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Segment Information | 12 Months Ended
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Dec. 31, 2018
Segment Reporting [Abstract] |
Segment Information | SEGMENT INFORMATION We manage our operations through five operating segments as outlined below. In the fourth quarter of 2018, we changed our TwinSpires segment name to Online Wagering.
• | Racing: includes Churchill Downs, Arlington International Race Course ("Arlington"), Fair Grounds Race Course ("Fair Grounds") and Calder Racing;
• | Online Wagering: includes our TwinSpires business and our online sports betting and iGaming business. TwinSpires includes TwinSpires.com, Fair Grounds Account Wagering, Velocity, BetAmerica, and Bloodstock Research Information Services. There was no material activity for the year ended December 31, 2018 related to our online sports betting and iGaming business;
• | Casino, which includes Oxford Casino ("Oxford"), Riverwalk Casino ("Riverwalk"), Harlow's Casino ("Harlow’s"), Calder, Fair Grounds Slots, Video Services, LLC ("VSI"), and our 50% equity investment in MVG. The Casino segment also includes the Company's 50% equity investment in Ocean Downs and 25% equity investment in SCH, which includes investments in Saratoga Casino Hotel, Saratoga Casino Black Hawk and Ocean Downs through August 31, 2018. On August 31, 2018, the Company completed the Ocean Downs/Saratoga Transaction, which resulted in the Company's 100% ownership of Ocean Downs, and the Company having no further equity interest or management involvement in Saratoga New York or Saratoga Colorado. The Casino segment includes 100% of Ocean Downs from September 1, 2018 to December 31, 2018. The Casino segment also includes our retail BetAmerica Sportsbook which we launched in August 2018 at our two Mississippi properties;
• | Other Investments, which includes United Tote, Derby City Gaming (which opened in September 2018), and other minor investments; 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.
As a result of the Big Fish Transaction, Big Fish Games is no longer reported as an operating segment and is presented as a discontinued operation. 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 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:
• | Transaction expense, net which includes:
• | Acquisition and disposition related charges, including fair value adjustments related to earnouts and deferred payments;
• | Calder Racing exit costs; and
• | Other transaction expense, including legal, accounting and other deal-related expense;
• | Stock-based compensation expense;
• | Asset impairments;
• | Gain on Ocean Downs/Saratoga Transaction;
• | Gain on Calder land sale;
• | Loss on extinguishment of debt;
• | Pre-opening expense; and
• | Other charges, recoveries and expenses
Effective January 1, 2017, certain revenue previously included in our Corporate segment was deemed by management to be more closely aligned with our Online Wagering segment. Due to the Big Fish Transaction, the Company has presented Big Fish Games as held for sale and discontinued operations in the accompanying consolidated financial statements and these notes. The Company has not allocated corporate and other certain expenses to Big Fish Games consistent with the discontinued operations presentation in the accompanying consolidated statements of comprehensive income. Accordingly, the prior year amounts were reclassified to conform to this presentation. 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 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 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) | 2018 |  | 2017 |  | 2016
Net revenue from external customers: |  |  |  |  |
Racing: |  |  |  |  |
Churchill Downs | $ | 181.0 |  |  | $ | 161.3 |  |  | $ | 155.2 |
Arlington | 55.0 |  |  | 57.2 |  |  | 55.3 |
Fair Grounds | 35.8 |  |  | 36.3 |  |  | 38.0 |
Calder Racing | 2.5 |  |  | 2.5 |  |  | 2.6 |
Total Racing | 274.3 |  |  | 257.3 |  |  | 251.1 |
Online Wagering | 290.2 |  |  | 255.6 |  |  | 221.6 |
Casino: |  |  |  |  |
Oxford | 102.0 |  |  | 90.8 |  |  | 84.6 |
Calder | 96.1 |  |  | 85.4 |  |  | 79.1 |
Fair Grounds Slots and VSI | 81.9 |  |  | 74.8 |  |  | 73.8 |
Riverwalk | 54.5 |  |  | 48.2 |  |  | 46.1 |
Harlow’s | 50.2 |  |  | 50.0 |  |  | 48.4 |
Ocean Downs | 25.9 |  |  | — |  |  | — |
Saratoga | 0.6 |  |  | 1.3 |  |  | 0.8 |
Total Casino | 411.2 |  |  | 350.5 |  |  | 332.8 |
Other Investments | 33.3 |  |  | 19.2 |  |  | 16.9 |
Net revenue from external customers | $ | 1,009.0 |  |  | $ | 882.6 |  |  | $ | 822.4 |
Intercompany net revenue: |  |  |  |  |
Racing: |  |  |  |  |
Churchill Downs | $ | 12.7 |  |  | $ | 11.4 |  |  | $ | 10.0 |
Arlington | 6.7 |  |  | 6.3 |  |  | 5.5 |
Fair Grounds | 1.6 |  |  | 1.6 |  |  | 1.5 |
Calder Racing | 0.1 |  |  | — |  |  | — |
Total Racing | 21.1 |  |  | 19.3 |  |  | 17.0 |
Online Wagering | 1.3 |  |  | 1.1 |  |  | 1.3 |
Other Investments | 4.5 |  |  | 4.5 |  |  | 3.9 |
Eliminations | (26.9 | ) |  | (24.9 | ) |  | (22.2 | )
Intercompany net revenue | $ | — |  |  | $ | — |  |  | $ | — |
Adjusted EBITDA by segment is comprised of the following:
| Year Ended December 31, 2018
(in millions) | Racing |  | Online Wagering |  | Casino |  | Other Investments |  | Corporate
Net revenue | $ | 295.4 |  |  | $ | 291.5 |  |  | $ | 411.2 |  |  | $ | 37.8 |  |  | $ | — |
Taxes & purses | (67.3 | ) |  | (15.2 | ) |  | (139.9 | ) |  | (4.3 | ) |  | — |
Marketing & advertising | (6.5 | ) |  | (6.0 | ) |  | (14.7 | ) |  | (1.0 | ) |  | — |
Salaries & benefits | (44.0 | ) |  | (9.2 | ) |  | (58.5 | ) |  | (15.0 | ) |  | — |
Content expense | (14.4 | ) |  | (152.0 | ) |  | (0.3 | ) |  | — |  |  | — |
SG&A expense | (17.8 | ) |  | (12.1 | ) |  | (26.1 | ) |  | (5.3 | ) |  | (11.0 | )
Other operating expense | (53.6 | ) |  | (24.2 | ) |  | (45.5 | ) |  | (7.0 | ) |  | (0.4 | )
Other income | 0.6 |  |  | — |  |  | 43.3 |  |  | 0.1 |  |  | 0.2 |
Adjusted EBITDA | $ | 92.4 |  |  | $ | 72.8 |  |  | $ | 169.5 |  |  | $ | 5.3 |  |  | $ | (11.2 | )
| Year Ended December 31, 2017
(in millions) | Racing |  | Online Wagering |  | Casino |  | Other Investments |  | Corporate(a)
Net revenue | $ | 276.6 |  |  | $ | 256.7 |  |  | $ | 350.5 |  |  | $ | 23.7 |  |  | $ | — |
Taxes & purses | (65.4 | ) |  | (14.7 | ) |  | (117.0 | ) |  | — |  |  | — |
Marketing & advertising | (4.9 | ) |  | (8.2 | ) |  | (12.1 | ) |  | — |  |  | — |
Salaries & benefits | (41.7 | ) |  | (9.9 | ) |  | (53.2 | ) |  | (12.0 | ) |  | — |
Content expense | (15.2 | ) |  | (125.0 | ) |  | — |  |  | — |  |  | — |
SG&A expense | (16.8 | ) |  | (12.4 | ) |  | (22.6 | ) |  | (3.3 | ) |  | (12.2 | )
Other operating expense | (48.9 | ) |  | (22.1 | ) |  | (41.6 | ) |  | (5.1 | ) |  | (0.5 | )
Other income | 0.8 |  |  | — |  |  | 42.0 |  |  | 0.4 |  |  | 0.3 |
Adjusted EBITDA | $ | 84.5 |  |  | $ | 64.4 |  |  | $ | 146.0 |  |  | $ | 3.7 |  |  | $ | (12.4 | )
| Year Ended December 31, 2016
(in millions) | Racing |  | Online Wagering |  | Casino |  | Other Investments |  | Corporate(a)
Net revenue | $ | 268.1 |  |  | $ | 222.9 |  |  | $ | 332.8 |  |  | $ | 20.8 |  |  | $ | — |
Taxes & purses | (64.2 | ) |  | (11.6 | ) |  | (110.9 | ) |  | — |  |  | — |
Marketing & advertising | (4.6 | ) |  | (6.3 | ) |  | (12.7 | ) |  | — |  |  | — |
Salaries & benefits | (40.9 | ) |  | (9.4 | ) |  | (50.8 | ) |  | (10.9 | ) |  | — |
Content expense | (15.6 | ) |  | (107.6 | ) |  | — |  |  | — |  |  | — |
SG&A expense | (16.2 | ) |  | (12.0 | ) |  | (21.2 | ) |  | (3.4 | ) |  | (11.7 | )
Other operating expense | (47.4 | ) |  | (19.8 | ) |  | (39.1 | ) |  | (4.1 | ) |  | (0.6 | )
Other income | 0.5 |  |  | — |  |  | 27.7 |  |  | 0.3 |  |  | 0.2 |
Adjusted EBITDA | $ | 79.7 |  |  | $ | 56.2 |  |  | $ | 125.8 |  |  | $ | 2.7 |  |  | $ | (12.1 | )
(a) The Corporate segment includes corporate and other certain expenses of $3.6 million in 2017 and $3.1 million in 2016 that have not been allocated to Big Fish Games as a result of the Big Fish Transaction and the Big Fish Games segment reported as held for sale and discontinued operations in the accompanying consolidated financial statements and these notes.
| Years Ended December 31,
(in millions) | 2018 |  | 2017 |  | 2016
Reconciliation of Comprehensive Income to Adjusted EBITDA: |  |  |  |  |
Comprehensive income | $ | 353.2 |  |  | $ | 140.4 |  |  | $ | 107.5 |
Foreign currency translation, net of tax | (0.6 | ) |  | 0.1 |  |  | (0.2 | )
Change in pension benefits, net of tax | 0.2 |  |  | — |  |  | 0.8 |
Net income | 352.8 |  |  | 140.5 |  |  | 108.1 |
Income from discontinued operations, net of tax | (170.2 | ) |  | (18.1 | ) |  | (11.4 | )
Income from continuing operations, net of tax | 182.6 |  |  | 122.4 |  |  | 96.7 |
Additions: |  |  |  |  |
Depreciation and amortization | 63.6 |  |  | 56.0 |  |  | 58.4 |
Interest expense | 40.1 |  |  | 49.3 |  |  | 43.7 |
Loss on extinguishment of debt | — |  |  | 20.7 |  |  | — |
Income tax provision (benefit) | 51.3 |  |  | (19.9 | ) |  | 50.7 |
EBITDA | $ | 337.6 |  |  | $ | 228.5 |  |  | $ | 249.5 |
Adjustments to EBITDA: |  |  |  |  |
Selling, general and administrative: |  |  |  |  |
Stock-based compensation expense | $ | 17.7 |  |  | $ | 16.0 |  |  | $ | 13.3 |
Other, net | (0.6 | ) |  | 0.5 |  |  | 2.5 |
Pre-opening expense | 4.8 |  |  | 0.5 |  |  | — |
Other income, expense: |  |  |  |  |
Interest, depreciation and amortization expense related to equity investments | 13.9 |  |  | 16.7 |  |  | 10.0 |
Other charges and recoveries, net | — |  |  | — |  |  | 0.5 |
Gain on Ocean Downs/Saratoga transaction | (54.9 | ) |  | — |  |  | — |
Transaction expense, net | 10.3 |  |  | 2.3 |  |  | 0.2 |
Impairment of tangible and other intangible assets | — |  |  | 21.7 |  |  | — |
Gain on Calder land sale | — |  |  | — |  |  | (23.7 | )
Total adjustments to EBITDA | (8.8 | ) |  | 57.7 |  |  | 2.8 |
Adjusted EBITDA | $ | 328.8 |  |  | $ | 286.2 |  |  | $ | 252.3 |
Adjusted EBITDA by segment: |  |  |  |  |
Racing | $ | 92.4 |  |  | $ | 84.5 |  |  | $ | 79.7 |
Online Wagering | 72.8 |  |  | 64.4 |  |  | 56.2 |
Casino | 169.5 |  |  | 146.0 |  |  | 125.8 |
Other Investments | 5.3 |  |  | 3.7 |  |  | 2.7 |
Corporate(a) | (11.2 | ) |  | (12.4 | ) |  | (12.1 | )
Adjusted EBITDA | $ | 328.8 |  |  | $ | 286.2 |  |  | $ | 252.3 |
(a) The Corporate segment includes corporate and other certain expenses of $3.6 million in 2017 and $3.1 million in 2016 that have not been allocated to Big Fish Games as a result of the Big Fish Transaction and the Big Fish Games segment reported as held for sale and discontinued operations in the accompanying consolidated financial statements and these notes. The table below presents information about earnings (losses) from equity investments, net included in our reported segments:
| Years Ended December 31,
(in millions) | 2018 |  | 2017 |  | 2016
Casino | $ | 29.4 |  |  | $ | 25.3 |  |  | $ | 17.4 |
Other Investments | 0.2 |  |  | 0.2 |  |  | — |
| $ | 29.6 |  |  | $ | 25.5 |  |  | $ | 17.4 |
The table below presents total asset information for each of our operating segments, as well as Big Fish Games, which is no longer reported as an operating segment but is presented as a discontinued operation:
| As of December 31,
(in millions) | 2018 |  | 2017
Total assets: |  |  |
Racing | $ | 498.9 |  |  | $ | 483.0 |
Online Wagering | 222.8 |  |  | 215.9 |
Casino | 774.1 |  |  | 679.6 |
Other Investments | 78.9 |  |  | 15.2 |
Corporate | 150.5 |  |  | 73.2 |
Big Fish Games (discontinued operation) | — |  |  | 892.5 |
| $ | 1,725.2 |  |  | $ | 2,359.4 |
The table below presents total capital expenditures for each of our operating segments, as well as Big Fish Games, which is no longer reported as an operating segment but is presented as a discontinued operation:
| Years Ended December 31,
(in millions) | 2018 |  | 2017 |  | 2016
Capital expenditures: |  |  |  |  |
Racing | $ | 59.9 |  |  | $ | 57.8 |  |  | $ | 26.1 |
Online Wagering | 9.7 |  |  | 9.0 |  |  | 7.0 |
Casino | 15.9 |  |  | 37.5 |  |  | 13.9 |
Other Investments | 61.7 |  |  | 3.4 |  |  | 1.0 |
Corporate | 2.2 |  |  | 1.3 |  |  | 1.2 |
Big Fish Games (discontinued operation) | — |  |  | 7.9 |  |  | 5.5 |
| $ | 149.4 |  |  | $ | 116.9 |  |  | $ | 54.7 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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