Business Segments

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Business Segments

Business Segments

We report our operations in three business segments—Gaming, Lottery and Interactive—representing our different products and services. These are our reportable segments under ASC 280, Segment Reporting. Each of our business segments is managed by a separate executive who reports to our chief executive officer (who is our "chief operating decision maker" under applicable accounting standards). Our three business segments represent separate standalone businesses based on the industries in which we operate. Our Gaming business segment generally sells gaming machines and VLTs, conversion kits and parts, and leases or otherwise provides gaming machines, server-based systems and content, to commercial, tribal and governmental gaming operators. The Gaming business segment also sells and supports specialized casino-management systems-based software and hardware, provides proprietary table game content and sells and leases Shufflers. Our Lottery business segment provides instant lottery games and related value-added services, as well as licensed brands that are printed on instant lottery games and other promotional lottery products. Our Lottery business segment also provides systems products and services generally comprised of point-of-sale terminals, central systems, customized computer software, data communication services, support and/or related equipment.  Our Interactive business segment provides social gaming and RMG services to online casino operators through our remote game servers. Additional discussion regarding the products and services from which each reportable business segment derives its revenue is included in Note 1 (Description of the Business and Summary of Significant Accounting Policies) in our 2014 Annual Report on Form 10-K.

In connection with the Bally acquisition, in the fourth quarter of 2014, we reviewed our operating and business segments in light of certain changes in the financial information regularly reviewed by our chief executive officer and other factors. Based on this review, we combined our previous lottery-related Instant Products and Lottery Systems business segments into one "Lottery" segment. We also determined that the interactive operating segment should be disclosed as a separate business segment and not aggregated with the gaming operating segment, reflecting the growth of the interactive operating segment. These changes, which were effective prior to December 31, 2014, had no impact on our consolidated financial statements for any periods. Business segment information for the three months ended March 31, 2014 has been adjusted to reflect these changes.

The following tables present revenue, cost of revenue, SG&A, R&D, employee termination and restructuring, D&A, operating income (loss) and earnings (loss) from equity investments by business segment for the three months ended March 31, 2015 and 2014. Certain unallocated expenses managed at the corporate level, comprised primarily of general and administrative costs and other income (expense), net, are not allocated to our business segments. Segment results for 2014 below do not include the results of Bally, which we acquired in November 2014. The increase in unallocated corporate costs for the three months ended March 31, 2015 primarily related to the inclusion of Bally's results.

	Three Months Ended March 31, 2015
	Gaming			Lottery		Interactive		Total
Revenue:
Services	$	237.9		$	45.6	$	46.9	$	330.4
Product sales	187.9			11.5		—		199.4
Instant games	—			128.9		—		128.9
Total revenue	425.8			186.0		46.9		658.7
Cost of services (1)	45.5			28.4		16.6		90.5
Cost of product sales (1)	87.8			10.1		—		97.9
Cost of instant games (1)	—			67.0		—		67.0
Selling, general and administrative	74.2			17.1		15.1		106.4
Research and development	39.8			1.6		5.5		46.9
Employee termination and restructuring	4.2			0.2		0.7		5.1
Depreciation and amortization	143.3			21.3		5.1		169.7
Segment operating income	$	31.0		$	40.3	$	3.9	$	75.2
Unallocated corporate costs								57.1
Consolidated operating income								$	18.1
Earnings (loss) from equity investments	$	(0.1	)	$	3.2	$	—	$	3.1

(1) Exclusive of depreciation and amortization.

	Three Months Ended March 31, 2014
	Gaming			Lottery		Interactive			Total
Revenue:
Services	$	95.9		$	50.1	$	30.8		$	176.8
Product sales	67.5			17.6		—			85.1
Instant games	—			126.2		—			126.2
Total revenue	163.4			193.9		30.8			388.1
Cost of services (1)	25.2			30.4		10.9			66.5
Cost of product sales (1)	32.7			13.7		—			46.4
Cost of instant games (1)	—			69.9		—			69.9
Selling, general and administrative	31.7			18.6		14.2			64.5
Research and development	22.3			0.6		3.0			25.9
Employee termination and restructuring	1.8			0.4		3.4			5.6
Depreciation and amortization	60.6			22.5		3.1			86.2
Segment operating income (loss)	$	(10.9	)	$	37.8	$	(3.8	)	$	23.1
Unallocated corporate costs									35.2
Consolidated operating loss									$	(12.1	)
Earnings (loss) from equity investments	$	(0.3	)	$	5.8	$	—		$	5.5

(1) Exclusive of depreciation and amortization.

The following table presents a reconciliation of reportable business segment operating income to net loss before income taxes for each period:

	Three Months Ended   March 31,
	2015			2014
Reportable business segment operating income	$	75.2		$	23.1
Unallocated corporate costs	(57.1		)	(35.2		)
Consolidated operating income (loss)	18.1			(12.1		)
Interest expense	(164.3		)	(47.9		)
Earnings from equity investments	3.1			5.5
Gain on sale of equity interest	—			14.5
Other income (expense), net	(5.6		)	2.9
Net loss before income taxes	$	(148.7	)	$	(37.1	)

In evaluating segment financial performance, we focus on operating income (loss) as a segment’s measure of profit or loss. Segment operating income (loss) is income (loss) before other income (expense), net, interest expense, earnings (loss) from equity investments, gain on sale of equity interest, unallocated corporate costs and income tax expense (benefit). The accounting policies of the business segments are the same as those described in our summary of significant accounting policies in Note 1 (Description of the Business and Summary of Significant Accounting Policies) in our 2014 Annual Report on Form 10-K.