Segment Information

9 Months Ended

Sep. 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, which ceased pari-mutuel operations on July 1, 2014, 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, SHRI, 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 nine months ended September 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 nine months ended September 30, 2014 and 2013 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net revenues from external customers:
Churchill Downs	$	8,021		$	7,956		$	128,511		$	118,534
Arlington	26,974			28,473			54,289			57,720
Calder	786			8,597			18,524			27,908
Fair Grounds	5,274			5,661			29,745			31,725
Total Racing Operations	41,055			50,687			231,069			235,887
Calder Casino	18,104			19,157			58,560			60,109
Fair Grounds Slots	9,453			9,781			30,823			32,123
VSI	8,190			8,443			25,771			27,449
Harlow's Casino	12,197			12,082			38,425			40,533
Oxford Casino	21,887			17,730			58,808			17,730
Riverwalk Casino	11,974			12,639			37,931			40,864
Total Gaming	81,805			79,832			250,318			218,808
Online Business	46,266			48,522			149,426			143,969
Other Investments	4,249			6,135			12,864			17,408
Corporate	290			320			949			894
Net revenues from external customers	$	173,665		$	185,496		$	644,626		$	616,966
Intercompany net revenues:
Churchill Downs	$	678		$	689		$	5,851		$	5,485
Arlington	2,001			2,070			4,795			3,110
Calder	—			412			707			917
Fair Grounds	15			22			744			855
Total Racing Operations	2,694			3,193			12,097			10,367
Online Business	240			211			714			657
Other Investments	829			938			2,937			3,188
Eliminations	(3,763		)	(4,342		)	(15,748		)	(14,212		)
Net revenues	$	—		$	—		$	—		$	—
Reconciliation of segment Adjusted EBITDA to net earnings:
Racing Operations	$	(1,229	)	$	(907	)	$	66,600		$	58,353
Gaming	24,937			20,496			78,362			61,788
Online Business	11,098			12,998			35,135			38,424
Other Investments	(1,254		)	469			(3,280		)	1,698
Total segment Adjusted EBITDA	33,552			33,056			176,817			160,263
Corporate Adjusted EBITDA	(1,398		)	(1,215		)	(3,645		)	(3,380		)
Other charges	(2,298		)	—			(2,298		)	—
Insurance recoveries, net of losses	—			—			431			375
HRE Trust Fund proceeds	—			4,249			—			4,541
Share-based compensation expense	(2,213		)	(5,990		)	(10,567		)	(15,567		)
Pre-opening expense	—			(500		)	(27		)	(1,211		)
MVG interest expense, net	(819		)	—			(1,956		)	—
Depreciation and amortization	(17,280		)	(15,796		)	(48,324		)	(45,822		)
Interest (expense) income, net	(5,167		)	(1,401		)	(15,092		)	(4,034		)
Income tax provision	(846		)	(3,195		)	(35,175		)	(34,559		)
Earnings from continuing operations	3,531			9,208			60,164			60,606
Discontinued operations, net of income taxes	—			41			—			(1		)
Net earnings and comprehensive income	$	3,531		$	9,249		$	60,164		$	60,605

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Gaming	$	1,839		$	(572	)	$	6,676		$	(1,365	)
Online Business	(289		)	(393		)	(41		)	(523		)
Other Investments	(493		)	78			(782		)	206
	$	1,057		$	(887	)	$	5,853		$	(1,682	)

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

	September 30, 2014		December 31, 2013
Total assets:
Racing Operations	$	498,459	$	513,345
Gaming	618,045		622,038
Online Business	185,507		186,621
Other Investments	30,253		30,257
	$	1,332,264	$	1,352,261

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

	Nine Months Ended September 30,
	2014		2013
Capital expenditures:
Racing Operations	$	33,491	$	11,801
Gaming	6,629		11,528
Online Business	4,716		4,857
Other Investments	4,018		1,672
	$	48,854	$	29,858