SEGMENT INFORMATION

We manage our operations through six operating segments, all of which are included in continuing operations with the exception of Big Fish Games:


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


•	Casino, which includes Oxford Casino ("Oxford"), Riverwalk Casino ("Riverwalk"), Harlow's Casino ("Harlow’s"), Calder Casino, Fair Grounds Slots, Video Services, LLC ("VSI"), 50% of EBITDA from our joint venture, MVG, an effective 62.5% of EBITDA from our equity investment in Ocean Downs and 25% of EBITDA from our equity investment in SCH.


•	TwinSpires, which includes TwinSpires.com, Fair Grounds Account Wagering, Velocity, BetAmerica, and Bloodstock Research Information Services;


•	Other Investments, which includes United Tote and other minor investments;


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

•

Big Fish Games 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. Big Fish Games is headquartered in Seattle, Washington and has a studio location in Oakland, California, with approximately 700 employees. On November 29, 2017, we entered into a definitive stock purchase agreement to sell Big Fish Games to the Purchaser in the Big Fish Transaction. On January 9, 2018, we closed the Big Fish Transaction, at which time Big Fish Games ceased to be an operating segment.

Eliminations include the elimination of intersegment transactions. We utilize non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. 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 our portion of the EBITDA from our equity investments.

Adjusted EBITDA excludes:


•	Transaction expense, net which includes:


◦	Acquisition and disposition related charges, including fair value adjustments related to earnouts and deferred payments; and


◦	Other transaction expense, including legal, accounting and other deal-related expense;


•	Stock-based compensation expense;


•	Asset impairments;


•	Gain on Calder land sale;


•	Calder exit costs;


•	Loss on extinguishment of debt; and


•	Other charges, recoveries and expenses

Effective January 1, 2017, certain revenue previously included in our Corporate segment was deemed by management to be more closely aligned with our TwinSpires segment. Due to the Big Fish Transaction, the Company has presented Big Fish Games as held for sale and discontinued operations in the accompanying Consolidated Financial Statements and these notes. The Company has not allocated corporate and other certain expenses to Big Fish Games consistent with the discontinued operations presentation in the accompanying Consolidated Statements of Comprehensive Income. Accordingly, the prior year amounts were reclassified to conform to this presentation.

We utilize the Adjusted EBITDA metric because we believe the inclusion or exclusion of certain non-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 GAAP. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited. For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the accompanying Consolidated Statements of Comprehensive Income. We have included Big Fish Games Adjusted EBITDA information as applicable within this Note due to the fact that Big Fish Games was an operating segment as of December 31, 2017.

The tables below present net revenue from external customers and intercompany revenue from each of our operating segments, Adjusted EBITDA by segment and reconciles Comprehensive Income to Adjusted EBITDA:



	Years Ended December 31,
(in millions)	2017			2016			2015
Net revenue from external customers:
Racing:
Churchill Downs	$	161.3		$	155.2		$	151.1
Arlington	57.2			55.3			54.4
Fair Grounds	36.3			38.0			39.8
Calder	2.5			2.6			2.7
Total Racing	257.3			251.1			248.0
Casino:
Oxford Casino	90.8			84.6			80.4
Riverwalk Casino	48.2			46.1			49.8
Harlow’s Casino	50.0			48.4			49.0
Calder Casino	85.4			79.1			77.4
Fair Grounds Slots	36.5			36.9			39.0
VSI	38.3			36.9			36.9
Saratoga	1.3			0.8			0.4
Total Casino	350.5			332.8			332.9
TwinSpires	255.6			221.6			201.1
Other Investments	19.2			16.9			16.6
Corporate	—			—			—
Net revenue from external customers	$	882.6		$	822.4		$	798.6
Intercompany net revenue:
Racing:
Churchill Downs	$	11.4		$	10.0		$	7.8
Arlington	6.3			5.5			5.1
Fair Grounds	1.6			1.5			1.3
Calder	—			—			—
Total Racing	19.3			17.0			14.2
TwinSpires	1.1			1.3			1.1
Other Investments	4.5			3.9			3.5
Eliminations	(24.9		)	(22.2		)	(18.8		)
Intercompany net revenue	$	—		$	—		$	—

Adjusted EBITDA by segment is comprised of the following:



	Year Ended December 31, 2017
	Continuing Operations															Discontinued Operations
(in millions)	Racing			Casino			TwinSpires			Other Investments			Corporate^(a)			Big Fish Games
Net revenue	$	276.6		$	350.5		$	256.7		$	23.7		$	—		$	466.0

Taxes & purses	(65.4		)	(117.0		)	(14.7		)	—			—			—
Platform & development fees	—			—			—			—			—			(167.8		)
Marketing & advertising	(4.9		)	(12.1		)	(8.2		)	—			—			(116.6		)
Salaries & benefits	(41.7		)	(53.2		)	(9.9		)	(12.0		)				(27.8		)
Content expense	(15.2		)	—			(125.0		)	—			—			—
SG&A expense	(16.8		)	(22.6		)	(12.4		)	(3.3		)	(12.2		)	(16.6		)
Research & development	—			—			—			—			—			(39.6		)
Other operating expense	(48.9		)	(41.6		)	(22.1		)	(5.1		)	(0.5		)	(15.6		)
Other income	0.8			42.0			—			0.4			0.3			(1.7		)

Adjusted EBITDA	$	84.5		$	146.0		$	64.4		$	3.7		$	(12.4	)	$	80.3



	Year Ended December 31, 2016
	Continuing Operations															Discontinued Operations
(in millions)	Racing			Casino			TwinSpires			Other Investments			Corporate^(a)			Big Fish Games
Net revenue	$	268.1		$	332.8		$	222.9		$	20.8		$	—		$	486.2

Taxes & purses	(64.2		)	(110.9		)	(11.6		)	—			—			—
Platform & development fees	—			—			—			—			—			(179.9		)
Marketing & advertising	(4.6		)	(12.7		)	(6.3		)	—			—			(127.9		)
Salaries & benefits	(40.9		)	(50.8		)	(9.4		)	(10.9		)	—			(25.0		)
Content expense	(15.6		)	—			(107.6		)	—			—			—
SG&A expense	(16.2		)	(21.2		)	(12.0		)	(3.4		)	(11.7		)	(15.4		)
Research & development	—			—			—			—			—			(39.0		)
Other operating expense	(47.4		)	(39.1		)	(19.8		)	(4.1		)	(0.6		)	(15.9		)
Other income	0.5			27.7			—			0.3			0.2			(0.9		)

Adjusted EBITDA	$	79.7		$	125.8		$	56.2		$	2.7		$	(12.1	)	$	82.2



	Year Ended December 31, 2015
	Continuing Operations															Discontinued Operations
(in millions)	Racing			Casino			TwinSpires			Other Investments			Corporate^(a)			Big Fish Games
Net revenue	$	262.2		$	332.9		$	202.2		$	20.1		$	—		$	413.7

Taxes & purses	(63.6		)	(109.9		)	(10.6		)	—			—			—
Platform & development fees	—			—			—			—			—			(143.6		)
Marketing & advertising	(6.1		)	(12.4		)	(4.8		)	—			—			(107.7		)
Salaries & benefits	(39.2		)	(49.7		)	(9.9		)	(11.1		)	—			(22.3		)
Content expense	(14.6		)	—			(97.9		)	—			—			—
SG&A expense	(16.6		)	(24.1		)	(11.5		)	(2.5		)	(9.3		)	(13.8		)
Research & development	—			—			—			—			—			(39.4		)
Other operating expense	(50.9		)	(41.3		)	(18.0		)	(3.8		)	1.1			(14.8		)
Other income	0.6			19.4			—			0.2			0.1			(0.6		)

Adjusted EBITDA	$	71.8		$	114.9		$	49.5		$	2.9		$	(8.1	)	$	71.5

(a) The Corporate segment includes corporate and other certain expenses of $3.6 million in 2017, $3.1 million in 2016 and $3.0 million in 2015 that have not been allocated to Big Fish Games as a result of the Big Fish Transaction and the Big Fish Games segment reported as held for sale and discontinued operations in the accompanying Consolidated Financial Statements and these notes.



	Years Ended December 31,
(in millions)	2017			2016			2015
Reconciliation of Comprehensive Income to Adjusted EBITDA:

Comprehensive income	$	140.4		$	107.5		$	64.7
Foreign currency translation, net of tax	0.1			(0.2		)	0.5
Net change in pension benefits, net of tax	—			0.8			—
Net income	140.5			108.1			65.2
Additions - continuing operations:
Depreciation and amortization	56.0			58.4			58.0
Interest expense	49.3			43.7			28.6
Loss on extinguishment of debt	20.7			—			—
Income tax (benefit) provision	(19.9		)	50.7			44.6
Additions - discontinued operations:
Depreciation and amortization	41.1			50.2			51.7
Income tax provision	5.1			9.3			2.3
EBITDA	$	292.8		$	320.4		$	250.4

Adjustments to EBITDA - continuing operations:
Selling, general and administrative:
Stock-based compensation expense	16.0			13.3			12.5
Other charges	1.2			2.5			—
Other income, expense:
Interest, depreciation and amortization expense related to equity investments	16.7			10.0			8.5
Other charges and recoveries, net	—			0.5			(5.8		)
Impairment of tangible and other intangible assets	21.7			—			—
Gain on Calder land sale	—			(23.7		)	—
Calder exit costs	0.8			2.5			13.9
Other, net	1.5			(2.4		)	—
Adjustments to EBITDA - discontinued operations:
Stock-based compensation expense	11.1			5.6			1.3
Transaction expense, net	4.7			5.8			21.7
Total adjustments to EBITDA	73.7			14.1			52.1
Adjusted EBITDA	$	366.5		$	334.5		$	302.5

Adjusted EBITDA by segment:
Racing	$	84.5		$	79.7		$	71.8
Casino	146.0			125.8			114.9
TwinSpires	64.4			56.2			49.5
Other Investments	3.7			2.7			2.9
Corporate^(a)	(12.4		)	(12.1		)	(8.1		)
Big Fish Games	80.3			82.2			71.5
Adjusted EBITDA	$	366.5		$	334.5		$	302.5

The table below presents information about earnings (losses) from equity investments, net included in our reported segments:



	Years Ended December 31,
(in millions)	2017		2016		2015
Casino	$	25.3	$	17.4	$	10.9
Other Investments	0.2		—		0.3
	$	25.5	$	17.4	$	11.2

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



	As of December 31,
(in millions)	2017		2016
Total assets:
Racing	$	483.0	$	454.6
Casino	679.6		628.7
TwinSpires	215.9		209.9
Other Investments	15.2		11.1
Corporate	73.2		56.3
Big Fish Games	892.5		893.8
	$	2,359.4	$	2,254.4

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



	Years Ended December 31,
(in millions)	2017		2016		2015
Capital expenditures:
Racing	$	57.8	$	26.1	$	12.3
Casino	37.5		13.9		18.8
TwinSpires	9.0		7.0		4.3
Other Investments	3.4		1.0		0.8
Corporate	1.3		1.2		0.9
Big Fish Games	7.9		5.5		6.4
	$	116.9	$	54.7	$	43.5