Segment Information

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Information

NOTE 10 — SEGMENT INFORMATION

The Company operates in the following five segments: (1) Big Fish Games; (2) Casinos, which includes video poker and casino operations at Calder Casino, Fair Grounds Slots, Harlow’s Casino Resort & Spa ("Harlow's"), the Company's equity investment in MVG, Oxford Casino (“Oxford”), Riverwalk Casino Hotel ("Riverwalk"), Video Services, LLC (“VSI”) and management fee revenue from Saratoga Casino and Raceway in Saratoga Springs, New York ("Saratoga"); (3) TwinSpires, which includes TwinSpires, our Advance Deposit Wagering (“ADW”) business, Fair Grounds Account Wagering, Bloodstock Research Information Services and Velocity, a business focused on high wagering-volume international customers, as well as the Company's equity investment in HRTV, LLC ("HRTV"), prior to its sale during January 2015; (4) Racing, which includes Churchill Downs, Arlington International Race Course ("Arlington") and its ten off-track betting facilities ("OTBs"), Fair Grounds Race Course ("Fair Grounds") and the pari-mutuel activity generated at its twelve OTBs and Calder Race Course ("Calder"), which ceased pari-mutuel operations on July 1, 2014; and (5) Other Investments, which includes United Tote, Bluff, I-Gaming 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's chief operating decision maker uses Adjusted EBITDA (defined as earnings before interest, taxes, depreciation, amortization, and adjusted for insurance recoveries net of losses, share-based compensation expenses, pre-opening expenses, the impairment of assets, Big Fish Games transaction expenses, Big Fish Games acquisition-related charges, changes in Big Fish Games deferred revenue, Calder exit costs and other charges or recoveries). Big Fish Games transaction expenses include legal, accounting and other deal-related expenses.  Big Fish Games acquisition-related charges reflect the change in fair value of the Big Fish Games earnout and deferred consideration liability recorded each reporting period.  Changes in Big Fish Games deferred revenue reflect reductions in revenue from business combination accounting rules when deferred revenue balances assumed as part of an acquisition are adjusted to their fair values.  Fair value approximates the cost of fulfilling the service obligation, plus a reasonable profit margin. 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 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 table below presents information about the reported segments for the three and nine months ended September 30, 2015 and 2014 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net revenues from external customers:
Big Fish Games	$	103,540		$	—		$	299,969		$	—
Casinos:
Calder Casino	18,561			18,104			58,726			58,560
Fair Grounds Slots	8,789			9,453			29,324			30,823
VSI	9,011			8,008			27,584			25,241
Harlow's Casino	11,741			12,197			37,471			38,425
Oxford Casino	22,338			21,887			60,799			58,808
Riverwalk Casino	12,003			11,974			37,724			37,931
Saratoga	236			—			236			—
Total Casinos	82,679			81,623			251,864			249,788
TwinSpires	50,346			46,266			156,409			149,426
Racing:
Churchill Downs	7,863			8,021			136,663			128,511
Arlington	24,978			26,974			48,909			54,289
Calder	638			786			2,029			18,524
Fair Grounds	5,388			5,274			31,140			29,745
Total Racing	38,867			41,055			218,741			231,069
Other Investments	4,093			4,249			12,200			12,864
Corporate	240			290			731			949
Net revenues from external customers	$	279,765		$	173,483		$	939,914		$	644,096
Intercompany net revenues:
TwinSpires	$	234		$	240		$	781		$	714
Racing:
Churchill Downs	685			678			6,302			5,851
Arlington	1,665			2,001			4,109			4,795
Calder	—			—			—			707
Fair Grounds	11			15			869			744
Total Racing	2,361			2,694			11,280			12,097
Other Investments	792			829			2,680			2,937
Eliminations	(3,387		)	(3,763		)	(14,741		)	(15,748		)
Net revenues	$	—		$	—		$	—		$	—
Reconciliation of segment Adjusted EBITDA to net earnings:
Big Fish Games	$	33,295		$	—		$	81,559		$	—
Casinos	25,037			24,937			81,779			78,362
TwinSpires	13,759			11,098			41,666			35,135
Racing	283			(1,229		)	76,281			66,600
Other Investments	(78		)	(899		)	35			(2,475		)
Total segment Adjusted EBITDA	72,296			33,907			281,320			177,622
Corporate Adjusted EBITDA	(1,685		)	(1,398		)	(5,239		)	(3,645		)
Insurance recoveries, net of losses	—			—			—			431
Big Fish Games acquisition charges	(2,810		)	—			(17,410		)	—
Big Fish Games changes in deferred revenue	(10,907		)	—			(32,003		)	—
Share-based compensation	(4,485		)	(2,213		)	(10,580		)	(10,567		)
Calder exit costs	(12,737		)	(2,298		)	(13,490		)	(2,298		)
MVG interest expense, net	(535		)	(819		)	(1,625		)	(1,956		)
Other charges and recoveries, net	—			(355		)	6,114			(832		)
Depreciation and amortization	(27,452		)	(17,280		)	(82,129		)	(48,324		)
Interest (expense) income, net	(6,732		)	(5,167		)	(21,104		)	(15,092		)
Income tax provision	(750		)	(846		)	(46,165		)	(35,175		)
Net earnings	4,203			3,531			57,689			60,164
Foreign currency translation, net of tax effect	58			—			(357		)	—
Comprehensive earnings	$	4,261		$	3,531		$	57,332		$	60,164

The table below presents equity in earnings of unconsolidated investments included in the Company’s reported segments for the three months and nine ended September 30, 2015 and 2014 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2015		2014			2015		2014
Casinos	$	2,337	$	1,839		$	7,754	$	6,676
TwinSpires	—		(289		)	—		(41		)
Other Investments	52		(493		)	490		(782		)
	$	2,389	$	1,057		$	8,244	$	5,853

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

	September 30, 2015		December 31, 2014
Total assets:
Big Fish Games	$	1,052,842	$	1,009,668
Casinos	608,396		621,240
TwinSpires	184,830		182,322
Racing	377,594		518,517
Other Investments	36,653		30,757
	$	2,260,315	$	2,362,504

The table below presents total capital expenditures for the reported segments for the nine months ended September 30, 2015 and 2014 (in thousands):

	Nine Months Ended September 30,
	2015		2014
Capital expenditures:
Big Fish Games	$	2,987	$	—
Casinos	15,383		6,629
TwinSpires	3,098		4,716
Racing	8,359		33,491
Other Investments	1,011		4,018
	$	30,838	$	48,854