Segment Information

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Information

NOTE 10 — SEGMENT INFORMATION

The Company operates in the following five segments: (1) Big Fish Games; (2) Casinos, which includes video poker and casino operations at Calder Casino, Fair Grounds Slots, Harlow’s Casino Resort & Spa ("Harlow's"), the Company's equity investment in MVG, Oxford Casino (“Oxford”), Riverwalk Casino Hotel ("Riverwalk") and Video Services, LLC (“VSI”); (3) TwinSpires, 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, prior to its sale during January 2015; (4) Racing, which includes Churchill Downs, Arlington International Race Course ("Arlington") and its ten off-track betting facilities ("OTBs"), and Fair Grounds Race Course ("Fair Grounds") and the pari-mutuel activity generated at its twelve OTBs; and (5) Other Investments, which includes United Tote, Bluff, I-Gaming and the Company's other minor investments. Eliminations include the elimination of intersegment transactions.

In order to evaluate the performance of these operating segments internally, the Company's chief operating decision maker uses Adjusted EBITDA (defined as earnings before interest, taxes, depreciation, amortization, and adjusted for insurance recoveries net of losses, 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. The Company utilizes 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. 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 table below presents information about the reported segments for the three and six months ended June 30, 2015 and 2014 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net revenues from external customers:
Big Fish Games	$	104,526		$	—		$	196,429		$	—
Casinos:
Calder Casino	19,786			19,873			40,165			40,456
Fair Grounds Slots	9,053			9,586			20,535			21,370
VSI	9,389			8,479			18,573			17,233
Harlow's Casino	12,050			11,777			25,730			26,228
Oxford Casino	20,958			19,402			38,461			36,921
Riverwalk Casino	12,534			12,662			25,721			25,957
Total Casinos	83,770			81,779			169,185			168,165
TwinSpires	60,748			57,076			106,063			103,160
Racing:
Churchill Downs	126,792			118,348			128,800			120,490
Arlington	18,119			21,193			23,931			27,315
Calder	717			9,714			1,391			17,738
Fair Grounds	9,808			10,180			25,752			24,471
Total Racing	155,436			159,435			179,874			190,014
Other Investments	4,502			4,778			8,107			8,615
Corporate	257			404			491			659
Net revenues from external customers	$	409,239		$	303,472		$	660,149		$	470,613
Intercompany net revenues:
TwinSpires	$	250		$	244		$	547		$	474
Racing:
Churchill Downs	5,384			4,945			5,617			5,173
Arlington	1,486			1,777			2,444			2,794
Calder	—			351			—			707
Fair Grounds	—			(3		)	858			729
Total Racing	6,870			7,070			8,919			9,403
Other Investments	1,093			1,210			1,888			2,108
Eliminations	(8,213		)	(8,524		)	(11,354		)	(11,985		)
Net revenues	$	—		$	—		$	—		$	—
Reconciliation of segment Adjusted EBITDA to net earnings:
Big Fish Games	$	28,238		$	—		$	48,264		$	—
Casinos	27,955			26,174			56,742			53,425
TwinSpires	16,717			14,087			27,907			24,037
Racing	85,195			78,079			75,998			67,829
Other Investments	781			(223		)	113			(1,576		)
Total segment Adjusted EBITDA	158,886			118,117			209,024			143,715
Corporate Adjusted EBITDA	(1,687		)	(1,141		)	(3,554		)	(2,247		)
Insurance recoveries, net of losses	—			—			—			431
Big Fish Games acquisition charges	(8,200		)	—			(14,600		)	—
Big Fish Games changes in deferred revenue	(8,220		)	—			(21,096		)	—
Share-based compensation	(3,372		)	(3,113		)	(6,095		)	(8,354		)
MVG interest expense, net	(536		)	(597		)	(1,090		)	(1,137		)
Other charges and recoveries, net	(777		)	(450		)	5,361			(477		)
Depreciation and amortization	(27,270		)	(15,760		)	(54,677		)	(31,044		)
Interest (expense) income, net	(7,106		)	(4,956		)	(14,372		)	(9,925		)
Income tax provision	(46,674		)	(34,767		)	(45,415		)	(34,329		)
Net earnings	55,044			57,333			53,486			56,633
Foreign currency translation, net of tax effect	(28		)	—			(415		)	—
Comprehensive earnings	$	55,016		$	57,333		$	53,071		$	56,633

The table below presents equity in earnings of unconsolidated investments included in the Company’s reported segments for the three months and six ended June 30, 2015 and 2014 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015		2014
Casinos	$	2,859	$	2,796		$	5,417	$	4,837
TwinSpires	—		28			—		248
Other Investments	48		(318		)	438		(289		)
	$	2,907	$	2,506		$	5,855	$	4,796

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

	June 30, 2015		December 31, 2014
Total assets:
Big Fish Games	$	1,032,810	$	1,009,668
Casinos	616,015		621,240
TwinSpires	188,194		182,322
Racing	426,176		518,517
Other Investments	35,795		30,757
	$	2,298,990	$	2,362,504

The table below presents total capital expenditures for the reported segments for the six months ended June 30, 2015 and 2014 (in thousands):

	Six Months Ended June 30,
	2015		2014
Capital expenditures:
Big Fish Games	$	1,924	$	—
Casinos	11,421		4,119
TwinSpires	1,997		3,174
Racing	6,582		27,915
Other Investments	757		3,267
	$	22,681	$	38,475