Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information [Abstract]

Segment Information

NOTE 12 — SEGMENT INFORMATION

The Company operates in the following four segments: (1) Racing Operations, which includes Churchill Downs, Calder, Arlington Park and its eleven OTBs and Fair Grounds and the pari-mutuel activity generated at its eleven OTBs; (2) Online Business, which includes TwinSpires, our ADW business, Fair Grounds Account Wagering and Bloodstock Research Information Systems as well as the Company's equity investment in HRTV, LLC; (3) Gaming, which includes video poker and gaming operations at Fair Grounds Slots, Calder Casino, Harlow's, a casino and hotel acquired on December 16, 2010 and VSI, an owner and operator of more than 700 video poker machines in Louisiana; and (4) Other Investments, which includes United Tote, a manufacturer and operator of pari-mutuel wagering systems acquired by the Company on June 2, 2010, CDSP and the Company's other minor investments. Eliminations include the elimination of intersegment transactions.

The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies" in Note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. The Company uses EBITDA (defined as earnings before interest, taxes, depreciation and amortization) as a key performance measure of the results of operations for purposes of evaluating performance internally. Management believes that the use of this measure enables management and investors to evaluate and compare from period to period, the Company's operating performance in a meaningful and consistent manner. EBITDA is a supplemental measure of the Company's performance that is not required by, or presented in accordance with, GAAP (defined as generally accepted accounting principles). EBITDA should not be considered an alternative to net earnings or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities or any other measures of the Company's cash flow or liquidity.

The table below presents information about reported segments for the three and nine months ended September 30, 2011 and 2010 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net revenues from external customers:
Churchill Downs	$	5,911		$	6,005		$	104,072		$	100,609
Arlington Park		30,875			30,208			62,273			63,994
Calder		23,673			24,396			45,753			48,015
Fair Grounds		6,080			6,739			34,274			35,183
Total Racing Operations		66,539			67,348			246,372			247,801
Calder Casino		20,251			17,089			62,574			48,848
Fair Grounds Slots		9,880			9,329			31,510			29,979
VSI		8,350			8,249			26,566			25,436
Harlow's Casino		13,441			—			39,818			—
Total Gaming		51,922			34,667			160,468			104,263
Online Business		42,015			39,232			125,344			87,374
Other Investments		5,820			6,235			15,143			8,599
Corporate		53			64			262			67
Net revenues	$	166,349		$	147,546		$	547,589		$	448,104
Intercompany net revenues:
Churchill Downs	$	381		$	336			3,993		$	2,872
Arlington Park		1,468			1,199			3,160			2,542
Calder		582			557			1,129			932
Fair Grounds		21			39			799			586
Total Racing Operations		2,452			2,131			9,081			6,932
Online Business		186			152			601			533
Other Investments		1,148			589			2,900			1,604
Eliminations		(3,786	)		(2,872	)		(12,582	)		(9,069	)
Net revenues	$	—		$	—			—		$	—
Reconciliation of Segment EBITDA to net earnings (loss):
Racing	$	20,414		$	1,254		$	66,223		$	37,819
Gaming		13,148			7,892			43,479			19,537
Online		9,818			5,818			28,671			14,467
Other Investments		1,157			1,792			2,110			2,918
Corporate		(1,540	)		296			(1,329	)		(2,327	)
Total EBITDA		42,997			17,052			139,154			72,414
Depreciation and amortization		(13,443	)		(12,395	)		(41,319	)		(34,410	)
Interest (expense) income, net		(1,460	)		(1,595	)		(7,257	)		(4,145	)
Income tax (expense) benefit		(8,374	)		638			(34,054	)		(10,034	)
Earnings from continuing operations		19,720			3,700			56,524			23,825
Discontinued operations, net of income taxes		60			(4,389	)		218			(5,577	)
Net earnings (loss)	$	19,780		$	(689	)	$	56,742		$	18,248

As further discussed in Note 1, during the year ended December 31, 2010, the Company revised its Consolidated Statements of Net Earnings to appropriately reflect the classification of pari-mutuel and gaming taxes, in addition to free play that is administered at its gaming facilities. For the three and nine months ended September 30, 2010, the net impact of the revision on the Company's net revenues from external customers is presented below. The revision, which the Company determined is not material, had no impact on intercompany net revenues or segment EBITDA.

	Three Months Ended September 30, 2010
	Previously Reported		Revised		Effect of Change
Net revenues from external customers:
Churchill Downs	$	5,449	$	6,005	$	556
Arlington Park		29,445		30,208		763
Calder		21,604		24,396		2,792
Fair Grounds		5,942		6,739		797
Total Racing Operations		62,440		67,348		4,908
Calder Casino		13,161		17,089		3,928
Fair Grounds Slots		8,600		9,329		729
VSI		6,545		8,249		1,704
Total Gaming		28,306		34,667		6,361
Online Business		38,739		39,232		493
Other Investments		6,195		6,235		40
Corporate		64		64		—
Net revenues from external customers	$	135,744	$	147,546	$	11,802
	Nine Months Ended September 30, 2010
	Previously Reported		Revised		Effect of Change
Net revenues from external customers:
Churchill Downs	$	96,979	$	100,609	$	3,630
Arlington Park		61,533		63,994		2,461
Calder		42,848		48,015		5,167
Fair Grounds		32,367		35,183		2,816
Total Racing Operations		233,727		247,801		14,074
Calder Casino		34,906		48,848		13,942
Fair Grounds Slots		27,716		29,979		2,263
VSI		20,202		25,436		5,234
Total Gaming		82,824		104,263		21,439
Online Business		86,089		87,374		1,285
Other Investments		8,599		8,599		—
Corporate		67		67		—
Net revenues from external customers	$	411,306	$	448,104	$	36,798

The table below presents information about equity in earnings (losses) of unconsolidated investments included in the Company's reported segments for the three and nine months ended September 30, 2011 and 2010 (in thousands):

	Three Months  Ended September 30,						Nine Months  Ended September 30,
	2011			2010			2011			2010
Online Business	$	(521	)	$	(543	)	$	(574	)	$	(345	)
Other Investments		54			73			151			28
	$	(467	)	$	(470	)	$	(423	)	$	(317	)

The table below presents total asset information for reported segments (in thousands):

	September 30, 2011			December 31, 2010
Total assets:
Racing Operations	$	915,764		$	951,062
Gaming		242,324			254,237
Online Business		182,258			189,962
Other Investments		184,451			191,160
		1,524,797			1,586,421
Eliminations		(567,927	)		(568,702	)
	$	956,870		$	1,017,719

The table below presents total goodwill information for reported segments (in thousands):

	September 30, 2011		December 31, 2010
Goodwill:
Racing Operations	$	50,401	$	50,401
Gaming		34,690		35,082
Online Business		127,363		127,787
Other Investments		1,258		1,258
	$	213,712	$	214,528

The table below presents total capital expenditure information for reported segments (in thousands):

	Nine Months  Ended September 30,
	2011		2010
Capital expenditures, net:
Racing Operations	$	6,943	$	33,825
Gaming		6,099		16,667
Online Business		1,647		3,842
Other Investments		2,113		2,159
	$	16,802	$	56,493