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Acquisition And New Ventures (Notes) | 9 Months Ended
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Sep. 30, 2015
Acquisitions and Joint Ventures [Abstract] |
Acquisitions And New Ventures | NOTE 2 — NEW VENTURES & ACQUISITIONS California Internet Gaming During May 2015, the Company's Internet real-money gaming operations, Churchill Downs Interactive Gaming ("I-Gaming"), entered into an agreement with a licensed California card room operator ("Licensed Operator") to provide Internet-based interactive gaming services within California, should enabling legislation be enacted which would permit such activities. The term of the agreement commences after enabling legislation and upon the acceptance of the first customer wager, continuing thereafter for a ten-year period. The venture provides for I-Gaming and the Licensed Operator to jointly provide a platform for operations, to obtain and maintain required licenses and regulatory approvals and to otherwise market and operate the venture, which may include poker and other real-money gaming activities, to California residents. At this time, it is difficult to assess whether this legislation will be enacted into law, and the effect it would have on the Company's business, financial condition and results of operation. Big Fish Games On December 16, 2014, the Company completed the acquisition of Big Fish Games. Big Fish Games, which has locations in Seattle, Washington, Oakland, California and Luxembourg, employs approximately 599 employees and develops casual games for PCs and mobile devices worldwide. Big Fish Games operates in three business lines: premium paid, casino and casual free-to-play. The Company acquired Big Fish Games to leverage its casino and casual game experience and assembled workforce, and to position itself in the mobile and online game industry. The Company financed the acquisition with borrowings under its Amended and Restated Credit Agreement (the “Senior Secured Credit Facility”) and the addition of a $200 million Term Loan Facility (“Term Loan”) to the existing Senior Secured Credit Facility. The purchase price consideration was $838.3 million, composed of $401.7 million in cash, a deferred payment to the founder of Big Fish Games of $85.3 million, payable over three years and recorded at fair value of $78.0 million as of the acquisition date, an estimated payable to the Big Fish Games equity holders related to an income tax refund of $18.1 million and $15.8 million payable in 157,115 shares of the common stock of the Company. In addition, the Company may be required to pay additional variable cash consideration that is contingent upon the achievement of certain performance milestones of Big Fish Games through December 31, 2015 and is limited to a maximum of $350 million based on achievement of certain non-GAAP earnings targets before interest and tax. The estimated fair value of the earnout liability at the acquisition date was $324.7 million. The Company estimated the fair value of the deferred payment and the earnout liability using a discounted cash flows analysis over the period in which the obligation is expected to be settled, and applied a discount rate based on the Company’s cost of debt. The cost of debt as of the closing date was based on the observed market yields of the Company’s Senior Unsecured Notes issued in December of 2013 and was adjusted for the difference in seniority and term of the deferred payment and the earnout liability. See Note 7 for further discussion of the fair value measurement of the deferred payment and the earnout liability. During the three months ended September 30, 2015, the Company finalized its 2014 federal provision to return income tax adjustments. The Company recorded a measurement period adjustment and increased goodwill by $0.4 million. As detailed in Note 6, the Company adopted ASU 2015-16, Simplifying the Accounting for Measurement Period Adjustments. The Company also increased deferred tax liabilities by $0.5 million and increased accounts receivable and income tax receivable by $0.1 million. The primary area of the preliminary valuation that was not finalized at September 30, 2015 related to the 2014 state provision to return income tax adjustments which the Company expects to complete during the fourth quarter of 2015. Furthermore, during the three months ended March 31, 2015, the Company obtained additional information to assist it in determining the values of the liabilities assumed at the acquisition date and changes which occurred during the measurement period. A measurement period adjustment was recorded related to estimated payroll taxes associated with the earnout liability. The Company retroactively adjusted the December 31, 2014 Condensed Consolidated Balance Sheet and increased deferred tax assets by $0.8 million, increased goodwill by $1.4 million and increased accrued expenses by $2.2 million. In addition, the Company made deferred payments of $12.7 million to Big Fish Games former equity holders for the receipt of a federal income tax refund and working capital adjustments related to the acquisition. The following table summarizes (in thousands) the current fair value of the assets acquired and liabilities assumed, net of cash acquired of $34.7 million, at the date of acquisition.
| Total
Accounts receivable | $ | 19,361 |
Income taxes receivable | 18,107 |
Prepaid expenses | 9,727 |
Deferred income taxes | 1,682 |
Other assets | 1,780 |
Property and equipment | 14,632 |
Goodwill | 540,744 |
Other intangible assets | 362,863 |
Total assets acquired | 968,896 |
Accounts payable | 9,064 |
Accrued expenses | 19,217 |
Income taxes payable | 210 |
Deferred revenue | 37,250 |
Deferred income taxes | 96,676 |
Other liabilities | 2,821 |
Total liabilities acquired | 165,238 |
Purchase price, net of cash acquired | $ | 803,658 |
During the three and nine months ended September 30, 2015, Big Fish Games contributed revenues of $103.5 million and $300.0 million, respectively, and earnings from continuing operations before provision for income taxes and acquisition-related charges of $9.0 million and $10.0 million, respectively. Pro Forma The following table illustrates the effect on net revenues and earnings from continuing operations for the three and nine months ended September 30, 2014, respectively, as if the Company had acquired Big Fish Games as of the beginning of 2014. The unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have occurred had the acquisition of Big Fish Games been consummated at the beginning of 2014 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30,
| 2014 | 2014
Net revenues | $ | 259,063 |  | $ | 882,518 |
Earnings from continuing operations | $ | 1,542 |  | $ | 55,437 |
Saratoga Harness Racing, Inc. Equity Investment and Management Agreement On October 2, 2015, the Company completed the acquisition of a 25% ownership interest in Saratoga Casino Holdings LLC ("SCH") for approximately $24.8 million. SCH is a newly formed entity that includes Saratoga Casino and Raceway in Saratoga Springs, New York and a 50% interest in a joint venture with Delaware North Companies to manage the Gideon Putnam Hotel and Resort in Saratoga Springs. Saratoga Casino and Raceway includes a $40 million hotel expansion under construction which is scheduled to open during the spring of 2016. The purchase price remains subject to final adjustments for SCH's working capital related to the transferred New York operations. Under the terms of the original agreement, Saratoga Harness Racing, Inc. ("SHRI") would also transfer its controlling interest in Saratoga Casino Black Hawk in Black Hawk, Colorado to SCH. During the three months ended September 30, 2015, the Company commenced a five-year management agreement pursuant to which it will manage Saratoga Casino and Raceway. Approvals from the Colorado Division of Gaming are expected to require several more months for this transaction, at which time, the Company will pay the remainder of the purchase price of approximately $6.4 million to SHRI for the Company's pro-rata ownership of the Colorado operations, subject to adjustments for working capital, and commence a five-year management agreement for Saratoga Casino Black Hawk.

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- Definition Tabular disclosure of a material business combination completed during the period, including background, timing, and recognized assets and liabilities. This table does not include leveraged buyouts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1486-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1392-128463 + Details
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