Segment Information

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Information

NOTE 9 — 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 off-track betting facilities ("OTBs"), Calder Race Course ("Calder") and Fair Grounds Race Course ("Fair Grounds") and the pari-mutuel activity generated at its twelve OTBs; (2) Gaming, which includes video poker and gaming operations at Calder Casino, Fair Grounds Slots, Harlow’s, Riverwalk 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 25 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.

In order to evaluate the performance of these operating segments internally, the Company uses Adjusted EBITDA (defined as earnings before interest, taxes, depreciation, amortization, insurance recoveries net of losses, HRE Trust Fund proceeds, share based compensation expenses, pre-opening expenses, including those of its equity investments, the impairment of assets and other charges or recoveries) as a key performance measure of our results of operations. During the three months ended June 30, 2013, the Company implemented the Adjusted EBITDA metric because it believes the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a more accurate measure of its core operating results and enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with Generally Accepted Accounting Principles ("GAAP"). The Company's calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

The table below presents information about the reported segments for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net revenues from external customers:
Churchill Downs	$	108,278		$	102,874		$	110,578		$	105,424
Arlington	22,006			22,807			29,247			32,224
Calder	17,031			22,873			19,311			24,741
Fair Grounds	10,072			11,886			26,064			28,233
Total Racing Operations	157,387			160,440			185,200			190,622
Calder Casino	20,466			19,188			40,952			41,067
Fair Grounds Slots	9,978			9,586			22,342			21,617
VSI	9,245			8,814			19,006			18,377
Harlow's Casino	13,097			13,783			28,451			29,646
Riverwalk Casino	14,101			—			28,225			—
Total Gaming	66,887			51,371			138,976			110,707
Online Business	52,531			52,702			95,447			96,737
Other Investments	6,550			5,967			11,649			10,469
Corporate	418			336			574			477
Net revenues from external customers	$	283,773		$	270,816		$	431,846		$	409,012
Intercompany net revenues:
Churchill Downs	$	4,607		$	4,082		$	4,796		$	4,268
Arlington	903			1,496			1,040			2,052
Calder	492			586			505			596
Fair Grounds	—			75			833			822
Total Racing Operations	6,002			6,239			7,174			7,738
Online Business	233			230			446			436
Other Investments	1,348			1,072			2,250			1,822
Eliminations	(7,583		)	(7,541		)	(9,870		)	(9,996		)
Net revenues	$	—		$	—		$	—		$	—
Reconciliation of Adjusted EBITDA to net earnings:
Racing Operations	$	70,517		$	67,423		$	59,260		$	56,370
Gaming	19,365			14,992			41,373			34,765
Online Business	14,091			13,806			25,426			25,434
Other Investments	902			(25		)	1,083			(273		)
Total segment Adjusted EBITDA	104,875			96,196			127,142			116,296
Corporate Adjusted EBITDA	(988		)	(1,189		)	(2,165		)	(2,277		)
Insurance recoveries, net of losses	—			5,003			375			6,514
HRE Trust Fund proceeds	292			—			292			—
Share based compensation expense	(6,214		)	(4,715		)	(9,577		)	(7,899		)
Pre-opening costs	(480		)	—			(711		)	—
Depreciation and amortization	(14,991		)	(13,639		)	(30,026		)	(27,445		)
Interest income (expense), net	(1,167		)	(947		)	(2,633		)	(2,152		)
Income tax provision	(31,029		)	(32,133		)	(31,340		)	(33,107		)
Earnings from continuing operations	50,298			48,576			51,357			49,930
Discontinued operations, net of income taxes	—			—			(1		)	(1		)
Net earnings and comprehensive income	$	50,298		$	48,576		$	51,356		$	49,929

The table below presents information about equity in losses of unconsolidated investments included in the Company’s reported segments for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Online Business	$	(239	)	$	(516	)	$	(130	)	$	(554	)
Other Investments	(392		)	(48		)	(665		)	(230		)
	$	(631	)	$	(564	)	$	(795	)	$	(784	)

The table below presents total asset information for the reported segments as of June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013		December 31, 2012
Total assets:
Racing Operations	$	510,611	$	502,993
Gaming	372,280		382,054
Online Business	191,165		184,638
Other Investments	55,058		44,652
	$	1,129,114	$	1,114,337

The table below presents total capital expenditure information for the reported segments for the six months ended June 30, 2013 and 2012 (in thousands):

	Six Months Ended June 30,
	2013		2012
Capital expenditures:
Racing Operations	$	10,210	$	4,532
Gaming	9,048		3,250
Online Business	3,528		2,306
Other Investments	986		6,385
	$	23,772	$	16,473