Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

The following tables present certain information regarding our intangible assets as of December 31, 2014 and 2013. Amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives with no estimated residual values.



Intangible Assets	Gross Carrying Amount		Accumulated Amortization		Net Balance
Balance as of December 31, 2014
Amortizable intangible assets:
Patents	$	17.9	$	8.4	$	9.5
Customer relationships	883.2		46.7		836.5
Licenses	332.8		88.5		244.3
Intellectual property	736.3		19.5		716.8
Brand names	128.2		5.3		122.9
Non-compete agreements	0.3		0.2		0.1
Lottery contracts	1.5		1.5		—
	2,100.2		170.1		1,930.1
Non-amortizable intangible assets:
Trade names	323.6		2.1		321.5
Total intangible assets	$	2,423.8	$	172.2	$	2,251.6
Balance as of December 31, 2013
Amortizable intangible assets:
Patents	$	14.5	$	7.1	$	7.4
Customer relationships	161.9		24.0		137.9
Licenses	181.0		59.9		121.1
Intellectual property	8.6		5.7		2.9
Brand names	39.3		0.6		38.7
Non-compete agreements	0.4		0.2		0.2
Lottery contracts	1.5		1.4		0.1
	407.2		98.9		308.3
Non-amortizable intangible assets:
Trade names	104.9		2.1		102.8
Total intangible assets	$	512.1	$	101.0	$	411.1

In 2014, the increase in intangible assets was primarily related to recording the intangible assets of Bally of $1,800.3 million at fair value upon acquisition. Additionally, the increase in the carrying amount of licenses for the year ended December 31, 2014 primarily reflected the recording of approximately $106 million associated with a long-term license agreement, which was amended and extended in the first quarter of 2014.

The aggregate intangible asset amortization expense for the years ended December 31, 2014, 2013 and 2012 was $89.0 million, $32.5 million and $17.6 million, respectively. The estimated intangible asset amortization expense for the year ending December 31, 2015 and each of the subsequent four years is $218.6 million, $224.9 million, $218.0 million, $204.3 million and $186.2 million, respectively.

As a result of our annual review of assets with indefinite useful lives as of December 31, 2014, we recorded an impairment of $6.0 million to reduce the historical book value of one indefinite lived asset to the fair value, which impairment is reflected in SG&A in our Consolidated Statements of Operations and Comprehensive Loss. No impairments were recorded for the years ended December 31, 2013 or 2012.

Goodwill

The table below reconciles the change in the carrying amount of goodwill, by business segment, for the period from December 31, 2012 to December 31, 2014.



Goodwill	Gaming			Lottery			Interactive		Totals
Balance as of December 31, 2012	$	262.7		$	538.7		$	—	$	801.4
Acquisitions (1)	361.1			—			24.5		385.6
Foreign currency adjustments	5.0			0.3			—		5.3
Write-off of goodwill (2)	—			(5.4		)	—		(5.4		)
Reallocation of Goodwill	(11.6		)	(19.7		)	31.3		—
Reported balance as of December 31, 2013	617.2			513.9			55.8		1,186.9
Prior year adjustments	(4.5		)	—			0.7		(3.8		)
Revised balance as of December 31, 2013	612.7			513.9			56.5		1,183.1
Acquisitions	2,902.8			—			53.3		2,956.1
Foreign currency adjustments	(15.8		)	(15.1		)	—		(30.9		)
Balance as of December 31, 2014	$	3,499.7		$	498.8		$	109.8	$	4,108.3

(1) Subsequent to the filing of our 2013 Annual Report on Form 10-K, we adjusted the estimated fair values of certain WMS assets to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date. The adjustments resulted in a decrease in Gaming goodwill of approximately $3.8 million related to the recognition of non-U.S.-based current and deferred tax assets and liabilities. We have applied the adjustment retrospectively to the opening balance sheet at October 18, 2013.

(2) At December 31, 2013, $5.4 million of goodwill was written off associated with the exit of our Provoloto instant lottery game operations in Mexico. See Note 3 (Acquisitions and Dispositions) for additional information.

Following the Bally acquisition in the fourth quarter of 2014, we revised our operating segments to reflect changes in the financial information regularly reviewed by our chief executive officer, who is designated as the CODM, and other factors and determined that we have three operating and business segments consisting of: Gaming, Lottery and Interactive. For business segment information see Note 2 (Business and Geographic Segments).

We reviewed our operating segments in accordance with ASC 350 to determine if additional reporting units exist within our operating segments based on the availability of discrete financial information that is regularly reviewed by segment management. We determined that we have eight reporting units as of December 31, 2014 consisting of: instant products; U.S. lottery systems; international lottery systems; SG gaming; legacy U.K. gaming; casino management systems; table products; and interactive. The change in reporting units did not result in a reallocation of goodwill balances in accordance with ASC 350. With the acquisition of WMS during the fourth quarter of 2013, we revised our operating segments to consist of: instant products, lottery systems, gaming and interactive. As a result of the change in operating segments, we determined that we had six reporting units: instant products; licensed properties; U.S. lottery systems; international lottery systems, gaming and interactive. For periods prior to the fourth quarter of 2013, we had seven operating segments and reporting units and, therefore, the change required the reallocation of certain goodwill balances to our new reporting units based on a relative fair value approach in accordance with ASC 350.

Our annual impairment valuation as of December 31, 2014 produced estimated fair values of equity, under our old and new structures, in excess of the carrying value of equity for all of our reporting units. As a result of the Bally acquisition, we recorded the fair value of all assets acquired and liabilities assumed as of November 21, 2014 and corresponding goodwill. The estimated fair values of equity for each of our instant products, U.S. lottery systems, international lottery systems, casino management systems, table products and interactive reporting units was substantially in excess of the carrying value of such reporting units. Although the estimated fair value of equity of our SG gaming and legacy U.K. gaming reporting units were in excess of their respective carrying values under our new structure in 2014, a decrease in the fair value of more than 16% and 10% for our SG gaming and legacy U.K. gaming reporting units, respectively, could potentially result in an impairment of goodwill.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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