Segment Information

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

The Company operates in the following five segments: (1) Racing, which includes Churchill Downs, Arlington and its ten OTBs, Fair Grounds and its twelve OTBs and Calder, which ceased pari-mutuel operations on July 1, 2014; (2) Casinos, which includes video poker and gaming operations at Calder Casino, Fair Grounds Slots, Harlow’s, Riverwalk, Oxford, MVG and VSI; (3) TwinSpires, which includes TwinSpires, our ADW business, Fair Grounds Account Wagering, Bloodstock Research Information Services, Velocity and Luckity, until the cessation of its operations on November 4, 2014, as well as the Company's equity investment in HRTV, LLC; (4) Big Fish Games; and (5) Other Investments, which includes United Tote, Bluff and the Company's other minor investments. Eliminations include the elimination of intersegment transactions.

On January 1, 2014, the Company reclassified its equity investment in MVG from Other Investments to Casinos, to coincide with the first full period of operations for the venture, which opened on December 12, 2013. MVG's results of operations for the year ended December 31, 2013 have been reclassified to the Casinos segment.

In order to evaluate the performance of these operating segments internally, the Company uses Adjusted EBITDA (defined as earnings before interest, taxes, depreciation, amortization, and adjusted for insurance recoveries net of losses, HRE Trust Fund proceeds, 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 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.

During the year ended December 31, 2013, the Company implemented the Adjusted EBITDA metric because it believes the inclusion or exclusion of certain recurring and non-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. The 2012 financial information has been retrospectively revised to reflect the change in the segment profitability reporting measure. 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 accounting policies of the segments are the same as those described in the “Summary of Significant Accounting Policies” in Note 1. The table below presents information about reported segments for the years ended December 31, 2014, 2013 and 2012 (in thousands):

	Year Ended December 31,
	2014			2013			2012
Net revenues from external customers:
Churchill Downs	$	143,191		$	132,845		$	124,255
Arlington	60,312			64,483			69,077
Calder	19,325			36,264			64,566
Fair Grounds	38,625			40,677			44,190
Total Racing	261,453			274,269			302,088
Calder Casino	77,003			78,951			77,864
Fair Grounds Slots	40,774			42,156			42,881
VSI	34,369			35,931			35,433
Harlow’s Casino	50,199			52,440			56,604
Oxford Casino	76,526			34,350			—
Riverwalk Casino	50,139			53,645			10,330
Total Casinos	329,010			297,473			223,112
TwinSpires	190,333			184,541			183,279
Big Fish Games	13,855			—			—
Other Investments	17,125			21,899			21,785
Corporate	1,158			1,143			1,032
Net revenues from external customers	$	812,934		$	779,325		$	731,296
Intercompany net revenues:
Churchill Downs	$	7,038		$	6,686		$	5,592
Arlington	5,767			3,395			4,712
Calder	707			1,263			1,583
Fair Grounds	1,089			1,151			1,270
Total Racing	14,601			12,495			13,157
TwinSpires	958			853			836
Other Investments	4,130			4,409			3,466
Eliminations	(19,689		)	(17,757		)	(17,459		)
Net revenues	$	—		$	—		$	—

	Year Ended December 31,
	2014			2013			2012
Reconciliation of segment Adjusted EBITDA to net earnings:
Racing	$	61,160		$	50,275		$	54,357
Casinos	101,106			80,631			64,231
TwinSpires	45,282			49,122			44,618
Big Fish Games	3,837			—			—
Other Investments	(3,857		)	809			(117		)
Total segment Adjusted EBITDA	207,528			180,837			163,089
Corporate Adjusted EBITDA	(5,037		)	(4,606		)	(4,834		)
Insurance recoveries, net of losses	431			375			7,006
Big Fish Games acquisition charges	(3,826		)	—			—
Big Fish Games transaction expenses	(6,367		)	—			—
Big Fish Games changes in deferred revenue	(4,497		)	—			—
HRE Trust Fund proceeds	—			4,541			—
Share-based compensation expense	(11,932		)	(21,482		)	(13,993		)
Pre-opening expenses	(27		)	(3,620		)	—
MVG interest expense, net	(2,546		)	(170		)	—
Asset impairment charges	(4,843		)	—			—
Other charges	(3,287		)	(2,500		)	—
Depreciation and amortization	(68,257		)	(61,750		)	(55,600		)
Interest income (expense), net	(20,822		)	(6,119		)	(4,441		)
Income tax provision	(30,161		)	(30,473		)	(33,075		)
Earnings from continuing operations	46,357			55,033			58,152
Discontinued operations, net of income taxes	—			(133		)	124
Net earnings	46,357			54,900			58,276
Foreign currency translation, net of tax	(125		)	—			—
Comprehensive income	$	46,232		$	54,900		$	58,276

The table below presents information about equity in (losses) earnings of unconsolidated investments included in the Company's reported segments for the years ended December 31, 2014, 2013 and 2012 (in thousands):

	Year Ended December 31,
	2014			2013			2012
Casinos	$	8,900		$	(3,718	)	$	(610	)
TwinSpires	(68		)	(848		)	(1,413		)
Other Investments	(2,504		)	424			322
	$	6,328		$	(4,142	)	$	(1,701	)

The tables below present total asset information about reported segments as of December 31, 2014 and 2013 and capital expenditures for the years ended December 31, 2014, 2013 and 2012 (in thousands):

	As of December 31,
	2014		2013
Total assets:
Racing	$	518,517	$	513,345
Casinos	621,240		622,038
TwinSpires	182,322		186,621
Big Fish Games	1,007,438		—
Other Investments	30,757		30,257
	$	2,360,274	$	1,352,261

	Year Ended December 31,
	2014		2013		2012
Capital expenditures, net:
Racing	$	35,637	$	20,184	$	14,027
Casinos	7,715		13,643		14,524
TwinSpires	5,778		5,908		4,427
Big Fish Games	116		—		—
Other Investments	5,240		9,036		8,320
	$	54,486	$	48,771	$	41,298