it was consistently before the law cut it off. But generally, we’ve made a lot of progress and continue to make progress rebuilding that customer.

Steve Altebrando – Sidoti & Company LLC

Okay, that's helpful. And just want to clarify something in the script, Bill. The $1.5 million decline in the EBITDA in Calder, is that all since the dispute began in mid-May.

William E. Mudd

Correct.

Steve Altebrando – Sidoti & Company LLC

Okay.

William E. Mudd

Was actually early May, I think it was like May 7.

Steve Altebrando – Sidoti & Company LLC

Okay, and then just lastly, how do you think about the return potential of the most recent Churchill expansion versus what you saw at the Mansion?

Robert L. Evans

Well, this is always one of those forward-looking statements that we hate to make, but I think you would expect something fairly similar, probably the same event, creating more seating, so we maybe wrong, but the future is a tricky place, but I would expect something similar.

Steve Altebrando – Sidoti & Company LLC

Okay, thanks so much.

Operator

Our next question comes from the line of Cameron McKnight with Wells Fargo. Your line is open.

Cameron P. S. McKnight – Wells Fargo Securities LLC

Hi, good morning. A question for Bob or Bill. Could you comment on the Cincinnati development and the Cincinnati market specifically, especially following some of Penn's comments earlier this week?

Robert L. Evans

Yeah, we kind of thought we might get that question, so Mr. Carstanjen is ready for it.

William C. Carstanjen

Well, that’s a situation and the jurisdiction we’ve been monitoring pretty closely including the commentary of our soon to be competitors in the market. So, we’ve had some concerns with what people are saying about the margins, some of the level of free play we’re seeing, but in our case, we’d already downsized our investment about 7% from our original plans and we’ve reduced the number of machines that we’re planning on starting with to about 1,600.

So, we feel like we’re in a pretty good place based on the environment now, we’ll keep our eye on it. We’re of course planning on opening later this year as opposed to one of the properties Penn is going to open in the Dayton market, which is sometime after that, but right now based on the environment that we see and the factors that we see, we feel pretty good. We’re very much like where this property is, its right of 575, nicely positioned between Cincinnati and Dayton, able to grab out of both those markets.

So, really good question, something we talked about and focused on everyday, but right now we think we right-size the investment and right-size the number of machines for the opening.

Cameron P. S. McKnight – Wells Fargo Securities LLC

Okay, great. Thanks. And then as a follow-on, can you guys talk to general trends across the original properties and assets. I think it's fair to say that we've been seeing some slightly more mixed economic data across the board, and in this quarter, we've seen earnings reports that have, for the most part, been a little bit mixed. So if you could talk to general customer trends that would be very helpful.

William E. Mudd

This is Bill. Cameron, I would say that it’s hard to paint each market with the same brush. So let’s go to each market, Mississippi has been a very tough economy generally, both in Vicksburg as well as Greenville and we continue to see that last quarter as well as July. And I think the July numbers will prove to be kind of similar to the second quarter, in total better than June.

Down in Louisiana, that’s kind of a GDP 2%, 3%, 4% type of economy. Our property seems to do very well there. It continues to grow quarter-after-quarter. In Florida, I think we are benefitting from the closure of the Internet cafes, we are seeing revenue increase there and both because they conjugate better, but I think that’s because of the Internet cafes going away, so July is actually looking even better than our second quarter.

And then in Maine, that’s a market that is relatively new and we continue to pull from a figure radius around the property, so that economy seems to be doing very well.

Cameron P. S. McKnight – Wells Fargo Securities LLC

Great, thanks. And then finally, just on the acquisition front, can you talk generally in terms of the, when you clearly looked at a lot of assets over the past two years. Can you talk generally to the type of assets and the markets that you're interested in, particularly as Penn gets closer to split into a REIT and operating company?

Robert L. Evans

Yeah Cameron, we’ve said before and it continues to be the case that we’re interested in newer properties as opposed to older properties. We like properties delivering gaming friendly, business friendly states and we like properties that we believe may not be true, but we believe they have some protection against competitive inroads. Those are the three things we look. We’ve look at some big ones, we’ve looked at small ones, but those are the three primary criteria.

Cameron P. S. McKnight – Wells Fargo Securities LLC

Great, thanks very much.

Robert L. Evans

You’re welcome.

Operator

Our next question comes from the line of Justin Sebastiano with Brean Capital. Your line is open.

Justin Sebastiano – Brean Capital

Hi, good morning guys. So you talked about the Internet cafe ban and how much do you think that added to EBITDA at Calder?

William E. Mudd

Well, it’s very difficult to separate, what the Internet cafe ban generated versus marketing performance generated, the market – I mean, we were up 7% revenue I think the market was up something more close to that. So, how much of that was economic, general economic conditions improving, it’s hard to put a number on that much low.

Justin Sebastiano – Brean Capital

Okay. And you're going to be online in Ohio soon enough. There's Internet cafes there and there's talk of banning them there. Where is the state on that and what is your participation in that lobbying effort?

William E. Mudd

Yeah, first of all I would say that there is a bill passed and the Governor signed it, that limited the ability for Internet cafes to pay out anything more that a $10 jackpot. There is a petition going around that was a clear referendum on 2014 ballet, recall that law, and there are successful and that we’ll be able to continue to operate under the old regulations and till the referendum occurs. And the reason for that is, it wasn’t passed as a emergency cause that bill wasn’t.

So they are seizing back and when the legislature could pass the bill of an emergency cause which was kind of mute the effect of getting that referendum, or they could wait until the referendum, it goes to referendum and then recall that. So, those are the two parts we work with the group there to make sure that we do it’s right for the casino industry. Bill, you want to make some comments?

William C. Carstanjen

I’d only add that, it seems pretty clear to us that Internet cafe is not supposed to be operational in Ohio. There is a series of tactics and maneuvering to keep the operations open by the folks that own them for as long as possible. So we’re going to birddog that along with some of the other gaming companies that are in the jurisdiction. We’re going to birddog that until the law is followed and it works the way it is supposed to work in terms of shutdown. And they will take some time, that’s the hardest part about it to predict.

Justin Sebastiano – Brean Capital

Okay, and there was a recent report out that the Ohio Roundtable, their fight against VLTs in Ohio is going to be taken up by the Ohio Supreme Court. Can you give us your thoughts on that and is it purely just a technical sort of move by them to get heard or do you think this actually has some legs?

Alan K. Tse

Hi, this is Alan Tse. There is another case that’s going in the Ohio that’s ahead of this case called Ohio Jobs Act, that’s basically the same issue whether these folks have standing to sue. So I think the courts are going to go look through that and we were on that. But, yeah, I understand that this is the case that Don, whether they have standing to sue. So even they win, then we go back to the merit of the case. So there is a lot of things I think your [word choice] technical challenge here. So there is a lot of things we play down and I think at the end of the day, yeah they reported in the rule on that one if put some reason that they win the merit for the case or though, the legislature has passed the laws and they are challenging on the technicality.

Justin Sebastiano – Brean Capital

Okay. Yes, I mean just based on the amount of investment that the companies that are going to be operating Racinos or that already are, kind of seems counterintuitive that they would actually rule in their favor. But stranger things have happened, I guess. As far as Harlow's, how much of the decline, and maybe this is tough to estimate, but could you kind of give us ballpark of how much of the decline in EBITDA there was from promotions from I assume the Tunica market, and how much was from the disruption on the slot floor that you guys experienced during the quarter as you were looking for the right mix? And I presume it's because the different [genomes] of the games.

Robert L. Evans

So let me start with that and maybe Bill will jump in as well. We’ve been stable in terms of our market share within the Greenville market. So it’s not been the case that its been our competitor in the market that’s really taking out of us, what happen so far is there has been some wagering that disappeared from the market. We do have some thoughts based on some of the information we know with some of those customers have headed up towards Tunica, but also it’s a function of the economy.

In terms of what we’re doing about it, we’re pleased with the state our facilities with some of the improvements we’ve made to us outside of the gaming floor, but on the gaming floor itself, we think that we’re pleased give an update or an information to make some changes to improve our competitive provision.

So you will see us do that over the short-term. We’ll add some games. We’ll bring in some games from some of the other properties that we think might perform better in the Harlow's market. And we’ll otherwise tweak all the levers that are there for us on the gaming floor to see if we can drive some improvement off of that. So did that answer your question.

Justin Sebastiano – Brean Capital

Yes, so it sounds like, if I'm hearing you correctly, you think you have found the right mix. There might be perhaps a little bit more tinkering to do this quarter, but ultimately that disruption you guys quoted in the release or in the queue, maybe the worst of it’s behind you. Is that fair to say?

Robert L. Evans

I think it’s fair to say that we know what we want to change, and hopefully what we change will drive better performance.

Justin Sebastiano – Brean Capital

Okay.

Robert L. Evans

And due upfront we’re in the process of implementing it and then we’ll have to measure the results once we do that.

Justin Sebastiano – Brean Capital

Okay. And has Tunica pulled back on the promotions to your zip codes or is that still kind of where we saw it in Q2?

Robert L. Evans

We, first of all I don’t think that it was the primary driver of the revenue declines. I think it was primarily the fact the economy was poor. We don’t think you’re seaming well in Tunica outperforming either, all the Mississippi counties reported declines in revenue over the last three months from all we could tell. Though, there is an expectional or to like we have to walk it did have did have increases in revenue. So I don’t think that to those point we’ve lost share, at least not anyone within Tunica. So, I think now it’s just a matter of we get enough cost out to outside the decline of revenue and is with the tax rates and being what they are in Mississippi that’s a tough thing to do.

Justin Sebastiano – Brean Capital

Right, okay but just so unclear, Tunica then, are you seeing the same level of promotions out of that market based on the intelligence you gathered from your customers and just elsewhere in the market?

Robert L. Evans

Yeah, we don’t think it increased versus the first quarter.

Justin Sebastiano – Brean Capital

Got you. Okay. And then just lastly, Bill, you guys talked about the increase in the stock-based comp and that data was very helpful. Clearly, it's being front end loaded and it's going to be that way it seems over the next four quarters or so. Is this a good run rate, that $6 million number? Is that based on the numbers you gave us and the math that we'll do, is that sort of a good run rate at least for the next couple quarters on the stock-based comp?

William E. Mudd

That $6 million was about $6.2 million in this quarter

Justin Sebastiano – Brean Capital

Right.

William E. Mudd

That’s high. It declines and reason why it declined, it doesn’t decline because of the new plan, the new plan cost us about $3.7 million in the quarter. That’s a good run rate for that portion of the plan. The old LTIP plan as well as the compensation planed Bob and other executives have been on than on and only long-term.

So the plan cost about $2.5 million and one of those of words especially in LTIP program we are vesting each quarters, so that has declined rather rapidly and that portion for example between first quarter and second quarter drop, that’s almost $500,000 and it will probably continue to drop maybe not quite $500,000, but close to it in the next couple of quarters, until I feel it’ll be completely done, a huge part of it will be done by the end of this year and there will be a smart portion that will bleed off through the end of next year.

Justin Sebastiano – Brean Capital

Okay, very helpful thank you very much guys.

William E. Mudd

You welcome.

Operator

(Operator Instructions) our next question comes from the line of Greg Klein with Imperial Capital. Your line is open.

Gregg Michael Klein – Imperial Capital LLC

Hi, thanks. Just two quick questions for you guys. One, with the issue that you are seeing in Harlow's, have you seen anything similar to that at Riverwalk or is it more specific to that casino? And then the question is a little bit more bigger picture. With NBC Sports paying up to get the NASCAR rights away from ESPN and then Fox Sports paying up for the Big East Basketball. I was wondering if you could see any with all three of these sports networks going after content and demand, how you think that could have any impact on your business. Thank you.

William C. Carstanjen

Greg, I will take first question, then Bill and then Bob will take the second question. There is pressure up and down in the Mississippi County, the Mississippi, so it’s not unique to Greenville. I think you can also see it in Tunica and you can see it in the Vicksburg market. I do think that its been a little worse in Greenville than the other River County regions. Our Riverwalk obviously is the strong property, Vicksburg wasn’t down as much I believe real strong property on the upswing, so we managed it well.

Greenville little bit tougher economy as Bill Mudd had alluded to earlier, but little more challenging and we’re focused not only on that market itself, but pushing the Harlow's marketing reach beyond the immediate counties up into Arkansas and a little bit further away to try to force some people in some there on top of our run rate.

William E. Mudd

The other thing I would make is that, Harlow's has the biggest market share in that markets, they have less ability to grab market share from competitors where as Riverwalk is a much, much bigger competitor, may have the ability to grab share from them. So Riverwalk has a little more ability to offset general economic declines than Harlow's property does.

Robert L. Evans

And Greg on the TV front, we pay attention to all of those deals as you might guess. Our current deal with NBC has two more derbies to run, so it expires after the 2015 Kentucky Derby. And I would observed that the viewership of the Derby is increased in the last year pretty significantly, I think with the second highest viewership in about 20 years or take about few years there. So, the product looks pretty good and the market seems to be pretty strong for sports content, but it won’t really get addressed for a couple more years. So, just put that in your thinking.

Gregg Michael Klein – Imperial Capital LLC

Great. One last quick question before I let you go. I see that you didn't repurchase any shares in the past quarter, just any thoughts on that? Do you expect to purchase anymore going forward or is this just an opportunistic type thing?

Robert L. Evans

We haven’t disclosed the circumstances under which we repurchase shares, but those remain in effect and if the opportunity is presented that we will do so.

Gregg Michael Klein – Imperial Capital LLC

Okay, great thank you.

Robert L. Evans

You welcome. Anyone else?

Operator

I’m not showing any further questions at this time, I would like to turn the call back over to management for closing remarks.

Robert L. Evans

Thanks very much for joining us. As I said earlier, we feel like it was pretty good quarter and our growth portfolio got little stronger. On a personal basis, I’m working on writing and producing a Broadway musical to be tilted the earnings call, which I think will be a huge hit and some of your questions today gave me a few ideas for our closing song which of course will be called Q&A. So, will work on that a little bit more when we talk again in the call maybe you’ve got a few more ideas like I’m working in my script. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.

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