Segment Information

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

The Company operates in the following four segments: (1) Racing Operations, which includes Churchill Downs Racetrack, Arlington Park Race Course and its twelve OTBs, Calder Race Course and Fair Grounds Race Course and the pari-mutuel activity generated at its eleven OTBs; (2) Gaming, which includes video poker and gaming operations at Calder Casino, Fair Grounds Slots, Harlow’s 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 and Velocity, a business focused on high wagering-volume international customers, as well as the Company's equity investment in HRTV, LLC; and (4) Other Investments, which includes United Tote, MVG, Bluff 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, 2011. The Company uses EBITDA (defined as earnings before interest, taxes, depreciation and amortization), a non-GAAP measure, 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. However, EBITDA should not be considered as an alternative to, or more meaningful than, net earnings (as determined in accordance with accounting principles generally accepted in the United States of America) as a measure of our operating results. A reconciliation of EBITDA to net earnings is provided in the following table.

The table below presents information about the reported segments for the three and six months ended June 30, 2012 and 2011 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Net revenues from external customers:
Churchill Downs	$	102,874		$	96,005		$	105,424		$	98,410
Arlington Park	22,807			22,050			32,224			31,398
Calder	22,873			19,412			24,741			22,080
Fair Grounds	11,886			10,904			28,233			28,194
Total Racing Operations	160,440			148,371			190,622			180,082
Calder Casino	19,188			21,711			41,067			42,323
Fair Grounds Slots	9,586			9,458			21,617			21,630
VSI	8,814			8,789			18,377			18,216
Harlow's Casino	13,783			9,501			29,646			26,377
Total Gaming	51,371			49,459			110,707			108,546
Online Business	52,702			46,526			96,737			83,329
Other Investments	5,967			5,192			10,469			9,074
Corporate	336			138			477			209
Net revenues from external customers	$	270,816		$	249,686		$	409,012		$	381,240
Intercompany net revenues:
Churchill Downs	$	4,082		$	3,464		$	4,268		$	3,612
Arlington Park	1,496			1,159			2,052			1,692
Calder	586			486			596			547
Fair Grounds	75			—			822			778
Total Racing Operations	6,239			5,109			7,738			6,629
Online Business	230			219			436			415
Other Investments	1,072			606			1,822			759
Eliminations	(7,541		)	(5,934		)	(9,996		)	(7,803		)
Net revenues	$	—		$	—		$	—		$	—
Reconciliation of Segment EBITDA to net earnings:
Racing Operations	$	65,390		$	58,815		$	53,851		$	46,327
Gaming	19,438			12,798			39,827			30,331
Online Business	12,539			11,308			22,960			18,853
Other Investments	(104		)	677			(434		)	435
Corporate	(1,969		)	1,385			(3,570		)	211
Total EBITDA	95,294			84,983			112,634			96,157
Depreciation and amortization	(13,638		)	(13,890		)	(27,445		)	(27,876		)
Interest income (expense), net	(947		)	(3,405		)	(2,152		)	(5,797		)
Income tax provision	(32,133		)	(27,698		)	(33,107		)	(25,680		)
Earnings from continuing operations	48,576			39,990			49,930			36,804
Discontinued operations, net of income taxes	—			157			(1		)	158
Net earnings and comprehensive income	$	48,576		$	40,147		$	49,929		$	36,962

The table below presents information about equity in earnings (losses) of unconsolidated investments included in the Company’s reported segments for the three and six months ended June 30, 2012 and 2011 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Online Business	$	(516	)	$	393	$	(554	)	$	(53	)
Other Investments	(48		)	67		(230		)	97
	$	(564	)	$	460	$	(784	)	$	44

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

	June 30, 2012		December 31, 2011
Total assets:
Racing Operations	$	522,980	$	509,133
Gaming	215,339		242,174
Online Business	189,516		183,397
Other Investments	31,580		13,318
	$	959,415	$	948,022

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

	Six Months Ended June 30,
	2012		2011
Capital expenditures:
Racing Operations	$	4,532	$	3,681
Gaming	3,250		4,736
Online Business	2,306		842
Other Investments	6,385		1,608
	$	16,473	$	10,867

During the six months ended June 30, 2012, the Company incurred $3.1 million of capital expenditures for its corporate office relocation, which is included in Other Investments.