Accounts and Notes Receivable and Credit Quality of Notes Receivable

Accounts and Notes Receivable

The following summarizes the components of current and long-term accounts and notes receivable, net:



	June 30, 2016			December 31, 2015
Current:
Accounts receivable	$	514.0		$	497.7
Notes receivable	154.5			180.4
Allowance for doubtful accounts	(27.2		)	(23.3		)
Current accounts and notes receivable, net	$	641.3		$	654.8
Long-term:
Notes receivable, net	43.8			51.3
Total accounts and notes receivable, net	$	685.1		$	706.1

Credit Quality of Notes Receivable

We have provided extended payment terms and development financing to certain customers in the form of notes receivable. We carry our notes receivable at face amounts less an allowance for doubtful accounts and imputed interest, if any. Interest income is recognized ratably over the life of the note receivable and any related fees or costs to establish the notes are expensed as incurred, as they are considered insignificant. Actual or imputed interest, if any, is determined based on stated rates or current market rates at the time the note originated and is recorded as interest income in other income (expense), net, ratably over the payment period. We generally impute interest income on notes receivable with terms greater than one year that do not contain a stated interest rate. The interest rates on our outstanding notes receivable ranged from 3.25% to 10.42% at June 30, 2016 and December 31, 2015.

We monitor the credit quality of our accounts and notes receivable by reviewing an aging of customer invoices. Invoices are considered past due if a scheduled payment is not received within the agreed-upon terms. We also review a variety of other relevant qualitative information such as collection experience, economic conditions and customer-specific financial conditions to evaluate credit risk in recording the allowance for doubtful accounts or as an indicator of an impaired loan. Where possible, we seek payment deposits, collateral, pledge agreements, bills of exchange, foreign bank letters of credit, post-dated checks or personal guarantees with respect to notes receivable from our customers. However, the majority of our international notes receivable do not have these features. Currently, we have not sold our notes receivable to third parties; therefore, we do not have any off-balance sheet liabilities for factored receivables.

Over the past few years, the government authorities in Argentina had limited the exchange of pesos into USD and the transfer of funds from Argentina. In December 2015, the newly elected government removed the limitations of the previous government and also devalued the "official" peso to the market rate. Our accounts and notes receivable, net, from customers in Argentina at June 30, 2016 was $19.0 million, which is denominated in USD, although, under the terms of our arrangements with our customers in Argentina, they are required to pay us in pesos at the spot exchange rate between the peso and the USD on the date of payment. With the recent devaluation of the peso, our customers will now have to pay more pesos to reduce their obligations. In evaluating the collectability of customer receivables in Argentina at June 30, 2016, we specifically evaluated recent government actions, payments, receivables aging, any additional security or collateral we had (bills of exchange, pledge agreements, etc.) and other facts and circumstances relevant to our customers' ability to pay. Our customers in Argentina have continued to pay us in pesos based on the spot exchange rate between the peso and the USD on the payment date. We collected $11.4 million of outstanding receivables from customers in Argentina during the six months ended June 30, 2016.

Government actions and challenges affecting the gaming industry in Mexico have increased the credit quality risk with respect to certain of our current Mexico customers. Our accounts and notes receivable, net, from these certain customers in Mexico at June 30, 2016 was $36.4 million. We collected $14.4 million of outstanding receivables from these certain customers during the six months ended June 30, 2016.

The following summarizes the components of total notes receivable, net:



	June 30, 2016			Balances over 90 days past due			December 31, 2015			Balances over 90 days past due
Notes receivable:
Domestic	$	39.6		$	2.0		$	62.4		$	2.6
International	159.0			41.5			169.8			26.6
Total notes receivable	198.6			43.5			232.2			29.2

Notes receivable allowance for doubtful accounts:
Domestic	(2.3		)	(2.3		)	(2.6		)	(2.5		)
International	(12.5		)	(12.5		)	(10.6		)	(9.5		)
Total notes receivable allowance for doubtful accounts	(14.8		)	(14.8		)	(13.2		)	(12.0		)
Notes receivable, net	$	183.8		$	28.7		$	219.0		$	17.2

At June 30, 2016, 15.6% of our total notes receivable, net, was past due by over 90 days, compared to 7.9% at December 31, 2015.

The following tables detail our evaluation of notes receivable for impairment as of June 30, 2016 and December 31, 2015:



	June 30, 2016		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment
Notes receivable:
Domestic	$	39.6	$	13.7	$	25.9
International	159.0		81.7		77.3
Total notes receivable	$	198.6	$	95.4	$	103.2



	December 31, 2015		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment
Notes receivable:
Domestic	$	62.4	$	20.7	$	41.7
International	169.8		101.8		68.0
Total notes receivable	$	232.2	$	122.5	$	109.7

The following table reconciles the allowance for doubtful notes receivable from December 31, 2015 to June 30, 2016:



	Total			Ending Balance Individually Evaluated for Impairment			Ending Balance Collectively Evaluated for Impairment
Beginning balance at December 31, 2015	$	13.2		$	12.9		$	0.3
Charge-offs	(1.3		)	(1.3		)	—
Recoveries	(0.2		)	(0.2		)	—
Provision	3.1			3.1			—
Ending balance at June 30, 2016	$	14.8		$	14.5		$	0.3

The following table reconciles the allowance for doubtful notes receivable from December 31, 2014 to June 30, 2015:



	Total			Ending Balance Individually Evaluated for Impairment			Ending Balance Collectively Evaluated for Impairment
Beginning balance at December 31, 2014	$	5.9		$	5.9		$	—
Charge-offs	(2.1		)	(2.1		)	—
Recoveries	(0.5		)	(0.4		)	(0.1		)
Provision	6.4			5.2			1.2
Ending balance at June 30, 2015	$	9.7		$	8.6		$	1.1

For the six months ended June 30, 2016 and 2015, we had no significant modifications to the original financing terms.

In certain international jurisdictions, we offer extended payment terms to our customers. Such payment terms subject us to increased credit risk, which could be exacerbated by, among other things, unfavorable economic conditions or political or economic instability in those regions. Our notes receivable were concentrated in the following international gaming jurisdictions at June 30, 2016:



Mexico	26	%
Peru	17	%
Argentina	9	%
Columbia	6	%
Other (less than 5% individually)	22	%
Total international notes receivable as a percentage of total notes receivable	80	%