Segment Information

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

The Company operates in the following four segments: (1) Racing Operations, which includes Churchill Downs Racetrack ("Churchill Downs"), Arlington International Race Course ("Arlington") and its eleven OTBs, Calder Race Course ("Calder") and Fair Grounds Race Course ("Fairgrounds") and the pari-mutuel activity generated at its eleven OTBs; (2) Gaming, which includes video poker and gaming operations at Calder Casino, Fair Grounds Slots, Harlow’s and Video Services, LLC (“VSI”); (3) Online Business, which includes TwinSpires, our Advance Deposit Wagering (“ADW”) business, Fair Grounds Account Wagering, Bloodstock Research Information Services, Velocity, a business focused on high wagering-volume international customers and Luckity, an ADW business that offers over 20 unique online games with outcomes based on and determined by pari-mutuel wagers on live horseraces, as well as the Company's equity investment in HRTV, LLC; and (4) Other Investments, which includes United Tote, MVG, Bluff and the Company's other minor investments. Eliminations include the elimination of intersegment transactions.

The accounting policies of the segments are the same as those described in the “Summary of Significant Accounting Policies” in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. The Company uses EBITDA (defined as earnings before interest, taxes, depreciation and amortization), a non-GAAP measure, as a key performance measure of the results of operations for purposes of evaluating performance internally. Management believes that the use of this measure enables management and investors to evaluate and compare from period to period the Company’s operating performance in a meaningful and consistent manner. However, EBITDA should not be considered as an alternative to, or more meaningful than, net earnings (as determined in accordance with accounting principles generally accepted in the United States of America) as a measure of our operating results. A reconciliation of EBITDA to net earnings is provided in the following table.

The table below presents information about the reported segments for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net revenues from external customers:
Churchill Downs	$	3,873		$	6,148		$	109,297		$	104,558
Arlington	30,578			30,875			62,802			62,273
Calder	22,633			23,673			47,374			45,753
Fair Grounds	5,835			6,080			34,068			34,274
Total Racing Operations	62,919			66,776			253,541			246,858
Calder Casino	17,841			20,251			58,908			62,574
Fair Grounds Slots	10,109			9,880			31,726			31,510
VSI	8,089			8,350			26,466			26,566
Harlow's Casino	13,454			13,441			43,100			39,818
Total Gaming	49,493			51,922			160,200			160,468
Online Business	45,593			42,015			142,330			125,344
Other Investments	6,543			5,583			17,012			14,657
Corporate	329			53			806			262
Net revenues from external customers	$	164,877		$	166,349		$	573,889		$	547,589
Intercompany net revenues:
Churchill Downs	$	151		$	381		$	4,419		$	3,993
Arlington	1,758			1,468			3,810			3,160
Calder	554			582			1,150			1,129
Fair Grounds	11			21			833			799
Total Racing Operations	2,474			2,452			10,212			9,081
Online Business	233			186			669			601
Other Investments	824			638			2,646			1,397
Eliminations	(3,531		)	(3,276		)	(13,527		)	(11,079		)
Net revenues	$	—		$	—		$	—		$	—
Reconciliation of Segment EBITDA to net earnings:
Racing Operations	$	1,243		$	20,789		$	55,094		$	67,116
Gaming	12,029			13,148			51,856			43,479
Online Business	8,986			9,818			31,946			28,671
Other Investments	421			782			(13		)	1,217
Corporate	(1,398		)	(1,540		)	(4,968		)	(1,329		)
Total EBITDA	21,281			42,997			133,915			139,154
Depreciation and amortization	(13,370		)	(13,443		)	(40,815		)	(41,319		)
Interest income (expense), net	(842		)	(1,460		)	(2,994		)	(7,257		)
Income tax provision	(1,096		)	(8,374		)	(34,203		)	(34,054		)
Earnings from continuing operations	5,973			19,720			55,903			56,524
Discontinued operations, net of income taxes	—			60			(1		)	218
Net earnings and comprehensive income	$	5,973		$	19,780		$	55,902		$	56,742

The table below presents information about equity in earnings (losses) of unconsolidated investments included in the Company’s reported segments for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Online Business	$	(490	)	$	(521	)	$	(1,044	)	$	(574	)
Other Investments	19			54			(211		)	151
	$	(471	)	$	(467	)	$	(1,255	)	$	(423	)

The table below presents total asset information for the reported segments (in thousands):

	September 30, 2012		December 31, 2011
Total assets:
Racing Operations	$	507,363	$	509,133
Gaming	214,825		242,174
Online Business	185,483		183,397
Other Investments	31,519		13,318
	$	939,190	$	948,022

The table below presents total capital expenditure information for the reported segments (in thousands):

	Nine Months Ended September 30,
	2012		2011
Capital expenditures:
Racing Operations	$	7,800	$	6,943
Gaming	6,846		6,099
Online Business	3,407		1,647
Other Investments	7,403		2,113
	$	25,456	$	16,802

During the nine months ended September 30, 2012, the Company incurred $3.7 million of capital expenditures for its corporate office relocation, which is included in Other Investments.