Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Information

NOTE 11 — 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 Casino Hotel ("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 and six months ended June 30, 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 table below presents information about the reported segments for the three and six months ended June 30, 2014 and 2013 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net revenues from external customers:
Churchill Downs	$	118,348		$	108,278		$	120,490		$	110,578
Arlington	21,193			22,006			27,315			29,247
Calder	9,714			17,031			17,738			19,311
Fair Grounds	10,180			10,072			24,471			26,064
Total Racing Operations	159,435			157,387			190,014			185,200
Calder Casino	19,873			20,466			40,456			40,952
Fair Grounds Slots	9,586			9,978			21,370			22,342
VSI	8,658			9,245			17,581			19,006
Harlow's Casino	11,777			13,097			26,228			28,451
Oxford Casino	19,402			—			36,921			—
Riverwalk Casino	12,662			14,101			25,957			28,225
Total Gaming	81,958			66,887			168,513			138,976
Online Business	57,076			52,531			103,160			95,447
Other Investments	4,778			6,371			8,615			11,273
Corporate	404			418			659			574
Net revenues from external customers	$	303,651		$	283,594		$	470,961		$	431,470
Intercompany net revenues:
Churchill Downs	$	4,945		$	4,607		$	5,173		$	4,796
Arlington	1,777			903			2,794			1,040
Calder	351			492			707			505
Fair Grounds	(3		)	—			729			833
Total Racing Operations	7,070			6,002			9,403			7,174
Online Business	244			233			474			446
Other Investments	1,210			1,348			2,108			2,250
Eliminations	(8,524		)	(7,583		)	(11,985		)	(9,870		)
Net revenues	$	—		$	—		$	—		$	—
Reconciliation of segment Adjusted EBITDA to net earnings:
Racing Operations	$	78,079		$	70,517		$	67,829		$	59,260
Gaming	26,174			19,365			53,425			41,292
Online Business	14,087			14,091			24,037			25,426
Other Investments	(673		)	920			(2,026		)	1,229
Total segment Adjusted EBITDA	117,667			104,893			143,265			127,207
Corporate Adjusted EBITDA	(1,141		)	(988		)	(2,247		)	(2,165		)
Insurance recoveries, net of losses	—			—			431			375
HRE Trust Fund proceeds	—			292			—			292
Share-based compensation expense	(3,113		)	(6,214		)	(8,354		)	(9,577		)
Pre-opening expenses	—			(481		)	(27		)	(711		)
MVG interest expense, net	(597		)	—			(1,137		)	—
Depreciation and amortization	(15,760		)	(14,991		)	(31,044		)	(30,026		)
Interest income (expense), net	(4,956		)	(1,167		)	(9,925		)	(2,633		)
Income tax provision	(34,767		)	(31,035		)	(34,329		)	(31,364		)
Earnings from continuing operations	57,333			50,309			56,633			51,398
Discontinued operations, net of income taxes	—			(11		)	—			(42		)
Net earnings and comprehensive income	$	57,333		$	50,298		$	56,633		$	51,356

The table below presents equity in earnings (losses) of unconsolidated investments included in the Company’s reported segments for the three and six months ended June 30, 2014 and 2013 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Gaming	$	2,796		$	(495	)	$	4,837		$	(793	)
Online Business	28			(239		)	248			(130		)
Other Investments	(318		)	103			(289		)	128
	$	2,506		$	(631	)	$	4,796		$	(795	)

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

	June 30, 2014		December 31, 2013
Total assets:
Racing Operations	$	521,657	$	513,345
Gaming	617,792		622,038
Online Business	191,450		186,621
Other Investments	32,240		30,257
	$	1,363,139	$	1,352,261

The table below presents total capital expenditures for the reported segments for the six months ended June 30, 2014 and 2013 (in thousands):

	Six Months Ended June 30,
	2014		2013
Capital expenditures:
Racing Operations	$	27,915	$	10,210
Gaming	4,119		9,048
Online Business	3,174		3,528
Other Investments	3,267		986
	$	38,475	$	23,772