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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Churchill Downs Inc | NASDAQ:CHDN | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.91 | 0.68% | 134.02 | 130.94 | 135.35 | 135.505 | 133.02 | 134.18 | 497,871 | 01:00:00 |
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Kentucky
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61-0156015
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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600 North Hurstbourne Parkway, Suite 400 Louisville, Kentucky 40222
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(502) 636-4400
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(Address of principal executive offices) (zip code)
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(Registrant’s telephone number, including area code)
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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o
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Emerging growth company
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o
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PART I.
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FINANCIAL INFORMATION
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions, except per common share data)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net revenue:
|
|
|
|
|
|
|
|
||||||||
Racing
|
$
|
38.8
|
|
|
$
|
38.5
|
|
|
$
|
228.0
|
|
|
$
|
220.8
|
|
Casinos
|
87.5
|
|
|
83.0
|
|
|
263.3
|
|
|
253.9
|
|
||||
TwinSpires
|
65.9
|
|
|
55.1
|
|
|
198.4
|
|
|
173.1
|
|
||||
Big Fish Games
|
117.9
|
|
|
122.3
|
|
|
342.5
|
|
|
369.6
|
|
||||
Other Investments
|
4.7
|
|
|
4.5
|
|
|
14.0
|
|
|
12.9
|
|
||||
Total net revenue
|
314.8
|
|
|
303.4
|
|
|
1,046.2
|
|
|
1,030.3
|
|
||||
Operating expense:
|
|
|
|
|
|
|
|
||||||||
Racing
|
40.8
|
|
|
41.5
|
|
|
153.7
|
|
|
149.4
|
|
||||
Casinos
|
60.7
|
|
|
61.4
|
|
|
185.5
|
|
|
182.8
|
|
||||
TwinSpires
|
42.8
|
|
|
36.8
|
|
|
130.6
|
|
|
112.8
|
|
||||
Big Fish Games
|
95.2
|
|
|
94.5
|
|
|
271.5
|
|
|
309.5
|
|
||||
Other Investments
|
4.3
|
|
|
3.9
|
|
|
13.1
|
|
|
11.9
|
|
||||
Corporate
|
0.6
|
|
|
0.5
|
|
|
1.8
|
|
|
1.5
|
|
||||
Selling, general and administrative expense
|
26.8
|
|
|
27.6
|
|
|
77.6
|
|
|
75.3
|
|
||||
Research and development
|
9.7
|
|
|
8.8
|
|
|
29.9
|
|
|
29.3
|
|
||||
Calder exit costs
|
0.2
|
|
|
0.5
|
|
|
0.8
|
|
|
2.4
|
|
||||
Acquisition expense, net
|
0.7
|
|
|
1.1
|
|
|
1.7
|
|
|
4.9
|
|
||||
Total operating expense
|
281.8
|
|
|
276.6
|
|
|
866.2
|
|
|
879.8
|
|
||||
Operating income
|
33.0
|
|
|
26.8
|
|
|
180.0
|
|
|
150.5
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(12.6
|
)
|
|
(11.1
|
)
|
|
(36.0
|
)
|
|
(32.8
|
)
|
||||
Equity in income of unconsolidated investments
|
8.9
|
|
|
4.9
|
|
|
22.7
|
|
|
13.5
|
|
||||
Miscellaneous, net
|
(1.0
|
)
|
|
(0.2
|
)
|
|
(0.8
|
)
|
|
(0.3
|
)
|
||||
Total other income (expense)
|
(4.7
|
)
|
|
(6.4
|
)
|
|
(14.1
|
)
|
|
(19.6
|
)
|
||||
Income from operations before provision for income taxes
|
28.3
|
|
|
20.4
|
|
|
165.9
|
|
|
130.9
|
|
||||
Income tax provision
|
(11.6
|
)
|
|
(11.7
|
)
|
|
(63.6
|
)
|
|
(49.6
|
)
|
||||
Net income
|
$
|
16.7
|
|
|
$
|
8.7
|
|
|
$
|
102.3
|
|
|
$
|
81.3
|
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|
||||||||
Net income per common share data:
|
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|
||||||||
Basic net income
|
$
|
1.09
|
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|
$
|
0.52
|
|
|
$
|
6.43
|
|
|
$
|
4.85
|
|
Diluted net income
|
$
|
1.08
|
|
|
$
|
0.52
|
|
|
$
|
6.32
|
|
|
$
|
4.79
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
15.3
|
|
|
16.4
|
|
|
15.9
|
|
|
16.5
|
|
||||
Diluted
|
15.5
|
|
|
16.9
|
|
|
16.2
|
|
|
17.0
|
|
||||
|
|
|
|
|
|
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|
||||||||
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation, net of tax
|
0.5
|
|
|
—
|
|
|
0.1
|
|
|
0.2
|
|
||||
Change in pension benefits, net of tax
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
||||
Other comprehensive gain
|
0.6
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
||||
Comprehensive income
|
$
|
17.3
|
|
|
$
|
8.7
|
|
|
$
|
102.5
|
|
|
$
|
81.5
|
|
(in millions)
|
September 30, 2017
|
|
December 31, 2016
|
||||
ASSETS
|
|
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|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
57.8
|
|
|
$
|
48.7
|
|
Restricted cash
|
37.3
|
|
|
34.3
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $3.9 at September 30, 2017 and $3.5 at December 31, 2016
|
74.0
|
|
|
81.4
|
|
||
Receivable from escrow
|
—
|
|
|
13.6
|
|
||
Income taxes receivable
|
—
|
|
|
7.6
|
|
||
Game software development, net
|
6.4
|
|
|
9.6
|
|
||
Other current assets
|
59.3
|
|
|
50.8
|
|
||
Total current assets
|
234.8
|
|
|
246.0
|
|
||
Property and equipment, net
|
619.4
|
|
|
574.4
|
|
||
Game software development, net
|
13.3
|
|
|
6.3
|
|
||
Investment in and advances to unconsolidated affiliates
|
173.9
|
|
|
139.1
|
|
||
Goodwill
|
848.3
|
|
|
832.2
|
|
||
Other intangible assets, net
|
425.4
|
|
|
445.7
|
|
||
Other assets
|
12.3
|
|
|
10.7
|
|
||
Total assets
|
$
|
2,327.4
|
|
|
$
|
2,254.4
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
61.6
|
|
|
$
|
53.2
|
|
Purses payable
|
19.2
|
|
|
12.5
|
|
||
Account wagering deposit liabilities
|
25.9
|
|
|
25.0
|
|
||
Accrued expense
|
111.2
|
|
|
100.1
|
|
||
Income taxes payable
|
16.9
|
|
|
—
|
|
||
Deferred revenue - Big Fish Games
|
85.6
|
|
|
81.3
|
|
||
Deferred revenue - all other
|
12.0
|
|
|
64.3
|
|
||
Big Fish Games deferred payment, current
|
28.3
|
|
|
27.8
|
|
||
Big Fish Games earnout liability, current
|
33.9
|
|
|
67.9
|
|
||
Current maturities of long-term debt
|
17.7
|
|
|
14.2
|
|
||
Dividends payable
|
—
|
|
|
21.8
|
|
||
Total current liabilities
|
412.3
|
|
|
468.1
|
|
||
Long-term debt (net of current maturities and loan origination fees of $0.5 at both September 30, 2017 and December 31, 2016)
|
510.7
|
|
|
312.8
|
|
||
Notes payable (including premium of $2.1 at September 30, 2017 and $2.5 at December 31, 2016 and net of debt issuance costs of $6.5 at September 30, 2017 and $7.8 at December 31, 2016)
|
595.6
|
|
|
594.7
|
|
||
Deferred revenue - all other
|
23.1
|
|
|
24.4
|
|
||
Deferred income taxes
|
140.2
|
|
|
153.1
|
|
||
Other liabilities
|
19.2
|
|
|
16.3
|
|
||
Total liabilities
|
1,701.1
|
|
|
1,569.4
|
|
||
Commitments and contingencies
|
|
|
|
||||
Shareholders' equity:
|
|
|
|
||||
Preferred stock, no par value; 0.3 shares authorized; no shares issued
|
—
|
|
|
—
|
|
||
Common stock, no par value; 50.0 shares authorized; 15.4 shares issued at September 30, 2017 and 16.5 shares issued at December 31, 2016
|
—
|
|
|
116.5
|
|
||
Retained earnings
|
627.3
|
|
|
569.7
|
|
||
Accumulated other comprehensive loss
|
(1.0
|
)
|
|
(1.2
|
)
|
||
Total shareholders' equity
|
626.3
|
|
|
685.0
|
|
||
Total liabilities and shareholders' equity
|
$
|
2,327.4
|
|
|
$
|
2,254.4
|
|
|
Nine Months Ended September 30,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
102.3
|
|
|
$
|
81.3
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
73.3
|
|
|
81.4
|
|
||
Game software development amortization
|
13.5
|
|
|
11.7
|
|
||
Acquisition expenses, net
|
1.7
|
|
|
4.9
|
|
||
Distributed earnings from equity investments
|
11.7
|
|
|
12.3
|
|
||
Earnings from equity investments, net
|
(22.7
|
)
|
|
(13.5
|
)
|
||
Stock-based compensation
|
17.5
|
|
|
14.3
|
|
||
Deferred income taxes
|
(13.0
|
)
|
|
0.5
|
|
||
Big Fish Games earnout payment
|
(2.5
|
)
|
|
(19.7
|
)
|
||
Other
|
1.0
|
|
|
1.6
|
|
||
Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of business acquisitions and dispositions:
|
|
|
|
||||
Other current assets and liabilities
|
(0.8
|
)
|
|
11.7
|
|
||
Game software development
|
(17.1
|
)
|
|
(16.3
|
)
|
||
Income taxes
|
24.5
|
|
|
28.1
|
|
||
Deferred revenue
|
(27.4
|
)
|
|
(7.5
|
)
|
||
Other assets and liabilities
|
2.2
|
|
|
(1.8
|
)
|
||
Net cash provided by operating activities
|
164.2
|
|
|
189.0
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital maintenance expenditures
|
(26.7
|
)
|
|
(24.2
|
)
|
||
Capital project expenditures
|
(62.4
|
)
|
|
(19.9
|
)
|
||
Acquisition of gaming licenses
|
(2.3
|
)
|
|
(2.5
|
)
|
||
Acquisition of a business
|
(23.1
|
)
|
|
—
|
|
||
Receivable from escrow
|
13.6
|
|
|
—
|
|
||
Investment in unconsolidated affiliates
|
(24.0
|
)
|
|
—
|
|
||
Other
|
0.3
|
|
|
0.4
|
|
||
Net cash used in investing activities
|
(124.6
|
)
|
|
(46.2
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Borrowings on bank line of credit
|
769.1
|
|
|
564.7
|
|
||
Repayments of bank line of credit
|
(567.7
|
)
|
|
(427.2
|
)
|
||
Big Fish Games earnout payment
|
(31.7
|
)
|
|
(261.9
|
)
|
||
Payment of dividends
|
(21.8
|
)
|
|
(19.1
|
)
|
||
Repurchase of common stock
|
(181.1
|
)
|
|
(20.0
|
)
|
||
Common stock issued
|
2.1
|
|
|
2.2
|
|
||
Loan origination fees and debit issuance costs
|
—
|
|
|
(1.4
|
)
|
||
Other
|
(0.6
|
)
|
|
2.7
|
|
||
Net cash used in financing activities
|
(31.7
|
)
|
|
(160.0
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
7.9
|
|
|
(17.2
|
)
|
||
Effect of exchange rate changes on cash
|
1.2
|
|
|
(0.4
|
)
|
||
Cash and cash equivalents, beginning of period
|
48.7
|
|
|
74.5
|
|
||
Cash and cash equivalents, end of period
|
$
|
57.8
|
|
|
$
|
56.9
|
|
|
Nine Months Ended September 30,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Interest
|
$
|
25.4
|
|
|
$
|
21.8
|
|
Income taxes
|
48.0
|
|
|
21.6
|
|
||
Schedule of non-cash investing and financing activities:
|
|
|
|
||||
Issuance of common stock in connection with the Company's restricted stock plans
|
18.5
|
|
|
18.8
|
|
||
Property and equipment additions included in accounts payable and accrued expenses
|
5.6
|
|
|
—
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Casino revenue
|
$
|
38.4
|
|
|
$
|
36.1
|
|
|
$
|
117.9
|
|
|
$
|
108.7
|
|
Non-casino revenue
|
1.2
|
|
|
1.2
|
|
|
5.1
|
|
|
5.2
|
|
||||
Net revenue
|
39.6
|
|
|
37.3
|
|
|
123.0
|
|
|
113.9
|
|
||||
Operating and SG&A expense
|
28.1
|
|
|
26.4
|
|
|
85.7
|
|
|
79.7
|
|
||||
Depreciation & amortization
|
3.2
|
|
|
3.4
|
|
|
9.5
|
|
|
9.9
|
|
||||
Operating income
|
8.3
|
|
|
7.5
|
|
|
27.8
|
|
|
24.3
|
|
||||
Interest and other expense, net
|
(0.6
|
)
|
|
(0.8
|
)
|
|
(1.9
|
)
|
|
(2.6
|
)
|
||||
Net income
|
$
|
7.7
|
|
|
$
|
6.7
|
|
|
$
|
25.9
|
|
|
$
|
21.7
|
|
(in millions)
|
September 30, 2017
|
|
December 31, 2016
|
||||
Assets
|
|
|
|
||||
Current assets
|
$
|
16.5
|
|
|
$
|
18.7
|
|
Property and equipment, net
|
104.6
|
|
|
109.8
|
|
||
Other assets, net
|
107.7
|
|
|
105.0
|
|
||
Total assets
|
$
|
228.8
|
|
|
$
|
233.5
|
|
|
|
|
|
||||
Liabilities and Members' Equity
|
|
|
|
||||
Current liabilities
|
$
|
9.0
|
|
|
$
|
12.5
|
|
Current portion of long-term debt
|
8.3
|
|
|
8.3
|
|
||
Long-term debt, excluding current portion
|
8.9
|
|
|
14.0
|
|
||
Other liabilities
|
0.1
|
|
|
0.1
|
|
||
Members' equity
|
202.5
|
|
|
198.6
|
|
||
Total liabilities and members' equity
|
$
|
228.8
|
|
|
$
|
233.5
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Equity in income of unconsolidated investments
|
$
|
3.8
|
|
|
$
|
3.4
|
|
|
$
|
12.9
|
|
|
$
|
10.9
|
|
(in millions)
|
Racing
|
|
Casinos
|
|
TwinSpires
|
|
Big Fish Games
|
|
Total
|
||||||||||
Balances as of December 31, 2016
|
$
|
51.7
|
|
|
$
|
117.6
|
|
|
$
|
132.1
|
|
|
$
|
530.8
|
|
|
$
|
832.2
|
|
Additions
|
—
|
|
|
—
|
|
|
16.1
|
|
|
—
|
|
|
16.1
|
|
|||||
Balances as of September 30, 2017
|
$
|
51.7
|
|
|
$
|
117.6
|
|
|
$
|
148.2
|
|
|
$
|
530.8
|
|
|
$
|
848.3
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
(in millions)
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Definite-lived intangible assets
|
$
|
180.4
|
|
|
$
|
(113.3
|
)
|
|
$
|
67.1
|
|
|
$
|
187.4
|
|
|
$
|
(100.0
|
)
|
|
$
|
87.4
|
|
Indefinite-lived intangible assets
|
|
|
|
|
358.3
|
|
|
|
|
|
|
358.3
|
|
||||||||||
Total
|
|
|
|
|
|
|
$
|
425.4
|
|
|
|
|
|
|
$
|
445.7
|
|
|
September 30, 2017
|
||||||
(in millions)
|
Level 1
|
|
Level 3
|
||||
Cash equivalents and restricted cash
|
$
|
36.0
|
|
|
$
|
—
|
|
Big Fish Games deferred payments
|
—
|
|
|
28.3
|
|
||
Big Fish Games earnout liability
|
—
|
|
|
33.9
|
|
||
Total
|
$
|
36.0
|
|
|
$
|
62.2
|
|
|
December 31, 2016
|
||||||
(in millions)
|
Level 1
|
|
Level 3
|
||||
Cash equivalents and restricted cash
|
$
|
34.1
|
|
|
$
|
—
|
|
Big Fish Games deferred payments
|
—
|
|
|
27.8
|
|
||
Big Fish Games earnout liability
|
—
|
|
|
67.9
|
|
||
Total
|
$
|
34.1
|
|
|
$
|
95.7
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
||||||||||
(in millions)
|
Big Fish Games Deferred Payments
|
|
Big Fish Games Earnout Liability
|
|
Total
|
||||||
Balances as of December 31, 2016
|
$
|
27.8
|
|
|
$
|
67.9
|
|
|
$
|
95.7
|
|
Payments
|
—
|
|
|
(34.2
|
)
|
|
(34.2
|
)
|
|||
Change in fair value
|
0.5
|
|
|
0.2
|
|
|
0.7
|
|
|||
Balances as of September 30, 2017
|
$
|
28.3
|
|
|
$
|
33.9
|
|
|
$
|
62.2
|
|
•
|
25,119
restricted stock units to NEOs vesting equally over
three
service periods ending December 31, 2017, December 31, 2018 and December 31, 2019;
|
•
|
28,467
performance share units ("PSU") to NEOs with vesting contingent on financial performance measures at the end of a
34
-month performance period ending December 31, 2019; and
|
•
|
61,530
restricted stock shares to Grantees vesting equally over
three
service periods ending February 17, 2018, February 17, 2019 and February 17, 2020.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions, except per share data)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator for basic income per common share:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
16.7
|
|
|
$
|
8.7
|
|
|
$
|
102.3
|
|
|
$
|
81.3
|
|
Net income allocated to participating securities
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(1.4
|
)
|
||||
Numerator for basic income per common share
|
$
|
16.7
|
|
|
$
|
8.6
|
|
|
$
|
102.2
|
|
|
$
|
79.9
|
|
|
|
|
|
|
|
|
|
||||||||
Numerator for diluted income per common share
|
$
|
16.7
|
|
|
$
|
8.7
|
|
|
$
|
102.3
|
|
|
$
|
81.3
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator for basic and diluted net income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic-weighted average shares
|
15.3
|
|
|
16.4
|
|
|
15.9
|
|
|
16.5
|
|
||||
Plus dilutive effect of stock awards
|
0.2
|
|
|
0.2
|
|
|
0.2
|
|
|
0.2
|
|
||||
Plus dilutive effect of participating securities
|
—
|
|
|
0.3
|
|
|
0.1
|
|
|
0.3
|
|
||||
Diluted-adjusted weighted average shares
|
15.5
|
|
|
16.9
|
|
|
16.2
|
|
|
17.0
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
1.09
|
|
|
$
|
0.52
|
|
|
$
|
6.43
|
|
|
$
|
4.85
|
|
Diluted
|
$
|
1.08
|
|
|
$
|
0.52
|
|
|
$
|
6.32
|
|
|
$
|
4.79
|
|
•
|
Racing, which includes Churchill Downs Racetrack ("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, 50% equity investment in Ocean Downs and 25% of EBITDA from our equity investment, SCH, which includes investments in Saratoga Casino Hotel, Saratoga Casino Black Hawk and Ocean Downs;
|
•
|
TwinSpires, which includes TwinSpires.com, Fair Grounds Account Wagering, Velocity, BetAmerica, Bloodstock Research Information Services, Bluff Media and Churchill Downs Interactive 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 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.
|
•
|
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;
|
•
|
Gain on Calder land sale;
|
•
|
Calder exit costs; and
|
•
|
Other charges and recoveries.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net revenue from external customers:
|
|
|
|
|
|
|
|
||||||||
Racing:
|
|
|
|
|
|
|
|
||||||||
Churchill Downs
|
$
|
8.1
|
|
|
$
|
8.7
|
|
|
$
|
147.1
|
|
|
$
|
140.1
|
|
Arlington
|
25.0
|
|
|
24.0
|
|
|
51.5
|
|
|
49.8
|
|
||||
Fair Grounds
|
5.0
|
|
|
5.1
|
|
|
27.5
|
|
|
28.9
|
|
||||
Calder
|
0.7
|
|
|
0.7
|
|
|
1.9
|
|
|
2.0
|
|
||||
Total Racing
|
38.8
|
|
|
38.5
|
|
|
228.0
|
|
|
220.8
|
|
||||
Casinos:
|
|
|
|
|
|
|
|
||||||||
Oxford Casino
|
25.2
|
|
|
24.4
|
|
|
69.2
|
|
|
65.4
|
|
||||
Riverwalk Casino
|
12.2
|
|
|
10.6
|
|
|
35.7
|
|
|
35.7
|
|
||||
Harlow’s Casino
|
12.3
|
|
|
11.7
|
|
|
38.3
|
|
|
36.6
|
|
||||
Calder Casino
|
19.4
|
|
|
19.0
|
|
|
62.6
|
|
|
59.8
|
|
||||
Fair Grounds Slots
|
8.7
|
|
|
8.5
|
|
|
27.7
|
|
|
27.9
|
|
||||
VSI
|
9.3
|
|
|
8.6
|
|
|
28.8
|
|
|
27.9
|
|
||||
Saratoga
|
0.4
|
|
|
0.2
|
|
|
1.0
|
|
|
0.6
|
|
||||
Total Casinos
|
87.5
|
|
|
83.0
|
|
|
263.3
|
|
|
253.9
|
|
||||
TwinSpires
|
65.9
|
|
|
55.1
|
|
|
198.4
|
|
|
173.1
|
|
||||
Big Fish Games:
|
|
|
|
|
|
|
|
||||||||
Social casino
|
53.4
|
|
|
44.3
|
|
|
149.1
|
|
|
138.3
|
|
||||
Casual and mid-core free-to-play
|
46.1
|
|
|
56.1
|
|
|
135.3
|
|
|
162.5
|
|
||||
Premium
|
18.4
|
|
|
21.9
|
|
|
58.1
|
|
|
68.8
|
|
||||
Total Big Fish Games
|
117.9
|
|
|
122.3
|
|
|
342.5
|
|
|
369.6
|
|
||||
Other Investments
|
4.7
|
|
|
4.5
|
|
|
14.0
|
|
|
12.9
|
|
||||
Net revenue from external customers
|
$
|
314.8
|
|
|
$
|
303.4
|
|
|
$
|
1,046.2
|
|
|
$
|
1,030.3
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Intercompany net revenue:
|
|
|
|
|
|
|
|
||||||||
Racing:
|
|
|
|
|
|
|
|
||||||||
Churchill Downs
|
$
|
0.9
|
|
|
$
|
0.9
|
|
|
$
|
9.6
|
|
|
$
|
8.2
|
|
Arlington
|
2.2
|
|
|
1.9
|
|
|
5.1
|
|
|
4.5
|
|
||||
Fair Grounds
|
—
|
|
|
—
|
|
|
1.0
|
|
|
1.0
|
|
||||
Total Racing
|
3.1
|
|
|
2.8
|
|
|
15.7
|
|
|
13.7
|
|
||||
TwinSpires
|
0.2
|
|
|
0.4
|
|
|
0.8
|
|
|
1.0
|
|
||||
Other Investments
|
1.0
|
|
|
0.7
|
|
|
3.7
|
|
|
3.0
|
|
||||
Eliminations
|
(4.3
|
)
|
|
(3.9
|
)
|
|
(20.2
|
)
|
|
(17.7
|
)
|
||||
Intercompany net revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Three Months Ended September 30, 2017
|
||||||||||||||||||||||
(in millions)
|
Racing
|
|
Casinos
|
|
TwinSpires
|
|
Big Fish
Games |
|
Other Investments
|
|
Corporate
|
||||||||||||
Net revenue
|
$
|
41.9
|
|
|
$
|
87.5
|
|
|
$
|
66.1
|
|
|
$
|
117.9
|
|
|
$
|
5.7
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Taxes & purses
|
(11.2
|
)
|
|
(28.9
|
)
|
|
(4.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Platform & development fees
|
—
|
|
|
—
|
|
|
—
|
|
|
(42.1
|
)
|
|
—
|
|
|
—
|
|
||||||
Marketing & advertising
|
(1.0
|
)
|
|
(3.1
|
)
|
|
(1.1
|
)
|
|
(31.8
|
)
|
|
—
|
|
|
—
|
|
||||||
Salaries & benefits
|
(10.3
|
)
|
|
(13.5
|
)
|
|
(2.3
|
)
|
|
(6.8
|
)
|
|
(2.9
|
)
|
|
—
|
|
||||||
Content expense
|
(3.8
|
)
|
|
—
|
|
|
(30.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
SG&A expense
|
(3.9
|
)
|
|
(5.5
|
)
|
|
(3.2
|
)
|
|
(5.3
|
)
|
|
(0.8
|
)
|
|
(2.2
|
)
|
||||||
Research & development
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.7
|
)
|
|
—
|
|
|
—
|
|
||||||
Other operating expense
|
(10.1
|
)
|
|
(9.8
|
)
|
|
(5.3
|
)
|
|
(4.0
|
)
|
|
(1.1
|
)
|
|
0.1
|
|
||||||
Other income (expense)
|
0.1
|
|
|
12.8
|
|
|
—
|
|
|
(1.2
|
)
|
|
0.2
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted EBITDA
|
$
|
1.7
|
|
|
$
|
39.5
|
|
|
$
|
18.8
|
|
|
$
|
17.0
|
|
|
$
|
1.1
|
|
|
$
|
(2.1
|
)
|
|
Three Months Ended September 30, 2016
|
||||||||||||||||||||||
(in millions)
|
Racing
|
|
Casinos
|
|
TwinSpires
|
|
Big Fish
Games |
|
Other Investments
|
|
Corporate
|
||||||||||||
Net revenue
|
$
|
41.3
|
|
|
$
|
83.0
|
|
|
$
|
55.5
|
|
|
$
|
122.3
|
|
|
$
|
5.2
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Taxes & purses
|
(11.2
|
)
|
|
(28.1
|
)
|
|
(4.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Platform & development fees
|
—
|
|
|
—
|
|
|
—
|
|
|
(45.2
|
)
|
|
—
|
|
|
—
|
|
||||||
Marketing & advertising
|
(1.1
|
)
|
|
(3.0
|
)
|
|
(1.0
|
)
|
|
(26.3
|
)
|
|
—
|
|
|
—
|
|
||||||
Salaries & benefits
|
(10.3
|
)
|
|
(13.4
|
)
|
|
(2.3
|
)
|
|
(6.2
|
)
|
|
(2.7
|
)
|
|
—
|
|
||||||
Content expense
|
(3.9
|
)
|
|
—
|
|
|
(26.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
SG&A expense
|
(4.0
|
)
|
|
(5.4
|
)
|
|
(3.0
|
)
|
|
(4.4
|
)
|
|
(0.9
|
)
|
|
(2.2
|
)
|
||||||
Research & development
|
—
|
|
|
—
|
|
|
—
|
|
|
(8.8
|
)
|
|
—
|
|
|
—
|
|
||||||
Other operating expense
|
(10.5
|
)
|
|
(10.0
|
)
|
|
(4.5
|
)
|
|
(3.9
|
)
|
|
(0.9
|
)
|
|
(0.2
|
)
|
||||||
Other income (expense)
|
0.1
|
|
|
7.3
|
|
|
—
|
|
|
(0.3
|
)
|
|
0.1
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted EBITDA
|
$
|
0.4
|
|
|
$
|
30.4
|
|
|
$
|
14.7
|
|
|
$
|
27.2
|
|
|
$
|
0.8
|
|
|
$
|
(2.4
|
)
|
|
Nine Months Ended September 30, 2017
|
||||||||||||||||||||||
(in millions)
|
Racing
|
|
Casinos
|
|
TwinSpires
|
|
Big Fish
Games |
|
Other Investments
|
|
Corporate
|
||||||||||||
Net revenue
|
$
|
243.7
|
|
|
$
|
263.3
|
|
|
$
|
199.2
|
|
|
$
|
342.5
|
|
|
$
|
17.7
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Taxes & purses
|
(54.3
|
)
|
|
(87.7
|
)
|
|
(11.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Platform & development fees
|
—
|
|
|
—
|
|
|
—
|
|
|
(124.0
|
)
|
|
—
|
|
|
—
|
|
||||||
Marketing & advertising
|
(3.9
|
)
|
|
(9.1
|
)
|
|
(6.7
|
)
|
|
(84.3
|
)
|
|
—
|
|
|
—
|
|
||||||
Salaries & benefits
|
(32.4
|
)
|
|
(40.0
|
)
|
|
(7.1
|
)
|
|
(20.7
|
)
|
|
(9.1
|
)
|
|
—
|
|
||||||
Content expense
|
(11.7
|
)
|
|
—
|
|
|
(96.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
SG&A expense
|
(11.9
|
)
|
|
(16.3
|
)
|
|
(8.9
|
)
|
|
(15.1
|
)
|
|
(2.3
|
)
|
|
(6.2
|
)
|
||||||
Research & development
|
—
|
|
|
—
|
|
|
—
|
|
|
(29.9
|
)
|
|
—
|
|
|
—
|
|
||||||
Other operating expense
|
(39.4
|
)
|
|
(31.0
|
)
|
|
(17.1
|
)
|
|
(11.3
|
)
|
|
(3.6
|
)
|
|
(0.4
|
)
|
||||||
Other income (expense)
|
0.6
|
|
|
33.1
|
|
|
—
|
|
|
(1.6
|
)
|
|
0.3
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted EBITDA
|
$
|
90.7
|
|
|
$
|
112.3
|
|
|
$
|
51.3
|
|
|
$
|
55.6
|
|
|
$
|
3.0
|
|
|
$
|
(6.6
|
)
|
|
Nine Months Ended September 30, 2016
|
||||||||||||||||||||||
(in millions)
|
Racing
|
|
Casinos
|
|
TwinSpires
|
|
Big Fish
Games |
|
Other Investments
|
|
Corporate
|
||||||||||||
Net revenue
|
$
|
234.5
|
|
|
$
|
253.9
|
|
|
$
|
174.1
|
|
|
$
|
369.6
|
|
|
$
|
15.9
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Taxes & purses
|
(52.7
|
)
|
|
(84.6
|
)
|
|
(8.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Platform & development fees
|
—
|
|
|
—
|
|
|
—
|
|
|
(135.2
|
)
|
|
—
|
|
|
—
|
|
||||||
Marketing & advertising
|
(3.8
|
)
|
|
(9.5
|
)
|
|
(5.2
|
)
|
|
(106.2
|
)
|
|
—
|
|
|
—
|
|
||||||
Salaries & benefits
|
(31.4
|
)
|
|
(38.2
|
)
|
|
(6.9
|
)
|
|
(18.4
|
)
|
|
(8.2
|
)
|
|
—
|
|
||||||
Content expense
|
(12.0
|
)
|
|
—
|
|
|
(83.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
SG&A expense
|
(11.9
|
)
|
|
(15.8
|
)
|
|
(8.6
|
)
|
|
(13.6
|
)
|
|
(2.5
|
)
|
|
(6.2
|
)
|
||||||
Research & development
|
—
|
|
|
—
|
|
|
—
|
|
|
(29.3
|
)
|
|
—
|
|
|
—
|
|
||||||
Other operating expense
|
(38.8
|
)
|
|
(29.4
|
)
|
|
(15.6
|
)
|
|
(11.8
|
)
|
|
(2.6
|
)
|
|
(0.5
|
)
|
||||||
Other income (expense)
|
0.4
|
|
|
21.6
|
|
|
—
|
|
|
(1.2
|
)
|
|
0.3
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted EBITDA
|
$
|
84.3
|
|
|
$
|
98.0
|
|
|
$
|
45.6
|
|
|
$
|
53.9
|
|
|
$
|
2.9
|
|
|
$
|
(6.7
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Reconciliation of Comprehensive Income to Adjusted EBITDA:
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive income
|
$
|
17.3
|
|
|
$
|
8.7
|
|
|
$
|
102.5
|
|
|
$
|
81.5
|
|
Foreign currency translation, net of tax
|
(0.5
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
(0.2
|
)
|
||||
Change in pension benefits, net of tax
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
||||
Net income
|
16.7
|
|
|
8.7
|
|
|
102.3
|
|
|
81.3
|
|
||||
Additions:
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization
|
24.0
|
|
|
27.5
|
|
|
73.3
|
|
|
81.4
|
|
||||
Interest expense
|
12.6
|
|
|
11.1
|
|
|
36.0
|
|
|
32.8
|
|
||||
Income tax provision
|
11.6
|
|
|
11.7
|
|
|
63.6
|
|
|
49.6
|
|
||||
EBITDA
|
64.9
|
|
|
59.0
|
|
|
275.2
|
|
|
245.1
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Adjustments to EBITDA:
|
|
|
|
|
|
|
|
||||||||
Operating income:
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense
|
5.8
|
|
|
4.9
|
|
|
17.5
|
|
|
14.3
|
|
||||
Other charges
|
0.4
|
|
|
3.1
|
|
|
0.5
|
|
|
3.4
|
|
||||
Other income, expense:
|
|
|
|
|
|
|
|
||||||||
Interest, depreciation and amortization expense related to equity investments
|
4.0
|
|
|
2.5
|
|
|
10.6
|
|
|
7.5
|
|
||||
Other charges and recoveries, net
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
||||
Acquisition expense, net
|
0.7
|
|
|
1.1
|
|
|
1.7
|
|
|
4.9
|
|
||||
Calder exit costs
|
0.2
|
|
|
0.5
|
|
|
0.8
|
|
|
2.4
|
|
||||
Total adjustments to EBITDA
|
11.1
|
|
|
12.1
|
|
|
31.1
|
|
|
32.9
|
|
||||
Adjusted EBITDA
|
$
|
76.0
|
|
|
$
|
71.1
|
|
|
$
|
306.3
|
|
|
$
|
278.0
|
|
|
|
|
|
|
|
|
|
||||||||
Adjusted EBITDA by segment:
|
|
|
|
|
|
|
|
||||||||
Racing
|
$
|
1.7
|
|
|
$
|
0.4
|
|
|
$
|
90.7
|
|
|
$
|
84.3
|
|
Casinos
|
39.5
|
|
|
30.4
|
|
|
112.3
|
|
|
98.0
|
|
||||
TwinSpires
|
18.8
|
|
|
14.7
|
|
|
51.3
|
|
|
45.6
|
|
||||
Big Fish Games
|
17.0
|
|
|
27.2
|
|
|
55.6
|
|
|
53.9
|
|
||||
Other Investments
|
1.1
|
|
|
0.8
|
|
|
3.0
|
|
|
2.9
|
|
||||
Corporate
|
(2.1
|
)
|
|
(2.4
|
)
|
|
(6.6
|
)
|
|
(6.7
|
)
|
||||
Adjusted EBITDA
|
$
|
76.0
|
|
|
$
|
71.1
|
|
|
$
|
306.3
|
|
|
$
|
278.0
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Casinos
|
$
|
8.7
|
|
|
$
|
4.8
|
|
|
$
|
22.5
|
|
|
$
|
13.6
|
|
Other Investments
|
0.2
|
|
|
0.1
|
|
|
0.2
|
|
|
(0.1
|
)
|
||||
|
$
|
8.9
|
|
|
$
|
4.9
|
|
|
$
|
22.7
|
|
|
$
|
13.5
|
|
(in millions)
|
September 30, 2017
|
|
December 31, 2016
|
||||
Total assets:
|
|
|
|
||||
Racing
|
$
|
463.7
|
|
|
$
|
454.6
|
|
Casinos
|
675.1
|
|
|
628.7
|
|
||
TwinSpires
|
213.0
|
|
|
209.9
|
|
||
Big Fish Games
|
902.8
|
|
|
893.8
|
|
||
Other Investments
|
11.9
|
|
|
11.1
|
|
||
Corporate
|
60.9
|
|
|
56.3
|
|
||
|
$
|
2,327.4
|
|
|
$
|
2,254.4
|
|
|
Nine Months Ended September 30,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Capital expenditures:
|
|
|
|
||||
Racing
|
$
|
47.8
|
|
|
$
|
23.4
|
|
Casinos
|
26.0
|
|
|
9.7
|
|
||
TwinSpires
|
7.3
|
|
|
5.4
|
|
||
Big Fish Games
|
5.6
|
|
|
3.6
|
|
||
Other Investments
|
1.3
|
|
|
0.8
|
|
||
Corporate
|
1.1
|
|
|
1.2
|
|
||
|
$
|
89.1
|
|
|
$
|
44.1
|
|
•
|
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;
|
•
|
Gain on Calder land sale;
|
•
|
Calder exit costs; and
|
•
|
Other charges and recoveries.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||
Net revenue
|
$
|
314.8
|
|
|
$
|
303.4
|
|
|
$
|
11.4
|
|
|
$
|
1,046.2
|
|
|
$
|
1,030.3
|
|
|
$
|
15.9
|
|
Operating income
|
33.0
|
|
|
26.8
|
|
|
6.2
|
|
|
180.0
|
|
|
150.5
|
|
|
29.5
|
|
||||||
Operating income margin
|
10
|
%
|
|
9
|
%
|
|
|
|
17
|
%
|
|
15
|
%
|
|
|
||||||||
Net income
|
$
|
16.7
|
|
|
$
|
8.7
|
|
|
$
|
8.0
|
|
|
$
|
102.3
|
|
|
$
|
81.3
|
|
|
$
|
21.0
|
|
Adjusted EBITDA
|
76.0
|
|
|
71.1
|
|
|
4.9
|
|
|
306.3
|
|
|
278.0
|
|
|
28.3
|
|
•
|
Our net revenue increased $11.4 million driven by a $10.8 million increase from TwinSpires due to a 23.9% increase in active players and 20.6% increase in handle, a $4.5 million increase from Casinos primarily from successful marketing and promotional activities, and a $0.5 million combined increase from Racing and Other Investments. Partially offsetting the increases was a $4.4 million decrease from Big Fish Games primarily due to a decline in casual and mid-core free-to-play games.
|
•
|
Our operating income increased $6.2 million driven by a $5.2 million increase from Casinos primarily driven by the increase in net revenue from successful marketing and promotional activities, a $4.8 million increase from TwinSpires due to the increase in active players and increase in handle, a $1.0 million increase in Racing driven by the successful Arlington meet and a $0.3 million increase from other sources. Partially offsetting these increases was a $5.1 million decrease from Big Fish Games primarily driven by a decline in net revenue and increase in user acquisition expense.
|
•
|
Our net income increased $8.0 million driven by a $6.2 million increase in operating income, a $4.0 million increase in income from our equity investments, and a $0.1 million increase from other sources. Partially offsetting these increases were a $1.5 million increase in interest expense associated with higher outstanding debt balances and a $0.8 million increase in other expense related to unfavorable foreign exchange rates at Big Fish Games.
|
•
|
Our Adjusted EBITDA increased $4.9 million driven by a $9.1 million increase from Casinos primarily due to our unconsolidated investments and organic growth at certain properties, a $4.1 million increase at TwinSpires driven by the increase in active players and increase in handle, a $1.3 million increase in Racing driven by favorable insurance reserve
|
•
|
Our net revenue increased $15.9 million driven by a $25.3 million increase from TwinSpires due to a 34.5% increase in active players and 16.4% increase in handle, a $9.4 million increase from Casinos due to successful marketing and promotional activities, a $7.2 million increase in Racing primarily due to a strong Kentucky Derby and Oaks week performance, and a $1.1 million increase from Other Investments. Partially offsetting these increases was a $27.1 million decrease from Big Fish Games primarily due to the decline in casual and mid-core free-to-play games.
|
•
|
Our operating income increased $29.5 million driven by a $10.9 million increase from Big Fish Games primarily from a decrease in user acquisition expense, a $7.5 million increase in TwinSpires driven by the increase in active players and increase in handle, a $6.7 million increase from Casinos due to organic growth at certain properties, a $3.2 million decrease in acquisition expense driven by non-cash fair value adjustments related to the liabilities for the Big Fish Games earnout and deferred payments to the founders, a $2.9 million increase in Racing due to a strong Kentucky Derby and Oaks week performance, and a $1.6 million decrease in Calder exit costs. Partially offsetting these expenses were a $2.3 million increase in selling, general and administrative expense primarily driven by stock-based compensation, a $0.6 million increase in research and development expense and a $0.4 million increase from other sources.
|
•
|
Our net income increased $21.0 million driven by a $29.5 million increase in operating income and a $9.2 million increase in income from our equity investments. Partially offsetting these increases were a $14.0 million increase in our income tax provision primarily from higher income from our segments and unconsolidated investments, a $3.2 million increase in interest expense associated with higher outstanding debt balances and $0.5 million of other expense related to unfavorable foreign exchange rates at Big Fish Games.
|
•
|
Our Adjusted EBITDA increased $28.3 million driven by a $14.3 million increase in Casinos due to our unconsolidated investments and organic growth at certain properties, a $6.4 million increase from Racing driven by a strong Kentucky Derby and Oaks week performance, a $5.7 million increase from TwinSpires due to an increase in active players and increase in handle, a $1.7 million increase from Big Fish Games primarily due to a decrease in user acquisition expense, and $0.2 million from other sources.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||
Racing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Churchill Downs
|
$
|
9.0
|
|
|
$
|
9.6
|
|
|
$
|
(0.6
|
)
|
|
$
|
156.7
|
|
|
$
|
148.3
|
|
|
$
|
8.4
|
|
Arlington
|
27.2
|
|
|
25.9
|
|
|
1.3
|
|
|
56.6
|
|
|
54.3
|
|
|
2.3
|
|
||||||
Fair Grounds
|
5.0
|
|
|
5.1
|
|
|
(0.1
|
)
|
|
28.5
|
|
|
29.9
|
|
|
(1.4
|
)
|
||||||
Calder
|
0.7
|
|
|
0.7
|
|
|
—
|
|
|
1.9
|
|
|
2.0
|
|
|
(0.1
|
)
|
||||||
Total Racing
|
41.9
|
|
|
41.3
|
|
|
0.6
|
|
|
243.7
|
|
|
234.5
|
|
|
9.2
|
|
||||||
Casinos:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Oxford Casino
|
25.2
|
|
|
24.4
|
|
|
0.8
|
|
|
69.2
|
|
|
65.4
|
|
|
3.8
|
|
||||||
Riverwalk Casino
|
12.2
|
|
|
10.6
|
|
|
1.6
|
|
|
35.7
|
|
|
35.7
|
|
|
—
|
|
||||||
Harlow's Casino
|
12.3
|
|
|
11.7
|
|
|
0.6
|
|
|
38.3
|
|
|
36.6
|
|
|
1.7
|
|
||||||
Calder Casino
|
19.4
|
|
|
19.0
|
|
|
0.4
|
|
|
62.6
|
|
|
59.8
|
|
|
2.8
|
|
||||||
Fair Grounds Slots
|
8.7
|
|
|
8.5
|
|
|
0.2
|
|
|
27.7
|
|
|
27.9
|
|
|
(0.2
|
)
|
||||||
VSI
|
9.3
|
|
|
8.6
|
|
|
0.7
|
|
|
28.8
|
|
|
27.9
|
|
|
0.9
|
|
||||||
Saratoga
|
0.4
|
|
|
0.2
|
|
|
0.2
|
|
|
1.0
|
|
|
0.6
|
|
|
0.4
|
|
||||||
Total Casino
|
87.5
|
|
|
83.0
|
|
|
4.5
|
|
|
263.3
|
|
|
253.9
|
|
|
9.4
|
|
||||||
TwinSpires
|
66.1
|
|
|
55.5
|
|
|
10.6
|
|
|
199.2
|
|
|
174.1
|
|
|
25.1
|
|
||||||
Big Fish Games:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Social casino
|
53.4
|
|
|
44.3
|
|
|
9.1
|
|
|
149.1
|
|
|
138.3
|
|
|
10.8
|
|
||||||
Casual and mid-core free-to-play
|
46.1
|
|
|
56.1
|
|
|
(10.0
|
)
|
|
135.3
|
|
|
162.5
|
|
|
(27.2
|
)
|
||||||
Premium
|
18.4
|
|
|
21.9
|
|
|
(3.5
|
)
|
|
58.1
|
|
|
68.8
|
|
|
(10.7
|
)
|
||||||
Total Big Fish Games
|
117.9
|
|
|
122.3
|
|
|
(4.4
|
)
|
|
342.5
|
|
|
369.6
|
|
|
(27.1
|
)
|
||||||
Other Investments
|
5.7
|
|
|
5.2
|
|
|
0.5
|
|
|
17.7
|
|
|
15.9
|
|
|
1.8
|
|
||||||
Eliminations
|
(4.3
|
)
|
|
(3.9
|
)
|
|
(0.4
|
)
|
|
(20.2
|
)
|
|
(17.7
|
)
|
|
(2.5
|
)
|
||||||
Net Revenue
|
$
|
314.8
|
|
|
$
|
303.4
|
|
|
$
|
11.4
|
|
|
$
|
1,046.2
|
|
|
$
|
1,030.3
|
|
|
$
|
15.9
|
|
•
|
Racing revenue increased $0.6 million driven by a $1.3 million increase at Arlington primarily from an increase in handle and admissions. Partially offsetting this increase was a $0.7 million decrease primarily due to one less live thoroughbred race day at Churchill Downs during the third quarter of 2017 compared to 2016.
|
•
|
Casino revenue increased $4.5 million driven by a $1.6 million increase at Riverwalk, a $0.8 million increase at Oxford, a $0.7 million increase at VSI, and a $0.6 million increase at Harlow's, all of which resulted from successful marketing and promotional activities, as well as a $0.8 million increase from our other Casino properties combined.
|
•
|
TwinSpires revenue increased $10.6 million primarily due to a 23.9% increase in active players and handle growth of 20.6%, which outpaced the U.S. thoroughbred industry performance by 16.9 percentage points.
|
•
|
Big Fish Games revenue decreased $4.4 million primarily driven by a $10.0 million decrease in casual and mid-core free-to-play revenue due to the significant decrease in user acquisition spending on casual free-to-play games beginning in July 2016 and a $3.5 million decrease in premium game revenue. Partially offsetting these decreases was a $9.1 million increase in social casino driven by strong growth in
Big Fish Casino
and
Jackpot Magic Slots
.
|
•
|
Racing revenue increased $9.2 million driven by an $8.4 million increase at Churchill Downs primarily from a successful Kentucky Derby and Oaks week performance and a $2.3 million increase at Arlington driven by an increase in handle and admissions. Partially offsetting these increases were a $1.4 million decrease in Fair Grounds revenue primarily driven from the impact of a contagious equine disease outbreak which quarantined horses causing limited field sizes in the first quarter of 2017 and a $0.1 million decrease from other sources.
|
•
|
Casino revenue increased $9.4 million driven by a $3.8 million increase in Oxford, a $2.8 million increase at Calder, a $1.7 million increase at Harlow's, a $0.9 million increase at VSI, and a $0.2 million increase from other sources, all of which resulted from successful marketing and promotional activities.
|
•
|
TwinSpires revenue increased $25.1 million primarily due to a 34.5% increase in active players and handle growth of 16.4%.
|
•
|
Big Fish Games revenue decreased $27.1 million primarily driven by a $27.2 million decrease in casual and mid-core free-to-play revenue due to the significant decrease in user acquisition spending on casual free-to-play games beginning in July 2016 and a $10.7 million decrease in premium games revenue. Partially offsetting these decreases was a $10.8 million increase in social casino revenue driven by strong growth in
Big Fish Casino
and
Jackpot Magic Slots
.
|
•
|
Other Investments revenue increased $1.8 million due to increased equipment sales and higher totalisator fees from new customers at United Tote.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Racing:
|
|
|
|
|
|
|
|
||||||||
Churchill Downs
|
|
|
|
|
|
|
|
||||||||
Race Days
|
10
|
|
|
11
|
|
|
48
|
|
|
47
|
|
||||
Total handle
|
$
|
46.6
|
|
|
$
|
54.6
|
|
|
$
|
499.3
|
|
|
$
|
469.7
|
|
Net pari-mutuel revenue
|
$
|
5.1
|
|
|
$
|
6.0
|
|
|
$
|
52.3
|
|
|
$
|
50.0
|
|
Commission %
|
10.9
|
%
|
|
11.0
|
%
|
|
10.5
|
%
|
|
10.6
|
%
|
||||
Arlington
|
|
|
|
|
|
|
|
||||||||
Race Days
|
47
|
|
|
49
|
|
|
71
|
|
|
74
|
|
||||
Total handle
|
$
|
171.5
|
|
|
$
|
167.0
|
|
|
$
|
348.9
|
|
|
$
|
339.8
|
|
Net pari-mutuel revenue
|
$
|
19.9
|
|
|
$
|
18.9
|
|
|
$
|
44.7
|
|
|
$
|
43.2
|
|
Commission %
|
11.6
|
%
|
|
11.3
|
%
|
|
12.8
|
%
|
|
12.7
|
%
|
||||
Fair Grounds
|
|
|
|
|
|
|
|
||||||||
Race Days
|
—
|
|
|
—
|
|
|
57
|
|
|
54
|
|
||||
Total handle
|
$
|
21.8
|
|
|
$
|
22.0
|
|
|
$
|
192.7
|
|
|
$
|
208.5
|
|
Net pari-mutuel revenue
|
$
|
4.3
|
|
|
$
|
4.4
|
|
|
$
|
20.6
|
|
|
$
|
21.6
|
|
Commission %
|
19.7
|
%
|
|
20.0
|
%
|
|
10.7
|
%
|
|
10.4
|
%
|
||||
Total Racing
|
|
|
|
|
|
|
|
||||||||
Race Days
|
57
|
|
|
60
|
|
|
176
|
|
|
175
|
|
||||
Total handle
|
$
|
239.9
|
|
|
$
|
243.6
|
|
|
$
|
1,040.9
|
|
|
$
|
1,018.0
|
|
Net pari-mutuel revenue
|
$
|
29.3
|
|
|
$
|
29.3
|
|
|
$
|
117.6
|
|
|
$
|
114.8
|
|
Commission %
|
12.2
|
%
|
|
12.0
|
%
|
|
11.3
|
%
|
|
11.3
|
%
|
||||
TwinSpires
(1)
|
|
|
|
|
|
|
|
||||||||
Total handle
|
$
|
338.6
|
|
|
$
|
280.5
|
|
|
$
|
994.4
|
|
|
$
|
854.2
|
|
Net pari-mutuel revenue
|
$
|
61.2
|
|
|
$
|
50.9
|
|
|
$
|
182.3
|
|
|
$
|
158.1
|
|
Commission %
|
18.1
|
%
|
|
18.1
|
%
|
|
18.3
|
%
|
|
18.5
|
%
|
||||
Eliminations
(2)
|
|
|
|
|
|
|
|
||||||||
Total handle
|
$
|
(18.8
|
)
|
|
$
|
(18.5
|
)
|
|
$
|
(122.3
|
)
|
|
$
|
(104.2
|
)
|
Net pari-mutuel revenue
|
$
|
(3.2
|
)
|
|
$
|
(2.9
|
)
|
|
$
|
(14.1
|
)
|
|
$
|
(13.4
|
)
|
Total
|
|
|
|
|
|
|
|
||||||||
Handle
|
$
|
559.7
|
|
|
$
|
505.6
|
|
|
$
|
1,913.0
|
|
|
$
|
1,768.0
|
|
Net pari-mutuel revenue
|
$
|
87.3
|
|
|
$
|
77.3
|
|
|
$
|
285.8
|
|
|
$
|
259.5
|
|
Commission %
|
15.6
|
%
|
|
15.3
|
%
|
|
14.9
|
%
|
|
14.7
|
%
|
(1)
|
Total handle and net pari-mutuel revenue generated by Velocity are not included in total handle and net pari-mutuel revenue from TwinSpires.
|
(2)
|
Eliminations include the elimination of intersegment transactions.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Oxford Casino
|
|
|
|
|
|
|
|
||||||||
Slot handle
|
$
|
231.8
|
|
|
$
|
228.3
|
|
|
$
|
627.2
|
|
|
$
|
599.9
|
|
Net slot revenue
|
19.3
|
|
|
19.2
|
|
|
52.7
|
|
|
50.5
|
|
||||
Net gaming revenue
|
23.9
|
|
|
23.1
|
|
|
65.8
|
|
|
62.1
|
|
||||
Riverwalk Casino
|
|
|
|
|
|
|
|
||||||||
Slot handle
|
$
|
162.2
|
|
|
$
|
110.7
|
|
|
$
|
451.6
|
|
|
$
|
371.8
|
|
Net slot revenue
|
10.4
|
|
|
8.8
|
|
|
30.4
|
|
|
30.0
|
|
||||
Net gaming revenue
|
11.6
|
|
|
10.0
|
|
|
34.0
|
|
|
33.7
|
|
||||
Harlow’s Casino
|
|
|
|
|
|
|
|
||||||||
Slot handle
|
$
|
134.6
|
|
|
$
|
134.5
|
|
|
$
|
423.0
|
|
|
$
|
401.8
|
|
Net slot revenue
|
10.6
|
|
|
10.0
|
|
|
33.1
|
|
|
31.7
|
|
||||
Net gaming revenue
|
11.7
|
|
|
11.0
|
|
|
36.3
|
|
|
34.5
|
|
||||
Calder Casino
|
|
|
|
|
|
|
|
||||||||
Slot handle
|
$
|
279.5
|
|
|
$
|
257.3
|
|
|
$
|
868.4
|
|
|
$
|
780.4
|
|
Net slot revenue
|
18.5
|
|
|
18.3
|
|
|
60.1
|
|
|
57.4
|
|
||||
Net gaming revenue
|
18.5
|
|
|
18.3
|
|
|
60.0
|
|
|
57.4
|
|
||||
Fair Grounds Slots and Video Poker
|
|
|
|
|
|
|
|
||||||||
Slot handle
|
$
|
97.1
|
|
|
$
|
94.8
|
|
|
$
|
312.0
|
|
|
$
|
304.2
|
|
Net slot revenue
|
8.5
|
|
|
8.2
|
|
|
26.9
|
|
|
27.0
|
|
||||
Net gaming revenue
|
17.8
|
|
|
16.9
|
|
|
55.6
|
|
|
54.9
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total net gaming revenue
|
$
|
83.5
|
|
|
$
|
79.3
|
|
|
$
|
251.7
|
|
|
$
|
242.6
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Bookings
|
|
|
|
|
|
|
|
||||||||
Social casino
|
$
|
53.4
|
|
|
$
|
44.2
|
|
|
$
|
149.3
|
|
|
$
|
137.9
|
|
Casual and mid-core free-to-play
|
51.2
|
|
|
51.8
|
|
|
136.9
|
|
|
164.4
|
|
||||
Premium
|
19.3
|
|
|
22.5
|
|
|
60.6
|
|
|
72.3
|
|
||||
Total bookings
|
$
|
123.9
|
|
|
$
|
118.5
|
|
|
$
|
346.8
|
|
|
$
|
374.6
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||
Taxes and purses
|
$
|
44.6
|
|
|
$
|
43.3
|
|
|
$
|
1.3
|
|
|
$
|
153.6
|
|
|
$
|
146.1
|
|
|
$
|
7.5
|
|
Platform & development fees
|
42.1
|
|
|
45.2
|
|
|
(3.1
|
)
|
|
124.0
|
|
|
135.2
|
|
|
(11.2
|
)
|
||||||
Marketing & advertising
|
37.0
|
|
|
31.4
|
|
|
5.6
|
|
|
103.7
|
|
|
124.4
|
|
|
(20.7
|
)
|
||||||
Salaries & benefits
|
35.8
|
|
|
34.9
|
|
|
0.9
|
|
|
109.3
|
|
|
103.1
|
|
|
6.2
|
|
||||||
Content expense
|
30.7
|
|
|
26.4
|
|
|
4.3
|
|
|
90.1
|
|
|
79.2
|
|
|
10.9
|
|
||||||
Selling, general and administrative expense
|
26.8
|
|
|
27.6
|
|
|
(0.8
|
)
|
|
77.6
|
|
|
75.3
|
|
|
2.3
|
|
||||||
Depreciation & amortization
|
24.0
|
|
|
27.5
|
|
|
(3.5
|
)
|
|
73.3
|
|
|
81.4
|
|
|
(8.1
|
)
|
||||||
Research & development
|
9.7
|
|
|
8.8
|
|
|
0.9
|
|
|
29.9
|
|
|
29.3
|
|
|
0.6
|
|
||||||
Acquisition expense, net
|
0.7
|
|
|
1.1
|
|
|
(0.4
|
)
|
|
1.7
|
|
|
4.9
|
|
|
(3.2
|
)
|
||||||
Calder exit costs
|
0.2
|
|
|
0.5
|
|
|
(0.3
|
)
|
|
0.8
|
|
|
2.4
|
|
|
(1.6
|
)
|
||||||
Other operating expense
|
30.2
|
|
|
29.9
|
|
|
0.3
|
|
|
102.2
|
|
|
98.5
|
|
|
3.7
|
|
||||||
Total expense
|
$
|
281.8
|
|
|
$
|
276.6
|
|
|
$
|
5.2
|
|
|
$
|
866.2
|
|
|
$
|
879.8
|
|
|
$
|
(13.6
|
)
|
Percent of net revenue
|
90
|
%
|
|
91
|
%
|
|
|
|
83
|
%
|
|
85
|
%
|
|
|
•
|
Taxes and purses increased $1.3 million driven by a $0.7 million increase in taxes for our Casinos associated with an increase in slot handle, a $0.5 million increase in pari-mutuel taxes for TwinSpires due to the increase in handle and a $0.1 increase from other sources.
|
•
|
Platform and development fees at Big Fish Games decreased $3.1 million driven by the decrease in revenues.
|
•
|
Marketing and advertising expense increased $5.6 million driven primarily by the increase in Big Fish Games user acquisition expense.
|
•
|
Salaries and benefits expense increased $0.9 million driven by additional personnel costs and related benefits.
|
•
|
Content expense increased $4.3 million driven by the 23.9% increase in active players and 20.6% handle growth at TwinSpires.
|
•
|
Selling, general and administrative expense decreased $0.8 million primarily related to a $2.5 million 2016 expense associated with potential federal tax penalties from untimely submission of informational returns which did not recur in 2017. Partially offsetting this decrease were a $0.9 million increase stock-based compensation expense and a $0.8 million increase from other sources.
|
•
|
Depreciation and amortization expense decreased $3.5 million driven primarily by a decrease at Big Fish Games associated with fully amortized intangible assets.
|
•
|
Research and development expense increased $0.9 million driven by an increase in headcount to support the portfolio of games offered by Big Fish Games.
|
•
|
Taxes and purses increased $7.5 million due to a $2.8 million increase in pari-mutuel taxes at TwinSpires due to the 34.5% increase in active players, 16.4% handle growth and a $1.7 million increase due to the 2016 Pennsylvania tax refund which did not recur, a $2.7 million increase in taxes for our Casinos from our slot handle growth, and a $2.0 million increase in purses primarily driven by Churchill Downs and Arlington.
|
•
|
Platform and development fees at Big Fish Games decreased $11.2 million driven by a decrease in revenues.
|
•
|
Marketing and advertising expense decreased $20.7 million driven primarily by a $21.8 million decrease in Big Fish Games user acquisition expense and a $0.4 million decrease from other sources. These decreases were partially offset by a $1.5 million increase in TwinSpires marketing for Kentucky Derby and Oaks week.
|
•
|
Salaries and benefits expense increased $6.2 million primarily driven by $3.7 million increase in additional personnel cost and a $2.5 million increase in health insurance expense across all segments.
|
•
|
Content expense increased $10.9 million driven by the 34.5% increase in active players and 16.4% in handle growth.
|
•
|
Selling, general and administrative expense increased $2.3 million driven primarily by a $3.2 million increase in stock-based compensation expense, a $1.5 million increase in bonus incentives and a $0.1 million increase from other sources. These increases were partially offset by a $2.5 million 2016 expense associated with potential federal tax penalties from untimely submission of informational returns which did not recur in 2017.
|
•
|
Depreciation and amortization expense decreased $8.1 million driven primarily by a decrease at Big Fish Games associated with fully amortized intangible assets.
|
•
|
Research and development expense increased $0.6 million driven by an increase in headcount to support the portfolio of games offered by Big Fish Games.
|
•
|
Acquisition expense, net decreased $3.2 million driven by non-cash fair value adjustments related to the liabilities for the Big Fish Games earnout and deferred payments to the founders which were partially paid during 2016 and 2017.
|
•
|
Calder exit costs decreased $1.6 million driven by lower costs associated with the grandstand demolition.
|
•
|
Other operating expense includes utilities, maintenance, food and beverage costs, property taxes and insurance and other operating expense. Other operating expense increased $3.7 million primarily driven by a $1.7 million increase in TwinSpires third party processing fees due to increase in revenues, a $1.4 million increase in insurance and property taxes, and a $0.6 million increase related to other expenses.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||
Racing
|
$
|
(1.5
|
)
|
|
$
|
(1.5
|
)
|
|
$
|
—
|
|
|
$
|
(4.3
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
—
|
|
Casinos
|
(1.8
|
)
|
|
(1.8
|
)
|
|
—
|
|
|
(5.3
|
)
|
|
(5.0
|
)
|
|
(0.3
|
)
|
||||||
TwinSpires
|
(1.4
|
)
|
|
(1.3
|
)
|
|
(0.1
|
)
|
|
(3.9
|
)
|
|
(3.9
|
)
|
|
—
|
|
||||||
Big Fish Games
|
(0.7
|
)
|
|
(0.8
|
)
|
|
0.1
|
|
|
(2.1
|
)
|
|
(2.1
|
)
|
|
—
|
|
||||||
Other Investments
|
(0.3
|
)
|
|
(0.4
|
)
|
|
0.1
|
|
|
(1.0
|
)
|
|
(1.1
|
)
|
|
0.1
|
|
||||||
Corporate allocated expense
|
5.7
|
|
|
5.8
|
|
|
(0.1
|
)
|
|
16.6
|
|
|
16.4
|
|
|
0.2
|
|
||||||
Total Corporate allocated expense
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||
Racing
|
$
|
1.7
|
|
|
$
|
0.4
|
|
|
$
|
1.3
|
|
|
$
|
90.7
|
|
|
$
|
84.3
|
|
|
$
|
6.4
|
|
Casinos
|
39.5
|
|
|
30.4
|
|
|
9.1
|
|
|
112.3
|
|
|
98.0
|
|
|
14.3
|
|
||||||
TwinSpires
|
18.8
|
|
|
14.7
|
|
|
4.1
|
|
|
51.3
|
|
|
45.6
|
|
|
5.7
|
|
||||||
Big Fish Games
|
17.0
|
|
|
27.2
|
|
|
(10.2
|
)
|
|
55.6
|
|
|
53.9
|
|
|
1.7
|
|
||||||
Other Investments
|
1.1
|
|
|
0.8
|
|
|
0.3
|
|
|
3.0
|
|
|
2.9
|
|
|
0.1
|
|
||||||
Corporate
|
(2.1
|
)
|
|
(2.4
|
)
|
|
0.3
|
|
|
(6.6
|
)
|
|
(6.7
|
)
|
|
0.1
|
|
||||||
Adjusted EBITDA
|
$
|
76.0
|
|
|
$
|
71.1
|
|
|
$
|
4.9
|
|
|
$
|
306.3
|
|
|
$
|
278.0
|
|
|
$
|
28.3
|
|
•
|
Racing Adjusted EBITDA increased $1.3 million driven by a $1.0 million increase at Fair Grounds primarily due to insurance reserve premium adjustments compared to the prior year quarter and a $0.9 million increase at Arlington due to an increase in handle and admissions. Partially offsetting these increases was a $0.6 million decrease at Churchill Downs due to one less live thoroughbred racing day in the third quarter of 2017 compared to the prior year quarter.
|
•
|
Casinos Adjusted EBITDA increased $9.1 million driven by a $5.5 million increase from strong performance of the Company's equity investments, including our new equity investment in Ocean Downs in January 2017, a $1.7 million increase at Riverwalk, a $0.5 million increase at Harlow's and a combined $1.4 million increase from all of our other Casino properties, all of which were due to successful marketing and promotional activities.
|
•
|
TwinSpires Adjusted EBITDA increased $4.1 million driven by the 23.9% increase in active players and handle growth of 20.6%.
|
•
|
Big Fish Games Adjusted EBITDA decreased $10.2 million driven by a $5.5 million increase in user acquisition expense, a $2.4 million increase in salaries & benefits, selling, general & administrative costs and research & development costs, a $1.3 million decrease in revenue net of platform and development fees, and a $1.0 million increase in other expense primarily related to unfavorable foreign exchange rates.
|
•
|
Racing Adjusted EBITDA increased $6.4 million due to a $5.7 million increase at Churchill Downs primarily from a successful Kentucky Derby and Oaks week performance and a $1.8 million increase at Arlington driven by increased handle and admissions. Partially offsetting these increases were a $0.7 million decrease at Fair Grounds primarily from a contagious equine disease which quarantined horses causing limited fields and remediation expenses and a $0.4 million decrease from other sources.
|
•
|
Casinos Adjusted EBITDA increased $14.3 million driven by a $12.0 million increase from strong performances of the Company's equity investments, including our new equity investment in Ocean Downs in January 2017, a $1.0 million increase at Oxford, a $0.8 million increase at Harlow's, and a $0.5 million combined increase from our other Casino properties, all of which resulted from successful marketing and promotional activities.
|
•
|
TwinSpires Adjusted EBITDA increased $5.7 million driven by the 34.5% increase in active players and handle growth of 16.4%.
|
•
|
Big Fish Games Adjusted EBITDA increased $1.7 million driven by a $21.9 million decrease in user acquisition spending and an $11.2 million decrease in platform and development fees. These increases were partially offset by the $27.1 million decrease in revenues, a $2.3 million increase in salaries and benefits primarily driven by increased headcount and associated benefits, a $1.6 million increase in selling, general and administrative expense primarily driven by increased bonus incentive expense, and a $0.4 million increase in other expense.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||
Comprehensive income
|
$
|
17.3
|
|
|
$
|
8.7
|
|
|
$
|
8.6
|
|
|
$
|
102.5
|
|
|
$
|
81.5
|
|
|
$
|
21.0
|
|
Foreign currency translation, net of tax
|
(0.5
|
)
|
|
—
|
|
|
(0.5
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
|
0.1
|
|
||||||
Net change in pension benefits, net of tax
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
||||||
Net income
|
16.7
|
|
|
8.7
|
|
|
8.0
|
|
|
102.3
|
|
|
81.3
|
|
|
21.0
|
|
||||||
Additions:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Depreciation and amortization
|
24.0
|
|
|
27.5
|
|
|
(3.5
|
)
|
|
73.3
|
|
|
81.4
|
|
|
(8.1
|
)
|
||||||
Interest expense
|
12.6
|
|
|
11.1
|
|
|
1.5
|
|
|
36.0
|
|
|
32.8
|
|
|
3.2
|
|
||||||
Income tax provision
|
11.6
|
|
|
11.7
|
|
|
(0.1
|
)
|
|
63.6
|
|
|
49.6
|
|
|
14.0
|
|
||||||
EBITDA
|
$
|
64.9
|
|
|
$
|
59.0
|
|
|
$
|
5.9
|
|
|
$
|
275.2
|
|
|
$
|
245.1
|
|
|
$
|
30.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjustments to EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Selling, general and administrative:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Stock-based compensation expense
|
$
|
5.8
|
|
|
$
|
4.9
|
|
|
$
|
0.9
|
|
|
$
|
17.5
|
|
|
$
|
14.3
|
|
|
$
|
3.2
|
|
Other charges
|
0.4
|
|
|
3.1
|
|
|
(2.7
|
)
|
|
0.5
|
|
|
3.4
|
|
|
(2.9
|
)
|
||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest, depreciation and amortization expense related to equity investments
|
4.0
|
|
|
2.5
|
|
|
1.5
|
|
|
10.6
|
|
|
7.5
|
|
|
3.1
|
|
||||||
Other charges and recoveries, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
(0.4
|
)
|
||||||
Acquisition expenses, net
|
0.7
|
|
|
1.1
|
|
|
(0.4
|
)
|
|
1.7
|
|
|
4.9
|
|
|
(3.2
|
)
|
||||||
Calder exit costs
|
0.2
|
|
|
0.5
|
|
|
(0.3
|
)
|
|
0.8
|
|
|
2.4
|
|
|
(1.6
|
)
|
||||||
Total adjustments to EBITDA
|
11.1
|
|
|
12.1
|
|
|
(1.0
|
)
|
|
31.1
|
|
|
32.9
|
|
|
(1.8
|
)
|
||||||
Adjusted EBITDA
|
$
|
76.0
|
|
|
$
|
71.1
|
|
|
$
|
4.9
|
|
|
$
|
306.3
|
|
|
$
|
278.0
|
|
|
$
|
28.3
|
|
•
|
Depreciation and amortization expense decreased $3.5 million primarily driven by a decrease at Big Fish Games associated with fully amortized intangible assets.
|
•
|
Interest expense increased $1.5 million primarily as a result of higher long-term debt balances outstanding and borrowings under our Fourth Amended and Restated Credit Agreement (the "Senior Secured Credit Facility").
|
•
|
Stock-based compensation expense increased $0.9 million driven by an increase in awards for Big Fish Games employees and other key resources.
|
•
|
Other selling, general and administrative charges decreased $2.7 million due to a $2.5 million 2016 expense associated with potential federal tax penalties from untimely submission of informational returns which did not recur in 2017 and a $0.2 million decrease from other sources.
|
•
|
Interest, depreciation and amortization expense related to our equity investments increased $1.5 million driven by our equity investments in SCH and Ocean Downs.
|
•
|
Depreciation and amortization expense decreased $8.1 million primarily driven by a decrease at Big Fish Games associated with fully amortized intangible assets.
|
•
|
Interest expense increased $3.2 million primarily as a result of higher long-term debt balances outstanding and borrowings under our Senior Secured Credit Facility.
|
•
|
Income tax provision increased $14.0 million driven by an increase in pretax income.
|
•
|
Stock-based compensation expense increased $3.2 million due to an increase in performance based awards compared to target and an increase in awards for Big Fish Games employees and other key resources.
|
•
|
Other selling, general and administrative charges decreased $2.9 million due to a $2.5 million 2016 expense associated with potential federal tax penalties from untimely submission of informational returns which did not recur in 2017 and a $0.4 million decrease from other sources.
|
•
|
Interest, depreciation and amortization expense related to our equity investments increased $3.1 million driven by our equity investments in SCH and Ocean Downs.
|
•
|
Acquisition expenses, net decreased $3.2 million driven by non-cash fair value adjustments related to the liabilities for the Big Fish Games earnout and deferred payments to the founders which were partially paid during 2016 and 2017.
|
•
|
Calder exit costs decreased $1.6 million driven by lower costs associated with the grandstand demolition.
|
(in millions)
|
September 30, 2017
|
|
December 31, 2016
|
|
Change
|
||||||
Total assets
|
$
|
2,327.4
|
|
|
$
|
2,254.4
|
|
|
$
|
73.0
|
|
Total liabilities
|
$
|
1,701.1
|
|
|
$
|
1,569.4
|
|
|
$
|
131.7
|
|
Total shareholders' equity
|
$
|
626.3
|
|
|
$
|
685.0
|
|
|
$
|
(58.7
|
)
|
•
|
Total assets increased $73.0 million driven by a $45.0 million increase in property and equipment, net due to our capital project and maintenance expenditures partially offset by depreciation expense, a $34.8 million increase in investments in affiliates primarily due to the acquired interest of Ocean Downs, a $16.1 million increase in goodwill due to the acquisition of BetAmerica, a $8.5 million increase in other current assets driven primarily by prepaid developer fees, and a $2.5 million increase in all other assets. Partially offsetting these increases were a $20.3 million decrease in intangible assets due to amortization expense partially offset by intangible assets acquired in the acquisition of BetAmerica and a $13.6 million decrease in escrow receivable related to the Calder land sale from the fourth quarter of 2016 and the completion of certain purchases of property and equipment.
|
•
|
Total liabilities increased $131.7 million driven by a $202.0 million increase in our total debt balance as we primarily borrowed under our Senior Secured Credit Facility to fund repurchases of common stock, a $16.9 million increase in income taxes payable due to our current year income tax provision, a $11.1 million increase in accrued expenses primarily from an increase in capital expenditures and a $9.8 million increase in all other liabilities. Partially offsetting these increases were a $52.3 million decrease in deferred revenue - all other due to revenue recognition for the 2017 Kentucky Derby and Oaks events, a $34.0 million decrease in the Big Fish Games earnout liability, and a $21.8 million decrease in dividends payable due to payment of annual dividends.
|
•
|
Total shareholders’ equity decreased $58.7 million driven by a $179.5 million decrease from repurchases of common stock. Partially offsetting this decrease were a $102.3 million increase in current year net income, a $17.5 million increase from the amortization of stock-based compensation, and a $1.0 million increase of other changes in shareholders' equity.
|
(in millions)
|
Nine Months Ended September 30,
|
||||||||||
Cash flows from:
|
2017
|
|
2016
|
|
Change
|
||||||
Operating activities
|
$
|
164.2
|
|
|
$
|
189.0
|
|
|
$
|
(24.8
|
)
|
Investing activities
|
$
|
(124.6
|
)
|
|
$
|
(46.2
|
)
|
|
$
|
(78.4
|
)
|
Financing activities
|
$
|
(31.7
|
)
|
|
$
|
(160.0
|
)
|
|
$
|
128.3
|
|
•
|
Cash provided by operating activities decreased $24.8 million driven by a $20.8 million reduction in deferred revenue driven by timing of payments related to the Kentucky Derby and Oaks events and lower Big Fish Games year to date bookings, a $12.2 million increase in other current assets and liabilities due to increased prepaid developer fees as a result of new games for Big Fish Games, and a $9.0 million decrease from other sources. Partially offsetting these decreases was a $17.2 million decrease in Big Fish Games earnout payments in comparison to the prior year.
|
•
|
Cash used in investing activities increased $78.4 million driven by $42.5 million in higher capital project expenditures, a $24.0 million equity investment in Ocean Downs, a $23.1 million increase for the acquisition of BetAmerica, and a $2.4 million increase from other investing activities. Partially offsetting these increases was a $13.6 million decrease in receivable from escrow related to the Calder land sale from the fourth quarter of 2016.
|
•
|
Cash used in financing activities decreased $128.3 primarily driven by a $230.2 million reduction in the Big Fish Games earnout payment and a $63.7 million increase in net borrowings and repayments under our Senior Secured Credit Facility. Partially offsetting these decreases were a $161.1 million increase in stock repurchases and a $4.5 million increase in other financing sources.
|
(in millions)
|
September 30, 2017
|
|
December 31, 2016
|
|
Change
|
||||||
Senior Secured Credit Facility:
|
|
|
|
|
|
||||||
Senior Secured Credit Facility due 2021
|
$
|
354.0
|
|
|
$
|
135.0
|
|
|
$
|
219.0
|
|
Term Loan due 2021
|
168.7
|
|
|
179.3
|
|
|
(10.6
|
)
|
|||
Swing line of credit
|
6.2
|
|
|
13.2
|
|
|
(7.0
|
)
|
|||
Total Senior Secured Credit Facility
|
528.9
|
|
|
327.5
|
|
|
201.4
|
|
|||
5.375% Senior Unsecured Notes due 2021
|
600.0
|
|
|
600.0
|
|
|
—
|
|
|||
Total debt
|
1,128.9
|
|
|
927.5
|
|
|
201.4
|
|
|||
Current maturities of long-term debt
|
17.7
|
|
|
14.2
|
|
|
3.5
|
|
|||
Total debt, net of current maturities
|
1,111.2
|
|
|
913.3
|
|
|
197.9
|
|
|||
Bond premium and issuance costs, net
|
(4.9
|
)
|
|
(5.8
|
)
|
|
0.9
|
|
|||
Net debt, net of current maturities
|
$
|
1,106.3
|
|
|
$
|
907.5
|
|
|
$
|
198.8
|
|
(in millions)
|
October 1 to December 31, 2017
|
|
2018-2019
|
|
2020-2021
|
|
Thereafter
|
|
Total
|
||||||||||
Big Fish Games earnout
|
$
|
—
|
|
|
$
|
34.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
34.2
|
|
Big Fish Games deferred payment
|
—
|
|
|
28.4
|
|
|
—
|
|
|
—
|
|
|
28.4
|
|
|||||
Senior Secured Credit Facility
|
—
|
|
|
—
|
|
|
360.2
|
|
|
—
|
|
|
360.2
|
|
|||||
Interest on Senior Secured Credit Facility
(1)
|
2.8
|
|
|
22.5
|
|
|
12.8
|
|
|
—
|
|
|
38.1
|
|
|||||
Term Loan
|
3.5
|
|
|
42.5
|
|
|
122.7
|
|
|
—
|
|
|
168.7
|
|
|||||
Interest on Term Loan
(1)
|
1.3
|
|
|
9.4
|
|
|
3.9
|
|
|
—
|
|
|
14.6
|
|
|||||
Senior Unsecured Notes
|
—
|
|
|
—
|
|
|
600.0
|
|
|
—
|
|
|
600.0
|
|
|||||
Interest on Senior Unsecured Notes
|
16.1
|
|
|
64.5
|
|
|
63.1
|
|
|
—
|
|
|
143.7
|
|
|||||
Operating leases
|
3.0
|
|
|
17.6
|
|
|
19.1
|
|
|
85.0
|
|
|
124.7
|
|
|||||
Total
|
$
|
26.7
|
|
|
$
|
219.1
|
|
|
$
|
1,181.8
|
|
|
$
|
85.0
|
|
|
$
|
1,512.6
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
•
|
general economic trends;
|
•
|
interest rate and credit risk; and
|
•
|
foreign currency exchange risk.
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
PART II.
|
OTHER INFORMATION
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1)
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)
(1)
|
|
||||||
7/1/17-7/31/17
|
|
235
|
|
|
$
|
188.01
|
|
|
—
|
|
|
$
|
78.3
|
|
|
8/1/17-8/31/17
|
|
47
|
|
|
192.25
|
|
|
—
|
|
|
78.3
|
|
|
||
9/1/17-9/30/17
|
|
212
|
|
|
196.62
|
|
|
—
|
|
|
78.3
|
|
|
||
Total
|
|
494
|
|
|
$
|
192.11
|
|
|
—
|
|
|
|
|
|
(1)
|
On April 25, 2017, the Board of Directors of the Company approved a new common stock repurchase program of up to $250.0 million. The repurchase program has no time limit and may be suspended or discontinued at any time.
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
|
CHURCHILL DOWNS INCORPORATED
|
|
|
|
|
|
|
November 1, 2017
|
/s/ William C. Carstanjen
|
|
William C. Carstanjen
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
November 1, 2017
|
/s/ Marcia A. Dall
|
|
Marcia A. Dall
|
|
Executive Vice President and Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
1 Year Churchill Downs Chart |
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