Churchill Downs curbs plans; Murren’s big payday

In its 1Q20 earnings call Churchill Downs announced some significant retrenchments. Although the company is comfortably liquid ($701 million in the kitty) it’s put four expansions on hold: Rivers Casino Des Plaines, an enlargement of Miami Valley Gaming, a $300 million hotel at its titular racetrack and a $109 million “historical racing” parlor at Turfway Park. “Thus, we see this as a temporary pause in project capex spend, not an outright cancellation,” wrote JP Morgan analyst Daniel Politzer. The Kentucky Derby has been rescheduled for September and will be run with fans in the stands. “In a dire scenario where local guidelines prohibit public sporting events, we could hypothetically envision a scenario whereby CHDN would conduct the race in adherence with social distancing guidelines or, potentially without fans,” Politzer added, noting that sponsorships and wagering would make up for some of the shortfall. Heck, even without live gaming at most of its facilities, CHDN is doing very well from its Twin Spires online wagering.

Churchill Downs narrowly beat Wall Street‘s revenue expectations, bringing in $253 million. Earnings were five cents per share, reflecting a slim $2 million profit. It said the construction postponements and reduced maintenance could keep it afloat for a year. As for the company’s signature event CEO Bill Carstanjen said it “is deeply committed to holding the very best Kentucky Derby ever and certainly the most unique in any of our lifetimes.”

* Back when Jim Murren was running MGM Resorts International it would take his median-paid employee 337 years to match Murren’s compensation: $2 million in salary, $7 million in stock and $4 million in unspecified goodies. The average worker took home $38,954, barely a living wage in Las Vegas. In the wake of Covid-19, CFO Corey Sanders agreed to trim his $1.25 million annual pay to an even million while Executive Vice President John McManus shaved $150K off his $850,000 annual pay packet. The company, by the way, is riding a $2.2 billion 2019 profit. The worst extravagance took place at Las Vegas Sands, where CEO Sheldon Adelson made 584X his average employee, although the median salary is definitely better ($42,228) than MGM’s. Adelson took home $25 million and his company socked away a $3.3 billion profit.

Also way out there was Boyd Gaming CEO Keith Smith, with 304-to-1 disconnect ($9.5 million). The average Boyd employee makes $31,728. Company profits were a modest $158 million. Caesars Entertainment was comparatively frugal, with a 129-to-1 ratio. CEO Anthony Rodio (below) took home just shy of $5 million while his average employee made $37,103. (The company lost $1.2 billion last year.) At Wynn Resorts, where 2019 saw a $311 million profit, CEO Matt Maddox was paid an extravagant $14 million. At least his workers were the best-compensated on the Las Vegas Strip: $45,706 median. Company profit was $311 million. And while Station Casinos CEO Frank Fertitta III didn’t don a hair shirt, he enjoyed the smallest disparity (64-to-1) of any surveyed CEO’s pay. His base pay was $2 million while the median worker salary was $31,003 (which could be a lot better). The company lost $7 million last year.

* Coronavirus is rampant in Massachusetts, with no end in sight. Thus we have no idea when casinos will reopen (nor do the casinos themselves). Definitely no sooner than May 18, which looks awfully optimistic. However, the Massachusetts Gaming Commission is formulating consensus for when the happy day finally arrives. Dice at the craps table would be cleaned every time there’s a change of shooter, when a player leaves a slot machine it will be sanitized and customers will have to wear masks. Players swear they won’t do the latter but we think the gambling jones will be too powerful to resist. Fitch Ratings analyst Colin Mansfield told the Boston Globe that “gambling patrons have never experienced anything like this, going into properties where people are wearing masks, taking your temperature. It is really difficult to predict how people are going to behave, and how they’re going to feel seeing something like that.” Agreed.

* Sports bettors, take note. If college football is canceled (a great loss, true), the NFL is preparing to step into the breach with Saturday games. Throw in the usual Sunday slate plus Thursday night and, of course, Monday Night Football and that’s four days a week of professional pigskin. We’ll know more May 9, when the NFL schedule appears.