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Segment Information | 12 Months Ended
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Dec. 31, 2016
Segment Reporting [Abstract] |
Segment Information | SEGMENT INFORMATION We manage our operations through six operating segments:
• | Racing, which includes Churchill Downs, Arlington International Race Course ("Arlington"), Fair Grounds Race Course ("Fair Grounds") and Calder;
• | Casinos, which includes Oxford Casino ("Oxford"), Riverwalk Casino ("Riverwalk"), Harlow's Casino ("Harlow’s"), Calder Casino, Fair Grounds Slots, Video Services, LLC ("VSI"), 50% of EBITDA from our joint venture, MVG, and 25% of EBITDA from our equity investment, SCH, which includes investments in Saratoga's New York facility and Saratoga's Colorado facility;
• | TwinSpires, which includes TwinSpires.com, Fair Grounds Account Wagering ("FAW"), Velocity, Bloodstock Research Information Services ("BRIS"), Bluff and I-Gaming;
• | Big Fish Games, which is a global producer and distributor of social casino, casual and mid-core free-to-play, and premium paid games for PC, Mac and mobile devices;
• | Other Investments, which includes United Tote and Capital View Casino & Resort Joint Venture ("Capital View"); and
• | Corporate, which includes miscellaneous and other revenue, compensation expense, professional fees and other general and administrative expense not allocated to our other operating segments.
Eliminations include the elimination of intersegment transactions. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following: Adjusted EBITDA includes our portion of the EBITDA from our equity investments. Adjusted EBITDA excludes:
• | Acquisition expense, net which includes:
• | Acquisition-related charges, including fair value adjustments related to earnouts and deferred payments; and
• | Transaction expense, including legal, accounting, and other deal-related expense;
• | Stock-based compensation expense;
• | Calder land sale;
• | Calder exit costs; and
• | Other charges and recoveries.
During 2016, we updated our definition of Adjusted EBITDA to exclude changes in Big Fish Games deferred revenue and to exclude depreciation and amortization from our equity investments. The prior year amounts were reclassified to conform to this presentation. We also prospectively implemented a change in accounting estimate for corporate expense allocated to other operating segments to use an activity based allocation rather than a revenue based allocation. We utilize the Adjusted EBITDA metric because we believe the inclusion or exclusion of certain non-recurring items is necessary to provide a more accurate measure of our 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 U.S. generally accepted accounting principles. 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 Consolidated Statements of Comprehensive Income. The tables below present net revenue from external customers and intercompany revenue from each of our operating segments, Adjusted EBITDA by segment and reconciles Comprehensive Income to Adjusted EBITDA:
| Years Ended December 31,
(in millions) | 2016 |  | 2015 |  | 2014
Net revenue from external customers: |  |  |  |  |
Racing: |  |  |  |  |
Churchill Downs | $ | 155.2 |  |  | $ | 151.1 |  |  | $ | 143.2 |
Arlington | 55.3 |  |  | 54.4 |  |  | 60.3 |
Fair Grounds | 38.0 |  |  | 39.8 |  |  | 38.6 |
Calder | 2.6 |  |  | 2.7 |  |  | 19.3 |
Total Racing | 251.1 |  |  | 248.0 |  |  | 261.4 |
Casinos: |  |  |  |  |
Oxford Casino | 84.6 |  |  | 80.4 |  |  | 76.5 |
Riverwalk Casino | 46.1 |  |  | 49.8 |  |  | 50.1 |
Harlow’s Casino | 48.4 |  |  | 49.0 |  |  | 50.2 |
Calder Casino | 79.1 |  |  | 77.4 |  |  | 77.0 |
Fair Grounds Slots | 36.9 |  |  | 39.0 |  |  | 40.8 |
VSI | 36.9 |  |  | 36.9 |  |  | 33.7 |
Saratoga | 0.8 |  |  | 0.4 |  |  | — |
Total Casinos | 332.8 |  |  | 332.9 |  |  | 328.3 |
TwinSpires | 220.6 |  |  | 200.2 |  |  | 191.0 |
Big Fish Games: |  |  |  |  |
Social casino | 182.5 |  |  | 193.4 |  |  | 7.6 |
Casual and mid-core free-to-play | 212.7 |  |  | 125.3 |  |  | 2.1 |
Premium | 91.0 |  |  | 95.0 |  |  | 4.2 |
Total Big Fish Games | 486.2 |  |  | 413.7 |  |  | 13.9 |
Other Investments | 16.9 |  |  | 16.6 |  |  | 16.5 |
Corporate | 1.0 |  |  | 0.9 |  |  | 1.1 |
Net revenue from external customers | $ | 1,308.6 |  |  | $ | 1,212.3 |  |  | $ | 812.2 |
Intercompany net revenue: |  |  |  |  |
Racing: |  |  |  |  |
Churchill Downs | $ | 10.0 |  |  | $ | 7.8 |  |  | $ | 7.0 |
Arlington | 5.5 |  |  | 5.1 |  |  | 5.8 |
Fair Grounds | 1.5 |  |  | 1.3 |  |  | 1.1 |
Calder | — |  |  | — |  |  | 0.7 |
Total Racing | 17.0 |  |  | 14.2 |  |  | 14.6 |
TwinSpires | 1.3 |  |  | 1.1 |  |  | 1.0 |
Other Investments | 3.9 |  |  | 3.5 |  |  | 4.1 |
Eliminations | (22.2 | ) |  | (18.8 | ) |  | (19.7 | )
Intercompany net revenue | $ | — |  |  | $ | — |  |  | $ | — |
Adjusted EBITDA by segment is comprised of the following:
| Year Ended December 31, 2016
(in millions) | Racing |  | Casinos |  | TwinSpires |  | Big Fish Games |  | Other Investments |  | Corporate
Net revenue | $ | 268.1 |  |  | $ | 332.8 |  |  | $ | 221.9 |  |  | $ | 486.2 |  |  | $ | 20.8 |  |  | $ | 1.0 |
Taxes & purses | (64.2 | ) |  | (110.9 | ) |  | (11.7 | ) |  | — |  |  | — |  |  | — |
Platform & development fees | — |  |  | — |  |  | — |  |  | (179.9 | ) |  | — |  |  | — |
Marketing & advertising | (4.6 | ) |  | (12.7 | ) |  | (6.3 | ) |  | (127.9 | ) |  | — |  |  | — |
Salaries & benefits | (40.9 | ) |  | (50.8 | ) |  | (9.4 | ) |  | (25.0 | ) |  | (10.9 | ) |  | — |
Content expense | (15.6 | ) |  | — |  |  | (107.6 | ) |  | — |  |  | — |  |  | — |
SG&A expense | (16.2 | ) |  | (21.2 | ) |  | (11.9 | ) |  | (18.5 | ) |  | (3.4 | ) |  | (8.6 | )
Research & development | — |  |  | — |  |  | — |  |  | (39.0 | ) |  | — |  |  | — |
Other operating expense | (47.4 | ) |  | (39.1 | ) |  | (19.8 | ) |  | (15.9 | ) |  | (4.1 | ) |  | (0.6 | )
Other income (expense) | 0.5 |  |  | 27.7 |  |  | — |  |  | (0.9 | ) |  | 0.3 |  |  | 0.2 |
Adjusted EBITDA | $ | 79.7 |  |  | $ | 125.8 |  |  | $ | 55.2 |  |  | $ | 79.1 |  |  | $ | 2.7 |  |  | $ | (8.0 | )
| Year Ended December 31, 2015
(in millions) | Racing |  | Casinos |  | TwinSpires |  | Big Fish Games |  | Other Investments |  | Corporate
Net revenue | $ | 262.2 |  |  | $ | 332.9 |  |  | $ | 201.3 |  |  | $ | 413.7 |  |  | $ | 20.1 |  |  | $ | 0.9 |
Taxes & purses | (63.6 | ) |  | (109.9 | ) |  | (10.6 | ) |  | — |  |  | — |  |  | — |
Platform & development fees | — |  |  | — |  |  | — |  |  | (143.6 | ) |  | — |  |  | — |
Marketing & advertising | (6.1 | ) |  | (12.4 | ) |  | (4.8 | ) |  | (107.7 | ) |  | — |  |  | — |
Salaries & benefits | (39.2 | ) |  | (49.7 | ) |  | (9.9 | ) |  | (22.3 | ) |  | (11.1 | ) |  | — |
Content expense | (14.6 | ) |  | — |  |  | (97.9 | ) |  | — |  |  | — |  |  | — |
SG&A expense | (16.6 | ) |  | (24.1 | ) |  | (11.5 | ) |  | (16.8 | ) |  | (2.5 | ) |  | (6.3 | )
Research & development | — |  |  | — |  |  | — |  |  | (39.4 | ) |  | — |  |  | — |
Other operating expense | (50.9 | ) |  | (41.3 | ) |  | (18.0 | ) |  | (14.8 | ) |  | (3.8 | ) |  | 1.1 |
Other income (expense) | 0.6 |  |  | 19.4 |  |  | — |  |  | (0.6 | ) |  | 0.2 |  |  | 0.1 |
Adjusted EBITDA | $ | 71.8 |  |  | $ | 114.9 |  |  | $ | 48.6 |  |  | $ | 68.5 |  |  | $ | 2.9 |  |  | $ | (4.2 | )
| Year Ended December 31, 2014
(in millions) | Racing |  | Casinos |  | TwinSpires |  | Big Fish Games |  | Other Investments |  | Corporate
Net revenue | $ | 276.0 |  |  | $ | 328.3 |  |  | $ | 192.0 |  |  | $ | 13.9 |  |  | $ | 20.6 |  |  | $ | 1.1 |
Taxes & purses | (72.7 | ) |  | (108.0 | ) |  | (9.2 | ) |  | — |  |  | — |  |  | — |
Platform & development fees | — |  |  | — |  |  | — |  |  | (5.1 | ) |  | — |  |  | — |
Marketing & advertising | (6.1 | ) |  | (12.5 | ) |  | (4.7 | ) |  | (5.7 | ) |  | — |  |  | — |
Salaries & benefits | (45.1 | ) |  | (49.1 | ) |  | (11.5 | ) |  | (2.6 | ) |  | (11.8 | ) |  | (0.2 | )
Content expense | (19.0 | ) |  | — |  |  | (92.6 | ) |  | — |  |  | — |  |  | — |
SG&A expense | (18.4 | ) |  | (25.5 | ) |  | (13.0 | ) |  | (0.8 | ) |  | (2.8 | ) |  | (5.3 | )
Research & development | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Other operating expense | (54.1 | ) |  | (43.5 | ) |  | (21.2 | ) |  | (0.4 | ) |  | (4.5 | ) |  | (0.7 | )
Other income (expense) | 0.6 |  |  | 17.5 |  |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
Adjusted EBITDA | $ | 61.2 |  |  | $ | 107.2 |  |  | $ | 39.8 |  |  | $ | (0.7 | ) |  | $ | 1.6 |  |  | $ | (5.0 | )
| Years Ended December 31,
(in millions) | 2016 |  | 2015 |  | 2014
Reconciliation of Comprehensive Income to Adjusted EBITDA: |  |  |  |  |
Comprehensive income | $ | 107.5 |  |  | $ | 64.7 |  |  | $ | 46.3 |
Foreign currency translation, net of tax | (0.2 | ) |  | 0.5 |  |  | 0.1 |
Net change in pension benefits, net of tax | 0.8 |  |  | — |  |  | — |
Net income | 108.1 |  |  | 65.2 |  |  | 46.4 |
Additions: |  |  |  |  |
Depreciation and amortization | 108.6 |  |  | 109.7 |  |  | 68.3 |
Interest expense | 43.7 |  |  | 28.6 |  |  | 20.8 |
Income tax provision | 60.0 |  |  | 46.9 |  |  | 30.1 |
EBITDA | $ | 320.4 |  |  | $ | 250.4 |  |  | $ | 165.6 |
Adjustments to EBITDA: |  |  |  |  |
Selling, general and administrative: |  |  |  |  |
Stock-based compensation expense | 18.9 |  |  | 13.8 |  |  | 11.9 |
Other charges | 2.5 |  |  | — |  |  | (0.4 | )
TwinSpires operating expense | — |  |  | — |  |  | 3.2 |
Other income, expense: |  |  |  |  |
Interest, depreciation and amortization expense related to equity investments | 10.0 |  |  | 8.5 |  |  | 8.7 |
Other charges and recoveries, net | 0.5 |  |  | (5.8 | ) |  | 2.6 |
Acquisition expense, net | 3.4 |  |  | 21.7 |  |  | 10.2 |
Gain on Calder land sale | (23.7 | ) |  | — |  |  | — |
Calder exit costs | 2.5 |  |  | 13.9 |  |  | 2.3 |
Total adjustments to EBITDA | 14.1 |  |  | 52.1 |  |  | 38.5 |
Adjusted EBITDA | $ | 334.5 |  |  | $ | 302.5 |  |  | $ | 204.1 |
Adjusted EBITDA by segment: |  |  |  |  |
Racing | $ | 79.7 |  |  | $ | 71.8 |  |  | $ | 61.2 |
Casinos | 125.8 |  |  | 114.9 |  |  | 107.2 |
TwinSpires | 55.2 |  |  | 48.6 |  |  | 39.8 |
Big Fish Games | 79.1 |  |  | 68.5 |  |  | (0.7 | )
Other Investments | 2.7 |  |  | 2.9 |  |  | 1.6 |
Corporate | (8.0 | ) |  | (4.2 | ) |  | (5.0 | )
Adjusted EBITDA | $ | 334.5 |  |  | $ | 302.5 |  |  | $ | 204.1 |
The table below presents information about earnings (losses) from equity investments, net included in our reported segments:
| Years Ended December 31,
(in millions) | 2016 |  | 2015 |  | 2014
Casinos | $ | 17.4 |  |  | $ | 10.9 |  |  | $ | 8.9 |
TwinSpires | — |  |  | — |  |  | (0.1 | )
Other Investments | — |  |  | 0.3 |  |  | (2.5 | )
| $ | 17.4 |  |  | $ | 11.2 |  |  | $ | 6.3 |
The table below presents total asset information for each of our operating segments:
| As of December 31,
(in millions) | 2016 |  | 2015
Total assets: |  |  |
Racing | $ | 454.6 |  |  | $ | 437.1 |
Casinos | 628.7 |  |  | 631.3 |
TwinSpires | 209.9 |  |  | 202.4 |
Big Fish Games | 893.8 |  |  | 947.1 |
Other Investments | 11.1 |  |  | 12.2 |
Corporate | 56.3 |  |  | 47.3 |
| $ | 2,254.4 |  |  | $ | 2,277.4 |
The table below presents total capital expenditures for each of our operating segments:
| Years Ended December 31,
(in millions) | 2016 |  | 2015 |  | 2014
Capital expenditures: |  |  |  |  |
Racing | $ | 26.1 |  |  | $ | 12.3 |  |  | $ | 33.9 |
Casinos | 13.9 |  |  | 18.8 |  |  | 7.7 |
TwinSpires | 7.0 |  |  | 4.3 |  |  | 5.8 |
Big Fish Games | 5.5 |  |  | 6.4 |  |  | 0.1 |
Other Investments | 1.0 |  |  | 0.8 |  |  | 5.3 |
Corporate | 1.2 |  |  | 0.9 |  |  | 1.7 |
| $ | 54.7 |  |  | $ | 43.5 |  |  | $ | 54.5 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8981-108599 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9038-108599 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 33 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8971-108599 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8595-108599 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8380-108599 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8984-108599 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9031-108599 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9054-108599 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8538-108599 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 29 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8864-108599 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8924-108599 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8906-108599 + Details
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