XML 45 R16.htm IDEA: XBRL DOCUMENT
v2.4.0.6

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2011
Income Taxes [Abstract] |
Income Taxes | NOTE 9—INCOME TAXES Components of the provision for income taxes are as follows (in thousands):
|  | 2011 |  |  | 2010 |  |  | 2009 |
Current provision: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 16,918 |  |  | $ | (1,620) |  |  | $ | 13,568 |
State and local |  |  | 3,423 |  |  |  | 1,211 |  |  |  | 3,435 |
Foreign |  |  | (149 | ) |  |  | 116 |  |  |  | — |
|  |  | 20,192 |  |  |  | (293 | ) |  |  | 17,003 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 12,798 |  |  |  | 9,464 |  |  |  | (171 | )
State and local |  |  | 1,299 |  |  |  | (830 | ) |  |  | 3 |
|  |  | 14,097 |  |  |  | 8,634 |  |  |  | (168 | )
|  | $ | 34,289 |  |  | $ | 8,341 |  |  | $ | 16,835 |
The Company's income tax expense is different from the amount computed by applying the federal statutory income tax rate to income before taxes as follows (in thousands):
|  | 2011 |  |  | 2010 |  |  | 2009 |
Federal statutory tax on earnings before income taxes |  | $ | 33,280 |  |  | $ | 9,765 |  |  | $ | 12,081 |
State income taxes, net of federal income tax benefit |  |  | 3,283 |  |  |  | 299 |  |  |  | 2,406 |
Non-deductible lobbying and contributions |  |  | 517 |  |  |  | 439 |  |  |  | 349 |
Tax credits and incentives |  |  | (775 | ) |  |  | (36 | ) |  |  | 58 |
Non-deductible transaction costs |  |  | — |  |  |  | 531 |  |  |  | — |
Tax adjustments |  |  | (434 | ) |  |  | (1,960 | ) |  |  | (7,899 | )
Accruals and settlements related to tax audits |  |  | (426 | ) |  |  | (853 | ) |  |  | 9,624 |
Valuation allowance |  |  | 105 |  |  |  | — |  |  |  | — |
Change in effective state tax rates |  |  | (714 | ) |  |  | 32 |  |  |  | — |
Other permanent differences |  |  | (547 | ) |  |  | 124 |  |  |  | 216 |
|  | $ | 34,289 |  |  | $ | 8,341 |  |  | $ | 16,835 |
During 2003, the Company entered into a Tax Increment Financing ("TIF") Agreement with the Commonwealth of Kentucky. Pursuant to this agreement, the Company is entitled to receive reimbursement for 80% of the increase in Kentucky income and sales tax resulting from its 2005 renovation of the Churchill facility. During 2011, the Company resolved uncertainties with the Commonwealth of Kentucky related to the computation of the tax increase and the Company recognized a $3.1 million reduction of its operating expenses related to the years 2005 through 2011. In addition, the Company recognized a $1.3 million reduction in its income tax expense, net of federal taxes, related to the years 2005 through 2011. The Company received $0.3 million and $0.2 million from the Commonwealth of Kentucky related to the reductions in operating expenses and income tax expense, respectively. As of December 31, 2011, the Company has recorded a sales tax receivable of $2.8 million and an income tax receivable of $1.1 million related to the reimbursement. For the year ended December 31, 2011, the Company received a refund of $8.5 million related to the overpayment of its 2010 federal income taxes and a refund of $1.9 million related to an amended prior year federal income tax return that served to adjust state lobbying expense deductions. During 2010, the Company identified adjustments to permanent tax differences related to years prior to January 1, 2008. As a result, the Company increased income taxes receivable and reduced income tax expense by $1.9 million during 2010. The adjustment relates to incorrectly treating deductible, local lobbying expenses incurred during 2005 and 2007 as non-deductible. These adjustments were recorded during the year ended December 31, 2010, as the corrections were deemed immaterial to both the results of operations for the year ended December 31, 2010, and all prior periods affected. During 2005 and 2006, the Company received approximately $22.9 million of proceeds related to the sale of PSLs sold in connection with the renovation of Churchill Downs. The PSLs that were sold included those with terms of 30 years and 5 years and provided the purchaser the right to purchase tickets to the Kentucky Derby, Kentucky Oaks and Breeders' Cup races each year during the term of the license. Accordingly, for tax purposes, the Company deferred the income for the PSLs over the respective terms of the licenses. During 2009, the Internal Revenue Service (the "IRS") proposed that the income related to the sale of the PSLs is taxable during the period the proceeds are received by the Company (the "Proposed Audit Adjustment"). As a result, the Proposed Audit Adjustment serves to increase the amount of income taxes due for each of the tax years 2005 and 2006. On April 14, 2010, the Company defended its position of deferring income related to the sale of PSLs using a fast track mediation process offered by the IRS. During the fast track mediation process, the Company agreed to change its method of accounting for proceeds related to the sale of PSLs to the deferral method provided for in Revenue Procedure 2004-34, effective for the taxable year ended December 31, 2007. As a result, the taxable income for each of the years ended December 31, 2007 and 2008 increased by $19.1 million and $0.4 million, respectively. In accordance with the settlement entered into during the fast track mediation process, the Company recognized an income tax benefit from continuing operations of $0.7 million during the year ended December 31, 2010, reflecting a reduction of interest expense previously estimated, partially offset by higher income tax due than previously estimated. Components of the Company's deferred tax assets and liabilities are as follows (in thousands):
|  | 2011 |  |  | 2010 |
Deferred tax assets: |  |  |  |  |  |  |  |
Deferred compensation plans |  | $ | 11,054 |  |  | $ | 7,578 |
Deferred income |  |  | 7,656 |  |  |  | 6,497 |
Allowance for uncollectible receivables |  |  | 412 |  |  |  | 978 |
Deferred liabilities |  |  | 5,294 |  |  |  | 4,057 |
Net operating losses and credit carryforward |  |  | 25,828 |  |  |  | 33,264 |
Other |  |  | 189 |  |  |  | 56 |
Deferred tax assets |  |  | 50,433 |  |  |  | 52,430 |
Valuation allowance |  |  | (1,487 | ) |  |  | (1,381 | )
Net deferred tax asset |  |  | 48,946 |  |  |  | 51,049 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Intangible assets in excess of tax basis |  |  | 17,762 |  |  |  | 18,870 |
Property and equipment in excess of tax basis |  |  | 38,009 |  |  |  | 25,166 |
Other |  |  | — |  |  |  | 308 |
Deferred tax liabilities |  |  | 55,771 |  |  |  | 44,344 |
Net deferred tax asset (liability) |  | $ | (6,825 | ) |  | $ | 6,705 |
Income taxes are classified in the balance sheet as follows: |  |  |  |  |  |  |  |
Net current deferred tax asset |  | $ | 8,727 |  |  | $ | 16,136 |
Net non-current deferred tax liability |  |  | (15,552 | ) |  |  | (9,431 | )
|  | $ | (6,825 | ) |  | $ | 6,705 |
As of December 31, 2011, the Company had federal net operating losses of $20.3 million, which were acquired in conjunction with the acquisition of Youbet.com. The utilization of these losses is limited on an annual basis pursuant to IRC § 382. However, the Company believes that it will be able to fully utilize all of these losses. In addition, the Company has $5.4 million of state net operating losses; $2.8 million of this loss carryforward was acquired in conjunction with the acquisition of Youbet.com. These losses may be subject to annual limitations similar to IRC § 382. The Company has recorded a valuation allowance of $1.4 million against the state net operating losses due to the fact that it is unlikely that it will generate income in certain states, which is necessary to utilize the assets. The changes in the valuation allowance for deferred tax assets for the years ended December 31, 2011 and 2010 are as follows (in thousands):
|  | 2011 |  |  | 2010 |
Balance at beginning of the year |  | $ | 1,381 |  |  | $ | — |
Charged to costs and expenses |  |  | 106 |  |  |  | — |
Charged to comprehensive income |  |  | — |  |  |  | — |
Charged to other accounts |  |  | — |  |  |  | 1,381 |
Deductions |  |  | — |  |  |  | — |
Balance at end of the year |  | $ | 1,487 |  |  | $ | 1,381 |
As of December 31, 2011, the Company had approximately $2.1 million of total gross unrecognized tax benefits. If these benefits were recognized, there would be a $1.4 million effect to the annual effective tax rate. The Company anticipates a decrease in its unrecognized tax positions of approximately $0.8 million during the next twelve months. This anticipated decrease is primarily due to the expiration of statutes of limitations. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|  | 2011 |  |  | 2010 |  |  | 2009 |
Balance as of January 1 |  | $ | 2,926 |  |  | $ | 2,967 |  |  | $ | 2,583 |
Additions for tax positions related to the current year |  |  | — |  |  |  | 585 |  |  |  | 572 |
Additions for tax positions of prior years |  |  | — |  |  |  | — |  |  |  | — |
Reductions for tax positions of prior years |  |  | (817 | ) |  |  | (626 | ) |  |  | (188 | )
Balance as of December 31 |  | $ | 2,109 |  |  | $ | 2,926 |  |  | $ | 2,967 |
The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense and penalties in selling, general and administrative expenses in the Consolidated Statements of Net Earnings and Comprehensive Earnings. The Company accrued approximately $0.2 million of interest for each of the years ended December 31, 2011 and 2010.

X
- Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration