Segment Information

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segment Information

NOTE 12 — SEGMENT INFORMATION

We manage our operations through six operating segments:

• Racing, which includes Churchill Downs Racetrack ("Churchill Downs"), Arlington International Race Course ("Arlington"), Fair Grounds Race Course ("Fair Grounds") and Calder Race Course ("Calder");

• Casinos, which includes Oxford Casino ("Oxford"), Riverwalk Casino ("Riverwalk"), Harlow's Casino ("Harlow’s"), Calder Casino, Fair Grounds Slots ("Fair Grounds Slots"), Video Services, LLC ("VSI"), 50% of EBITDA from our joint venture, MVG, 25% of EBITDA from our equity investment, SCH and two hotels (Riverwalk and Harlow’s);

• TwinSpires, which includes TwinSpires.com, Fair Grounds Account Wagering ("FAW"), Velocity, Bloodstock Research Information Services ("BRIS"), Bluff Media ("Bluff") and Churchill Downs Interactive Gaming ("I-Gaming");

• Big Fish Games which is a global producer and distributor of social casino, casual and mid-core free-to-play, and premium paid games for PC, Mac and mobile devices;

• Other Investments, which includes United Tote and Capital View Casino & Resort Joint Venture ("Capital View"); and

• Corporate, which includes miscellaneous and other revenue, compensation expense, professional fees and other general and administrative expense not allocated to our other operating segments.

Eliminations include the elimination of intersegment transactions. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following:

Adjusted EBITDA includes:

• Changes in Big Fish Games deferred revenue;

• 50% of EBITDA of our joint venture, MVG;

• 25% of EBITDA from our SCH equity investment; and

• Intercompany revenue and expense totals that are eliminated in the Condensed Consolidated Statements of Comprehensive Income (Loss).

Adjusted EBITDA excludes:

• Big Fish Games adjustments which include:

◦ Acquisition-related charges, including the change in fair value of the Big Fish Games earnout and deferred consideration liability recorded each reporting period

• Stock-based compensation expense;

• Calder exit costs; and

• Other charges and recoveries.

As of January 1, 2016, we modified our definition of Adjusted EBITDA to exclude depreciation and amortization from our 50% joint venture, MVG and our 25% equity investment in SCH. The prior year amounts were reclassified to conform to this presentation. We also prospectively implemented a change in accounting estimate for corporate expenses allocated to other operating segments to use an activity based allocation rather than a revenue based allocation.

We utilize the Adjusted EBITDA metric because we believe the inclusion or exclusion of certain recurring items is necessary to provide a more accurate measure of our 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 U.S. generally accepted accounting principles. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

The tables below present net revenue from external customers and intercompany revenue from each of our operating segments and reconcile Adjusted EBITDA to Comprehensive Income (Loss):

	Three Months Ended March 31,
(in millions)	2016			2015
Net revenue from external customers:
Racing:
Churchill Downs	$	2.3		$	2.0
Arlington	9.0			5.8
Fair Grounds	14.3			15.3
Calder	0.6			0.7
Total Racing	26.2			23.8
Casinos:
Oxford Casino	19.9			17.5
Riverwalk Casino	12.7			13.2
Harlow’s Casino	13.0			13.7
Calder Casino	20.3			20.3
Fair Grounds Slots	10.6			12.1
VSI	9.8			9.2
Saratoga	0.2			—
Total Casinos	86.5			86.0
TwinSpires	49.4			45.4
Big Fish Games:
Social casino	47.5			49.6
Casual and mid-core free-to-play	50.4			21.5
Premium	26.7			30.0
Fair value adjustments	(2.5		)	(9.2		)
Total Big Fish Games	122.1			91.9
Other Investments	4.0			3.6
Corporate	0.2			0.2
Net revenue from external customers	$	288.4		$	250.9
Intercompany net revenue:
Racing:
Churchill Downs	$	0.3		$	0.2
Arlington	1.0			1.0
Fair Grounds	1.0			0.9
Total Racing	2.3			2.1
TwinSpires	0.3			0.2
Other Investments	0.9			0.8
Eliminations	(3.5		)	(3.1		)
Net revenue	$	—		$	—

	Three Months Ended March 31,
(in millions)	2016			2015
Reconciliation of segment Adjusted EBITDA to comprehensive income (loss):
Racing	$	(7.4	)	$	(9.2	)
Casinos	34.3			30.4
TwinSpires	12.1			10.1
Big Fish Games	15.0			20.0
Other Investments	0.8			0.4
Corporate	(2.0		)	(1.9		)
Total segment Adjusted EBITDA	52.8			49.8
Change in Big Fish Games deferred revenue	(6.1		)	(12.9		)
Big Fish Games adjustments	(2.7		)	(6.4		)
Stock-based compensation expense	(4.1		)	(2.7		)
Equity investments - interest, depreciation and amortization expense	(2.5		)	(2.0		)
Calder exit costs	(0.4		)	—
Other (charges) and recoveries, net	(0.4		)	6.1
Depreciation and amortization	(27.0		)	(27.4		)
Interest income (expense), net	(10.6		)	(7.3		)
Income tax benefit	3.8			1.2
Net income (loss)	2.8			(1.6		)
Foreign currency translation, net of tax	—			(0.3		)
Comprehensive income (loss)	$	2.8		$	(1.9	)

The table below presents information about equity in income (losses) of unconsolidated investments included in our reported segments:

	Three Months Ended March 31,
(in millions)	2016			2015
Casinos	$	4.1		$	2.6
Other Investments	(0.3		)	0.4
	$	3.8		$	3.0

The table below presents total asset information for each of our operating segments:

(in millions)	March 31, 2016		December 31, 2015
Total assets:
Racing	$	416.8	$	437.1
Casinos	625.9		631.3
TwinSpires	204.6		202.4
Big Fish Games	946.7		947.1
Other Investments	10.4		12.2
Corporate	33.9		47.3
	$	2,238.3	$	2,277.4

The table below presents capital expenditures for each of our operating segments:

	Three Months Ended March 31,
(in millions)	2016		2015
Capital expenditures:
Racing	$	9.4	$	3.3
Casinos	3.3		3.6
TwinSpires	1.9		1.6
Big Fish Games	1.2		1.2
Other Investments	0.2		0.1
Corporate	0.4		—
	$	16.4	$	9.8