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Segment Information
 3 Months Ended
Mar. 31, 2021
Segment Reporting [Abstract]  
Segment Information SEGMENT INFORMATION
We manage our operations through three reportable segments:
•Live and Historical Racing
The Live and Historical Racing segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack, Derby City Gaming, Oak Grove, Turfway Park, and Newport.
Churchill Downs Racetrack is the home of the Kentucky Derby and conducts live racing during the year. Derby City Gaming is a historical racing machine facility that operates under the Churchill Downs pari-mutuel racing license at its ancillary training facility in Louisville, Kentucky. Oak Grove conducts live harness racing during the year and operates a HRM facility under its pari-mutuel racing license. Turfway Park conducts live racing during the year, and Newport is an ancillary HRM facility that operates under the Turfway Park pari-mutuel racing license.
Our Live and Historical Racing properties earn commissions primarily from pari-mutuel wagering on live and historical races; simulcast fees earned from other wagering sites; admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services (collectively "racing event-related services"), as well as food and beverage services.
•TwinSpires
The TwinSpires segment includes the revenue and expenses for the online horse racing and the online and retail sports betting and iGaming wagering business.
TwinSpires Horse Racing operates the online horse racing wagering business for TwinSpires.com, BetAmerica.com, and other white-label platforms; facilitates high dollar wagering by international customers (through Velocity); and provides the Bloodstock Research Information Services platform for horse racing statistical data.
Our sports betting and iGaming business includes the retail and online TwinSpires sports betting and casino gaming operations.
Our TwinSpires Sports and Casino business operates our sports betting and casino iGaming platform in multiple states. The Company launched its mobile sports betting app in Michigan in January 2021 and Tennessee in March 2021. The TwinSpires Sports and Casino business includes the mobile and online sports betting and casino results and the results of our six retail sportsbooks, which include our wholly-owned properties at Harlow’s Casino Resort and Spa (“Harlow’s”), Presque Isle, and Riverwalk Casino Hotel (“Riverwalk”), as well as in Colorado, Indiana and Michigan which utilize a third party's casino license.
•Gaming
The Gaming segment includes revenue and expenses for the casino properties and associated racetrack or jai alai facilities which support the casino license. The Gaming segment has approximately 11,000 slot machines and video lottery terminals ("VLTs") and 200 table games located in eight states.
The Gaming segment revenue and Adjusted EBITDA includes the following properties:
◦Calder Casino and Racing ("Calder")
◦Fair Grounds Slots, Fair Grounds Race Course, and Video Services, LLC ("VSI") (collectively, "Fair Grounds and VSI")
◦Harlow’s
◦Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") management agreement
◦Ocean Downs Casino and Racetrack ("Ocean Downs")
◦Oxford Casino and Hotel ("Oxford")
◦Presque Isle
◦Riverwalk
The Gaming segment Adjusted EBITDA also includes the Adjusted EBITDA related to the Company’s equity investments in the following:
◦61.3% equity investment in Rivers Des Plaines
◦50% equity investment in MVG
The Gaming segment generates revenue and expenses from slot machines, table games, VLTs, video poker, retail sports betting, ancillary food and beverage services, hotel services, commission on pari-mutuel wagering, racing event-related services, and / or other miscellaneous operations.
We have aggregated the following businesses as well as certain corporate operations, and other immaterial joint ventures in "All Other" to reconcile to consolidated results:
•Arlington International Racecourse ("Arlington")
•United Tote
•Corporate
We conduct our business through these reportable segments and report net revenue and operating expense associated with these reportable segments in the accompanying condensed consolidated statements of comprehensive income (loss). 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 includes the following adjustments:
Adjusted EBITDA includes our portion of EBITDA from our equity investments.
Adjusted EBITDA excludes:
•Transaction expense, net which includes:
–Acquisition and disposition related charges; and
–Other transaction expense, including legal, accounting, and other deal-related expense;
•Stock-based compensation expense;
•Rivers Des Plaines' impact on our investments in unconsolidated affiliates from:
–The impact of changes in fair value of interest rate swaps; and
–Legal reserves and transaction costs;
•Asset impairments;
•Legal reserves;
•Pre-opening expense; and
•Other charges, recoveries and expenses
We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable 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 condensed consolidated statements of comprehensive income (loss).
The tables below present net revenue from external customers and intercompany revenue from each of our segments, net revenue from external customers for each group of similar services, Adjusted EBITDA by segment, and a reconciliation of comprehensive income (loss) to Adjusted EBITDA:
Three Months Ended March 31,
(in millions)20212020
Net revenue from external customers:
Live and Historical Racing:
Churchill Downs Racetrack$2.0 $1.9 
Derby City Gaming32.9 21.6 
Oak Grove19.4 — 
Turfway Park4.5 4.6 
Newport4.4 — 
Total Live and Historical Racing63.2 28.1 
TwinSpires:
Horse Racing92.7 66.6 
Sports and Casino7.0 2.5 
Total TwinSpires99.7 69.1 
Gaming:
Fair Grounds and VSI38.3 31.6 
Presque Isle23.8 27.0 
Calder20.9 21.8 
Oxford15.7 20.1 
Ocean Downs20.0 14.8 
Riverwalk 14.4 12.0 
Harlow’s 14.0 11.3 
Lady Luck Nemacolin4.9 7.3 
Total Gaming152.0 145.9 
All Other9.4 9.8 
Net revenue from external customers$324.3 $252.9 
Three Months Ended March 31,
(in millions)20212020
Intercompany net revenue:
Live and Historical Racing$1.5 $1.0 
TwinSpires0.4 0.3 
Gaming2.0 1.5 
All Other2.7 2.4 
Eliminations(6.6)(5.2)
Intercompany net revenue$— $— 
Three Months Ended March 31, 2021
(in millions)Live and Historical RacingTwinSpiresGamingTotal SegmentsAll OtherTotal
Net revenue from external customers
Pari-mutuel:
Live and simulcast racing$5.9 $89.2 $11.7 $106.8 $5.1 $111.9 
Historical racing(a)
52.9 — — 52.9 — 52.9 
Racing event-related services— — 0.7 0.7 — 0.7 
Gaming(a)
— 7.0 132.5 139.5 — 139.5 
Other(a)
4.4 3.5 7.1 15.0 4.3 19.3 
Total$63.2 $99.7 $152.0 $314.9 $9.4 $324.3 
Three Months Ended March 31, 2020
(in millions)Live and Historical RacingTwinSpiresGamingTotal SegmentsAll OtherTotal
Net revenue from external customers
Pari-mutuel:
Live and simulcast racing$5.2 $63.9 $9.9 $79.0 $5.7 $84.7 
Historical racing(a)
20.4 — — 20.4 — 20.4 
Racing event-related services— — 1.3 1.3 0.1 1.4 
Gaming(a)
— 2.5 119.8 122.3 — 122.3 
Other(a)
2.5 2.7 14.9 20.1 4.0 24.1 
Total$28.1 $69.1 $145.9 $243.1 $9.8 $252.9 
(a) Food and beverage, hotel, and other services furnished to customers for free as an inducement to wager or through the redemption of our customers' loyalty points are recorded at the estimated standalone selling prices in Other revenue with a corresponding offset recorded as a reduction in historical pari-mutuel revenue for HRMs or gaming revenue for our casino properties. These amounts were $3.7 million for the three months ended March 31, 2021 and $7.6 million for the three months ended March 31, 2020.
Adjusted EBITDA by segment is comprised of the following:
Three Months Ended March 31, 2021
(in millions)Live and Historical RacingTwinSpiresGaming
Net revenue$64.7 $100.1 $154.0 
Taxes and purses(20.0)(6.4)(59.3)
Marketing and advertising(2.1)(8.5)(1.4)
Salaries and benefits(10.0)(3.1)(19.9)
Content expense(0.6)(46.5)(1.0)
Selling, general and administrative expense(3.0)(2.2)(6.0)
Other operating expense(10.7)(10.9)(15.5)
Other income — — 31.5 
Adjusted EBITDA$18.3 $22.5 $82.4 
Three Months Ended March 31, 2020
(in millions)Live and Historical RacingTwinSpiresGaming
Net revenue$29.1 $69.4 $147.4 
Taxes and purses(9.5)(4.3)(58.7)
Marketing and advertising(1.2)(3.5)(5.3)
Salaries and benefits(7.2)(3.5)(29.5)
Content expense(0.7)(32.6)(1.0)
Selling, general and administrative expense(1.7)(1.4)(6.7)
Other operating expense(7.8)(8.1)(19.5)
Other income — — 21.2 
Adjusted EBITDA$1.0 $16.0 $47.9 
Three Months Ended March 31,
(in millions)20212020
Reconciliation of Comprehensive Income (Loss) to Adjusted EBITDA:
Net income (loss) and comprehensive income (loss) attributable to Churchill Downs Incorporated$36.1 $(23.4)
Net loss attributable to noncontrolling interest— 0.1 
Net income (loss) before noncontrolling interest36.1 (23.5)
Loss from discontinued operations, net of tax— 0.9 
Income (loss) from continuing operations, net of tax36.1 (22.6)
Additions:
Depreciation and amortization26.0 22.0 
Interest expense19.4 19.3 
Income tax provision (benefit) 16.2 (11.6)
EBITDA$97.7 $7.1 
Adjustments to EBITDA:
Selling, general and administrative:
Stock-based compensation expense $5.5 $4.3 
Pre-opening expense and other expense0.6 1.7 
Impairment of intangible assets— 17.5 
Transaction expense, net0.1 0.3 
Other income, expense:
Interest, depreciation and amortization expense related to equity investments9.6 9.5 
Changes in fair value of Rivers Des Plaines' interest rate swaps(4.2)14.9 
Rivers Des Plaines' legal reserves and transaction costs1.3 — 
Total adjustments to EBITDA12.9 48.2 
Adjusted EBITDA$110.6 $55.3 
Adjusted EBITDA by segment:
Live and Historical Racing$18.3 $1.0 
TwinSpires22.5 16.0 
Gaming82.4 47.9 
Total segment Adjusted EBITDA123.2 64.9 
All Other(12.6)(9.6)
Total Adjusted EBITDA$110.6 $55.3 
The table below presents information about equity in income (loss) of unconsolidated affiliates included in our reported segments:
Three Months Ended March 31,
(in millions)20212020
Gaming$24.9 $(3.3)
As noted in Note 1, Description of Business, we updated our segments and moved our Oak Grove, Turfway Park and Newport businesses into the Live and Historical Racing segment with Churchill Downs Racetrack and Derby City Gaming. As a result, we moved $196.4 million of assets from Oak Grove, $52.1 million of assets from Turfway Park, and $37.9 million from Newport from All Other segment assets to the Live and Historical Racing segment at December 31, 2020. As noted in Note 9, Debt, as a result of our proceeds received from the Term Loan B-1 and Additional 2028 Notes, our All Other total assets increased $99.8 million at March 31, 2021 compared to December 31, 2020, which was primarily an increase in cash and cash equivalents. There were no other significant changes in our segment assets at March 31, 2021 compared to December 31, 2020.
The table below presents total capital expenditures for each of our segments:
Three Months Ended March 31,
(in millions)20212020
Capital expenditures, net:
Live and Historical Racing$7.8 $39.7 
TwinSpires2.3 3.5 
Gaming1.6 3.3 
Total segment capital expenditures11.7 46.5 
All Other0.6 1.8 
Total capital expenditures$12.3 $48.3