Segment Information

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Segment Information

NOTE 10 — SEGMENT INFORMATION

The Company operates in the following four segments: (1) Racing Operations, which includes 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 Casino Resort & Spa ("Harlow's"), the Company's equity investment in MVG, Oxford, 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 real-money Bingo online 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, Bluff Media and the Company's other minor investments. Eliminations include the elimination of intersegment transactions.

On January 1, 2014, the Company reclassified its equity investment in MVG from Other Investments to Gaming, to coincide with the first full period of operations for the venture, which opened on December 12, 2013. MVG's results of operations for the three months ended March 31, 2013 have been reclassified to the Gaming segment.

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, the impairment of assets and other charges or recoveries). Adjusted EBITDA also includes 50% of the operating income or loss of our joint venture, MVG. The Company utilizes 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 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 Company implemented the Adjusted EBITDA measure during the second quarter of 2013. The segment information for the three months ended March 31, 2013 has been revised to reflect the change in the segment profitability reporting measure. The table below presents information about the reported segments for the three months ended March 31, 2014 and 2013 (in thousands):

	Three Months Ended March 31,
	2014			2013
Net revenues from external customers:
Churchill Downs	$	2,142		$	2,300
Arlington	6,122			7,241
Calder	8,024			2,280
Fair Grounds	14,291			15,992
Total Racing Operations	30,579			27,813
Calder Casino	20,583			20,486
Fair Grounds Slots	11,784			12,364
VSI	8,923			9,761
Harlow's Casino	14,451			15,354
Oxford Casino	17,519			—
Riverwalk Casino	13,295			14,124
Total Gaming	86,555			72,089
Online Business	46,084			42,916
Other Investments	3,837			4,902
Corporate	255			156
Net revenues from external customers	$	167,310		$	147,876
Intercompany net revenues:
Churchill Downs	$	228		$	189
Arlington	1,017			137
Calder	356			13
Fair Grounds	732			833
Total Racing Operations	2,333			1,172
Online Business	230			213
Other Investments	898			902
Eliminations	(3,461		)	(2,287		)
Net revenues	$	—		$	—
Reconciliation of segment Adjusted EBITDA to net (loss) earnings:
Racing Operations	$	(10,250	)	$	(11,257	)
Gaming	27,251			21,927
Online Business	9,950			11,335
Other Investments	(1,353		)	309
Total segment Adjusted EBITDA	25,598			22,314
Corporate Adjusted EBITDA	(1,106		)	(1,177		)
Insurance recoveries, net of losses	431			375
Share-based compensation expense	(5,241		)	(3,363		)
Pre-opening expenses	(27		)	(230		)
MVG interest expense, net	(540		)	—
Depreciation and amortization	(15,284		)	(15,035		)
Interest income (expense), net	(4,969		)	(1,466		)
Income tax benefit (provision)	438			(329		)
(Loss) earnings from continuing operations	(700		)	1,089
Discontinued operations, net of income taxes	—			(31		)
Net (loss) earnings and comprehensive income	$	(700	)	$	1,058

The table below presents equity in earnings (losses) of unconsolidated investments included in the Company’s reported segments for the three months ended March 31, 2014 and 2013 (in thousands):

	Three Months Ended March 31,
	2014		2013
Gaming	$	2,041	$	(298	)
Online Business	220		109
Other Investments	29		25
	$	2,290	$	(164	)

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

	March 31, 2014		December 31, 2013
Total assets:
Racing Operations	$	507,807	$	513,345
Gaming	621,710		622,038
Online Business	189,746		186,621
Other Investments	31,820		30,257
	$	1,351,083	$	1,352,261

The table below presents total capital expenditures for the reported segments for the three months ended March 31, 2014 and 2013 (in thousands):

	Three Months Ended March 31,
	2014		2013
Capital expenditures:
Racing Operations	$	14,037	$	5,002
Gaming	2,250		6,426
Online Business	1,592		1,985
Other Investments	2,290		281
	$	20,169	$	13,694