Equity Investments

We account for our equity investments where we own a non-controlling interest, but exercise significant influence, under the equity method of accounting. Under the equity method of accounting, our original cost of the investment is adjusted for our share of equity in the earnings of the equity investee and reduced by dividends and distributions of capital received.

We evaluate our investments in unconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the carrying value of the investment may have experienced an "other-than-temporary" decline in value. If such conditions exist, we compare the estimated fair value of the investment to its carrying value to determine if an impairment is indicated and determine whether the impairment is "other-than-temporary" based on an assessment of all relevant factors, including consideration of our intent and ability to retain our investment until the recovery of the unrealized loss. We estimate fair value using a discounted cash flow analysis based on estimated future results of, or cash distributions from, the investee. Impairment charges, if any, are recorded in Earnings (loss) from equity investment.

During the fourth quarter of 2016, we recorded an impairment charge of $11.3 million related to our investment in GLB. During the third quarter of 2014, we concluded that indicators of impairment were present related to our investment in Northstar Illinois as we understood that the Governor's office of the State of Illinois directed the Illinois Department of Lottery to end the PMA with Northstar Illinois, which termination agreement was signed during the third quarter of 2015. We recorded an impairment charge of $19.7 million in the third quarter of 2014, which is reflected in earnings (loss) from equity investments for the year ended December 31, 2014.

At December 31, 2016, we had investments in a number of entities (principally in our lottery business segment) which are accounted for under the equity method of accounting because we do not have a controlling financial interest but we have the ability to exercise significant influence. Equity method income (loss) is recorded in “Earnings (loss) from equity investments”, with our investment recorded in “Equity investments”. See the tables below for details of our equity investments:



Equity Investment	Purpose	Term	Ownership Interest	Segment
LNS ⁽¹⁾	Exclusive operator of Italian instant game lottery	Initial term of nine years beginning October 2010	20%	Lottery
Northstar IL ⁽²⁾	Private manager of Illinois lottery under a PMA	10 years beginning January 2011, see below	20%	Lottery
Northstar NJ ⁽³⁾	Provision of marketing and sales services to New Jersey Lottery	October 1, 2013 through 2029	17.69%	Lottery
Northstar SupplyCo New Jersey LLC (NJ SupplyCo)	Separate agreement under which we provide instant games to Northstar NJ	October 1, 2013 through 2029	30%	Lottery

(1)Other members of consortium are Gtech S.p.A, a subsidiary of IGT and Arianna 2001. LNS succeeded Consorzio Lotterie Nazionali, a consortium comprised of essentially the same group that owns LNS, as holder of the concession as the exclusive operator of the Italian Gratta e Vinci instant game lottery.

(2) Other member of Northstar Illinois is Gtech corporation, a subsidiary of IGT.

(3) Other members are Gtech and a subsidiary of the administrator of the Ontario Municipal Employees Retirement System, this agreement provides us substantive participating rights.



	Equity investment Balance as of December 31,				Equity earnings (loss) recognized for the Year Ended December 31,									Cash distributions and dividends received for the Year Ended December 31,
Equity Investment	2016		2015		2016			2015			2014			2016		2015		2014
LNS	$	80.0	$	104.5	$	14.0		$	14.8		$	17.5		$	34.3	$	31.5	$	49.9
Northstar IL	—		—		(0.4		)	(2.7		)	(34.8		)	—		—		—
Northstar NJ and NJ Supply Co	24.8		27.3		1.0			(4.0		)	(3.7		)	4.8		—		—
GLB and CSG	38.3		51.2		(8.0		)	3.5			7.8			1.7		4.7		6.4
ITL	12.3		20.9		—			1.0			0.3			5.9		10.0		17.4
Other	24.5		24.6		6.4			4.3			5.3			5.0		17.4		3.6
Total	$	179.9	$	228.5	$	13.0		$	16.9		$	(7.6	)	$	51.7	$	63.6	$	77.3



	Revenue recognized from sales to investee for the Year Ended December 31,
Equity Investment	2016		2015		2014
LNS	$	45.3	$	46.6	$	47.1
Northstar IL	22.6		20.8		24.5
Northstar NJ and NJ Supply Co	20.9		18.3		12.7
Other	4.9		6.0		6.3
Total	$	93.7	$	91.7	$	90.6

LNS

In 2010, we paid $97.7 million (our pro-rata share of the $1,089.8 million LNS paid to obtain this concession) in upfront fees which are being amortized on a straight-line basis over the term of the concession, thereby reducing our investment balance.

As of December 31, 2016 we had accounts receivable of $13.1 million from LNS.

Northstar Illinois

In August 2015, Northstar Illinois, the State of Illinois, SGI and Gtech entered into a termination agreement with respect to the PMA (the “Termination Agreement”). The Termination Agreement contemplated, among other things, (1) a $10.0 million net income shortfall payment for the lottery’s 2015 fiscal year, (2) termination of the PMA in January 2017 (subject to possible extension by mutual agreement of the State of Illinois and Northstar Illinois in 3- to 6-month increments), (3) that, following December 2014, Northstar Illinois will no longer be entitled to any incentive compensation payments and will no longer be liable for any shortfall payments following the $10.0 million shortfall payment for the lottery's 2015 fiscal year, (4) reimbursement of Northstar Illinois for certain costs it incurs in transitioning its obligations under the PMA, (5) continuation of our instant lottery game supply agreement (and Gtech’s lottery systems supply agreement) with Northstar Illinois until July 2017, subject to a reduced rate structure, and (6) our right to negotiate a new supply agreement with any manager that replaces Northstar Illinois and our ability to participate in the procurement process for such replacement manager. In September 2016, Northstar Illinois, the State of Illinois, SGI and IGT (formerly Gtech) entered into a letter agreement that (a) extended the term of the PMA to July 2017 and (b) extended our instant lottery game supply agreement (and IGT’s lottery systems supply agreement) with Northstar Illinois until January 2018.

Northstar New Jersey

Northstar New Jersey is entitled to receive annual incentive compensation payments from the State of New Jersey to the extent the lottery's net income for the applicable year exceeds specified target levels, subject to a cap of 3% of the applicable year's net income. Northstar New Jersey is responsible for payments to the State of New Jersey to the extent certain net income targets are not achieved by the New Jersey Lottery, subject to a cap of 2% of the applicable year’s net income and a $20.0 million shortfall payment credit that was fully used by the end of the fourth quarter of 2015. In addition, pursuant to a December 2015 amendment to the Northstar New Jersey services agreement, the State of New Jersey will be entitled to additional amounts for each of the lottery’s 2016-2018 fiscal years to the extent the sum of the New Jersey Lottery’s net income and the net income shortfall payments paid to the State of New Jersey by Northstar New Jersey (if any) for the applicable year fall below certain guaranteed amounts. We may be required to make capital contributions to Northstar New Jersey to fund our pro rata share of any shortfall payments that are payable to the State of New Jersey under the services agreement.

In December 2015, pursuant to the terms of the amendment to its services agreement discussed above, (i) Northstar New Jersey made a $15.4 million payment to the State of New Jersey, of which we contributed our pro rata portion of $2.7 million, representing consideration in connection with the terms and conditions of the amendment, and (ii) Northstar New Jersey satisfied the $5.9 million net income shortfall payment owed to the State of New Jersey for the lottery’s fiscal year ended June 30, 2015 with the remainder of the $20.0 million shortfall payment credit.